Steadfast Apartment REIT III DEFM14A Proxy related to merger

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of the

Securities Exchange Act of 1934 (Amendment No.     )

Filed by the Registrant    ☒                                     Filed by a Party other than the Registrant    ☐

Check the appropriate box:

☐	Preliminary Proxy Statement
☐	Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
☒	Definitive Proxy Statement
☐	Definitive Additional Materials
☐	Soliciting Material Pursuant to §240.14a-12

STEADFAST APARTMENT REIT III, INC.

(Name of Registrant as Specified in Its Charter)

(Name of Person(s) Filing Proxy Statement, if Other Than the Registrant)

Payment of Filing Fee (Check the appropriate box):

☒	No fee required.
☐	Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
	1)	Title of each class of securities to which transaction applies:
	2)	Aggregate number of securities to which transaction applies:
	3)	Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):
	4)	Proposed maximum aggregate value of transaction:
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☐	Fee paid previously with preliminary materials.
☐	Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
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	3)	Filing Party:
	4)	Date Filed:

PROXY STATEMENT/PROSPECTUS

MERGER PROPOSED-YOUR VOTE IS VERY IMPORTANT

To the Stockholders of Steadfast Apartment REIT III, Inc. (“STAR III”):

On August 5, 2019, STAR III, Steadfast Apartment REIT, Inc. (“STAR”), Steadfast Apartment REIT Operating Partnership, L.P., STAR’s operating partnership, Steadfast Apartment REIT III Operating Partnership, L.P., STAR III’s operating partnership, and SIII Subsidiary, LLC, a wholly owned subsidiary of STAR (“Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) pursuant to which STAR III will merge with and into Merger Sub (the “STAR III Merger”), with Merger Sub surviving the STAR III Merger, such that following the STAR III Merger, the surviving entity will continue as a wholly owned subsidiary of STAR. In accordance with the applicable provisions of the Maryland General Corporation Law, the separate existence of STAR III shall cease. The STAR III Merger Agreement was entered into after a thorough due diligence and negotiation process conducted by a special committee of STAR III’s board of directors (the “STAR III Special Committee”), with the assistance of its advisors, and a special committee of STAR’s board of directors (the “STAR Special Committee”), with the assistance of its advisors. Both the STAR III Special Committee and the STAR Special Committee are comprised solely of independent directors. The board of directors of each of STAR III and STAR, based on the unanimous recommendation of the STAR III Special Committee and STAR Special Committee, respectively, each unanimously approved the STAR III Merger. The obligations of STAR III and STAR to effect the STAR III Merger are subject to the satisfaction or waiver of several conditions set forth in the STAR III Merger Agreement and described in this proxy statement/prospectus.

On August 5, 2019, STAR also entered into an Agreement and Plan of Merger to acquire Steadfast Income REIT, Inc. (“SIR”). STAR’s proposed merger with SIR is referred to herein as the “SIR Merger” and collectively with the STAR III Merger, the “Mergers.” The consummation of the SIR Merger is not contingent upon the completion of the STAR III Merger, and the consummation of the STAR III Merger is not contingent upon the completion of the SIR Merger.

The Combined Company

If the STAR III Merger was consummated on September 30, 2019, the portfolio of the surviving company (the “STAR III/STAR Combined Company”) would have a gross real estate value of approximately $2.2 billion, consisting of 43 properties in 12 states. On a pro forma basis, the STAR III/STAR Combined Company portfolio would have an average effective rent of $1,187 and occupancy of 94%.

If both Mergers were consummated on September 30, 2019, the portfolio of the surviving company (the “Fully Combined Company”) would have a gross real estate value of approximately $3.2 billion, consisting of 70 properties in 14 states. On a pro forma basis, the Fully Combined Company portfolio would have an average effective rent of $1,165 and occupancy of 95%. STAR III stockholders do not have the right to vote on the SIR Merger. If both Mergers are completed, holders of shares of common stock, par value $0.01 per share, of STAR III (the “STAR III Common Stock”) will become holders of the common stock of the Fully Combined Company.

Portfolio Statistics (as of September 30, 2019)
	SIR			STAR			STAR III			STAR III/ STAR Combined Company			Fully Combined Company
Properties/States(1)		27/9			33/11			10/6			43/12			70/14
Average Effective Rent	$	1,123		$	1,190		$	1,183		$	1,187		$	1,165
Portfolio Occupancy		95.8	%		94.4	%		93.7	%		94.3	%		94.8	%
Average Age of Portfolio (years)		14.0			23.4			23.4			23.4			20.4
Gross Real Estate Value (in thousands)	$	1,006,400	(2)	$	1,795,810	(2)	$	437,110	(3)	$	2,232,920		$	3,239,320

1. Does not include (a) properties held in a joint venture in which SIR owns a 10% interest and (b) one parcel of land held for development owned by STAR.

2. Based on third-party appraisals as of December 31, 2018.

3. Based on third-party appraisals as of June 30, 2018.

Summary of Strategic Benefits

The STAR III Merger and, if consummated, the SIR Merger, are expected to create meaningful operational and financial benefits, including:

• Improves Portfolio: Through the proposed transaction, management believes the STAR III/STAR Combined Company and the Fully Combined Company would have a portfolio that is larger, more diversified and newer than STAR III’s portfolio. Following the merger transaction(s), STAR, as the resulting company, expects to maintain its exclusive multifamily focus with an emphasis on moderate income apartments, a property type that has demonstrated strong performance with low levels of volatility.

• Enhances Market Prominence and Increases Portfolio Diversification: The STAR III/STAR Combined Company and the Fully Combined Company should have enhanced market prominence in high growth areas, and growth potential in a recession-resilient sector supported by demographic trends. The Fully Combined Company would have a presence in seven of the top 20 real estate investment markets, including Dallas, Nashville and Austin, and would rank among the top 50 apartment owners in the country based on number of apartment homes owned. The Mergers are expected to enable the Fully Combined Company to reposition the portfolio based on market and property conditions and pursueground-up development opportunities. STAR expects average annual returns onground-up development to average 40% higher than acquisitions of stabilized, developed multifamily properties.

• Generates Cash Savings and Increased Cash Flow: Management expects that the expected revised fee structure, platform synergies and increased purchasing power will generate cash savings. The expected synergies and revised fee structure described herein are expected to provide a projected average annual increase through 2024 of almost $21 million in cash flow to the Fully Combined Company and $14 million for the STAR III/STAR Combined Company, each as compared to SIR’s, STAR’s and STAR III’s stand-alone projected cash flow through the same period. In addition, management believes that STAR, as the resulting company, should have the ability to raise rents in a majority of its markets where the median household income to rent ratios are 4.0x and above.

• Expands Access to and Use of Capital: As a larger entity, the STAR III/STAR Combined Company or the Fully Combined Company is expected to have improved access to capital sources that may be used to grow the portfolio. STAR, as the resulting company, should be able to increase liquidity options through potential share repurchases, divestitures of assets that no longer fit the portfolio strategy, periodic monetization or distribution events or a potential listing on an exchange in the future.

• Lowers Risk Profile and Strengthens Balance Sheet: The STAR III/STAR Combined Company is expected to have limited near-term debt maturities and a combined capital structure of 58% secured debt and 42% equity. The Fully Combined Company is expected to have limited near-term debt maturities and a combined capital structure of 52% secured debt and 48% equity.

Merger Consideration

As consideration for the STAR III Merger, in exchange for each share of STAR III Common Stock, STAR III stockholders will receive 1.430 shares of common stock of STAR, par value $0.01 per share (“STAR Common Stock”). See “The STAR III Merger” beginning on page 121 of this proxy statement/prospectus for more information about the determination of the merger consideration.

STAR III Special Meeting

STAR III will hold a special meeting of its stockholders on March 2, 2020 (the “STAR III Special Meeting”), at which its stockholders will be asked to consider and vote on (i) a proposal to approve the STAR III Merger, (ii) a proposal to approve the amendment of the charter of STAR III to remove the provision related to“Roll-Up Transactions” in connection with the STAR III Merger (the “STAR III Charter Amendment”), and (iii) a proposal to adjourn the STAR III Special Meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the STAR III Merger.

The record date for determining the stockholders entitled to receive notice of, and to vote at, the STAR III Special Meeting is the close of business on December 16, 2019 (the “STAR III record date”). The STAR III Merger will not be completed unless STAR III stockholders approve the STAR III Merger and the STAR III Charter Amendment by the affirmative vote of at least a majority of the outstanding shares of STAR III Common Stock entitled to vote.

No matter the size of your investment in STAR III, your vote is very important.

YOUR VOTE IS VERY IMPORTANT

Proxy Vote

As noted above, based on the unanimous recommendation of the STAR III Special Committee, the STAR III board of directors (the “STAR III Board”) unanimously approved the STAR III Merger Agreement, the STAR III Merger, the STAR III Charter Amendment and the other transactions contemplated by the STAR III Merger Agreement, and determined that they are advisable and in the best interests of STAR III and STAR III’s stockholders and, with respect to the STAR III Merger Agreement and the STAR III Merger, are fair and reasonable to STAR III and on terms and conditions no less favorable from unaffiliated third parties.

Therefore, the STAR III Board recommends that you vote FOR the proposal to approve the STAR III Merger, FOR the proposal to adopt the STAR III Charter Amendment, and FOR the proposal to adjourn the STAR III Special Meeting, if necessary or appropriate, as set forth in the Notice of Special Meeting of Stockholders.

Your Vote Matters

Whether or not you expect to attend the STAR III Special Meeting in person, please authorize a proxy to vote on your behalf as promptly as possible by completing, signing, dating and mailing your proxy card in thepre-addressed postage-paid envelope provided or by authorizing your proxy by one of the other methods specified in this proxy statement/prospectus. This saves STAR III time and money as management will no longer have to solicit your vote.

This proxy statement/prospectus provides you with detailed information about the STAR III Special Meeting, the STAR III Merger Agreement, the STAR III Merger, the STAR III Charter Amendment and other related matters. A copy of the STAR III Merger Agreement is attached as Annex A to this proxy statement/prospectus, and a copy of the STAR III Charter Amendment is attached as Annex B to this proxy statement/prospectus. We encourage you to read this proxy statement/prospectus in its entirety before voting, including the STAR III Merger Agreement, the STAR III Charter Amendment and the other annexes.In particular, you should carefully consider the discussion in the section of this proxy statement/prospectus entitled “Risk Factors” beginning on page 30.

On behalf of STAR III’s management team, the STAR III Board and the STAR III Special Committee, we thank you for your support and urge you to vote FOR the approval of each of the matters to be presented at the STAR III Special Meeting.

Sincerely,

Rodney F. Emery

Chief Executive Officer

Steadfast Apartment REIT III, Inc.

Neither the SEC, nor any state securities regulatory authority has approved or disapproved of the STAR III Merger or the securities to be issued under this proxy statement/prospectus or has passed upon the adequacy or accuracy of the disclosure in this proxy statement/prospectus. Any representation to the contrary is a criminal offense.

This proxy statement/prospectus is dated December 18, 2019, and is first being mailed to STAR III stockholders on or about January 2, 2020.

STEADFAST APARTMENT REIT III, INC.

18100 Von Karman Avenue, Suite 500

Irvine, California 92612

NOTICE OF SPECIAL MEETING OF STOCKHOLDERS

Dear Stockholder:

You are cordially invited to attend a special meeting of stockholders (the “STAR III Special Meeting”) of Steadfast Apartment REIT III, Inc., a Maryland corporation (“STAR III”), which will be held at the offices of STAR III located at 18100 Von Karman Avenue, Suite 500, Irvine, California 92612, at 3:30 p.m. Pacific Time on March 2, 2020.

The purpose of the STAR III Special Meeting is to consider and vote upon the following proposals:

1.     A proposal to approve the merger of Steadfast Apartment REIT III, Inc. with and into SIII Subsidiary, LLC, a wholly owned subsidiary of Steadfast Apartment REIT, Inc., pursuant to the Agreement and Plan of Merger, dated as of August 5, 2019, by and among Steadfast Apartment REIT III, Inc., Steadfast Apartment REIT, Inc. and the other parties thereto, which we refer to as the “STAR III Merger Proposal.”

The STAR III Board of Directors recommends a vote FOR this proposal.

2.    A proposal to approve the amendment of the charter of STAR III to remove the provision related to“Roll-Up Transactions” in connection with the STAR III Merger, which we refer to as the “STAR III Charter Amendment Proposal.”

The STAR III Board of Directors recommends a vote FOR this proposal.

3.    A proposal to adjourn the STAR III Special Meeting to solicit additional proxies in favor of the STAR III Merger Proposal and/or the STAR III Charter Amendment if there are not sufficient votes to approve the STAR III Merger Proposal and/or the STAR III Charter Amendment Proposal, if necessary and as determined by the chair of the STAR III Special Meeting.

The STAR III Board of Directors recommends a vote FOR this proposal.

The STAR III Board of Directors has fixed the close of business on December 16, 2019 as the record date for the STAR III Special Meeting. Only the holders (the “STAR III stockholders”) of record of shares of common stock, par value $0.01 per share, of STAR III (the “STAR III Common Stock”) as of the close of business on December 16, 2019 are entitled to notice of and to vote at the STAR III Special Meeting and any adjournment or postponement thereof.

This proxy statement/prospectus and proxy card is dated as of December 18, 2019 and is first being mailed to you on or about January 2, 2020.

YOUR VOTE IS VERY IMPORTANT

Your vote is important regardless of the number of shares of STAR III Common Stock that you own. Whether or not you plan to attend the STAR III Special Meeting in person, please authorize a proxy to vote your shares as promptly as possible.To authorize a proxy, complete, sign, date and mail your proxy card in thepre-addressed postage-paid envelope provided or, if the option is available to you, call the toll-free telephone number listed on your proxy card or use the internet as described in the instructions on the enclosed proxy card to authorize your proxy. Authorizing a proxy will assure that your vote is cast and counted at the STAR III Special Meeting if you do not attend in person. If your shares of STAR III Common Stock are held in “street name” by your broker or other nominee, only your broker or other nominee can vote your shares of STAR III Common Stock at the STAR III Special Meeting and your vote cannot be cast unless you provide instructions to your broker or other nominee on how to vote or obtain a legal proxy from your broker or other nominee. You should follow the directions provided by your broker or other nominee regarding how to instruct your broker or other nominee to vote your shares of STAR III Common Stock. You may revoke your proxy at any time before it is voted. Please review the proxy statement/prospectus accompanying this notice for more complete information regarding the STAR III Merger and the other proposals to be acted upon at the STAR III Special Meeting.

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE STAR III SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON MARCH 2, 2020:

Our proxy statement/prospectus and form of proxy card is also available atwww.proxypush.com/STAR III with the use of the control number on your proxy card.

By Order of the Board of Directors,

Ana Marie del Rio, Secretary

Irvine, California

December 18, 2019

ADDITIONAL INFORMATION

Investors may also consult STAR III’s and STAR’s website for more information concerning the STAR III Merger described in this proxy statement/prospectus. STAR III and STAR share a website, which is located atwww.SteadfastREITs.com. Each company’s public filings are also available at www.sec.gov. Information included on this website is not incorporated by reference into this proxy statement/prospectus.

If you are a stockholder of STAR III and would like to request documents, please do so by February 17, 2020, to receive them before the STAR III Special Meeting.

See “Where You Can Find More Information” on page 223.

ABOUT THIS DOCUMENT

This proxy statement/prospectus, which forms part of a registration statement on FormS-4 filed by STAR (FileNo. 333-234513) with the U.S. Securities and Exchange Commission constitutes a prospectus of STAR for purposes of the Securities Act of 1933, as amended, with respect to the shares of STAR Common Stock to be issued to STAR III stockholders in exchange for shares of STAR III Common Stock pursuant to the STAR III Merger Agreement. This proxy statement/prospectus also constitutes a proxy statement for STAR III for purposes of the Securities Exchange Act of 1934, as amended. In addition, it constitutes a notice of meeting with respect to the STAR III Special Meeting.

You should rely only on the information contained in this proxy statement/prospectus. No one has been authorized to provide you with information that is different from that contained in this proxy statement/prospectus. This proxy statement/prospectus is dated December 18, 2019. You should not assume that the information contained in this proxy statement/prospectus is accurate as of any date other than that date. Neither our mailing of this proxy statement/prospectus to STAR III stockholders nor the issuance by STAR of STAR Common Stock to STAR III stockholders pursuant to the STAR III Merger Agreement will create any implication to the contrary.

This proxy statement/prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any securities, or the solicitation of a proxy, in any jurisdiction in which or from any person or entity to whom it is unlawful to make any such offer or solicitation in such jurisdiction. Information contained in this proxy statement/prospectus regarding STAR has been provided by STAR and information contained in this proxy statement/prospectus regarding STAR III has been provided by STAR III.

TABLE OF CONTENTS

	Page
QUESTIONS AND ANSWERS ABOUT THE STAR III MERGER AND THE STAR III SPECIAL MEETING		1
SUMMARY		9
The Companies		9
The STAR III Merger		10
Recommendation of the STAR III Board		12
Summary of Risks Related to the STAR III Merger		12
The STAR III Special Meeting		13
Opinion of STAR III Special Committee’s Financial Advisor		14
Treatment of STAR III Equity Awards		14
Stock Ownership of Directors and Executive Officers of STAR III		14
Directors and Management of the STAR III/STAR Combined Company After the STAR III Merger		15
Interests of STAR III’s and STAR’s Directors and Executive Officers in the STAR III Merger		15
Dissenters’ and Appraisal Rights in the STAR III Merger		16
Conditions to Completion of the STAR III Merger		16
Regulatory Approvals Required for the STAR III Merger		17
STAR III Go Shop Period; Acquisition Proposals		17
No Solicitation and Change in Recommendation with Acquisition Proposal		18
Termination of the STAR III Merger Agreement		19
Termination Fee and Expenses		20
Material U.S. Federal Income Tax Consequences of the STAR III Merger		20
Accounting Treatment of the STAR III Merger		20
Comparison of Rights of STAR III Stockholders and STAR Stockholders		20
Selected Historical Financial Information of STAR		21
Selected Historical Financial Information of STAR III		22
Selected Unaudited Pro Forma Combined Financial Information		24
Unaudited Comparative Per Share Information		27
Comparative Market Price Data and Distribution Data		28
RISK FACTORS		30
Risks Related to the STAR III Merger		30
Risks Related to the STAR III/STAR Combined Company Following the STAR III Merger		36
Risks Related to STAR’s Structure and an Investment in STAR		41
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS		51
THE COMPANIES		53
Steadfast Apartment REIT, Inc. and SIII Subsidiary, LLC		53
Steadfast Apartment REIT III, Inc.		80
The Fully Combined Company		102
The STAR III/STAR Combined Company		110
MATERIAL PROPERTIES		112
STAR III Material Properties		112
THE STAR III SPECIAL MEETING		115
Date, Time, Place and Purpose of the STAR III Special Meeting		115
Recommendation of the STAR III Board of Directors		115
STAR III Record Date; Who Can Vote at the STAR III Special Meeting		115
Required Vote; Quorum		115
Abstentions and BrokerNon-Votes		116
Voting by STAR III Advisor, Directors and Affiliates		116
Manner of Submitting Proxy		116
Shares Held in “Street Name”		117

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TABLE OF CONTENTS

(continued)

	Page
Delivery and Householding of Proxy Materials		117
Revocation of Proxies or Voting Instructions		118
Solicitation of Proxies; Payment of Solicitation Expenses		118
Adjournment Proposal		118
Rights of Dissenting Stockholders		118
Assistance		118
PROPOSALS SUBMITTED TO STAR III STOCKHOLDERS		119
The STAR III Merger Proposal		119
The STAR III Charter Amendment Proposal		119
The STAR III Adjournment Proposal		119
THE STAR III MERGER		121
General		121
Background of the STAR III Merger		121
Recommendation of the STAR III Board and Its Reasons for the STAR III Merger		134
STAR’s Reasons for the STAR III Merger		137
Opinion of STAR III Special Committee’s Financial Advisor		140
Certain STAR III Unaudited Financial Projections		147
Certain Post-Merger Fully Combined Company Unaudited Financial Projections		149
Interests of STAR’s Directors and Executive Officers in the STAR III Merger		151
Interests of STAR III’s Directors and Executive Officers in the STAR III Merger		151
Directors and Management of the STAR III/STAR Combined Company After the STAR III Merger		153
Regulatory Approvals Required for the STAR III Merger		154
U.S. FEDERAL INCOME TAX CONSIDERATIONS		155
Material U.S. Federal Income Tax Consequences of the STAR III Merger		156
REIT Qualification of STAR III and STAR		157
Material U.S. Federal Income Tax Considerations Relating to the Combined Company’s Treatment as a REIT and to Holders of the STAR Common Stock		159
Tax Aspects of the Combined Company’s Operating Partnerships, the Subsidiary Partnerships and the Limited Liability Companies		170
Material U.S. Federal Income Tax Consequences to Holders of the Combined Company’s Common Stock		172
Information Reporting and Backup Withholding		176
Medicare Contribution Tax on Unearned Income		177
Additional Withholding Tax on Payments Made to Foreign Accounts		177
Other Tax Consequences		178
ACCOUNTING TREATMENT		179
ISSUANCE OF SHARES IN THE STAR III MERGER		179
DISTRIBUTIONS		179
DEREGISTRATION OF STAR III COMMON STOCK		179
THE STAR III MERGER AGREEMENT		180
Form, Effective Time and Closing of the STAR III Merger		180
Consideration to be Received in the STAR III Merger		180
No Appraisal Rights		181
Representations and Warranties		181
Definition of “Material Adverse Effect”		183
Conditions to Completion of the STAR III Merger		184
Covenants and Agreements		186
Termination of the STAR III Merger Agreement		197
Miscellaneous Provisions		199

ii

TABLE OF CONTENTS

(continued)

	Page
RELATED AGREEMENTS		201
DESCRIPTION OF CAPITAL STOCK		203
Common Stock		203
Preferred Stock		203
Convertible Stock		204
Meeting, Special Voting Requirements and Access to Records		206
Tender Offers		207
Restrictions on Ownership and Transfer		207
Distributions		209
Distribution Reinvestment Plan		210
Share Repurchase Plan		211
Business Combinations		213
Business Combination with STAR Advisor
Control Share Acquisitions		213
Advance Notice of Director Nominations and New Business		214
Subtitle 8		215
Restrictions onRoll-up Transactions		215
Reports to Stockholders		216
Estimated Value Per Share		217
Exclusive Jurisdiction for Certain Claims		217
COMPARISON OF RIGHTS OF THE STAR III STOCKHOLDERS AND THE STAR STOCKHOLDERS		218
SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS		220
2020 STAR III Annual Meeting of Stockholders		220
LEGAL MATTERS		221
EXPERTS		222
WHERE YOU CAN FIND MORE INFORMATION		223
INDEX TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS		F-1
ANNEXES
Annex A – Agreement and Plan of Merger
Annex B – Charter Amendment
Annex C – Opinion Houlihan Lokey Capital, Inc.
Annex D – STAR III Annual Report
Annex E – STAR III Quarterly Report
Annex F – STAR Annual Report
Annex G – STAR Quarterly Report
Annex H – SIR Annual Report
Annex I – SIR Quarterly Report

iii

QUESTIONS AND ANSWERS ABOUT THE STAR III MERGER AND THE STAR III SPECIAL MEETING

The following are answers to some questions that STAR III stockholders may have regarding the proposed transaction between STAR III and STAR and the other proposals being considered at the STAR III Special Meeting. STAR III and STAR urge you to read carefully this entire proxy statement/prospectus, including the Annexes, because the information in this section does not provide all the information that might be important to you.

Unless stated otherwise, all references in this proxy statement/prospectus to:

1. “Amended STAR Advisory Agreement” are to the Amended and Restated STAR Advisory Agreement, dated as of August 5, 2019, which will become effective at the effective time of the earlier of the STAR III Merger and SIR Merger;

2. “Code” are to the Internal Revenue Code of 1986, as amended;

3. “Exchange Act” are to the Securities Exchange Act of 1934, as amended;

4. the “Fully Combined Company” are to STAR and its consolidated subsidiaries (including both the Surviving Entity and SI Subsidiary, LLC) assuming the closing of both Mergers;

5. the “Mergers” are to the STAR III Merger and SIR Merger;

6. the “Merger Agreements” are to the STAR III Merger Agreement and the SIR Merger Agreement;

7. “Merger Sub” are to SIII Subsidiary, LLC, a Maryland limited liability company and wholly owned subsidiary of STAR;

8. “MGCL” are to the Maryland General Corporation Law or any successor statute;

9. “ordinary course of business” are to an action taken by a person or entity that is consistent with past practice and similar in nature and magnitude to actions customarily taken without any authorization by the board of directors in the course of normalday-to-day operations;

10. the “Outside Date” are to April 30, 2020;

11. “REIT” are to a real estate investment trust;

12. the “SEC” are to the U.S. Securities and Exchange Commission;

13. “Securities Act” are to the Securities Act of 1933, as amended;

14. “SIR” are to Steadfast Income REIT, Inc., a Maryland corporation;

15. the “SIR Merger” are to a merger of SIR with and into SI Subsidiary, LLC, with SI Subsidiary, LLC surviving the merger, pursuant to the SIR Merger Agreement;

16. the “SIR Merger Agreement” are to the Agreement and Plan of Merger, dated as of August 5, 2019, by and among SIR, STAR, STAR OP, Steadfast Income REIT Operating Partnership, L.P., and SI Subsidiary, LLC, as it may be amended from time to time;

17. “Sponsor” are to Steadfast REIT Investments, LLC, a Delaware limited liability company, and sponsor to STAR III and STAR;

18. “STAR” are to Steadfast Apartment REIT, Inc., a Maryland corporation;

19. “STAR Advisor” are to Steadfast Apartment Advisor, LLC, a Delaware limited liability company;

20. “STAR Advisory Agreement” are to the Advisory Agreement, as amended, dated as of December 13, 2013, by and among STAR, STAR OP and STAR Advisor;

21. the “STAR Board” are to the board of directors of STAR;

1

22. the “STAR Charter” are to the charter of STAR;

23. “STAR Common Stock” are to the shares of common stock, $0.01 par value per share, of STAR;

24 “STAR OP” are to Steadfast Apartment REIT Operating Partnership, L.P., a Delaware limited partnership;

25. “STAR OP Partnership Agreement” are to the Limited Partnership Agreement of Steadfast Apartment REIT Operating Partnership, L.P., dated as of September 3, 2013, as amended;

26. “STAR Parties” are to STAR, STAR OP, and Merger Sub;

27. the “STAR Special Committee” are to the special committee of the STAR Board that was formed by the STAR Board to evaluate and consider the Mergers and the other transactions contemplated by the Merger Agreements;

28. “STAR III” are to Steadfast Apartment REIT III, Inc., a Maryland corporation;

29. “STAR III Advisor” are to Steadfast Apartment Advisor III, LLC, a Delaware limited liability company;

30. “STAR III Advisory Agreement” are to the Amended and Restated Advisory Agreement, as amended, dated as of July 25, 2016, by and among STAR III, STAR III Advisor and STAR III OP;

31. the “STAR III Board” are to the board of directors of STAR III;

32. the “STAR III Charter” are to the charter of STAR III;

33. the “STAR III Charter Amendment” are to the proposed amendment of STAR III Charter to remove the provision related to“Roll-Up Transactions” in connection with the STAR III Merger;

34. “STAR III Common Stock” are to the shares of common stock of STAR III, $0.01 par value per share, which are classified as Class A common stock, Class R common stock and Class T common stock;

35. the “STAR III Merger” are to a merger of STAR III with and into Merger Sub, with Merger Sub surviving the merger, pursuant to the STAR III Merger Agreement;

36. the “STAR III Merger Agreement” are to the Agreement and Plan of Merger, dated as of August 5, 2019, by and among the STAR III Parties and the STAR Parties, as it may be amended from time to time, a copy of which is attached as Annex A to this proxy statement/prospectus;

37. “STAR III OP” are to Steadfast Apartment REIT III Operating Partnership, L.P., a Delaware limited partnership;

38. “STAR III OP Partnership Agreement” are to the Agreement of Limited Partnership of Steadfast Apartment REIT III Operating Partnership, L.P., dated July 25, 2016, as amended;

39. “STAR III Parties” are to STAR III and STAR III OP;

40 the “STAR III Special Committee” are to the special committee of the STAR III Board that was formed by the STAR III Board to consider the STAR III Merger and the other transactions contemplated by the STAR III Merger Agreement;

41. the “STAR III/STAR Combined Company” are to STAR and its consolidated subsidiaries (including the Surviving Entity) after the closing of the STAR III Merger; and

42. the “Surviving Entity” are to Merger Sub, a wholly owned subsidiary of STAR, after the effective time of the STAR III Merger.

Q: What is the STAR III Merger, and what is the SIR Merger?

A: STAR III and STAR have entered into the STAR III Merger Agreement pursuant to which STAR III will merge with and into Merger Sub, with Merger Sub surviving the STAR III Merger, such that following the

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STAR III Merger, the Surviving Entity will continue as a wholly owned subsidiary of STAR. In accordance with the applicable provisions of the MGCL, the separate existence of STAR III shall cease.

STAR also entered into the SIR Merger Agreement to acquire SIR. The consummation of the SIR Merger is not contingent upon the completion of the STAR III Merger, and the consummation of the STAR III Merger is not contingent upon the completion of the SIR Merger.

The Fully Combined Company will retain the name “Steadfast Apartment REIT, Inc.,” and in the event the SIR Merger does not occur, but the STAR III Merger does, the STAR III/STAR Combined Company will retain the name “Steadfast Apartment REIT, Inc.”

Q: What will happen in the STAR III Merger?

A: At the effective time of the STAR III Merger, each issued and outstanding share of STAR III Common Stock (or fraction thereof), will be converted automatically into the right to receive 1.430 shares of STAR Common Stock (or fraction thereof) pursuant to the terms of the STAR III Merger Agreement. See “The STAR III Merger Agreement—Consideration to be Received in the STAR III Merger” beginning on page 180 for detailed descriptions of the merger consideration and treatment of securities.

Q: How will STAR stockholders be affected by the STAR III Merger and the issuance of shares of STAR Common Stock in connection with the STAR III Merger?

A: After the STAR III Merger, each STAR stockholder will continue to own the shares of STAR Common Stock that such stockholder held immediately prior to the effective time of the STAR III Merger. As a result, each STAR stockholder will own shares of common stock in a larger company with more assets. However, because STAR will be issuing new shares of STAR Common Stock to STAR III stockholders in exchange for shares of STAR III Common Stock in the STAR III Merger, each outstanding share of STAR Common Stock immediately prior to the effective time of the STAR III Merger will represent a smaller percentage of the aggregate number of shares of the STAR Common Stock outstanding after the STAR III Merger. Upon completion of the STAR III Merger, based on the number of shares of STAR Common Stock and STAR III Common Stock outstanding on September 30, 2019, continuing STAR stockholders will own approximately 81% of the issued and outstanding shares of STAR III/STAR Combined Company common stock, and former STAR III stockholders will own approximately 19% of the issued and outstanding shares of common stock of the STAR III/STAR Combined Company. Upon completion of both Mergers, continuing STAR stockholders will own approximately 48% of the issued and outstanding shares of Fully Combined Company common stock, and former STAR III stockholders and SIR stockholders will own approximately 11% and 41%, respectively, of the issued and outstanding shares of common stock of the Fully Combined Company. See “The STAR III Merger Agreement—Consideration to be Received in the STAR III Merger” beginning on page 180 for additional information.

Q: Why am I receiving this proxy statement/prospectus?

A: The STAR III Board is using this proxy statement/prospectus to solicit proxies of STAR III stockholders in connection with the STAR III Special Meeting. In addition, STAR is using this proxy statement/prospectus as a prospectus for STAR III stockholders because STAR is issuing shares of STAR Common Stock as consideration for the STAR III Merger.

The STAR III Merger cannot be completed unless the holders of STAR III Common Stock vote to approve the STAR III Merger and the STAR III Charter Amendment.

This proxy statement/prospectus contains important information about the STAR III Merger, and you should read it carefully. The enclosed voting materials allow you to vote your shares of STAR III Common Stock by proxy without attending the STAR III Special Meeting in person.

Your vote is very important. You are encouraged to authorize your proxy as promptly as possible.

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Q: Why is the STAR III Charter Amendment proposed?

A: The STAR III Charter presently contains substantive and procedural requirements for certain transactions, which are referred to as“Roll-Up Transactions” involving a“Roll-Up Entity.” The STAR III Merger would be a“Roll-Up Transaction” under the definition in the STAR III Charter. Pursuant to these“Roll-Up” provisions of the STAR III Charter, STAR III stockholders who vote “Against” the proposal to approve the STAR III Merger would be entitled to the choice of: (1) accepting the shares of STAR Common Stock or (2) one of the following: (a) remaining as holders of STAR III Common Stock and preserving their interests therein on the same terms and conditions as existed previously or (b) receiving cash in an amount equal to the stockholder’s pro rata share of the appraised value of STAR III’s net assets. In addition, under the STAR III Charter, STAR III would be prohibited from participating in anyRoll-Up Transaction (1) that would result in the STAR III stockholders having voting rights in aRoll-Up Entity that are less than those provided in the STAR III Charter, (2) that includes provisions that would operate to materially impede or frustrate the accumulation of shares by any purchaser of the securities of theRoll-Up Entity, except to the minimum extent necessary to preserve the tax status of theRoll-Up Entity, or which would limit the ability of an investor to exercise the voting rights of its securities of theRoll-Up Entity on the basis of the number of shares held by that investor, (3) in which investors’ rights to access of records of theRoll-Up Entity would be less than those provided in the STAR III Charter, or (4) in which any of the costs of theRoll-Up Transaction would be borne by STAR III if theRoll-Up Transaction is rejected by the STAR III stockholders.

The STAR III Board believes that the effect of these provisions, if not amended, would have made the STAR III Merger more difficult and costly to complete. Because of the effect of these provisions on the STAR III Merger, STAR III and STAR determined that it was necessary to amend the STAR III Charter to eliminate these provisions. Accordingly, approval of the STAR III Charter Amendment is a condition to each party’s obligation to complete the STAR III Merger. See “Proposals Submitted to STAR III Stockholders—STAR III Charter Amendment Proposal” on page 119 for a detailed discussion of the STAR III Charter Amendment. A copy of the STAR III Charter Amendment is attached to this proxy statement/prospectus as Annex B.

Q: Am I being asked to vote on any other proposals at the STAR III Special Meeting in addition to the STAR III Merger Proposal and STAR III Charter Amendment Proposal?

A: Yes. At the STAR III Special Meeting, STAR III stockholders will be asked to consider and vote to approve one or more adjournments of the STAR III Special Meeting to another date, time or place, if necessary or appropriate, as determined by the chairman of the STAR III Special Meeting, to solicit additional proxies in favor of the proposal to approve the STAR III Merger and/or the STAR III Charter Amendment, which is referred to as the “adjournment proposal.”

Q: How does the STAR III Board recommend that STAR III stockholders vote?

A: The STAR III Board recommends that STAR III stockholders vote FOR the proposal to approve the STAR III Merger, FOR the proposal to approve the STAR III Charter Amendment and FOR the proposal to adjourn the STAR III Special Meeting, if necessary or appropriate, to solicit additional proxies in favor of the proposal to approve the STAR III Merger and STAR III Charter Amendment.

For a more complete description of the recommendation of the STAR III Board, see “The STAR III Merger—Recommendation of the STAR III Board and Its Reasons for the STAR III Merger” beginning on page 134.

Q: Will STAR III and STAR continue to pay dividends or distributions prior to the closing of the STAR III Merger?

A: Yes. The STAR III Merger Agreement permits the authorization and payment by STAR III of distributions in the ordinary course of business and any distribution that is reasonably necessary to maintain its REIT qualification and/or to avoid the imposition of U.S. federal income or excise tax.

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Similarly, the STAR III Merger Agreement permits the authorization and payment by STAR of dividends in the ordinary course of business and any distribution that is reasonably necessary to maintain its REIT qualification and/or to avoid the imposition of U.S. federal income or excise tax.

Q: What fees will STAR III Advisor receive in connection with the STAR III Merger?

A: STAR III Advisor serves as the external advisor for STAR III. Concurrently with the entry into the STAR III Merger Agreement, STAR III, STAR III OP and STAR III Advisor entered into a termination letter agreement (the “Termination Agreement”), effective as of August 5, 2019. Pursuant to the Termination Agreement, the STAR III Advisory Agreement will be terminated at the effective time of the STAR III Merger. Also pursuant to the Termination Agreement, STAR III Advisor waived any disposition fee to which it otherwise would be entitled pursuant to the STAR III Advisory Agreement related to the STAR III Merger. However, the controlling persons of the Sponsor control, directly or indirectly, STAR Advisor, and in connection with the STAR III Merger, pursuant to the STAR Advisory Agreement, STAR Advisor will be entitled to an acquisition fee equal to 1.0% of the “cost of investment” (as defined in the STAR Advisory Agreement) in the STAR III Merger and a loan coordination fee equal to 1.0% of the amount of debt assumed by STAR in connection with the STAR III Merger.

Q: When and where is the STAR III Special Meeting?

A: The STAR III Special Meeting will be held on March 2, 2020, at 3:30 p.m. Pacific Time at the offices of STAR III, located at 18100 Von Karman Avenue, Suite 500, Irvine, California 92612. If you need directions to the location of the STAR III Special Meeting, please contact Investor Relations at (949)852-0700.

Q: Who can vote at the STAR III Special Meeting?

A: All holders of STAR III Common Stock of record as of the close of business on December 16, 2019, the record date for determining stockholders entitled to notice of and to vote at the STAR III Special Meeting, are entitled to receive notice of and to vote at the STAR III Special Meeting, except that while STAR III Advisor, any director of STAR III and any of their affiliates are entitled to vote on the STAR III Charter Amendment proposal and the adjournment proposal, they are not entitled to vote on the proposal to approve the STAR III Merger. Each eligible voting share of STAR III Common Stock is entitled to one vote on each proposal presented at the STAR III Special Meeting. As of the record date, there were 8,572,832 shares of STAR III Common Stock outstanding held by approximately 4,800 holders of record (which includes 24,276 restricted Class A shares of common stock held or controlled by STAR III’s independent directors, 2,808 Class A shares of common stock held by Ana Marie del Rio, 1,111 Class A shares of common stock held by Ella S. Neyland, 19,857 Class A shares of common stock held by Rodney F. Emery and 8,000 Class A shares of common stock held by STAR III Advisor).

Q: What constitutes a quorum?

A: The STAR III Charter and STAR III bylaws provide that the presence in person or by proxy of stockholders entitled to cast at least 50% of all the votes entitled to be cast constitutes a quorum at a meeting of its stockholders. Shares that are voted and shares abstaining from voting are treated as being present at the STAR III Special Meeting for purposes of determining whether a quorum is present.

Q: Do any of STAR III’s executive officers or directors have interests in the STAR III Merger that may differ from those of STAR III stockholders?

A: Some of STAR III’s executive officers and directors have interests in the STAR III Merger that are different from, or in addition to, their interests as STAR III stockholders. The independent members of the STAR III Board are aware of and considered these interests, among other matters, in evaluating the STAR III Merger Agreement, STAR III Merger and the STAR III Charter Amendment and in recommending that STAR III stockholders vote FOR the proposal to approve the STAR III Merger, FOR the proposal to approve the

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STAR III Charter Amendment, and FOR the adjournment proposal. For a description of these interests, refer to the section entitled “The STAR III Merger—Interests of STAR III’s Directors and Executive Officers in the STAR III Merger” on page 151.

Q: When is the STAR III Merger expected to be completed?

A: STAR III and STAR expect to complete the STAR III Merger as soon as reasonably practicable following satisfaction of all of the required conditions set forth in the STAR III Merger Agreement. If STAR III stockholders approve the STAR III Merger and the STAR III Charter Amendment, and if the other conditions to closing the STAR III Merger are satisfied or waived, it is currently expected that the STAR III Merger will be completed in the first quarter of 2020. However, there is no guarantee that the conditions to the STAR III Merger will be satisfied or that the STAR III Merger will close on the expected timeline or at all. STAR III and STAR have a mutual right to terminate the STAR III Merger Agreement if the STAR III Merger is not completed by the Outside Date. See “The STAR III Merger Agreement—Termination of the STAR III Merger Agreement—Termination by Either STAR III or STAR” beginning on page 197.

Q: How has my investment performed?

A: For purposes of the following, we assume that the STAR III Merger closed on September 30, 2019 and a purchase price of $24.00 per share of STAR III, which is the average price paid for all classes of STAR III Common Stock in the aggregate.

“Early” investors, or those investors who acquired STAR III Common Stock on February 5, 2016, the first day of STAR III’s initial public offering, and received all cash distributions (i.e., such investors did not participate in STAR III’s distribution reinvestment plan), would have received cumulative cash of approximately $4.79 per share, or 20.0% of their invested capital of $24.00. Such cumulative cash plus $22.65, the current estimated value of the 1.430 shares of STAR Common Stock to be received per share of STAR III Common Stock as stock consideration in the STAR III Merger using STAR’s most recently estimated value per share of STAR Common Stock as of December 31, 2018, totals $27.44.

“Later” investors, or those investors who acquired STAR III Common Stock on August 31, 2018, the last day of STAR III’s initial public offering, and received all cash distributions (i.e. did not participate in STAR III’s distribution reinvestment plan), would have received cumulative cash of approximately $1.62 per share, or 6.8% of their invested capital of $24.00. Such cumulative cash plus $22.65, the current estimated value of the 1.430 shares of STAR Common Stock to be received per share of STAR III Common Stock as stock consideration in the STAR III Merger using STAR’s most recently estimated value per share of STAR Common Stock as of December 31, 2018, totals $24.27.

A STAR III Stockholder that becomes a stockholder of STAR may not realize STAR’s most recently estimated net asset value per share of STAR Common Stock in the event he or she attempts to sell its shares of STAR Common Stock or upon the liquidation of STAR.

Q: What are the anticipated U.S. federal income tax consequences to me of the proposed STAR III Merger?

A: The STAR III Merger is intended to qualify as a “reorganization” within the meaning of Section 368(a) of the Code, and the closing of the STAR III Merger is conditioned on the receipt by each of STAR III and STAR of an opinion from its respective counsel to that effect. Assuming the STAR III Merger qualifies as a reorganization, a holder of shares of STAR III Common Stock generally will not recognize gain or loss for U.S. federal income tax purposes upon the receipt of STAR Common Stock in exchange for shares of STAR III Common Stock in connection with the STAR III Merger.

Q: How will my receipt of STAR Common Stock in exchange for my STAR III Common Stock be recorded? Will I have to take any action in connection with the recording of such ownership of STAR Common Stock? Will such shares of STAR Common Stock be certificated or in book-entry form?

A: Pursuant to the STAR III Merger Agreement, as soon as practicable following the STAR III Merger effective time, STAR will cause DST Systems, Inc., the exchange agent in connection with the STAR III

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Merger, to record the issuance of STAR Common Stock to each holder of STAR III Common Stock (including any fractional shares thereof) as merger consideration pursuant to the STAR III Merger Agreement. If the STAR III Merger is consummated, you will not have to take any action in connection with the recording of your ownership of STAR Common Stock. Shares of STAR Common Stock issued as merger consideration to you will not be certificated and will be in book-entry form and will be recorded in the books and records of STAR.

Q: Will my shares of STAR Common Stock be publicly traded?

A: Shares of STAR Common Stock are not publicly traded; however, the listing of the STAR III/STAR Combined Company’s or the Fully Combined Company’s shares on a national stock exchange remains an option that would result in a publicly traded market for STAR Common Stock.

Q: Are STAR III stockholders entitled to appraisal rights?

A: STAR III stockholders are not entitled to exercise any rights of an objecting stockholder provided for under Title 3, Subtitle 2 of the MGCL in connection with the STAR III Merger.

Q: What do I need to do now?

A: After you have carefully read this proxy statement/prospectus, please respond by completing, signing and dating your proxy card or voting instruction card and returning it in the enclosedpre-addressed postage-paid envelope or by submitting your proxy by one of the other methods specified in your proxy card or voting instruction card as promptly as possible so that your shares of STAR III Common Stock will be represented and voted at the STAR III Special Meeting. The method by which you submit a proxy will in no way limit your right to vote at the STAR III Special Meeting, if you later decide to attend the meeting in person.

However, if your shares of STAR III Common Stock are held in the name of a broker or other nominee, you must obtain a legal proxy, executed in your favor, from your broker or other nominee, to be able to vote in person at the STAR III Special Meeting. Obtaining a legal proxy may take several days. Please refer to your proxy card or voting instruction card forwarded by your broker or other nominee to see which voting options are available to you.

Q: How will my proxy be voted?

A: All shares of STAR III Common Stock entitled to vote and represented by properly completed proxies received prior to the STAR III Special Meeting, and not revoked, will be voted at the STAR III Special Meeting as instructed on the proxies. If you properly sign, date and return a proxy card, but do not indicate how your shares of STAR III Common Stock should be voted on any proposal, the shares of STAR III Common Stock represented by your proxy will be voted as the STAR III Board recommends. If your shares are held in street name through a broker or other nominee and you do not provide voting instructions to your broker or other nominee, your shares of STAR III Common Stock willNOT be voted at the STAR III Special Meeting and may result in brokernon-votes.

Q: Can I, as a STAR III stockholder, revoke my proxy or change my vote after I have delivered my proxy?

A: Yes. You may revoke your proxy or change your vote at any time before your proxy is voted at the STAR III Special Meeting. For information on how to revoke your proxy or change your vote, see “The STAR III Special Meeting—Revocation of Proxies or Voting Instructions” beginning on page 118.

Q: What does it mean if I receive more than one set of voting materials for the STAR III Special Meeting?

A: You may receive more than one set of voting materials for the STAR III Special Meeting, including multiple copies of this proxy statement/prospectus and multiple proxy cards or voting instruction cards. For example, if you hold your shares of STAR III Common Stock in more than one brokerage account, you will

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receive a separate voting instruction card for each brokerage account in which you hold your shares of STAR III Common Stock. If you are a holder of record and your shares of STAR III Common Stock are registered in more than one name, you may receive more than one proxy card. Please complete, sign, date and return each proxy card and voting instruction card that you receive or, if available, please submit your proxy by telephone or over the Internet.

Q: Do I need identification to attend the STAR III Special Meeting in person?

A: Yes. Please bring proper identification, together with proof that you are a record owner of shares of STAR III Common Stock. If your shares are held in street name, please bring acceptable proof of ownership, such as a letter from your broker or an account statement showing that you beneficially owned shares of STAR III on the record date. If your shares are held in street name, you must obtain a legal proxy from your broker or other nominee in order to vote at the STAR III Special Meeting.

Q: Will a proxy solicitor be used?

A: Yes. STAR III has contracted with Mediant Communications, Inc. (“Mediant”) to assist STAR III in the distribution of proxy materials and the solicitation of proxies. STAR III expects to pay Mediant fees of approximately $122,500 to solicit and distribute proxies, which includes estimated postage and otherout-of-pocket expenses of Mediant, plus other fees and expenses for other services related to this proxy solicitation, including, but not limited to, the review of proxy materials. STAR III will also reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonableout-of-pocket expenses for forwarding proxy and solicitation materials to STAR III’s stockholders.

Q: If I plan to attend the STAR III Special Meeting in person, should I notify anyone?

A: While you are not required to notify anyone in order to attend the STAR III Special Meeting, if you do plan to attend the meeting, STAR III would appreciate it if you would mark the appropriate box on the applicable enclosed proxy card to let the management of STAR III know how many stockholders will be attending the meeting so that a suitable meeting room for the attendees can be prepared.

Q: Who can answer my questions?

A: If you have any questions about the STAR III Merger or how to submit your proxy or need additional copies of this proxy statement/prospectus, the enclosed proxy card or voting instructions, you should contact:

STAR III:

Steadfast Apartment REIT III, Inc.

18100 Von Karman Avenue, Suite 500

Irvine, California 92612

(949)852-0700

Mediant:

Mediant Communications, Inc.

P.O. Box 8035

Cary, NC 27512

(844) 371-1437

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SUMMARY

The following summary highlights some of the information contained in this proxy statement/prospectus. This summary may not contain all of the information that is important to you. For a more complete description of the STAR III Merger Agreement, STAR III Merger and the STAR III Charter Amendment, STAR III and STAR encourage you to read carefully this entire proxy statement/prospectus, including the attached Annexes and the other documents to which we have referred you because this section does not provide all the information that might be important to you with respect to the STAR III Merger. See also the section entitled “Where You Can Find More Information” on page 224. We have included page references to direct you to a more complete description of the topics presented in this summary.

The Companies

Steadfast Apartment REIT III, Inc. (Beginning on page 80)

STAR III is a public,non-traded REIT that was formed as a Maryland corporation on July 29, 2015, that elected to be taxed as a REIT for U.S. federal income tax purposes for the year ended December 31, 2016, and each year thereafter.

STAR III owns and operates a portfolio of multifamily properties located in targeted markets throughout the United States. As of September 30, 2019, STAR III owned ten multifamily properties comprising a total of 2,775 apartment homes. STAR III owns its interests in all of its properties and conducts substantially all of its business through STAR III OP, a Delaware limited partnership formed on July 29, 2015. STAR III is externally managed by STAR III Advisor. The principal executive offices of STAR III are located at 18100 Von Karman Avenue, Suite 500, Irvine, California.

For more information on STAR III, please see STAR III’s Annual Report onForm 10-K for the fiscal year ended December 31, 2018 and Quarterly Report onForm 10-Q for the period ended September 30, 2019, copies of which are attached to this proxy statement/prospectus as Annex D and Annex E, respectively.

Steadfast Apartment REIT, Inc. and SIII Subsidiary, LLC (Beginning on page 53)

STAR is a public,non-traded REIT that was formed as a Maryland corporation on August 22, 2013, and elected to be taxed as a REIT for U.S. federal income tax purposes for the year ended December 31, 2014, and each year thereafter.

STAR owns and operates a diverse portfolio of multifamily properties throughout the United States. As of September 30, 2019, STAR owned 33 multifamily properties comprising a total of 11,455 apartment homes and one parcel of land held for the development of apartment homes. STAR may acquire additional properties or pursue multifamily developments in the future. STAR owns its interests in all of its properties and conducts substantially all of its business through STAR OP, a Delaware limited partnership formed on August 27, 2013. STAR is externally managed by STAR Advisor. The principal executive offices of STAR are located at 18100 Von Karman Avenue, Suite 500, Irvine, California.

SIII Subsidiary, LLC, the Merger Sub, is a Maryland limited liability company and direct wholly-owned subsidiary of STAR formed solely for the purpose of entering into the STAR III Merger Agreement and effecting the STAR III Merger. Upon completion of the STAR III Merger, STAR III will be merged with and into Merger Sub, with Merger Sub continuing as the Surviving Entity and a wholly-owned subsidiary of STAR. Merger Sub has not conducted any activities other than those incidental to its formation and the matters contemplated by the STAR III Merger Agreement.

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For more information on STAR, please see STAR’s Annual Report onForm 10-K for the fiscal year ended December 31, 2018 and Quarterly Report onForm 10-Q for the period ended September 30, 2019, copies of which are attached to this proxy statement/prospectus as Annex F and Annex G, respectively.

The STAR III/STAR Combined Company (Beginning on page 110)

References to the “STAR III/STAR Combined Company” are to STAR III and STAR after the effective time of the STAR III Merger. The STAR III/STAR Combined Company will be named “Steadfast Apartment REIT, Inc.” and will continue to be a Maryland corporation. The STAR III/STAR Combined Company after the completion of the STAR III Merger is expected to have a gross real estate value of approximately $2.2 billion, and will own 43 properties in 12 states, comprising a total of 14,230 apartment homes and one parcel of land held for the development of apartment homes (based on data as of September 30, 2019).

The business of the STAR III/STAR Combined Company will be operated through STAR III OP, STAR OP and their subsidiaries. STAR will have the full, exclusive and complete responsibility for and discretion in theday-to-day management and control of STAR III OP and STAR OP.

The STAR III/STAR Combined Company’s principal executive offices will continue to be located at 18100 Von Karman Avenue, Suite 500, Irvine, California, and its telephone number is (949)852-0700.

Fully Combined Company (Beginning on page 102)

References to the “Fully Combined Company” are to STAR III, SIR, and STAR after the effective time of each of the STAR III Merger and SIR Merger, the closings of which are not cross-contingent. The Fully Combined Company will be named “Steadfast Apartment REIT, Inc.” and will continue to be a Maryland corporation. The Fully Combined Company after the completion of the Mergers is expected to have a gross real estate value of approximately $3.2 billion, and will own 70 properties in 14 states, comprising a total of 21,757 apartment homes, a 10% interest in one unconsolidated joint venture that owns 20 properties with a total of 4,584 apartment homes and one parcel of land held for the development of apartment homes (based on data as of September 30, 2019).

The business of the Fully Combined Company will be operated through STAR III OP, SIR OP, STAR OP and their subsidiaries. STAR will have the full, exclusive and complete responsibility for and discretion in theday-to-day management and control of STAR III OP, SIR OP and STAR OP.

The Fully Combined Company’s principal executive offices will continue to be located at 18100 Von Karman Avenue, Suite 500, Irvine, California, and its telephone number is (949)852-0700.

The STAR III Merger

The STAR III Merger Agreement (Beginning on page 180)

On August 5, 2019, the STAR III Parties and STAR Parties entered into the STAR III Merger Agreement, which is attached as Annex A to this proxy statement/prospectus, and incorporated herein by reference. STAR III and STAR encourage you to carefully read the STAR III Merger Agreement in its entirety because it is the principal document governing the STAR III Merger and the other transactions contemplated by the STAR III Merger Agreement.

The STAR III Merger Agreement provides that the closing of the STAR III Merger will take place at 10:00 a.m. Eastern Time no later than the third business day following the date on which the last of the conditions to closing of the STAR III Merger has been satisfied or waived, or at such other place and date as may be agreed to in writing by STAR III and STAR.

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The STAR III Merger (Beginning on page 121)

Subject to the terms and conditions of the STAR III Merger Agreement, at the completion of the STAR III Merger, STAR III will merge with and into Merger Sub, with Merger Sub surviving the STAR III Merger as the Surviving Entity, such that following the STAR III Merger, the Surviving Entity will continue as a wholly owned subsidiary of STAR. The STAR III Merger is intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Code.

The Merger Consideration (Beginning on page 180)

At the effective time of the STAR III Merger and by virtue of the STAR III Merger, each issued and outstanding share of STAR III Common Stock (and each fraction thereof) will be cancelled and converted into the right to receive 1.430 shares (or corresponding fraction thereof) of STAR Common Stock.

Upon completion of the STAR III Merger, based on the number of shares of STAR Common Stock and STAR III Common Stock outstanding on September 30, 2019, continuing STAR stockholders will own approximately 81% of the issued and outstanding shares of the STAR III/STAR Combined Company common stock, and former STAR III stockholders will own approximately 19% of the issued and outstanding shares of common stock of the STAR III/STAR Combined Company. Upon completion of both Mergers, continuing STAR stockholders will own approximately 48% of the issued and outstanding shares of Fully Combined Company common stock, and former STAR III stockholders and SIR stockholders will own approximately 11% and 41%, respectively, of the issued and outstanding shares of common stock of the Fully Combined Company.

Reasons for the STAR III Merger (Beginning on page 134)

In evaluating the STAR III Merger Agreement, the STAR III Merger, the STAR III Charter Amendment, and the other transactions contemplated by the STAR III Merger Agreement, the STAR III Board considered the recommendation of the STAR III Special Committee. The STAR III Special Committee, prior to making its unanimous recommendation, evaluated the STAR III Merger Agreement, the STAR III Merger, the STAR III Charter Amendment and the other transactions contemplated by the STAR III Merger Agreement in consultation with its outside legal and financial advisors. In deciding to declare advisable and approve the STAR III Merger Agreement, the STAR III Merger, the STAR III Charter Amendment, and the other transactions contemplated by the STAR III Merger Agreement, and to recommend that STAR III stockholders vote to approve the STAR III Merger and the STAR III Charter Amendment pursuant to the STAR III Merger Agreement, the STAR III Board and STAR III Special Committee considered a number of factors, including various factors that the STAR III Board and the STAR III Special Committee viewed as supporting their respective decisions with respect to the STAR III Merger Agreement, the STAR III Merger, the STAR III Charter Amendment and the other transactions contemplated by the STAR III Merger Agreement. In the course of their evaluations of the proposed transactions, the STAR III Special Committee and the STAR III Board also considered a variety of risks and other potentially negative factors concerning the STAR III Merger Agreement, the STAR III Merger and the other transactions contemplated by the STAR III Merger Agreement.

A fulsome discussion of certain factors considered by the STAR III Special Committee and the STAR III Board in reaching their decisions to approve the STAR III Merger Agreement, the STAR III Merger, the STAR III Charter Amendment, and the other transactions contemplated by the STAR III Merger Agreement can be found in the section entitled “The STAR III Merger—Recommendation of the STAR III Board and Its Reasons for the STAR III Merger” beginning on page 134.

In evaluating the STAR III Merger Agreement, STAR III Merger, the STAR III Charter Amendment, and the other transactions contemplated by the STAR III Merger Agreement, the STAR Board considered the recommendation of the STAR Special Committee. The STAR Special Committee, prior to making its unanimous

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recommendation, consulted with its outside legal and financial advisors. In deciding to declare advisable and approve the STAR III Merger Agreement, the STAR III Merger, and the other transactions contemplated by the STAR III Merger Agreement, the STAR Board and STAR Special Committee considered a number of factors, including various factors that the STAR Board and the STAR Special Committee viewed as supporting their respective decisions with respect to the STAR III Merger Agreement, the STAR III Merger, and the other transactions contemplated by the STAR III Merger Agreement. A fulsome discussion of certain factors considered by the STAR Special Committee and the STAR Board in reaching their decisions to approve the STAR III Merger Agreement, the STAR III Merger, and the other transactions contemplated by the STAR III Merger Agreement can be found in the section entitled “The STAR III Merger—STAR’s Reasons for the STAR III Merger” beginning on page 134.

Recommendation of the STAR III Board(Beginning on page 134)

On August 5, 2019, after careful consideration, members of the STAR III Board, based on the unanimous recommendation of the STAR III Special Committee, (i) determined that the STAR III Merger, the STAR III Charter Amendment and the other transactions contemplated by the STAR III Merger Agreement are advisable and in the best interests of STAR III and its stockholders and, with respect to the STAR III Merger Agreement and the STAR III Merger, are fair and reasonable to STAR III and on terms and conditions no less favorable to STAR III than those available from third parties, and (ii) approved the STAR III Merger Agreement, the STAR III Merger, the STAR III Charter Amendment and the other transactions contemplated by the STAR III Merger Agreement. Certain factors considered by the STAR III Board in reaching its decision to approve the STAR III Merger Agreement, the STAR III Merger, the STAR III Charter Amendment and the other transactions contemplated by the STAR III Merger Agreement can be found in the section entitled “The STAR III Merger—Recommendation of the STAR III Board and Its Reasons for the STAR III Merger” beginning on page 134.

The STAR III Board recommends that STAR III stockholders vote (i) FOR the proposal to approve the STAR III Merger, (ii) FOR the proposal to approve the STAR III Charter Amendment and (iii) FOR the adjournment proposal.

Summary of Risks Related to the STAR III Merger(Beginning on page 30)

You should consider carefully the risk factors described below together with all of the other information included in this proxy statement/prospectus before deciding how to vote. The risks related to the STAR III Merger are described under the section “Risk Factors—Risks Related to the STAR III Merger.” Certain of the risks related to the STAR III Merger, include, among others, the following:

• The merger consideration would not be adjusted in the event of any change in the relative values of STAR III or STAR.

• Completion of the STAR III Merger is subject to many conditions and if these conditions are not satisfied or waived, the STAR III Merger will not be completed, which could result in the expenditure of significant unrecoverable transaction costs.

• Completion of the STAR III Merger is not contingent upon the completion of the SIR Merger, and failure to complete the SIR Merger could negatively impact the future business and financial results of STAR.

• Failure to complete the STAR III Merger could negatively impact the future business and financial results of STAR III.

• The pendency of the STAR III Merger, including as a result of the restrictions on the operation of STAR III’s and STAR’s business during the period between signing the STAR III Merger Agreement and the completion of the STAR III Merger, could adversely affect the business and operations of STAR III, STAR or both.

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• Some of the directors and executive officers of STAR III have interests in seeing the STAR III Merger completed that are different from, or in addition to, those of the STAR III stockholders.

• The STAR III Merger and STAR III Charter Amendment are subject to approval by STAR III stockholders.

• The STAR III Merger Agreement prohibits STAR III from soliciting proposals after the Go Shop Period End Time (as defined below), and places conditions on its ability to accept a Superior Proposal, which may adversely affect STAR III stockholders.

• STAR III and STAR each expect to incur substantial expenses related to the STAR III Merger.

• The STAR III Merger Agreement, and the other agreements contemplated by the STAR III Merger Agreement, contain provisions that could discourage a potential competing acquirer of STAR III or could result in a competing Acquisition Proposal being at a lower price than it might otherwise be.

• The STAR III Merger will not result in a Liquidity Event for STAR III Stockholders. If and when the STAR III/STAR Combined Company or Fully Combined Company, as applicable, completes a liquidity event, the market value ascribed to the shares of common stock of the STAR III/STAR Combined Company or Fully Combined Company, as applicable, upon the liquidity event may be significantly lower than the estimated net asset value per share of STAR considered by the STAR III Board in approving and recommending the STAR III Merger.

• Following the Mergers, STAR III stockholders will receive a lower dollar amount per share in monthly distributions if STAR continues to pay distributions at the current rate.

• STAR III stockholders’ ownership interests will be diluted by the STAR III Merger.

• Litigation challenging the STAR III Merger may increase transaction costs and prevent the STAR III Merger from becoming effective within the expected timeframe.

The STAR III Special Meeting (Beginning on page 115)

The STAR III Special Meeting will be held at the offices of STAR III at 18100 Von Karman Avenue, Suite 500, Irvine, California, commencing at 3:30 p.m. Pacific Time on March 2, 2020.

At the STAR III Special Meeting, the STAR III stockholders will be asked to consider and vote upon the following matters:

1. a proposal to approve the STAR III Merger;

2. a proposal to approve the STAR III Charter Amendment; and

3. a proposal to adjourn the STAR III Special Meeting to solicit additional proxies in favor of the STAR III Merger Proposal and STAR III Charter Amendment Proposal if there are not sufficient votes to approve the STAR III Merger Proposal and/or STAR III Charter Amendment Proposal, if necessary and as determined by the chair of the STAR III Special Meeting.

Approval of the proposal to approve the STAR III Merger requires the affirmative vote of a majority of all of the votes entitled to be cast on such proposal.

Approval of the proposal to approve the STAR III Charter Amendment requires the affirmative vote of a majority of all of the votes entitled to be cast on such proposal.

Approval of the proposal to approve one or more adjournments of the STAR III Special Meeting to another date, time or place, if necessary or appropriate, as determined by the chair of the STAR III Special Meeting, to solicit additional proxies in favor of the proposal to approve the STAR III Merger and/or the STAR III Charter Amendment requires the affirmative vote of a majority of all of the votes cast on such proposal.

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Your vote as a STAR III stockholder is very important regardless of how many shares of STAR III Common Stock you own. Accordingly, please sign and return the enclosed proxy card whether or not you plan to attend the STAR III Special Meeting in person.

Opinion of STAR III Special Committee’s Financial Advisor

On August 5, 2019, Houlihan Lokey verbally rendered its opinion, which was subsequently confirmed in writing by delivery of Houlihan Lokey’s written opinion addressed to the STAR III Special Committee, dated August 5, 2019, as to, as of such date, the fairness, from a financial point of view, to the holders of STAR III Common Stock of the 1.430x exchange ratio provided for in the STAR III Merger pursuant to the STAR III Merger Agreement.

Houlihan Lokey’s opinion was directed to the STAR III Special Committee (in its capacity as such) and only addressed the fairness, from a financial point of view, to the holders of STAR III Common Stock of the exchange ratio provided for in the STAR III Merger pursuant to the STAR III Merger Agreement and did not address any other aspect or implication of the STAR III Merger or any other agreement, arrangement or understanding. The summary of Houlihan Lokey’s opinion in this proxy statement/prospectus is qualified in its entirety by reference to the full text of Houlihan Lokey’s written opinion, which is attached as Annex C to this proxy statement/prospectus and describes the procedures followed, assumptions made and qualifications and limitations on the review undertaken and other matters considered by Houlihan Lokey in connection with the preparation of its opinion. However, neither Houlihan Lokey’s opinion nor the summary of its opinion and the related analyses set forth in this proxy statement/prospectus are intended to be, and do not constitute, advice or a recommendation to the STAR III Special Committee, the STAR III Board, any security holder of STAR III or any other person as to how to act or vote with respect to any matter relating to the STAR III Merger.

See “The STAR III Merger—Opinion of STAR III Special Committee’s Financial Advisor” beginning on page 140.

Treatment of STAR III Equity Awards (See pages 152 and 180)

STAR III’s independent directors hold restricted shares of STAR III Common Stock issued pursuant to STAR III’s Independent Directors Compensation Plan (the “STAR III Incentive Plan”). At the effective time of the STAR III Merger, each of these outstanding restricted shares of STAR III Common Stock will vest and all restrictions thereon will lapse, and each such STAR III restricted share will be cancelled and converted into the right to receive 1.430 shares of STAR Common Stock pursuant to the terms of the STAR III Merger Agreement.

For more information regarding treatment of STAR III equity awards, see “The STAR III Merger—Interests of STAR III’s Directors and Executive Officers in the STAR III Merger—Treatment of STAR III Equity Awards” beginning on page 152 and “The STAR III Merger Agreement—Consideration to be Received in the STAR III Merger” beginning on page 180.

Stock Ownership of Directors and Executive Officers of STAR III (See page 151)

At the close of business on the STAR III record date, the executive officers and directors of STAR III and their affiliates collectively held 56,052 shares of STAR III Common Stock, collectively representing approximately 0.65% of all the shares of STAR III Common Stock outstanding and entitled to vote. See “The Companies—STAR III—Security Ownership of Certain Beneficial Owners”.

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Directors and Management of the STAR III/STAR Combined Company After the STAR III Merger(Beginning on page 153)

Pursuant to the STAR III Merger Agreement, STAR III has the right to designate one independent director to the STAR Board. STAR III designated Stephen R. Bowie for election to the STAR Board to serve until STAR’s first annual meeting of stockholders following the completion of the STAR III Merger and until his successor is duly elected and qualifies. The STAR Board currently consists of five directors, and upon the consummation of the STAR III Merger, all of the directors of STAR immediately prior to the effective time of the STAR III Merger along with Mr. Bowie are expected to comprise the board of directors of the STAR III/STAR Combined Company after the effective time of the STAR III Merger. In such event, Mr. Bowie would receive 3,333 shares of restricted STAR Common Stock pursuant to STAR’s independent directors’ compensation plan in connection with his election to the STAR Board. See “The Companies—Steadfast Apartment REIT, Inc. and SIII Subsidiary, LLC—Equity Plan Compensation” for more information regarding the terms of the restricted STAR Common Stock.

Pursuant to the SIR Merger Agreement, SIR has the right to designate one independent director to the STAR Board. SIR designated Ned W. Brines for election to the STAR Board to serve until STAR’s first annual meeting of stockholders following the completion of the SIR Merger and until his successor is duly elected and qualifies. Upon consummation of the Mergers, all of the directors of STAR immediately prior to the effective time of the STAR III Merger and SIR Merger, along with Messrs. Bowie and Brines, are expected to comprise the board of directors of the Fully Combined Company. In such event, Messrs. Bowie and Brines would each receive 3,333 shares of restricted STAR Common Stock pursuant to STAR’s independent directors’ compensation plan in connection with his election to the STAR Board. See “The Companies—Steadfast Apartment REIT, Inc. and SIII Subsidiary, LLC—Equity Plan Compensation” for more information regarding the terms of the restricted STAR Common Stock.

The executive officers of STAR immediately prior to the effective time of the STAR III Merger will continue to serve as the executive officers of the STAR III/STAR Combined Company, with Rodney F. Emery continuing to serve as the Chief Executive Officer and Chairman of the STAR III/STAR Combined Company board of directors, Ella S. Neyland continuing to serve as President of the STAR III/STAR Combined Company, Kevin Keating continuing to serve as the Chief Financial Officer of the STAR III/STAR Combined Company and Ana Marie del Rio continuing to serve as Secretary of the STAR III/STAR Combined Company. See “The STAR III Merger Agreement—Directors and Management of the STAR III/STAR Combined Company After the STAR III Merger” beginning on page 153 for more information.

Interests of STAR III’s and STAR’s Directors and Executive Officers in the STAR III Merger(See page 151)

In addition to their interests in the STAR III Merger as stockholders, some of the STAR III and STAR directors and executive officers have interests in the STAR III Merger that differ from, or are in addition to, the interests of the STAR III stockholders. The STAR III Special Committee and the STAR III Board were each aware of these interests and considered them, among other things, in reaching its decision to approve the STAR III Merger, the STAR III Merger Agreement, and the other transactions contemplated by the STAR III Merger Agreement. These interests include, among other things, the fact that STAR Advisor, which is controlled, directly and indirectly, by Mr. Emery, will be entitled to an acquisition fee equal to approximately $4.7 million and a loan coordination fee equal to approximately $2.9 million upon consummation of the STAR III Merger, and the issuance of shares of STAR Common Stock to the former directors and certain executive officers of STAR III if the STAR III Merger is consummated.

Relationship of STAR III and STAR

The Sponsor, which is the sponsor of both STAR and STAR III, is majority owned and controlled indirectly by Rodney F. Emery, who owns an 86% interest in Steadfast REIT Holdings, LLC (“Steadfast REIT Holdings”),

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the parent company of the Sponsor. Mr. Emery serves as the Chairman of both the STAR III Board and STAR Board and Chief Executive Officer of STAR III and STAR. Ana Marie del Rio, the Secretary of STAR and STAR III, owns a 7% interest in Steadfast REIT Holdings. Since 2014, Ms. Neyland has earned an annual 5% profits interest from Steadfast REIT Holdings.

Mr. Emery also indirectly controls STAR Advisor and STAR III Advisor. As discussed above, in connection with the STAR III Merger, pursuant to the STAR Advisory Agreement, STAR Advisor is entitled to an acquisition fee equal to 1.0% of the “cost of investment” (as defined in the STAR Advisory Agreement) of STAR III in the STAR III Merger and a loan coordination fee equal to 1.0% of the amount of debt assumed by STAR in connection with the STAR III Merger.

Indemnification and Insurance

For a period of six years after the effective time of the STAR III Merger, pursuant to the terms of the STAR III Merger Agreement and subject to certain limitations, STAR will, and will cause the Surviving Entity to, indemnify, defend and hold harmless the current or former managers, directors, officers, partners, members, trustees, employees, agents, fiduciaries or other individuals of STAR III or any of the STAR III subsidiaries (the “Indemnified Parties”) for any action or omission or alleged action or omission at or prior to the effective time of the STAR III Merger, including with respect to the transactions contemplated by the STAR III Merger Agreement. STAR and Merger Sub have agreed that all rights to indemnification and exculpation from liabilities for acts, and advancement of expenses, provided in (i) the governing documents of STAR III or similar organizational documents or agreements of any subsidiary of STAR III and (ii) any indemnification agreements of STAR III will survive the STAR III Merger and will continue in full force and effect in accordance with their terms. For a period of six years after the effective time of the STAR III Merger, the organizational documents of STAR and the Surviving Entity and the organizational documents of any subsidiary of STAR will not have indemnification and director and officer liability limitation provisions less favorable than such provisions in the STAR III organizational documents as of the effective time of the STAR III Merger, or, if applicable, similar organizational documents or agreements of any subsidiary of STAR III.

STAR III will obtain an extended reporting period coverage under STAR III’s existing insurance programs for a period of six years after the effective time of the STAR III Merger, to be effective as of the effective time of the STAR III Merger. STAR and the Surviving Entity will not take any action to terminate or modify the terms of the extended reporting period coverage.

Dissenters’ and Appraisal Rights in the STAR III Merger(See page 181)

No dissenters’ or appraisal rights or rights of objecting stockholders will be available with respect to the STAR III Merger.

Conditions to Completion of the STAR III Merger(Beginning on page 184)

As more fully described in this proxy statement/prospectus and the STAR III Merger Agreement, the obligation of each of STAR III and STAR to complete the STAR III Merger and the other transactions contemplated by the STAR III Merger Agreement is subject to the satisfaction or, to the extent permitted by law, waiver by the applicable party, at or prior to the effective time of the STAR III Merger, of a number of closing conditions. These conditions include, among other things:

• approval by STAR III stockholders of the STAR III Merger and STAR III Charter Amendment;

• receipt of opinions of counsel concerning certain tax matters;

• the absence of any judgment, injunction, order or decree issued by any governmental authority of competent jurisdiction prohibiting the consummation of the STAR III Merger, and the absence of any law that has been enacted, entered, promulgated or enforced by any governmental authority after the

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date of the STAR III Merger Agreement that prohibits, restrains, enjoins or makes illegal the consummation of the STAR III Merger or the other transactions contemplated by the STAR III Merger Agreement;

• the registration statement of which this proxy statement/prospectus is a part having been declared effective by the SEC, no stop order suspending the effectiveness of such registration statement having been issued by the SEC and no proceeding for that purpose shall have been initiated by the SEC and not withdrawn; and

• the truth and accuracy of the representations and warranties of each party made in the STAR III Merger Agreement as of the closing, subject to certain materiality standards.

Neither STAR III nor STAR can give any assurance as to when or if all of the conditions to the consummation of the STAR III Merger will be satisfied or waived or that the STAR III Merger will occur.

The completion of the STAR III Merger is not contingent upon the completion of the SIR Merger.

See “The STAR III Merger Agreement—Conditions to Completion of the STAR III Merger” on page 184 for more information.

Regulatory Approvals Required for the STAR III Merger(See page 154)

STAR III and STAR are not aware of any material federal or state regulatory requirements that must be complied with, or regulatory approvals that must be obtained, in connection with the STAR III Merger or the other transactions contemplated by the STAR III Merger Agreement.

STAR III Go Shop Period; Acquisition Proposals (Beginning on page 192)

Until 11:59 p.m. (New York City time) on September 19, 2019 (the “Go Shop Period End Time”), under certain specified circumstances, STAR III, its subsidiaries and their respective representatives had the right to:

• initiate, solicit, encourage or facilitate any inquiries or the making of any proposal, offer or other action that constitutes, or may reasonably be expected to lead to, any Acquisition Proposal, including by way of (A) contacting third parties, (B) broadly disseminating public disclosure or (C) providing access to the properties, offices, assets, books, records and personnel of STAR III and its subsidiaries and furnishingnon-public information pursuant to (but only pursuant to) one or more acceptable confidentiality agreements; provided, however, that STAR III had previously or contemporaneously furnished, made available or provided access to suchnon-public information to STAR;

• enter into, continue or otherwise participate in any discussions or negotiations with any person relating to, or in furtherance of such inquiries, proposals, offers or other actions or to obtain, an Acquisition Proposal;

• release any person from, or refrain from enforcing, any standstill agreement or similar obligation to STAR III or its subsidiaries; or

• disclose to the STAR III stockholders any information required to be disclosed under applicable law; provided, however, that to the extent any such disclosure addresses STAR III or an Acquisition Proposal, such disclosure would be deemed to be an Adverse Recommendation Change (as later defined) if the disclosure has the effect of withdrawing or adversely modifying or is not accompanied by an express publicre-affirmation of the recommendation of the STAR III Board in favor of the STAR III Merger and the STAR III Merger Agreement.

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In accordance with the terms of the STAR III Merger Agreement, following the execution of the STAR III Merger Agreement, Houlihan Lokey, as financial advisor to the STAR III Special Committee, at the direction of the STAR III Special Committee, began soliciting inquiries and proposals from third parties. The “go shop” period expired at 11:59 p.m. (New York City time) on September 19, 2019. During the “go shop” period, Houlihan Lokey contacted 53 third parties, 15 of which executed confidentiality agreements with STAR III. Three parties submitted an indication of interest. At a telephonic meeting held on September 16, 2019, the STAR III Special Committee determined, after consultation with representatives of DLA Piper LLP (US) (“DLA Piper”) and Houlihan Lokey, who also attended the meeting, that none of the indications of interest could reasonably be expected to lead to an acquisition proposal that would be more favorable from a financial point of view to the stockholders of STAR III than the STAR III Merger.

No Solicitation and Change in Recommendation with Acquisition Proposal(Beginning on page 192)

Beginning at the Go Shop Period End Time, except as described below, the STAR III Merger Agreement provides that STAR III may not, and will cause its subsidiaries not to, initiate, solicit, knowingly encourage or facilitate any inquiries, proposals or offers for, or engage in any negotiations concerning, or provide any confidential or nonpublic information or data to, or have any discussions with, any persons relating to any inquiry, proposal, offer or other action that constitutes, or may reasonably be expected to lead to, any Acquisition Proposal.

At any time after the Go Shop Period End Time and prior to obtaining the necessary approvals of the STAR III stockholders, STAR III may, if and only to the extent that the STAR III Special Committee has either determined that an Acquisition Proposal constitutes a Superior Proposal or determined in good faith after consultation with outside legal counsel and outside financial advisors that an Acquisition Proposal could reasonably be expected to lead to a Superior Proposal:

• provide information in response to a request by a person who has made a written Acquisition Proposal that did not result from a breach by STAR III of thenon-solicitation provisions in the STAR III Merger Agreement; and

• engage or participate in any discussions or negotiations with any person who has made such a written Acquisition Proposal.

At any time prior to obtaining the necessary approvals of the STAR III stockholders, STAR III has the right, upon receipt of a written Acquisition Proposal that constitutes a Superior Proposal that did not result from a breach of thenon-solicitation provisions of the STAR III Merger Agreement, to give notice of its intention to terminate the STAR III Merger Agreement to enter into an Alternative Acquisition Agreement (as later defined) for such Superior Proposal and/or effect an Adverse Recommendation Change, subject to the following conditions:

• the foregoing determination must have been upon the determination that failing to take such action would be inconsistent with the STAR III directors’ duties under applicable law;

• STAR III must have notified STAR in writing that the STAR III Board intends to take such action at least five (5) business days in advance of effecting an Adverse Recommendation Change, which notice must specify the material terms of the Superior Proposal and attach the most current version of such proposal; and

• during the five (5) business days after STAR received such notice, STAR III must have offered to negotiate with STAR (and negotiate in good faith) with respect to making adjustments to the terms of the STAR III Merger Agreement so that the subject Superior Proposal no longer was a Superior Proposal.

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For more information regarding the limitations on STAR III, the STAR III Board and the STAR III Special Committee to consider other proposals, see “The STAR III Merger Agreement—Covenants and Agreements—No Solicitation and Change in Recommendation with Acquisition Proposal” beginning on page 192.

Termination of the STAR III Merger Agreement (Beginning on page 197)

STAR III and STAR may, by written consent, mutually agree to terminate the STAR III Merger Agreement before completing the STAR III Merger, even after the approval of STAR III stockholders.

The STAR III Merger Agreement may also be terminated prior to the effective time of the STAR III Merger by either STAR III (with prior approval of the STAR III Special Committee) or STAR (with prior approval of the STAR Special Committee) if any of the following occur, each subject to certain exceptions:

• the STAR III Merger has not occurred on or before the Outside Date;

• there is any final,non-appealable order issued by a governmental authority of competent jurisdiction that permanently restrains or otherwise prohibits the transactions contemplated by the STAR III Merger Agreement; or

• if the approval of the STAR III stockholders of the STAR III Merger and STAR III Charter Amendment has not been obtained at the STAR III Special Meeting.

The STAR III Merger Agreement may also be terminated prior to the effective time of the STAR III Merger by STAR (with the prior approval of the STAR Special Committee) upon either of the following:

• any of the STAR III Parties shall have breached or failed to perform any of its representations, warranties, covenants or other agreements set forth in the STAR III Merger Agreement, which breach or failure to perform (A) would result in a failure of STAR III to satisfy certain closing conditions, and (B) cannot be cured or, if curable, is not cured by STAR III by the earlier of 20 days following written notice of such breach or failure from STAR to STAR III and two (2) business days before the Outside Date, subject to certain exceptions; or

• if, at any time prior to obtaining the necessary approvals of the STAR III stockholders, (A) the STAR III Board has made an Adverse Recommendation Change, (B) a tender offer or exchange offer for any shares of STAR III Common Stock that constitutes an Acquisition Proposal (other than by STAR or any of its affiliates) is commenced and the STAR III Board fails to recommend against acceptance of such tender offer or exchange offer by the STAR III stockholders and to publicly reaffirm the STAR III Board recommendation within ten (10) business days of being requested to do so by STAR, or (C) if STAR III shall have violated any of its obligations described in “The STAR III Merger Agreement—Covenants and Agreements—No Solicitation and Change in Recommendation with Acquisition Proposal.”

The STAR III Merger Agreement may also be terminated prior to the effective time of the STAR III Merger by STAR III (with the prior approval of the STAR III Special Committee) upon either of the following, each subject to certain exceptions:

• any of the STAR Parties shall have breached or failed to perform any of its representations, warranties, covenants or other agreements set forth in the STAR III Merger Agreement, which breach or failure to perform (A) would result in a failure of STAR to satisfy certain closing conditions, and (B) cannot be cured or, if curable, is not cured by STAR by the earlier of 20 days following written notice of such breach or failure from STAR III to STAR and two (2) business days before the Outside Date, subject to certain exceptions; or

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• if, at any time prior to obtaining the necessary approvals of the STAR III stockholders, in order to enter into an Alternative Acquisition Agreement with respect to a Superior Proposal in accordance with the STAR III Merger Agreement, so long as the termination fee payment described in “—Termination Fee and Expenses” below is made in full to STAR prior to or concurrently with such termination.

For more information regarding the rights of STAR III and STAR to terminate the STAR III Merger Agreement, see “The STAR III Merger Agreement—Termination of the STAR III Merger Agreement” beginning on page 197.

Termination Fee and Expenses (See page 199)

All expenses incurred in connection with the STAR III Merger Agreement and the other transactions contemplated by the STAR III Merger Agreement will be paid by the party incurring such expenses, provided that STAR III and STAR will share equally theForm S-4 filing fees as may be required to consummate the transactions contemplated by the STAR III Merger Agreement. Additionally, upon termination of the STAR III Merger Agreement in certain circumstances, the STAR III Merger Agreement provides for the payment of a termination fee to STAR by STAR III of $2,660,000 (in the case of termination in connection with the go-shop provisions of the STAR III Merger Agreement) or $5,320,000 (in connection with termination under certain other circumstances).

See “The STAR III Merger Agreement—Termination of the STAR III Merger Agreement—Termination Fee” on page 199 for more information on the termination fees that could be payable by STAR III to STAR.

Material U.S. Federal Income Tax Consequences of the STAR III Merger(Beginning on page 156)

STAR III and STAR intend that the STAR III Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. The closing of the STAR III Merger is conditioned on the receipt by STAR and STAR III of an opinion from its respective tax counsel to the effect that the STAR III Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. Assuming that the STAR III Merger qualifies as a reorganization within the meaning of Section 368(a) of the Code, a holder of shares of STAR III Common Stock generally will not recognize gain or loss for U.S. federal income tax purposes upon the receipt of STAR Common Stock in exchange for shares of STAR III Common Stock in connection with the STAR III Merger.

For further discussion of certain U.S. federal income tax consequences of the STAR III Merger and the ownership and disposition of the STAR Common Stock, see “U.S. Federal Income Tax Considerations” beginning on page 155. STAR III stockholders should consult their tax advisors to determine the tax consequences to them (including the application and effect of any state, local ornon-U.S. income and other tax laws) of the STAR III Merger and the ownership and disposition of the STAR Common Stock.

Accounting Treatment of the STAR III Merger (See page 179)

STAR prepares its financial statements in accordance with U.S. generally accepted accounting principles, which we refer to herein as “GAAP.” The STAR III Merger will be treated as an asset acquisition under GAAP. See “Accounting Treatment” on page 179 for more information.

Comparison of Rights of STAR III Stockholders and STAR Stockholders(Beginning on page 219)

At the effective time of the STAR III Merger, STAR III stockholders will become STAR stockholders and, accordingly, their rights will be governed by the STAR Charter and STAR’s bylaws and the laws of the State of Maryland. The STAR Charter and STAR’s bylaws contain certain provisions that are different from the STAR III Charter and STAR III bylaws.

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For a summary of certain differences between the rights of STAR III stockholders and STAR stockholders, see “Comparison of Rights of the STAR III Stockholders and the STAR Stockholders” beginning on page  218.

Selected Historical Financial Information of STAR

Presented below is the selected historical consolidated financial data of STAR as of and for the periods indicated. The selected historical consolidated financial data of STAR for each of the fiscal years ended December 31, 2018, 2017, 2016, 2015 and 2014 has been derived from STAR’s historical audited consolidated financial statements for such periods. The selected historical financial information for the nine months ended September 30, 2019, has been derived from STAR’s unaudited interim consolidated financial statements for such period.

You should read the historical financial information together with the financial statements included in this proxy statement/prospectus and their accompanying notes beginning on page F-1 and STAR management’s discussion and analysis of operations and financial condition of STAR included in STAR’s Annual Report on Form 10-K and Quarterly Report on Form 10-Q, attached as Annex F and Annex G, respectively, to this proxy statement/prospectus, which should be read together.

			As of December 31,
	As of September 30, 2019		2018		2017		2016		2015		2014
Balance sheet data
Total real estate, net	$	1,298,099,034	$	1,356,639,742	$	1,411,166,101	$	1,453,385,165	$	1,207,028,126	$	269,987,629
Total assets		1,426,200,518		1,434,138,648		1,454,368,057		1,497,101,228		1,258,692,194		306,470,497
Notes payable, net		1,100,164,923		1,050,155,743		993,405,862		971,761,151		850,766,025		196,930,600
Total liabilities		1,138,738,579		1,088,150,688		1,027,665,812		1,007,103,450		876,726,253		202,426,021
Redeemable common stock		1,182,360		—		36,397,062		27,949,492		9,401,360		660,089
Total stockholders’ equity		286,279,579		345,987,960		390,305,183		462,048,286		372,564,581		103,384,387

				For the Year Ended December 31,
	For the Nine Months Ended September 30, 2019			2018			2017			2016			2015			2014
Operating data
Total revenues	$	131,222,487		$	169,963,230		$	163,398,158		$	144,010,514		$	68,449,753		$	7,255,266
Net loss		34,742,088			(49,100,346	)		(33,623,841	)		(37,682,474	)		(50,694,124	)		(11,840,455	)
Net loss attributable to common stockholders		34,742,088			(49,100,346	)		(33,623,841	)		(37,682,474	)		(50,694,124	)		(11,840,455	)
Loss per common share—basic and diluted		(0.67	)		(0.96	)		(0.67	)		(0.80	)		(2.33	)		(4.74	)
Other data
Cash flows provided by (used in) operating activities		18,793,335			33,557,275			34,670,391			38,221,740			6,674,297			(1,955,348	)
Cash flows provided by (used in) investing activities		6,841,975			(17,481,756	)		(26,784,774	)		(269,914,470	)		(910,353,430	)		(276,964,629	)
Cash flows provided by (used in) financing activities		23,703,932			17,995,551			(8,033,178	)		225,786,450			917,012,264			310,104,892
Distributions declared		35,056,265			46,179,769			45,321,063			42,357,688			19,559,628			2,224,079
Distributions declared per common share(2)		0.673			0.900			0.900			0.900			0.900			0.663
Weighted-average number of common shares outstanding, basic and diluted		52,096,357			51,312,947			50,358,618			47,092,206			21,753,832			2,495,771
FFO(1)	$	17,358,334		$	21,892,934		$	34,793,715		$	30,309,069		$	(8,255,364	)	$	(6,523,945	)
MFFO(1)		19,119,839			27,369,983			35,243,568			36,566,768			17,530,067			1,013,255

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(1) GAAP basis accounting for real estate assets utilizes historical cost accounting and assumes real estate values depreciate over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets, the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”) established the measurement tool of funds from operations (“FFO”). Since its introduction, FFO has become a widely usednon-GAAP financial measure among REITs. Additionally, STAR uses modified funds from operations (“MFFO”), as defined by the Institute for Portfolio Alternatives (the “IPA”) as a supplemental measure to evaluate STAR’s operating performance. MFFO is based on FFO but includes certain adjustments STAR believes are necessary due to changes in accounting and reporting under GAAP since the establishment of FFO. Neither FFO or MFFO should be considered as an alternative to net loss or other measurements under GAAP as indicators of STAR’s operating performance, nor should they be considered as alternatives to cash flow from operating activities or other measurements under GAAP as indicators of liquidity. For additional information on how STAR calculates FFO and MFFO and a reconciliation of FFO and MFFO to net loss, see Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds From Operations and Modified Funds From Operations” in the STAR’s Quarterly Report on Form10-Q for the quarter ended September 30, 2019, attached as Annex G to this proxy statement/prospectus.

(2) On April 4, 2014, the STAR Board approved a cash distribution that began to accrue on April 7, 2014. Distributions declared per share of STAR Common Stock for the nine months ended September 30, 2019 and the years ended December 31, 2018, 2017, 2016, 2015 and 2014 assume each share was issued and outstanding each day from April 7, 2014 through September 30, 2019. During the nine months ended September 30, 2019 and the years ended December 31, 2018, 2017, 2015 and 2014 distributions declared were calculated at a rate of $0.002466 per share of STAR Common Stock per day, which if paid over a365-day period is equivalent to a 6.0% annualized distribution rate based on a purchase price of $15.00 per share of STAR Common Stock. During the year ended December 31, 2016, distributions declared were calculated at a rate of $0.002459 per share of STAR Common Stock per day, which if paid each day over a366-day period, is equivalent to a 6.0% annualized distribution rate based on a purchase price of $15.00 per share of STAR Common Stock.

Selected Historical Financial Information of STAR III

Presented below is the selected historical consolidated financial data of STAR III as of and for the periods indicated. The selected historical consolidated financial data of STAR III for each of the fiscal years ended December 31, 2018, 2017, 2016 and for the period from July 29, 2015 (inception) to December 31, 2015, has been derived from STAR III’s historical audited consolidated financial statements for such periods. The selected historical financial information for the nine months ended September 30, 2019, has been derived from STAR III’s unaudited interim consolidated financial statements for such period.

You should read the historical financial information together with the financial statements included in this proxy statement/prospectus and their accompanying notes beginning on page F-1 and STAR III management’s discussion and analysis of operations and financial condition of STAR III included in STAR III’s Annual Report on Form 10-K and Quarterly Report on Form 10-Q attached as Annex D and Annex E, respectively, to this proxy statement/prospectus, which should be read together.

			As of December 31,
	As of September 30, 2019		2018		2017		2016		2015
Balance sheet data
Total real estate, net	$	375,090,366	$	380,301,823	$	360,485,475	$	98,947,503	$	—
Total assets		402,785,692		421,082,401		381,554,845		117,448,401		200,000
Notes payable, net		287,517,455		280,086,921		258,470,441		72,016,933		—
Total liabilities		297,062,300		293,676,343		270,430,279		77,241,609		—
Redeemable common stock		4,149,979		6,570,093		2,920,059		292,818		—
Total stockholders’ equity		101,573,413		120,835,965		108,204,507		39,913,974		200,000

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				For the Year Ended December 31,									For the Period from July 29, 2015 (Inception) to December 31, 2015
	For the Nine Months Ended September 30, 2019			2018			2017			2016
Operating data
Total revenues	$	30,801,984		$	37,909,630		$	19,591,577		$	1,264,906		$	—
Net loss		(11,767,865	)		(15,365,609	)		(11,753,187	)		(4,920,712	)		—
Net loss attributable tonon-controlling interest		—			—			—			(100	)		—
Net loss attributable to common stockholders		(11,767,865	)		(15,365,609	)		(11,753,187	)		(4,920,612	)		—
Net loss attributable to Class A common stockholders—basic and diluted		(4,772,019	)		(6,401,649	)		(5,726,887	)		(3,160,451	)		—
Net loss attributable to Class R common stockholders—basic and diluted		(649,931	)		(806,620	)		(534,790	)		(165,258	)		—
Net loss attributable to Class T common stockholders—basic and diluted		(6,345,915	)		(8,157,340	)		(5,491,510	)		(1,594,903	)		—
Net loss per Class A common share—basic and diluted		(1.37	)		(1.86	)		(2.49	)		(8.36	)		—
Net loss per Class R common share—basic and diluted		(1.37	)		(1.91	)		(2.55	)		(8.42	)		—
Net loss per Class T common share—basic and diluted	��	(1.37	)		(2.05	)		(2.75	)		(8.62	)		—
Other data
Cash flows provided by (used in) operating activities		(669,909	)		1,914,725			5,941,399			(1,784,706	)		—
Cash flows used in investing activities		(5,809,501	)		(36,715,267	)		(273,486,909	)		(100,824,607	)		—
Cash flows provided by (used in) financing activities		(7,211,779	)		54,279,898			270,282,264			119,551,512			200,000
Total distributions declared to Class A common stockholders		3,918,856			4,903,884			3,286,288			560,327			—
Total distributions declared to Class R common stockholders		533,413			597,062			295,072			27,997			—
Total distributions declared to Class T common stockholders		5,208,277			5,463,772			2,607,893			232,376			—
Distributions declared per Class A common share(2)		1.122			1.500			1.500			0.930			—
Distributions declared per Class R common share(2)		1.122			1.448			1.425			0.598			—
Distributions declared per Class T common share(2)		1.122			1.307			1.241			0.764			—
Weighted-average number of Class A common shares outstanding, basic and diluted		3,471,013			3,266,046			2,190,070			374,595			—
Weighted-average number of Class R common shares outstanding, basic and diluted		475,208			411,528			204,514			19,587			—
Weighted-average number of Class T common shares outstanding, basic and diluted		4,634,576			4,161,778			2,100,058			189,037			—
FFO(1)	$	(194,068	)	$	1,293,508		$	735,644		$	(4,094,977	)	$	—
MFFO(1)		349,038			1,178,251			1,340,468			(1,076,205	)		—

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(1) For additional information on how STAR III calculates FFO and MFFO and a reconciliation of FFO and MFFO to net loss, see Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds From Operations and Modified Funds From Operations” in the STAR III’s Quarterly Report on Form10-Q for the quarter ended September 30, 2019, attached as Annex E to this proxy statement/prospectus.

(2) For information on STAR III’s distributions, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Distributions” in the STAR III’s Annual Report on Form10-K for the year ended December 31, 2018, which is included as Annex D, and Note 6—Stockholder’s Equity in the financial statements of STAR III’s Quarterly Report on Form10-Q for the quarter ended September 30, 2019, which is attached as Annex E to this proxy statement/prospectus.

Selected Unaudited Pro Forma Combined Financial Information of the STAR III/STAR Combined Company

The following tables set forth selected unaudited pro forma combined financial information of the STAR III/STAR Combined Company after giving effect to the STAR III Merger. The unaudited pro forma combined statements of income of the STAR III/STAR Combined Company for the nine months ended September 30, 2019 and the year ended December 31, 2018 give effect to the STAR III Merger as if it had occurred on January 1, 2018, the beginning of the earliest period presented. The unaudited pro forma combined balance sheet of the STAR III/STAR Combined Company as of September 30, 2019 gives effect to the STAR III Merger as if it had occurred on September 30, 2019.

The unaudited pro forma combined financial statements of the STAR III/STAR Combined Company were prepared using the asset acquisition method of accounting, with STAR considered the accounting acquirer of STAR III. Under the asset acquisition method of accounting, the purchase price is allocated to the underlying STAR III tangible and intangible assets acquired and liabilities assumed based on their respective fair values.

The unaudited pro forma combined financial information should be read in conjunction with (i) the more detailed unaudited pro forma combined financial information of the STAR III/STAR Combined Company, including the notes thereto, appearing in this proxy statement/prospectus and (ii) the historical consolidated financial statements of STAR and STAR III, including the notes thereto, which are included herein. See “Unaudited Pro Forma Condensed Combined Consolidated Financial Information of Steadfast Apartment REIT, Inc.” and STAR’s and STAR III’s historical financial statements included as Annexes D - G hereto.

The unaudited pro forma combined financial information of the STAR III/STAR Combined Company is presented for illustrative purposes only and does not purport to be indicative of the results that would actually have occurred if the transactions described above had occurred as presented in such statements or that may be obtained in the future. In addition, future results may vary significantly from the results reflected in such statements.

	As of September 30, 2019
	STAR Historical		STAR III Historical		STAR/STAR III Merger Adjustments			Pro Forma Total
Balance Sheet Data:
Total real estate, net	$	1,298,099,034	$	375,090,366	$	98,989,297		$	1,772,178,697
Total assets		1,426,200,518		402,785,692		86,357,022			1,915,343,232
Notes payable total, net		1,100,164,923		287,517,455		(2,097,459	)		1,385,584,919
Total liabilities		1,138,738,579		297,062,300		(2,097,459	)		1,433,703,420
Total stockholders’ equity		286,279,579		101,573,413		92,604,460			480,457,452

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	For the Nine Months Ended September 30, 2019
	STAR Historical			STAR III Historical			STAR/STAR III Merger Adjustments		Pro Forma Total
Operating Data:
Total revenue	$	131,222,487		$	30,801,984		$	—	$	162,024,471
(Loss) income before other income (expense)		(38,071,166	)		(12,642,865	)		853,213		(49,860,818	)
Total other income (expense)		3,329,078			875,000			—		4,204,078
Net (loss) income		(34,742,088	)		(11,767,865	)		853,213		(45,656,740	)

	For the Year Ended December 31, 2018
	STAR Historical			STAR III Historical			STAR/STAR III Merger Adjustments			Pro Forma Total
Operating Data:
Total revenue	$	169,963,230		$	37,909,630		$	—		$	207,872,860
(Loss) income before other income (expense)		(49,100,346	)		(15,365,609	)		(384,870	)		(64,850,825	)
Net (loss) income		(49,100,346	)		(15,365,609	)		(384,870	)		(64,850,825	)

Selected Unaudited Pro Forma Condensed Combined Financial Information of the Fully Combined Company

The following tables set forth selected unaudited pro forma condensed combined financial information of the Fully Combined Company after giving effect to both Mergers. The unaudited pro forma condensed combined statements of income of the Fully Combined Company for the nine months ended September 30, 2019 and the year ended December 31, 2018 give effect to the Mergers as if each had occurred on January 1, 2018, the beginning of the earliest period presented. The unaudited pro forma condensed combined balance sheet of the Fully Combined Company as of September 30, 2019 gives effect to the Mergers as if they had occurred on September 30, 2019.

The unaudited pro forma condensed combined financial statements of the Fully Combined Company were prepared using the acquisition method of accounting, with STAR considered the accounting acquirer of each of STAR III and SIR. Under the asset acquisition method of accounting, the purchase price is allocated to the underlying STAR III tangible and intangible assets acquired and liabilities assumed based on their respective fair values.

The unaudited pro forma condensed combined financial information should be read in conjunction with (i) the more detailed unaudited pro forma condensed combined financial information, including the notes thereto, appearing in this proxy statement/prospectus and (ii) the historical consolidated financial statements of STAR, SIR and STAR III, including the notes thereto, which are included herein as Annexes. See “Unaudited Pro Forma Condensed Combined Consolidated Financial Information of Steadfast Apartment REIT, Inc.” STAR’s historical financial statements are attached as Annexes F and G to this proxy statement/prospectus, SIR’s historical financial statements are attached as Annexes H and I to this proxy statement/prospectus, and STAR III’s historical financial statements are attached as Annexes D and E to this proxy statement/prospectus.

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The unaudited pro forma combined financial information of the Fully Combined Company is presented for illustrative purposes only and does not purport to be indicative of the results that would actually have occurred if the transactions described above had occurred as presented in such statements or that may be obtained in the future. In addition, future results may vary significantly from the results reflected in such statements.

	As of September 30, 2019
	Pro Forma Combined STAR & STAR III		SIR Historical		SIR Pro Forma Merger Adjustments			Combined Pro Forma Total
Balance Sheet Data:
Total real estate, net	$	1,772,178,697	$	703,489,154	$	372,717,540		$	2,848,385,391
Total assets		1,915,343,232		851,368,872		363,767,293			3,130,479,397
Notes payable total, net		1,385,584,919		498,426,493		(4,071,876	)		1,879,939,536
Total liabilities		1,433,703,420		523,799,933		(4,071,876	)		1,953,431,477
Total stockholders’ equity		480,457,452		326,279,826		369,128,282			1,175,865,560

	For the Nine Months Ended September 30, 2019
	Pro Forma Combined STAR & STAR III			SIR Historical			SIR Pro Forma Adjustments			SIR Pro Forma Total			SIR Pro Forma Merger Adjustments			Combined Pro Forma Total
Operating Data:
Total revenue	$	162,024,471		$	88,166,926		$	(6,694,200	)	$	81,472,726		$	—		$	243,497,197
(Loss) income before other income (expense)		(49,860,818	)		(14,094,915	)		775,977			(13,318,938	)		(4,719,114	)		(67,898,870	)
Total other income (expense)		4,204,078			86,372,843			(86,888,796	)		(515,953	)		164,655			3,852,780
Net (loss) income		(45,656,740	)		72,277,928			(86,112,819	)		(13,834,891	)		(4,554,459	)		(64,046,090	)

	For the Year Ended December 31, 2018
	Pro Forma Combined STAR & STAR III			SIR Historical			SIR Pro Forma Adjustments			SIR Pro Forma Total			SIR Pro Forma Merger Adjustments			Combined Pro Forma Total
Operating Data:
Total revenue	$	207,872,860		$	141,988,859		$	(37,055,577	)	$	104,933,282		$	—		$	312,806,142
(Loss) income before other income (expense)		(64,850,825	)		(25,792,864	)		(4,718	)		(25,797,582	)		(6,228,265	)		(96,876,672	)
Total other income (expense)		—			114,876,416			86,889,096			201,765,512			530,940			202,296,452
Net (loss) income		(64,850,825	)		89,083,552			86,884,378			175,967,930			(5,697,325	)		105,419,780

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Unaudited Comparative Per Share Information

The following table sets forth for the year ended December 31, 2018 and the nine months ended September 30, 2019, selected per share information for STAR III Common Stock, STAR Common Stock and shares of common stock of SIR (“SIR Common Stock”) on an historical basis and for the STAR III/STAR Combined Company and the Fully Combined Company on a pro forma basis after giving effect to the STAR III Merger and SIR Merger, both accounted for as an asset acquisition. The information in the table is unaudited. You should read the tables below together with the historical consolidated financial statements and related notes of STAR III, STAR and SIR, which are included in this proxy statement/prospectus as Annex D, Annex E, Annex F, Annex G, Annex H and Annex I, respectively.

	STAR Historical			STAR III Historical			SIR Historical			Pro Forma STAR III/ STAR Combined			Pro Forma Fully Combined
As of September 30, 2019
Book value per share of common stock	$	5.49	(1)	$	12.33	(2)	$	4.43	(3)	$	7.46		$	10.85
For the nine months ended September 30, 2019
Distributions declared per share of common stock	$	0.67		$	1.12		$	0.42		$	0.67		$	0.67
Income (loss) per share from continuing operations	$	(0.67	)	$	(1.37	)	$	0.97		$	(0.71	)	$	(0.59	)
For the year ended December 31, 2018
Distributions declared per share of common stock	$	0.90		$	1.42		$	1.61		$	0.90		$	0.90
Income per share from continuing operations	$	(0.96	)	$	(1.96	)	$	1.19		$	(1.02	)	$	0.98

(1) The book value per share of STAR Common Stock is a calculation using amounts derived from STAR’s consolidated balance sheets, and is calculated as (1) total assets, (2) minus total liabilities, (3) divided by the total number of shares of STAR Common Stock outstanding. The book value of STAR Common Stock is not intended to reflect the value of STAR’s assets upon an orderly liquidation of STAR, in accordance with STAR’s investment objectives.

(2) The book value per share of STAR III Common Stock is a calculation using amounts derived from STAR III’s consolidated balance sheets, and is calculated as (1) total assets, (2) minus total liabilities, (3) divided by the total number of shares of STAR III Common Stock outstanding. The book value of STAR III Common Stock is not intended to reflect the value of STAR III’s assets upon an orderly liquidation of STAR III, in accordance with STAR III’s investment objectives.

(3) The book value per share of SIR Common Stock is a calculation using amounts derived from SIR’s consolidated balance sheets, and is calculated as (1) total assets, (2) minus total liabilities, (3) divided by the total number of shares of SIR Common Stock outstanding. The book value of SIR Common Stock is not intended to reflect the value of SIR’s assets upon an orderly liquidation of SIR, in accordance with SIR’s investment objectives.

The pro forma STAR III/STAR Combined Company net income (loss) per share for the nine months ended September 30, 2019 and the year ended December 31, 2018, includes the combined net income (loss) per share of STAR III Common Stock and STAR Common Stock on a pro forma basis as if the transaction was consummated on January 1, 2018 and, with respect to net book value per share of common stock, on September 30, 2019.

The pro forma Fully Combined Company net income (loss) per share for the nine months ended September 30, 2019 and the year ended December 31, 2018 includes the combined net income (loss) per share of STAR III Common Stock, STAR Common Stock and SIR Common Stock on a pro forma basis as if the transaction was consummated on January 1, 2018 and, with respect to net book value per share of common stock, on September 30, 2019.

The STAR pro forma combined per share data is presented for illustrative purposes only and is not necessarily indicative of the operating results or financial position that would have occurred if the transaction had

27

been consummated at the beginning of the earliest period presented, nor is it necessarily indicative of future operating results or financial position. The pro forma adjustments are estimates based upon information and assumptions available at the time of the filing of this proxy statement/prospectus.

Comparative Market Price Data and Distribution Data

Neither the STAR III Common Stock nor STAR Common Stock is listed on an exchange and there is no established public trading market for shares of STAR III Common Stock or STAR Common Stock.

STAR III’s Distribution Data

The STAR III Board has historically authorized distributions to its stockholders on a quarterly basis that accrue daily to STAR III stockholders of record as of the close of business on each day and are payable in cumulative amounts on or before the 3rd day of each calendar month with respect to the prior month.

For the period from January 1, 2019 to September 30, 2019, the distribution rate declared per share of Class A common stock, Class R common stock and Class T common stock was $0.004110 per day, which, if paid over a 365-day period, is equivalent to a 6.0%, 6.7% and 6.3% annualized distribution rate, respectively, based on a purchase price of $25.00 per share of Class A common stock, $22.50 per share of Class R common stock and $23.81 per share of Class T common stock.

There can be no assurance that the STAR III Board will continue to authorize such distributions at such amount or frequency, if at all.

	Class A Shares				Class R Shares				Class T Shares
(in thousands, except per share amounts)	Total Distributions Paid to Common Stockholders		Distributions Declared Per Common Share		Total Distributions Paid to Common Stockholders		Distributions Declared Per Common Share		Total Distributions Paid to Common Stockholders		Distributions Declared Per Common Share
2019
Third Quarter	$	1,316	$	0.378	$	180	$	0.378	$	1,754	$	0.378
Second Quarter	$	1,323	$	0.374	$	180	$	0.374	$	1,758	$	0.374
First Quarter	$	1,300	$	0.370	$	178	$	0.370	$	1,785	$	0.370
2018
Fourth Quarter	$	1,310	$	0.378	$	172	$	0.378	$	1,549	$	0.378
Third Quarter	$	1,253	$	0.378	$	152	$	0.361	$	1,334	$	0.313
Second Quarter	$	1,177	$	0.374	$	136	$	0.357	$	1,217	$	0.309
First Quarter	$	1,079	$	0.370	$	111	$	0.352	$	1,051	$	0.306
2017
Fourth Quarter	$	999	$	0.378	$	94	$	0.352	$	880	$	0.310
Third Quarter	$	880	$	0.378	$	77	$	0.363	$	695	$	0.320
Second Quarter	$	707	$	0.374	$	58	$	0.357	$	475	$	0.307
First Quarter	$	486	$	0.370	$	40	$	0.353	$	294	$	0.304

(1) Distribution rates for Class R and Class T shares of common stock vary depending on the distribution and shareholder servicing fee. For more information on the distribution rates paid to the Class R and Class T shares of common stock, see the Annual Report on Form10-K and Quarterly Report on Form10-Q for STAR III attached as Annex D and E, respectively, to this proxy statement/prospectus.

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STAR’s Distribution Data

The STAR Board historically has authorized distributions to STAR stockholders on a quarterly basis that accrue daily to STAR stockholders of record on each day and are payable in cumulative amounts on or before the 3rd day of each calendar month with respect to the prior month.

For the period from January 1, 2019 to September 30, 2019, the distribution rate declared per share of STAR Common Stock was $0.002466 per day, which, if paid over a365-day period, is equivalent to a 6.0% annualized distribution rate based on a purchase price of $15.00 per share of STAR Common Stock.

There can be no assurance that the STAR Board will continue to authorize such distributions at such amount and frequency, if at all.

(in thousands, except per share amounts)	Total Distributions Paid to Common Stockholders		Distributions Declared Per Common Share
2019
Third Quarter	$	11,844	$	0.227
Second Quarter	$	11,798	$	0.224
First Quarter	$	11,495	$	0.222
2018
Fourth Quarter	$	11,573	$	0.227
Third Quarter	$	11,647	$	0.227
Second Quarter	$	11,594	$	0.224
First Quarter	$	11,299	$	0.222
2017
Fourth Quarter	$	11,374	$	0.227
Third Quarter	$	11,437	$	0.227
Second Quarter	$	11,369	$	0.224
First Quarter	$	11,043	$	0.222

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RISK FACTORS

In addition to the other information included in this proxy statement/prospectus, including the matters addressed in the section entitled “Cautionary Statement Concerning Forward-Looking Statements,” a stockholder of STAR III should carefully consider the following risks before deciding how to vote your shares of STAR III Common Stock. In addition, you should read and consider the risks associated with each of the businesses of STAR III and STAR because these risks will also affect the Combined Company. These risks can be found in the respective Annual Reports on Form10-K for the year ended December 31, 2018 and subsequent Quarterly Reports onForm 10-Q of STAR III and STAR, which are attached as Annexes to this proxy statement/prospectus. You should also read and consider the other information included or incorporated by reference in this proxy statement/prospectus, including the Annexes. See “Where You Can Find More Information” on page 223.

In this section, the term “Combined Company” means either the STAR III/STAR Combined Company or the Fully Combined Company, as applicable.

Risks Related to the STAR III Merger

The merger consideration would not be adjusted in the event of any change in the relative values of STAR III or STAR.

Upon the consummation of the STAR III Merger, each outstanding share of STAR III Common Stock, and each fraction thereof, will be converted automatically into the right to receive 1.430 shares of STAR Common Stock (or a fraction thereof). The exchange ratio will not be adjusted, other than in the limited circumstances as expressly contemplated in the STAR III Merger Agreement in connection with stock splits, combinations, reorganizations, or other similar events affecting the outstanding STAR III Common Stock or STAR Common Stock. Except as expressly contemplated in the STAR III Merger Agreement, no change in the STAR III Merger consideration will be made for any reason, including the following:

• changes in the respective businesses, operations, assets, liabilities and prospects of STAR III and STAR;

• STAR’s failure to complete the SIR Merger;

• changes in the estimated value per share of either the shares of STAR III Common Stock or the STAR Common Stock;

• interest rates, general market and economic conditions and other factors generally affecting the businesses of STAR III and STAR;

• federal, state and local legislation, governmental regulation and legal developments in the businesses in which STAR III and STAR operate;

• dissident stockholder activity, including any stockholder litigation challenging the transaction;

• other factors beyond the control of STAR III and STAR, including those described or referred to elsewhere in this “Risk Factors” section; and

• acquisitions, disposals, or new development opportunities.

The terms of the STAR III Merger may not be as favorable to the STAR III stockholders as they would have been if only independent representatives were involved in analyzing the transactions.

While each of the STAR III Board and STAR Board formed a separate special committee consisting solely of independent directors and each special committee retained separate legal and financial advisors to assist it in evaluating the STAR III Merger, the STAR III Merger was initially proposed by certain representatives of each of STAR III and STAR, some of whom serve as officers of both entities, after performing an initial review of

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potential alternatives for STAR III and STAR. If only independent representatives of STAR III and STAR were involved in initially analyzing the transactions and considering other strategic alternatives, the STAR III Merger may never have been proposed or the terms of the STAR III Merger might have been different. STAR can provide no assurances as to whether the merger consideration to be received by STAR III stockholders in the STAR III Merger will be greater or less than that which could have been obtained if the initial negotiations of the STAR III Merger had taken place between unaffiliated or unrelated third parties.

Completion of the STAR III Merger is subject to many conditions and if these conditions are not satisfied or waived, the STAR III Merger will not be completed, which could result in the expenditure of significant unrecoverable transaction costs.

The STAR III Merger Agreement is subject to many conditions, which must be satisfied or waived in order to complete the STAR III Merger. The mutual conditions of the parties include, among others: (i) the approval by the STAR III stockholders of the STAR III Merger and STAR III Charter Amendment; (ii) the absence of any judgment, injunction, order or decree issued by any governmental authority of competent jurisdiction prohibiting the consummation of the STAR III Merger, and the absence of any law that has been enacted, entered, promulgated or enforced by any governmental authority after the date of the STAR III Merger Agreement that prohibits, restrains, enjoins or makes illegal the consummation of the STAR III Merger or the other transactions contemplated by the STAR III Merger Agreement; and (iii) the effectiveness of the registration statement onForm S-4 to be filed by STAR for purposes of registering the STAR Common Stock to be issued in connection with the STAR III Merger. In addition, each party’s obligation to consummate the STAR III Merger is subject to certain other conditions, including, among others: (a) the accuracy of the other party’s representations and warranties (subject to customary materiality qualifiers and other customary exceptions); (b) the other party’s compliance with its covenants and agreements contained in the STAR III Merger Agreement (subject to customary materiality qualifiers); (c) the absence of any change, event, circumstance or development arising during the period from the date of the STAR III Merger Agreement until the effective time of the STAR III Merger that has had or would have a material adverse effect on the other party; (d) the receipt of an opinion of counsel of the other party to the effect that such party has been organized and has operated in conformity with the requirements for qualification and taxation as a REIT; and (e) the receipt of an opinion of counsel of each party to the effect that the STAR III Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code. For a more complete summary of the conditions that must be satisfied or waived prior to completion of the STAR III Merger, see “The STAR III Merger Agreement—Conditions to Completion of the STAR III Merger” beginning on page 184.

There can be no assurance that the conditions to closing of the STAR III Merger will be satisfied or waived or that the STAR III Merger will be completed. Failure to consummate the STAR III Merger may adversely affect STAR III’s or STAR’s results of operations and business prospects for the following reasons, among others: (i) each of STAR III and STAR has incurred and will continue to incur certain transaction costs, regardless of whether the STAR III Merger closes, which could adversely affect each company’s financial condition, results of operations and ability to make distributions to its stockholders; and (ii) the STAR III Merger, whether or not it closes, will divert the attention of certain management and other key employees of STAR III and STAR from ongoing business activities, including the pursuit of other opportunities that could be beneficial to STAR III or STAR, respectively. In addition, STAR III or STAR may terminate the STAR III Merger Agreement under certain circumstances, including, among other reasons, if the STAR III Merger is not completed by the Outside Date. If the STAR III Merger is not consummated, the ongoing business of STAR III could be adversely affected. See “The STAR III Merger Agreement—Termination of the STAR III Merger Agreement” beginning on page 197.

Completion of the STAR III Merger is not contingent on the completion of the SIR Merger.

The completion of the STAR III Merger is not contingent on the completion of the SIR Merger, which means the STAR III Merger may be completed without the SIR Merger also being completed. As of September 30, 2019, SIR owned 27 multifamily properties encompassing in the aggregate 7,527 residential

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apartment homes. In the event the SIR Merger is not completed, STAR III investors who receive STAR Common Stock in the STAR III Merger will not benefit from STAR’s ownership of the SIR properties. Furthermore, as described elsewhere in this proxy statement/prospectus, one of the reasons for the Mergers is to realize efficiencies related to the consolidation of the Sponsor’s affiliated REITs that own multifamily properties into one entity. Some of these efficiencies will not be achieved if the SIR Merger is not completed. As a result, if the SIR Merger is not completed, the STAR III/STAR Combined Company’s business prospects, financial condition, cash flows, results of operations and the value of the STAR III/STAR Combined Company’s common stock could be materially and adversely impacted. The SIR Merger is subject to a number of conditions, including approval by SIR’s stockholders, and there can be no assurances that the SIR Merger will be completed.

If the SIR Merger is not completed, the STAR III/STAR Combined Company may compete with SIR.

In addition, if the SIR Merger is not completed, the STAR III/STAR Combined Company may compete with SIR for investment opportunities. To the extent the STAR III/STAR Combined Company competes with SIR, there is a risk that the Sponsor will select investment opportunities for the STAR III/STAR Combined Company that provide lower returns than the investments selected for SIR, or that certain otherwise attractive investment opportunities will not be available to the STAR III/STAR Combined Company. As a result of our potential competition with SIR, certain investment opportunities that would otherwise be available to the STAR III/STAR Combined Company may not in fact be available. Such competition may also result in conflicts of interest that are not resolved in favor of the STAR III/STAR Combined Company.

Failure to complete the STAR III Merger could negatively impact the future business and financial results of STAR III.

If the STAR III Merger is not completed, the ongoing business of STAR III could be materially and adversely affected and STAR III will be subject to a variety of risks associated with the failure to complete the STAR III Merger, including the following:

• STAR III being required, under certain circumstances, to pay to STAR a termination fee of $5.3 million in the event of termination of the STAR III Merger Agreement;

• STAR III having to pay certain costs relating to the proposed merger, such as legal, accounting, financial advisor, filing, printing and mailing fees; and

• the diversion of STAR III management focus and resources from operational matters and other strategic opportunities while working to implement the STAR III Merger.

If the STAR III Merger is not completed, these risks could materially affect the business and financial results of STAR III.

The pendency of the STAR III Merger, including as a result of the restrictions on the operation of STAR III’s and STAR’s business during the period between signing the STAR III Merger Agreement and the completion of the STAR III Merger, could adversely affect the business and operations of STAR III, STAR, or both.

In connection with the pending STAR III Merger, some business partners or vendors of each of STAR III and STAR may delay or defer decisions, which could negatively impact the revenues, earnings, cash flows and expenses of STAR III and STAR, regardless of whether the STAR III Merger is completed. In addition, due to operating covenants in the STAR III Merger Agreement, each of STAR III and STAR may be unable, during the pendency of the STAR III Merger, to pursue certain strategic transactions, undertake certain significant capital projects, undertake certain significant financing transactions and otherwise pursue other actions that are not in the ordinary course of business, even if such actions would prove beneficial. In addition, STAR faces similar restrictions and risks related to the SIR Merger, which could further impact its revenues, earnings, cash flows and expenses.

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Some of the directors and executive officers of STAR III have interests in seeing the STAR III Merger completed that are different from, or in addition to, those of the STAR III stockholders.

Some of the directors and executive officers of STAR III have interests in seeing the STAR III Merger completed that are different from, or in addition to, those of the STAR III stockholders. Other than as discussed below, none of STAR III’s executive officers or directors is party to an arrangement with STAR III, or participates in any STAR III plan, program or arrangement, that provides such executive officer or director with financial incentives that are contingent upon the consummation of the STAR III Merger; however, controlling persons of the Sponsor control, directly or indirectly, STAR Advisor. Mr. Emery, the Chairman of the Board and Chief Executive Officer of STAR and STAR III, owns an 86% interest in Steadfast REIT Holdings, the parent company of the Sponsor. Ana Marie del Rio, the Secretary of STAR and STAR III, owns a 7% interest in Steadfast REIT Holdings. Since 2014, Ms. Neyland, the President of STAR and STAR III has earned an annual 5% profits interest from Steadfast REIT Holdings. In connection with the STAR III Merger, pursuant to the STAR Advisory Agreement, STAR Advisor is entitled to an acquisition fee equal to approximately $4.7 million, or 1.0% of the “cost of investment” (as defined in the STAR Advisory Agreement) of STAR III in the STAR III Merger and a loan coordination fee equal to approximately $2.9 million, or 1.0% of the amount of debt assumed by STAR in connection with the STAR III Merger (based on data as of September 30, 2019). See “The STAR III Merger—Interests of STAR III’s Directors and Executive Officers in the STAR III Merger” on page 151.

STAR III is seeking approval of its stockholders of the STAR III Charter Amendment, which would remove substantive and procedural protections relating to Roll-Up Transactions such as the STAR III Merger.

STAR III is seeking approval of its stockholders of the STAR III Charter Amendment. If adopted, this proposal would remove substantive and procedural protections relating to Roll-Up Transactions, which would eliminate certain protections that would have applied to the STAR III Merger. For example, the STAR III Charter provides that prior to conducting a Roll-Up Transaction, STAR III would be required to obtain an appraisal of STAR III’s assets. In addition, as part of the Roll-Up Transaction, STAR III would be required to provide stockholders certain rights including the right to remain as a stockholder of STAR III and preserve their interests therein on the same terms and conditions as existed previously, or to receive cash in an amount equal to the stockholders pro rata share of the appraised value of the net assets of STAR III, even if the STAR III Board concludes that transaction would be in STAR III’s best interests. Because the STAR III Merger is conditioned on approval of the STAR III Charter Amendment, the STAR III stockholders will not be entitled to the benefit of these protections in connection with the STAR III Merger.

The STAR III Merger and STAR III Charter Amendment are each subject to approval by STAR III stockholders.

In order for the STAR III Merger to be completed, STAR III stockholders must approve the STAR III Merger and STAR III Charter Amendment, which each require the affirmative vote of the holders of at least a majority of the outstanding shares of STAR III Common Stock entitled to vote on such proposals at the STAR III Special Meeting. If the proposals are not approved by the stockholders by the Outside Date, either party can terminate the STAR III Merger Agreement, in which case the STAR III Merger would not be consummated.

The STAR III Merger Agreement prohibits STAR III from soliciting proposals after the Go Shop Period End Time and places conditions on its ability to negotiate and accept a Superior Proposal, which may adversely affect STAR III stockholders.

In the STAR III Merger Agreement, STAR III agreed that, beginning as of the Go Shop Period End Time, it will be subject to restrictions relating to, among other things, the initiation, solicitation, knowing encouragement or facilitation of any inquiries, offers, or other actions that constitute or may reasonably be expected to lead to an Acquisition Proposal. After that date, under certain circumstances, if STAR III receives an Acquisition Proposal from any person that did not result from a breach of its obligations described herein under “The STAR III Merger

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Agreement—Covenants and Agreements—No Solicitation and Change in Recommendation with an Acquisition Proposal” and if the STAR III Special Committee determines that such Acquisition Proposal is or is reasonably expected to lead to a Superior Proposal, the STAR III Special Committee may take certain actions, including furnishingnon-public information with respect to STAR III (subject to compliance with certain matters). STAR III may, upon the STAR III Board making certain determinations relating to its duties, disclose to STAR III stockholders any information required to be disclosed under applicable law.

Pursuant to the STAR III Merger Agreement, the STAR III Board may also, upon making certain determinations to make an Adverse Recommendation Change, terminate the STAR III Merger Agreement pay a termination fee to STAR, pay a disposition fee to STAR III Advisor and enter into an agreement relating to a Superior Proposal. The limitations, requirements and conditions mentioned above are further described herein under the heading “The STAR III Merger Agreement—Covenants and Agreements—No Solicitation and Change in Recommendation with an Acquisition Proposal.” The limitations, requirements and conditions described above may make it more unlikely that after the Go Shop Period End Time, a proposal relating to an alternative business combination transaction would emerge for STAR III and may make it more difficult and expensive for STAR III to accept a proposal relating to an alternative business combination transaction that the STAR III Special Committee determines to be superior to the STAR III Merger.

The STAR III Merger Agreement, and other agreements contemplated by the STAR III Merger Agreement, contain provisions that could discourage a potential competing acquirer of STAR III or could result in a competing Acquisition Proposal being at a lower price than it might otherwise be.

Except for a45-daygo-shop period that expired on September 19, 2019, the STAR III Merger Agreement contains provisions that, subject to limited exceptions, restrict STAR III’s ability to solicit, initiate or knowingly facilitate, or encourage any Acquisition Proposal. With respect to any written, bona fide Acquisition Proposal that STAR III receives, STAR generally has an opportunity to offer to modify the terms of the STAR III Merger Agreement in response to such proposal before the STAR III Board may change, withdraw, or modify its recommendation to stockholders in response to such Acquisition Proposal or terminate the STAR III Merger Agreement to enter into an agreement with respect to such Acquisition Proposal. Upon termination of the STAR III Merger Agreement under certain circumstances relating to an Acquisition Proposal, STAR III would have to pay STAR a termination fee of $5.32 million in connection with a transaction initiated after thego-shop process. In addition, although STAR III Advisor agreed to waive its right to receive a disposition fee in connection with the STAR III Merger, in the event the STAR III Merger is not consummated, STAR III would be responsible for paying a disposition fee in connection with any other competing transaction if STAR III’s independent directors determine that the STAR III Advisor or its affiliates provided a substantial amount of services.

These provisions could discourage a potential competing acquirer that might have an interest in acquiring all or a significant part of STAR III’s business from considering or making a competing Acquisition Proposal, even if the potential competing acquirer was prepared to pay consideration with a higher per share cash value than that market value proposed to be received or realized in the STAR III Merger, or might cause a potential competing acquirer to propose to pay a lower price than it might otherwise have proposed to pay because of the added expense of the termination fee that may become payable in certain circumstances under the STAR III Merger Agreement.

In certain circumstances, either of STAR III or STAR may terminate the STAR III Merger Agreement.

STAR III or STAR may terminate the STAR III Merger Agreement if the STAR III Merger has not been consummated by the Outside Date. Also, the STAR III Merger Agreement may be terminated if a final andnon-appealable order is entered prohibiting or disapproving the transaction, upon a material uncured breach by the other party that would cause the closing conditions not to be satisfied, or upon the failure to obtain receipt of approvals of the STAR III stockholders. In addition, STAR III has the right to terminate the STAR III Merger Agreement at any time prior to obtaining the necessary approvals of the STAR III stockholders in order to enter

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into an Alternative Acquisition Agreement with respect to a Superior Proposal (as such terms are defined under the heading “The STAR III Merger Agreement—Covenants and Agreements—No Solicitation and Change in Recommendation with an Acquisition Proposal”). Finally, STAR has the right to terminate the STAR III Merger Agreement at any time prior to obtaining the approvals of the STAR III stockholders, upon an Adverse Recommendation Change or upon the commencement of a tender offer or exchange offer for any shares of STAR III Common Stock that constitutes an Acquisition Proposal (as such term is defined under the heading “The STAR III Merger Agreement—Covenants and Agreements—No Solicitation and Change in Recommendation with an Acquisition Proposal”) (other than by STAR or any of its affiliates), and the STAR III Board fails to recommend against acceptance of such tender offer or exchange offer and to publicly reaffirm the STAR III Board recommendation after being requested to do so by STAR III. See “The STAR III Merger Agreement—Termination of the STAR III Merger Agreement” beginning on page 197.

STAR III and STAR each expect to incur substantial expenses related to the STAR III Merger.

STAR III and STAR each expect to incur substantial expenses in connection with completing the STAR III Merger and integrating the properties and operations of STAR III that STAR is acquiring with those of STAR. While STAR III and STAR each has assumed that a certain level of transaction expenses would be incurred, there are a number of factors beyond the control of each company that could affect the total amount or the timing of such expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. As a result, the transaction expenses associated with the STAR III Merger could, particularly in the near term, exceed the savings that STAR expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings following the completion of the STAR III Merger.

STAR expects to incur substantial expenses related to the SIR Merger.

STAR expects to incur substantial expenses in connection with completing the SIR Merger and integrating the properties and operations of SIR with those of STAR. While STAR has assumed that a certain level of transaction expenses would be incurred, there are a number of factors beyond the control of STAR that could affect the total amount or the timing of such expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. As a result, the transaction expenses, including an acquisition fee of approximately $11.2 million and a loan coordination fee of approximately $4.9 million payable by STAR to STAR Advisor, associated with the SIR Merger could, particularly in the near term, exceed the savings that STAR expects to achieve from the elimination of duplicative expenses and the realization of economies of scale and cost savings following the completion of the SIR Merger.

The ownership positions of STAR and STAR III stockholders will be diluted by the Mergers.

The Mergers will dilute the ownership position of STAR stockholders and result in STAR III stockholders having an ownership stake in the Combined Company that is smaller than their current stake in STAR III. Upon completion of the STAR III Merger, based on the number of shares of STAR Common Stock and STAR III Common Stock outstanding on September 30, 2019, continuing STAR stockholders will own approximately 81% of the issued and outstanding shares of STAR III/STAR Combined Company common stock, and former STAR III stockholders will own approximately 19% of the issued and outstanding shares of common stock of the STAR III/STAR Combined Company. Upon completion of both Mergers, continuing STAR stockholders will own approximately 48% of the issued and outstanding shares of Fully Combined Company common stock, and former STAR III stockholders will own approximately 11% of the issued and outstanding shares of common stock of the Fully Combined Company. Consequently, STAR stockholders and STAR III stockholders, as a general matter, will have less influence over the management and policies of the Combined Company following the Mergers than each currently exercise over the management and policies of STAR and STAR III, as applicable.

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Litigation challenging either Merger may increase transaction costs and prevent the applicable merger from becoming effective or from becoming effective within the expected timeframe.

If any stockholder files a lawsuit challenging the STAR III Merger or the SIR Merger, STAR III and STAR can provide no assurances as to the outcome of any such lawsuit, including the costs associated with defending these claims or any other liabilities that may be incurred in connection with the litigation or settlement of these claims. If plaintiffs are successful in obtaining an injunction prohibiting the parties from completing either of the Mergers on the agreed-upon terms, such an injunction may prevent the completion of the applicable merger in the expected time frame, or may prevent it from being completed altogether. Whether or not any such plaintiffs’ claims are successful, this type of litigation is often expensive and diverts management’s attention and resources, which could adversely affect the operations of each company’s business.

If and when the Combined Company completes a liquidity event, the market value ascribed to the shares of common stock of the Combined Company upon the liquidity event may be significantly lower than the estimated value per share of STAR Common Stock considered by the STAR III Board in approving and recommending the STAR III Merger.

In approving and recommending the STAR III Merger, the STAR III Board considered, among other things, the most recent estimated value per share of STAR III Common Stock and STAR Common Stock as determined by their respective boards of directors prepared with the assistance of their respective third-party valuation experts. The estimated value per share of the STAR Common Stock will not be updated in connection with the consummation of the Mergers. In the event that the Combined Company completes a liquidity event after consummation of the Mergers, such as a listing of its shares on a national securities exchange, a merger in which stockholders of the Combined Company receive securities that are listed on a national securities exchange, or a sale of the Combined Company for cash, the market value of the shares of the Combined Company upon consummation of such liquidity event may be significantly lower than the current estimated value considered by the STAR III Board and the estimated value per share of STAR Common Stock that may be reflected on the account statements of stockholders of the Combined Company after consummation of the Mergers. For example, if the shares of the Combined Company are listed on a national securities exchange at some point after the consummation of the Mergers, the trading price of the shares may be significantly lower than the current STAR Common Stock estimated value per share of $15.84 as of December 31, 2018.

Risks Related to the Combined Company Following the Mergers

The Combined Company will have substantial indebtedness upon completion of the Mergers.

In connection with the Mergers, the Combined Company will assume and/or refinance certain indebtedness of STAR III and SIR and will be subject to risks associated with debt financing, including a risk that the Combined Company’s cash flow could be insufficient to meet required payments on its debt. As of September 30, 2019, STAR had $1.10 billion of outstanding debt, comprised of $552 million of mortgage notes payable, net and $548 million of debt related to the credit facility, net. After giving effect to the Mergers, the Fully Combined Company’s total pro forma consolidated indebtedness will increase. Taking into account STAR III’s existing indebtedness, transaction expenses, and the assumption and/or refinancing of indebtedness in the STAR III Merger, the STAR III/STAR Combined Company’s pro forma consolidated indebtedness as of September 30, 2019, after giving effect to the STAR III Merger, would be approximately $1.39 billion. Taking into account both STAR III’s and SIR’s existing indebtedness, transaction expenses, and the assumption and/or refinancing of indebtedness in both Mergers, the Fully Combined Company’s pro forma consolidated indebtedness as of September 30, 2019, after giving effect to both Mergers, would be approximately $1.88 billion. The indebtedness of the STAR III/STAR Combined Company will be comprised of $548 million of outstanding borrowings under STAR’s credit facility and a total of $837 million of outstanding mortgage debt, and the indebtedness of the Fully Combined Company will be comprised of $548 million of outstanding borrowings under STAR’s credit facility and a total of $1.33 billion of outstanding mortgage debt.

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The Combined Company’s indebtedness could have important consequences to holders of its common stock and preferred stock, if any, including STAR III stockholders who receive STAR Common Stock in the STAR III Merger, including:

• vulnerability of the Combined Company to general adverse economic and industry conditions;

• limiting the Combined Company’s ability to obtain additional financing to fund future working capital, capital expenditures and other general corporate requirements;

• requiring the use of a substantial portion of the Combined Company’s cash flow from operations for the payment of principal and interest on its indebtedness, thereby reducing its ability to use its cash flow to fund working capital, acquisitions, capital expenditures and general corporate requirements;

• limiting the Combined Company’s flexibility in planning for, or reacting to, changes in its business and its industry;

• putting the Combined Company at a disadvantage compared to its competitors with less indebtedness; and

• limiting the Combined Company’s ability to access capital markets.

If the Combined Company defaults under a mortgage loan, it would automatically be in default under any other loan that has cross-default provisions, and it may lose the properties securing these loans.

The Combined Company may need to incur additional indebtedness in the future.

It is possible that the Combined Company may increase its outstanding debt from current levels. The amount of such indebtedness could have material adverse consequences for the Combined Company, including hindering the Combined Company’s ability to adjust to changing market, industry or economic conditions; limiting the Combined Company’s ability to access the capital markets to refinance maturing debt or to fund acquisitions, development, or emerging businesses and limiting the possibility of a listing on a securities exchange; limiting the amount of free cash flow available for future operations, acquisitions, distributions, stock repurchases or other uses; making the Combined Company more vulnerable to economic or industry downturns, including interest rate increases; and placing the Combined Company at a competitive disadvantage compared to less leveraged competitors.

The estimated value per share of the Combined Company’s common stock may decline as a result of the Mergers.

STAR’s board of directors determines an estimated value per share of STAR Common Stock annually based on input from an independent valuation firm. The estimated per share value of the Combined Company’s common stock may decline in the future as a result of the Mergers if the assets to be acquired by STAR in the Mergers are not as accretive as expected by STAR’s management. There can be no assurances that the merger consideration to be paid for the assets of STAR III and SIR reflects fair market value or that the appraised value of those assets will not be reduced in the future. In addition, STAR III stockholders are expected to own approximately 11% and SIR stockholders are expected to own approximately 41% of the outstanding shares of STAR Common Stock, on a pro forma basis (calculated based on fully diluted shares outstanding as of September 30, 2019), following the Mergers. The Combined Company’s estimated value per share could be negatively impacted by the dilution associated with the issuance of shares of STAR Common Stock as merger consideration in the Mergers if the appraised values of the STAR III, STAR, or the SIR assets are reduced in connection with any future determination of the Combined Company’s estimated value per share. Furthermore, the estimated value per share may not be an accurate measure of the value of STAR Common Stock. See “For more information about STAR’s valuation process, see Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Estimated Value Per Share” in STAR’s Annual Report on Form 10-K, attached as Annex F to this proxy statement/prospectus.

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Following the Mergers, STAR III stockholders will receive a lower dollar amount per share in monthly distributions if the Combined Company continues to pay distributions at STAR’s current distribution rate.

STAR distributions are currently equivalent to a 6% annualized distribution rate based on a purchase price of $15.00 per share, or $0.90 per share annually. STAR III’s current distribution rate is $1.50 per share annually. Based on the merger consideration of 1.430 shares of STAR Common Stock for each share of STAR III Common Stock, annual distributions post-merger are expected to be approximately $1.29 per share at the current STAR distribution rate. There is no guarantee that STAR will continue to pay distributions at this rate, if at all, and all decisions regarding future distributions will remain entirely at the discretion of the Combined Company’s board of directors.

Stockholders of the Combined Company will have no contractual or other legal right to distributions that have not been authorized by the Combined Company’s board of directors and declared by the Combined Company.

Following the consummation of the Mergers, the Combined Company may assume certain potential and unknown liabilities relating to STAR III and SIR.

Following the consummation of the Mergers, the Combined Company will have assumed certain potential and unknown liabilities relating to STAR III and SIR. These liabilities could be significant and have a material adverse effect on the Combined Company’s business to the extent the Combined Company has not identified such liabilities or has underestimated the amount of such liabilities.

The historical and unaudited pro forma combined financial information included elsewhere in this proxy statement/prospectus may not be representative of the STAR III/STAR Combined Company’s or the Fully Combined Company’s results following the effective time of the Mergers, and accordingly, STAR III stockholders have limited financial information on which to evaluate the Combined Company.

The historical and unaudited pro forma combined financial information included elsewhere in this proxy statement/prospectus has been presented for informational purposes only and is not necessarily indicative of the STAR III/STAR Combined Company’s or the Fully Combined Company’s financial position or results of operations that actually would have occurred had the Mergers been completed as of the date indicated, nor is it indicative of the future operating results or financial position of the STAR III/STAR Combined Company or the Fully Combined Company, as applicable. The unaudited pro forma combined financial information does not reflect future events that may occur after the effective time of the STAR III Merger or the SIR Merger, including any future nonrecurring charges resulting from the Mergers, and does not consider potential impacts of current market conditions on revenues or expense efficiencies. The unaudited pro forma combined financial information presented elsewhere in this proxy statement/prospectus is based in part on certain assumptions regarding the Mergers that STAR III and STAR believe are reasonable under the circumstances. STAR III and STAR can provide no assurances that the assumptions will prove to be accurate over time.

The Combined Company may incur adverse tax consequences if prior to the Mergers, STAR III, STAR or SIR failed to qualify as a REIT for U.S. federal income tax purposes.

Each of STAR III, STAR and SIR has operated in a manner that it believes has allowed it to qualify as a REIT for U.S. federal income tax purposes under the Code and intends to continue to do so through the time of the STAR III Merger and the SIR Merger, and the Combined Company intends to continue operating in such a manner following the Mergers. None of STAR III, STAR or SIR has requested or plans to request a ruling from the Internal Revenue Service, or the IRS, that it qualifies as a REIT. Qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations. The complexity of these provisions and of the applicable Treasury Regulations is greater in the case of a REIT, like each of STAR III, STAR and SIR, that holds its assets through a partnership.

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The determination of various factual matters and circumstances not entirely within the control of STAR III or STAR may affect its ability to qualify as a REIT. In order to qualify as a REIT, each of STAR III, STAR or SIR must satisfy a number of requirements, including requirements regarding the ownership of its stock and the composition of its gross income and assets. Also, a REIT must make distributions to stockholders aggregating annually at least 90% of its REIT taxable income, excluding any net capital gains.

If STAR III, STAR or SIR (or, following the Mergers, the Combined Company) loses its REIT status, or is determined to have lost its REIT status in a prior year, it will face serious tax consequences that would substantially reduce its cash available for distribution, including cash available to pay dividends to its stockholders, because:

• it would be subject to U.S. federal corporate income tax on its net income for the years it did not qualify for taxation as a REIT (and, for such years, would not be allowed a deduction for dividends paid to stockholders in computing its taxable income);

• it could be subject to the federal alternative minimum tax for taxable years prior to January 1, 2018 and possibly increased state and local taxes for such periods;

• unless it is entitled to relief under applicable statutory provisions, neither it nor any “successor” company could elect to be taxed as a REIT until the fifth taxable year following the year during which it was disqualified; and

• for five years followingre-election of REIT status, upon a taxable disposition of an asset owned as of suchre-election, it could be subject to corporate level tax with respect to anybuilt-in gain inherent in such asset at the time ofre-election.

Following the Mergers, the Combined Company will inherit any liability with respect to unpaid taxes of STAR III for any periods prior to the Mergers. In addition, as described above, if STAR III or SIR failed to qualify as a REIT as of the Mergers, but the Combined Company nevertheless qualified as a REIT, in the event of a taxable disposition of a former STAR III or SIR asset during the five years following the Mergers the Combined Company would be subject to corporate tax with respect to anybuilt-in gain inherent in such asset as of the Mergers.

As a result of all these factors, any of STAR III, STAR, SIR or the Combined Company’s failure to qualify as a REIT could impair the STAR III/STAR Combined Company’s ability to expand its business and have other material adverse effects on the STAR III/STAR Combined Company. In addition, for years in which the STAR III/STAR Combined Company does not qualify as a REIT, it would not otherwise be required to make distributions to stockholders.

In certain circumstances, even if the Combined Company qualifies as a REIT, it and its subsidiaries may be subject to certain U.S. federal, state, and other taxes, which would reduce the Combined Company’s cash available for distribution to its stockholders.

Even if the Combined Company has qualified and continues to qualify as a REIT, it may be subject to some U.S. federal, state and local taxes on its income or property and, in certain cases, a 100% penalty tax, in the event it sells property as a dealer. Any U.S. federal, state or other taxes the Combined Company pays will reduce its cash available for distribution to stockholders. See “U.S. Federal Income Tax Considerations—Material U.S. Federal Income Tax Considerations Relating to the Combined Company’s Treatment as a REIT and to Holders of the STAR Common Stock—Taxation of the Combined Company” beginning on page 159.

If the STAR III Merger does not qualify as atax-free reorganization, there may be adverse tax consequences.

The STAR III Merger is intended to qualify as atax-free reorganization within the meaning of Section 368(a) of the Code. The closing of the STAR III Merger is conditioned on the receipt by each of STAR III and STAR of an

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opinion of its counsel to the effect that the STAR III Merger will qualify as atax-free reorganization within the meaning of Section 368(a) of the Code. However, these legal opinions will not be binding on the IRS or on the courts. If, for any reason, the STAR III Merger were to fail to qualify as atax-free reorganization, then each STAR III stockholder generally would recognize gain or loss, as applicable, equal to the difference between (i) the merger consideration (i.e., the fair market value of the shares of STAR Common Stock) received by the STAR III stockholder in the STAR III Merger; and (ii) the STAR III stockholder’s adjusted tax basis in its STAR III Common Stock.

The Combined Company will depend on key personnel for its future success, and the loss of key personnel or inability to attract and retain personnel could harm the Combined Company’s business.

The future success of the Combined Company will depend in large part on the ability of STAR Advisor to attract and retain a sufficient number of qualified personnel. The future success of the Combined Company also depends upon the service of the Combined Company’s executive officers, who have extensive market knowledge and relationships and will exercise substantial influence over the Combined Company’s operational, financing, acquisition and disposition activity. Among the reasons that they are important to the Combined Company’s success is that each has a national or regional industry reputation that is expected to attract business and investment opportunities and assist the Combined Company in negotiations with lenders, existing and potential residents and industry personnel.

Many of the Combined Company’s, and STAR Advisor’s, other key executive personnel, particularly its senior managers, also have extensive experience and strong reputations in the industry. In particular, the extent and nature of the relationships that these individuals have developed with financial institutions and existing and prospective residents is critically important to the success of the Combined Company’s business. The loss of services of one or more members of the Combined Company’s senior management team, or the Combined Company’s inability to attract and retain highly qualified personnel, could adversely affect the Combined Company’s business, diminish the Combined Company’s investment opportunities and weaken its relationships with lenders, business partners, existing and potential residents and industry personnel, which could materially and adversely affect the Combined Company.

Key employees of STAR III Advisor, STAR Advisor and/or SIR Advisor may depart either before or after the Mergers because of a desire not to remain with the Combined Company following the Mergers. Accordingly, no assurance can be given that the Combined Company will be able to retain key employees of its advisor to the same extent as in the past.

If the Combined Company internalizes its management functions following the Mergers, the percentage of the outstanding common stock owned by stockholders of the Combined Company could be reduced, and the Combined Company could incur other significant costs associated with being self-administered.

STAR Advisor notified STAR that upon consummation of the Mergers, it intends to present a proposal to the STAR Special Committee within 60 days of the closing of the Mergers regarding a possible internalization of management, whereby STAR Advisor would sell, and STAR would acquire, STAR Advisor or certain assets of STAR Advisor and its affiliates and retain a number of officers and employees of STAR Advisor and its affiliates as employees of STAR. There is no assurance that internalizing the Combined Company’s management functions would be beneficial to the Combined Company and its stockholders. Any internalization transaction could result in significant payments to the owners of STAR Advisor, including in the form of stock, which would reduce the percentage ownership of STAR’s then existing stockholders and concentrate ownership in the owner of the advisor. Additionally, the Combined Company may not realize the perceived benefits, may not be able to properly integrate a new staff of managers and employees or may not be able to effectively replicate the services provided previously by the advisor, property manager, or their affiliates. Internalization transactions involving the acquisition of advisors or property managers affiliated with entity sponsors have also, in some cases, been the subject of litigation. Even if these claims are without merit, the Combined Company could be forced to spend

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significant amounts of money defending claims, which would reduce the amount of funds available for the Combined Company to invest in properties or other investments and to pay distributions. All of these factors could have a material adverse effect on the Combined Company’s results of operations, financial condition and ability to pay distributions to its stockholders.

Risks Related to STAR’s Structure and an Investment in STAR

Shares of STAR Common Stock will not be listed on an exchange for the foreseeable future, if ever, and STAR is not required to provide for a liquidity event. Therefore, it may be difficult for STAR stockholders to sell their shares and, if stockholders are able to sell their shares, they will likely sell them at a substantial discount.

There is currently no public market for shares of STAR Common Stock, and there may never be one. Moreover, investors should not rely on STAR’s share repurchase plan as a method to sell shares promptly because STAR’s share repurchase plan includes numerous restrictions that limit stockholders’ ability to sell shares to STAR, and the STAR Board may amend, suspend or terminate STAR’s share repurchase plan upon 30 days’ prior notice to STAR stockholders for any reason it deems appropriate. In particular, the STAR Board amended and restated STAR’s share repurchase plan, which became effective on September 5, 2019, in connection with STAR’s announcement of the Mergers. The amended and restated share repurchase plan, or the STAR Amended and Restated SRP, only provides stockholders with an opportunity to have their shares of STAR Common Stock repurchased by STAR in connection with the death or qualifying disability of a stockholder, subject to certain terms and conditions specified in the STAR Amended & Restated SRP. STAR III made similar amendments to its share repurchase plan. STAR will not make any share repurchases unless STAR has sufficient funds available for repurchase, which could include other operating funds that may be authorized by the STAR Board and the applicable quarterly limitations described in the STAR Amended & Restated SRP have not been reached, and to the extent the total number of shares for which repurchase is requested does not exceed 5% of the number of shares of STAR Common Stock outstanding on December 31^st of the previous calendar year. Additionally, repurchases pursuant to STAR’s share repurchase plan are limited to $2 million per quarter and the current share repurchase price is 93% of STAR’s estimated NAV per share, further reduced based on a stockholder’s applicable holding period. The STAR Board may reject any request for repurchase of shares. Therefore, STAR stockholders may not have the opportunity to make a repurchase request under the STAR Amended & Restated SRP and STAR stockholders may not be able to sell any of their shares of STAR Common Stock back to STAR pursuant to the STAR Amended & Restated SRP. Moreover, if STAR stockholders are able to sell their shares back to STAR, it may not be for the same price they paid for the shares of common stock being repurchased. In the event the STAR III Merger and/or the SIR Merger is consummated, STAR expects to communicate the terms of the Combined Company’s share repurchase plan, which will be determined by the board of directors at a future time. Investor suitability standards imposed by certain states may also make it more difficult to sell shares to someone in those states.

The STAR Board determined an estimated value per share of $15.84 for shares of STAR Common Stock as of December 31, 2018. You should not rely on the estimated value per share as being an accurate measure of the current value of STAR Common Stock.

On March 12, 2019, the STAR Board determined an estimated value per share of STAR Common Stock of $15.84 as of December 31, 2018. The STAR Board’s objective in determining the estimated value per share was to arrive at a value, based on the most recent data available, that it believed was reasonable based on methodologies that it deemed appropriate after consultation with STAR Advisor. However, the market for commercial real estate can fluctuate quickly and substantially and the value of STAR’s assets is expected to change in the future and may decrease. Also, the STAR Board did not consider certain other factors, such as a liquidity discount to reflect the fact that STAR’s shares are not traded on a national securities exchange and the limitations on the ability to repurchase shares pursuant to the STAR Amended & Restated SRP.

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As with any valuation methodology, the methodologies used to determine the estimated value per share were based upon a number of assumptions, estimates and judgments that may not be accurate or complete. STAR’s assets have been valued based upon appraisal standards and the value of STAR’s assets using these methodologies are not required to be a reflection of market value under those standards and will not result in a reflection of fair value under GAAP. Further, different parties using different property-specific and general real estate and capital market assumptions, estimates, judgments and standards could derive a different estimated value per share, which could be significantly different from the estimated value per share determined by the STAR Board. The estimated value per share does not represent the fair value of STAR’s assets less liabilities in accordance with United States GAAP as of December 31, 2018. The estimated value per share is not a representation or indication that: a stockholder would be able to realize the estimated value per share if he or she attempts to sell shares; a stockholder would ultimately realize distributions per share equal to the estimated value per share upon liquidation of assets and settlement of STAR’s liabilities or upon a sale of STAR; shares of STAR Common Stock would trade at the estimated value per share on a national securities exchange; a third party would offer the estimated value per share in anarm’s-length transaction to purchase all or substantially all of shares of STAR Common Stock; or the methodologies used to estimate the value per share would be acceptable to FINRA or compliant with the Employee Retirement Income Security Act of 1974, or ERISA, the Internal Revenue Code or other applicable law, or the applicable provisions of a retirement plan or individual retirement plan, or IRA, with respect to their respective requirements. Further, the estimated value per share was calculated as of a moment in time and the value of STAR’s shares will fluctuate over time as a result of, among other things, future acquisitions or dispositions of assets (including acquisitions and dispositions of real estate investments since December 31, 2018), developments related to individual assets and changes in the real estate and capital markets. For additional information on the calculation of STAR’s estimated value per share as of December 31, 2018, see Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Purchases of Equity Securities—Estimated Value Per Share” in STAR’s Annual Report on Form10-K for the year ended December 31, 2018, which is attached as Annex F to this proxy statement/prospectus.

STAR has paid, and it is likely STAR will continue to pay, distributions from sources other than its cash flow from operations. To the extent that STAR pays distributions from sources other than its cash flow from operations, STAR will have reduced funds available for investment and the overall return to STAR stockholders may be reduced.

STAR’s organizational documents permit STAR to pay distributions from any source, including net proceeds from public or private offerings, borrowings, advances from STAR Sponsor or STAR Advisor and the deferral of fees and expense reimbursements by STAR Advisor, in its sole discretion. To the extent that STAR’s cash flow from operations has been or is insufficient to fully cover STAR’s distributions, STAR has paid, and may continue to pay, distributions from sources other than cash flow from operations. It is likely that STAR, following the SIR Merger and/or the STAR III Merger, will pay distributions from sources other than cash flow from operations. STAR has not established a limit on the amount of proceeds from public or private offerings, or other sources other than cash flow from operations which STAR may use to fund distributions.

To the extent that STAR funds distributions from sources other than its cash flow from operations, STAR’s funds available for investment will be reduced relative to the funds available for investment if its distributions were funded solely from cash flow from operations, STAR’s ability to achieve STAR’s investment objectives will be negatively impacted and the overall return to STAR stockholders may be reduced. In addition, if STAR makes a distribution in excess of STAR’s current and accumulated earnings and profits, the distribution will be treated first as atax-free return of capital, which will reduce the stockholder’s tax basis in its shares of common stock. The amount, if any, of each distribution in excess of a stockholder’s tax basis in shares of STAR Common Stock will be taxable as gain realized from the sale or exchange of property.

For the three and nine months ended September 30, 2019, STAR paid aggregate distributions of $11,843,692 and $35,136,678, including $6,550,164 and $19,085,888 of distributions paid in cash and 334,187 and 1,028,071 shares of STAR Common Stock issued pursuant to STAR’s distribution reinvestment plan (the “STAR DRP”) for $5,293,528 and $16,050,790, respectively. For the three and nine months ended September 30,

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2019, STAR’s net loss was $10,389,806 and $34,742,088, STAR had FFO of $4,912,689 and $17,358,334 and net cash provided by operations of $7,611,759 and $18,793,335, respectively. For the three and nine months ended September 30, 2019, STAR funded $7,611,759 and $18,793,335, or 64% and 53%, and $4,231,933 and $16,343,343, or 36% and 47%, of total distributions paid, including shares issued pursuant to the STAR DRP, from net cash provided by operating activities and from funds equal to amounts reinvested in the STAR DRP, respectively. Since inception, of the $186,825,406 in total distributions paid through September 30, 2019, including amounts reinvested in shares issued pursuant to the STAR DRP, 68% of such amounts were funded from cash flow from operations, 11% were funded from net public offering proceeds and 21% were funded from funds equal to amounts reinvested in the STAR DRP. For information on how STAR calculates FFO and the reconciliation of FFO to net loss, see Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds from Operations and Modified Funds from Operations” in the Quarterly Report on Form 10-Q, attached as Annex G to this proxy statement/prospectus.

If the aggregate amount of cash STAR distributes to stockholders in any given year exceeds the amount of its “REIT taxable income” generated during the year, the excess amount will either be (1) a return of capital or (2) a gain from the sale or exchange of property to the extent that a stockholder’s basis in STAR Common Stock equals or is reduced to zero as the result of STAR’s current or prior year distributions.

STAR is an “emerging growth company” under the federal securities laws and is subject to reduced public company reporting requirements.

STAR is an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act, and is eligible to take advantage of certain exemptions from, or reduced disclosure obligations relating to, various reporting requirements that are normally applicable to public companies.

STAR may retain its status as an “emerging growth company” for a maximum of five years, or until the earliest of (1) the last day of the first fiscal year in which it has total annual gross revenue of $1.07 billion or more, (2) December 31 of the fiscal year that STAR becomes a “large accelerated filer” as defined inRule 12b-2 under the Exchange Act (which would occur if the market value of STAR Common Stock held bynon-affiliates exceeds $700 million, measured as of the last business day of STAR’s most recently completed second fiscal quarter, and STAR has been publicly reporting for at least 12 months) or (3) the date on which STAR has issued more than $1 billion innon-convertible debt during the preceding three year period. Under the JOBS Act, emerging growth companies are not required to (1) provide an auditor’s attestation report on management’s assessment of the effectiveness of internal control over financial reporting, pursuant to Section 404 of the Sarbanes-Oxley Act, (2) comply with new audit rules adopted by the Public Company Accounting Oversight Board (“PCAOB”) after April 5, 2012 (unless the SEC determines otherwise), (3) provide certain disclosures relating to executive compensation generally required for larger public companies or (4) hold shareholder advisory votes on executive compensation. If STAR takes advantage of any of these exemptions, STAR does not know if some investors will find its common stock less attractive as a result.

Additionally, the JOBS Act provides that an “emerging growth company” may take advantage of an extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies. This means an “emerging growth company” can delay adopting certain accounting standards until such standards are otherwise applicable to private companies. However, STAR has elected to “opt out” of such extended transition period, and will therefore comply with new or revised accounting standards on the applicable dates on which the adoption of such standards are required fornon-emerging growth companies. Section 107 of the JOBS Act provides that STAR’s decision to opt out of such extended transition period for compliance with new or revised accounting standards is irrevocable.

A cybersecurity incident and other technology disruptions could negatively impact STAR’s business.

STAR uses technology in substantially all aspects of its business operations. STAR also uses mobile devices, social networking, outside vendors and other online activities to connect with STAR’s residents,

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suppliers and employees of its affiliates. Such uses give rise to potential cybersecurity risks, including security breach, espionage, system disruption, theft and inadvertent release of information. STAR’s business involves the storage and transmission of numerous classes of sensitive and confidential information and intellectual property, including residents’ and suppliers’ personal information, private information about employees of STAR’s affiliates, and financial and strategic information about STAR. If STAR fails to assess and identify cybersecurity risks associated with STAR’s operations, STAR may become increasingly vulnerable to such risks. Additionally, the measures STAR has implemented to prevent security breaches and cyber incidents may not be effective. The theft, destruction, loss, misappropriation, or release of sensitive and/or confidential information or intellectual property, or interference with STAR’s information technology systems or the technology systems of third parties on which STAR relies, could result in business disruption, negative publicity, brand damage, violation of privacy laws, loss of residents, potential liability and competitive disadvantage, any of which could result in a material adverse effect on STAR’s financial condition or results of operations.

The limit on the percentage of shares of STAR Common Stock that any person may own may discourage a takeover or business combination that may benefit STAR’s stockholders.

STAR’s charter restricts the direct or indirect ownership by one person or entity to no more than 9.8% of the value of STAR’s then outstanding capital stock (which includes common stock and any preferred stock STAR may issue) and no more than 9.8% of the value or number of shares, whichever is more restrictive, of the then outstanding STAR Common Stock unless exempted (prospectively or retroactively) by the STAR Board. These restrictions may discourage a change of control of STAR and may deter individuals or entities from making tender offers for shares of STAR Common Stock on terms that might be financially attractive to stockholders or which may cause a change in STAR’s management. In addition to deterring potential transactions that may be favorable to STAR’s stockholders, these provisions may also decrease the ability of stockholders to sell their shares of STAR Common Stock.

STAR may issue preferred stock or other classes of common stock, which issuance could adversely affect the existing holders of STAR Common Stock.

STAR stockholders do not have preemptive rights to any shares issued by STAR in the future. STAR may issue, without stockholder approval, preferred stock or other classes of common stock with rights that could dilute the value of shares of STAR Common Stock. However, the issuance of preferred stock must also be approved by a majority of STAR’s independent directors not otherwise interested in the transaction, who will have access, at STAR’s expense, to STAR’s legal counsel or to independent legal counsel. The issuance of preferred stock or other classes of common stock could increase the number of STAR stockholders entitled to distributions without simultaneously increasing the size of STAR’s asset base. Under STAR’s charter, STAR has authority to issue a total of 1,100,000,000 shares of capital stock, of which 999,999,000 shares are classified as STAR Common Stock, 100,000,000 shares are classified as preferred stock with a par value of $0.01 per share, and 1,000 shares are classified as convertible stock with a par value of $0.01 per share. The STAR Board, with the approval of a majority of the entire board of directors and without any action by STAR stockholders, may amend STAR’s charter from time to time to increase or decrease the aggregate number of shares of capital stock or the number of shares of capital stock of any class or series that STAR has authority to issue. If STAR ever created and issued preferred stock with a distribution preference over common stock, payment of any distribution preferences of outstanding preferred stock would reduce the amount of funds available for the payment of distributions on STAR Common Stock. Further, holders of preferred stock are normally entitled to receive a preference payment in the event STAR liquidates, dissolves or winds up before any payment is made to STAR’s common stockholders, likely reducing the amount common stockholders would otherwise receive upon such an occurrence. In addition, under certain circumstances, the issuance of preferred stock or a separate class or series of common stock may make more difficult or tend to discourage a merger, tender offer or proxy contest, the assumption of control by a holder of a large block of STAR’s securities, or the removal of incumbent management.

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STAR stockholders’ voting interests in STAR will be diluted as it issues additional shares.

STAR stockholders do not have preemptive rights to any shares issued by it in the future. Subject to any limitations set forth under Maryland law, the STAR Board may increase the number of authorized shares of stock, increase or decrease the number of shares of any class or series of stock designated, or reclassify any unissued shares without the necessity of obtaining stockholder approval. All of such shares may be issued in the discretion of the STAR Board. Therefore, if and as STAR (1) sells additional shares of STAR Common Stock in the future, including those issued pursuant to its distribution reinvestment plan, (2) sells securities that are convertible into shares of STAR Common Stock, (3) issues shares of STAR Common Stock in a private offering of securities to institutional investors, (4) issues shares of restricted STAR Common Stock or stock options to its independent directors or (5) issues shares of STAR Common Stock in connection with an exchange of limited partnership interests of its operating partnership, existing stockholders will experience dilution of their equity investment in STAR. Because the limited partnership interests of STAR OP, and, if the Mergers are consummated, the limited partnership interests of STAR III OP and SIR OP, may, in the discretion of the STAR Board, be exchanged for shares of STAR Common Stock, any merger, exchange or conversion between STAR OP and another entity ultimately could result in the issuance of a substantial number of shares of STAR Common Stock, thereby diluting the percentage ownership interest of other stockholders. Because of these and other reasons described in this “Risk Factors” section, stockholders should not expect to be able to own a significant percentage of STAR shares. See “Risks Related to the STAR III Merger—The ownership positions of STAR and STAR III stockholders will be diluted by the Mergers.”

Your investment will be diluted upon conversion of the convertible stock.

STAR has issued 1,000 shares of its convertible stock to STAR Advisor for an aggregate purchase price of $1,000. Under limited circumstances, each outstanding share of STAR’s convertible stock may be converted into shares of STAR Common Stock, which will have a dilutive effect to STAR stockholders. STAR convertible stock will be converted into shares of STAR Common Stock if (1) STAR has made total distributions on the then-outstanding shares of STAR Common Stock equal to the original issue price of those shares plus an aggregate 6.0% cumulative,non-compounded, annual return on the original issue price of those shares, (2) STAR lists STAR Common Stock for trading on a national securities exchange or enter into a merger whereby holders of STAR Common Stock receive listed securities of another issuer or (3) the STAR Advisory Agreement is terminated or not renewed (other than for “cause” as defined in the STAR Advisory Agreement). Upon any of these events, each share of convertible stock will be converted into a number of shares of common stock equal to 1/1000 of the quotient of (A) 15% of the amount, if any, by which (i) STAR’s “enterprise value” plus the aggregate value of the distributions paid to date on the then outstanding shares exceeds (ii) the aggregate purchase price paid by stockholders for those outstanding shares plus an aggregated 6.0% cumulative,non-compounded, annual return on the original issue price of the shares, divided by (B) STAR’s enterprise value divided by the number of outstanding shares of STAR Common Stock on anas-converted basis as of the date of conversion. In the event of a termination ornon-renewal of STAR Advisory Agreement for cause, all of the shares of the convertible stock will be repurchased by STAR for $1.00. Upon the issuance of STAR Common Stock in connection with the conversion of STAR’s convertible stock, then-existing stockholder’s interests in STAR will be diluted.

Pursuant to the STAR III Merger Agreement, if, prior to the closing of the STAR III Merger, STAR Advisor requests that, in lieu of the Subordinated Incentive Listing Fee, Subordinated Share of Net Sales Proceeds, and Performance Fees provided for and defined in the Amended STAR Advisory Agreement, STAR issue, at the closing, convertible stock (the “New Convertible Stock”) in exchange for the convertible stock STAR Advisor currently owns (such exchange, the “Exchange”), then subject to the consent of each of STAR and STAR III, upon the approval of each of their respective special committees (which consent shall not be unreasonably withheld, delayed or conditioned), the STAR Parties and STAR III Parties shall amend the STAR III Merger Agreement, and take all necessary actions, to provide for the Exchange, including amending the Amended and Restated STAR Advisory Agreement, and to issue the New Convertible Stock in the Exchange. The New Convertible Stock will have economic terms and conditions that are substantially similar to the terms set forth in

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the Amended STAR Advisory Agreement regarding the Subordinated Incentive Listing Fee, Subordinated Share of Net Sales Proceeds and Performance Fees. STAR Advisor intends to request, prior to the consummation of either of the Mergers, the issuance of New Convertible Stock in lieu of the incentive, termination and performance fees. In the event the New Convertible Stock is redeemed for STAR Common Stock, the interests of stockholders of STAR at that time will be diluted.

STAR stockholders’ investment return may be reduced if STAR is required to register as an investment company under the Investment Company Act of 1940, as amended (the “Investment Company Act”); if STAR is subject to registration under the Investment Company Act, STAR will not be able to continue STAR’s business as it is currently conducted.

Neither STAR, STAR OP nor any of STAR’s subsidiaries (including STAR III OP and SIR OP in the event the Mergers are consummated) intend to register as an investment company under the Investment Company Act. STAR OP’s and subsidiaries’ investments in real estate will represent the substantial majority of STAR’s total asset mix. In order for STAR not to be subject to regulation under the Investment Company Act, STAR engages, through STAR OP and STAR’s wholly and majority-owned subsidiaries, primarily in the business of buying real estate. These investments were made within a year after STAR’s public offering ended.

If STAR were obligated to register as an investment company, STAR would have to comply with a variety of substantive requirements under the Investment Company Act that impose, among other things:

• limitations on capital structure;

• restrictions on specified investments;

• prohibitions on transactions with affiliates; and

• compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase STAR’s operating expenses.

Section 3(a)(1)(A) of the Investment Company Act defines an investment company as any issuer that is or holds itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. Section 3(a)(1)(C) of the Investment Company Act defines an investment company as any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of the issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis, which STAR refers to as the 40% test. Excluded from the term “investment securities,” among other things, are U.S. government securities and securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act.

STAR expects that most of STAR’s assets will continue to be held through wholly or majority-owned subsidiaries. STAR expects that most of these subsidiaries will be outside the definition of an “investment company” under Section 3(a)(1) of the Investment Company Act as they are generally expected to hold at least 60% of their assets in real property. STAR believes that it, STAR OP and most of the subsidiaries of STAR OP will not fall within either definition of investment company under Section 3(a)(1) of the Investment Company Act as STAR intends to invest primarily in real property, through its wholly or majority-owned subsidiaries, the majority of which STAR expects to have at least 60% of their assets in real property. As these subsidiaries would be investing either solely or primarily in real property, they would be outside of the definition of “investment company” under Section 3(a)(1) of the Investment Company Act. STAR is organized as a holding company that conducts its businesses primarily through STAR OP, which in turn is a holding company conducting its business through its subsidiaries. Both STAR and STAR OP intend to conduct STAR’s operations so that they comply with the 40% test. STAR will monitor STAR’s holdings to ensure continuing and ongoing compliance with this test. In addition, STAR believes that neither STAR nor STAR OP will be considered an investment company

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under Section 3(a)(1)(A) of the Investment Company Act because neither STAR nor STAR OP will engage primarily or hold itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. Rather, through STAR OP’s wholly owned or majority owned subsidiaries, STAR and STAR OP will be primarily engaged in thenon-investment company businesses of these subsidiaries, namely the business of purchasing or otherwise acquiring real property.

In the event that the value of investment securities held by a subsidiary of STAR OP were to exceed 40% of the value of its total assets, STAR expects that subsidiary to be able to rely on the exception from the definition of “investment company” under Section 3(c)(5)(C) of the Investment Company Act, which is available for entities “primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.” This exception generally requires that at least 55% of a subsidiary’s portfolio must be comprised of qualifying real estate assets and at least 80% of its portfolio must be comprised of qualifying real estate assets and real estate-related assets (and no more than 20% comprised of miscellaneous assets). What STAR buys and sells is therefore limited by these criteria. How STAR determines to classify STAR’s assets for purposes of the Investment Company Act will be based in large measure uponno-action letters issued by the SEC staff and other SEC interpretive guidance and, in the absence of SEC guidance, on STAR’s view of what constitutes a qualifying real estate asset and a real estate-related asset. Theseno-action positions were issued in accordance with factual situations that may be substantially different from the factual situations STAR may face, and a number of theseno-action positions were issued more than twenty years ago. Pursuant to this guidance, and depending on the characteristics of the specific investments, certain mortgage loans, participations in mortgage loans, mortgage-backed securities, mezzanine loans, joint venture investments and the equity securities of other entities may not constitute qualifying real estate assets and therefore investments in these types of assets may be limited. The SEC or its staff may not concur with STAR’s classification of STAR’s assets. Future revisions to the Investment Company Act or further guidance from the SEC or its staff may cause STAR to lose its exclusion from the definition of investment company or force STAR tore-evaluate STAR’s portfolio and STAR’s investment strategy. Such changes may prevent STAR from operating its business successfully.

In August 2011, the SEC solicited public comment on a wide range of issues relating to Section 3(c)(5)(C) of the Investment Company Act, including the nature of the assets that qualify for purposes of the exclusion. There can be no assurance that the laws and regulations governing the Investment Company Act status of REITs, including more specific or different guidance regarding these exclusions that may be published by the SEC or its staff, will not change in a manner that adversely affects STAR’s operations. In addition, the SEC or its staff could take action that results in STAR’s or STAR’s subsidiary’s failure to maintain an exception or exemption from the Investment Company Act.

In the event that STAR, or STAR OP, were to acquire assets that could make either entity fall within the definition of investment company under Section 3(a)(1) of the Investment Company Act, STAR believes that it would still qualify for the exception from the definition of investment company provided by Section 3(c)(6). Although the SEC or its staff has issued little interpretive guidance with respect to Section 3(c)(6), STAR believes that STAR and STAR OP may rely on Section 3(c)(6) if 55% of the assets of STAR OP consist of, and at least 55% of the income of STAR OP is derived from, qualifying real estate assets owned by wholly owned or majority-owned subsidiaries of STAR OP.

To ensure that neither STAR nor any of its subsidiaries, including STAR OP, are required to register as an investment company, each entity may be unable to sell assets that it would otherwise want to sell and may need to sell assets that it would otherwise wish to retain. In addition, STAR, STAR OP or its subsidiaries may be required to acquire additional income- or loss-generating assets that STAR might not otherwise acquire or forego opportunities to acquire interests in companies that STAR would otherwise want to acquire. Although STAR, STAR OP and STAR’s subsidiaries intend to monitor STAR’s portfolio periodically and prior to each acquisition and disposition, any of these entities may not be able to remain outside the definition of investment company or maintain an exclusion from the definition of investment company. If STAR, STAR OP or STAR’s subsidiaries are required to register as an investment company but fail to do so, the unregistered entity would be prohibited

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from engaging in STAR’s business, and criminal and civil actions could be brought against such entity. In addition, the contracts of such entity would be unenforceable unless a court required enforcement, and a court could appoint a receiver to take control of the entity and liquidate its business.

STAR stockholders are bound by the majority vote on matters on which its stockholders are entitled to vote and, therefore, a stockholder’s vote on a particular matter may be superseded by the vote of other stockholders.

STAR stockholders may vote on certain matters at any annual or special meeting of stockholders, including the election of directors. However, STAR stockholders will be bound by the majority vote on matters requiring approval of a majority of the votes cast, present or entitled to vote even if they do not vote with the majority on any such matter.

STAR is not afforded the protection of Maryland law relating to business combinations.

Under Maryland law, “business combinations” between a Maryland corporation and an interested stockholder or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder becomes an interested stockholder. These business combinations include a merger, consolidation, share exchange, or, in circumstances specified in the statute, an asset transfer or issuance or reclassification of equity securities. An interested stockholder is defined as:

• any person who beneficially owns, directly or indirectly, 10% or more of the voting power of the corporation’s outstanding voting stock; or

• an affiliate or associate of the corporation who, at any time within thetwo-year period prior to the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then outstanding stock of the corporation.

These prohibitions are intended to prevent a change of control by interested stockholders who do not have the support of the STAR Board. STAR will not be afforded the protections of this statute and, accordingly, there is no guarantee that the ownership limitations in its charter would provide the same measure of protection as the business combinations statute and prevent an undesired change of control by an interested stockholder.

If STAR stockholders do not agree with the decisions of the STAR Board, they only have limited control over changes in STAR policies and operations and may not be able to change such policies and operations, except as provided for in the STAR Charter and under applicable law.

The STAR Board determines its major policies, including its policies regarding investments, operations, capitalization, financing, growth, REIT qualification and distributions. The STAR Board may amend or revise these and other policies without a vote of its stockholders. Under the MGCL and the STAR Charter, STAR stockholders generally have a right to vote only on the following:

• the election or removal of directors;

• amendment of the STAR Charter, except that the STAR Board may amend the STAR Charter without stockholder approval to increase or decrease the aggregate number of shares of stock of STAR, to increase or decrease the number of shares of stock of any class or series that STAR has the authority to issue, to change the name or other designation or the par value of any class or series of shares of stock of STAR and the aggregate par value of shares of stock of STAR, or to effect certain reverse stock splits, provided however, that any such amendment does not adversely affect the rights, preferences and privileges of the stockholders;

• STAR’s liquidation or dissolution; and

• a merger, consolidation, conversion, statutory share exchange or sale or other disposition of substantially all of STAR’s assets.

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All other matters are subject to the discretion of the STAR Board. Therefore, STAR stockholders are limited in their ability to change STAR policies and operations.

The STAR Board may change STAR’s investment policies without stockholder approval, which could alter the nature of its stockholders’ investments.

STAR’s charter requires that its independent directors review STAR’s investment policies at least annually to determine that the policies STAR is following are in the best interest of the stockholders. These policies may change over time. The methods of implementing STAR’s investment objectives and strategies also may vary, as new real estate development trends emerge and new investment techniques are developed. Except to the extent that policies and investment limitations are included in the STAR Charter, STAR’s investment policies, the methods for their implementation, and STAR’s other objectives, policies and procedures may be altered by the STAR Board without the approval of STAR stockholders. As a result, the nature of STAR stockholders’ investment could change without their consent.

Maryland law and STAR’s organizational documents limit a stockholder’s right to bring claims against STAR’s officers and directors.

Maryland law provides that a director will not have any liability as a director so long as he or she performs his or her duties in accordance with the applicable standard of conduct. In addition, the STAR Charter provides that, subject to the applicable limitations set forth therein or under Maryland law, no director or officer will be liable to STAR or STAR’s stockholders for monetary damages. The STAR Charter also provides that STAR will generally indemnify STAR’s directors, officers, advisor and the advisor’s affiliates for losses they may incur by reason of their service in those capacities unless their act or omission was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty, they actually received an improper personal benefit in money, property or services or, in the case of any criminal proceeding, they had reasonable cause to believe the act or omission was unlawful. Moreover, STAR has entered into separate indemnification agreements with each of STAR’s directors and executive officers. As a result, STAR and STAR stockholders may have more limited rights against these persons than might otherwise exist under common law. In addition, STAR may be obligated to fund the defense costs incurred by these persons. However, the STAR Charter provides that STAR may not indemnify STAR’s directors, STAR Advisor and its affiliates for loss or liability suffered by them or hold STAR’s directors or STAR Advisor and its affiliates harmless for loss or liability suffered by STAR unless they have determined in good faith, that the course of conduct that caused the loss or liability was in STAR’s best interests, they were acting on STAR’s behalf or performing services for STAR, the liability was not the result of negligence or misconduct by STAR’snon-independent directors, STAR Advisor and its affiliates, or gross negligence or willful misconduct by STAR’s independent directors, and the indemnification or agreement to hold harmless is recoverable only out of STAR’s net assets, including the proceeds of insurance, and not from the stockholders. As a result of these limitations on liability and indemnification provisions and agreements, STAR and STAR stockholders may be entitled to a more limited right of action than STAR would otherwise have if indemnification rights were not granted.

Increases in interest rates could increase the amount of STAR’s debt payments and negatively impact STAR’s operating results.

The interest STAR pays on its debt obligations reduces STAR’s cash available for distributions. Utilization of variable rate debt, combined with increases in interest rates would increase STAR’s interest costs, which would reduce STAR’s cash flows and its ability to make distributions to STAR stockholders. If STAR needs to repay existing debt during periods of rising interest rates, STAR could be required to liquidate one or more of STAR’s investments at times which may not permit realization of the maximum return on such investments.

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Lenders may require STAR to enter into restrictive covenants relating to its operations, which could limit its ability to make distributions to stockholders at its current level.

When providing financing, a lender could impose restrictions on STAR that affect its distribution and operating policies and its ability to incur additional debt. Loan documents STAR enters into may contain covenants that limit its ability to further mortgage the property, discontinue insurance coverage or replace STAR Advisor. These or other limitations may adversely affect STAR’s flexibility and limit its ability to make distributions to stockholders at its current level.

STAR III and STAR face other risks.

The foregoing risks are not exhaustive, and STAR III stockholders should be aware that, following the Mergers, the Combined Company will face various other risks, including those discussed in reports filed by STAR III and/or STAR with the SEC under the heading “Risk Factors” in their respective most recently filed annual and quarterly reports onForms 10-K and10-Q, which are included as Annexes to this proxy statement/prospectus.

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CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus (including the Annexes), contains forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. These forward-looking statements are based on current expectations, estimates and projections about the industry and markets in which STAR III and STAR operate and beliefs of, and assumptions made by, STAR III management and STAR management and involve uncertainties that could significantly affect the financial results of STAR III, STAR, the STAR III/STAR Combined Company or the Fully Combined Company. Words such as “may,” “will,” “would,” “could,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” variations of such words and similar expressions are intended to identify such forward-looking statements, which generally are not historical in nature. Such forward-looking statements include, but are not limited to, statements about the anticipated benefits of the business combination transaction involving STAR III and STAR, including future financial and operating results, and the STAR III/STAR Combined Company’s or the Fully Combined Company’s plans, objectives, expectations and intentions. All statements that address operating performance, events or developments that STAR III and STAR expect or anticipate will occur in the future—including statements regarding future financial condition, results of operations, and business—are forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Although STAR III and STAR believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, STAR III and STAR can give no assurance that their expectations will be attained and therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Some of the factors that may affect outcomes and results include, but are not limited to:

• the ability of STAR III to obtain the required stockholder approval;

• the satisfaction or waiver of other conditions in the STAR III Merger Agreement;

• the risk that the STAR III Merger or other transactions contemplated by the STAR III Merger Agreement may not be completed in the time frame expected by the parties or at all;

• the occurrence of any event, change or other circumstances that could give rise to the termination of the STAR III Merger Agreement and that a termination under certain circumstances could cause STAR III to pay STAR a termination fee, as described under “The STAR III Merger Agreement—Termination of the STAR III Merger Agreement” beginning on page 197,

• the ability of STAR to complete the SIR Merger;

• the ability of STAR to effectively acquire and dispose of properties, including properties to be acquired in the Mergers;

• changes in national, regional and local economic conditions;

• changes in financial markets and interest rates, or to the business or financial condition of STAR III, STAR or the STAR III/STAR Combined Company, the Fully Combined Company or their respective businesses;

• the nature and extent of future competition;

• the ability of STAR III, STAR and the STAR III/STAR Combined Company or the Fully Combined Company to maintain its qualification as a REIT due to economic, market, legal, tax or other considerations;

• availability to STAR, STAR III and the STAR III/STAR Combined Company or the Fully Combined Company of financing and capital; and

• those additional risks and factors discussed in reports filed with the SEC, by STAR III and STAR from time to time, including those discussed under the heading “Risk Factors” in this proxy statement/prospectus.

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Should one or more of the risks or uncertainties described above or elsewhere in this proxy statement/prospectus occur, or should underlying assumptions prove incorrect, actual results and plans could differ materially from those expressed in any forward-looking statements. You are cautioned not to place undue reliance on these statements, which speak only as of the date of this proxy statement/prospectus. All forward-looking statements, expressed or implied, included in this proxy statement/prospectus are expressly qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that STAR III, STAR or persons acting on their behalf may issue.

Neither STAR III nor STAR undertakes any duty to update any forward-looking statements appearing in this proxy statement/prospectus.

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THE COMPANIES

Steadfast Apartment REIT, Inc. and SIII Subsidiary, LLC

Set forth below is a description of the business of STAR. When used in this section, unless otherwise specifically stated or the context requires otherwise, the terms “STAR,” “we,” “us” or “our” refer to Steadfast Apartment REIT, Inc. and its consolidated subsidiaries.

Description of STAR’s Business

STAR is a publicnon-traded REIT that was formed as a Maryland corporation on August 22, 2013, and elected to be taxed as a REIT for U.S. federal income tax purposes for the year ended December 31, 2014, and each year thereafter.

STAR owns its interests in all of its properties and conducts substantially all of its business through STAR OP. STAR is externally managed by STAR Advisor. The principal executive offices of STAR are located at 18100 Von Karman Avenue, Suite 500, Irvine, California 92612.STAR’s website is located atwww.SteadfastREITs.com. The information found on, or otherwise accessible through, STAR’s website is not incorporated into, and does not form a part of, this proxy statement/prospectus or any other report or document STAR files with or furnishes to the SEC.

STAR owns and operates a diverse portfolio of multifamily properties located in targeted markets throughout the United States. STAR focuses on investing in established, stable apartment communities with operating histories that have demonstrated consistently high occupancy and income levels across market cycles, and are located in neighborhoods within close proximity to employment centers. STAR will seek opportunities to convert good properties into better ones by bringing its institutional resources to under-managed real estate. STAR anticipates that a portion of its overall portfolio will include properties that offer value-enhancement opportunities through renovation and repositioning. As of September 30, 2019, STAR owned 33 multifamily properties comprising a total of 11,455 apartment homes and one parcel of land held for the development of apartment homes. As of September 30, 2019, STAR’s multifamily properties were 96.4% leased.

On December 30, 2013, STAR commenced its initial public offering to offer a maximum of 66,666,667 shares of common stock for sale to the public at an initial price of $15.00 per share (with discounts available for certain categories of purchasers) (the “STAR Primary Offering”). STAR also registered up to 7,017,544 shares of STAR Common Stock for sale pursuant to the STAR distribution reinvestment plan (the “STAR DRP,” and together with the STAR Primary Offering, the “STAR Public Offering”) at an initial price of $14.25 per share. STAR terminated the STAR Primary Offering on March 24, 2016, but continues to offer shares of STAR Common Stock pursuant to the STAR DRP. As of the termination of the STAR Public Offering, STAR had sold 48,625,651 shares of STAR Common Stock in the STAR Public Offering for gross proceeds of $724,849,631, including 1,011,561 shares of STAR Common Stock issued pursuant to the STAR DRP for gross offering proceeds of $14,414,752. As of September 30, 2019, STAR had issued 53,949,748 shares of STAR Common Stock for gross offering proceeds of $804,390,765, including 6,335,721 shares of STAR Common Stock issued pursuant to the STAR DRP for gross offering proceeds of $93,955,886.

On March 12, 2019, the STAR Board approved an estimated value per share of STAR Common Stock of $15.84 as of December 31, 2018. In connection with the determination of an estimated value per share, the STAR Board approved a price per share for the STAR DRP of $15.84, effective April 1, 2019. The STAR Board may again, from time to time, in its sole discretion, change the price at which STAR offers shares pursuant to the STAR DRP to reflect changes in STAR’s estimated value per share and other factors that the STAR Board deems relevant.

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Real Estate Portfolio

As of September 30, 2019, STAR owned the 33 multifamily apartment communities and one parcel of land held for the development of apartment homes listed below:

												Average Monthly Occupancy(1)						Average Monthly Rent(2)
	Property Name(6)	Location	Purchase Date		Number of Units		Contract Purchase Price		Mortgage Debt Outstanding(3)			Sep 30, 2019			Dec 31, 2018			Sep 30, 2019		Dec 31, 2018
1	Villages at Spring Hill Apartments	Spring Hill, TN		5/22/2014		176	$	14,200,000			(4)		94.9	%		94.9	%	$	1,120	$	996
2	Harrison Place Apartments	Indianapolis, IN		6/30/2014		307		27,864,250			(4)		93.5	%		95.4	%		981		971
3	Club at Summer Valley	Austin, TX		8/28/2014		260		21,500,000			(4)		95.0	%		92.3	%		926		913
4	Terrace Cove Apartment Homes	Austin, TX		8/28/2014		304		23,500,000			(4)		95.1	%	��	95.7	%		961		918
5	The Residences on McGinnis Ferry	Suwanee, GA		10/16/2014		696		98,500,000			(4)		94.5	%		93.0	%		1,341		1,282
6	The 1800 at Barrett Lakes	Kennesaw, GA		11/20/2014		500		49,000,000		40,613,028			93.0	%		95.2	%		1,086		1,035
7	The Oasis	Colorado Springs, CO		12/19/2014		252		40,000,000		39,486,587			95.6	%		93.7	%		1,402		1,349
8	Columns on Wetherington	Florence, KY		2/26/2015		192		25,000,000			(4)		93.8	%		94.3	%		1,209		1,153
9	Preston Hills at Mill Creek	Buford, GA		3/10/2015		464		51,000,000			(4)		92.2	%		93.5	%		1,186		1,113
10	Eagle Lake Landing Apartments	Speedway, IN		3/27/2015		277		19,200,000			(4)		94.6	%		94.6	%		892		865
11	Reveal on Cumberland	Fishers, IN		3/30/2015		220		29,500,000		21,638,579			96.4	%		94.5	%		1,130		1,104
12	Heritage Place Apartments	Franklin, TN		4/27/2015		105		9,650,000		8,586,593			96.2	%		96.2	%		1,152		1,130
13	Rosemont at East Cobb	Marietta, GA		5/21/2015		180		16,450,000		13,253,459			93.9	%		92.8	%		1,046		991
14	Ridge Crossings Apartments	Hoover, AL		5/28/2015		720		72,000,000		57,653,083			95.0	%		94.7	%		1,004		979
15	Bella Terra at City Center	Aurora, CO		6/11/2015		304		37,600,000			(4)		94.4	%		91.8	%		1,185		1,150
16	Hearthstone at City Center	Aurora, CO		6/25/2015		360		53,400,000			(4)		96.1	%		92.2	%		1,253		1,224
17	Arbors at Brookfield	Mauldin, SC		6/30/2015		702		66,800,000			(4)		92.0	%		93.0	%		940		929
18	Carrington Park	Kansas City, MO		8/19/2015		298		39,480,000			(4)		94.3	%		94.0	%		1,038		1,013
19	Delano at North Richland Hills	North Richland Hills, TX		8/26/2015		263		38,500,000		31,803,343			95.8	%		94.3	%		1,475		1,439
20	Meadows at North Richland Hills	North Richland Hills, TX		8/26/2015		252		32,600,000		25,462,929			96.0	%		93.7	%		1,396		1,339
21	Kensington by the Vineyard	Euless, TX		8/26/2015		259		46,200,000		34,105,671			96.5	%		95.0	%		1,482		1,485
22	Monticello by the Vineyard	Euless, TX		9/23/2015		354		52,200,000		41,212,446			97.2	%		95.2	%		1,337		1,336
23	The Shores	Oklahoma City, OK		9/29/2015		300		36,250,000		23,727,188			94.7	%		94.0	%		1,018		1,000
24	Lakeside at Coppell	Coppell, TX		10/7/2015		315		60,500,000		47,871,611			97.5	%		94.6	%		1,725		1,687
25	Meadows at River Run	Bolingbrook, IL		10/30/2015		374		58,500,000		42,599,949			88.2	%		91.4	%		1,376		1,408
26	PeakView at T-Bone Ranch	Greeley, CO		12/11/2015		224		40,300,000			(4)		93.3	%		95.5	%		1,342		1,295
27	Park Valley Apartments	Smyrna, GA		12/11/2015		496		51,400,000		44,735,111			93.8	%		92.9	%		1,069		1,012
28	PeakView by Horseshoe Lake	Loveland, CO		12/18/2015		222		44,200,000		33,727,620			95.0	%		94.1	%		1,408		1,388
29	Stoneridge Farms	Smyrna, TN		12/30/2015		336		47,750,000		45,329,213			93.8	%		93.8	%		1,206		1,178
30	Fielder’s Creek	Englewood, CO		3/23/2016		217		32,400,000		—			95.4	%		95.9	%		1,209		1,193
31	Landings of Brentwood	Brentwood, TN		5/18/2016		724		110,000,000		—			96.7	%		95.9	%		1,251		1,191
32	1250 West Apartments	Marietta, GA		8/12/2016		468		55,772,500			(4)		92.7	%		90.4	%		1,038		1,008
33	Sixteen50 @ Lake Ray Hubbard	Rockwall, TX		9/29/2016		334		66,050,000			(4)		95.2	%		94.6	%		1,503		1,492
34	Garrison Station Development(5)	Murfreesboro, TN		5/30/2019		—		4,305,247		—			—	%		—	%		—		—
						11,455	$	1,471,571,997	$	551,806,410			94.4	%		93.9	%	$	1,190	$	1,163

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(1) As of September 30, 2019, STAR’s portfolio was approximately 96.4% leased, calculated using the number of occupied and contractually leased homes divided by total homes.

(2) Average monthly rent is based upon the effective rental income after considering the effect of vacancies, concessions and write-offs.

(3) Mortgage debt outstanding is net of deferred financing costs associated with the loans for each individual property listed above but excludes the principal balance of $551,669,000 and associated deferred financing costs of $3,310,487 related to the refinancings pursuant to a Master Credit Facility Agreement with Newmark Group Inc. (the “MCFA”).

(4) Properties secured under the terms of the MCFA.

(5) STAR acquired the Garrison Station property on May 30, 2019, which included unimproved land, currently zoned as a Planned Unit Development, or PUD. The current zoning permits the development of the property into a multifamily community including 176 units of 1, 2 and3-bedroom units with a typical unit mix for this market.

(6) Management believes each property is adequately insured and is suitable for its present and intended use.

STAR owns its multifamily properties fee simple through single purpose limited liability companies that are direct wholly-owned subsidiaries of STAR OP. During 2020, STAR intends to conduct approximately $5.5 million of value enhancement at selected properties and $21.1 million in development costs at the Garrison Station property.

Investment Objectives

Our primary investment objectives are to:

• realize capital appreciation in the value of our investments over the long term; and

• pay attractive, stable cash distributions to stockholders.

We cannot assure stockholders that we will attain these objectives or that the value of our assets will not decrease. Furthermore, within our investment objectives and policies, STAR Advisor will have substantial discretion with respect to the selection of specific investments and the purchase and sale of our assets, subject to the approval of the STAR Board.

Investment Strategy

We invested in and manage a diverse portfolio of multifamily properties located in targeted markets throughout the United States with the objective of generating stable rental income and maximizing the opportunity for future capital appreciation for our investors.

The majority of our properties are established, well-positioned, institutional-quality apartment communities with existing strong occupancies and consistent rental revenue, intended to provide a source of stable income to investors.

We believe that established apartments represent an attractive type of investment within the multifamily housing sector. Established apartments are typically older, more affordable apartments that cater to the middle-class segment of the workforce, with monthly rental rates that accommodate the generally accepted guidelines for housing costs as a percentage of gross income. As a result, the demand for apartment housing at these properties is higher compared to other types of multifamily properties and is generally more consistent in all economic cycles. We believe that established apartment communities are well positioned for the current economic and anticipated demographic trends.Ground-up development apartment communities follow substantially similar investment strategies and underwriting processes as our established apartment communities described below and provide an opportunity to increase investment returns, while decreasing the age of the overall portfolio.

We intend to review opportunities to execute a “value-enhancement” strategy at least annually, whereby we will review and may invest additional capital to reposition the properties with the intention of better positioning the properties in the market and increasing both average rental rates and occupancy.

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Underwriting Process

We utilize STAR Advisor’s expertise in underwriting multifamily property investments to evaluate potential real estate opportunities and determine whether an apartment community satisfies our acquisition criteria. In analyzing potential multifamily investment opportunities, STAR Advisor will review all aspects of a transaction with a focus on the following five factors:

• target location selection;

• individual property review;

• income and expense analysis;

• capital improvement planning; and

• green initiatives.

Target Location Selection: Our primary acquisition criterion for our multifamily property investments is location. When determining what markets to target, some of the key characteristics we seek include: stabilized employment rates with strong anticipated job growth; limited multifamily inventory or new product based upon historical norms and market occupancy; positive demographic trends with appreciable population growth; and MSAs that are within close proximity to medical centers, universities or state and federal government offices.

Once we have identified a market that we believe has fundamentals for long-term success, we will then transition our focus to where a specific apartment property is located within its community, relative to job centers, hospitals, entertainment, transportation and competing properties.

Selected locations could include, but are not limited to:

• revitalized neighborhoods within densely populated urban centers;

• downtown, upscale buildings supported by strong business districts;

• municipalities with restrictive development policies, thus limiting future competitive supply;

• areas with higher-than-average job growth projections;

• markets whereper-unit construction costs are significantly higher thanper-unit acquisition costs for similar properties for established apartment communities;

• markets whereper-unit construction costs are significantly lower thanper-unit acquisition costs for similar properties for development opportunities; and

• “Green Forward” communities attractive to increasinglyeco-conscious renters.

The purchase price of an investment, including land for development, will be underwritten to account for the location and condition of the property. Generally, we expect to pay higher purchase prices with respect to properties in markets that meet all, or a majority of, the characteristics set forth above or properties with stable operations.

We generally avoid markets with the following characteristics, regardless of whether the property meets the criteria noted above: (1) lack of economic diversity; (2) historical median income growth significantly below the United States average; (3) markets with supply/demand imbalances; and (4) markets with significant seasonal fluctuations in tenancy.

Target the Right Residents: We continue to target key demographic groups exhibiting higher-than-average propensities to rent. These groups include, but are not limited to:

• young professionals (primarily in the “Millennial” demographic group, age 25 to 34), who value geographic mobility and career flexibility over home ownership;

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• Baby Boomers, especially those who are either disinclined or unable to maintain their own homes; and

• displaced homeowners, who desire the amenities of home ownership but are otherwise priced out of that market due to tightened lending standards or personal financial burdens.

We believe that specific property types are uniquely positioned to capitalize on key components of demographic and economic growth that impact apartment rental markets. These properties include:

• for young professionals and students, downtown loft conversions, urbanin-fill and business-district residential towers;

• for Baby Boomers, independent senior living facilities; and

• for displaced homeowners, high-amenity suburban communities, townhomes and family-friendly apartment homes with at least two bedrooms and garages.

Offer Amenities that Attract and Retain Residents: Common to all of the groups described above is the desire for amenities that elevate their living experience from a mere apartment unit to an apartment home. Such amenities include:

• community centers/club houses;

• pools or hot tubs;

• expansive landscaped common areas (in suburban locations);

• pet-friendly policies;

• fitness centers;

• covered parking/garages;

• gated entries; and

• dedicatedon-site maintenance staff.

We refer to properties with the features described above as “lifestyle” communities, and we believe these communities are best positioned to attract market rent-paying residents. By operating a quality property with a degree of exclusivity relative to nearby competing properties, we believe we can maintain a high demand over time and therefore maximize rents.

Individual Property Review: When evaluating a particular multifamily property investment opportunity, STAR Advisor will complete several detailed property evaluations, including but not limited to:

• title and legal review;

• site selection;

• any rights, entitlements or approvals with undeveloped land;

• property condition assessments;

• environmental site assessments; and

• appraisal and market studies.

STAR Advisor will also evaluate the position of any potential property acquisition orground-up development as compared to other competitive properties in thesub-market to determine the optimal strategy. By focusing on the underlying strengths and weaknesses of each property or new development, we expect to more accurately anticipate future performance.

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Income and Expense Analysis: In addition to evaluating physical and economic occupancy, income and expense growth and controllable operating expenses of potential multifamily property investments, STAR Advisor intends to place particular emphasis upon largenon-controllable expenses in evaluating multifamily properties, in particular, property taxes, water and sewer charges and common area electricity. In addition, STAR Advisor may evaluate natural gas use, which can also be a keynon-controllable expense for multifamily properties where the owner pays the cost of water heating.

An analysis of local property taxes is performed on investments given that most taxing jurisdictions throughout the United States are actively pursuing ways to increase revenues. STAR Advisor works with property tax evaluation consultants to analyze and manage property taxes throughout the portfolio.

STAR Advisor also analyzes utility sources, particularly electric and water, in order to estimate property-level utility costs, as these expenses are often the subject of environmental and judicial mandates that result in expenses increasing at rates substantially greater than general rates of inflation. Forground-up development, STAR Advisor makes estimates of construction costs and the estimated time of the lease-up.

Capital Improvement Planning: To ensure that each of the properties we acquire continues to produce attractive levels of rental income during the period in which we own the asset, a comprehensive capital improvement plan and long-term capital budget is prepared for each property prior to the purchase of the property and periodically thereafter. Improvements and renovations are based on the quality and current condition of the asset. Before implementation of the initial capital improvement plan for an asset, STAR Advisor will utilize the following three-step approach to determine an adequate budget. First, for improvements other than value-enhancement renovations, STAR Advisor intends to engage a qualified, third party engineer to assess the physical condition of each property and its mechanical services. Second, STAR Advisor will review the third-party report and independently conduct a more detailed evaluation of the property and its potential physical needs. Finally, STAR Advisor evaluates the proposed improvements to ascertain whether the planned improvements will enable the property to remain competitive in the market and generate maximum rental income.

In addition to ensuring that any improvements are completed successfully, STAR Advisor relies on the three step approach outlined above to complete a long term capital needs assessment. We believe that this assessment can help us manage cash flow to provide for future capital improvements. We believe that making ongoing capital improvements at each asset will facilitate the property’s ability to generate consistent and stable cash flow.

Green Initiatives: We focus on green initiatives that are cost beneficial to each property. As a matter of practice, we use the following guidelines in the rehabilitation, repair and maintenance of our apartment properties:

• paint with low volatile organic compound (VOC) levels;

• flooring that is recyclable or made from recycled fibers;

• high efficiency or compact fluorescent lighting in common areas;

• lighting timers and sensors installed in property offices and common areas;

• toilets, faucets and shower heads fitted with water saving devices;

• where possible, water usage will be individually metered or allocated;

• apartment appliances, HVAC systems, water heating or boiler systems and windows and doors upgraded as necessary with systems and materials meeting current energy efficiency requirements;

• voice over IP phone systems to minimize the number of phone lines and eliminate most long distance charges; and

• green product guidelines for sourcing cleaning and maintenance supplies.

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Each of these green initiatives should reduce operating costs, provide for stable operating costs on a going forward basis and have an acceptable payback period in order to be included in the proposed property improvements. In addition, we may consider solar retrofits if the cost-benefit analysis, financial incentive packages and financing options for undertaking those improvements are attractive for purposes of the investment.

Real Estate-Related Assets

We may also selectively acquire debt collateralized by multifamily properties and securities of other companies owning multifamily properties. We expect that for any investment in real estate related-assets, the underlying real estate will generally meet our criteria for direct investment. The real estate-related assets we may invest in include, but are not limited to, first mortgages and other indebtedness secured by high-quality multifamily properties. We may also make equity investments in other real estate companies, especially when we consider it more efficient to acquire an entity that already owns assets meeting our investment criteria than to acquire such assets directly.

If we determine to make investments in real estate-related assets, we will consider such factors as:

• positioning the overall portfolio to achieve an optimal mix of investments;

• the diversification benefits of the real estate-related assets relative to the rest of the portfolio;

• the potential for the investment to deliver high current income and attractive risk-adjusted total returns; and

• other factors considered important to meeting our investment objectives.

Other Property Investments

We invest primarily in multifamily properties and we may also acquire real-estate related assets in which the underlying property is in the multifamily sector. We may, however, also make selective strategic acquisitions of other types of commercial properties that we determine are undervalued or will produce stable, secure income and increase in value over time. In selecting investments in other property types, we will generally follow the same criteria and guidelines outlined above for multifamily investments, adapted as necessary to meet the unique characteristics of each property type.

General Investment Characteristics

The following sections relate generally to all property investments that may be considered by STAR Advisor in identifying appropriate investments for us.

Form of Ownership

We own our multifamily properties fee simple through single purpose limited liability companies that are direct wholly-owned subsidiaries of STAR OP. We may also obtain options to acquire real estate properties. The amount paid for an option, if any, is normally surrendered if the property is not purchased and may or may not be credited against the purchase price if the property is purchased.

Lease Terms

Consistent with the multifamily property focus, the leases we enter into for multifamily apartment homes are generally for a term of one year or less. These terms provide us with maximum flexibility to implement rental increases when the market will bear such increases and may provide us with a hedge against inflation.

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Due Diligence

Prior to acquiring a real property, STAR Advisor or its affiliates, including our property manager, undertakes an extensive property and site review. STAR Advisor typically also undertakes a long-term viability and fair value analysis, including an inspection of the property and surrounding area by an acquisition specialist and an assessment of market area demographics. Depending on the property to be acquired and terms agreed to, STAR Advisor or its affiliate will obtain, evaluate and assess, as applicable, the following:

• a list of the current residents at the property and the terms of their respective leases;

• audited financial statements covering recent operations of properties with operating histories to the extent such statements are required to be filed with the SEC;

• historical net operating income data;

• historical occupancy rates;

• a schedule of historical, current year and projected future resident improvements, leasing commissions and capital expenditures;

• historical and projected operating expenses;

• current and historical data on real estate taxes and potential increases in real estate taxes over the projected term of the investment;

• competitive rents in the same geographical area for similar properties;

• historical, current year and projected future utility expenses;

• service and vendor contracts, parking management agreements, ground lease and property management agreements;

• existing property leases;

• all appropriate environmental due diligence assessments and reports, including, but not limited to, a preliminary investigation comprised of record reviews, interviews and physical property inspections intended to identify areas of potential hazardous substance contamination on the property, commonly referred to as a “Phase I environmental site assessment,” and, if deemed necessary based upon the findings of the Phase I environmental site assessment, a second more thorough investigation involving the collection of original samples of soil, groundwater or building materials to test for various environmental contaminants, commonly referred to as a “Phase II environmental site assessment;”

• an independent engineering report of the property’s mechanical, electrical and structural integrity;

• an independent roofing report;

• title and liability insurance policies;

• evidence that the owner of the property has good and marketable title to the property and can transfer such title to us free and clear of claims on the property from third parties, with the exception of such liens and encumbrances on the property as are acceptable to STAR Advisor;

• surveys of the property;

• for properties other than multifamily properties, a certification from each resident verifying, among other things, the material terms and status of the resident’s existing lease;

• current and potential alternative uses of the property; and

• other documents and materials determined to be material or relevant to evaluation of the property.

Forground-up development, STAR Advisor or its affiliate will perform many of the same procedures above and may additionally obtain, evaluate and assess, as applicable, the following:

• civil and engineering reports;

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• soils reports;

• comprehensive market study;

• traffic study;

• environmental impact reviews;

• land use, zoning and entitlement analysis;

• design and architecture;

• construction cost analysis and detailed budgeting;

• community outreach meetings; and

• city planning and permitting meetings.

Acquisitions from Affiliates

We are not precluded from acquiring properties, directly or through joint ventures, from the Sponsor or an affiliate of the Sponsor. All such acquisitions will be approved by a majority of our directors, including a majority of our independent directors, not otherwise interested in the transaction (i) as fair and reasonable to us and (ii) at a price to us no greater than the cost of the asset to the Sponsor or such affiliate or, if the price to us is in excess of such cost, after a determination that substantial justification for such excess exists and such excess is reasonable. Such transactions or investments may not be acquired for a value, at the time the transaction was entered into, in excess of the appraised fair market value of such investment. Subject to these limitations, the Sponsor, its affiliates and its employees (including our officers and directors) may make substantial profits in connection with any such investment and our cost to acquire the property may be in excess of the cost that we would have incurred if we had developed the property.

Joint Venture Investments

We may enter into joint ventures, partnerships,co-tenancies and otherco-ownership arrangements or participations with real estate developers, owners and other affiliated ornon-affiliated third parties for the purpose of owning or operating properties. We may also enter into joint ventures for the development or improvement of properties. Joint venture investments permit us to own interests in large properties and other investments without unduly limiting the diversity of our portfolio. Our investment may be in the form of equity or debt. In determining whether to recommend investment in a particular joint venture, STAR Advisor will evaluate the real property that such joint venture owns or is being formed to own under the same criteria described in “—Investment strategy” in this proxy statement/prospectus for the selection of our real property investments.

We have not established the specific terms we will require in the joint venture agreements we may enter into, or the safeguards we will apply to, or require in, our potential joint ventures. Particular terms and conditions or safeguards we will require in joint ventures will be determined on acase-by-case basis after STAR Advisor and the STAR Board consider all facts they feel are relevant, such as the nature and attributes of our other potential joint venture partners, the proposed structure of the joint venture, the nature of the operations, liabilities and assets the joint venture may conduct and own, and the proportion of the size of our interest when compared to the interests owned by other parties. Any joint ventures with our affiliates will result in certain conflicts of interest.

Disposition Policies

We generally acquire properties with an expectation of holding each property for an extended period. However, circumstances might arise that could result in a shortened holding period for certain properties. STAR Advisor develops an exit strategy for each investment we make in a property, which may be modified over the period we hold the investment in order to conform to changing market conditions and property-level factors. STAR Advisor will regularly perform a hold-sell analysis on each investment we make in a property to determine the optimal time to hold the investment and generate an attractive return for our stockholders. Economic and

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market conditions may influence us to hold investments for different periods. We may sell a property before the end of the expected holding period if we believe that market conditions have maximized its value to us or the sale of the asset would otherwise be in the best interests of our stockholders. Relevant factors that STAR Advisor will consider when determining whether to dispose of a property include:

• the prevailing economic, real estate and securities market conditions;

• the extent to which the property has realized its expected total return;

• benefits associated with disposing of the property and diversifying and rebalancing our investment portfolio;

• the amount of capital expenditures required;

• the opportunity to pursue a more attractive investment;

• compliance with REIT qualification requirements;

• the opportunity to enhance overall investment returns through sale of the property;

• the fact that the property was acquired as part of a portfolio acquisition and does not meet our general acquisition criteria;

• STAR Advisor’s judgment that the value of the property might decline or a mortgage loan may not be refinanced on favorable terms, if at all;

• liquidity benefits with respect to the availability of sufficient funds for the share repurchase plan; and

• other factors that, in the judgment of STAR Advisor, determine that the sale of the property is in our stockholders’ best interests.

The determination of whether a particular property should be sold or otherwise disposed of will be made after consideration of all relevant factors, including prevailing economic conditions, with a view toward achieving maximum total return for the investment. We cannot assure stockholders that this objective will be realized. In connection with our sales of properties, we may lend the purchaser all or a portion of the purchase price. In these instances, our taxable income may exceed the cash received from the sale. The terms of payment will be affected by custom in the area in which the real property being sold is located and by the then-prevailing economic conditions.

We may sell properties to affiliates. While there is no minimum on the price we must receive in such affiliated transactions, a majority of our directors, including a majority of our independent directors, not otherwise interested in such transactions must approve such transactions as being fair and reasonable to us.

Distribution Policy

Our board of directors has historically authorized daily distributions that are paid on a monthly basis. We expect to continue paying monthly distributions unless our results of operations, our general financial condition, general economic conditions or other factors prohibit us from doing so. We may declare distributions in excess of our cash flow from operations. As a result, our distribution rate and payment frequency may vary from time to time. However, to qualify as a REIT for tax purposes, we must make distributions equal to at least 90% of our “REIT taxable income” each year.

Distributions declared (1) accrue daily to our stockholders of record as of the close of business on each day, (2) are payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month and (3) were calculated at a rate of $0.002466 per share per day during the period from January 1, 2018 through September 30, 2019, which if paid overa 365-day period, is equivalent to a 6.0% annualized distribution rate based on a purchase price of $15.00 per share of STAR Common Stock.

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The distributions declared and paid during the first, second and third fiscal quarters of 2019, along with the amount of distributions reinvested pursuant to the STAR DRP were as follows:

					Distributions Paid(3)						Sources of Distributions Paid
Period	Distributions Declared(1)		Distributions Declared Per Share(1)(2)		Cash		Reinvested		Total		Cash Flow From Operations		Funds Equal to Amounts Reinvested in the STAR DRP		Net Cash Provided by Operating Activities
First Quarter 2019	$	11,511,537	$	0.222	$	6,116,456	$	5,378,566	$	11,495,022	$	2,276,063	$	9,218,959	$	2,276,063
Second Quarter 2019		11,684,723		0.224		6,419,268		5,378,696		11,797,964		8,905,513		2,892,451		8,905,513
Third Quarter 2019		11,860,005		0.227		6,550,164		5,293,528		11,843,692		7,611,759		4,231,933		7,611,759
	$	35,056,265	$	0.673	$	19,085,888	$	16,050,790	$	35,136,678	$	18,793,335	$	16,343,343	$	18,793,335

(1) Distributions during the three and nine months ended September 30, 2019, were based on daily record dates and calculated at a rate of $0.002466 per share per day.

(2) Assumes each share was issued and outstanding each day during the period presented.

(3) Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid approximately three days following month end.

For the nine months ended September 30, 2019, we paid aggregate distributions of $35,136,678, including $19,085,888 of distributions paid in cash and 1,028,071 of distributions reinvested in shares of STAR Common Stock pursuant to the STAR DRP for $16,050,790. For the nine months ended September 30, 2019, our net loss was $34,742,088, we had FFO of $17,358,334 and net cash provided by operations of $18,793,335. For the nine months ended September 30, 2019, we funded $18,793,335, or 53%, and $16,343,343, or 47%, of total distributions paid, including shares issued pursuant to the STAR DRP, from net cash provided by operating activities and from funds equal to amounts reinvested in the STAR DRP. Since inception, of the $186,825,406 in total distributions paid through September 30, 2019, including shares issued pursuant to the STAR DRP, 68% of such amounts were funded from cash flow from operations, 11% were funded from net public offering proceeds and 21% were funded from funds equal to amounts reinvested in the STAR DRP. For information on how we calculate FFO and the reconciliation of FFO to net loss, see Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds from Operations and Modified Funds from Operations” in the Quarterly Report on Form 10-Q, attached as Annex G to this proxy statement/prospectus.

Our long-term policy is to pay distributions solely from cash flow from operations. Because we may receive income from interest or rents at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund capital expenditures and other expenses, we expect that during our operational stage, we may declare distributions in anticipation of cash flow that we expect to receive during a later period, and we expect to pay these distributions in advance of our actual receipt of these funds. In these instances, the STAR Board has the authority under our organizational documents, to the extent permitted by Maryland law, to fund distributions from sources such as borrowings, offering proceeds or advances and the deferral of fees and expense reimbursements by STAR Advisor, in its sole discretion. We have not established a limit on the amount of proceeds we may use from sources other than cash flow from operations to fund distributions. If we pay distributions from sources other than cash flow from operations, we will have fewer funds available for investments.

Leverage

Weintend to use leverage to acquire properties forground-up development, redevelopment, repurchase shares and to provide additional funds for investment in our properties. We will access leverage on a secured and an unsecured basis depending on the use of capital. We may employ credit facilities with a portfolio of secured assets, mezzanine debt and/or convertible preferred equity.

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We look at several factors in considering our leverage strategy. The first factor is the maturity schedule. Our goal is to ladder maturities to avoid having a significant percentage of our loans maturing in any single year. Second, we consider a balance of fixed rate and variable rate debt depending on the term of the loan. Third, we manage our loan to value ratio and expect our first lien borrowings to be approximately 55% to 65% of the most recent annual valuations that are performed by an independent third-party appraiser or qualified valuation expert.

The STAR Board may from time to time modify our leverage policy in light of then-current economic conditions, relative costs of debt and equity capital, fair values of our properties, general conditions in the market for debt and equity securities, growth and acquisition opportunities or other factors. Our actual leverage may be higher or lower than our target leverage depending on a number of factors, including the availability of attractive investment and disposition opportunities, inflows and outflows of capital and increases and decreases in the value of our portfolio. In particular, large outflows of capital over short periods of time could cause our leverage to be substantially higher than our target.

The STAR Charter restricts us from obtaining loans from any of our directors, STAR Advisor, the Sponsor and any of their respective affiliates unless such loan is approved by a majority of the directors, including a majority of the independent directors, not otherwise interested in the transaction as fair, competitive and commercially reasonable and no less favorable to us than comparable loans between unaffiliated parties under the same circumstances. Our aggregate borrowings are reviewed by our board of directors at least quarterly.

Liquidity Strategy

The STAR Board is responsible for evaluating opportunities to return capital to our stockholders in order to optimize their overall return. One of the programs that the STAR Board has approved for returning capital is the share repurchase plan which provides for quarterly redemptions of STAR Common Stock, subject to the limitations of the plan. Other alternatives that may provide a return of capital include, but are not limited to, periodic monetization events such as special distributions and tender offers. These would be at the discretion of the STAR Board based on availability of cash in STAR.

Additionally, the STAR Board may pursue a listing of STAR Common Stock on a national securities exchange, a sale or merger in a transaction that provides our stockholders with cash and/or securities of a public company, the sale of individual assets, a sale of the company or substantially all assets of the company for cash or other consideration. We may also consider raising institutional capital that may be used for asset acquisition growth and the return of capital to stockholders.

Investment Limitations

The STAR Charter places certain limitations on us with respect to the manner in which we may invest our funds. We may not:

• invest in commodities or commodity futures contracts, except for futures contracts when used solely for the purpose of hedging in connection with our ordinary business of investing in real property and real estate-related loans;

• invest in real estate contracts of sale, otherwise known as land sale contracts, unless the contract is in recordable form and is appropriately recorded in the chain of title;

• make or invest in individual mortgage loans unless an appraisal is obtained concerning the underlying property, except for those mortgage loans insured or guaranteed by a government or government agency;

• make or invest in mortgage loans that are subordinate to any lien or other indebtedness of any of our directors, STAR Advisor, the Sponsor or our affiliates;

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• acquire equity securities unless a majority of our directors (including a majority of our independent directors) not otherwise interested in the transaction approves such investment as being fair, competitive and commercially reasonable, provided that investments in equity securities in “publicly traded entities” that are otherwise approved by a majority of our directors (including a majority of our independent directors) shall be deemed fair, competitive and commercially reasonable if we acquire the equity securities through a trade that is effected in a recognized securities market (a “publicly traded entity” shall mean any entity having securities listed on a national securities exchange or included for quotation on an inter-dealer quotation system) and provided further that this limitation does not apply to (1) acquisitions effected through the purchase of all of the equity securities of an existing entity, (2) the investment in wholly owned subsidiaries of ours or (3) investments in securities, which we refer to as “asset-backed securities,” that are collateralized by a pool of assets, including loans and receivables, that provide for a specific cash flow stream to the holder;

• make or invest in mortgage loans, including construction loans, on any one real property if the aggregate amount of all mortgage loans on such real property would exceed an amount equal to 85% of the appraised value of such real property as determined by appraisal, unless substantial justification exists because of the presence of other underwriting criteria;

• make investments in unimproved real property or mortgage loans on unimproved real property in excess of 10% of our total assets;

• issue (1) equity securities redeemable solely at the option of the holder (this limitation, however, does not limit or prohibit the operation of our share repurchase plan), (2) debt securities in the absence of adequate cash flow to cover debt service, (3) options or warrants to purchase shares to STAR Advisor, the Sponsor, any of our directors or any of their respective affiliates except on the same terms as the options or warrants, if any, are sold to the general public and unless the amount of the options or warrants does not exceed an amount equal to 10% of our outstanding shares on the date of grant of the warrants and options, or (4) equity securities on a deferred payment basis or under similar arrangements;

• invest in junior debt secured by a mortgage on real property which is subordinate to the lien of other senior debt except where the amount of such junior debt plus any senior debt does not exceed 90% of the appraised value of such property if, after giving effect thereto, the value of all such mortgage loans would not then exceed 25% of our tangible assets;

• engage in securities trading, except for the purpose of short-term investments;

• engage in underwriting or the agency distribution of securities issued by others;

• invest in the securities of any entity holding investments or engaging in activities prohibited by the STAR Charter except for investments in which we hold anon-controlling interest or investments in publicly traded entities; or

• make any investment that our board of directors believes will be inconsistent with our objectives of qualifying and remaining qualified as a REIT unless and until the STAR Board determines, in its sole discretion, that REIT qualification is not in our best interests.

Change in Investment Objectives and Policies

The STAR Charter requires our independent directors to review our investment policies at least annually to determine that the policies we are following are in the best interests of our stockholders. Each determination and the basis therefor are required to be set forth in the applicable meeting minutes. The methods of implementing our investment policies also may vary as new investment techniques are developed. The methods of implementing our investment objectives and policies, such as the number, size, location and characteristics of the multifamily properties and real-estate related assets that we intend to acquire, may be altered by a majority of our directors, including a majority of our independent directors, without the approval of our stockholders. However,

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the specific investment limitations set forth in the STAR Charter may only be changed pursuant to an amendment to the STAR Charter, which requires approval by the affirmative vote of a majority of all votes entitled to be cast on the matter. The investment limitations set forth in the STAR Charter are discussed under “—Investment Limitations” above.

Investment Company Act Considerations

We intend to operate in such a manner that we will not be subject to regulation under the Investment Company Act. We will continually review our investment activity to attempt to ensure that we do not come within the application of the Investment Company Act. Among other things, STAR Advisor will monitor the proportion of our portfolio that is placed in various investments so that we do not come within the definition of an “investment company” under the Investment Company Act. If at any time the character of our investments could cause us to be deemed as an investment company for purposes of the Investment Company Act, we will take all necessary actions to attempt to ensure that we are not deemed to be an “investment company.”

Emerging Growth Company

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act (the “JOBS Act”). For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Although these exemptions will be available to us, they will not have a material impact on our public reporting and disclosure. We are deemed a“non-accelerated filer” under the Exchange Act, and as anon-accelerated filer, we are permanently exempt from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. In addition, because we have no employees, we do not have any executive compensation or golden parachute payments to report in our periodic reports and proxy statements.

Additionally, under Section 107 of the JOBS Act, an “emerging growth company” may take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards. This means an “emerging growth company,” can delay adopting certain accounting standards until such standards are otherwise applicable to private companies. However, we are electing to “opt out” of such extended transition period, and will therefore comply with new or revised accounting standards on the applicable dates on which the adoption of such standards is required fornon-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of such extended transition period for compliance with new or revised accounting standards is irrevocable.

Economic Dependency

We are dependent on STAR Advisor for certain services that are essential to us, including the identification, evaluation, negotiation, purchase and disposition of real estate and real estate-related investments; management of the daily operations of our real estate and real estate-related investment portfolio; and other general and administrative responsibilities. In the event that STAR Advisor is unable to provide such services, we will be required to obtain such services from other sources. We may not be able to retain services from such other sources on favorable terms or at all.

Competition

We are subject to significant competition in seeking real estate investments and residents. We compete with many third parties engaged in real estate investment activities, including other REITs, specialty finance

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companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, lenders, hedge funds, governmental bodies and other entities. Many of our competitors have substantially greater financial and other resources than we have and may have substantially more operating experience than us. They may also enjoy significant competitive advantages that result from, among other things, a lower cost of capital.

The multifamily property market in particular is highly competitive. This competition could reduce occupancy levels and revenues at our multifamily properties, which would adversely affect our operations. We face competition from many sources, including from other multifamily properties in our target markets. In addition, overbuilding of multifamily properties may occur, which would increase the number of multifamily homes available and may decrease occupancy and unit rental rates. Furthermore, multifamily properties we acquire most likely compete, or will compete, with numerous housing alternatives in attracting residents, including owner occupied single- and multifamily homes available to rent or purchase. Competitive housing in a particular area and the increasing affordability of owner occupied single- and multifamily homes available to rent or buy could adversely affect our ability to retain our residents, lease apartment homes and increase or maintain rental rates.

We may compete with SIR and STAR III for investment opportunities due to the similarities in our investment strategies. SIR terminated its initial public offering on December 20, 2013, and STAR III terminated the STAR III Public Offering on August 31, 2018. In the event the Mergers are not consummated, SIR and STAR III may reinvest any proceeds from a sale of assets or engage in future securities offerings to raise capital to acquire additional multifamily properties. We may also compete with the Sponsor and its affiliates in our markets. To the extent that we compete with SIR, STAR III or any other program affiliated with the Sponsor for investments, the Sponsor will face potential conflicts of interest and there is a risk that the Sponsor will select investment opportunities for us that provide lower returns than the investments selected for such other programs, or that certain otherwise attractive investment opportunities will not be available to us.

We and STAR Advisor have developed procedures to resolve potential conflicts of interest in the allocation of investment opportunities between us and other Steadfast affiliates. STAR Advisor is required to provide information to our board of directors to enable our board of directors, including the independent directors, to determine whether such procedures are being fairly applied.

Certain of our affiliates currently own or manage multifamily properties in geographical areas in which we expect to own multifamily properties. Conflicts of interest will exist to the extent that we own or manage real properties in the same geographic areas where real properties owned or managed by other Steadfast affiliates are located. In such a case, a conflict could arise in the leasing of real properties in the event that we and another Steadfast affiliate were to compete for the same residents in negotiating leases, or a conflict could arise in connection with the resale of properties in the event that we and another Steadfast affiliate were to attempt to sell similar real properties at the same time. Conflicts of interest may also exist at such time as we or our affiliates managing real property on our behalf seek to employ leasing agents, developers, contractors or building managers.

Concentration of Credit Risk

The geographic concentration of our portfolio makes it particularly susceptible to adverse economic developments in the Atlanta, Georgia, Dallas/Fort Worth, Texas and Nashville, Tennessee apartment markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, relocations of businesses, increased competition from other apartment communities, decrease in demand for apartments or any other changes, could adversely affect our operating results and its ability to make distributions to stockholders.

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Environmental

As an owner of real estate, we are subject to various environmental laws of federal, state and local governments. We are not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of our properties, the activities of its residents and other environmental conditions of which we are unaware with respect to the properties could result in future environmental liabilities.

Legal Matters

From time to time, we are subject, or party, to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition nor are we aware of any such legal proceedings contemplated by government agencies.

Governmental Regulations

Our business is subject to many laws and governmental regulations. Changes in these laws and regulations, or their interpretation by agencies and courts, occur frequently.

We and any operating subsidiaries that we may form may be subject to state and local tax in states and localities in which they or we do business or own property. The tax treatment of us, STAR OP, any operating subsidiaries we may form and the holders of our shares in local jurisdictions may differ from our federal income tax treatment.

Americans with Disabilities Act

Investment in properties may also be subject to the Americans with Disabilities Act of 1990, as amended (the “ADA”). Under the ADA, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. We are committed to complying with the ADA to the extent to which it applies. The ADA has separate compliance requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services be made accessible and available to people with disabilities. With respect to the properties we acquire, the ADA’s requirements could require us to remove access barriers and could result in the imposition of injunctive relief, monetary penalties or, in some cases, an award of damages. We will attempt to acquire properties that comply with the ADA or place the burden on the seller or other third party, such as residents, to ensure compliance with the ADA.

Housing for Older Persons Act (“HOPA”), the Fair Housing Act (“FHA”) and Government-Assisted Housing

To the extent we invest inage-restricted communities, any such properties must comply with the FHA and HOPA. The FHA generally prohibitsage-based housing discrimination; however certain exceptions exist for housing developments that qualify as housing for older persons. HOPA provides the legal requirements for such housing developments. In order for housing to qualify as housing for older persons, HOPA requires (1) all residents of such developments to be at least 62 years of age or (2) that at least 80% of the occupied apartment homes are occupied by at least one person who is at least 55 years of age and that the housing community publish and adhere to policies and procedures that demonstrate this required intent and comply with rules issued by the United States Department of Housing and Urban Development, or HUD, for verification of occupancy. In addition, certain states require thatage-restricted communities register with the state. Noncompliance with the FHA, HOPA or state registration requirements could result in the imposition of fines, awards of damages to private litigants, payment of attorneys’ fees and other costs to plaintiffs, substantial litigation costs and substantial costs of remediation, all of which would reduce the amount of cash available for distribution to our stockholders.

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To the extent that we invest in government-assisted housing, we may acquire properties that benefit from governmental programs intended to provide affordable housing to individuals with low or moderate incomes. These programs, which are typically administered by HUD or state housing finance agencies, typically provide mortgage insurance, favorable financing terms, tax credits or rental assistance payments to property owners. As a condition of the receipt of assistance under these programs, the properties must comply with various requirements, which typically limit rents topre-approved amounts and impose restrictions on resident incomes. Failure to comply with these requirements and restrictions may result in financial penalties or loss of benefits. In addition, we will typically need to obtain the approval of HUD in order to acquire or dispose of a significant interest in or manage aHUD-assisted property.

Compensation of Executive Officers

Our executive officers do not receive compensation directly from us for services rendered to us and we do not intend to pay any compensation to our executive officers. We do not reimburse STAR Advisor directly or indirectly for the salary or other compensation paid to any of our executive officers. As a result, we do not have, nor has the STAR Board considered, a compensation policy for our executive officers. Our executive officers are officers and/or employees of, or hold an indirect ownership interest in, STAR Advisor and/or its affiliates, and our executive officers are compensated by these entities, in part, for their services to us.

Compensation of Directors

If a director is also one of our executive officers or an affiliate of STAR Advisor, we do not pay any compensation to that person for services rendered as a director. The amount and form of compensation payable to our independent directors for their service to us is determined by the STAR Board based upon recommendations from STAR Advisor. Four of our executive officers, Messrs. Rodney F. Emery and Kevin Keating and Mses. Ana Marie del Rio and Ella Neyland, manage, control or are affiliated with STAR Advisor, and through STAR Advisor, they are involved in recommending the compensation to be paid to our independent directors.

We have provided below certain information regarding compensation earned by or paid to our directors during the fiscal year ended December 31, 2018.

Name	Fees Earned or Paid in Cash in 2018(1)		Stock Awards		Option Awards		Non-Equity Incentive Plan Compensation		Change in Pension Value and Nonqualified Deferred Compensation		All Other Compensation		Total
G. Brian Christie(2)(3)	$	158,750	$	25,290	$	—	$	—	$	—	$	7,123	$	191,163
Thomas H. Purcell(2)(3)		170,000		25,290		—		—		—		—		195,290
Kerry D. Vandell(2)(3)		167,250		25,290		—		—		—		—		192,540
Ella S. Neyland(4)		—		—		—		—		—		—		—
Rodney F. Emery(4)		—		—		—		—		—		—		—
	$	496,000	$	75,870	$	—	$	—	$	—	$	7,123	$	578,993

(1) The amounts shown in this column include payments made to members of the STAR Special Committee, which was formed during the year ended December 31, 2018. The members of the STAR Special Committee are our independent directors. Each independent director received a retainer of $63,750 with the Special Committee chairperson receiving an additional $11,250. In addition, each member receives meeting fees as described below; provided there is no daily limit for special committee meeting fees.

(2) Independent directors.

(3) On August 8, 2018, each of our three independent directors was granted 1,666 shares of restricted STAR Common Stock in connection with theirre-election to the board of directors pursuant to our Independent Directors Compensation Plan (described below). The grant date fair value of the stock was $15.18 per share

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for an aggregate amount of $25,290 for each independent director. Of these shares of restricted STAR Common Stock granted in 2018, each independent director had 1,250 shares of restricted STAR Common Stock that remain unvested as of December 31, 2018. The amounts shown in this column reflect the aggregate fair value of shares of restricted stock granted, computed as of the grant date in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718.

(4) Directors who are also our executive officers or executive officers of our affiliates do not receive compensation for services rendered as a director.

Cash Compensation

We pay each of our independent directors:

• an annual retainer of $55,000 (the audit committee chairperson receives an additional $10,000 annual retainer);

• $2,500 for eachin-person board of directors meeting attended;

• $1,500 for eachin-person committee meeting attended; and

• $1,000 for each teleconference meeting of the board of directors or committee.

We will not pay in excess of $4,000 for any one set of meetings attended on any given day.

Special Committee

The STAR Special Committee was formed for the purpose of reviewing, considering, investigating, evaluating, proposing and, if deemed appropriate by the STAR Special Committee, negotiating our proposed mergers with each of SIR and STAR III and, among other matters, determining whether the STAR III Merger and the SIR Merger are fair and in the best interests of the Company and its stockholders. The members of the STAR Special Committee are Thomas H. Purcell, G. Brian Christie and Kerry D. Vandell, with Mr. Purcell serving as the chairman of the STAR Special Committee.

The STAR Special Committee held 20 meetings during the year ended December 31, 2018.

Equity Plan Compensation

Our board of directors has approved and adopted the Steadfast Apartment REIT, Inc. Independent Directors Compensation Plan (the “STAR Plan”), which operates as asub-plan of the Steadfast Apartment REIT, Inc. Amended and Restated 2013 Incentive Plan (the “STAR Incentive Plan”). Under the STAR Plan and subject to such STAR Plan’s conditions and restrictions, each of our current independent directors was entitled to receive 3,333 shares of restricted common stock once we raised $2,000,000 in gross offering proceeds from our public offering. Each subsequent independent director that joins our board of directors receives 3,333 shares of restricted common stock upon election to our board of directors. In addition, on the date following an independent director’sre-election to our board of directors, he or she receives 1,666 shares of restricted common stock. Grants of restricted common stock are subject to share availability under the STAR Incentive Plan. The shares of restricted common stock granted pursuant to the STAR Plan generally vest in four equal annual installments beginning on the date of grant and ending on the third anniversary of the date of grant; provided, however, that the restricted stock will become fully vested on the earlier to occur of: (1) the termination of the independent director’s service as a director due to his or her death or “disability”, or (2) a “change in control” of STAR (as such terms are defined in the STAR Incentive Plan).

Compensation Committee Interlocks and Insider Participation

We currently do not have a compensation committee of the STAR board because we do not pay, or plan to pay, any compensation to our officers. There are no interlocks or insider participation as to compensation decisions required to be disclosed pursuant to SEC regulations.

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Equity Compensation Plan Information

The following table provides information about our common stock that may be issued upon the exercise of options, warrants and rights under the STAR Incentive Plan as of December 31, 2018.

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights		Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans
Equity compensation plans approved by security holders:		—		—		965,011
Equity compensation plans not approved by security holders:		N/A		N/A		N/A
Total		—		—		965,011

Security Ownership of Certain Beneficial Owners

The following table shows, as of December 16, 2019, the amount of STAR Common Stock beneficially owned (unless otherwise indicated) by: (1) any person who is known by us to be the beneficial owner of more than 5% of the outstanding shares of our common stock, (2) the STAR Board (3) our executive officers and (4) all of the STAR Board and executive officers as a group.

Name and Address of Beneficial Owner(1)	Amount and Nature of Beneficial Ownership(2)		Percentage
Rodney F. Emery(3)		39,624		*
G. Brian Christie		13,329		*
Thomas H. Purcell(4)		19,031		*
Kerry D. Vandell		15,109		*
Ella S. Neyland		370		*
Kevin J. Keating		—		*
Ana Marie del Rio		3,842		*
All officers and directors as a group (seven persons)		91,305		*

* Indicates less than 1% of the outstanding common stock.

(1) The address of each named beneficial owner is c/o Steadfast Apartment REIT, Inc., 18100 Von Karman Avenue, Suite 500, Irvine, CA, 92612.

(2) None of the shares are pledged as security.

(3) Includes 13,500 shares owned by Steadfast REIT Investments, LLC, which is primarily indirectly owned and controlled by Rodney F. Emery.

(4) Includes 3,704 shares owned by THP Management, LLC, which is primarily owned and controlled by Thomas H. Purcell.

Certain Transactions with Related Persons

The following describes all transactions during the nine months ended September 30, 2019 and the year ended December 31, 2018, and currently proposed transactions, involving us, our directors, STAR Advisor, the Sponsor and any affiliate thereof. Our independent directors are specifically charged with and have examined the fairness of such transactions to our stockholders, and have determined that all such transactions are fair and reasonable to us.

Ownership Interests

On September 3, 2013, the Sponsor purchased 13,500 shares of STAR Common Stock for an aggregate purchase price of $202,500 and was admitted as our initial stockholder. The Sponsor is majority owned and controlled indirectly by Rodney F. Emery, our Chairman of the Board Directors and Chief Executive Officer, through Steadfast REIT Holdings.

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On September 3, 2013, STAR Advisor purchased 1,000 shares of our convertible stock for an aggregate purchase price of $1,000. As of December 31, 2018 and September 30, 2019, STAR Advisor owned 100% of our outstanding convertible stock. We are the general partner of STAR OP. Steadfast Apartment REIT Limited Partner, LLC, our wholly-owned subsidiary, made a $1,000 capital contribution to STAR OP as the initial limited partner.

Our convertible stock will convert into shares of STAR Common Stock if and when: (A) we have made total distributions on the then outstanding shares of STAR Common Stock equal to the original issue price of those shares plus an aggregate 6.0% cumulative,non-compounded, annual return on the original issue price of those shares, (B) we list the STAR Common Stock for trading on a national securities exchange or (C) the STAR Advisory Agreement is terminated or not renewed (other than for “cause” as defined in the STAR’s Advisory Agreement). In the event of a termination ornon-renewal of the STAR Advisory Agreement for cause, all of the shares of the convertible stock will be redeemed by us for $1.00. In general, each share of our convertible stock will convert into a number of shares of STAR Common Stock equal to 1/1000 of the quotient of: (A) 15% of the excess of (1) our “enterprise value” (as defined in the STAR Charter) plus the aggregate value of distributions paid to date on the then outstanding shares of STAR Common Stock over (2) the aggregate purchase price paid by stockholders for those outstanding shares of STAR Common Stock plus an aggregated 6.0% cumulative,non-compounded, annual return on the original issue price of those outstanding shares, divided by (B) our enterprise value divided by the number of outstanding shares of STAR Common Stock on anas-converted basis, in each case calculated as of the date of the conversion. Shares of our convertible stock are not paid dividends and as of the date hereof 1,000 shares of convertible stock remained outstanding. Pursuant to the STAR III Merger Agreement, we will cause all shares of our convertible stock to be redeemed for no consideration prior to the effective time of the STAR III Merger.

Pursuant to the STAR III Merger Agreement, if, prior to the closing of the STAR III Merger, STAR Advisor requests that, in lieu of the incentive, termination and performance fees provided for in the Amended STAR Advisory Agreement, STAR issue, at the closing, New Convertible Stock in exchange for the convertible stock STAR Advisor currently owns, then subject to the consent of each of STAR and STAR III, upon the approval of each of their respective special committees (which consent shall not be unreasonably withheld, delayed or conditioned), the STAR Parties and STAR III Parties shall amend the STAR III Merger Agreement, and take all necessary actions, to provide for the Exchange, including amending the Amended and Restated STAR Advisory Agreement, to issue the New Convertible Stock in the Exchange. If issued New Convertible Stock will have economic terms and conditions that are substantially similar to the terms set forth in the Amended STAR Advisory Agreement regarding incentive and performance fees. STAR Advisor intends to request, prior to the consummation of either of the Mergers, the issuance of the New Convertible Stock in lieu of the incentive, termination and performance fees.

Our Relationships with STAR Advisor and Sponsor

STAR Advisor supervises and manages ourday-to-day operations and selects our real property investments and real estate-related assets, subject to oversight by the STAR Board. STAR Advisor also provides marketing, sales and client services on our behalf. STAR Advisor is owned by the Sponsor. Mr. Emery, our Chairman of the Board of Directors and Chief Executive Officer, indirectly controls the Sponsor, STAR Advisor and the dealer manager for the STAR Public Offering, Stira Capital Markets Group, LLC (“Stira Capital Markets Group”). Ms. Ana Marie del Rio, our Secretary, owns an indirect 7% interest in the Sponsor. Since 2014, Ms. Neyland has earned an annual 5% profits interest from Steadfast REIT Holdings. Crossroads Capital Multifamily, LLC (“Crossroads Capital Multifamily”), owns a 25% membership interest in the Sponsor. Pursuant to the Third Amended and Restated Operating Agreement of the Sponsor, effective as of January 1, 2014, as amended, distributions are allocated to each member of the Sponsor in an amount equal to such member’s accrued and unpaid 10% preferred return, as defined in the Third Amended and Restated Operating Agreement. Thereafter, all distributions to Crossroads Capital Multifamily are subordinated to distributions to the other member of the Sponsor, Steadfast REIT Holdings, until Steadfast REIT Holdings has received an amount equal to certain

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expenses, including certain organization and offering costs, incurred by Steadfast REIT Holdings and its affiliates on our behalf.

All of our officers and directors, other than our independent directors, are officers of STAR Advisor and officers, limited partners and/or members of the Sponsor and other affiliates of STAR Advisor.

We and STAR OP have entered into the STAR Advisory Agreement with STAR Advisor and STAR OP, which has aone-year term expiring December 13, 2020, subject to an unlimited number of successiveone-year renewals upon mutual consent of the parties. We may terminate the STAR Advisory Agreement without cause or penalty upon 60 days’ written notice and immediately upon fraud, criminal conduct, willful misconduct, gross negligence or material breach of the STAR Advisory Agreement by STAR Advisor or STAR Advisor’s bankruptcy. If we terminate the STAR Advisory Agreement, we will pay STAR Advisor all unpaid advances for operating expenses and all earned but unpaid fees.

Services provided by STAR Advisor pursuant to the terms of the STAR Advisory Agreement include the following:

• finding, presenting and recommending investment opportunities to us consistent with our investment policies and objectives;

• making investment decisions for us, subject to the limitations in the STAR Charter and the direction and oversight of our board of directors;

• structuring the terms and conditions of our investments, sales and joint ventures;

• acquiring investments on our behalf in compliance with our investment objectives and policies;

• sourcing and structuring our loan originations;

• arranging for financing and refinancing of investments;

• entering into service agreements for our loans;

• supervising and evaluating each loan servicer’s and property manager’s performance;

• reviewing and analyzing the operating and capital budgets of the properties underlying our investments and the properties we may acquire;

• entering into leases and service contracts for our properties;

• assisting us in obtaining insurance;

• generating our annual budget;

• reviewing and analyzing financial information for each of our assets and our overall investment portfolio;

• formulating and overseeing the implementation of strategies for the administration, promotion, management, financing and refinancing, marketing, servicing and disposition of our investments;

• performing investor relations services;

• maintaining our accounting and other records and assisting us in filing all reports required to be filed with the SEC, the Internal Revenue Service and other regulatory agencies;

• engaging and supervising the performance of our agents, including our registrar and transfer agent; and

• performing any other services reasonably requested by us.

The above summary is provided to illustrate the material functions that STAR Advisor performs for us as an advisor and is not intended to include all of the services that may be provided to us by STAR Advisor, its affiliates or third parties. STAR Advisor also entered into an Advisory Services Agreement with Crossroads Capital Advisors, LLC (“Crossroads Capital Advisors”), an affiliate of Crossroads Capital Multifamily, whereby Crossroads Capital Advisors provides certain advisory services to us on behalf of STAR Advisor.

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Fees and Expense Reimbursements Paid to STAR Advisor

Pursuant to the terms of the STAR Advisory Agreement, we pay STAR Advisor the fees described below.

• We pay STAR Advisor an acquisition fee of 1.0% of the cost of investment, which includes the amount actually paid or budgeted to fund the acquisition, origination, development, construction or improvement of any real property or real estate-related asset acquired. For the year ended December 31, 2018, we did not incur or pay acquisition fees to STAR Advisor. For the nine months ended September 30, 2019, we incurred and paid to STAR Advisor acquisition fees of $48,343.

• We pay STAR Advisor a loan coordination fee equal to 1.0% of the initial amount of the new debt financed or outstanding debt assumed in connection with the acquisition, development, construction, improvement or origination of a property or a real estate-related asset. In addition, in connection with any financing or the refinancing of any debt (in each case, other than identified at the time of the acquisition of a property or a real estate-related asset), we pay STAR Advisor or its affiliate a loan coordination fee equal to 0.75% of the amount of debt financed or refinanced. In some instances, STAR Advisor may reduce the loan coordination fee to $100,000 per loan refinanced. For the year ended December 31, 2018, we incurred $3,562,595 and paid $4,290,695 of loan coordination fees to STAR Advisor. For the nine months ended September 30, 2019, we incurred $542,833 and paid $342,833 of loan coordination fees to STAR Advisor.

• We pay STAR Advisor a monthly investment management fee equal toone-twelfth of 1.0% of (1) the cost of our investments in real properties and real estate-related assets acquired directly by us or (2) our allocable cost of each investment in real property or real estate-related asset acquired through a joint venture. For the year ended December 31, 2018, we incurred investment management fees to STAR Advisor of $15,743,185. During the same period, we paid $15,687,320 of investment management fees to STAR Advisor. For the nine months ended September 30, 2019, we incurred $12,525,074 and paid $12,578,452 of investment management fees to STAR Advisor.

• We will pay STAR Advisor a disposition fee of up toone-half of the brokerage commissions paid but in no event to exceed 1.0% of the sales price of each property or real estate-related asset sold if STAR Advisor or its affiliates provides a substantial amount of services, as determined by a majority of our independent directors, in connection with the sale of a real property or real estate-related asset. To the extent the disposition fee is paid upon the sale of any assets other than real property, it will be included as an operating expense for purposes of the 2%/25% Guidelines (discussed below). With respect to a property held in a joint venture, the foregoing commission will be reduced to a percentage of such amounts reflecting our economic interest in the joint venture. For the year ended December 31, 2018, we did not incur or pay STAR Advisor any disposition fees. For the nine months ended September 30, 2019, we incurred $310,000 of disposition fees, none of which was paid to STAR Advisor.

In addition to the fees we pay to STAR Advisor pursuant to the STAR Advisory Agreement, we also reimburse STAR Advisor and its affiliates for the costs and expenses described below.

• We reimbursed STAR Advisor and its affiliates for organization and offering expenses, for actual legal, accounting, tax, printing, mailing and filing fees, charges of our transfer agent, expenses of organizing the company, data processing fees, advertising and sales literature costs,out-of-pocket due diligence costs, and amounts to reimburse STAR Advisor or its affiliates for the salaries of its employees and other costs in connection with preparing supplemental sales materials and providing other administrative services in connection with the STAR Public Offering. Any such reimbursement did not exceed actual expenses incurred by STAR Advisor. For the year ended December 31, 2018, we incurred $0 and paid $262,387 to STAR Advisor for the reimbursement of organization and offering expenses. For the nine months ended September 30, 2019, we incurred $0 and paid $172,278 to STAR Advisor for the reimbursement of organization and offering expenses. Following the termination of the STAR Public Offering, STAR Advisor had an obligation to reimburse us to the extent total organization and offering expenses (including sales commissions and dealer manager fees) borne by us exceeded 15% of the gross proceeds raised in the STAR Public Offering. Total organization and offering expenses borne by us did not exceed 15% of the gross offering proceeds in our public offering.

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• Subject to the 2%/25% Guidelines discussed below, we reimburse STAR Advisor for all expenses incurred by STAR Advisor in providing services to us, including our allocable share of STAR Advisor’s overhead such as rent, employee costs, utilities and information technology costs; provided, however, that no reimbursement shall be made for costs of such personnel to the extent that personnel are used in transactions for which STAR Advisor receives an acquisition fee, investment management fee, loan coordination fee or disposition fee or for the employee costs STAR Advisor pays to our executive officers. For the year ended December 31, 2018, we incurred and reimbursed STAR Advisor $1,175,061 and $1,157,836 for administrative services. For the nine months ended September 30, 2019, we incurred and reimbursed $1,322,066 and $1,158,155, respectively, for administrative services to STAR Advisor.

• We reimburse STAR Advisor for acquisition expenses incurred related to the selection, evaluation, acquisition and development of real property investments and real estate-related investments as long as total acquisition fees and expenses (including any loan coordination fees) relating to the purchase of an investment do not exceed 4.5% of the contract price of the property unless such excess is approved by the STAR Board. For the year ended December 31, 2018, we incurred and reimbursed STAR Advisor acquisition expenses of $26,113 and $24,507, respectively. For the nine months ended September 30, 2019, we incurred and reimbursed STAR Advisor acquisition expenses of $595,617 and $597,224, respectively.

2%/25% Guidelines

As described above, STAR Advisor and its affiliates are entitled to reimbursement of actual expenses incurred for administrative and other services provided to us for which they do not otherwise receive a fee. However, we will not reimburse STAR Advisor or its affiliates at the end of any fiscal quarter for “total operating expenses” that for the four consecutive fiscal quarters then ended, or the expense year, exceeded the greater of (1) 2% of our average invested assets or (2) 25% of our net income, which we refer to as the “2%/25% Guidelines,” and STAR Advisor must reimburse us quarterly for any amounts by which our total operating expenses exceed the 2%/25% Guidelines in the expense year, unless our independent directors have determined that such excess expenses were justified based on unusual andnon-recurring factors.

For purposes of the 2%/25% Guidelines, “total operating expenses” means all expenses paid or incurred by us, that are in any way related to our operation, including our allocable share of STAR Advisor’s overhead, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, listing and registration of shares of STAR Common Stock; (b) interest payments; (c) taxes;(d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based on the gain in the sale of our assets; (f) acquisition fees and acquisition expenses (including expenses relating to potential acquisitions that we do not close) and investment management fees; (g) real estate commissions on the sale of real property; and (h) other expenses connected with the acquisition, disposition, management and ownership of investments (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair, and improvement of real property). At December 31, 2018 and September 30, 2019, our total operating expenses did not exceed the 2%/25% Guidelines.

Fees and Reimbursements Paid to our Property Manager

• We have entered into property management agreements with our property manager, Steadfast Management Company, Inc., an affiliate of the Sponsor, in connection with the management of our multifamily properties. Pursuant to the property management agreements, we pay the property manager a monthly management fee equal to a range from 2.5% to 3.0% of each property’s gross revenues (as defined in the respective property management agreements) for each month. Each property management agreement has an initialone-year term and will continue thereafter on amonth-to-month basis unless either party gives 60 days’ prior notice of its desire to terminate the property management agreement, provided that we may terminate the property management agreement at any time upon the

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determination of gross negligence, willful misconduct or bad acts of the property manager or its employees or upon an uncured breach of the agreement upon 30 days’ prior written notice to the property manager. For the year ended December 31, 2018, we incurred and paid property management fees of $4,886,436 and $4,872,734, respectively, to the property manager. For the nine months ended September 30, 2019, we incurred and paid property management fees of $3,756,048 and $3,738,669, respectively, to the property manager.

• The property management agreements specify that we are to reimburse the property manager for the salaries and related benefits ofon-site personnel. For the year ended December 31, 2018, we incurred and reimbursedon-site personnel costs of $14,959,964 and $14,958,751, respectively, to the property manager. For the nine months ended September 30, 2019, we incurred and reimbursedon-site personnel costs of $11,441,579 and $10,969,323, respectively, to the property manager.

• The property management agreements also specify certain other fees payable to the property manager for benefit administration, information technology infrastructure, licenses, support and training services and capital expenditures. For the year ended December 31, 2018, we incurred and reimbursed other fees of $1,916,387 and $1,916,348, respectively, and incurred and paid capital expenditures of $7,295 to the property manager. For the nine months ended September 30, 2019, we incurred and reimbursed other fees of $2,579,316 and $2,572,033, respectively, to the property manager. No capital expenditures were incurred or paid during the nine months ended September 30, 2019.

Payments to our Construction Manager

• We have entered into construction management agreements with our construction manager, Pacific Coast Land and Construction, Inc., an affiliate of the Sponsor, in connection with capital improvements and renovation or value-enhancement projects for certain of our properties. The construction management fee payable with respect to each property under the construction management agreement ranges from 8.0% to 12.0% of the costs of the improvements for which the construction manager has planning and oversight authority. Generally, each construction management agreement can be terminated by either party with 30 days’ prior written notice to the other party. For the year ended December 31, 2018, we incurred and paid construction management fees of $585,532 and $700,410, respectively, to the construction manager. For the nine months ended September 30, 2019, we incurred and paid construction management fees of $953,635 and $916,796, respectively, to the construction manager.

• The construction management agreements also specify that we are to reimburse the construction manager for the salaries and related benefits of certain of its employees for time spent working on capital improvements and renovations. We may also reimburse the construction manager for the salaries and related benefits of certain of its employees for time spent working on capital improvements and renovations. For the year ended December 31, 2018, we incurred and reimbursed labor costs of $908,206 and $941,879, respectively, to the construction manager. For the nine months ended September 30, 2019, we incurred and reimbursed labor costs of $379,176 and $393,341, respectively, to the construction manager.

Development Services

In some instances, we may enter into a Development Services Agreement with Steadfast Multifamily Development, Inc., an affiliate of the Advisor, (the “Developer”), in connection with a development project, pursuant to which the Developer will receive a development fee and reimbursement for certain expenses for overseeing the development project. We entered into a Development Services Agreement with the Developer in connection with the Garrison Station development project that provided for a development fee equal to 4% of the hard and soft costs of the development project as specified in the Development Services Agreement. 75% of the development fee will be paid in 14 monthly installments and the remaining 25% will be paid upon delivery by

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the Developer to us of a certificate of occupancy. As of September 30, 2019, no amounts had been paid pursuant to the Development Services Agreement.

Pending Mergers with STAR III and SIR

On August 5, 2019, we entered into the Merger Agreements to acquire each of STAR III and SIR. Both mergers arestock-for-stock transactions whereby each of STAR III and SIR will be merged into one of our wholly-owned subsidiaries. The consummation of our merger with STAR III is not contingent upon the completion of the merger with SIR, and the consummation of the merger with SIR is not contingent upon the completion of the merger with STAR III. STAR III is externally advised by STAR III Advisor and SIR is externally advised by SIR Advisor. Each of STAR III Advisor and SIR Advisor is an indirect subsidiary of the Sponsor.

Amended and Restated Advisory Agreement

Concurrently with the entry into the Merger Agreements, we and STAR Advisor entered into the Amended and Restated STAR Advisory Agreement, dated as of August 5, 2019 (the “Amended STAR Advisory Agreement”), which will become effective at the effective time of the earlier of the STAR III Merger and SIR Merger. The Amended STAR Advisory Agreement amends the existing STAR Advisory Agreement to lower certain fees and to change the form of consideration for the investment management fee so that such fees are paid 50% in cash and 50% in STAR Common Stock. Any acquisition fee, disposition fee or loan coordination fee payable to STAR Advisor will be 0.5% of the cost of investment, sales price or amount financed, as applicable. Any loan coordination fee related to non-acquisition financing or refinancing will be payable to STAR Advisor in the form of STAR Common Stock. In addition, the Amended STAR Advisory Agreement provides for a Subordinated Incentive Listing Fee, Subordinated Share of Net Sales Proceeds and Performance Fee (each as defined in the Amended STAR Advisory Agreement) to be payable to STAR Advisor in exchange for the redemption of the 1,000 shares of convertible stock currently owned by STAR Advisor.

However, pursuant to the Merger Agreements, prior to the consummation of either of the Mergers, STAR Advisor intends to request to receive a new class of convertible stock in exchange for our convertible stock owned by STAR Advisor in lieu of the Subordinated Incentive Listing Fee, Subordinated Share of Net Proceeds and Performance Fee provided for in the Amended STAR Advisory Agreement. See “—Ownership Interests.”

Other Transactions

• We deposit amounts with an affiliate of the Sponsor to fund a prepaid insurance deductible account to cover the cost of required insurance deductibles across all properties owned by us and other affiliated entities of the Sponsor. Upon filing a major claim, proceeds from the insurance deductible account may be used by us or another affiliate of the Sponsor. In addition, we deposit amounts with an affiliate of the Sponsor to cover the cost of property and property related insurance across certain of our properties. For the year ended December 31, 2018, we incurred $1,394,218 and funded $1,323,074 into the prepaid insurance deductible and property insurance accounts to an affiliate of the Sponsor and earned $150,000 and received $75,000 in insurance proceeds from an affiliate of the Sponsor upon filing claims. For the nine months ended September 30, 2019, we incurred $1,533,091 and funded $1,932,245 into the prepaid insurance deductible and property insurance accounts to an affiliate of the Sponsor and earned $0 and received $75,000 in insurance proceeds from an affiliate of the Sponsor related to the filing of any claims.

• We lease apartment homes to an affiliate of the Sponsor for use as regional offices. For the year ended December 31, 2018, we earned and received $21,589 of rental revenue from our affiliates. For the nine months ended September 30, 2019, we earned and received $44,235 of rental revenue from our affiliates.

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Potential Internalization

STAR Advisor notified us that upon consummation of the Mergers, it intends to present a proposal to the STAR Special Committee within 60 days of the closing of the Mergers regarding a possible internalization of management, whereby STAR Advisor would sell, and we would acquire, STAR Advisor or certain assets of STAR Advisor and its affiliates and retain a number of officers and employees of STAR Advisor and its affiliates as our employees. Such a transaction, if consummated, likely would include an amendment to the advisory agreement with STAR Advisor to permit STAR Advisor or its affiliates to receive consideration in exchange for the sale. STAR Advisor believes that an internalization would, among other things, result in administrative and other cost savings to us and increase the likelihood of a future listing. STAR Advisor has not proposed a price at which it would be willing to effect such a transaction, and there is no guarantee that we and STAR Advisor will successfully negotiate an internalization of management, or in the event of an internalization, the potential benefits of the internalization would be realized.

Currently Proposed Transactions

Other than as described above, there are no currently proposed material transactions with related persons other than those covered by the terms of the agreements described above.

Policies and Procedures for Transactions with Related Persons

In order to reduce or eliminate certain potential conflicts of interest, the STAR Charter and the Amended STAR Advisory Agreement contain restrictions and conflict resolution procedures relating to transactions we enter into with STAR Advisor, our directors or their respective affiliates. Each of the restrictions and procedures that apply to transactions with STAR Advisor and its affiliates will also apply to any transaction with any entity or real estate program controlled by STAR Advisor and its affiliates. As a general rule, any related party transaction must be approved by a majority of the directors (including a majority of independent directors) not otherwise interested in the transaction. In determining whether to approve or authorize a particular related party transaction, these persons will consider whether the transaction between us and the related party is fair and reasonable to us and has terms and conditions no less favorable to us than those available from unaffiliated third parties.

We have also adopted a Code of Ethics that applies to each of our officers and directors, which we refer to as “covered persons.” The Code of Ethics sets forth certain conflicts of interest policies that limit and govern certain matters among us, the covered persons, STAR Advisor and their respective affiliates. Our Code of Ethics is available on our website atwww.SteadfastREITs.com. For more information on our Code of Ethics, see “Code of Business Conduct and Ethics.”

Director Independence

Although our shares are not listed for trading on any national securities exchange, a majority of the members of our board of directors and all of the members of the audit committee are “independent” as defined by the New York Stock Exchange (the “NYSE”). The NYSE standards provide that to qualify as an independent director, in addition to satisfying certain bright-line criteria, the board of directors must affirmatively determine that a director has no material relationship with us (either directly or as a partner, stockholder or officer of an organization that has a relationship with us). In addition, we have determined that these directors are independent pursuant to the definition of independence in the STAR Charter, which is based on the definition included in the North American Securities Administrators Association, Inc.’s Statement of Policy Regarding Real Estate Investment Trusts, as revised and adopted on May 7, 2007. The STAR Board has determined that G. Brian Christie, Thomas H. Purcell and Kerry D. Vandell each satisfies the bright-line criteria and that none has a relationship with us that would interfere with such person’s ability to exercise independent judgment as a member of our board of directors. None of these directors has ever served as (or is related to) an employee of

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ours or any of our predecessors or acquired companies or received any compensation from us or any such other entities except for compensation directly related to service as a director. Therefore, we believe that all of these directors are independent directors.

SIII Subsidiary, LLC

Merger Sub is a Maryland limited liability company and direct wholly-owned subsidiary of STAR formed solely for the purpose of entering into the Merger Agreement and effecting the STAR III Merger. Upon completion of the STAR III Merger, STAR III will be merged with and into Merger Sub, with Merger Sub continuing as the Surviving Entity and a wholly-owned subsidiary of STAR. Merger Sub has not conducted any activities other than those incidental to its formation and the matters contemplated by the Merger Agreement.

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Steadfast Apartment REIT III, Inc.

Set forth below is a description of the business of STAR III. When used in this section, unless otherwise specifically stated or the context requires otherwise, the terms “STAR III,” “we,” “us” or “our” refer to Steadfast Apartment REIT III, Inc. and its consolidated subsidiaries. Certain statements regarding STAR III’s future operations and its plans for future business may not be applicable to the extent the STAR III Merger is completed.

Description of STAR III’s Business

STAR III is a public,non-traded REIT that was formed as a Maryland corporation on July 29, 2015, that elected to be taxed as a REIT for U.S. federal income tax purposes for the year ended December 31, 2016, and each year thereafter.

We are externally managed by STAR III Advisor and substantially all of our business is conducted through the STAR III OP. The principal executive offices of STAR III are located at 18100 Von Karman Avenue, Suite 500, Irvine, CA 92612. STAR III’s telephone number at that location is (949)852-0700. STAR III’s website is located atwww.SteadfastREITs.com. The information found on, or otherwise accessible through, STAR III’s website is not incorporated into, and does not form a part of, this proxy statement/prospectus or any other report or document STAR III files with or furnishes to the SEC.

We own and manage a portfolio of multifamily properties located in targeted markets throughout the United States. We target for acquisition established, stable apartment communities with operating histories that have demonstrated consistently high occupancy and income levels across market cycles, and are located in neighborhoods within close proximity to employment centers. We seek opportunities to convert good properties into better ones by bringing our institutional resources to under-managed real estate. We anticipate that a portion of our overall portfolio will include properties that offer value-enhancement opportunities through renovation and repositioning. As of September 30, 2019, we owned ten multifamily properties comprised of 2,775 apartment homes.

On February 5, 2016, we commenced our initial public offering to offer a maximum of $1,000,000,000 in shares of STAR III Common Stock for sale to the public in the primary offering (the “STAR III Primary Offering”). As of August 31, 2018, the date we terminated the STAR III Primary Offering, we had sold 3,483,706 shares of Class A common stock, 474,357 shares of Class R common stock and 4,572,889 shares of Class T common stock in the STAR III Primary Offering for gross proceeds of $85,801,001, $10,672,273 and $108,706,960, respectively, and $205,180,234 in the aggregate, including 111,922 shares of Class A common stock, 8,450 shares of Class R common stock and 145,838 shares of Class T common stock issued pursuant to our distribution reinvestment plan (the “STAR III DRP”) for gross offering proceeds of $2,658,156, $190,125 and $3,298,847, respectively. We terminated the STAR III DRP effective with distributions that began to accrue on February 1, 2019. As of September 30, 2019, we had sold 3,528,797 shares of Class A common stock, 479,529 shares of Class R common stock and 4,654,978 shares of Class T common stock in the STAR III Primary Offering for gross proceeds of $86,834,671, $10,788,788 and $110,559,107, respectively, and $208,182,566 in the aggregate, including 157,012 shares of Class A common stock, 13,622 shares of Class R common stock and 227,925 shares of Class T common stock issued pursuant to the STAR III DRP for gross offering proceeds of $3,691,826, $306,640 and $5,150,991, respectively.

On October 9, 2018, the STAR III Board determined an estimated value per share for each of our Class A common stock, Class R common stock and Class T common stock of $22.54 as of June 30, 2018. In connection with the determination of an estimated value per share, the STAR III Board determined a price per share for the STAR III DRP for each of our Class A common stock, Class R common stock, and Class T common stock of $22.54 effective November 1, 2018. The STAR III Board may, from time to time in its sole discretion, reinstate the DRP, although there is no assurance as to if or when this would happen.

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Real Estate Portfolio

As of September 30, 2019, we owned the ten multifamily apartment communities listed below:

											Average Monthly Occupancy(2)						Average Monthly Rent(3)
Property Name(4)		Location	Purchase Date		Number of Units		Total Purchase Price		Mortgage Debt Outstanding(1)		Sep 30, 2019			Dec 31, 2018			Sep 30, 2019		Dec 31, 2018
1	Carriage House Apartment Homes	Gurnee, IL		5/19/2016		136	$	7,525,000	$	5,638,098		88.3	%		86.8	%	$	887	$	818
2	Bristol Village Apartments	Aurora, CO		11/17/2016		240		47,400,000		34,033,421		94.2	%		91.9	%		1,415		1,374
3	Canyon Resort at Great Hills Apartments	Austin, TX		12/29/2016		256		44,500,000		31,583,615		96.5	%		94.3	%		1,346		1,313
4	Reflections on Sweetwater Apartments	Lawrenceville, GA		1/12/2017		280		33,288,337		30,001,137		93.0	%		93.4	%		1,148		1,071
5	The Pointe at Vista Ridge Apartments	Lewisville, TX		5/25/2017		300		45,188,223		29,964,563		95.0	%		92.6	%		1,290		1,228
6	Belmar Villas	Lakewood, CO		7/21/2017		318		64,503,255		46,925,464		96.3	%		90.0	%		1,376		1,329
7	Ansley at Princeton Lakes	Atlanta, GA		8/31/2017		306		44,594,087		32,219,902		93.4	%		91.4	%		1,220		1,146
8	Sugar Mill Apartments	Lawrenceville, GA		12/7/2017		244		36,305,492		24,659,302		94.7	%		94.6	%		1,183		1,139
9	Avery Point Apartments	Indianapolis, IN		12/15/2017		512		45,829,836		31,083,091		91.0	%		94.2	%		833		809
10	Cottage Trails at Culpepper Landing	Chesapeake, VA		5/31/2018		183		31,118,698		21,408,862		94.9	%		90.6	%		1,275		1,338
						2,775	$	400,252,928	$	287,517,455		93.7	%		92.4	%	$	1,183	$	1,136

(1) Mortgage debt outstanding is net of deferred financing costs associated with the loans for the properties listed above.

(2) At September 30, 2019, our portfolio was approximately 96.4% leased, calculated using the number of occupied and contractually leased units divided by total units.

(3) Average monthly rent is based upon the effective rental income after considering the effect of vacancies, concessions and write-offs.

(4) We believe each property is adequately insured and is suitable for its present and intended use.

Investment Objectives

Our investment objectives are to:

• realize capital appreciation in the value of our investments over the long term; and

• pay attractive and stable cash distributions to stockholders.

We cannot assure stockholders that we will attain these objectives or that the value of our assets will not decrease. Furthermore, within our investment objectives and policies, STAR III Advisor has substantial discretion with respect to the selection of specific investments and the purchase and sale of our assets, subject to the approval of the STAR III Board.

Investment Strategy

In pursuing our investment objectives and selecting our multifamily investments, STAR III Advisor considers a number of factors, including, but not limited to, the following:

• positioning our overall portfolio to achieve diversity by geography;

• macroeconomic and microeconomic employment and demographic data and trends of the submarket where the investment is located;

• regional, market and property specific supply and demand dynamics;

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• transaction size and projected property-level leverage;

• physical condition of the property and the need for capital expenditures;

• property location and positioning within itssub-market;

• design characteristics of the property;

• types and duration of leases related to the property;

• adequacy of parking and access to public transportation;

• income-producing capacity of the property;

• opportunities for capital appreciation based on property repositioning, operating expense reductions and other factors;

• potential to otherwise add value to the property;

• risk characteristics of the investment compared to the potential returns and availability of alternative investments;

• REIT qualification requirements;

• liquidity and tax considerations; and

• other factors considered important to meet our investment objectives.

We are not limited as to the geographic area in which we may conduct our operations; however, we intend to continue to focus on investments in the United States. We are not specifically limited in the number or size of properties we may acquire.

Multifamily Properties

We invested in a portfolio of multifamily properties throughout the United States. Our investments include established, stable, income-producing multifamily properties and under-managed multifamily properties that offer value-enhancement opportunities through renovation and repositioning, all of which we believe will produce an attractive and consistent level of income and appreciation for our investors.

All such properties comply with applicable federal, state and local laws and regulations.

Value-Enhancement Properties

We will regularly review opportunities to execute a value enhancement strategy. These investments will allow us to enhance good properties to create better ones by initiating strategic value-enhancement repositioning and capital improvement projects. The frequency and extent of these opportunities will be determined on acase-by-case basis.

These opportunities will vary in degree, but generally will employ the following methodology:

• purchased valuable, but somewhat under-managed, communities from sellers who are not realizing the potential of these properties;

• renew and revitalize communities with aesthetic improvements and strategic upgrades;

• reposition assets in their markets to attract higher-paying residents; and

• sell assets at a premium due to increased cash flow and property quality.

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Underwriting Process

We utilize STAR III Advisor’s expertise in underwriting multifamily property investments to evaluate potential real estate opportunities and determine whether an apartment community satisfies our acquisition criteria. In analyzing potential multifamily investment opportunities, STAR III Advisor reviews all aspects of a transaction with a focus on the following five factors:

• target location selection;

• individual property review;

• income and expense analysis;

• capital improvement planning; and

• green initiatives.

STAR III Advisor follows the same underwriting process as its affiliate, STAR Advisor. For information on the five factors of the underwriting process, see “The Companies—Steadfast Apartment REIT, Inc. and SIII Subsidiary, LLC—Underwriting Process.”

Real Estate-Related Assets

We may also selectively acquire debt collateralized by multifamily properties and securities of other companies owning multifamily properties. We expect that for any investment in real estate related-assets, the underlying real estate will generally meet our criteria for direct investment. The real estate-related assets we may invest in include, but are not limited to, first mortgages and other indebtedness secured by high-quality multifamily properties. We may also make equity investments in other real estate companies, especially when we consider it more efficient to acquire an entity that already owns assets meeting our investment criteria than to acquire such assets directly.

If we determine to make investments in real estate-related assets, we will consider such factors as:

• positioning the overall portfolio to achieve an optimal mix of investments;

• the diversification benefits of the real estate-related assets relative to the rest of the portfolio;

• the potential for the investment to deliver high current income and attractive risk-adjusted total returns; and

• other factors considered important to meeting our investment objectives.

Other Property Investments

We intend to continue to invest primarily in multifamily properties and we may also acquire real-estate related assets in which the underlying property is in the multifamily sector. We may, however, also make selective strategic acquisitions of other types of commercial properties that we determine are undervalued or will produce stable, secure income and increase in value over time. In selecting investments in other property types, we will generally follow the same criteria and guidelines outlined above for multifamily investments, adapted as necessary to meet the unique characteristics of each property type.

General Investment Characteristics

STAR III Advisor utilizes the same general investment characteristics as its affiliate, STAR Advisor. For information on form of ownership, lease terms, due diligence utilized by STAR III Advisor, with respect to all property investments, see “The Companies—Steadfast Apartment REIT, Inc. and SIII Subsidiary, LLC— General Investment Characteristics.”

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Acquisitions from Affiliates

We are not precluded from acquiring properties, directly or through joint ventures, from our affiliates. All such acquisitions will be approved by a majority of our directors, including a majority of our independent directors, not otherwise interested in the transaction (i) as fair and reasonable to us and (ii) at a price to us no greater than the cost of the asset to such affiliate or, if the price to us is in excess of such cost, after a determination that substantial justification for such excess exists and such excess is reasonable. Such transactions or investments may not be acquired for a value, at the time the transaction was entered into, in excess of the appraised fair market value of such investment. Subject to these limitations, the Sponsor, its affiliates and its employees (including our officers and directors) may make substantial profits in connection with any such investment and our cost to acquire the property may be in excess of the cost that we would have incurred if we had developed the property.

Joint Venture Investments

We may enter into joint ventures, partnerships,co-tenancies and otherco-ownership arrangements or participations with real estate developers, owners and other affiliated ornon-affiliated third parties for the purpose of owning or operating properties. We may also enter into joint ventures for the development or improvement of properties. Joint venture investments permit us to own interests in large properties and other investments without unduly limiting the diversity of our portfolio. Our investment may be in the form of equity or debt. In determining whether to recommend investment in a particular joint venture, STAR III Advisor will evaluate the real property that such joint venture owns or is being formed to own under the same criteria described elsewhere in this proxy statement/prospectus for the selection of our real property investments.

We have not established the specific terms we will require in the joint venture agreements we may enter into, or the safeguards we will apply to, or require in, our potential joint ventures. Particular terms and conditions or safeguards we will require in joint ventures will be determined on acase-by-case basis after STAR III Advisor and the STAR III Board consider all facts they feel are relevant, such as the nature and attributes of our other potential joint venture partners, the proposed structure of the joint venture, the nature of the operations, liabilities and assets the joint venture may conduct and own, and the proportion of the size of our interest when compared to the interests owned by other parties. Any joint venture with our affiliates must be approved by a majority of our directors, including a majority of our independent directors, not otherwise interested in the transaction as being fair and reasonable to us and on substantially the same terms and conditions as those received by the other joint venturers. Any joint ventures with our affiliates will result in certain conflicts of interest.

Disposition Policies

We generally acquire properties with an expectation of holding each property for an extended period. However, circumstances might arise that could result in a shortened holding period for certain properties. STAR III Advisor develops an exit strategy for each investment we make in a property, which may be modified over the period we hold the investment in order to conform to changing market conditions and property-level factors. STAR III Advisor will regularly perform a hold-sell analysis on each investment we make in a property to determine the optimal time to hold the investment and generate an attractive return for our stockholders. Economic and market conditions may influence us to hold investments for different periods. We may sell a property before the end of the expected holding period if we believe that market conditions have maximized its value to us or the sale of the asset would otherwise be in the best interests of our stockholders. Relevant factors that STAR III Advisor will consider when determining whether to dispose of a property include:

• the prevailing economic, real estate and securities market conditions;

• the extent to which the property has realized its expected total return;

• benefits associated with disposing of the property and diversifying and rebalancing our investment portfolio;

• the opportunity to pursue a more attractive investment;

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• capital expenditure requirements;

• compliance with REIT qualification requirements;

• the opportunity to enhance overall investment returns through sale of the property;

• the fact that the property was acquired as part of a portfolio acquisition and does not meet our general acquisition criteria;

• STAR III Advisor’s judgment that the value of the property might decline or a mortgage loan may not be refinanced, if at all;

• liquidity benefits with respect to the availability of sufficient funds for the share repurchase plan; and

• other factors that, in the judgment of STAR III Advisor, determine that the sale of the property is in our stockholders’ best interests.

The determination of whether a particular property should be sold or otherwise disposed of will be made after consideration of all relevant factors, including prevailing economic conditions, with a view toward achieving maximum total return for the investment. We cannot assure stockholders that this objective will be realized. In connection with our sales of properties, we may lend the purchaser all or a portion of the purchase price. In these instances, our taxable income may exceed the cash received from the sale. The terms of payment will be affected by custom in the area in which the real property being sold is located and by the then-prevailing economic conditions. We may sell properties to affiliates. While there is no minimum on the price we must receive in such transactions, a majority of our directors, including a majority of our independent directors, not otherwise interested in such transactions must approve such transactions as being fair and reasonable to us.

Distribution Policy

The STAR III Board has authorized daily distributions that are paid on a monthly basis. We expect to continue paying monthly distributions unless our results of operations, our general financial condition, general economic conditions or other factors prohibit us from doing so. We may declare distributions in excess of our cash flow from operations. As a result, our distribution rate and payment frequency may vary from time to time. However, to qualify as a REIT for tax purposes, we must make distributions equal to at least 90% of our “REIT taxable income” each year.

The distributions declared and paid during the first, second and third fiscal quarters of 2019, along with the amount of distributions reinvested pursuant to the STAR III DRP were as follows:

					Distributions Paid(2)						Sources of Distributions Paid				Net Cash Provided by (Used in) Operating Activities
Period	Distributions Declared(1)		Distributions Declared Per Share		Cash		Reinvested		Total		Cash Flow From Operations		Offering Proceeds
First Quarter 2019	$	3,193,787	$	0.370	$	2,168,613	$	1,094,956	$	3,263,569	$	—	$	3,263,569	$	(1,116,143	)
Second Quarter 2019		3,221,597		0.374		3,260,785		—		3,260,785		127,491		3,133,294		127,491
Third Quarter 2019		3,245,162		0.378		3,249,014		—		3,249,014		318,743		2,930,271		318,743
	$	9,660,546	$	1.122	$	8,678,412	$	1,094,956	$	9,773,368	$	446,234	$	9,327,134	$	(669,909	)

(1) Assumes each share was issued and outstanding each day during the periods presented.

(2) Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid approximately three days following month end.

For the nine months ended September 30, 2019, we paid aggregate distributions of $9,773,368, including $8,678,412 of distributions paid in cash and 48,578 shares of our common stock issued pursuant to our DRP for

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$1,094,956. For the nine months ended September 30, 2019, our net loss was $11,767,865, we had FFO of $(194,068) and net cash provided by (used in) operations of $(669,909). For the nine months ended September 30, 2019, we funded $446,234, or 5%, and $9,327,134, or 95% of total distributions paid, including shares issued pursuant to our DRP, from cash flow from operations and with proceeds from our Public Offering. Since inception, of the $26,578,224 in total distributions paid through September 30, 2019, including shares issued pursuant to our DRP, 7% of such amounts were funded from cash flow from operations and 93% were funded from offering proceeds. For information on how we calculate FFO and the reconciliation of FFO to net loss, see Item 2. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds from Operations and Modified Funds from Operations” in the Quarterly Report on Form 10-Q, attached as Annex E to this proxy statement/prospectus.

Our long-term policy is to pay distributions solely from cash flow from operations. Further, because we may receive income from interest or rents at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund capital expenditures and other expenses, we expect that during our operational stage, we will declare distributions in anticipation of cash flow that we expect to receive during a later period, and we expect to pay these distributions in advance of our actual receipt of these funds. In these instances, the STAR III Board has the authority under our organizational documents, to the extent permitted by Maryland law, to fund distributions from sources such as borrowings, offering proceeds or advances and the deferral of fees and expense reimbursements by STAR III Advisor, in its sole discretion. If we pay distributions from sources other than cash flow from operations, we will have fewer funds available for investments and stockholders’ overall returns on their investment in us may be reduced.

We elected to be taxed as, and currently qualify as, a REIT for federal income tax purposes commencing with the taxable year ended December 31, 2016. To qualify as a REIT, we must make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). If we meet the REIT qualification requirements, we generally will not be subject to federal income tax on the income that we distribute to our stockholders each year. We have not established a minimum distribution level and the STAR III Charter does not require that we make distributions to our stockholders.

Leverage

We intend to use leverage to acquire properties forground-up development, redevelopment, repurchase shares and to provide additional funds for investment in our properties. We will access leverage on a secured and an unsecured basis depending on the use of capital. We may employ credit facilities with a portfolio of secured assets, mezzanine debt and/or convertible preferred equity.

We look at several factors in considering our leverage strategy. The first factor is the maturity schedule. Our goal is to ladder maturities to avoid having a significant percentage of our loans maturing in any single year. Second, we consider a balance of fixed rate and variable rate debt depending on the term of the loan. Third, we manage our loan to value ratio and expect our first lien borrowings to be approximately 55% to 65% of the most recent annual valuations that are performed by an independent third-party appraiser or qualified valuation expert.

The STAR III Board may from time to time modify our leverage policy in light of then-current economic conditions, relative costs of debt and equity capital, fair values of our properties, general conditions in the market for debt and equity securities, growth and acquisition opportunities or other factors. Our actual leverage may be higher or lower than our target leverage depending on a number of factors, including the availability of attractive investment and disposition opportunities, inflows and outflows of capital and increases and decreases in the value of our portfolio. In particular, large outflows of capital over short periods of time could cause our leverage to be substantially higher than our target.

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The STAR III Charter restricts us from obtaining loans from any of our directors, STAR III Advisor, the Sponsor and any of their respective affiliates unless such loan is approved by a majority of the directors, including a majority of the independent directors, not otherwise interested in the transaction as fair, competitive and commercially reasonable and no less favorable to us than comparable loans between unaffiliated parties under the same circumstances. Our aggregate borrowings are reviewed by the STAR III Board of directors at least quarterly.

Liquidity Strategy

The STAR III Board is responsible for evaluating opportunities to return capital to our stockholders in order to optimize their overall return. In the event the STAR III Merger is not consummated, the STAR III Board may determine in its sole discretion to pursue a listing of STAR III Common Stock on a national securities exchange, a sale or merger in a transaction that provides our stockholders with cash and/or securities of a public company, the sale of individual assets, a sale of the company or substantially all assets of the company for cash or other consideration. The STAR III Board would also consider reopening our share repurchase plan to all repurchase requests and alternatives that provide stockholders a return of capital, such as special distributions and tender offers.

Investment Limitations

The STAR III Charter places certain limitations on us with respect to the manner in which we may invest our funds, which are the same limitations for STAR as described under “The Companies—Steadfast Apartment REIT, Inc. and SIII Subsidiary, LLC—Investment Limitations” above.

Change in Investment Objectives and Policies

The STAR III Charter requires our independent directors to review our investment policies at least annually to determine that the policies we are following are in the best interests of our stockholders. Each determination and the basis therefor are required to be set forth in the applicable meeting minutes. The methods of implementing our investment policies also may vary as new investment techniques are developed. The methods of implementing our investment objectives and policies, such as the number, size, location and characteristics of the multifamily properties and real estate-related assets that we intend to acquire, may be altered by a majority of our directors, including a majority of our independent directors, without the approval of our stockholders. However, the specific investment limitations set forth in the STAR III Charter may only be changed pursuant to an amendment to the STAR III Charter, which requires approval by the affirmative vote of a majority of all votes entitled to be cast on the matter. The investment limitations set forth in the STAR III Charter are discussed under “—Investment Limitations” above.

Investment Company Act Considerations

We intend to operate in such a manner that we will not be subject to regulation under the Investment Company Act. We will continually review our investment activity to attempt to ensure that we do not come within the application of the Investment Company Act. Among other things, STAR III Advisor will attempt to monitor the proportion of our portfolio that is placed in various investments so that we do not come within the definition of an “investment company” under the Investment Company Act. If at any time the character of our investments could cause us to be deemed as an investment company for purposes of the Investment Company Act, we will take all necessary actions to attempt to ensure that we are not deemed to be an “investment company.”

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Emerging Growth Company

We are an “emerging growth company,” as defined in the Jumpstart Our Business Startups Act, or the JOBS Act. For as long as we continue to be an emerging growth company, we may take advantage of exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. Although these exemptions will be available to us, they will not have a material impact on our public reporting and disclosure. We are deemed a“non-accelerated filer” under the Exchange Act, and as anon-accelerated filer, we are permanently exempt from compliance with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act. In addition, because we have no employees, we do not have any executive compensation or golden parachute payments to report in our periodic reports and proxy statements.

Additionally, under Section 107 of the JOBS Act, an “emerging growth company” may take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. This means an “emerging growth company,” can delay adopting certain accounting standards until such standards are otherwise applicable to private companies. However, we are electing to “opt out” of such extended transition period, and will therefore comply with new or revised accounting standards on the applicable dates on which the adoption of such standards is required fornon-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of such extended transition period for compliance with new or revised accounting standards is irrevocable.

Economic Dependency

We are dependent on STAR III Advisor for certain services that are essential to us, including the identification, evaluation, negotiation, purchase and disposition of real estate and real estate-related investments; management of the daily operations of our real estate and real estate-related investment portfolio; and other general and administrative responsibilities. In the event that STAR III Advisor is unable to provide such services, we will be required to obtain such services from other sources. We may not be able to retain services from such other sources on favorable terms or at all.

Competition

We are subject to significant competition in seeking real estate investments and residents. We compete with many third parties engaged in real estate investment activities, including other REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, lenders, hedge funds, governmental bodies and other entities. Many of our competitors have substantially greater financial and other resources than we have and may have substantially more operating experience than us. They may also enjoy significant competitive advantages that result from, among other things, a lower cost of capital.

The multifamily property market in particular is highly competitive. This competition could reduce occupancy levels and revenues at our multifamily properties, which would adversely affect our operations. We face competition from many sources, including from other multifamily properties in our target markets. In addition, overbuilding of multifamily properties may occur, which would increase the number of multifamily homes available and may decrease occupancy and unit rental rates. Furthermore, multifamily properties we acquire most likely compete, or will compete, with numerous housing alternatives in attracting residents, including owner occupied single- and multifamily homes available to rent or purchase. Competitive housing in a particular area and the increasing affordability of owner occupied single- and multifamily homes available to rent or buy could adversely affect our ability to retain our residents, lease apartment homes and increase or maintain rental rates.

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We may compete with SIR and STAR for investment opportunities due to the similarities in our investment strategies. STAR terminated its primary offering on March 24, 2016 and SIR terminated its initial public offering on December 20, 2013, but SIR and STAR may reinvest any proceeds from a sale of assets, the refinancing of debt, or engage in future securities offerings to raise capital to acquire additional multifamily properties. We also may compete with the Sponsor and its affiliates in our markets. To the extent that we compete with SIR, STAR or any other program affiliated with the Sponsor for investments, the Sponsor will face potential conflicts of interest and there is a risk that the Sponsor will select investment opportunities for us that provide lower returns than the investments selected for such other programs, or that certain otherwise attractive investment opportunities will not be available to us.

We and STAR III Advisor developed procedures to resolve potential conflicts of interest in the allocation of investment opportunities between us and other Steadfast affiliates. STAR III Advisor is required to provide information to the STAR III Board to enable the STAR III Board of directors, including the independent directors, to determine whether such procedures are being fairly applied.

Certain of our affiliates currently own or manage multifamily properties in geographical areas in which we expect to own multifamily properties. Conflicts of interest will exist to the extent that we own or manage real properties in the same geographic areas where real properties owned or managed by other Steadfast affiliates are located. In such a case, a conflict could arise in the leasing of real properties in the event that we and another Steadfast affiliate were to compete for the same residents in negotiating leases, or a conflict could arise in connection with the resale of properties in the event that we and another Steadfast affiliate were to attempt to sell similar real properties at the same time. Conflicts of interest may also exist at such time as we or our affiliates managing real property on our behalf seek to employ leasing agents, developers, contractors or building managers.

Concentration of Credit Risk

The geographic concentration of our portfolio makes it particularly susceptible to adverse economic developments in the Atlanta, Georgia, Austin, Texas, Dallas, Texas, Denver, Colorado and Indianapolis, Indiana apartment markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, relocations of businesses, increased competition from other apartment communities, decrease in demand for apartments or any other changes, could adversely affect our operating results and its ability to make distributions to stockholders.

Environmental

As an owner of real estate, we are subject to various environmental laws of federal, state and local governments. We are not aware of any environmental liability that could have a material adverse effect on our financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of our properties, the activities of its residents and other environmental conditions of which we are unaware with respect to the properties could result in future environmental liabilities.

Legal Matters

From time to time, we are subject, or party, to legal proceedings that arise in the ordinary course of our business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition nor are we aware of any such legal proceedings contemplated by government agencies.

Governmental Regulations

Our business is subject to many laws and governmental regulations. Changes in these laws and regulations, or their interpretation by agencies and courts, occur frequently.

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We and any operating subsidiaries that we may form may be subject to state and local tax in states and localities in which they or we do business or own property. The tax treatment of us, STAR III OP, any operating subsidiaries we may form and the holders of our shares in local jurisdictions may differ from our federal income tax treatment.

Americans with Disabilities Act

Investment in properties may also be subject to the ADA. Under the ADA, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. We are committed to complying with the ADA to the extent to which it applies. The ADA has separate compliance requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services be made accessible and available to people with disabilities. With respect to the properties we acquire, the ADA’s requirements could require us to remove access barriers and could result in the imposition of injunctive relief, monetary penalties or, in some cases, an award of damages. We will attempt to acquire properties that comply with the ADA or place the burden on the seller or other third party, such as residents, to ensure compliance with the ADA.

HOPA, the FHA and Government-Assisted Housing

To the extent we invest inage-restricted communities, any such properties must comply with the FHA and HOPA. The FHA generally prohibitsage-based housing discrimination; however certain exceptions exist for housing developments that qualify as housing for older persons. HOPA provides the legal requirements for such housing developments. In order for housing to qualify as housing for older persons, HOPA requires (1) all residents of such developments to be at least 62 years of age or (2) that at least 80% of the occupied apartment homes are occupied by at least one person who is at least 55 years of age and that the housing community publish and adhere to policies and procedures that demonstrate this required intent and comply with rules issued by the United States Department of Housing and Urban Development, or HUD, for verification of occupancy. In addition, certain states require thatage-restricted communities register with the state. Noncompliance with the FHA, HOPA or state registration requirements could result in the imposition of fines, awards of damages to private litigants, payment of attorneys’ fees and other costs to plaintiffs, substantial litigation costs and substantial costs of remediation, all of which would reduce the amount of cash available for distribution to our stockholders.

To the extent that we invest in government-assisted housing, we may acquire properties that benefit from governmental programs intended to provide affordable housing to individuals with low or moderate incomes. These programs, which are typically administered by HUD or state housing finance agencies, typically provide mortgage insurance, favorable financing terms, tax credits or rental assistance payments to property owners. As a condition of the receipt of assistance under these programs, the properties must comply with various requirements, which typically limit rents topre-approved amounts and impose restrictions on resident incomes. Failure to comply with these requirements and restrictions may result in financial penalties or loss of benefits. In addition, we will typically need to obtain the approval of HUD in order to acquire or dispose of a significant interest in or manage aHUD-assisted property.

Compensation of Executive Officers

Our executive officers do not receive compensation directly from us for services rendered to us and we do not intend to pay any compensation to our executive officers. We do not reimburse STAR III Advisor directly or indirectly for the salary or other compensation paid to any of our executive officers. As a result, we do not, nor has the STAR III Board considered, a compensation policy for our executive officers. Our executive officers are officers and/or employees of, or hold an indirect ownership interest in, STAR III Advisor and/or its affiliates, and our executive officers are compensated by these entities, in part, for their services to us.

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Compensation of Directors

If a director is also one of our executive officers or an affiliate of STAR III Advisor, we do not pay any compensation to that person for services rendered as a director. The amount and form of compensation payable to our independent directors for their service to us is determined by the STAR III Board, based upon recommendations from STAR III Advisor. Four of our executive officers, Messrs. Rodney F. Emery and Kevin Keating and Mses. Ana Marie del Rio and Ella Neyland, manage, control or are affiliated with STAR III Advisor, and through STAR III Advisor, they are involved in recommending the compensation to be paid to our independent directors.

Provided below is certain information regarding compensation earned by or paid to our directors during the fiscal year ended December 31, 2018.

Name	Fees Earned or Paid in Cash in 2018(1)		Stock Awards(2)		Option Awards		Non-Equity Incentive Plan Compensation		Change in Pension Value and Nonqualified Deferred Compensation		All Other Compensation		Total
Stephen R. Bowie(3)(4)	$	151,500	$	25,000	$	—	$	—	$	—	$	—	$	176,500
Ned W. Brines(3)(4)		131,500		25,000		—		—		—		—		156,500
Janice M. Munemitsu(3)(4)		146,500		25,000		—		—		—		—		171,500
Ella S. Neyland(5)		—		—		—		—		—		—		—
Rodney F. Emery(5)		—		—		—		—		—		—		—
	$	429,500	$	75,000	$	—	$	—	$	—	$	—	$	504,500

(1) The amounts shown in this column include payments made to members of the STAR III Special Committee, which was formed during the year ended December 31, 2018. The members of the special committee are our independent directors. Each independent director received retainers between $30,000 and $60,000. In addition, each member receives $1,000 for each meeting attended.

(2) The amounts shown in this column reflect the aggregate fair value of shares of restricted stock granted under our independent directors compensation plan computed as of the grant date in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718.

(3) Independent Directors.

(4) On August 9, 2018, each of our three independent directors was granted 1,000 shares of restricted Class A common stock in connection with theirre-election to the STAR III Board pursuant to the STAR III Incentive Plan described below. The grant date fair value of the stock was $25.00 per share for an aggregate amount of $25,000 for each independent director. Of these shares of restricted common stock granted in 2018, each independent director had 750 shares of restricted Class A common stock that remained unvested as of December 31, 2018.

(5) Directors who are also our executive officers or executive officers of our affiliates do not receive compensation for services rendered as a director.

Cash Compensation

We pay each of our independent directors:

• annual compensation of $55,000 (the audit committee chairperson receives an additional $10,000 in annual compensation);

• $2,500 for eachin-person board of directors meeting attended;

• $1,500 for eachin-person committee meeting attended; and

• $1,000 for each teleconference meeting of the board of directors or committee.

We will not pay in excess of $4,000 for any one set of meetings attended within a48-hour period.

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Special Committee

The STAR III Special Committee was formed for the purpose of reviewing, considering, investigating, evaluating, and if deemed appropriate by the STAR III Special Committee, negotiating the proposed merger with STAR or any alternative extraordinary transaction. The members of the Special Committee are Stephen R. Bowie and Janice M. Munemitsu, with Mr. Bowie serving as the chairman of the STAR III Special Committee.

The STAR III Special Committee held 15 meetings during the year ended December 31, 2018.

Equity Plan Compensation

The STAR III Board has adopted a long-term incentive plan, the Steadfast Apartment REIT III, Inc. Independent Directors Compensation Plan (the “STAR III Plan”), which operates as asub-plan of our Steadfast Apartment REIT III, Inc. 2016 Incentive Plan (the “STAR III Incentive Plan”). Under the STAR III Plan and subject to such STAR III Plan’s conditions and restrictions, each of our current independent directors was entitled to receive 2,000 shares of restricted Class A common stock once we raised $2,000,000 in gross offering proceeds in the STAR III Public Offering. Each subsequent independent director that joins our board of directors receives 2,000 shares of restricted Class A common stock upon election to the STAR III Board. In addition, on the date following an independent director’sre-election to the STAR III Board, he or she receives 1,000 shares of restricted Class A common stock. Grants of restricted stock are subject to share availability under the STAR III Incentive Plan. The shares of restricted Class A common stock generally vest in four equal annual installments beginning on the date of grant and ending on the third anniversary of the date of grant; provided, however, that the restricted stock will become fully vested and becomenon-forfeitable on the earlier to occur of: (1) the termination of the independent director’s service as a director due to his or her death or “disability,” or (2) a “change in control” of STAR III (as such terms are defined in the STAR III Incentive Plan). These awards entitle the holders to participate in distributions immediately upon issuance.

Compensation Committee Interlocks and Insider Participation

We currently do not have a compensation committee of our board of directors because we do not pay, or plan to pay, any compensation to our officers. There are no interlocks or insider participation as to compensation decisions required to be disclosed pursuant to SEC regulations.

Equity Compensation Plan Information

The following table provides information about our common stock that may be issued upon the exercise of options, warrants and rights under the STAR III Incentive Plan as of December 31, 2018.

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants  and Rights		Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance Under Equity  Compensation Plans
Equity compensation plans approved by security holders:		—		—		388,000
Equity compensation plans not approved by security holders:		N/A		N/A		N/A
Total		—		—		388,000

Security Ownership of Certain Beneficial Owners

The following table shows, as of December 16, 2019, the amount of our common stock beneficially owned (unless otherwise indicated) by: (1) any person who is known by us to be the beneficial owner of more than 5%

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of the outstanding shares of our common stock, (2) our board of directors, (3) our executive officers and (4) all of our board of directors and executive officers as a group.

Name and Address of Beneficial Owner (1)	Amount and Nature of Beneficial Ownership(2)		Percentage
Rodney F. Emery(3)		27,857	*
Ned W. Brines		6,800	*
Janice M. Munemitsu		8,572	*
Stephen R. Bowie		8,904	*
Ella S. Neyland		1,111	*
Kevin J. Keating		—	*
Ana Marie del Rio		2,808	*
All officers and directors as a group (seven persons)		56,052	*

* Indicates less than 1% of the outstanding common stock.

(1) The address of each named beneficial owner is c/o Steadfast Apartment REIT III, Inc., 18100 Von Karman Avenue, Suite 500, Irvine, CA, 92612.

(2) None of the shares are pledged as security.

(3) Includes 8,000 Class A shares owned by Steadfast Apartment Advisor III, LLC, which is primarily indirectly owned and controlled by Rodney F. Emery.

Certain Transactions with Related Persons

The following describes all transactions during the period from January 1, 2017 to September 30, 2019, involving us, our directors, STAR III Advisor, the Sponsor and any affiliate thereof. Our independent directors are specifically charged with and have examined the fairness of such transactions to our stockholders, and have determined that all such transactions are fair and reasonable to us.

Ownership Interests

On August 24, 2015, STAR III Advisor purchased 8,000 shares of our Class A common stock at a purchase price of $25.00 per share for an aggregate purchase price of $200,000 and was admitted as our initial stockholder. We are the sole general partner of STAR III OP and own a 99.99% partnership interest in STAR III OP. STAR III Advisor is the sole limited partner of and owns the remaining 0.01% partnership interest in STAR III OP. We entered into a partnership agreement with STAR III Advisor on July 29, 2015. As we accepted subscriptions for shares of STAR III Common Stock in the STAR III Public Offering, we transferred substantially all of the net offering proceeds from STAR III Public Offering to STAR III OP as a contribution in exchange for partnership interests and our percentage ownership in STAR III OP increases proportionately.

Our Relationships with STAR III Advisor and the Sponsor

STAR III Advisor manages ourday-to-day operations, manages our portfolio of properties and real estate-related assets, sources and presents investment opportunities to the STAR III Board and provides investment management services on our behalf. STAR III Advisor also provides offering services, marketing, investor relations and other administrative services on our behalf. STAR III Advisor is 99% owned by the Sponsor. Mr. Emery, our Chairman of the Board of Directors and Chief Executive Officer, indirectly controls the Sponsor, STAR III Advisor and the dealer manager in the STAR III Public Offering, Stira Capital Markets Group. Ms. Ana Marie del Rio, our Secretary, owns an indirect 7% interest in the Sponsor, STAR III Advisor and the dealer manager. Since 2014, Ms. Neyland has earned an annual 5% profits interest from Steadfast REIT Holdings. Crossroads Capital Multifamily, currently owns a 25% membership interest in the Sponsor that will increase upon a net increase in our book capitalization. Pursuant to the Third Amended and Restated Operating Agreement of the Sponsor, effective as of January 1, 2014, as amended, distributions are allocated to each member of the Sponsor in an amount equal to such member’s accrued and unpaid 10% preferred return, as

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defined in the Third Amended and Restated Operating Agreement. Thereafter, all distributions to Crossroads Capital Multifamily are subordinated to distributions to the other member of the Sponsor until Steadfast REIT Holdings has received an amount equal to certain expenses, including certain organization and offering costs, incurred by Steadfast REIT Holdings and its affiliates on our behalf. Steadfast REIT Holdings owns the remaining 1% partnership interest in STAR III Advisor.

All of our other officers and directors, other than our independent directors, are officers of STAR III Advisor and officers, limited partners and/or members of the Sponsor and other affiliates of STAR III Advisor.

We and STAR III OP have entered into the STAR III Advisory Agreement with STAR III Advisor, which has aone-year term expiring February 5, 2020, subject to an unlimited number of successiveone-year renewals upon mutual consent of the parties. We may terminate the STAR III Advisory Agreement without cause or penalty upon 60 days’ written notice and immediately upon fraud, criminal conduct, willful misconduct, gross negligence or material breach of the STAR III Advisory Agreement by STAR III Advisor or STAR III Advisor’s bankruptcy. If we terminate the STAR III Advisory Agreement, we will pay STAR III Advisor all unpaid advances for operating expenses and all earned but unpaid fees.

Services provided by STAR III Advisor under the terms of the STAR III Advisory Agreement include the following:

• finding, presenting and recommending investment opportunities to us consistent with our investment policies and objectives;

• making investment decisions for us, subject to the limitations in the STAR III Charter and the direction and oversight of the STAR III Board;

• structuring the terms and conditions of our investments, sales and joint ventures;

• acquiring investments on our behalf in compliance with our investment objectives and policies;

• sourcing and structuring our loan originations;

• arranging for financing and refinancing of investments;

• entering into service agreements for our loans;

• supervising and evaluating each loan servicer’s and property manager’s performance;

• reviewing and analyzing the operating and capital budgets of the properties underlying our investments and the properties we may acquire;

• entering into leases and service contracts for our properties;

• assisting us in obtaining insurance;

• generating our annual budget;

• reviewing and analyzing financial information for each of our assets and our overall investment portfolio;

• formulating and overseeing the implementation of strategies for the administration, promotion, management, financing and refinancing, marketing, servicing and disposition of our investments;

• performing investor relations services;

• maintaining our accounting and other records and assisting us in filing all reports required to be filed with the SEC, the Internal Revenue Service and other regulatory agencies;

• engaging and supervising the performance of our agents, including our registrar and transfer agent;

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• performing services for us in connection with a listing of our shares on a securities exchange or a sale or merger of our company; and

• performing any other services reasonably requested by us.

The above summary is provided to illustrate the material functions that STAR III Advisor performs for us as an advisor and is not intended to include all of the services that may be provided to us by STAR III Advisor, its affiliates or third parties. STAR III Advisor has also entered into an Advisory Services Agreement with Crossroads Capital Advisors, an affiliate of Crossroads Capital Multifamily, whereby Crossroads Capital Advisors provides advisory services to us on behalf of STAR III Advisor.

Fees and Expense Reimbursements Paid to STAR III Advisor

Pursuant to the terms of the STAR III Advisory Agreement, we pay STAR III Advisor the fees described below.

• We pay STAR III Advisor an acquisition fee of 2.0% of the cost of investment, which includes the amount actually paid or budgeted to fund the acquisition, origination, development, construction or improvement of any real property or real estate-related asset acquired. For the period from January 1, 2017 to December 31, 2018, we incurred and paid $6,200,271 and $7,149,402, respectively, in acquisition fees to STAR III Advisor. For the nine months ended September 30, 2019, we did not incur or pay any acquisition fees to STAR III Advisor.

• We paid STAR III Advisor a monthly investment management fee in an amount equal toone-twelfth of 0.5% of the value of our investments in properties and real estate-related assets until the aggregate value of our investments in properties and real estate-related assets equaled $300,000,000, which occurred on August 31, 2017. Thereafter, we pay STAR III Advisor a monthly investment management fee equal toone-twelfth of 1.0% of the value of our investments in properties and real estate-related assets. For the purposes of the investment management fee, the value of our investments in properties equaled their costs, until our investments were valued by a qualified independent valuation expert. “Costs” are calculated by including acquisition fees, acquisition expenses, renovations and upgrades, and any debt attributable to such investments, or our proportionate share thereof in the case of investments made through joint ventures. For the period from January 1, 2017 to December 31, 2018, we incurred $5,823,091 and paid $5,152,116 in investment management fees to STAR III Advisor. For the nine months ended September 30, 2019, we incurred $3,321,625 and paid $4,031,640 in investment management fees to STAR III Advisor.

• We pay STAR III Advisor a loan coordination fee if our independent directors determine that STAR III Advisor provided a substantial amount of services in connection with the origination or refinancing of any debt financing obtained by us that is used to refinance properties or other permitted investments or financing in connection with the recapitalization of our company. The loan coordination fee equals 0.75% of the amount available under such financing. For the period from January 1, 2017 to December 31, 2018, no loan coordination fees were incurred or paid to STAR III Advisor. For the nine months ended September 30, 2019, we incurred and paid loan coordination fees of $711,458 to STAR III Advisor.

• We will pay STAR III Advisor or its affiliate a disposition fee if, as determined by a majority of the independent directors, STAR III Advisor or its affiliate provide a substantial amount of services in connection with the sale of a property or real estate-related asset, including pursuant to a sale of the entire company, which we refer to as a “liquidity event,” equal to (1) 1.5% of the sales price of each property or real estate-related asset sold or (2) 1.0%, which may be increased to 1.5% in the sole discretion of our independent directors, of the total consideration paid in a liquidity event. In the event of a final liquidity event, this fee will be reduced by the amount of any previous disposition fee paid on properties previously exchanged under Section 1031 of the Code, as amended. For the period from

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January 1, 2017 to December 31, 2018, and during the nine months ended September 30, 2019, we did not incur or pay STAR III Advisor any disposition fees.

• We will pay STAR III Advisor (in its capacity as special limited partner of STAR III OP) a subordinated participation in net sale proceeds (payable only if we are not listed on an exchange), equal to 15.0% of the remaining net sale proceeds after return of the total investment amount, which is the amount equal to the original issue price paid by the stockholders in STAR III Public Offering multiplied by the number of shares issued in STAR III Public Offering, reduced by the weighted average original issue price of the shares sold in the STAR III Public Offering multiplied by the total number of shares repurchased by us, plus payment to investors of an amount equal to a 6.0% annual cumulative,non-compounded return of the total investment amount, less amounts previously distributed to stockholders, including distributions that may constitute a return of capital for federal income tax purposes. For the period from January 1, 2017 to December 31, 2018, and during the nine months ended September 30, 2019, we did not incur or pay any such fees.

“Net sale proceeds” means the net cash proceeds realized from the sale of the company or all of our assets after deduction of all expenses incurred in connection with a sale or disposition of the company or of our assets, including disposition fees paid to STAR III Advisor, or from the prepayment, maturity, workout or other settlement of any loan or other investment. For purposes of calculating the 6.0% annual cumulative,non-compounded return of the total investment amount, the aggregate of all investors’ capital shall be deemed to have been invested collectively on one date—the aggregate average investment date, being a day of a month determined by the average weighted month of all shares sold on a monthly basis. In addition, STAR III Advisor (in its capacity as special limited partner of STAR III OP) will receive a distribution similar to the subordinated participation in net sale proceeds in the event we undertake an issuer tender offer that results in the tendering stockholders receiving a return of the total investment amount of the tendering stockholders plus payment to those investors of an amount equal to a 6.0% annual cumulative,non-compounded return of the total investment amount of the tendering stockholders, less amounts previously distributed to stockholders, including distributions that may constitute a return of capital for federal income tax purposes.

• We will pay STAR III Advisor (in its capacity as special limited partner of STAR III OP), upon a listing of STAR III Common Stock on a national securities exchange, a subordinated incentive listing distribution equal to 15.0% of the amount by which the sum of our adjusted market value plus distributions paid by us to stockholders from inception until the date the adjusted market value is determined, including distributions that may constitute a return of capital for federal income tax purposes, exceeds the sum of the total investment amount plus an amount equal to a 6.0% annual cumulative,non-compounded return to investors of the total investment amount. For purposes of calculating the 6.0% annual cumulative,non-compounded return of the total investment amount, the aggregate of all investors’ capital shall be deemed to have been invested collectively on one date—the aggregate average investment date, being a day of a month determined by the average weighted month of all shares sold on a monthly basis. The adjusted market value of our common stock will be calculated based on the average market value of the shares of common stock issued and outstanding at listing over the 30 trading days beginning 180 days after the shares are first listed or included for quotation. We have the option to pay the subordinated incentive listing distribution in the form of stock, cash, a promissory note or any combination thereof. Any previous payments of the subordinated participation in net sales proceeds will offset the amounts due pursuant to the subordinated listing distribution. For the period from January 1, 2017 to December 31, 2018, and during the nine months ended September 30, 2019, we did not incur or pay any such fees.

• We will pay STAR III Advisor (in its capacity as special limited partner of STAR III OP), upon termination or nonrenewal of the STAR III Advisory Agreement with or without cause, a subordinated distribution, which will entitle STAR III Advisor to receive distributions from STAR III OP equal to 15.0% of the amount by which the sum of our appraised market value plus distributions exceeds the sum of the total investment amount plus an amount equal to a 6.0% annual cumulative,

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non-compounded return of the total investment amount to investors. For purposes of calculating the 6.0% annual cumulative,non-compounded return of the total investment amount, the aggregate of all investors’ capital shall be deemed to have been invested collectively on one date—the aggregate average investment date, being a day of a month determined by the average weighted month of all shares sold on a monthly basis. If we do not provide this return, STAR III Advisor will not receive this distribution. In addition, STAR III Advisor may elect to defer its right to receive a subordinated distribution upon termination until either shares of STAR III Common Stock are listed and traded on a national securities exchange or another liquidity event occurs. For the period from January 1, 2017 to December 31, 2018, and during the nine months ended September 30, 2019, we did not incur or pay any such fees.

In addition to the fees we pay to STAR III Advisor pursuant to the STAR III Advisory Agreement, we also reimburse STAR III Advisor and its affiliates for the costs and expenses described below.

• We reimburse STAR III Advisor and its affiliates for organization and offering expenses it may incur on our behalf, other than underwriting compensation such as sales commissions, the dealer manager fee and the distribution and shareholder servicing fee, in connection with the STAR III Public Offering, including legal, accounting, tax, printing, mailing and filing fees, charges of our escrow holder and transfer agent, expenses of organizing us, data processing fees, advertising and sales literature costs, transfer agent costs, information technology costs, bona-fideout-of-pocket due diligence costs and amounts to reimburse STAR III Advisor or its affiliates for the salaries of its employees and other costs in connection with preparing sales materials and providing other administrative services in connection with the STAR III Public Offering. Any such reimbursement will not exceed actual expenses incurred by STAR III Advisor. At the termination of the STAR III Public Offering, STAR III Advisor was required to reimburse us to the extent total organization and offering expenses (including sales commissions, dealer manager fees and the distribution and shareholder servicing fees) borne by us exceeded 15% of the gross proceeds raised in the STAR III Public Offering. The STAR III Public Offering terminated on August 31, 2018. Through the termination of the STAR III Public Offering, total organization and offering expenses incurred by us did not exceed 15% of the gross offering proceeds raised in the STAR III Public Offering. To the extent we did not pay the full sales commissions, dealer manager fee or distribution and shareholder servicing fees for shares sold in the STAR III Public Offering, we reimbursed STAR III Advisor costs of bona fide training and education meetings held by us (primarily the travel, meal and lodging costs of registered representatives of broker-dealers), attendance and sponsorship fees and cost reimbursement of employees of our affiliates to attend seminars conducted by broker-dealers and, in certain cases, reimbursement to participating broker-dealers for technology costs associated with the STAR III Public Offering, costs and expenses related to such technology costs, and costs and expenses associated with the facilitation of the marketing of our shares and the ownership of our shares by such broker-dealers’ customers; provided, however, that we could not pay any of the foregoing costs to the extent that such payment would cause total underwriting compensation paid by us to exceed 10% of the gross offering proceeds of our completed public offering, as required by the rules of FINRA. For the period from January 1, 2017 to December 31, 2018, we incurred $20,659,583 and paid $18,595,254 to STAR III Advisor for the reimbursement of organization and offering expenses. For the nine months ended September 30, 2019, we incurred $0 and paid $3,680,816 to STAR III Advisor for the reimbursement of organization and offering expenses.

• Subject to the 2%/25% Guidelines discussed below, we reimburse STAR III Advisor for other operating expenses incurred in providing services to us, including our allocable share of STAR III Advisor’s overhead such as rent, employee costs, benefit administration costs, utilities and IT costs; provided, however, that no reimbursement shall be made for costs of such personnel to the extent that personnel are used in transactions for which STAR III Advisor receives an acquisition fee, investment management fee, loan coordination fee or disposition fee or for the employee costs STAR III Advisor pays to our executive officers. For the period from January 1, 2017 to December 31, 2018, we incurred

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$2,200,324 and reimbursed STAR III Advisor $2,404,207 for administrative services. For the nine months ended September 30, 2019, we incurred $917,922 and reimbursed STAR III Advisor $871,933 for administrative services.

• We reimburse STAR III Advisor for acquisition expenses incurred related to the selection, evaluation, acquisition and development of a property or acquisition of real estate-related assets (including expenses relating to potential investments that we do not close) as long as total acquisition fees and expenses (including any loan coordination fee) relating to the purchase of an investment do not exceed 6.0% of the contract price of the property unless such excess is approved by STAR III Board, including a majority of the independent directors. For the period from January 1, 2017 to December 31, 2018, we incurred $1,120,515 and reimbursed STAR III Advisor $1,176,707 for acquisition expenses. For the nine months ended September 30, 2019, we incurred and reimbursed STAR III Advisor $0 for acquisition expenses.

2%/25% Guidelines

As described above, STAR III Advisor and its affiliates are entitled to reimbursement of actual expenses incurred for administrative and other services provided to us for which they do not otherwise receive a fee. However, we will not reimburse STAR III Advisor or its affiliates at the end of any fiscal quarter for “total operating expenses” that for the four consecutive fiscal quarters then ended, or the expense year, exceeded the greater of (1) 2% of our average invested assets or (2) 25% of our net income, which we refer to as the “2%/25% Guidelines,” and STAR III Advisor must reimburse us at least annually for any amounts by which our total operating expenses exceed the 2%/25% Guidelines in the expense year, unless our independent directors have determined that such excess expenses were justified based on unusual andnon-recurring factors.

For purposes of the 2%/25% Guidelines, “average invested assets” means the average monthly book value of our assets invested directly or indirectly in equity interests and loans secured by real estate during the12-month period before deducting depreciation, reserves for bad debts or other noncash reserves. “Total operating expenses” means all costs and expenses paid or incurred by us, as determined under U.S. generally accepted accounting principles, that are in any way related to our operation, including investment management fees, but excluding (1) 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 the listing of our shares of common stock, (2) interest payments, (3) taxes, (4)non-cash expenditures such as depreciation, amortization and bad debt reserves, (5) reasonable incentive fees, (6) acquisition fees and acquisition expenses (including expenses relating to potential acquisitions that do not close), (7) real estate commissions on the sale of a real property, and (8) other expenses connected with the acquisition, disposition, management and ownership of investments (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of real property). Within 60 days after the end of any fiscal quarter for which there are excess expenses which the independent directors conclude were justified and reimbursable to STAR III Advisor, we will send written notice of such fact to our stockholders, together with an explanation of the factors the independent directors considered in determining that such excess expenses were justified. Any such finding and the reasons in support thereof shall be reflected in the minutes of the meetings of the STAR III Board.

For the four fiscal quarters ended June 30, 2017, our total operating expenses exceeded the 2%/25% Guidelines by $314,750 (the “Excess Amount”). The independent directors of the STAR III Board determined that such Excess Amount was justified based on unusual andnon-recurring factors, including the fact that we incurred the operating expenses of a newly formed public company, such as director fees, legal fees and other professional fees, during the beginning of its acquisition stage. As of each quarter from September 30, 2017 through September 30, 2019, our total operating expenses, as defined above, did not exceed the 2%/25% Guidelines.

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Selling Commissions and Fees Paid to our Dealer Manager

The dealer manager for the STAR III Public Offering was Stira Capital Markets Group, an affiliate of the Sponsor. Our dealer manager is a licensed broker-dealer registered with FINRA. As the dealer manager for the STAR III Public Offering, Stira Capital Markets Group was entitled to certain selling commissions, dealer manager fees and reimbursements relating to raising capital. Our dealer manager agreement with Stira Capital Markets Group provided for the following compensation:

• Selling commissions of up to 7% of the gross offering proceeds from the sale of Class A shares and up to 3% of gross offering proceeds from the sale of Class T shares, all of which were reallowed to participating broker-dealers, subject to reductions based on volume and for certain categories of purchasers. No sales commissions were paid for sales of Class R shares or for sales pursuant to the STAR III DRP. For the period from January 1, 2017 to December 31, 2018, we incurred and paid $3,182,545 and $2,529,842, respectively, in selling commissions to our dealer manager in connection with the sale of Class A shares and Class T shares in the STAR III Primary Offering, respectively. For the nine months ended September 30, 2019, we did not incur or pay selling commissions to our dealer manager in connection with the sale of Class A shares and Class T shares, respectively.

• A dealer manager fee of up to 3% of the gross offering proceeds from the sale of Class A shares and up to 2.5% of gross offering proceeds from the sale of Class T shares (a portion of which was reallowed to participating broker-dealers). No dealer manager fee was paid for sales of Class R shares or for sales pursuant to the STAR III DRP. For the period from January 1, 2017 to December 31, 2018, we incurred and paid $1,586,125 and $2,108,199 in dealer manager fees to our dealer manager in connection with the sale of Class A shares and Class T shares in the STAR III Primary Offering, respectively. For the nine months ended September 30, 2019, we did not incur or pay dealer manager fees to our dealer manager in connection with the sale of Class A shares and Class T shares, respectively.

• A distribution and shareholder servicing fee of up to (1) 0.27%, annualized, of the purchase price per Class R share (or, once reported, the amount of our estimated value per Class R share) for each Class R share purchased in the STAR III Public Offering from a registered investment advisor that does not participate on an alternative investment platform, (2) 0.67%, annualized, of the purchase price per Class R share (or, once reported, the amount of our estimated value per Class R share) for each Class R share purchased in the STAR III Public Offering from a registered investment advisor that participates on an alternative investment platform, and (3) 1.125%, annualized, of the purchase price per Class T share (or, once reported, the estimated value per Class T share) for each Class T share purchased in the STAR III Public Offering. The distribution and shareholder servicing fee accrued daily and was paid monthly in arrears. In the future, we may seek to amend the STAR III Charter to authorize and pay different distributions to different holders of Class T and/or Class R shares. For the period from January 1, 2017 to December 31, 2018, we paid $32,961 and $1,269,183 in distribution and shareholder servicing fees to our dealer manager in connection with the sale of Class R shares and Class T shares in our primary offering, respectively. Effective October 1, 2018, we ceased paying the distribution and shareholder servicing fee because total underwriting compensation had reached 10% of the total gross investment amount in the STAR III Primary Offering.

Fees and Reimbursements Paid to our Property Manager

• We have entered into property management agreements with our property manager, Steadfast Management Company, Inc., in connection with the management of each of our properties. The property management fee payable with respect to each property under the property management agreements ranges from 2.75% to 3.0% of the gross revenues of the property (as defined in the respective property management agreement) for each month. In addition, the property manager may also earn an incentive management fee equal to 1.0% of total collections based on performance metrics of the properties. The property manager may subcontract with third-party property managers and will be responsible for supervising and compensating those third-party property managers and will be paid

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an oversight fee equal to 1.0% of the gross revenues of the property managed for providing such supervisory services. In no event will we pay the property manager or any affiliate both a property management fee and an oversight fee with respect to any particular property. Each management agreement has an initial one year term and will continue thereafter on amonth-to-month basis unless either party gives 60 days’ prior notice of its desire to terminate the management agreement, provided that we may terminate the management agreement at any time upon a determination of gross negligence, willful misconduct or bad acts of the property manager or its employees or upon an uncured breach of the property management agreement upon 30 days’ prior written notice to the property manager. In the event of a termination of the property management agreement by us without cause, we will pay a termination fee to the property manager equal to three months of the monthly management fee based on the average gross collections for the three months preceding the date of termination. For the period from January 1, 2017 to December 31, 2018, we incurred and paid property management fees of $1,752,109 and $1,596,668, respectively, to the property manager. For the nine months ended September 30, 2019, we incurred and paid property management fees of $948,497 and $960,064, respectively, to the property manager.

• The property management agreements specify that we are to reimburse the property manager for the salaries and related benefits ofon-site personnel. For the period from January 1, 2017 to December 31, 2018, we incurred and reimbursedon-site property management personnel costs of $5,130,738 and $4,963,967, respectively, to the property manager. For the nine months ended September 30, 2019, we incurred and reimbursedon-site personnel costs of $2,818,693 and $2,718,631 to the property manager.

• The property management agreements also specify certain other fees payable to the property manager for benefit administration, information technology infrastructure, licenses and support, training services and capital expenditures. For the period from January 1, 2017 to December 31, 2018, we incurred and paid other fees of $722,542 and $712,815, respectively, to the property manager. For the nine months ended September 30, 2019, we incurred and paid other fees of $653,846 and $653,941, respectively, to the property manager.

Payments to our Construction Manager

• We have entered into construction management agreements with our construction manager, Pacific Coast Land & Construction, Inc., an affiliate of the Sponsor, for construction management or construction oversight services rendered in connection with capital improvements and renovation or value-enhancement projects. The fees for such services with respect to the property under the construction management agreements is equal to 6.0% of the total cost of the work done; provided, however, that such fees shall only be paid if a majority of the STAR III Board, including a majority of our independent directors, determine that such fees are fair and reasonable in relation to the services being performed. Generally, each construction management agreement can be terminated by either party with 30 days’ prior written notice to the other party. Construction management fees are capitalized to the respective real estate properties in the period in which they are incurred, as such costs relate to capital improvements and renovations for apartment homes taken out of service while they undergo the planned renovation. For the period from January 1, 2017 to December 31, 2018, we incurred and paid construction management fees of $351,731 and $347,810, respectively, to the construction manager. For the nine months ended September 30, 2019, we incurred and paid construction management fees of $266,197 and $258,922, respectively, to the construction manager.

• The construction management agreements also specify that we are to reimburse the construction manager for the salaries and related benefits of certain of its employees for time spent working on capital improvements and renovations. For the period from January 1, 2017 to December 31, 2018, we incurred and reimbursed labor costs of $612,071 and $595,184, respectively, to the construction manager. For the nine months ended September 30, 2019, we incurred and reimbursed labor costs of and $113,137 and $125,821, respectively, to the construction manager.

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Pending Merger with STAR

On August 5, 2019, STAR III, STAR III OP, STAR, STAR OP and Merger Sub entered into the STAR III Merger Agreement. Subject to the terms and conditions of the Merger Agreement, we will merge with and into Merger Sub, with Merger Sub surviving the STAR III Merger, such that following the STAR III Merger, the surviving entity will continue as a wholly-owned subsidiary of STAR. In accordance with the applicable provisions of the MGCL, the separate existence of the Company shall cease. STAR is externally advised by STAR Advisor, which is an indirect subsidiary of the Sponsor.

In connection with the proposed STAR III Merger we also entered into the agreements described below.

Amendment to Operating Partnership Agreement

Concurrently with the entry into the STAR III Merger Agreement, we entered into an amendment (the “First Amendment”) to our partnership agreement with STAR III OP. The First Amendment will become effective at the earlier of (i) the date that we merge with and into Merger Sub and (ii) upon payment of certain consideration owed to the advisor in connection with consummation of a Superior Proposal (as defined in the STAR III Merger Agreement). The purpose of the First Amendment is to revise the economic interests of the advisor by providing that the advisor will not receive any special allocations with respect to a “Special Limited Partner Interest” (as defined in the partnership agreement) pursuant to the partnership agreement.

Termination Agreement

Concurrently with the entry into the STAR III Merger Agreement, we and the advisor entered into a termination letter agreement (the “Termination Agreement”), effective as of August 5, 2019. Pursuant to the Termination Agreement, the current advisory agreement will be terminated at the effective time of the STAR III Merger. Also pursuant to the Termination Agreement, the advisor waived any disposition fee in connection with the STAR III Merger.

The Termination Agreement also provides (i) the amount of the disposition fee payable in the event the Company completes a “Final Liquidity Event” (as defined in the Termination Agreement) in connection with a Superior Proposal, and (ii) that the costs of the Company associated with the attempted merger in the case of a “Dead Deal” (as defined in the Termination Agreement) will be assigned to the advisor.

Other Transactions

We deposit amounts with an affiliate of the Sponsor to fund a prepaid insurance deductible account to cover the cost of required insurance deductibles across all properties owned by us and other affiliated entities of the Sponsor. Upon filing a major claim, proceeds from the insurance deductible account may be used by us or another affiliate of the Sponsor. In addition, we deposit amounts with an affiliate of the Sponsor to cover the cost of property and property related insurance across certain of our properties. For the period from January 1, 2017 to December 31, 2018, we incurred $450,368 and funded $489,630 of the prepaid deductible account and property insurance accounts to an affiliate of the Sponsor. For the nine months ended September 30, 2019, we incurred $442,923 and funded $511,040 of the prepaid deductible account and property insurance accounts to an affiliate of the Sponsor.

We reimburse an affiliate of the Sponsor for capital expenditures incurred by our multifamily properties. For the period from January 1, 2017 to December 31, 2018, we incurred and reimbursed $72,528 for capital expenditures incurred by our multifamily properties to an affiliate of the Sponsor. For the nine months ended September 30, 2019, we incurred and reimbursed $0 for capital expenditures incurred by our multifamily properties to an affiliate of the Sponsor.

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Currently Proposed Transactions

Other than as described above, there are no currently proposed material transactions with related persons other than those covered by the terms of the agreements described above.

Policies and Procedures for Transactions with Related Persons

In order to reduce or eliminate certain potential conflicts of interest, the STAR III Charter and our advisory agreement contain restrictions and conflict resolution procedures relating to transactions we enter into with STAR III Advisor, our directors or their respective affiliates. Each of the restrictions and procedures that apply to transactions with STAR III Advisor and its affiliates will also apply to any transaction with any entity or real estate program controlled by STAR III Advisor and its affiliates. As a general rule, any related party transaction must be approved by a majority of the directors (including a majority of independent directors) not otherwise interested in the transaction. In determining whether to approve or authorize a particular related party transaction, these persons will consider whether the transaction between us and the related party is fair and reasonable to us and has terms and conditions no less favorable to us than those available from unaffiliated third parties.

We have also adopted a Code of Ethics that applies to each of our officers and directors, which we refer to as “covered persons.” The Code of Ethics sets forth certain conflicts of interest policies that limit and govern certain matters among us, the covered persons, STAR III Advisor and their respective affiliates. Our Code of Ethics is available on our website atwww.SteadfastREITs.com.

Director Independence

Although our shares are not listed for trading on any national securities exchange, a majority of the members of our board of directors and all of the members of the audit committee are “independent” as defined by the NYSE. The NYSE standards provide that to qualify as an independent director, in addition to satisfying certain bright-line criteria, the board of directors must affirmatively determine that a director has no material relationship with us (either directly or as a partner, stockholder or officer of an organization that has a relationship with us). In addition, we determined that these directors are independent pursuant to the definition of independence in the STAR III Charter, which is based on the definition included in the North American Securities Administrators Association, Inc.’s Statement of Policy Regarding Real Estate Investment Trusts, as revised and adopted on May 7, 2007. Our board of directors has determined that Stephen R. Bowie, Ned W. Brines and Janice M. Munemitsu each satisfies the bright-line criteria and that none has a relationship with us that would interfere with such person’s ability to exercise independent judgment as a member of our board of directors. None of these directors has ever served as (or is related to) an employee of ours or any of our predecessors or acquired companies or received any compensation from us or any such other entities except for compensation directly related to service as a director. Therefore, we believe that all of these directors are independent directors.

The Fully Combined Company

The Fully Combined Company will retain the name “Steadfast Apartment REIT, Inc.” and will continue to be a Maryland corporation that intends to qualify as a REIT under the Code. The Fully Combined Company will own and operate a diverse portfolio of real estate investments, primarily in the multifamily sector located throughout the United States.

The principal executive offices of the Fully Combined Company will be 18100 Von Karman Avenue, Suite 500, Irvine, California 92612 and its phone number will be (949)852-0700.

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The following table presents a summary of the Fully Combined Company’s portfolio metrics, on a pro forma basis, using data as of September 30, 2019:

Portfolio Statistics
Properties/States		70/14
Average Effective Rent	$	1,165
Portfolio Occupancy		94.8	%
Average Age of Portfolio (years)		20.4
Gross Real Estate Value (in thousands)(1)	$	3,239,320

¹ Based on third-party appraisals as of December 31, 2018 for STAR and SIR and as of June 30, 2018 for STAR III.

The following table presents the Fully Combined Company’s geographic diversification, on a pro forma basis, upon consummation of the STAR III Merger and the SIR Merger, using data as of September 30, 2019.

Geographic Diversification
State	Number of Homes		Gross Real Estate Assets Value		%
Texas		5,097	$	774,550,000		23.9	%
Georgia		4,138	$	661,100,000		20.4	%
Colorado		2,137	$	436,500,000		13.5	%
Tennessee		1,533	$	241,150,000		7.4	%
Indiana		2,028	$	235,900,000		7.3	%
Oklahoma		1,446	$	178,500,000		5.5	%
Ohio		1,313	$	176,500,000		5.4	%
Alabama		1,074	$	147,000,000		4.5	%
Kentucky		1,078	$	141,800,000		4.4	%
South Carolina		702	$	78,700,000		2.4	%
Illinois		510	$	75,220,000		2.3	%
Missouri		298	$	42,800,000		1.3	%
Virginia		183	$	31,400,000		1.0	%
Kansas		220	$	18,200,000		0.6	%
Total		21,757	$	3,239,320,000		100	%

The following table summarizes the Fully Combined Company’s pro forma capital structure upon consummation of the STAR III Merger and the SIR Merger, using data as of September 30, 2019.

Capital Structure
Secured Debt	52	%
Equity	48	%
Total	100	%

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The Fully Combined Company Portfolio Information

Immediately following the STAR III Merger and the SIR Merger, the Fully Combined Company’s portfolio will collectively comprise the properties listed in “—STAR and STAR III Merger Sub—Real Estate Portfolio” beginning on page 54 and in “—STAR III—Real Estate Portfolio” beginning on page 81, in addition to the properties of SIR, listed below:

											Average Occupancy as of						Average Monthly Rent(1) as of
	Property Name	Location	Purchase Date		Number of Units		Total Purchase Price		Mortgage Debt Outstanding at September 30, 2019		30-Sep-19			31-Dec-18			30-Sep-19		31-Dec-18
1	Clarion Park Apartments	Olathe, KS		6/28/2011		220	$	11,215,000	$	11,936,941		95.7	%		96.4	%	$	872	$	841
2	Spring Creek Apartments	Edmond, OK		3/9/2012		252		19,350,000		17,145,073		97.4	%		94.0	%		873		848
3	Montclair Parc Apartment Homes	Oklahoma City, OK		4/26/2012		360		35,750,000		—		96.8	%		94.4	%		891		857
4	Hilliard Park Apartments	Columbus, OH		9/11/2012		201		19,800,000		12,173,887		96.2	%		94.5	%		1,140		1,120
5	Sycamore Terrace Apartments	Terre Haute, IN		9/20/2012 & 3/5/2014		250		23,174,157		22,728,173		93.1	%		94.0	%		1,171		1,138
6	Hilliard Summit Apartments	Columbus, OH		9/28/2012		208		24,100,000		14,757,094		95.3	%		95.7	%		1,236		1,217
7	Forty 57 Apartments	Lexington, KY		12/20/2012		436		52,500,000		34,982,843		96.3	%		93.1	%		970		912
8	Riverford Crossing Apartments	Frankfort, KY		12/28/2012		300		30,000,000		19,904,276		96.9	%		97.3	%		978		933
9	Montecito Apartments	Austin, TX		12/31/2012		268		19,000,000		12,596,576		96.7	%		95.1	%		1,039		1,008
10	Hilliard Grand Apartments	Dublin, OH		12/31/2012		314		40,500,000		28,108,786		96.1	%		96.5	%		1,317		1,290
11	Deep Deuce at Bricktown	Oklahoma City, OK		3/28/2013		294		38,271,000		32,087,170		94.6	%		93.9	%		1,284		1,235
12	Retreat at Quail North	Oklahoma City, OK		6/12/2013		240		25,250,000		16,103,751		94.4	%		92.9	%		978		954
13	Tapestry Park Apartments	Birmingham, AL		8/13/2013 & 12/1/2014		354		50,285,000		48,223,343		95.6	%		92.9	%		1,376		1,311
14	BriceGrove Park Apartments	Canal Winchester, OH		8/29/2013		240		20,100,000		—		95.6	%		95.8	%		911		879
15	Retreat at Hamburg Place	Lexington, KY		9/5/2013		150		16,300,000		—		97.0	%		96.0	%		1,038		897
16	Villas at Huffmeister	Houston, TX		10/10/2013		294		37,600,000		27,213,547		95.4	%		93.9	%		1,228		1,209
17	Villas of Kingwood	Kingwood, TX		10/10/2013		330		40,150,000		34,598,132		96.9	%		94.8	%		1,246		1,282
18	Waterford Place at Riata Ranch	Cypress, TX		10/10/2013		228		23,400,000		—		96.3	%		93.9	%		1,149		1,104
19	Carrington Place	Houston, TX		11/7/2013		324		32,568,034		—		94.3	%		91.7	%		1,117		1,076
20	Carrington at Champion Forest	Houston, TX		11/7/2013		284		33,000,000		—		95.6	%		94.0	%		1,147		1,106
21	Carrington Park at Huffmeister	Cypress, TX		11/7/2013		232		25,150,000		19,472,583		95.3	%		94.4	%		1,170		1,198
22	Heritage Grand at Sienna Plantation	Missouri City, TX		12/20/2013		240		27,000,000		16,654,527		93.4	%		95.8	%		1,160		1,147
23	Mallard Crossing Apartments	Loveland, OH		12/27/2013		350		39,800,000		—		96.1	%		93.7	%		1,142		1,095

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											Average Occupancy as of						Average Monthly Rent(1) as of
	Property Name	Location	Purchase Date		Number of Units		Total Purchase Price		Mortgage Debt Outstanding at September 30, 2019		Sep 30, 2019			31-Dec-18			Sep 30, 2019		31-Dec-18
24	Reserve at Creekside	Chattanooga, TN		3/28/2014		192		18,875,000		14,701,227		97.2	%		96.4	%		1,055		1,040
25	Oak Crossing Apartments	Fort Wayne, IN		6/3/2014		222		24,230,000		20,235,203		97.2	%		95.9	%		1,024		1,002
26	Double Creek Flats	Plainfield, IN		5/7/2018		240		31,852,079		21,893,600		96.3	%		93.8	%		1,050		1,063
27	Jefferson at Perimeter Apartments	Dunwoody, GA		6/11/2018		504		103,633,983		72,909,761		94.6	%		89.3	%		1,413		1,331
						7,527	$	862,854,253	$	498,426,493		95.8	%		94.3	%	$	1,123	$	1,068

¹  Average monthly rent is based upon the effective rental income after considering the effect of vacancies, concessions and write-offs.

STAR and STAR III believe the increased size and scale of the Fully Combined Company, as well as the increased resident and geographic diversification, will create meaningful operational and financial benefits. These benefits are expected to include reduced general and administrative expenses and cash savings from investment management fees (50% of which will be paid in STAR Common Stock) and enhanced access to the capital markets with an expected reduction of the cost of capital. The Fully Combined Company should also be better positioned for a liquidity event in the future.

Following the consummation of the Mergers, management expects that the Fully Combined Company will continue to implement STAR’s current investment strategy of acquiring, owning and operating a diverse portfolio of real estate investments, primarily in the multifamily sector located throughout the United States. In pursuing its investment objectives and selecting its real property investments, the Fully Combined Company’s advisor, STAR Advisor, will consider a number of factors, including, but not limited to, the following:

• positioning our overall portfolio to achieve diversity by geography;

• macroeconomic and microeconomic employment and demographic data and trends of the submarket where the investment is located;

• regional, market and property specific supply and demand dynamics;

• transaction size and projected property-level leverage;

• physical condition of the property and the need for capital expenditures;

• property location and positioning within its market;

• design characteristics of the property;

• types and duration of leases related to the property;

• adequacy of parking and access to public transportation;

• income-producing capacity of the property;

• opportunities for capital appreciation based on property repositioning, operating expense reductions and other factors;

• potential to otherwise add value to the property;

• risk characteristics of the investment compared to the potential returns and availability of alternative investments;

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• REIT qualification requirements;

• liquidity and tax considerations; and

• other factors considered important to meet our investment objectives.

Management of the Fully Combined Company

The following table sets forth certain information with respect to each of the persons who will serve as directors and executive officers of the Fully Combined Company, immediately following the consummation of the STAR III Merger and the SIR Merger:

Name	Age	Position(s)
Rodney F. Emery	69	Chairman of the Board and Chief Executive Officer
Ella S. Neyland	65	Affiliated Director and President
Kevin J. Keating	57	Chief Financial Officer and Treasurer
Ana Marie del Rio	65	Secretary
G. Brian Christie	72	Independent Director
Thomas H. Purcell	69	Independent Director
Kerry D. Vandell	72	Independent Director
Ned W. Brines	57	Independent Director
Stephen R. Bowie	69	Independent Director

The information presented above is as of the date hereof. There are no family relationships between any directors or executive officers, or between any director and executive officer.

Rodney F. Emery has served as the Chairman of STAR Board since August 2013 and as our Chief Executive Officer since September 2013. Mr. Emery also serves as Chairman of the board of directors and Chief Executive Officer of SIR, positions he has held since its inception in May 2009. In addition, Mr. Emery serves as the Chairman of the board of directors and Chief Executive Officer of STAR III, positions he has held since January 2016 and August 2015, respectively. Mr. Emery is the founder of Steadfast Companies and is responsible for the corporate vision, strategy and overall guidance of the operations of Steadfast Companies. Mr. Emery chairs the Steadfast Executive Committee, which establishes policy and strategy and acts as the general oversight committee of Steadfast Companies. Mr. Emery also serves on the Steadfast Companies Investment Committee and is a member of the Board of Managers of Stira Capital Markets Group. Prior to founding Steadfast Companies in 1994, Mr. Emery served for 17 years as the President of Cove Properties, a diversified commercial real estate firm specializing in property management, construction and development with a specialty in industrial properties. Mr. Emery received a Bachelor of Science in Accounting from the University of Southern California and serves on the board of directors of severalnon-profit organizations.

The STAR Board and the STAR III Board, excluding Mr. Emery, determined that Mr. Emery is qualified to serve as one of STAR’s and STAR III’s directors, respectively, due to the leadership positions previously and currently held by Mr. Emery and Mr. Emery’s extensive experience acquiring, financing, developing and managing multifamily, hotel, office, industrial and retail real estate assets throughout the country.

Ella S. Neyland has served as President of STAR since September 2013 and an affiliated director since August 2013. Ms. Neyland also serves as President and an affiliated director of SIR, positions she has held since October 2012, and she served as an independent director of SIR from October 2011 to September 2012. In addition, Ms. Neyland serves as the President and an affiliated director of STAR III, positions she has held since August 2015 and January 2016, respectively. Ms. Neyland was a founder of Thin Centers MD (“TCMD”), which provides medically supervised weight loss programs, and served as its Chief Financial Officer from February 2011 to October 2011. Prior to founding TCMD, Ms. Neyland was a founder of Santa Barbara Medical Innovations, LLC, a privately owned company that owns and leaseslow-level lasers to medical groups, and

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served as its Chief Financial Officer from December 2008 to February 2011. From October 2004 to December 2008, Ms. Neyland was a financial advisor of Montecito Medical Investment Company, a private real estate acquisition and development company headquartered in Santa Barbara, California. From April 2001 to September 2004, Ms. Neyland served as the Executive Vice President, Treasurer and Investor Relations Officer of United Dominion Realty Trust, Inc., where she was responsible for capital market transactions, banking relationships and presentations to investors and Wall Street analysts. Ms. Neyland also served as a voting member of the Investment Committee of United Dominion Realty Trust, Inc. that approved the repositioning of over $3 billion of investments. Prior to working at United Dominion Realty Trust, Inc., Ms. Neyland served as the Chief Financial Officer at Sunrise Housing, Ltd, a privately owned apartment development company, from November 1999 to March 2001. Ms. Neyland also served as Executive Director of CIBC World Markets, which provides investment, research and corporate banking products, from November 1997 to October 1999. From July 1990 to October 1997, Ms. Neyland served as the Senior Vice President of Finance and the Vice President of Troubled Debt Restructures/Finance for the Lincoln Property Company, a commercial real estate development and management company. From November 1989 to July 1990, Ms. Neyland was the Vice President/Portfolio Manager at Bonnet Resources Corporation, a subsidiary of BancOne. Prior to her employment at Bonnet Resources Corporation, Ms. Neyland served on the board of directors and as the Senior Vice President/Director of Commercial Real Estate Lending at Commerce Savings Association , a subsidiary of the publicly held American Century Corporation, from May 1983 to March 1989. Ms. Neyland received a Bachelor of Science in Finance from Trinity University in San Antonio, Texas.

The STAR Board and the STAR III Board, excluding Ms. Neyland, determined that Ms. Neyland is qualified to serve as one of STAR’s and STAR III’s directors, respectively, due to Ms. Neyland’s prior service in real estate and banking.

Kevin J. Keating has served as Chief Financial Officer and Treasurer of STAR since November 2017 and September 2013, respectively, and as STAR Advisor’s Treasurer and Chief Accounting Officer since September 2013, where he focuses on the accounting function and compliance responsibilities for us and STAR Advisor. Mr. Keating has also served as Chief Financial Officer and Treasurer of SIR, since November 2017 and April 2011, respectively, and as Chief Financial Officer and Treasurer of STAR III since November 2017 and August 2015, respectively. Prior to joining Steadfast Companies, Mr. Keating served as Senior Audit Manager with BDO, USA, LLP (formerly BDO Seidman, LLP), an accounting and audit firm, from June 2006 to January 2011. From June 2004 to June 2006, Mr. Keating served as Vice President and Corporate Controller of Endocare, Inc., a medical device manufacturer. Mr. Keating has extensive experience working with public companies and served as Assistant Controller and Audit Manager for Ernst & Young from 1988 to 1999. Mr. Keating holds a Bachelor of Science in Accounting from St. John’s University in New York, New York and is a certified public accountant.

Ana Marie del Rio has served as Secretary and Compliance Officer of STAR since September 2013. Ms. del Rio also serves as Secretary and Compliance Officer of SIR, positions she has held since its inception in May 2009 and Secretary and Compliance Officer of STAR III since August 2015. Ms. del Rio also serves as the Chief Legal Officer for Steadfast Companies and manages the Risk Management and Legal Services Departments for Steadfast Companies. Ms. del Rio works closely with Steadfast Management Company, Inc. in the management and operation of Steadfast Companies’ residential apartment homes, especially in the area of compliance. Prior to joining Steadfast Companies in April 2003, Ms. del Rio was a partner in the public finance group at Orrick, Herrington & Sutcliffe, LLP, where she practiced from September 1993 to April 2003, representing both issuers and underwriters in financing single-family and multifamily housing and other types of public-private and redevelopment projects. From 1979 to 1993, Ms. del Rioco-owned and operated a campaign consulting and research company specializing in local campaigns and ballot measures. Ms. del Rio received a Juris Doctor from the University of the Pacific, McGeorge School of Law, and received a Master of Public Administration and a Bachelor of Arts from the University of Southern California. Ms. del Rio serves on the Board of Directors of Project Access and is a lecturer for the University of California, Irvine, School of Law.

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G. Brian Christie has served as one of the independent directors of STAR since August 2013. Mr. Christie has practiced as an attorney in the real estate, corporate and banking fields since 1979. Mr. Christie currently serves as a principal of Christie Law Firm, a position he has held since 2005. From 1998 to 2005, Mr. Christie served as Chief Executive Officer of Liti Holographics, Inc., a3-D optical technology company. From 1992 to 1997, Mr. Christie served as a Director, Executive Vice President and General Counsel of ARV Assisted Living, Inc. (“ARV”), a company which acquired, developed and operated multifamily apartments, senior apartments and assisted living apartments. While at ARV, Mr. Christie played an integral role in the listing of ARV on NASDAQ. Prior to joining ARV, Mr. Christie was a partner at the law firm of Good, Wildman, Hegness and Walley. Mr. Christie received a Bachelor of Arts from Calvary Bible College, a Master of Theology from Dallas Theological Seminary and a Juris Doctor from the University of Texas Law School. Mr. Christie is a member of the State Bar of California, the State Bar of Virginia and the American Bar Association.

The STAR Board, excluding Mr. Christie, determined that Mr. Christie is qualified to serve as one of STAR’s directors due to Mr. Christie’s prior experience as a director and officer in the multifamily industry.

Thomas H. Purcell has served as one of independent directors of STAR since August 2013. Mr. Purcell has been actively involved in the real estate development business since 1972. Since September 2009, Mr. Purcell has served as Chairman and Chief Executive Officer of the Curci Companies, a real estate investment company that owns and manages office, industrial and retail property throughout the western United States. From April 1998 to August 2009, Mr. Purcell wasCo-Founder and President of Spring Creek Investors, LLC, a private equity capital business focused on real estate development. From 1996 to 1998, Mr. Purcell served as President of Diversified Shopping Centers, where he developed and managed neighborhood and community shopping centers. From 1977 to 1996, Mr. Purcell wasCo-Founder and President of a shopping center development business that developed and renovated over four million square feet of retail shopping centers. Prior to 1977, Mr. Purcell was employed at a shopping center development company where he headed the development and construction management team and served as the controller. Since 2007, Mr. Purcell has been a board member of Bixby Land Company, a private industrial REIT, where he also chairs the investment committee and is a member of the audit and compensation committees. Mr. Purcell is a member of the International Council of Shopping Centers (“ICSC”), and previously served as Western Division Vice President and on the Board of Trustees and Executive Committee of ICSC and was a trustee of the ICSC Educational Foundation. He formerly served as a board member of the California Business Properties Association and an advisory board member of Buchanan Street Partners and Western National Realty Fund. Mr. Purcell received a Bachelor of Science in Finance from the University of Southern California.

The STAR Board, excluding Mr. Purcell, determined that Mr. Purcell is qualified to serve as one of STAR’s directors due to Mr. Purcell’s prior experience as an executive of real estate investment and development companies.

Kerry D. Vandell has served as one of the independent directors of STAR since August 2013. Dr. Vandell also served as an independent director of SIR from October 2012 to August 2015. In March 2016, Dr. Vandell was appointed an independent member of the board of directors of the PREDEX Fund, a mutual fund invested in privately offered,non-traded, perpetual-life institutional real estate funds. Dr. Vandell currently serves as the Dean’s Professor Emeritus of Economics and Public Policy and Director Emeritus of the Center for Real Estate at the Paul Merage School of Business at the University of California-Irvine (“UCI”), having joined UCI in July 2006. He also has held courtesy appointments at UCI’s School of Law and the Department of Planning, Policy and Design in the School of Social Ecology since 2008. Before joining UCI, Dr. Vandell was on the faculty of the University of Wisconsin-Madison for 17 years (1989-2006), where he served as the Tiefenthaler Chaired Professor of Real Estate and Urban Land Economics, the Director of the Center for Urban Land Economics Research, and the Chairman of the Department of Real Estate and Urban Land Economics. His first academic appointment was at Southern Methodist University (1976-1989), where he ultimately served as Professor and Chairman of the Department of Real Estate and Regional Science. Dr. Vandell has researched and consulted extensively in the areas of real estate investment, urban/real estate/environmental economics, mortgage finance, housing economics and policy, and

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valuation theory and is principal in the consulting firm KDV Associates, providing expert testimony in major litigation matters internationally. He has also previously served as a board member for firms representing the commercial banking, real estate investment trusts and shopping center sectors. Dr. Vandell received his Ph.D. from the Massachusetts Institute of Technology in Urban Studies and Planning, his M.C.P. in City and Regional Planning from Harvard University, and his undergraduate and master’s degrees in Mechanical Engineering from Rice University. He has authored orco-authored over 70 publications and has been invited to provide numerous presentations on the topics of finance, economics and real estate.

The STAR Board, excluding Dr. Vandell, determined that Dr. Vandell is qualified to serve as one of STAR’s directors due to Dr. Vandell’s prior position as a finance professor and his real estate program experience.

Ned W. Brines has served as one of the independent directors of STAR III since January 2016. Mr. Brines also serves as an independent director of SIR, a position he has held since October 2012, and served as an independent trustee of Stira Alcentra Global Credit Fund from March 2017 to May 2019. Mr. Brines has served as the Director of Investments for Arnel & Affiliates since March 2016 where he oversees the management of the assets of a private family with significant and diversified holdings. From June 2012 to March 2016, Mr. Brines served as the Chief Investment Officer for the Citizen Trust Wealth Management and Trust division of Citizens Business Bank, where he was responsible for the investment management discipline, process, products and related sources. In addition, in September 2008, Mr. Brines founded Montelena Asset Management, a California based registered investment adviser firm, and currently serves as its Chief Investment Officer. From June 2010 to July 2012, Mr. Brines served as a portfolio manager for Andell Holdings, a private family office with significant and diversified holdings. From May 2001 to September 2008, Mr. Brines served as a Senior Vice President and senior portfolio manager with Provident Investment Counsel in Pasadena, managing its Small Cap Growth Fund with $1.6 billion in assets under management. Mr. Brines was with Roger Engemann & Associate in Pasadena from September 1994 to March 2001 where he served as both an analyst and portfolio manager for their mid cap mutual fund and large cap Private Client business as the firm grew from $3 billion to over $19 billion in assets under management. Mr. Brines earned a Master of Business Administration degree from the University of Southern California and a Bachelor of Science degree from San Diego State University. Mr. Brines also holds the Chartered Financial Analyst designation and is involved in various community activities including serving on the investment committee of City of Hope, as well as the Orange County Regional Counsel for San Diego State University.

The STAR III Board determined that Mr. Brines’ prior service as a director and as chief investment officer provided Mr. Brines with the experience, skills and attributes necessary to effectively carry out his duties and responsibilities as a director. Consequently, the STAR III Board determined that Mr. Brines is highly qualified to serve as one of STAR III’s directors.

Stephen R. Bowie has served as one of independent directors of STAR III since January 2016. Mr. Bowie currently is a partner with Pacific Development Group, a position he has held since 1987, specializing in the development and management of neighborhood and community shopping centers throughout California, with a primary responsibility in the development of new projects. From 1979 to 1987, Mr. Bowie served as president of Bowie Development Company, Inc., a California corporation. In addition, since 2009 Mr. Bowie has served as an investor in, and an advisor to, Alta Equities, Inc., a company that invests in and rehabs single family residential properties in southern California. Mr. Bowie earned a Bachelor of Science degree in business administration from the University of Southern California. Mr. Bowie is a member of the International Council of Shopping Centers and a licensed real estate broker in California, and serves on multiple boards, including the Northrise University Initiative 501(c)(3) and the Northrise University Board of Trustees.

The STAR III Board, excluding Mr. Bowie, determined that Mr. Bowie’s prior experience in the real estate industry have provided Mr. Bowie with the experience, skills and attributes necessary to effectively carry out his duties and responsibilities as a director. Consequently, the STAR III Board determined that Mr. Bowie is highly qualified to serve as STAR III Board.

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The STAR III/STAR Combined Company

The information in this section pertains only in the event the STAR III Merger is consummated, while the SIR Merger fails to be consummated. Such information will be inapplicable in the event that both the STAR III Merger and the SIR Merger are consummated.

In the event that the STAR III Merger is consummated, while the SIR Merger fails to be consummated, the resulting company will be the “STAR III/STAR Combined Company.” The STAR III/STAR Combined Company will retain the name “Steadfast Apartment REIT, Inc.” and will continue to be a Maryland corporation that intends to qualify as a REIT under the Code. The STAR III/STAR Combined Company will own and operate a diverse portfolio of real estate investments, primarily in the multifamily sector located throughout the United States.

The principal executive offices of the STAR III/STAR Combined Company will be 18100 Von Karman Avenue, Suite 500, Irvine, California 92612 and its phone number will be (949)852-0700.

The following table presents a summary of the STAR III/STAR Combined Company’s portfolio metrics, on a pro forma basis, using data as of September 30, 2019:

Portfolio Statistics
Properties/States		43/12
Average Effective Rent	$	1,187
Portfolio Occupancy		94.3	%
Average Age of Portfolio (years)		23.4
Gross Real Estate Value (in thousands)(1)	$	2,232,920

1. Based on third-party appraisals as of December 31, 2018 for STAR and as of June 30, 2018 for STAR III.

The following table presents the STAR III/STAR Combined Company’s geographic diversification, on a pro forma basis upon consummation of the STAR III Merger, using data as of September 30, 2019.

Geographic Diversification
State	Number of Homes		Gross Real Estate Assets Value		%
Georgia		3,634	$	557,550,000		25.0	%
Texas		2,897	$	498,850,000		22.3	%
Colorado		2,137	$	436,500,000		19.5	%
Tennessee		1,341	$	219,100,000		9.8	%
Indiana		1,316	$	143,500,000		6.4	%
Alabama		720	$	83,700,000		3.7	%
South Carolina		702	$	78,700,000		3.5	%
Illinois		510	$	75,220,000		3.4	%
Missouri		298	$	42,800,000		1.9	%
Oklahoma		300	$	38,000,000		1.7	%
Virginia		183	$	31,400,000		1.4	%
Kentucky		192	$	27,600,000		1.2	%
Total		14,230	$	2,232,920,000		100.0	%

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The following table summarizes the STAR III/STAR Combined Company’s pro forma capital structure upon consummation of the STAR III Merger, using data as of September 30, 2019.

Capital Structure
Secured Debt	58	%
Equity	42	%
Total	100	%

STAR III/STAR Combined Company Portfolio Information

Immediately following the STAR III Merger (and in the event the SIR Merger fails to be consummated), the STAR III/STAR Combined Company’s portfolio will collectively comprise the properties listed in “—STAR and STAR III Merger Sub—Real Estate Portfolio” beginning on page 54 and in “—STAR III—Real Estate Portfolio” beginning on page 81.

Management of the STAR III/STAR Combined Company

The following table sets forth certain information with respect to each of the persons who will serve as directors and executive officers of the STAR III/STAR Combined Company:

Name	Age	Position(s)
Rodney F. Emery	69	Chairman of the Board and Chief Executive Officer
Ella S. Neyland	65	Affiliated Director and President
Kevin J. Keating	57	Chief Financial Officer and Treasurer
Ana Marie del Rio	65	Secretary
G. Brian Christie	72	Independent Director
Thomas H. Purcell	69	Independent Director
Kerry D. Vandell	72	Independent Director
Stephen R. Bowie	69	Independent Director

For more information about the persons listed above, see “The Fully Combined Company—Management of the Fully Combined Company.”

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MATERIAL PROPERTIES

STAR III Material Properties

As of September 30, 2019, STAR III had six properties with rental revenue equal to or greater than 10% of its total revenue or a purchase price equal to or greater than 10% of its total assets (the “material properties”).

The following table shows the key information regarding the material properties as of September 30, 2019 and December 31, 2018:

											Average Occupancy as of						Average Monthly Rent(3) as of
	Property Name(1)	Location	Purchase Date		Number of Units		Total Purchase Price		Mortgage Debt Outstanding at 9/30/19(2)		9/30/19			12/31/18			9/30/19		12/31/18		Capitalization Rate(4)
1	Bristol Village Apartments	Aurora, CO		11/17/2016		240	$	47,400,000	$	34,033,421		94.2	%		91.9	%	$	1,415	$	1,374		5.6	%
2	Canyon Resort at Great Hills Apartments	Austin, TX		12/29/2016		256		44,500,000		31,583,615		96.5	%		94.3	%		1,346		1,313		5.5	%
3	The Pointe at Vista Ridge Apartments	Lewisville, TX		5/25/2017		300		45,188,223		29,964,563		95.0	%		92.6	%		1,290		1,228		5.7	%
4	Belmar Villas	Lakewood, CO		7/21/2017		318		64,503,255		46,925,464		96.3	%		90.0	%		1,376		1,329		5.8	%
5	Ansley at Princeton Lakes	Atlanta, GA		8/31/2017		306		44,594,087		32,219,902		93.4	%		91.4	%		1,220		1,146		5.7	%
6	Avery Point Apartments	Indianapolis, IN		12/15/2017		512		45,829,836		31,083,091		91.0	%		94.2	%		833		809		5.9	%

(1) The listed properties are multifamily properties, consisting of 1,932 apartment homes. There are plans for material improvement through our value-enhancement program at Canyon Resort, Pointe at Vista Ridge, Belmar Villas and Avery Point.

(2) Mortgage debt outstanding is net of deferred financing costs associated with the loans for each individual property listed in the table.

(3) Average monthly rent is based upon the effective rental income after considering the effect of vacancies, concessions and write-offs.

(4) The capitalization rate reflected in the table is as of the closing of the acquisition of the property. STAR III calculates the capitalization rate for a real property by dividing the “net operating income” of the property by the purchase price of the property, excluding acquisition costs. Net operating income is calculated by deducting all operating expenses of a property, including property taxes and management fees but excluding debt service payments and capital expenditures, from gross operating revenues received from a property. For purposes of this calculation, net operating income is determined using the projected first year net operating income of the property based onin-place leases, potential rent increases or decreases for each unit and other revenues from late fees or services, adjusted for projected vacancies, tenant concessions, if any, and charges not collected.

* STAR III believes all of its properties are suitable for their present and intended purposes, and are adequately covered by insurance.

Competition

The multifamily property market in particular is highly competitive. This competition could reduce occupancy levels and revenues at STAR III’s multifamily properties, which would adversely affect STAR III’s operations of its material properties. STAR III faces competition from many sources, including from other multifamily properties in STAR III’s target markets. In addition, overbuilding of multifamily properties may occur, which would increase the number of multifamily homes available and may decrease occupancy and unit rental rates. Furthermore, STAR III’s material properties may compete with numerous housing alternatives in attracting residents, including owner occupied single- and multifamily homes available to rent or purchase. Competitive housing in a particular area and the increasing affordability of owner occupied single- and multifamily homes available to rent or buy could adversely affect STAR III’s ability to retain residents, lease apartment homes and increase or maintain rental rates.

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Bristol Village Apartments

The following is a schedule of historical average monthly occupancy and rent since STAR III acquired ownership of Bristol Village Apartments:

Year	Average Monthly Occupancy			Average Monthly Rent
2014		—			—
2015		—			—
2016		96.3	%	$	1,254
2017		95.0	%	$	1,319
2018		91.9	%	$	1,374

Canyon Resort at Great Hills Apartments

The following is a schedule of historical average monthly occupancy and rent since STAR III acquired ownership of Canyon Resort at Great Hills Apartments:

Year	Average Monthly Occupancy			Average Monthly Rent
2014		—			—
2015		—			—
2016		95.7	%	$	1,332
2017		91.0	%	$	1,254
2018		94.3	%	$	1,313

The Pointe at Vista Ridge Apartments

The following is a schedule of historical average monthly occupancy and rent since STAR III acquired ownership of The Pointe at Vista Ridge Apartments:

Year	Average Monthly Occupancy			Average Monthly Rent
2014		—			—
2015		—			—
2016		—			—
2017		91.7	%	$	1,223
2018		92.6	%	$	1,228

Belmar Villas

The following is a schedule of historical average monthly occupancy and rent since STAR III acquired ownership of Belmar Villas:

Year	Average Monthly Occupancy			Average Monthly Rent
2014		—			—
2015		—			—
2016		—			—
2017		91.2	%	$	1,310
2018		90.0	%	$	1,329

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Ansley at Princeton Lakes

The following is a schedule of historical average monthly occupancy and rent since STAR III acquired ownership of Ansley at Princeton Lakes:

Year	Average Monthly Occupancy			Average Monthly Rent
2014		—			—
2015		—			—
2016		—			—
2017		91.2	%	$	1,168
2018		91.4	%	$	1,146

Avery Point Apartments

The following is a schedule of historical average monthly occupancy and rent since STAR III acquired ownership of Avery Point Apartments:

Year	Average Monthly Occupancy			Average Monthly Rent
2014		—			—
2015		—			—
2016		—			—
2017		93.2	%	$	776
2018		94.2	%	$	809

Depreciable Tax Basis

For federal income tax purposes, we depreciate land improvements and building and building improvements on a straight-line basis based upon an estimated useful life of 20, 30 and 40 years, respectively. We depreciate cost segregation personal property using the Modified Accelerated Cost Recovery System over five years. The depreciable basis in the material properties, as of September 30, 2019, is as follows:

Property Description	Depreciable Tax Basis
Bristol Village Apartments	$	50,208,114
Canyon Resort at Great Hills Apartments	$	46,920,422
The Pointe at Vista Ridge Apartments	$	47,232,632
Belmar Villas	$	67,500,055
Ansley at Princeton Lakes	$	45,278,114
Avery Point Apartments	$	47,966,813

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THE STAR III SPECIAL MEETING

This proxy statement/prospectus is being furnished in connection with the solicitation of proxies from STAR III stockholders for use at the STAR III Special Meeting. This proxy statement/prospectus and accompanying form of proxy are first being mailed to STAR III stockholders on or about                 ,                 .

Date, Time, Place and Purpose of the STAR III Special Meeting

The STAR III Special Meeting will be held at the corporate offices of STAR III, located at 18100 Von Karman Avenue, Suite 500, Irvine, California 92612 on March 2, 2020, commencing at 3:30 p.m. Pacific Time for the following purposes:

1. to consider and vote on a proposal to approve the STAR III Merger (which we refer to as the “STAR III Merger Proposal”);

2. to consider and vote on a proposal to approve the STAR III Charter Amendment in connection with the STAR III Merger (which we refer to as the “STAR III Charter Amendment Proposal”); and

3. to consider and vote on a proposal to adjourn the STAR III Special Meeting to solicit additional proxies in favor of the STAR III Merger Proposal and the STAR III Charter Amendment proposal if there are not sufficient votes to approve such proposals, if necessary and as determined by the chair of the STAR III Special Meeting (which we refer to as the “adjournment proposal”).

STAR stockholders are not voting on the proposals to be voted on at the STAR III Special Meeting.

Recommendation of the STAR III Board of Directors

Based on the unanimous recommendation of the STAR III Special Committee of the proposals set forth in clauses (1), (2) and (3) above, the STAR III Board unanimously recommends that the STAR III stockholders vote (i) FOR the STAR III Merger Proposal, (ii) FOR the STAR III Charter Amendment Proposal and (iii) FOR the adjournment proposal. For the reasons for these recommendations, see “The STAR III Merger—Recommendation of the STAR III Board and Its Reasons for the STAR III Merger” beginning on page 134.

STAR III Record Date; Who Can Vote at the STAR III Special Meeting

All holders of record of shares of STAR III Common Stock at the close of business on December 16, 2019, STAR III’s record date, are entitled to notice of, and to vote at, the STAR III Special Meeting and any adjournment or postponement of the STAR III Special Meeting, except that while STAR III Advisor, any director of STAR III and any of their affiliates are entitled to vote on the STAR III Charter Amendment proposal, and the adjournment proposal, they are not entitled to vote on the STAR III Merger Proposal.

Each eligible voting share of STAR III Common Stock is entitled to one vote on each proposal at the STAR III Special Meeting per share of STAR III Common Stock owned as of the close of business on the STAR III record date. As of the record date, there were 8,572,832 shares of STAR III Common Stock outstanding held by approximately 4,800 holders of record (which includes 24,276 restricted Class A shares of common stock held by STAR III’s independent directors, 2,808 Class A shares of common stock held by Ana Marie del Rio, 1,111 Class A shares of common stock held by Ella S. Neyland, 19,857 Class A shares of common stock held by Rodney F. Emery and 8,000 Class A shares of common stock held by STAR III Advisor).

Required Vote; Quorum

Approval of the STAR III Merger Proposal and approval of the STAR III Charter Amendment Proposal requires the affirmative vote of a majority of all of the votes entitled to be cast on such proposals as of the close of business on the record date.

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Approval of the adjournment proposal requires the affirmative vote of a majority of all of the votes cast on such proposal.

Regardless of the number of shares of STAR III Common Stock you own, your vote is very important. Please complete, sign, date and promptly return the enclosed proxy card today or authorize a proxy to vote your shares by phone or Internet.

The STAR III Charter and STAR III bylaws provide that the presence, in person or by proxy, of stockholders entitled to cast at least 50% of all of the votes entitled to be cast at such meeting will constitute a quorum. Shares that are voted and shares abstaining from voting are treated as being present at the STAR III Special Meeting for purposes of determining whether a quorum is present.

No business may be conducted at the STAR III Special Meeting if a quorum is not present at the STAR III Special Meeting other than the proposal to adjourn the STAR III Special Meeting to solicit additional proxies. Pursuant to STAR III’s bylaws, the chairman of the meeting may adjourn the STAR III Special Meeting to a later date, time and place announced at the meeting, whether or not a quorum is present and without a vote of stockholders.

Abstentions and BrokerNon-Votes

Abstentions and brokernon-votes will be counted in determining the presence of a quorum. Abstentions and brokernon-votes, if any, will have the same effect as votes AGAINST (i) the STAR III Merger Proposal and (ii) the STAR III Charter Amendment Proposal. Abstentions and brokernon-votes will have no effect on the adjournment proposal.

Voting by STAR III Advisor, Directors and Affiliates

All holders of record of shares of STAR III Common Stock at the close of business on December 16, 2019, STAR III’s record date, are entitled to notice of, and to vote at, the STAR III Special Meeting and any adjournment or postponement of the STAR III Special Meeting, except that while STAR III Advisor, any director of STAR III and any of their affiliates are entitled to vote on the STAR III Charter Amendment proposal, and the adjournment proposal, they are not entitled to vote on the STAR III Merger Proposal.

As of the record date, there were 8,572,832 shares of STAR III Common Stock outstanding held by approximately 4,800 holders of record (which includes 24,276 Class A shares of common stock held by STAR III’s independent directors, 2,808 Class A shares of common stock held by Ana Marie del Rio, 1,111 Class A shares of common stock held by Ella S. Neyland, and 19,857 Class A shares of common stock held by Rodney F. Emery, which, pursuant to the STAR III Charter, cannot vote on the STAR III Merger Proposal). As of the record date, STAR III Advisor owns 8,000 shares of STAR III Class A Common Stock.

Manner of Submitting Proxy

STAR III stockholders may vote for or against or abstain from voting on the proposals submitted at the STAR III Special Meeting in person or by proxy. STAR III stockholders can authorize a proxy in the following ways:

• Internet. STAR III stockholders may submit a proxy over the Internet by following the “Vote by Internet” instructions on the enclosed proxy card.

• Telephone. STAR III stockholders may submit a proxy by following the “Vote by Phone” instructions on the enclosed proxy card.

• Mail. STAR III stockholders may submit a proxy by completing, signing, dating and returning their proxy card or voting instruction card in the preaddressed postage-paid envelope provided.

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STAR III stockholders should refer to their proxy cards or the information forwarded by their broker or other nominee to see which options are available to them.

The Internet and telephone proxy submission procedures are designed to authenticate stockholders and to allow them to confirm that their instructions have been properly recorded. If you submit a proxy over the Internet or by telephone, then you need not return a written proxy card or voting instruction card by mail.

The method by which STAR III stockholders submit a proxy will in no way limit their right to vote at the STAR III Special Meeting if they later decide to attend the meeting and vote in person. If shares of STAR III Common Stock are held in the name of a broker or other nominee, STAR III stockholders must obtain a proxy, executed in their favor, from the broker or other nominee, to be able to vote in person at the STAR III Special Meeting.

All shares of STAR III Common Stock entitled to vote and represented by properly completed proxies received prior to the STAR III Special Meeting, and not revoked, will be voted at the STAR III Special Meeting as instructed on the proxies.If STAR III stockholders of record return properly executed proxies but do not indicate how their shares of STAR III Common Stock should be voted on a proposal, the shares of STAR III Common Stock represented by their properly executed proxy will be voted as the STAR III Board recommends and therefore, (i) FOR the STAR III Merger Proposal, (ii) FOR the STAR III Charter Amendment Proposal and (iii) FOR the adjournment proposal.If you do not provide voting instructions to your broker or other nominee, your shares of STAR III Common Stock will NOT be voted and will be considered brokernon-votes. Abstentions and brokernon-votes will have the same effect as a voteAGAINST the STAR III Merger Proposal and the STAR III Charter Amendment Proposal.

Shares Held in “Street Name”

If STAR III stockholders hold shares of STAR III Common Stock in an account of a broker or other nominee and they wish to vote such shares, they must return their voting instructions to the broker or other nominee.

If STAR III stockholders hold shares of STAR III Common Stock in an account of a broker or other nominee and attend the STAR III Special Meeting, they should bring a letter from their broker or other nominee identifying them as the beneficial owner of such shares of STAR III Common Stock and authorizing them to vote.

If STAR III stockholders hold their shares in “street name” and they fail to provide their broker or other nominee with any instructions regarding how to vote their shares of STAR III Common Stock, their shares of STAR III Common Stock held by brokers and other nominees will NOT be voted and may NOT be present for purposes of determining a quorum.

Delivery and Householding of Proxy Materials

STAR III may give a single notice of the STAR III Special Meeting to all STAR III stockholders who share an address, which single notice shall be effective as to any STAR III stockholder at such address, unless such STAR III stockholder has objected to receiving the single notice or has revoked a prior consent to receiving such single notice. This process, which is commonly referred to as “householding,” potentially means extra convenience for stockholders and cost savings for companies.

If, at any time, a STAR III stockholder no longer wishes to participate in “householding” and would prefer to receive a separate set of proxy materials, such STAR III stockholder should so notify STAR III by directing written notice to Mediant.

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Revocation of Proxies or Voting Instructions

STAR III stockholders of record may change their vote or revoke their proxy at any time before it is exercised at the STAR III Special Meeting by:

• submitting notice in writing to STAR III’s secretary, Ana Marie del Rio, at STAR III’s offices located at 18100 Von Karman Avenue, Suite 500, Irvine, California 92612;

• executing and delivering a later-dated, properly executed proxy card or submitting a later-dated proxy by telephone or on the Internet; or

• voting in person at the STAR III Special Meeting.

Attending the STAR III Special Meeting without voting will not revoke your proxy.

STAR III stockholders who hold shares of STAR III Common Stock in an account of a broker or other nominee may revoke their voting instructions by following the instructions provided by their broker or other nominee.

Solicitation of Proxies; Payment of Solicitation Expenses

The solicitation of proxies from STAR III stockholders is made on behalf of the STAR III Board. STAR III will pay the cost of soliciting proxies from STAR III stockholders. STAR III has contracted with Mediant Communications, Inc. (“Mediant”) to assist STAR III in the distribution of proxy materials and the solicitation of proxies. STAR III expects to pay Mediant fees of approximately $122,500 to solicit and distribute proxies, which includes estimated postage and otherout-of-pocket expenses of Mediant, plus other fees and expenses for other services related to this proxy solicitation, including, but not limited to, the review of proxy materials. STAR III will also reimburse brokerage houses and other custodians, nominees and fiduciaries for their reasonableout-of-pocket expenses for forwarding proxy and solicitation materials to STAR III’s stockholders.

In accordance with the regulations of the SEC, STAR III also will reimburse brokerage firms and other custodians, nominees and fiduciaries for their expenses incurred in sending proxies and proxy materials to beneficial owners of shares of STAR III Common Stock.

Adjournment Proposal

In addition to the approval of the STAR III Merger Proposal and the STAR III Charter Amendment Proposal, STAR III stockholders are also being asked to approve a proposal to adjourn the STAR III Special Meeting to another date, time or place, if necessary or appropriate, to solicit additional proxies in favor of the approval of the STAR III Merger Proposal and the STAR III Charter Amendment Proposal. If this proposal is approved, the STAR III Special Meeting could be successively adjourned to any date not more than 120 days after the record date.

If the STAR III Special Meeting is postponed or adjourned for the purpose of soliciting additional proxies, STAR III stockholders who have already submitted their proxies will be able to revoke them at any time prior to their use at the adjourned Special Meeting.

Rights of Dissenting Stockholders

No dissenters’ or appraisal rights, or rights of objecting stockholders under Title 3, Subtitle 2 of the MGCL will be available to holders of shares of STAR III Common Stock with respect to the STAR III Merger.

Assistance

If you need assistance in completing your proxy card or have questions regarding the various voting options with respect to the STAR III Special Meeting, please call STAR III’s proxy solicitor, Mediant, toll-free at1-844-371-1437.

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PROPOSALS SUBMITTED TO STAR III STOCKHOLDERS

The STAR III Merger Proposal

(Proposal 1 on the STAR III Proxy Card)

STAR III stockholders are asked to consider and vote on a proposal to approve the STAR III Merger. For a summary and detailed information regarding this proposal, see the information about the STAR III Merger and the STAR III Merger Agreement throughout this proxy statement/prospectus, including the information set forth in sections entitled “The STAR III Merger” beginning on page 121 and “The STAR III Merger Agreement” beginning on page 180. A copy of the STAR III Merger Agreement is attached as Annex A to this proxy statement/prospectus.

Pursuant to the STAR III Merger Agreement, approval of the STAR III Merger Proposal is a condition to the consummation of the STAR III Merger. If this proposal is not approved, the STAR III Merger will not be completed.

STAR III is requesting that STAR III stockholders approve the STAR III Merger. Approval of this proposal requires the affirmative vote of a majority of the votes entitled to be cast on such proposal as of the close of business on the record date.

Recommendation of the STAR III Board

The STAR III Board recommends that STAR III stockholders vote FOR the proposal to approve the STAR III Merger.

The STAR III Charter Amendment Proposal

(Proposal 2 on the STAR III Proxy Card)

STAR III stockholders are asked to consider and vote on a proposal to approve the STAR III Charter Amendment that, if adopted, would delete Article XIV related toRoll-Up Transactions (and the associated definitions, all as defined in the STAR III Charter) from the STAR III Charter. Article XIV imposes substantive and procedural requirements relating toRoll-Up Transactions, none of which will be applicable if the STAR III Charter Amendment Proposal is approved. The full text of the STAR III Charter Amendment is set forth in the form of Articles of Amendment attached as Annex B to this proxy statement/prospectus.

Pursuant to the STAR III Merger Agreement, approval of the STAR III Charter Amendment Proposal is a condition to the consummation of the STAR III Merger. If this proposal is not approved, the STAR III Merger will not be completed.

STAR III is requesting that STAR III stockholders approve the STAR III Charter Amendment. Approval of this proposal requires the affirmative vote of a majority of the votes entitled to be cast on such proposal as of the close of business on the record date.

Recommendation of the STAR III Board

The STAR III Board recommends that STAR III stockholders vote FOR the proposal to approve the STAR III Charter Amendment.

The STAR III Adjournment Proposal

(Proposal 3 on the STAR III Proxy Card)

STAR III is requesting that STAR III stockholders approve one or more adjournments of the STAR III Special Meeting to another date, time or place, solely for the purpose of and for the times reasonably necessary for further solicitation of proxies or to obtain additional votes in favor of the approval of the STAR III Merger Proposal, if necessary or appropriate.

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Approval of this proposal requires the affirmative vote of a majority of all votes cast at the STAR III Special Meeting.

If, at the STAR III Special Meeting, the number of shares of STAR III Common Stock present in person or represented by proxy and voting in favor of the approval of the STAR III Merger Proposal and/or the STAR III Charter Amendment is insufficient to approve the proposals, STAR III intends to move to adjourn the STAR III Special Meeting in order to enable the STAR III Board to solicit additional proxies for approval of the STAR III Merger Proposal and the STAR III Charter Amendment.

The STAR III Special Meeting may not be postponed or adjourned to a date that is more than 30 days after the date for which the special meeting was originally scheduled or more than 120 days from the record date for the STAR III Special Meeting.

STAR III retains full authority to the extent it is set forth in its bylaws and Maryland law to adjourn the STAR III Special Meeting, or to postpone the STAR III Special Meeting before it is convened, without the approval of any stockholder.

Recommendation of the STAR III Board

The STAR III Board recommends that STAR III stockholders vote FOR the adjournment proposal.

Other Business

As of the date of this notice, STAR III does not intend to bring any other matters before the STAR III Special Meeting, and STAR III does not know of any matters to be presented for consideration at the STAR III Special Meeting and which would be required to be set forth in this proxy statement/prospectus other than the matters set forth in the accompanying Notice of Special Meeting of Stockholders. In accordance with the STAR III bylaws and Maryland law, business transacted at the STAR III Special Meeting will be limited to those matters set forth in such notice.

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THE STAR III MERGER

The following is a description of the material aspects of the STAR III Merger. While STAR and STAR III believe that the following description covers the material terms of the STAR III Merger, the description may not contain all of the information that is important to STAR stockholders and STAR III stockholders. STAR and STAR III encourage STAR III stockholders to carefully read this entire proxy statement/prospectus, including the STAR III Merger Agreement and the other documents attached to this proxy statement/prospectus, for a more complete understanding of the STAR III Merger.

General

Each of the STAR III Special Committee and the STAR III Board has unanimously declared advisable, and each has unanimously approved, the STAR III Merger Agreement, the STAR III Charter Amendment, the STAR III Merger and the other transactions contemplated by the STAR III Merger Agreement, based on, among other factors, the reasons described below in the section “—Recommendation of the STAR III Board and Its Reasons for the STAR III Merger.” In the STAR III Merger, STAR III will merge with and into Merger Sub, with Merger Sub continuing as the Surviving Entity. STAR III stockholders will receive the merger consideration described below under “The STAR III Merger Agreement—Merger Consideration—Effects of the STAR III Merger.”

Background of the STAR III Merger

STAR III was formed in July 2015 and commenced its initial public offering to raise up to $1 billion in February 2016. STAR III ceased offering shares of common stock in its initial public offering on August 31, 2018. STAR III raised approximately $205 million of gross proceeds in its initial public offering and used the proceeds, along with borrowed funds, to acquire a portfolio of ten multifamily properties with a total of 2,775 apartment homes.

On June 18, 2018, at a duly convened meeting of the STAR Board, the STAR Board discussed, in general terms, the possibility of an extraordinary transaction involving the Company and STAR III and the formation of the STAR Special Committee comprised solely of Thomas H. Purcell, Brian Christie and Kerry D. Vandell, all of whom are independent from STAR Advisor and are disinterested with respect to STAR III. On June 25, 2018, by unanimous written consent, the STAR Board delegated to the STAR Special Committee the authority to (i) explore a possible extraordinary transaction involving STAR III, (ii) negotiate the terms and conditions of a potential transaction, (iii) determine whether the potential transaction with STAR III is fair to and in the best interests of STAR, (iv) recommend to the STAR Board whether a potential transaction with STAR III is in the best interests of STAR and what action, if any, should be taken with respect to a potential transaction and (iv) select and retain legal, investment banking and other advisors. Mr. Purcell was appointed chair of the STAR Special Committee.

On June 25, 2018 and June 28, 2018, the STAR Special Committee held two telephonic meetings to discuss the organization of the STAR Special Committee and the engagement of outside legal advisors. On June 29, 2018, the STAR Special Committee held a telephonic meeting with representatives of company counsel to STAR, initially with the law firm of Morris, Manning & Martin LLP, who as of March 13, 2019, joined the law firm of Morrison & Foerster LLP (referred to herein as “STAR Company Counsel”) to discuss the identification of potential outside legal advisors to the STAR Special Committee. On July 2, 2019, July 3, 2019 and July 6, 2019, the STAR Special Committee held telephonic meetings to interview three law firms with experience with publicnon-traded REITs as potential outside legal advisors and to discuss the independence and qualifications of each law firm. On July 13, 2018, the STAR Special Committee engaged Venable LLP (“Venable”) as its outside legal advisor.

On July 18, 2018, the STAR Special Committee held a telephonic meeting with representatives of Venable. At the meeting, the STAR Special Committee discussed (i) the independence of each of Messrs. Purcell, Christie and Vandell, (ii) the process to be undertaken by the STAR Special Committee to explore a potential business

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combination transaction between STAR and STAR III, (iii) the role of STAR Company Counsel, (iv) the duties of the members of the STAR Special Committee under Maryland law and (v) the selection of an outside financial advisor to the STAR Special Committee. The STAR Special Committee discussed the qualifications of several firms that could serve as outside financial advisor and directed Venable to request proposals and set up interviews with three potential outside financial advisors.

From July 30, 2018 to August 6, 2018, the STAR Special Committee and Venable telephonically interviewed three potential outside financial advisors, all of which had extensive experience with publicnon-traded REITs and had not previously received any material fees for providing investment banking or financial advisory services to STAR III, STAR or SIR, and held three telephonic meetings to discuss the independence, qualifications and fees for each potential financial advisor. On August 10, 2018, the STAR Special Committee engaged Robert A. Stanger & Co., Inc. (“Stanger”) as its outside financial advisor.

On August 16, 2018, the STAR Special Committee held a telephonic meeting with representatives of Venable, Stanger, STAR Advisor and STAR Company Counsel. At the meeting, representatives of STAR Advisor gave a presentation regarding the potential acquisition of STAR III and its vision for the STAR III/STAR Combined Company (including financial projections) and responded to questions from the STAR Special Committee and its legal and financial advisors regarding the potential transaction. Representatives of STAR Advisor reviewed the portfolios of STAR and STAR III, noting their complementary nature and explained that the larger Combined Company could benefit from (i) economies of scale, (ii) greater access to debt capital and institutional financing, (iii) additional optionality to provide liquidity to the Company’s stockholders and (iv) reduced advisory fees. After all of the representatives of STAR Advisor and STAR Company Counsel left the meeting, the STAR Special Committee discussed the potential transaction, including STAR Advisor’s presentation, in executive session with representatives of Venable and Stanger.

During August 2018, STAR III Advisor began conferring with members of the STAR III Board about strategic alternatives in light of STAR III’s small size relative to the general and administrative expense associated with being an externally advised public company. STAR III Advisor disclosed to the STAR III Board that management of STAR III and STAR were considering a business combination of the companies and that management of SIR and STAR were also considering a potential business combination.

On August 30, 2018, the STAR Special Committee held a telephonic meeting with representatives of Venable and Stanger to discuss the potential acquisition of STAR III. The STAR Special Committee directed Venable to prepare a draftnon-disclosure agreement to propose to STAR III.

On September 7, 2018, STAR Advisor proposed that the STAR Special Committee also review, consider, and, if deemed appropriate by the STAR Special Committee, negotiate the possible acquisition of SIR, which would close simultaneously with, but would not be conditioned on, the potential STAR III transaction.

On September 7, 2018, by unanimous written consent, the STAR III Board appointed Janice M. Munemitsu, Ned W. Brines and Stephen R. Bowie, all of whom are independent of STAR III Advisor and disinterested with respect to STAR, to serve on the newly formed STAR III Special Committee to (i) explore a possible business combination with STAR or an alternative extraordinary transaction, (ii) negotiate the terms and conditions of a potential transaction, (iii) recommend to the STAR III Board whether a potential transaction is in the best interests of STAR III and what action, if any, should be taken with respect to the potential transaction and (iv) select and retain legal, investment banking and other advisors.

On September 10, 2018 and September 17, 2018, the STAR Special Committee held two telephonic meetings with representatives of Venable and Stangerto discuss the potential STAR III transaction.

During the month of September 2018, the STAR III Special Committee held twoin-person and three telephonic meetings to discuss the engagement of legal and financial advisors. During this time, the STAR III

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Special Committee interviewed three law firms, all of which had experience with publicnon-traded REITs and no material relationship with STAR III, STAR, SIR, their sponsor or affiliates of their sponsor. At a meeting on September 20, 2018, the STAR III Special Committee decided to engage DLA Piper LLP (US) (“DLA Piper”) as its counsel.

On September 26, 2018, the STAR Special Committee proposed anon-disclosure agreement pursuant to which STAR and STAR III would share information with each other on a confidential basis. After negotiation between counsel, the STAR III Special Committee approved thenon-disclosure agreement at a telephonic meeting held on September 27, 2018, and the agreement was signed the following day.

During October 2018, the STAR III Special Committee held seven telephonic meetings to discuss the engagement of a financial advisor. After discussing with a representive of DLA Piper the results of DLA Piper’s interviews of six potential financial advisors, the STAR III Special Committee determined to interview three financial advisors, all of which had extensive experience with publicnon-traded REITs and had not previously received fees for providing investment banking or financial advisory services to STAR III, STAR, their sponsor, affiliates of their sponsor or any other REITs managed by affiliates of their sponsor. At a meeting held on October 31, 2018, the STAR III Special Committee determined to engage Houlihan Lokey Capital, Inc. (“Houlihan Lokey”) as its financial advisor.

On October 15, 2018, the STAR Special Committee met telephonically with representatives of Venable and Stanger to discuss the due diligence to be performed in connection with the potential STAR III transaction and the potential SIR transaction. On October 31, 2018, STAR and SIR entered into anon-disclosure agreement pursuant to which STAR and SIR would share information with each other on a confidential basis.

On November 5, 2018, the STAR III Special Committee met by telephone to discuss directors’ duties with representatives of DLA Piper and discuss the optimal process to identify the best strategic alternative for STAR III with representatives of Houlihan Lokey and DLA Piper.

On November 2, 2018, the STAR Special Committee held a telephonic meeting with representatives of Venable and Stanger. At the meeting, representatives of Stanger provided an overview of (i) Stanger’s preliminary financial analysis of the potential transaction with STAR III, (ii) the advisory fees payable in connection with the potential transaction, (ii) an accretion analysis of each of STAR and STAR III and (iii) the valuations, structures and fees of comparable transactions.

On November 28, 2018, the STAR Special Committee held a telephonic meeting with representatives of Venable. At the meeting, the STAR Special Committee discussed (i) the duties of the members of the STAR Special Committee under Maryland law and (ii) the potential transaction with STAR III, including transaction structure, stockholder approvals and potential advisory fees.

On December 4, 2018, the STAR Special Committee held anin-person meeting with representatives of Stanger and Venable to discuss (i) Stanger’s financial analyses of the potential acquisition of STAR III, including analysis of potential exchange ratios, and (ii) the drafting of a letter of intent, including the documented financial assumptions to be sent with the letter of intent (collectively, the “STAR III LOI”), and an exclusivity agreement to propose to the STAR III Special Committee. At the meeting, the STAR Special Committee also discussed potential accretion attributable to the potential acquisition of STAR III, advisor fees and risks associated with the potential transaction.

During the month of December 2018, at the STAR Special Committee’s request, representatives of Stanger and Venable discussed with STAR Advisor the advisory fees payable in connection with the potential STAR III transaction and the potential SIR transaction and the proposed advisory fee structure that would apply to the Combined Company after the potential transactions.

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On December 21, 2018, December 28, 2018 and January 4, 2019, the STAR Special Committee held three telephonic meetings with representatives of Venable and Stanger to discuss (i) STAR Advisor’s proposed advisory fees, (ii) the draft STAR III LOI and (iii) recent transactions in thenon-traded REIT sector.

On January 7, 2019, Mr. Brines resigned from the STAR III Special Committee, noting that he also served on the SIR Special Committee and that his resignation from the STAR III Special Committee would avoid the potential for certain conflicts in the event STAR offered to buy both SIR and STAR III, even if, as expected, the potential acquisitions would not be contingent on each other.

On January 8, 2019, the STAR Special Committee delivered the STAR III LOI to the STAR III Special Committee, proposing the acquisition by STAR of STAR III, pursuant to a merger in astock-for-stock transaction (the “STAR III Merger”). The STAR III LOI provided that each share of STAR III Common Stock would be exchanged for 1.40278 shares of STAR Common Stock, subject to adjustment for material developments prior to signing the agreement and plan of merger (the “STAR III Merger Agreement”). The STAR III LOI indicated that STAR was simultaneously pursuing the acquisition of SIR but that the acquisition of STAR III was not contingent on STAR’s acquisition of SIR.

The STAR III LOI indicated that STAR III would be able to terminate the STAR III Merger Agreement to pursue a “superior proposal” upon paying abreak-up fee and reimbursing STAR’s expenses and would also be able to solicit superior proposals for the first 30 days (the“go-shop” period) after signing the STAR III Merger Agreement. Thebreak-up fee was proposed to be at 1.5% of STAR III’s “enterprise value” if STAR III terminated the STAR III Merger Agreement to pursue a superior proposal at the end of the30-day“go-shop” period and at 3.0% of STAR III’s “enterprise value” if STAR III terminated the STAR III Merger Agreement thereafter. “Enterprise value” was generally defined as the value of STAR III’s equity and debt minus cash. The expense reimbursement was capped at $5 million.

The STAR III LOI indicated that the 1.40278 exchange ratio reflected an estimated value of STAR III of $25.25 per share, net of estimated transaction costs and net of STAR III Advisor’s incentive and performance fees, and an estimated value of STAR of $18.00 per share, net of estimated transaction costs and net of STAR Advisor’s incentive and performance fees. The STAR III LOI also indicated that STAR Advisor had offered, after the STAR III Merger, to reduce its acquisition fees, disposition fees and financing fees to 50 basis points and to take half of its investment management fees in the form of stock. In arriving at the exchange ratio, the STAR III LOI assumed that STAR III would not pay any disposition fees to STAR III Advisor as part of the proposed STAR III Merger but indicated that this was “subject to negotiation with STAR III Advisor.”

The STAR III LOI also indicated that the offer was conditioned on the stockholders of STAR III agreeing to amend the charter of STAR III to remove the provisions with respect to“roll-up” transactions, which would have required, among other things, that the stockholders of STAR III be offered the option of choosing cash or stock in connection with the STAR III Merger.

The STAR III LOI was also accompanied by an exclusivity agreement, which provided that STAR III would exclusively negotiate with STAR for a period of 60 days (with automatic30-day renewals for so long as the parties were negotiating in good faith).

On January 14, 2019, the STAR III Special Committee met to discuss the STAR III LOI and the proposed exclusivity agreement with representatives of DLA Piper and Houlihan Lokey. The STAR III Special Committee determined to request a meeting with representatives of STAR III Advisor to gain a better understanding of the proposed transaction and the prospects for the Combined Company.

On January 30, 2019 and February 4, 2019, the STAR Special Committee held telephonic meetings with representatives of Venable and Stanger to discuss the STAR III Merger, including (i) the status of Stanger’s due diligence and preliminary financial analysis of the potential transactions and (ii) advisory fees.

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On February 5, 2019, the STAR Special Committee delivered letter of intent to the SIR Special Committee, proposing the acquisition by STAR of SIR, pursuant to a merger in astock-for-stock transaction (the “SIR Merger”).

On February 6, 2019, the STAR III Special Committee met. Representatives of DLA Piper and Houlihan Lokey also attended this meeting. By invitation, representatives of STAR III Advisor later joined the meeting, along with a representative of STAR Company Counsel. STAR III Advisor presented (i) its vision of the Combined Company (including financial projections), (ii) proposed transaction terms, (iii) the merits of the STAR III Merger, (iv) an overview and outlook regarding multifamily real estate and (v) the depth of the management team that would serve the Combined Company.

On February 11, 2019, the STAR III Special Committee met telephonically to discuss the STAR III LOI and STAR III’s potential strategic alternatives with representatives of DLA Piper and Houlihan Lokey, including the advantages and disadvantages of soliciting other buyers at that time. The STAR III Special Committee discussed with representatives of Houlihan Lokey the prospects for STAR III receiving other bids from third parties and the likelihood that STAR III was more valuable to STAR than others. There was a consensus among the members of the STAR III Special Committee that the STAR III Merger was attractive and that the risks of losing STAR’s offer offset the possible benefits of soliciting other bidders at that time, especially in light of the proposedgo-shop period to be included in the STAR III Merger Agreement. The STAR III Special Committee discussed on what terms STAR III might be willing to agree to negotiate exclusively with STAR.

On February 12, 2019, the STAR III Special Committee informed the STAR Special Committee that the STAR III Special Committee may be willing to approve a45-day exclusivity arrangement (with automatic15-day extensions unless a party has provided a termination notice) if the parties were working toward definitive agreements that would include the following terms: (i) the exchange ratio shall be determined after financial due diligence and shall take into account any amounts projected to be owed under the terms of the incentive and performance fees arrangements each party has with its external advisor; (ii) no disposition fees shall be paid to STAR III Advisor in connection with the STAR III Merger; (iii) the incentive and performance fees potentially payable to STAR Advisor upon a liquidity event for the Combined Company shall take into account the investment returns of all stockholders, including the returns of stockholders of STAR III calculated as of their original investment in STAR III; (iv) an acknowledgement from STAR III Advisor that in the event of the sale of STAR III to another bidder making a superior proposal, any disposition fees owed to STAR III Advisor (when coupled with investment banking fees paid by STAR III) would not exceed an amount that is reasonable, customary and competitive for such disposition services and that such limitation is consistent with a proper interpretation of the advisory agreement between STAR III and STAR III Advisor (the “Disposition Fee Limitation”); (v) thego-shop period shall have a duration of 45 days; (vi) in the event of a superior proposal, STAR III shall not have to reimburse any of STAR’s expenses but shall pay STAR abreak-up fee of 1.5% of equity value (not enterprise value) if the termination is at the end of thego-shop period and 3.0% thereafter; (vii) in addition to customary closing conditions, the Merger shall be conditioned on an amendment to the STAR III charter to remove provisions with respect to“roll-up” transactions; (viii) the advisory agreement between STAR and STAR Advisor shall be revised (effective no later than the date of the STAR III Merger) to provide that acquisition fees, disposition fees and financing fees would be lowered from 100 basis points to 50 basis points and investment management fees would be paid half in cash and half in stock; (ix) each party shall pay its own expenses associated with the transaction except that STAR or STAR III Advisor shall reimburse STAR III for its costs if the STAR III stockholders reject the STAR III Merger at a meeting of stockholders; (x) STAR III and SIR shall be permitted to exchange information with each other during the course of the negotiations with STAR; and (xi) at least one independent director of STAR III shall be appointed to the board of directors of the Combined Company.

On February 19, 2019 and February 22, 2019, the STAR Special Committee held two telephonic meetings with Stanger and Venable to discuss the term sheet proposed by STAR III. At the meetings, representatives of Stanger summarized their discussions with (i) STAR Advisor regarding financial projections, advisory fees and

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the exchange ratio for each of the SIR Merger and the STAR III Merger and (ii) Houlihan Lokey regarding the STAR III Merger.

From February 22, 2019 to February 27, 2019, the STAR Special Committee formulated a response to the term sheet proposed by STAR III with the assistance of Stanger, Venable, STAR Company Counsel and STAR Advisor.

On February 25, 2019, the STAR III Special Committee met to discuss with representatives of Houlihan Lokey and DLA Piper, among other things, (i) communications between Houlihan Lokey and Stanger with respect to STAR’s plans following the STAR III Merger, (ii) counsel’s ongoing efforts to secure anon-disclosure agreement with SIR and (iii) strategies with respect to conducting cost-effective legal due diligence on SIR. There was a consensus that it was premature for Houlihan Lokey to attempt to perform financial analyses of SIR given the early stages of the negotiations.

On February 27, 2019, the STAR Special Committee informed the STAR III Special Committee that STAR would be willing to enter into the proposed exclusivity arrangement if the parties were working toward a definitive agreement along the terms described in the proposed term sheet except that (i) any disposition fee paid in connection with a superior proposal shall be as provided in the current advisory agreement between STAR III and STAR III Advisor, (ii) thebreak-up fee shall include reimbursement of expenses of up to $5 million, (iii) reimbursement of STAR III’s expenses in the event the STAR III stockholders reject the proposed STAR III Merger shall be negotiated during the exclusivity period and (iv) the composition of the board of directors of the Combined Company shall be negotiated during the exclusivity period.

On March 4, 2019, the STAR III Special Committee met by telephone to discuss the proposed term sheet from the STAR Special Committee with representatives of DLA Piper and Houlihan Lokey. There was a consensus not to reimburse STAR’s expenses in the event of a termination of the STAR III Merger Agreement in order to pursue a superior proposal. Following the meeting, the STAR III Special Committee informed the STAR Special Committee that it would be willing to approve the proposed exclusivity arrangement if the parties were working toward a definitive agreement along the lines most recently proposed by STAR except that STAR would have to accept abreak-up fee that did not include any reimbursement of expenses.

On March 7, 2019, the STAR Special Committee held a telephonic meeting with representatives of Venable and Stanger to discuss the STAR III response to the proposed term sheet. After the meeting, the STAR Special Committee informed the STAR III Special Committee that STAR was willing to negotiate exclusively with STAR III to try to reach definitive agreements on the terms most recently proposed by STAR III. On March 11, 2019, the parties executed a45-day exclusivity agreement (with automatic15-day extensions unless a party has provided a timely termination notice).

On March 13, 2019, the STAR III Special Committee met by telephone. Representatives of DLA Piper and Houlihan Lokey also participated. During the meeting, the committee discussed the SIR Merger and how it could delay an agreement between STAR and STAR III. The STAR III Special Committee viewed potential delay negatively and discussed strategies to persuade STAR not to let SIR negotiations delay an agreement with STAR III.

On March 14, 2019, Mr. Purcell, the chair of the STAR Special Committee, met with Messrs. Bowie and Barker, the chairs of the STAR III Special Committee and the SIR Special Committee, respectively, to discuss the STAR III Merger and the SIR Merger.

On March 14, 2019, the STAR Special Committee held a telephonic meeting with representatives of Venable and Stanger. At the meeting Mr. Purcell reported on his discussions with the STAR III Special Committee chair and the SIR Special Committee chair, noting that each communicated continued interest in pursuing the potential transactions.

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On March 20, 2019, the STAR Special Committee held a telephonic meeting with representatives of Venable and Stanger to discuss the status of the negotiations and due diligence regarding the STAR III Merger. At the request of the STAR Special Committee, representatives of STAR Advisor and STAR Company Counsel attended part of the meeting to respond to questions from the STAR Special Committee.

On March 25, 2019, the STAR III Special Committee met by telephone. Representatives of DLA Piper and Houlihan Lokey also participated. During the meeting, representatives of Houlihan Lokey discussed the preliminary financial analyses of STAR and STAR III that it had performed to date which, in the case of STAR, did not take into account the potential acquisition of SIR by STAR. There was a consensus that STAR III should push for an exchange ratio of 1.52 shares of STAR for every share of STAR III, which was viewed as highly favorable to STAR III.

On March 26, 2019, in accordance with the STAR III Special Committee’s directives, a representative of Houlihan Lokey called a representative of Stanger to discuss why STAR III believed that an exchange ratio of 1.52 was appropriate. The Stanger representative resisted the suggested increase in the proposed exchange ratio primarily on account of the ongoing dilutive distributions paid by STAR III, which distributions were likely to continue until closing. The Houlihan Lokey representative conveyed STAR III’s desire to move expeditiously, noting that this would reduce the dilutive impact of future STAR III distributions.

On March 27, 2019, the STAR Special Committee held a telephonic meeting with representatives of Venable and Stanger to discuss the proposed increase to the exchange ratio. STAR Advisor and STAR Company Counsel joined part of the meeting to respond to questions from the STAR Special Committee. Representatives of Stanger noted that it expected to receive backup support for the increased exchange ratio from Houlihan Lokey on behalf of STAR III.

On March 28, 2019, the STAR III Special Committee met by telephone to discuss with representatives of DLA Piper and Houlihan Lokey the materials that Houlihan Lokey should share, on behalf of STAR III, with Stanger in support of a 1.52 exchange ratio. The committee also discussed the possibility of agreeing to suspend distributions in advance of the STAR III Merger in order to secure a higher exchange ratio and directed Houlihan Lokey to explore that possibility with Stanger.

On March 29, 2019, representatives of Stanger and Houlihan Lokey held telephonic discussions regarding the exchange ratio, with Houlihan Lokey sharing materials supporting a 1.52 exchange ratio if coupled with a suspension of dividends after May 31, 2019. The Stanger representative indicated that he would review the proposal with the STAR Special Committee.

On April 4, 2019, the STAR Special Committee held a telephonic meeting with representatives of Venable, Stanger, STAR Company Counsel and STAR Advisor to discuss STAR Advisor’s liquidity strategy for the Combined Company and advisory fees. After all of the representatives of STAR Advisor and STAR Company Counsel left the meeting, the STAR Special Committee met in executive session with representatives of Venable and Stanger to discuss advisory fees and the preparation of the STAR III Merger Agreement.

On April 8, 2019, the STAR Special Committee held a telephonic meeting with representatives of Venable and Stanger to discuss the status of negotiations with respect to the STAR III Merger, including the response to the STAR III Special Committee’s proposed exchange ratio.

On April 8, 2019, the STAR III Special Committee met by telephone to discuss the status of the negotiations with representatives of DLA Piper and Houlihan Lokey. Later that day, the STAR Special Committee delivered a counter proposal to the STAR III Special Committee indicating a willingness to proceed with a 1.45 exchange ratio if STAR III stopped paying distributions after May 31, 2019 and indicating that STAR III Advisor had agreed to waive any incentive and performance fees or disposition fee in connection with the proposed STAR III Merger.

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On April 10, 2019, the STAR Special Committee held a telephonic meeting with representatives of Venable, Stanger, STAR Company Counsel and STAR Advisor to discuss the negotiation of the STAR III Merger. After all of the representatives of STAR Advisor and STAR Company Counsel left the meeting, the STAR Special Committee met in executive session with representatives of Venable and Stanger to discuss the STAR III Merger.

On April 10, 2019 and April 12, 2019, the STAR III Special Committee met by telephone to discuss STAR’s counter offer with representatives of DLA Piper and Houlihan Lokey. There was a consensus that STAR had not adequately improved the exchange ratio to justify the suspension of STAR III distributions after May 31, 2019. The STAR III Special Committee agreed to respond with a counter offer that proposed a 1.45 exchange ratio without any suspension of distributions. The counterproposal was relayed on April 12, 2019, along with another request to expedite the transaction.

On April 17, 2019, the STAR Special Committee held a telephonic meeting with representatives of Venable, Stanger, STAR Company Counsel and STAR Advisor to discuss the status of negotiations of the STAR III Merger. After the representatives of STAR Advisor and STAR Company Counsel left the meeting, the STAR Special Committee met in executive session with representatives of Stanger and Venable to discuss the STAR III Special Committee’s counter offer. On April 17, 2019, the STAR Special Committee communicated their willingness to proceed with a 1.45 exchange ratio with no change to the ongoing distribution rate of STAR III. On April 22, 2019, the STAR Special Committee delivered the proposed STAR III Merger Agreement to the STAR III Special Committee.

On April 24, 2019, the STAR Special Committee held a telephonic meeting with representatives of Venable, Stanger, STAR Company Counsel and STAR Advisor to discuss the status of negotiations of the STAR III Merger. After all of the representatives of STAR Advisor and STAR Company Counsel left the meeting, the STAR Special Committee continued their discussions in executive session with representatives of Venable and Stanger.

On April 29, 2019, the STAR III Special Committee met to discuss the STAR III Merger Agreement proposed by STAR with representatives of DLA Piper and Houlihan Lokey. The committee decided to respond on the same day with amark-up of the STAR III Merger Agreement that, among other things, included the following: (i) a call for an amendment to the terms of the convertible stock so that thepre-STAR III Merger returns of STAR III investors were taken into account when calculating how much is owed to STAR Advisor as a incentive and performance fees in connection with a liquidity event after the STAR III Merger, (ii) revisions to the representations and warranties and restrictive covenants so that those to be agreed to by STAR III generally mirrored those to be agreed to by STAR, (iii) a restriction on STAR’s ability to enter into a merger agreement with SIR without STAR III’s prior consent but permitting STAR to terminate the STAR III Merger Agreement without penalty should STAR III refuse to so consent, (iv) no requirement that STAR III hold a stockholder meeting to consider the STAR III Merger before terminating the STAR III Merger Agreement to enter into a superior proposal, (v) less stringent requirements with respect to the terms of any confidentiality agreement that STAR III must use with any prospective topping bidders, (vi) less stringent restrictions on STAR III with respect to its conduct during the“go-shop” period, (vii) a requirement that STAR appoint one independent director from STAR III onto the board of directors of the Combined Company in connection with the STAR III Merger and (viii) revisions such that a breach of a representation by STAR III cannot result in liability for abreak-up fee payment.

In addition, the STAR III Special Committee also approved the distribution of a proposed side letter (the “Termination Agreement”) with STAR III Advisor providing for the following: (i) termination of the advisory agreement upon the effective date of the STAR III Merger, (ii) a waiver of disposition fees in connection with the STAR III Merger, (iii) an acknowledgement of the Disposition Fee Limitation, and (iv) an agreement that STAR III Advisor would reimburse STAR III for the costs of pursuing the STAR III Merger if the STAR III stockholders reject the STAR III Merger at a meeting of stockholders.

On May 15, 2019, the STAR Special Committee held a telephonic meeting with representatives of Venable, Stanger, STAR Company Counsel and STAR Advisor to discuss the proposed revisions to the STAR III Merger

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Agreement. After all of the representatives of STAR Advisor and STAR Company Counsel left the meeting, the STAR Special Committee continued their discussions in executive session with representatives of Venable and Stanger.

On June 3, 2019, the STAR Special Committee responded to STAR III’s April 29th markup of the STAR III Merger Agreement with delivery of a revised draft to the STAR III Special Committee. On that same day, the STAR III Special Committee met by telephone with representatives of DLA Piper and Houlihan Lokey to discuss the revised STAR III Merger Agreement. The STAR III Special Committee favorably noted that the revised STAR III Merger Agreement included most of the revisions previously sought by STAR III. However, the committee noted some areas of continued disagreement, the most important of which was that STAR did not give STAR III the right to refuse to consent to the terms of any business combination with SIR. It appeared, therefore, that the only way to proceed was for SIR and STAR III to sign their respective merger agreements contemporaneously with both parties having full knowledge of the terms of both transactions. Despite the risk of delay, there was a consensus that this timeline was unavoidable if STAR III wanted to complete the STAR III Merger. In light of this conclusion, the STAR III Special Committee directed (i) Houlihan Lokey to include SIR in the financial analyses of STAR it was performing and (ii) DLA Piper to recommend the extent of legal due diligence on SIR that would be appropriate given the relative sizes of the companies.

During its June 3rd meeting, the STAR III Special Committee also discussed the duration of the exclusivity agreement and decided to ask that the agreement be revised to permit the STAR III Special Committee to engage in discussions with other potential bidders so long as the bidders were not solicited by STAR III. The STAR III Special Committee also directed counsel to press for anon-disclosure agreement between SIR and STAR III so that the parties could share confidential information with each other and share information with each other regarding each party’s negotiations with STAR.

On June 4, 2019, the STAR III Special Committee distributed the proposed revisions to the exclusivity agreement.

On June 5, 2019, the STAR Special Committee held a telephonic meeting with representatives of Venable, Stanger, STAR Company Counsel and STAR Advisor to discuss the negotiation of the STAR III Merger Agreement and the proposed revisions to the STAR III exclusivity agreement. After all of the representatives of STAR Advisor and STAR Company Counsel left the meeting, the STAR Special Committee continued their discussions in executive session with representatives of Venable and Stanger. The STAR Special Committee rejected the proposed revisions to the exclusivity agreement, which was communicated through counsel to the STAR III Special Committee after the meeting.

On June 5, 2019, the STAR III Special Committee delivered a draftnon-disclosure agreement to SIR and asked that STAR permit STAR III and SIR to share information with each other with respect to each party’s negotiations with STAR.

On June 7, 2019, STAR and SIR entered into an exclusivity agreement with respect to the SIR Merger.

On June 10, 2019, the STAR III Special Committee met by telephone to discuss proposed revisions to the June 3rd draft of the STAR III Merger Agreement with representatives of DLA Piper and Houlihan Lokey. The committee decided to continue to insist on having more flexibility with respect to the terms of the confidentiality agreement STAR III enters into with potential topping bidders. Although that issue was the only significant one viewed as unresolved in the STAR III Merger Agreement, the committee noted that it was awaiting a response from STAR III Advisor with respect to the Termination Agreement. The STAR III Special Committee also discussed the scope of legal diligence to be performed on SIR. After the meeting, the STAR III Special Committee transmitted a revised draft of the STAR III Merger Agreement to the STAR Special Committee.

On June 12, 2019, SIR and STAR III entered into anon-disclosure agreement and joined STAR as parties to a related waiver agreement. On June 14, 2019, STAR III shared the June 10th draft of the STAR III Merger Agreement with SIR and SIR gave STAR III a copy of the letter of intent between STAR and SIR.

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On June 12, 2019, June 19, 2019 and June 26, 2019, the STAR Special Committee held three telephonic meetings with representatives of Venable, Stanger, STAR Company Counsel and STAR Advisor to discuss the STAR III Merger and the SIR Merger. After representatives of STAR Company Counsel and STAR Advisor left each meeting, the STAR III Special Committee met in executive session with representatives of Stanger and Venable to discuss changes to the exchange ratios based on various projected closing dates due to the dilution caused by the continuing distributions being made by SIR and STAR III.

On June 19, 2019, the STAR Special Committee delivered a revised draft of the STAR III Merger Agreement to the STAR III Special Committee with no material differences from the version last distributed by the STAR III Special Committee.

On June 28, 2019, STAR III Advisor relayed to the STAR III Special Committee that (i) STAR III Advisor believed it should receive a 1.5% disposition fee in the event of a sale of STAR III to a topping bidder and (ii) STAR III Advisor was unwilling to acknowledge the Disposition Fee Limitation.

On July 1, 2019, the STAR Special Committee held a telephonic meeting with representatives of Venable and Stanger to discuss updated projections provided by STAR Advisor that detailed the effect on the exchange ratios of continuing distributions to be paid by STAR III and SIR in excess of funds from operations. After the meeting, the STAR Special Committee relayed its position to the STAR III Special Committee that an adjustment to the exchange ratio was warranted because of the additional months of dilutive distributions being made by STAR III.

On July 10, 2019, the STAR Special Committee held a telephonic meeting with representatives of Venable, Stanger, STAR Company Counsel and STAR Advisor to discuss the potential timing of the STAR Merger and the SIR Merger. After the representatives of STAR Company Counsel and STAR Advisor left the meeting, the STAR Special Committee met in executive session with representatives of Venable and Stanger to discuss the proposed amended advisory agreement with STAR Advisor (the “Amended STAR Advisory Agreement”).

On July 11, 2019, the STAR III Special Committee met by telephone with representatives of DLA Piper and Houlihan Lokey to discuss STAR’s request for an adjustment to the exchange ratio. The members of the committee recognized that STAR III’s ongoing distributions were dilutive and believed the request to be fair but decided that it was best from a negotiation standpoint not to agree to a lower exchange ratio at that time. The STAR III Special Committee also discussed STAR III Advisor’s response to the proposed Termination Agreement but decided not to respond with a counter offer.

On July 17, 2019, the STAR Special Committee held a telephonic meeting with representatives of Venable, Stanger, STAR Company Counsel and STAR Advisor. At the meeting, STAR Advisor provided an update on the financial projections of the Combined Company and the status of the due diligence being performed by the STAR III Special Committee. After the representatives of STAR Company Counsel and STAR Advisor left the meeting, the STAR Special Committee discussed the status of negotiations with respect to the STAR Merger.

On July 22, 2019, the STAR III Special Committee met by telephone to discuss, in consultation with representatives of DLA Piper and Houlihan Lokey, (i) whether the exclusivity agreement should be allowed to renew automatically, with the committee deciding the parties were too close to an agreement to threaten to terminate the exclusivity arrangement at this time, (ii) preparation for thego-shop period, (iii) whether STAR III should respond with respect to the exchange ratio issue or with respect to the Termination Agreement issues and (iv) the status of legal due diligence efforts.

On July 23, 2019, STAR III Advisor and STAR Advisor distributed proposed disclosure schedules for the STAR III Merger Agreement. On July 24, 2019, the STAR Special Committee distributed a first draft of the Amended STAR Advisory Agreement to be effective upon closing of the merger with STAR III or SIR, whichever occurred first.

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On July 24, 2019, the STAR Special Committee held a telephonic meeting with representatives of Venable, Stanger, STAR Company Counsel and STAR Advisor. At the meeting, STAR Advisor provided an update on the status of the due diligence being performed by the STAR III Special Committee and the SIR Special Committee. After the representatives of STAR Company Counsel and STAR Advisor left the meeting, the STAR Special Committee discussed the STAR Amended Advisory Agreement in executive session with representatives of Venable and Stanger.

On July 26, 2019, the SIR Special Committee delivered to the STAR III Special Committee a copy of the draft of the SIR Merger Agreement.

On July 29, 2019, the STAR III Special Committee met by telephone to discuss the proposed Amended STAR Advisory Agreement, the Termination Agreement, the STAR III Merger Agreement and the status of legal due diligence with representatives of DLA Piper. Representatives of Houlihan Lokey also participated. With respect to the Amended STAR Advisory Agreement, the STAR III Special Committee had no objection to the inclusion of STAR Advisor’s incentive and performance fees in the Amended STAR Advisory Agreement as opposed to being effected through new shares of convertible stock; however, the committee directed counsel to seek technical corrections in how the fee was calculated. On the Termination Agreement, the STAR III Special Committee did not agree to make any concession with respect to STAR III Advisor’s view that it was entitled to a 1.5% disposition fee in connection with the sale of the company to a topping bidder; however, the committee was willing to back off of its insistence that STAR III Advisor acknowledge the Disposition Fee Limitation. With respect to the STAR III Merger Agreement, there was a consensus that counsel should seek revisions to make sure that the terms of the STAR III Merger Agreement were generally no worse for STAR III than for SIR under the SIR Merger Agreement.

On July 31, 2019, the STAR Special Committee held a telephonic meeting with representatives of Venable, Stanger, STAR Company Counsel and STAR Advisor to discuss the STAR III Merger. After the representatives of STAR Company Counsel and STAR Advisor left the meeting, the STAR Special Committee discussed adjustments to the exchange ratios and the Amended STAR Advisory Agreement (including the provisions governing the incentive and performance fees) in executive session with representatives of Venable and Stanger. After the meeting, the STAR Special Committee again communicated to the STAR III Special Committee its request for a downward adjustment to the exchange ratio, indicating that the ratio should be reduced from 1.45 to 1.43 on account of the dilutive impact of STAR III’s ongoing distributions.

On August 1, 2019, the STAR III Special Committee met by telephone to discuss the exchange ratio with representatives of DLA Piper and Houlihan Lokey and concluded that proposed change in the exchange ratio was justified for the reasons noted and directed Houlihan Lokey to relay the committee’s acceptance of a 1.43 exchange ratio.

Later on August 1, 2019, STAR III Advisor indicated that STAR III Advisor would not agree to the proposed Termination Agreement unless the Termination Agreement included an agreement to pay STAR III Advisor a 1.5% disposition fee in connection with a sale of the company to a topping bidder.

Following that August 1^st communication, the STAR III Special Committee met again on August 1, 2019, with a representative of DLA Piper to discuss the Termination Agreement. It was agreed that the benefits of agreeing to a 1.5% disposition fee in connection with a sale of the company to a topping bidder outweighed the costs, noting that the Termination Agreement included a waiver of all disposition fees in connection with the STAR III Merger as well as STAR III Advisor’s agreement to reimburse STAR III for its costs related to the STAR III Merger if the stockholders of STAR III rejected the STAR III Merger at the stockholder meeting. Counsel to the committee then distributed to STAR III Advisor a revised draft of the Termination Agreement that provided for a disposition fee in connection with a sale to a topping bidder equal to 1.5% of the consideration received by the STAR III stockholders but only if STAR III Advisor met a high standard of performance as determined in good faith by the independent directors of STAR III.

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On August 1, 2019, the STAR Special Committee held a telephonic meeting with representatives of Venable and Stanger. At the meeting, the STAR Special Committee discussed the incentive and performance fees contained in the Amended STAR Advisory Agreement and the disclosure schedules to the STAR III Merger Agreement.

On August 2, 2019, the STAR Special Committee held a telephonic meeting with representatives of Venable and Stanger. At the meeting, representatives of Stanger summarized the terms of the STAR III Merger Agreement and discussed their financial analysis of the STAR III Merger, including the accretion that would result from the STAR III Merger.

On August 2, 2019, the STAR III Special Committee met to review the status of the various transaction documents with representatives of DLA Piper. Representatives of Houlihan Lokey also were present. Also on August 2, 2019, STAR Advisor informed the STAR III Special Committee that STAR Advisor may prefer to effect its incentive and performance fees arrangement through new shares of convertible stock as opposed to a fee in the Amended STAR Advisory Agreement.

On August 3, 2019, STAR distributed a revised STAR III Merger Agreement and a revised Termination Agreement that included the possibility that STAR Advisor would receive replacement convertible stock in lieu of the incentive and performance fees set forth in the Amended STAR Advisory Agreement. Until August 5, 2019, the parties continued to exchange drafts of various transaction documents.

On August 5, 2019, the STAR III Special Committee met with representatives of DLA Piper and Houlihan Lokey also present. At this meeting, Houlihan Lokey discussed certain potential strategic benefits of the STAR III Merger with the STAR III Special Committee and reviewed with the STAR III Special Committee its financial analysis of the 1.430x exchange ratio provided for in the STAR III Merger (both on a STAR-standalone basis and giving effect to the proposed STAR/SIR combination), as more fully described under “—Opinion of STAR III Special Committee’s Financial Advisor”). Houlihan Lokey verbally rendered its opinion to the STAR III Special Committee (which was subsequently confirmed in writing by delivery of Houlihan Lokey’s written opinion addressed to the STAR III Special Committee dated August 5, 2019), as to, as of such date, the fairness, from a financial point of view, to the holders of STAR III Common Stock of the 1.430x exchange ratio provided for in the STAR III Merger pursuant to the STAR III Merger Agreement. Representatives of Houlihan Lokey also described steps taken to prepare for a“go-shop” process. A representative of DLA Piper reviewed with the STAR III Special Committee the directors’ duties under Maryland law, the terms of the STAR III Merger Agreement and the other agreements related thereto and the proposed resolutions to be adopted by the STAR III Special Committee. Following discussion of, among other things, the reasons for and against the STAR III Merger, which are described below under “—Recommendation of the STAR III Board of Directors and Its Reasons for the REIT Merger,” the STAR III Special Committee voted unanimously, among other things, to recommend that (i) the STAR III Board determine that the STAR III Merger Agreement, the STAR III Merger, the Charter Amendment, the Termination Agreement, an amendment to the Agreement of Limited Partnership of STAR III OP (the “First Amendment”), and the other transactions contemplated by the STAR III Merger Agreement were advisable and in the best interests of STAR III and its stockholders and that the STAR III Merger Agreement, the STAR III Merger, the Termination Agreement and the First Amendment were fair and reasonable and on terms and conditions no less favorable to STAR III than those available from unaffiliated third parties; (ii) the STAR III Board authorize and approve the STAR III Merger Agreement, the STAR III Merger, the First Amendment, the Termination Agreement and the other transactions contemplated by the STAR III Merger Agreement; (iii) direct that the STAR III Merger and the Charter Amendment be submitted to a vote of the holders of the STAR III Common Stock; and (iv) except as may be permitted pursuant the STAR III Merger Agreement, recommend that the holders of the common stock vote in favor of the STAR III Merger and the Charter Amendment and resolve to include such recommendation in the related proxy statement.

Following the STAR III Special Committee meeting, on August 5, 2019, the STAR III Board held a meeting at which representatives of DLA Piper, Morrison & Foerster (in its capacity as counsel to STAR III), Houlihan Lokey and STAR III management were present. At the meeting, the STAR III Board discussed the terms of the

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STAR III Merger Agreement, the STAR III Merger, the Termination Agreement, the Amended STAR Advisory Agreement, the First Amendment and the other transactions contemplated by the STAR III Merger Agreement. After discussion, the STAR III Board, following the recommendation of the STAR III Special Committee, (i) determined that the STAR III Merger Agreement, the STAR III Merger, the Charter Amendment, the Termination Agreement, the First Amendment and the other transactions contemplated by the STAR III Merger Agreement were advisable and in the best interests of STAR III and that the STAR III Merger Agreement, the STAR III Merger, the Termination Agreement and the First Amendment were fair and reasonable to STAR III and on terms and conditions no less favorable to STAR III than those available from unaffiliated third parties, (ii) authorized and approved the STAR III Merger Agreement, the STAR III Merger, the First Amendment, the Termination Agreement and the other transactions contemplated by the STAR III Merger Agreement, (iii) directed that the STAR III Merger and the Charter Amendment be submitted to a vote of the holders of the STAR III Common Stock and (iv) determined to, except as may be permitted pursuant the STAR III Merger Agreement, recommend that the holders of the common stock vote in favor of the STAR III Merger and the Charter Amendment and resolved to include such recommendation in the related proxy statement.

On August 5, 2019, the STAR Special Committee held an in-person meeting with representatives of Venable, STAR Company Counsel and Stanger. At the meeting, (i) a representative of Venable provided an overview of the duties of directors of a Maryland corporation in considering a transaction such as the STAR III Merger, (ii) a representative of STAR Company Counsel provided a summary of the terms and conditions of the STAR III Merger Agreement, the Amended STAR Advisory Agreement and the other transactions contemplated by the STAR III Merger Agreement and (iii) representatives of Stanger discussed their financial analysis of the STAR III Merger. The STAR Special Committee discussed the STAR III Merger Agreement, the STAR III Merger, the Amended STAR Advisory Agreement and the other transactions contemplated by the STAR III Merger Agreement. After discussion, the STAR Special Committee, by a unanimous vote: (i) determined that the terms of the STAR III Merger Agreement, the STAR III Merger, the Amended STAR Advisory Agreement, and the other transactions contemplated by the STAR III Merger Agreement were advisable and in the best interests of STAR and its stockholders and were fair and reasonable to STAR and, as to the STAR III Merger Agreement and the STAR III Merger, on terms and conditions no less favorable to STAR than those available from unaffiliated third parties and recommended that the STAR Board make the same determination; and (ii) recommended that the STAR Board approve the STAR III Merger Agreement, the STAR III Merger, the STAR Advisory Agreement and the other transactions contemplated by the STAR III Merger Agreement.

Following the STAR Special Committee meeting, on August 5, 2019, the STAR Board held an in-person meeting with representatives of Venable, STAR Company Counsel and STAR Advisor. At the meeting, the STAR Board discussed the terms of the STAR III Merger Agreement, the STAR III Merger, the Amended STAR Advisory Agreement and the other transactions contemplated by the STAR III Merger Agreement. After discussion, the STAR Board, following the recommendation of the STAR Special Committee, by a unanimous vote: (i) determined that the STAR III Merger Agreement, the STAR III Merger, the Amended STAR Advisory Agreement and the other transactions contemplated by the STAR III Merger Agreement were advisable and in the best interests of STAR and its stockholders and were fair and reasonable to STAR and, as to the STAR III Merger Agreement and the STAR III Merger, on terms and conditions no less favorable to STAR than those available from unaffiliated third parties and (ii) authorized and approved the STAR III Merger Agreement, the STAR III Merger, the Amended STAR Advisory Agreement and the other transactions contemplated by the STAR III Merger Agreement.

In accordance with the terms of the Merger Agreement, following the execution of the Merger Agreement, Houlihan Lokey, at the direction of the STAR III Special Committee, began soliciting inquiries and proposals from third parties. The “go shop” period expired at 11:59 p.m. (New York City time) on September 19, 2019. During the “go shop” period, Houlihan Lokey contacted 53 third parties, 15 of which executed confidentiality agreements with STAR III. Three parties submitted an indication of interest.

During August and September of 2019, the STAR III Special Committee held four meetings by telephone with representatives of DLA Piper and Houlihan Lokey to discuss developments during the “go shop” period. Of

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the three indications of interest received, two were from bidders with an interest in anall-cash merger. The highestall-cash indication of interest was at $21.40 per share and required a45-day due diligence period, with no obligation to close unless the bidder was satisfied with its due diligence findings. A secondall-cash indication of interest was at $20.46 per share. The third indication of interest did not provide a specific value but indicated orally that it would be “in line with the value of STAR’s consideration” and that it was most likely to be all stock. This third potential bidder was not a reporting company and its shares were not traded on a national securities exchange.

At a telephonic meeting held on September 16, 2019, the STAR III Special Committee determined, after consultation with representatives of DLA Piper and Houlihan Lokey, who also attended the meeting, that none of the indications of interest could reasonably be expected to lead to an acquisition proposal that would be more favorable from a financial point of view to the stockholders of STAR III than the STAR III Merger.

Recommendation of the STAR III Board and Its Reasons for the STAR III Merger

In evaluating the STAR III Merger Agreement, the STAR III Merger and the other transactions contemplated by the STAR III Merger Agreement, the STAR III Board considered the recommendation of the STAR III Special Committee. In reaching their respective determinations, the STAR III Board and STAR III Special Committee considered a number of factors, including the following material factors that the STAR III Board and STAR III Special Committee viewed as supporting their respective decisions with respect to the STAR III Merger Agreement, the STAR III Merger and the other transactions contemplated by the STAR III Merger Agreement:

• the risks associated with alternatives to the STAR III Merger, namely:

• STAR III’s size and other factors would have made it difficult to achieve favorable pricing if STAR III chose to list its shares on a national securities exchange; and

• STAR III’s prospects as a standalone company are limited by its size relative to its general and administrative expenses and by the difficulty it would have raising equity capital due to changes in the market with respect to sales ofnon-traded REITs.

• the receipt of shares of STAR Common Stock as merger consideration provides STAR III stockholders the opportunity to continue ownership in the STAR III/STAR Combined Company or Fully Combined Company, which is expected to provide a number of significant potential benefits, including the following:

• the STAR III/STAR Combined Company or the Fully Combined Company should have a more diversified and newer portfolio;

• the enhanced size of the STAR III/STAR Combined Company will likely improve access to capital markets, which can be used to support acquisitions and capital improvements that drive growth opportunities;

• the STAR III/STAR Combined Company is expected to enjoy improved dividend coverage and funds from operation in comparison with expectations for STAR III with respect to such liquidity and performance metrics;

• general and administrative expenses relative to gross asset value of the STAR III/STAR Combined Company should be lower than those of STAR III due to a reduction in fees paid to STAR Advisor and other cost savings;

• half of the investment management fees paid to STAR Advisor will be paid in STAR Common Stock; and

• debt to gross asset value for the STAR III/STAR Combined Company should be lower than for STAR III.

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• the STAR III Board’s and STAR III Special Committee’s belief that, the STAR III/STAR Combined Company would be better positioned than STAR III to achieve certain potential liquidity events, such as listing its shares on a national securities exchange, as a result of increased size and other factors noted above.

• the integrated organizational structure of the STAR III/STAR Combined Company will allow management of STAR III and STAR to focus its efforts on the operation of the STAR III/STAR Combined Company instead of two separate REITs.

• the financial analysis reviewed by Houlihan Lokey with the STAR III Special Committee as well as the opinion of Houlihan Lokey verbally rendered to the STAR III Special Committee on August 5, 2019 (which was subsequently confirmed in writing by delivery of Houlihan Lokey’s written opinion addressed to the STAR III Special Committee dated August 5, 2019), as to, as of such date, the fairness, from a financial point of view, to the holders of STAR III Common Stock of the 1.430x exchange ratio provided for in the STAR III Merger pursuant to the STAR III Merger Agreement. See “The STAR III Merger—Opinion of STAR III Special Committee’s Financial Advisor.”

• the exchange ratio in the STAR III Merger Agreement is fixed and will not be adjusted in any event, which limits the impact of external factors on the STAR III Merger.

• the STAR III Merger Agreement provides STAR III the right, upon a receipt of a written Acquisition Proposal that constituted a Superior Proposal (as defined in “The STAR III Merger Agreement—Covenants and Agreements—No Solicitation of Transactions by STAR III”) that did not result from a breach of thenon-solicitation provisions of the STAR III Merger Agreement, to give notice of its intention to terminate the STAR III Merger Agreement to enter into an agreement for a Superior Proposal and/or effect an Adverse Recommendation Change (as defined in “The STAR III Merger Agreement—Covenants and Agreements—No Solicitation and Change in Recommendation with an Acquisition Proposal”), subject to certain conditions.

• the STAR III Merger Agreement provides STAR III a45-day “go shop” period during which the STAR III Special Committee actively solicited any inquiries or the making of any proposal that constitutes, or may be reasonably expected to lead to, any Acquisition Proposal (as defined in “The STAR III Merger Agreement—Covenants and Agreements—No Solicitation and Change in Recommendation with an Acquisition Proposal”) by way of contacting third parties, providing an opportunity for STAR III to terminate the STAR III Merger Agreement after complying with applicable provisions to enter into an agreement for a Superior Proposal in connection with the go shop process upon the payment to STAR of a $2.66 million termination fee.

• after expiration of the “go shop” period, the STAR III Merger Agreement provides STAR III with the ability, under certain specified circumstances, to consider an Acquisition Proposal if the STAR III Special Committee determines, in good faith, it is reasonably expected to lead to a Superior Proposal and provides the STAR III Board with the ability, under certain specified circumstances, to make an “Adverse Recommendation Change” (as defined in “The STAR III Merger Agreement—Covenants and Agreements—No Solicitation of Transactions by STAR III”) and to terminate the STAR III Merger Agreement in order to enter into an agreement with respect to a Superior Proposal outside of the go shop process upon payment to STAR of a $5.32 million termination fee.

• pursuant to the Termination Agreement, the STAR III Advisor agreed to waive the receipt of disposition fees in connection with the STAR III Merger.

• in arriving at the 1.430 exchange ratio, the acquisition fees and incentive and performance fees to be paid by STAR to the STAR Advisor were deemed a liability of STAR such that those fees were effectively borne only by stockholders of STAR.

• the STAR III Merger Agreement permits STAR III to continue to pay its stockholders regular monthly dividends in the ordinary course of business through the effective date of the STAR III Merger.

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• the STAR III Merger and the STAR III Charter Amendment are each subject to approval by STAR III stockholders, which requires the affirmative vote of a majority of votes entitled to be cast on the STAR III Merger and the STAR III Charter Amendment.

• the intent for the STAR III Merger to qualify as a reorganization for U.S. federal income tax purposes, resulting in the receipt of shares of STAR Common Stock in the STAR III Merger on atax-deferred basis.

• the commitment on the part of each of STAR III and STAR to complete the STAR III Merger as reflected in their respective obligations under the terms of the STAR III Merger Agreement and the absence of any required government consents.

• the other terms of the STAR III Merger Agreement, including representations, warranties and covenants of the parties, as well as the conditions to their respective obligations under the STAR III Merger Agreement.

The STAR III Board and STAR III Special Committee also considered a variety of risks and other potentially negative factors in considering the STAR III Merger Agreement, the STAR III Merger and the other transactions contemplated by the STAR III Merger Agreement, including the following material factors:

• the decision of the STAR III Special Committee to agree to an exclusivity period pursuant to the LOI and the deterrent effect of such exclusivity period on alternative Acquisition Proposals prior to the execution of the STAR III Merger Agreement.

• the risk that the value of the STAR Common Stock to be received by STAR III stockholders may decline as a result of the STAR III Merger if the STAR III/STAR Combined Company does not achieve the perceived benefits of the STAR III Merger as rapidly or to the extent anticipated.

• the risk that, because the exchange ratio in the STAR III Merger Agreement will not be adjusted in the event of any increase in the value of the shares of STAR III Common Stock or decrease in the value of STAR Common Stock, an increase in the value of STAR III that is unmatched by a similar increase in the value of STAR or a decline in the value of STAR that is unmatched by a similar decline in value of STAR III would reduce the attractiveness of the STAR III Merger.

• the risk that the STAR III/STAR Combined Company may not achieve a liquidity event on favorable terms.

• the risk that a prolonged period of operations before the STAR III/STAR Combined Company achieves a liquidity event could, when coupled with expected general and administrative expenses for the STAR III/STAR Combined Company, result in lower investor returns than other strategic alternatives currently available to STAR III.

• the terms of the STAR III Merger Agreement that place limitations on the ability of STAR III to initiate, solicit, knowingly encourage or facilitate any inquiries or the making of any proposal, offer or other activities that constitutes any acquisition proposal after the “go shop” period ended on September 19, 2019.

• following the Mergers, STAR III stockholders will receive a lower dollar amount in monthly distributions if STAR continues to pay distributions at its current rate.

• the risk that STAR III would be less likely to enter into a Superior Proposal or that a Superior Proposal would be less attractive than it otherwise would be on account of (i) the disposition fees payable to the STAR III Advisor in the event of a sale of STAR III in connection with a Superior Proposal and (ii) the termination fees payable to STAR in connection with a Superior Proposal.

• the risk that, while the STAR III Merger is expected to be completed, there is no assurance that all of the conditions to the parties’ obligations to complete the STAR III Merger will be satisfied or waived.

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• the risk of diverting management focus and resources from operational matters and other strategic opportunities while working to implement the STAR III Merger.

• the risk of stockholder litigation relating to the STAR III Merger.

• the obligations under the STAR III Merger Agreement regarding the restrictions on the operation of STAR III’s business during the period between signing the STAR III Merger Agreement and the completion of the STAR III Merger may delay or prevent STAR III from undertaking business opportunities that may arise or any other action it would otherwise take with respect to its operations absent the pending completion of the STAR III Merger.

• the expenses to be incurred by STAR III in connection with pursuing the STAR III Merger.

• the sponsors of STAR III and STAR are affiliated entities, and STAR III and STAR have common management; therefore, conflicts of interest may arise when the individuals who comprise the management teams of STAR III and STAR are assisting the STAR III and STAR Boards in connection with the STAR III Merger, and some of STAR III’s directors and executive officers have interests with respect to the STAR III Merger that are different from, and in addition to, those of the STAR III stockholders generally, as more fully described in the section entitled “—Interests of STAR III’s and STAR’s Directors and Executive Officers in the STAR III Merger” beginning on page 151.

• the types and nature of the risks described under the section entitled “Risk Factors” on page 30.

The foregoing discussion of the factors considered by the STAR III Board and the STAR III Special Committee is not intended to be exhaustive and is not provided in any specific order or ranking, but rather includes material factors considered by the STAR III Board and the STAR III Special Committee. In view of the wide variety of factors considered in connection with their respective evaluations of the STAR III Merger Agreement, the STAR III Merger and the other transactions contemplated by the STAR III Merger Agreement, and the complexity of these matters, the STAR III Board and the STAR III Special Committee did not consider it practical to, and did not attempt to, quantify, rank or otherwise assign any relative or specific weights or values to the different factors considered and individuals may have given different weights to different factors. The STAR III Board and the STAR III Special Committee conducted an overall review of the factors considered and determined that, in the aggregate, the potential benefits considered outweighed the potential risks or possible negative consequences of approving the STAR III Merger Agreement, the STAR III Merger and the other transactions contemplated by the STAR III Merger Agreement.

The explanation and reasoning of the STAR III Board and the STAR III Special Committee and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed in the section entitled “Cautionary Statement Concerning Forward-Looking Statements” beginning on page 51.

After careful consideration, for the reasons set forth above and based on the unanimous recommendation of the STAR III Special Committee, the STAR III Board (1) determined that the STAR III Merger Agreement, the STAR III Merger and the other transactions contemplated by the STAR III Merger Agreement are fair, reasonable, advisable and in the best interests of STAR III and its stockholders and (2) approved the STAR III Merger Agreement, the STAR III Merger and the other transactions contemplated by the STAR III Merger Agreement. The STAR III Board unanimously recommends that STAR III stockholders vote FOR the proposal to approve the STAR III Merger, FOR the STAR III Charter Amendment, and FOR the adjournment proposal.

STAR’s Reasons for the STAR III Merger

In evaluating the STAR III Merger Agreement, the STAR III Merger and the other transactions contemplated by the STAR III Merger Agreement, the STAR Board considered the unanimous recommendation of the STAR Special Committee. In reaching their respective determinations, the STAR Board and STAR Special Committee considered a number of factors and risks, which are set forth below.

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The STAR Board and STAR Special Committee considered a variety of factors that the STAR Board and STAR Special Committee viewed as supporting their respective decisions with respect to the STAR III Merger Agreement, the STAR III Merger and the other transactions contemplated by the STAR III Merger Agreement, including the following material factors:

• the appraised market value of the portfolio, as well as the financial performance, financial condition, business operations and prospects, of each of STAR III and STAR, independently and as a combined entity.

• the stockholders of the STAR III/STAR Combined Company, including the STAR stockholders, have the opportunity to continue ownership in the STAR III/STAR Combined Company, which is expected to provide a number of significant potential strategic opportunities and benefits, including the following:

• the STAR III/STAR Combined Company will benefit from enhanced diversification across multifamily markets, metropolitan economies and tenancy;

• the enhanced size, scale and financials of the STAR III/STAR Combined Company (i) will likely improve access to capital markets and reduce the cost of capital, which can be used to support strategic investments that drive growth opportunities, and (ii) may increase opportunities for stockholder liquidity; and

• the STAR III/STAR Combined Company will retain the STAR Board as well as the STAR management team that also manages STAR III.

• the integrated organizational structure of the STAR III/STAR Combined Company will allow management to focus its efforts on the operation of a single REIT.

• the acquisition of STAR III will allow STAR to grow without the expense of negotiating acquisitions of individual properties.

• the exchange ratio in the STAR III Merger Agreement uses a fixed price per share of STAR Common Stock and will not be adjusted in the event of any change in the value of the shares of STAR Common Stock, which limits the impact of external factors on the STAR III Merger.

• the exchange ratio in the STAR III Merger Agreement was based, in part, on the estimated net asset value of STAR III and STAR, each calculated as of June 30, 2018 and December 31, 2018, respectively.

• the STAR III Merger Agreement provides that STAR III will pay a $2.66 million termination fee to STAR if STAR III terminates the STAR III Merger Agreement during the “go shop” period after complying with applicable provisions to enter into an agreement for a Superior Proposal in connection with the go shop process.

• the STAR III Merger Agreement provides that STAR III will pay a $5.32 million termination fee to STAR if after the “go shop” period, STAR III Board changes its recommendation with respect to the STAR III Merger and terminates the STAR III Merger Agreement following such change in recommendation and/or in order to enter into an agreement with respect to a Superior Proposal outside of the go shop process.

• the anticipated benefits of the STAR III Merger to the STAR III/STAR Combined Company, including potential annual cost savings that will result from the increased efficiency of operating one public company instead of two.

• the commitment on the part of each of STAR III and STAR to complete the STAR III Merger as reflected in their respective obligations under the terms of the STAR III Merger Agreement and the absence of any required government consents.

• the other terms of the STAR III Merger Agreement, including representations, warranties and covenants of the parties, as well as the conditions to their respective obligations under the STAR III Merger Agreement.

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The STAR Board and STAR Special Committee also considered a variety of risks and other potentially negative factors in considering the STAR III Merger Agreement, the STAR III Merger and the other transactions contemplated by the STAR III Merger Agreement, including the following material factors:

• the risk that the STAR III stockholders do not approve the STAR III Merger.

• the risk that STAR III would receive an Acquisition Proposal during the “go shop” period.

• the risk that changes in local and national economic conditions may adversely impact the STAR III/STAR Combined Company’s operating results.

• the risk that the estimated value of the STAR Common Stock may decline as a result of the STAR III Merger if the STAR III/STAR Combined Company does not achieve the perceived benefits of the STAR III Merger as rapidly or to the extent anticipated.

• the risk that a different strategic alternative could prove to be more beneficial to STAR stockholders.

• the risk that the anticipated benefits of the STAR III Merger to the STAR III/STAR Combined Company may not be realized.

• the risk that, while the STAR III Merger is expected to be completed, there is no assurance that all of the conditions to the parties’ obligations to complete the STAR III Merger will be satisfied or waived.

• the risk of diverting management focus and resources from operational matters and other strategic opportunities while working to implement the STAR III Merger.

• the risk that the obligations under the STAR III Merger Agreement regarding the restrictions on the operation of STAR’s business during the period between signing the STAR III Merger Agreement and the completion of the STAR III Merger may delay or prevent STAR from undertaking business opportunities that may arise or any other action it would otherwise take with respect to its operations absent the pending completion of the STAR III Merger.

• the expenses to be incurred in connection with pursuing the STAR III Merger, including fees payable to third party advisors of STAR III and STAR.

• the sponsor of STAR III and STAR is the same entity, and STAR III and STAR have common management; therefore, conflicts of interest that may arise when the individuals who comprise the management teams of STAR III and STAR are assisting the STAR III and STAR Boards in connection with the STAR III Merger, and some of STAR’s directors and executive officers have interests with respect to the STAR III Merger that are different from, and in addition to, those of the STAR stockholders generally, as more fully described in the section entitled “—Interests of STAR’s Directors and Executive Officers in the STAR III Merger” beginning on page 151.

• the risks described under the section entitled “Risk Factors” on page 30.

The foregoing discussion of the factors considered by the STAR Board and STAR Special Committee is not intended to be exhaustive and is not provided in any specific order or ranking, but rather includes material factors considered by the STAR Board and the STAR Special Committee. In view of the wide variety of factors considered in connection with their respective evaluations of the STAR III Merger Agreement, the STAR III Merger and the other transactions contemplated by the STAR III Merger Agreement, and the complexity of these matters, the STAR Board and the STAR Special Committee did not consider it practical to, and did not attempt to, quantify, rank or otherwise assign any relative or specific weights or values to the different factors considered and individuals may have given different weights to different factors. The STAR Board and the STAR Special Committee conducted an overall review of the factors considered and determined that, in the aggregate, the potential benefits considered outweighed the potential risks or possible negative consequences of approving the STAR III Merger Agreement, the STAR III Merger and the other transactions contemplated by the STAR III Merger Agreement.

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The explanation and reasoning of the STAR Board and the STAR Special Committee and all other information presented in this section is forward-looking in nature and, therefore, should be read in light of the factors discussed in the section entitled “Cautionary Statement Concerning Forward-Looking Statements” beginning on page 51.

After careful consideration, for the reasons set forth above and based on the unanimous recommendation of the STAR Special Committee, the STAR Board (1) determined that the STAR III Merger Agreement, the STAR III Merger and the other transactions contemplated by the STAR III Merger Agreement are fair, reasonable, advisable and in the best interests of STAR and its stockholders and (2) approved the STAR III Merger Agreement, the STAR III Merger and the other transactions contemplated by the STAR III Merger Agreement.

Opinion of STAR III Special Committee’s Financial Advisor

On August 5, 2019, Houlihan Lokey verbally rendered its opinion to the STAR III Special Committee (which was subsequently confirmed in writing by delivery of Houlihan Lokey’s written opinion addressed to the STAR III Special Committee dated August 5, 2019), as to, as of such date, the fairness, from a financial point of view, to the holders of STAR III Common Stock of the 1.430x exchange ratio provided for in the STAR III Merger pursuant to the STAR III Merger Agreement.

Houlihan Lokey’s opinion was directed to the STAR III Special Committee (in its capacity as such) and only addressed the fairness, from a financial point of view, to the holders of STAR III Common Stock of the exchange ratio provided for in the STAR III Merger pursuant to the STAR III Merger Agreement and did not address any other aspect or implication of the STAR III Merger or any other agreement, arrangement or understanding. The summary of Houlihan Lokey’s opinion in this proxy statement/prospectus is qualified in its entirety by reference to the full text of its written opinion, which is attached asAnnex C to this proxy statement/prospectus and describes the procedures followed, assumptions made, qualifications and limitations on the review undertaken and other matters considered by Houlihan Lokey in connection with the preparation of its opinion. However, neither Houlihan Lokey’s opinion nor the summary of its opinion and the related analyses set forth in this proxy statement/prospectus are intended to be, and do not constitute, advice or a recommendation to the STAR III Special Committee, the STAR III Board, any security holder of STAR III or any other person as to how to act or vote with respect to any matter relating to the STAR III Merger.

In arriving at its opinion, Houlihan Lokey, among other things:

1. reviewed an execution version of the STAR III Merger Agreement;

2. reviewed certain publicly available business and financial information relating to STAR III, STAR and SIR that Houlihan Lokey deemed to be relevant, including the reported estimate of the value of SIR’s joint venture investment as of December 31, 2018 contained in certain public filings of SIR;

3. reviewed certain information relating to the historical, current and future operations, financial condition and prospects of STAR III and its portfolio properties made available to Houlihan Lokey by STAR III, including (a) certain financial projections prepared by the management of STAR III Advisor relating to STAR III’s portfolio properties for the years 2019 through 2024 that Houlihan Lokey was directed by STAR III and STAR III Advisor to rely upon and utilize for purposes of Houlihan Lokey’s analyses and opinion and (b) certain cash projections prepared by STAR III Advisor relating to STAR III for 2019;

4. reviewed certain information relating to the historical, current and future operations, financial condition and prospects of STAR (both on a standalone basis and giving effect to the SIR Merger), the portfolio properties of STAR and the portfolio properties of SIR that would be acquired by STAR in the SIR Merger, if consummated, made available to Houlihan Lokey by STAR and SIR, including (a) certain

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financial projections prepared by the management of STAR Advisor relating to STAR’s portfolio properties and SIR’s portfolio properties for the years 2019 through 2024 that Houlihan Lokey was directed by STAR and STAR Advisor to rely upon and utilize for purposes of Houlihan Lokey’s analyses and opinion and (b) certain cash projections prepared by STAR Advisor relating to STAR and SIR for 2019;

5. spoke with certain members of the managements of STAR III Advisor and STAR Advisor regarding the respective businesses, operations, financial condition and prospects of STAR III and STAR (both on a standalone basis and giving effect to the SIR Merger), STAR III’s portfolio properties, STAR’s portfolio properties, SIR’s portfolio properties, the STAR III Merger, the SIR Merger and related matters; and

6. conducted such other financial studies, analyses and inquiries and considered such other information and factors as Houlihan Lokey deemed appropriate.

Houlihan Lokey relied upon and assumed, without independent verification, the accuracy and completeness of all data, material and other information furnished, or otherwise made available, to it, discussed with or reviewed by it, or publicly available, and did not assume any responsibility with respect to such data, material and other information. In addition, managements of STAR III Advisor and STAR Advisor advised Houlihan Lokey, and Houlihan Lokey assumed, that the financial projections and other estimates reviewed by Houlihan Lokey were reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of such managements, as the case may be (or, in the case of the publicly reported estimate of value of SIR’s joint venture investment referred to above, represented reasonable estimates and judgments), as to the future financial results and condition of STAR III’s portfolio properties, STAR’s portfolio properties and SIR’s portfolio properties and as to the other matters covered thereby, and Houlihan Lokey expressed no opinion with respect to such projections or the assumptions on which they were based. At STAR III’s direction, Houlihan Lokey neither utilized nor relied upon the financial projections relating to STAR III’s portfolio properties, STAR’s portfolio properties and SIR’s portfolio properties for periods beyond the year 2024 which were utilized in certain third-party valuation reports obtained by STAR III, STAR and SIR and reviewed by Houlihan Lokey. Houlihan Lokey relied upon and assumed, without independent verification, that there had been no change in the businesses, assets, liabilities, financial condition, results of operations, cash flows or prospects of STAR III, STAR (both on a standalone basis and giving effect to the SIR Merger) or SIR or any of STAR III’s portfolio properties, STAR’s portfolio properties or SIR’s portfolio properties since the respective dates of the most recent financial statements and other information, financial or otherwise, provided to Houlihan Lokey that would have been material to its analyses or opinion, that the financial statements and other information (including the financial projections) reviewed by Houlihan Lokey reflected all of the assets and liabilities of STAR III and STAR (both on a standalone basis and giving effect to the SIR Merger) and that there was no information or any facts that would have made any of the information reviewed by Houlihan Lokey incomplete or misleading. In reaching its conclusions, Houlihan Lokey performed and relied solely upon discounted cash flow analyses of STAR III’s portfolio properties, STAR’s portfolio properties and SIR’s portfolio properties.

Houlihan Lokey relied upon and assumed, without independent verification, that (a) the representations and warranties of all parties to the STAR III Merger Agreement and all other related documents and instruments that are referred to therein (including, without limitation, the SIR Merger Agreement) were true and correct, (b) each party to the STAR III Merger Agreement and such other related documents and instruments would fully and timely perform all of the covenants and agreements required to be performed by such party, (c) all conditions to the consummation of the STAR III Merger would be satisfied without waiver thereof, and (d) the STAR III Merger and, if consummated, the SIR Merger would be consummated in a timely manner in accordance with the terms described in the STAR III Merger Agreement and such other related documents and instruments and as otherwise described to Houlihan Lokey by representatives of STAR III and STAR, without any amendments or modifications thereto. Houlihan Lokey also assumed, with the consent of the STAR III Special Committee, that the STAR III Merger would qualify for the intended tax treatment described in the STAR III Merger Agreement for U.S. federal income tax purposes. Houlihan Lokey relied upon and assumed, without independent

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verification, that (i) the STAR III Merger and, if consummated, the SIR Merger would be consummated in a manner that complies in all respects with all applicable federal and state statutes, rules and regulations, and (ii) all governmental, regulatory, and other consents and approvals necessary for the consummation of the STAR III Merger and, if consummated, the SIR Merger would be obtained and that no delay, limitations, restrictions or conditions would be imposed or amendments, modifications or waivers made that would result in the disposition of any assets of STAR III, STAR or SIR, or otherwise have an effect on the STAR III Merger, STAR III, STAR, SIR, STAR III’s portfolio properties, STAR’s portfolio properties, SIR’s portfolio properties or any expected benefits of the STAR III Merger that would be material to Houlihan Lokey’s analyses or opinion. In addition, Houlihan Lokey relied upon and assumed, without independent verification, that the final form of the STAR III Merger Agreement would not differ in any respect from the execution version of the STAR III Merger Agreement identified above.

Furthermore, in connection with its opinion, Houlihan Lokey was not requested to make, and did not make, any physical inspection or independent appraisal of any of the assets, properties or liabilities (fixed, contingent, derivative,off-balance-sheet or otherwise) of STAR III (including, without limitation, any of STAR III’s portfolio properties), STAR (including, without limitation, any of STAR’s portfolio properties), SIR (including, without limitation, any of SIR’s portfolio properties) or any other party. Houlihan Lokey expressed no opinion as to the value of any of STAR III’s portfolio properties, STAR’s portfolio properties or SIR’s portfolio properties or the price at which any such properties might be transferable at any time. Houlihan Lokey did not estimate, and expressed no opinion regarding, the liquidation value of any entity or business. Houlihan Lokey undertook no independent analysis of any potential or actual litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which STAR III, STAR, SIR, or any of STAR III’s portfolio properties, STAR’s portfolio properties or SIR’s portfolio properties was or may have been a party or was or may have been subject, or of any governmental investigation of any possible unasserted claims or other contingent liabilities to which STAR III, STAR, SIR, or any of STAR III’s portfolio properties, STAR’s portfolio properties or SIR’s portfolio properties was or may have been a party or was or may have been subject. Houlihan Lokey relied upon and assumed, without independent verification, that each of STAR III, STAR and SIR has operated in conformity with the requirements for qualification as a REIT for federal income tax purposes since its formation as a REIT, and also relied upon and assumed, without independent verification, that the STAR III Merger and, if consummated, the SIR Merger would not adversely affect the REIT status of STAR.

Before rendering its opinion to the STAR III Special Committee, Houlihan Lokey was not requested to, and did not, initiate any discussions with, or solicit any indications of interest from, third parties with respect to the STAR III Merger, the securities, assets, businesses or operations of STAR III or any other party, or any alternatives to the STAR III Merger. Houlihan Lokey expressed no view or opinion as to any such matters, including the terms that could have been obtained if any of the foregoing had been undertaken. Houlihan Lokey’s opinion was necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to Houlihan Lokey as of, the date of the opinion. Houlihan Lokey did not undertake, and is under no obligation, to update, revise, reaffirm or withdraw its opinion, or otherwise comment on or consider events occurring or coming to Houlihan Lokey’s attention after the date of the opinion. Houlihan Lokey did not express any opinion as to what the value of STAR Common Stock actually will be when issued pursuant to the STAR III Merger or the price or range of prices at which STAR Common Stock, STAR III Common Stock or any other securities of STAR, STAR III or SIR might be purchased or sold, or otherwise be transferable, at any time.

Houlihan Lokey’s opinion was furnished for the use of the STAR III Special Committee (in its capacity as such) in connection with its evaluation of the STAR III Merger and may not be used for any other purpose without Houlihan Lokey’s prior written consent. Houlihan Lokey’s opinion should not be construed as creating any fiduciary duty on Houlihan Lokey’s part to any party. Houlihan Lokey’s opinion is not intended to be, and does not constitute, a recommendation to the STAR III Special Committee, the STAR III Board, STAR III, any security holder or any other party as to how to act or vote with respect to any matter relating to the STAR III Merger, the SIR Merger or otherwise.

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Houlihan Lokey was not asked to, and Houlihan Lokey did not, express any opinion with respect to any matter other than the fairness, from a financial point of view, of the exchange ratio provided for in the STAR III Merger pursuant to the STAR III Merger Agreement to the holders of STAR III Common Stock, without regard to differences among the classes of STAR III Common Stock. STAR III advised Houlihan Lokey, and Houlihan Lokey relied upon and assumed, without independent verification, that such classes of STAR III Common Stock were economically equivalent. Houlihan Lokey was not requested to opine as to, and its opinion did not express an opinion as to or otherwise address, among other things: (i) the underlying business decision of the STAR III Special Committee, the STAR III Board, STAR III, its security holders or any other party to proceed with or effect the STAR III Merger, (ii) the terms of any arrangements, understandings, agreements or documents related to, or the form, structure or any other portion or aspect of, the STAR III Merger (other than the exchange ratio provided for in the STAR III Merger to the extent expressly specified in the opinion) or otherwise, including, without limitation, the fees and expenses to be paid to STAR III Advisor and STAR Advisor in connection with the STAR III Merger, any term or other aspect of the termination agreement to be entered into by STAR III, STAR III Operating Partnership and STAR III Advisor, the amended and restated advisory agreement to be entered into by STAR, STAR Operating Partnership and STAR Advisor, the amended and restated agreement of limited partnership to be entered into by STAR III Operating Partnership and the amendment to the charter of STAR III to be effected in connection with the STAR III Merger and any term or other aspect of the SIR Merger or the SIR Merger Agreement, (iii) the fairness of any portion or aspect of the STAR III Merger or the SIR Merger to the holders of any class of securities, creditors or other constituencies of STAR III, STAR or SIR, or to any other party, except if and only to the extent expressly set forth in the last sentence of Houlihan Lokey’s opinion, (iv) the relative merits of the STAR III Merger as compared to any alternative business strategies or transactions that might have been available for STAR III or any other party, (v) the fairness of any portion or aspect of the STAR III Merger or the SIR Merger to any one class or group of STAR III’s, STAR’s, SIR’s or any other party’s security holders or other constituentsvis-à-vis any other class or group of STAR III’s, STAR’s, SIR’s or such other party’s security holders or other constituents (including, without limitation, the allocation of any consideration amongst or within such classes or groups of security holders or other constituents and the relative fairness of the exchange ratio and the consideration to be paid by STAR to the holders of the common stock of SIR in the SIR Merger), (vi) whether or not STAR III, STAR, SIR, their respective security holders or any other party is receiving or paying reasonably equivalent value in the STAR III Merger or the SIR Merger, (vii) the solvency, creditworthiness or fair value of STAR III, STAR, SIR or any other participant in the STAR III Merger or the SIR Merger, or any of their respective assets (including, without limitation, any of STAR III’s portfolio properties, STAR’s portfolio properties or SIR’s portfolio properties), under any applicable laws relating to bankruptcy, insolvency, fraudulent conveyance or similar matters, (viii) the fairness, financial or otherwise, of the amount, nature or any other aspect of any compensation to or consideration payable to or received by any officers, directors or employees of any party to the STAR III Merger, any class of such persons or any other party, relative to the exchange ratio or otherwise, or (ix) the financial or other implications and effects of the STAR III Merger or the SIR Merger on STAR or any other party (including, without limitation, any aspects relating to ongoing operations of STAR following consummation of the STAR III Merger or the SIR Merger). Furthermore, no opinion, counsel or interpretation was intended in matters that require legal, regulatory, accounting, insurance, tax or other similar professional advice. Houlihan Lokey assumed that such opinions, counsel or interpretations had been or would be obtained from the appropriate professional sources. Furthermore, Houlihan Lokey relied, with the consent of the STAR III Special Committee, on the assessments by the STAR III Special Committee, STAR III, STAR and their respective advisors as to all legal, regulatory, accounting, insurance, tax and other similar matters with respect to STAR III, STAR, SIR, STAR III’s portfolio properties, STAR’s portfolio properties, SIR’s portfolio properties and the STAR III Merger or otherwise.

In performing its analyses, Houlihan Lokey considered general business, economic, industry and market conditions, financial and otherwise, and other matters as they existed on, and could be evaluated as of, the date of its opinion. No company, transaction or business used in Houlihan Lokey’s analyses for comparative purposes is identical to STAR III, STAR, SIR, STAR III’s portfolio properties, STAR’s portfolio properties or SIR’s portfolio propertiesand an evaluation of the results of those analyses is not entirely mathematical. The estimates contained in the financial forecasts prepared by the managements of STAR III Advisor or STAR Advisor and the

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implied reference range values indicated by Houlihan Lokey’s analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than those suggested by the analyses. In addition, any analyses relating to the value of assets, businesses or securities do not purport to be appraisals or to reflect the prices at which assets, businesses or securities actually may be sold, which may depend on a variety of factors, many of which are beyond the control of STAR III, STAR or SIR. Much of the information used in, and accordingly the results of, Houlihan Lokey’s analyses are inherently subject to substantial uncertainty.

Houlihan Lokey’s opinion was only one of many factors considered by the STAR III Special Committee in evaluating the proposed STAR III Merger. Neither Houlihan Lokey’s opinion nor its analyses were determinative of the exchange ratio or of the views of the STAR III Special Committee, the STAR III Board or STAR III’s management with respect to the STAR III Merger or the exchange ratio. The type and amount of consideration payable in the STAR III Merger were determined through negotiation between STAR III and STAR, and the decision of STAR III to enter into the STAR III Merger Agreement was solely that of the STAR III Special Committee and the STAR III Board.

Financial Analyses

In preparing its opinion to the STAR III Special Committee, Houlihan Lokey performed certain analyses described below. The summary of Houlihan Lokey’s analyses is not a complete description of the analyses underlying Houlihan Lokey’s opinion. The preparation of such an opinion is a complex process involving various quantitative and qualitative judgments and determinations with respect to the financial, comparative and other analytical methods employed and the adaptation and application of these methods to the unique facts and circumstances presented. As a consequence, neither Houlihan Lokey’s opinion nor its underlying analyses is readily susceptible to summary description. Houlihan Lokey arrived at its opinion based on the results of all analyses undertaken by it and assessed as a whole and did not draw, in isolation, conclusions from or with regard to any individual analysis, methodology or factor. While the results of each analysis were taken into account in reaching Houlihan Lokey’s overall conclusion with respect to fairness, Houlihan Lokey did not make separate or quantifiable judgments regarding individual analyses. Accordingly, Houlihan Lokey believes that its analyses and the following summary must be considered as a whole and that selecting portions of its analyses, methodologies and factors, without considering all analyses, methodologies and factors, could create a misleading or incomplete view of the processes underlying Houlihan Lokey’s analyses and opinion.

The following is a summary of the material financial analyses performed by Houlihan Lokey in connection with the preparation of its opinion and reviewed with the STAR III Special Committee on August 5, 2019. The order of the analyses does not represent relative importance or weight given to those analyses by Houlihan Lokey.

For purposes of its analyses, Houlihan Lokey reviewed a number of financial metrics, including:

• NOI—net operating income, which is calculated generally as revenue, less property operating expenses.

• Net Cash Flows Before Debt Service—generally calculated as NOI, less total leasing costs and total capital expenditures.

Estimated financial data for STAR III and its portfolio properties were based on estimates prepared and provided to Houlihan Lokey by STAR III Advisor’s management. Estimated financial data for STAR (both on a standalone basis and giving effect to the SIR Merger), STAR’s portfolio properties and SIR’s portfolio properties were based on estimates prepared and provided to Houlihan Lokey by STAR Advisor’s management except as otherwise indicated.

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Net Asset Value Analyses

Houlihan Lokey performed a net asset value analysis of STAR III and net asset value analyses of STAR (both on a standalone basis and giving effect to the SIR Merger) in order to derive two implied exchange ratio reference ranges.

STAR III.In performing a net asset value analysis of STAR III, Houlihan Lokey conducted a separate analysis of each portfolio property of STAR III as described more fully in the immediately following paragraph. As part of this net asset value analysis of STAR III, STAR III’s cash and cash equivalents (net of projected remaining transaction expenses) and restricted cash as of June 30, 2019 were also added, and STAR III’s outstanding debt (including debtmark-to-market adjustments) and other liabilities as of June 30, 2019 were then subtracted.

For each portfolio property of STAR III, Houlihan Lokey calculated the estimated net present value of the projected Net Cash Flows Before Debt Service for the4.5-year period ending December 31, 2023 using financial projections prepared and provided to Houlihan Lokey by STAR III Advisor’s management. Houlihan Lokey also calculated the estimated present value of the implied terminal values for each portfolio property derived by applying a range of selected capitalization rates, based on implied capitalization rates compiled by a third-party source for real estate transactions in certain geographic areas that Houlihan Lokey deemed to be relevant, to the applicable portfolio property’s estimated terminal NOI, based on financial projections for 2024. In order to calculate implied terminal values, Houlihan Lokey applied selected capitalization rate ranges of 4.50% to 5.00% in the case of two portfolio properties, 4.75% to 5.25% in the case of three portfolio properties, 5.00% to 5.50% in the case of one portfolio property, 5.25% to 5.75% in the case of two portfolio properties and 5.75% to 6.25% in the case of two portfolio properties. In order to calculate estimated present values of Net Cash Flows Before Debt Service and implied terminal values, Houlihan Lokey applied discount rate ranges of 5.50% to 6.00% in the case of one portfolio property, 5.75% to 6.25% in the case of three portfolio properties, 6.00% to 6.50% in the case of four portfolio properties, 6.75% to 7.25% in the case of one portfolio property and 7.25% to 7.75% in the case of one portfolio property.

STAR (Standalone).In performing a net asset value analysis of STAR on a standalone basis, Houlihan Lokey conducted a separate analysis of each portfolio property of STAR as described more fully in the immediately following paragraph. As part of this net asset value analysis of STAR, STAR’s cash and cash equivalents (net of projected remaining transaction expenses) and restricted cash as of June 30, 2019 were also added, and STAR’s outstanding debt (including debtmark-to-market adjustments) and other liabilities (including, at the high end of the valuation range derived for STAR, the potential incentive fee liability due to STAR Advisor) as of June 30, 2019 were then subtracted.

For each portfolio property of STAR, Houlihan Lokey calculated the estimated net present value of the projected Net Cash Flows Before Debt Service for the4.5-year period ending December 31, 2023 using financial projections prepared and provided to Houlihan Lokey by STAR Advisor’s management. Houlihan Lokey also calculated the estimated present value of the implied terminal values for each portfolio property derived by applying a range of selected capitalization rates, based on implied capitalization rates compiled by a third-party source for real estate transactions in certain geographic areas that Houlihan Lokey deemed to be relevant, to the applicable portfolio property’s estimated terminal NOI, based on financial projections for 2024. In order to calculate implied terminal values, Houlihan Lokey applied selected capitalization rate ranges of 4.50% to 5.00% in the case of one portfolio property, 4.75% to 5.25% in the case of five portfolio properties, 5.00% to 5.50% in the case of six portfolio properties, 5.25% to 5.75% in the case of six portfolio properties, 5.50% to 6.00% in the case of 11 portfolio properties, 5.75% to 6.25% in the case of one portfolio property, 6.00% to 6.50% in the case of two portfolio properties, 6.25% to 6.75% in the case of one portfolio property and 6.75% to 7.25% in the case of one portfolio property. In order to calculate estimated present values of Net Cash Flows Before Debt Service and implied terminal values, Houlihan Lokey applied discount rate ranges of 5.75% to 6.25% in the case of two portfolio properties, 6.00% to 6.50% in the case of five portfolio properties, 6.25% to 6.75% in the case of four

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portfolio properties, 6.50% to 7.00% in the case of three portfolio properties, 6.75% to 7.25% in the case of five portfolio properties, 7.00% to 7.50% in the case of nine portfolio properties, 7.25% to 7.75% in the case of one portfolio property, 7.50% to 8.00% in the case of three portfolio properties and 7.75% to 8.25% in the case of two portfolio properties.

STAR (giving effect to the SIR Merger).In performing a net asset value analysis of STAR (giving effect to the SIR Merger), in addition to the analyses of the portfolio properties of STAR as previously described, Houlihan Lokey conducted a separate analysis of each portfolio property of SIR as described more fully in the immediately following paragraph. As part of this net asset value analysis of STAR, STAR’s and SIR’s cash and cash equivalents (net of projected remaining transaction expenses) and restricted cash as of June 30, 2019 and the reported estimate of the value of SIR’s joint venture investment as of December 31, 2018 were also added, and STAR’s and SIR’s outstanding debt (including debtmark-to-market adjustments) and other liabilities (including, at the high end of the valuation range derived for STAR, the potential incentive fee liability due to STAR Advisor) as of June 30, 2019 were then subtracted.

For each portfolio property of SIR, Houlihan Lokey calculated the estimated net present value of the projected Net Cash Flows Before Debt Service for the4.5-year period ending December 31, 2023 using financial projections prepared and provided to Houlihan Lokey by STAR Advisor’s management. Houlihan Lokey also calculated the estimated present value of the implied terminal values for each portfolio property derived by applying a range of selected capitalization rates, based on implied capitalization rates compiled by a third-party source for real estate transactions in certain geographic areas that Houlihan Lokey deemed to be relevant, to the applicable portfolio property’s estimated terminal NOI, based on financial projections for 2024. In order to calculate implied terminal values, Houlihan Lokey applied selected capitalization rate ranges of 5.00% to 5.50% in the case of three portfolio properties, 5.25% to 5.75% in the case of two portfolio properties, 5.50% to 6.00% in the case of five portfolio properties, 5.75% to 6.25% in the case of ten portfolio properties, 6.00% to 6.50% in the case of four portfolio properties, 6.25% to 6.75% in the case of two portfolio properties and 6.50% to 7.00% in the case of one portfolio property. In order to calculate estimated present values of Net Cash Flows Before Debt Service and implied terminal values, Houlihan Lokey applied discount rate ranges of 6.00% to 6.50% in the case of one portfolio property, 6.25% to 6.75% in the case of five portfolio properties, 6.75% to 7.25% in the case of ten portfolio properties, 7.00% to 7.50% in the case of five portfolio properties, 7.25% to 7.75% in the case of four portfolio properties and 7.50% to 8.00% in the case of two portfolio properties.

Implied Exchange Ratio References Ranges.The net asset value analyses summarized above indicated the following implied exchange ratio reference ranges, as compared to the exchange ratio of 1.430x:

• 1.150x to 1.764x based on the results of the net asset analysis of STAR III and the net asset value analysis of STAR on a standalone basis

• 1.196x to 1.793x based on the results of the net asset analysis of STAR III and the net asset value analysis of STAR (giving effect to the SIR Merger)

Other Matters

Houlihan Lokey was engaged by the STAR III Special Committee to act as its financial advisor in connection with the STAR III Merger and provide financial advisory services, including an opinion to the STAR III Special Committee as to the fairness, from a financial point of view, to the holders of STAR III Common Stock of the exchange ratio provided for in the STAR III Merger pursuant to the STAR III Merger Agreement. The STAR III Special Committee engaged Houlihan Lokey based on Houlihan Lokey’s experience and reputation. Houlihan Lokey is regularly engaged to provide financial advisory services in connection with mergers, acquisitions, divestitures, leveraged buyouts, and for other purposes. Houlihan Lokey is entitled to an aggregate fee of $1.5 million for its services, a portion of which became payable upon the execution of Houlihan Lokey’s engagement letter, a portion of which became payable upon the delivery of Houlihan Lokey’s opinion, regardless of the conclusion reached therein, and a portion of which is contingent upon the consummation of the

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STAR III Merger. STAR III has also agreed to reimburse Houlihan Lokey for certain expenses and to indemnify Houlihan Lokey, its affiliates and certain related parties against certain liabilities and expenses, including certain liabilities under the federal securities laws, arising out of or related to Houlihan Lokey’s engagement.

In the ordinary course of business, certain of Houlihan Lokey’s employees and affiliates, as well as investment funds in which they may have financial interests or with which they mayco-invest, may acquire, hold or sell, long or short positions, or trade, in debt, equity, and other securities and financial instruments (including loans and other obligations) of, or investments in, STAR III, STAR, SIR or any other party that may be involved in the STAR III Merger or the SIR Merger and their respective affiliates or security holders or any currency or commodity that may be involved in the STAR III Merger or the SIR Merger.

Houlihan Lokey and certain of its affiliates may provide investment banking, financial advisory and/or other financial or consulting services to STAR III, STAR, SIR, Steadfast REIT Investments, LLC (“Steadfast”) or one or more security holders and/or affiliates of Steadfast (collectively, with Steadfast, the “Steadfast Group”), other participants in the STAR III Merger or the SIR Merger or certain of their respective affiliates or security holders in the future, for which Houlihan Lokey and its affiliates may receive compensation. Furthermore, in connection with bankruptcies, restructurings, and similar matters, Houlihan Lokey and certain of its affiliates may have in the past acted, may currently be acting and may in the future act as financial advisor to debtors, creditors, equity holders, trustees, agents and other interested parties (including, without limitation, formal and informal committees or groups of creditors) that may have included or represented and may include or represent, directly or indirectly, or may be or have been adverse to, STAR III, STAR, SIR, other members of the Steadfast Group, other participants in the STAR III Merger or the SIR Merger or certain of their respective affiliates or security holders, for which advice and services Houlihan Lokey and its affiliates have received and may receive compensation.

Certain STAR III Unaudited Financial Projections

STAR III does not, as a matter of course, publicly disclose long-term projections as to future revenues, earnings or other results due to, among other reasons, the inherent uncertainty and subjectivity underlying assumptions and estimates. In connection with the STAR III Special Committee’s consideration of the STAR III Merger, STAR III’s management prepared certain non-public unaudited financial projections, derived from STAR III’s property level projections, regarding STAR III’s anticipated future performance on a stand-alone basis for fiscal years 2019 through 2024 (the “STAR III financial projections”), which are summarized below. The STAR III financial projections were provided, in whole or in part, (i) to the STAR III Special Committee and Houlihan Lokey and (ii) to the STAR Special Committee and its financial advisor.

The STAR III financial projections are summarized in this proxy statement/prospectus solely to give STAR III stockholders access to information that was made available to the STAR III Special Committee and Houlihan Lokey in connection with the STAR III Merger, and are not included in this proxy statement/prospectus in order to influence any STAR III stockholder to make any investment or voting decision with respect to the STAR III Merger.

The STAR III financial projections were prepared solely for internal use and are subjective in many respects. The inclusion of a summary of the STAR III financial projections in this proxy statement/prospectus should not be regarded as an indication that any of STAR III, STAR, or their respective special committees’ financial advisors or any other person considered, or now considers, this information to be necessarily predictive of actual future results or events. There can be no assurance that the prospective results will be realized or that actual results will not be significantly higher or lower than estimated.

The STAR III financial projections were not prepared with a view toward public disclosure or soliciting proxies, nor were they prepared with a view toward compliance with GAAP or with the published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation

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and presentation of prospective financial information. In addition, neither STAR III’s independent auditors, nor any other independent accountants, have compiled, examined, or performed any audit or other procedures with respect to the STAR III financial projections contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability. The report of the independent registered public accounting firm of STAR III contained in STAR III’s Annual Report on Form10-K for the year ended December 31, 2018, which is attached as Annex D, relates to STAR III’s historical financial statements. It does not extend to the STAR III financial projections and should not be read to do so.

Furthermore, the STAR III financial projections do not necessarily reflect STAR III’s current estimates and do not take into account any circumstances or events occurring after the date they were prepared. In particular, the STAR III financial projections set forth below do not give effect to the STAR III Merger nor do they take into account the effect of any failure of the STAR III Merger to occur.

The STAR III financial projections reflect numerous assumptions and estimates as to future events. The STAR III financial projections were based on assumptions and estimates that STAR III’s management believed were reasonable at the time the STAR III financial projections were prepared, taking into account relevant information available to STAR III’s management at the time, but these assumptions and estimates may not be realized and are inherently subject to significant business, economic, competitive and regulatory uncertainties and contingencies, including, among others, the risks and uncertainties described under “Risk Factors” and “Cautionary Statement Concerning Forward-Looking Statements” beginning on pages 30 and 51, respectively, and in STAR III’s Annual Report onForm 10-K for the year ended December 31, 2018, which is attached as Annex D to this proxy statement/prospectus and STAR III’s Quarterly Report onForm 10-Q for the quarter ended September 30, 2019, which is attached as Annex E to this proxy statement/prospectus. All of these uncertainties and contingencies are difficult to predict and many are beyond the control of STAR III and will be beyond the control of the STAR III/STAR Combined Company. As a result, neither STAR III, STAR nor any of their respective affiliates, officers, directors, advisors or other representatives can provide any assurance that actual results will not differ materially from the STAR III financial projections, and neither STAR III nor any of its affiliates undertakes any obligation to update or otherwise revise or reconcile the STAR III financial projections to reflect circumstances existing after the date such financial projections were generated or to reflect the occurrence of future events.

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The inclusion of a summary of the STAR III financial projections herein should not be deemed an admission or representation by STAR III or STAR that such financial projections are viewed by STAR III or STAR as material information of STAR III. The STAR III financial projections should be evaluated in conjunction with STAR III’s reported financial results and the risk factors with respect to the business of STAR III. See “Cautionary Statement Concerning Forward-Looking Statements” beginning on page 51 and “Where You Can Find More Information” on page 223.

The following summarizes the STAR III financial projections:

	($ in thousands)
	Yr. 1			Yr. 2			Yr. 3			Yr. 4			Yr. 5			Yr. 6
	12 Mos.			12 Mos.			12 Mos.			12 Mos.			12 Mos.			12 Mos.
Start Date	Jan. 2019			Jan. 2020			Jan. 2021			Jan. 2022			Jan. 2023			Jan. 2024
End Date	Dec. 2019			Dec. 2020			Dec. 2021			Dec. 2022			Dec. 2023			Dec. 2024
Net Operating Income	$	21,971.8		$	22,853.4		$	24,119.7		$	25,117.8		$	25,964.0		$	26,712.8
										��
Earnings Before EBITDA	$	12,294.3		$	15,429.2		$	16,582.2		$	17,472.1		$	18,223.0		$	18,384.8
Funds From Operations (FFO)	$	19.8		$	3,648.3		$	4,392.7		$	4,785.1		$	5,087.1		$	4,349.4
Modified Funds From Operations (MFFO)	$	19.8		$	3,648.3		$	4,392.7		$	4,785.1		$	5,087.1		$	4,349.4
Dividends Paid — Net of Servicing Fees	$	13,111.4		$	13,122.8		$	13,245.4		$	13,408.6		$	13,577.3		$	13,790.0
MFFO Payout Ratio		66154.48	%		359.70	%		301.53	%		280.22	%		266.90	%		317.06	%
Funds Available for Distribution (FAD)	$	(6,382.5	)	$	(6,574.3	)	$	(6,662.7	)	$	(6,299.4	)	$	(4,642.3	)	$	172,597.6

EXCEPT AS MAY BE REQUIRED BY APPLICABLE SECURITIES LAWS, STAR III DOES NOT INTEND TO, AND DISCLAIMS ANY OBLIGATION TO, UPDATE OR OTHERWISE REVISE THE ABOVE UNAUDITED FINANCIAL PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING SUCH UNAUDITED FINANCIAL PROJECTIONS ARE SHOWN TO BE IN ERROR OR ARE NO LONGER APPROPRIATE (EVEN IN THE SHORT TERM).

None of STAR III, STAR or their respective officers, directors, affiliates, advisors or other representatives can give you any assurance that actual results will not differ materially from this unaudited prospective financial information.

Certain Post-Merger Fully Combined Company Unaudited Financial Projections

STAR, SIR and STAR III do not, as a matter of course, publicly disclose long-term projections as to future revenues, earnings or other results due to, among other reasons, the inherent uncertainty and subjectivity underlying assumptions and estimates. In connection with the STAR III Special Committee’s consideration of the STAR III Merger, STAR’s, SIR’s and STAR III’s management prepared certain non-public unaudited financial projections, derived from STAR’s, SIR’s and STAR III’s property level projections, regarding STAR’s, SIR’s and STAR III’s anticipated future performance for fiscal years 2019 through 2024 as the Fully Combined Company (the “Fully Combined Company financial projections”), which are summarized below. The Fully Combined Company financial projections were provided, in whole or in part, (i) to the STAR III Special Committee and Houlihan Lokey and (ii) to the STAR Special Committee and its financial advisor.

The Fully Combined Company financial projections are summarized in this proxy statement/prospectus solely to give STAR III stockholders access to information that was made available to the STAR III Special Committee and Houlihan Lokey in connection with the STAR III Merger, and are not included in this proxy statement/prospectus in order to influence any STAR III stockholder to make any investment or voting decision with respect to the STAR III Merger.

The Fully Combined Company financial projections were prepared solely for internal use and are subjective in many respects. The inclusion of a summary of the Fully Combined Company financial projections in this proxy statement/prospectus should not be regarded as an indication that any of STAR III, STAR, SIR or their respective special

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committees’ financial advisors or any other person considered, or now considers, this information to be necessarily predictive of actual future results or events. There can be no assurance that the prospective results will be realized or that actual results will not be significantly higher or lower than estimated.

The Fully Combined Company financial projections were not prepared with a view toward public disclosure or soliciting proxies, nor were they prepared with a view toward compliance with GAAP or with the published guidelines of the SEC or the guidelines established by the American Institute of Certified Public Accountants for preparation and presentation of prospective financial information. In addition, none of STAR’s SIR’s or STAR III’s independent auditors, nor any other independent accountants, have compiled, examined, or performed any audit or other procedures with respect to the Fully Combined Company financial projections contained herein, nor have they expressed any opinion or any other form of assurance on such information or its achievability. The reports of the independent registered public accounting firm of STAR, SIR, STAR III contained in each of STAR’s, SIR’s and STAR III’s Annual Reports on Form 10-K, which are attached as Annex F, Annex H, and Annex D, respectively, to this proxy statement/prospectus, relate to STAR’s, SIR’s and STAR III’s historical financial statements, respectively. They do not extend to the Fully Combined Company financial projections and should not be read to do so.

Furthermore, the Fully Combined Company financial projections do not necessarily reflect STAR’s, SIR’s or STAR III’s current estimates and do not take into account any circumstances or events occurring after the date they were prepared.

The Fully Combined Company financial projections reflect numerous assumptions and estimates as to future events. The Fully Combined Company financial projections were based on assumptions and estimates that management believed were reasonable at the time the Fully Combined Company financial projections were prepared, taking into account relevant information available to management at the time, but these assumptions and estimates may not be realized and are inherently subject to significant business, economic, competitive and regulatory uncertainties and contingencies, including, among others, the risks and uncertainties described under “Risk Factors” and “Cautionary Statement Concerning Forward-Looking Statements” beginning on pages 30 and 51, respectively. All of these uncertainties and contingencies are difficult to predict and many are beyond the control of STAR, SIR, and STAR III and will be beyond the control of the STAR III/STAR Combined Company or Fully Combined Company. As a result, none of STAR III, STAR, SIR or any of their respective affiliates, officers, directors, advisors or other representatives can provide any assurance that actual results will not differ materially from the Fully Combined Company financial projections, and none of STAR, SIR, STAR III or any of their affiliates undertakes any obligation to update or otherwise revise or reconcile the Fully Combined Company financial projections to reflect circumstances existing after the date such financial projections were generated or to reflect the occurrence of future events, even in the event that any or all of the assumptions underlying such financial projections are shown to be in error.

The inclusion of a summary of the Fully Combined Company financial projections herein should not be deemed an admission or representation by STAR III, STAR or SIR that such financial projections are viewed by STAR III, STAR or SIR as material information of the STAR III/STAR Combined Company or the Fully Combined Company and in fact, none of STAR III, STAR or SIR views the Fully Combined Company financial projections as material because of the inherent risks and uncertainties associated with such long-term projections. The Fully Combined Company financial projections should be evaluated in conjunction with STAR’s reported financial results, SIR’s reported financial results and STAR III’s reported financial results and the risk factors with respect to the business of each of STAR, SIR and STAR III. See “Cautionary Statement Concerning Forward-Looking Statements” beginning on page 30 and “Where You Can Find More Information” on page 223.

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The following summarizes the Fully Combined Company financial projections:

	($ in thousands)
	Yr. 1			Yr. 2			Yr. 3			Yr. 4			Yr. 5			Yr. 6
	12 Mos.			12 Mos.			12 Mos.			12 Mos.			12 Mos.			12 Mos.
Start Date	Jan. 2019			Jan. 2020			Jan. 2021			Jan. 2022			Jan. 2023			Jan. 2024
End Date	Dec. 2019			Dec. 2020			Dec. 2021			Dec. 2022			Dec. 2023			Dec. 2024
Net Operating Income	$	97,327.3		$	180,791.5		$	187,055.4		$	193,538.4		$	199,621.5		$	205,465.5
Earnings Before EBITDA	$	25,402.3		$	111,431.1		$	143,856.3		$	172,492.1		$	155,555.9		$	161,409.0
Funds From Operations (FFO)	$	(22,973.8	)	$	33,182.7		$	67,399.3		$	96,093.3		$	77,330.1		$	83,330.2
Modified Funds From Operations (MFFO)	$	11,604.3		$	33,182.7		$	67,399.3		$	97,324.4		$	80,309.8		$	85,543.1
Dividends Paid	$	47,329.6		$	103,636.3		$	105,760.9		$	108,262.9		$	110,905.0		$	113,881.9
MFFO Payout Ratio		407.86	%		312.32	%		156.92	%		111.24	%		138.10	%		133.13	%
Funds Available for Distribution (FAD)	$	(741,232.1	)	$	14,248.0		$	25,250.5		$	57,227.7		$	46,069.4		$	2,027,047.5

None of STAR III, STAR, SIR or their respective officers, directors, affiliates, advisors or other representatives can give you any assurance that actual results will not differ materially from this unaudited prospective financial information.

EXCEPT AS MAY BE REQUIRED BY APPLICABLE SECURITIES LAWS, NONE OF STAR, SIR OR STAR III INTENDS TO, AND DISCLAIMS ANY OBLIGATION TO, UPDATE OR OTHERWISE REVISE THE ABOVE UNAUDITED FINANCIAL PROJECTIONS TO REFLECT CIRCUMSTANCES EXISTING AFTER THE DATE WHEN MADE OR TO REFLECT THE OCCURRENCE OF FUTURE EVENTS, EVEN IN THE EVENT THAT ANY OR ALL OF THE ASSUMPTIONS UNDERLYING SUCH UNAUDITED FINANCIAL PROJECTIONS ARE SHOWN TO BE IN ERROR OR ARE NO LONGER APPROPRIATE (EVEN IN THE SHORT TERM).

Interests of STAR’s Directors and Executive Officers in the STAR III Merger

Except as discussed below, none of STAR’s executive officers or members of the STAR Board is party to an arrangement with STAR III, or participates in any STAR III plan, program or arrangement, that provides such executive officer or board member with financial incentives that are contingent upon the consummation of the STAR III Merger. Rodney F. Emery, Chairman of the Board of Directors and Chief Executive Officer of STAR, Ella S. Neyland, President and Affiliated Director of STAR, and Ana Marie del Rio, Secretary and Compliance Officer of STAR, beneficially owned 27,857, 1,111, and 2,808 shares of STAR III Common Stock, respectively.

Additionally, Mr. Emery owns an 86% interest in Steadfast REIT Holdings, the parent company of the Sponsor. Ana Marie del Rio, the Secretary of STAR and STAR III, owns a 7% interest in Steadfast REIT Holdings. In connection with the STAR III Merger, pursuant to the STAR Advisory Agreement, STAR Advisor is entitled to an acquisition fee equal to approximately $4.7 million, or 1.0% of the “cost of investment” (as defined in the STAR Advisory Agreement) of STAR III in the STAR III Merger and a loan coordination fee equal to approximately $2.9 million, or 1.0% of the amount of debt assumed by STAR in connection with the STAR III Merger.

As of December 16, 2019, Stephen R. Bowie, Ned W. Brines and Janice M. Munemitsu, STAR III’s independent directors, beneficially owned 8,904, 6,800 and 8,572 shares of STAR III Common Stock, respectively. Upon the consummation of the STAR III Merger, they will each receive a number of shares of STAR Common Stock consistent with the exchange ratio.

Interests of STAR III’s Directors and Executive Officers in the STAR III Merger

In considering the recommendation of the STAR III Board to approve the STAR III Merger, STAR III stockholders should be aware that directors of STAR III have certain interests in the STAR III Merger that may be different from, or in addition to, the interests of STAR III stockholders generally. The STAR III Board was aware of those interests and considered them, among other matters, in reaching its decision to approve the STAR III Merger Agreement. These interests include the interests described below in this section.

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Treatment of STAR III Equity Awards

STAR III Restricted Shares

STAR III’s independent directors hold restricted shares of STAR III Common Stock issued pursuant to the STAR III Incentive Plan. At the effective time of the STAR III Merger, each of these outstanding restricted shares of STAR III Common Stock will vest and all restrictions thereon will lapse, and each such STAR III restricted share will be cancelled and converted into the right to receive 1.430 shares of STAR Common Stock pursuant to the terms of the STAR III Merger Agreement.

None of STAR III’s executive officers hold any restricted stock or other equity compensation awards in STAR III.

Value of Outstanding STAR III Equity Awards

The table below sets forth the number of shares of STAR III Common Stock subject to restricted stock awards held by STAR III’s independent directors as of December 16, 2019, the aggregate values of such restricted stock awards, and the number of shares of STAR Common Stock with respect to which such restricted stock awards are expected to be converted into a number of fully vested shares of STAR Common Stock consistent with the exchange ratio at the effective time of the STAR III Merger. None of STAR III’s executive officers hold any restricted stock or other equity compensation awards in STAR III.

	STAR III Restricted Shares
	Number of Unvested STAR III Restricted Shares		Aggregate Value of Unvested STAR III Restricted Shares(1)		Number of STAR Shares Issuable in respect of STAR III Restricted Shares(1)(2)
Independent Directors
Stephen R. Bowie		1,500	$	33,977		2,145
Ned W. Brines		1,500	$	33,977		2,145
Janice M. Munemitsu		1,500	$	33,977		2,145

(1) Based on an NAV of $15.84.

(2) Based on a conversion ratio of 1.430 shares of STAR Common Stock.

Relationship of STAR III and STAR

The Sponsor, which is the sponsor of both STAR and STAR III, is majority owned and controlled indirectly by Rodney F. Emery, who serves as the Chairman of both the STAR III Board and STAR Board and Chief Executive Officer of STAR III and STAR, through Steadfast REIT Holdings, the parent company of the Sponsor. Ana Marie del Rio, the Secretary of STAR and STAR III, owns a 7% interest in Steadfast REIT Holdings. Since 2014, Ms. Neyland has earned a 5% profits interest from Steadfast REIT Holdings.

Mr. Emery also indirectly controls STAR Advisor and STAR III Advisor. In connection with the STAR III Merger, pursuant to the STAR Advisory Agreement, STAR Advisor is entitled to an acquisition fee equal to 1.0% of the “cost of investment” (as defined in the STAR Advisory Agreement) of STAR III in the STAR III Merger and a loan coordination fee equal to 1.0% of the value of debt assumed by STAR in the STAR III Merger.

Indemnification and Insurance

For a period of six years after the effective time of the STAR III Merger, pursuant to the terms of the STAR III Merger Agreement and subject to certain limitations, STAR will, and will cause the Surviving Entity to, indemnify, defend and hold harmless the current or former managers, directors, officers, partners, members, trustees, employees, agents, fiduciaries or other individuals of STAR III or any of the STAR III subsidiaries (the

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“Indemnified Parties”) for any action or omission or alleged action or omission at or prior to the effective time of the STAR III Merger, including with respect to the transactions contemplated by the STAR III Merger Agreement. STAR and the Merger Sub have agreed that all rights to indemnification and exculpation from liabilities for acts, and advancement of expenses, provided in (i) the governing documents of STAR III or similar organizational documents or agreements of any subsidiary of STAR III and (ii) any indemnification agreements of STAR III will survive the STAR III Merger and will continue in full force and effect in accordance with their terms. For a period of six years after the effective time of the STAR III Merger, the organizational documents of STAR and the Surviving Entity and the organizational documents of any subsidiary of STAR or subsidiary of STAR III will not have indemnification and director and officer liability limitation provisions less favorable than such provisions in the STAR III governing documents or, if applicable, similar organizational documents or agreements of any subsidiary of STAR III.

STAR III will obtain an extended reporting period coverage under STAR III’s existing insurance programs for a period of six years after the effective time of the STAR III Merger, to be effective as of the effective time of the STAR III Merger.

Directors and Management of the STAR III/STAR Combined Company After the STAR III Merger

Pursuant to the STAR III Merger Agreement, STAR III has the right to designate one independent director to the STAR Board. STAR III designated Stephen R. Bowie for election to the STAR Board to serve until STAR’s first annual meeting of stockholders following the completion of the STAR III Merger and until his successor is duly elected and qualifies. The STAR Board currently consists of five directors, and upon the consummation of the STAR III Merger, all of the directors of STAR immediately prior to the effective time of the STAR III Merger along with Mr. Bowie are expected to comprise the board of directors of the STAR III/STAR Combined Company after the effective time of the STAR III Merger. In such event, Mr. Bowie would receive 3,333 shares of restricted STAR Common Stock pursuant to STAR’s independent directors’ compensation plan in connection with his election to the STAR Board. See “The Companies—Steadfast Apartment REIT, Inc. and SIII Subsidiary, LLC—Equity Plan Compensation” for more information regarding the terms of the restricted STAR Common Stock.

Pursuant to the SIR Merger Agreement, SIR has the right to designate one independent director to the STAR Board. SIR designated Ned W. Brines for election to the STAR Board to serve until STAR’s first annual meeting of stockholders following the completion of the SIR Merger and until his successor is duly elected and qualifies. Upon consummation of the Mergers, all of the directors of STAR immediately prior to the effective time of the STAR III Merger and SIR Merger, along with Messrs. Bowie and Brines are expected to comprise the board of directors of the Fully Combined Company. In such event, Messrs. Bowie and Brines would each receive 3,333 shares of restricted STAR Common Stock pursuant to STAR’s independent directors’ compensation plan in connection with his election to the STAR Board. See “The Companies—Steadfast Apartment REIT, Inc. and SIII Subsidiary, LLC—Equity Plan Compensation” for more information regarding the terms of the restricted STAR Common Stock.

The executive officers of STAR immediately prior to the effective time of the STAR III Merger will continue to serve as the executive officers of the STAR III/STAR Combined Company, with Rodney F. Emery continuing to serve as the Chief Executive Officer of the STAR III/STAR Combined Company and Chairman of the STAR III/STAR Combined Company board of directors, Ella S. Neyland continuing to serve as President of the STAR III/STAR Combined Company, Kevin Keating continuing to serve as the Chief Financial Officer of the STAR III/STAR Combined Company and Ana Marie del Rio continuing to serve as the Secretary of the STAR III/STAR Combined Company.

Additionally, the executive officers of STAR immediately prior to the effective time of the Mergers will continue to serve as the executive officers of the Fully Combined Company, with Rodney F. Emery continuing to serve as the Chief Executive Officer of the Fully Combined Company and Chairman of the Fully Combined

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Company board of directors, Ella S. Neyland continuing to serve as President of the Fully Combined Company, Kevin Keating continuing to serve as the Chief Financial Officer of the Fully Combined Company and Ana Marie del Rio continuing to serve as the Secretary of the Fully Combined Company.

Regulatory Approvals Required for the STAR III Merger

STAR III and STAR are not aware of any material federal or state regulatory requirements that must be complied with, or regulatory approvals that must be obtained, in connection with the STAR III Merger.

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U.S. FEDERAL INCOME TAX CONSIDERATIONS

The following is a summary of the material U.S. federal income tax consequences of the STAR III Merger to U.S. holders andnon-U.S. holders (each as defined below) of shares of STAR III Common Stock and of the ownership and disposition of the STAR Common Stock received in the STAR III Merger.

This summary is for general information only and is not tax advice. This summary assumes that holders of STAR III Common Stock and STAR Common Stock hold such common stock as a capital asset within the meaning of Section 1221 of the Code. This summary is based upon the Code, Treasury Regulations promulgated under the Code, referred to herein as Treasury Regulations, judicial decisions and published administrative rulings, all as currently in effect and all of which are subject to change, possibly with retroactive effect. This discussion does not address (i) U.S. federal taxes other than income taxes, (ii) state, local ornon-U.S. taxes or (iii) tax reporting requirements, in each case, as applicable to the STAR III Merger. In addition, this discussion does not address U.S. federal income tax considerations applicable to persons or entities that are subject to special treatment under U.S. federal income tax law, including, for example:

• banks, insurance companies, and other financial institutions;

• tax-exempt organizations or governmental organizations;

• S corporations, partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein);

• persons or entities who hold shares of STAR III Common Stock (or, following the STAR III Merger, the STAR Common Stock) pursuant to the exercise of any employee stock option or otherwise as compensation;

• individuals subject to the alternative minimum tax;

• regulated investment companies and REITs;

• “controlled foreign corporations,” “passive foreign investment companies,” and corporations that accumulate earnings to avoid U.S. federal income tax;

• broker, dealers or traders in securities;

• U.S. expatriates and former citizens or long-term residents of the United States;

• persons holding shares of STAR III Common Stock (or, following the STAR III Merger, the STAR Common Stock) as part of a hedge, straddle or other risk reduction strategy or as part of a conversion transaction or other integrated investment;

• persons or entities deemed to sell STAR III Common Stock (or, following the STAR III Merger, the STAR Common Stock) under the constructive sale provisions of the Code;

• United States persons or entities whose functional currency is not the U.S. dollar;

• tax-qualified retirement plans;

• “qualified foreign pension funds” as defined in Section 897(l)(2) of the Code and entities all of the interests of which are held by qualified foreign pension funds;

• “qualified shareholders” as defined in Section 897(k)(3)(A) of the Code; or

• persons or entities subject to special tax accounting rules as a result of any item of gross income with respect to the stock being taken into account in an applicable financial statement.

For purposes of this summary, a “holder” means a beneficial owner of shares of STAR III Common Stock (or, following the STAR III Merger, of STAR Common Stock), and a “U.S. holder,” means a holder that, for U.S. federal income tax purposes, is or is treated as:

• an individual who is a citizen or resident of the United States;

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• a corporation (or other entity taxable as a corporation) created or organized under the laws of the United States, any state thereof, or the District of Columbia;

• an estate, the income of which is subject to U.S. federal income taxation regardless of its source; or

• a trust that (i) is subject to the primary supervision of a United States court and the control of one or more “United States persons” (within the meaning of Section 7701(a)(30) of the Code), or (ii) has a valid election in effect under applicable Treasury Regulations to be treated as a United States person for U.S. federal income tax purposes.

For purposes of this summary, a“non-U.S. holder” means a beneficial owner of shares of STAR III Common Stock that is a nonresident alien individual or foreign corporation for U.S. federal income tax purposes that is not otherwise subject to special treatment under the Code.

If an entity treated as a partnership for U.S. federal income tax purposes holds shares of STAR III Common Stock (or, following the STAR III Merger, STAR Common Stock), the tax treatment of a partner in the partnership generally will depend on the status of the partner, the activities of the partnership and certain determinations made at the partner level. Accordingly, partnerships holding shares of STAR III Common Stock (or, following the STAR III Merger, STAR Common Stock) and the partners in such partnerships should consult their tax advisors regarding the U.S. federal income tax consequences to them.

This discussion of material U.S. federal income tax consequences of the STAR III Merger and of the ownership and disposition of the STAR Common Stock received in the STAR III Merger is not binding on the IRS. No assurance can be given that the IRS would not assert, or that a court would not sustain, a position contrary to any described herein.

For purposes of this summary, the term “Combined Company” means either the STAR III/STAR Combined Company or the Fully Combined Company, as applicable.

THIS DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE. YOU SHOULD CONSULT YOUR TAX ADVISOR WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO YOUR PARTICULAR CIRCUMSTANCES AS WELL AS ANY TAX CONSEQUENCES OF THE COMPANY MERGER AND THE OWNERSHIP AND DISPOSITION OF THE STAR COMMON STOCK ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL ORNON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.

Material U.S. Federal Income Tax Consequences of the STAR III Merger

Qualification of the Merger as a Reorganization

The parties intend for the STAR III Merger to qualify as a reorganization within the meaning of Section 368(a) of the Code. It is a condition to the completion of the STAR III Merger that DLA Piper render an opinion to STAR III and Morrison & Foerster LLP (“Morrison Foerster”) render an opinion to STAR to the effect that the STAR III Merger will constitute a reorganization within the meaning of Section 368(a) of the Code. Such opinions will be subject to customary exceptions, assumptions and qualifications, and will be based on representations made by STAR and STAR III regarding factual matters (including those contained in the tax representation letters provided by STAR and STAR III), and covenants undertaken by STAR and STAR III. If any assumption or representation is inaccurate in any way, or any covenant is not complied with, the tax consequences of the STAR III Merger could differ from those described in the tax opinions and in this summary. These tax opinions represent the legal judgment of counsel rendering the opinion and are not binding on the IRS or the courts. No ruling from the IRS has been or is expected to be requested in connection with the STAR III Merger, and there can be no assurance that the IRS would not assert, or that a court would not sustain, a position contrary to the conclusions set forth in the tax opinions. Accordingly, the tax opinions are not a guarantee of the legal outcome of the STAR III Merger or any tax benefits that may be derived from the STAR III Merger.

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Consequences of the STAR III Merger to Holders of STAR III Common Stock

The following discussion summarizes that material U.S. federal income tax consequences of the STAR III Merger to holders assuming the STAR III Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code.

A holder of STAR III Common Stock will receive solely STAR Common Stock in exchange for shares of STAR III Common Stock pursuant to the STAR III Merger and generally will not recognize gain or loss for U.S. federal income tax purposes upon the receipt of STAR Common Stock in exchange for shares of STAR III Common Stock in connection with the STAR III Merger.

A holder will have an aggregate tax basis in the STAR Common Stock it receives in the STAR III Merger equal to the holder’s aggregate tax basis in its STAR III Common Stock surrendered pursuant to the STAR III Merger. If a holder acquired any of its shares of STAR III Common Stock at different prices and/or at different times, Treasury Regulations provide guidance on how such holder may allocate its tax basis to the STAR Common Stock received in the STAR III Merger. Such holders should consult their tax advisors regarding the proper allocation of their basis among the STAR Common Stock received in the STAR III Merger under these Treasury Regulations.

The holding period of the STAR Common Stock received by a holder in connection with the STAR III Merger will include the holding period of the STAR III Common Stock surrendered in connection with the STAR III Merger. Holders owning blocks of STAR III Common Stock acquired at different times or different prices should consult their tax advisors with respect to identifying the holding periods of the particular shares of STAR Common Stock received in the STAR III Merger.

Certain Reporting Requirements

Under applicable Treasury Regulations, “significant holders” of STAR III Common Stock generally will be required to comply with certain reporting requirements. A U.S. holder is a “significant holder” if, immediately before the STAR III Merger, such holder held 5% or more, by vote or value, of the total outstanding STAR III Common Stock. Significant holders generally will be required to file a statement with the holder’s U.S. federal income tax return for the taxable year that includes the closing of the STAR III Merger. That statement must set forth the holder’s tax basis in, and the fair market value of, the shares of STAR III Common Stock surrendered pursuant to the STAR III Merger (both as determined immediately before the surrender of shares), the date of the STAR III Merger, and the name and employer identification number of STAR, STAR III and STAR III Merger Sub, and the holder will be required to retain permanent records of these facts. U.S. holders should consult their tax advisors as to whether they may be treated as a “significant holder.”

THE PRECEDING DISCUSSION DOES NOT PURPORT TO BE A COMPLETE ANALYSIS OR DISCUSSION OF ALL OF THE POTENTIAL TAX CONSEQUENCES OF THE COMPANY MERGER. HOLDERS OF STAR III COMMON STOCK SHOULD CONSULT THEIR TAX ADVISORS REGARDING THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE COMPANY MERGER, INCLUDING TAX RETURN REPORTING REQUIREMENTS, AND THE APPLICABILITY AND EFFECT OF U.S. FEDERAL, STATE, LOCAL,NON-U.S. AND OTHER APPLICABLE TAX LAWS IN LIGHT OF THEIR PARTICULAR CIRCUMSTANCES.

REIT Qualification of STAR III and STAR

Tax Opinions from Counsel Regarding REIT Qualification of STAR III and STAR

It is a condition to the obligation of STAR III to complete the STAR III Merger that STAR III receive an opinion of Morrison & Foerster LLP (or other counsel reasonably satisfactory to STAR III) to the effect that, commencing with STAR’s taxable year ended on December 31, 2014, STAR has been organized and operated in

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conformity with the requirements for qualification and taxation as a REIT under the Code and its and its current organization and current and proposed method of operation will enable it to continue to meet the requirements for qualification and taxation as a REIT for the taxable year ending December 31, 2019 and thereafter, which opinion will be subject to customary exceptions, assumptions and qualifications and will be based on customary representations made by STAR and STAR III. This opinion will not be binding on the IRS or the courts.

The Combined Company intends to continue to operate in a manner to qualify as a REIT following the STAR III Merger, but there is no guarantee that it will qualify or remain qualified as a REIT. Qualification and taxation as a REIT depend upon the ability of the Combined Company to meet, through actual annual (or, in some cases, quarterly) operating results, requirements relating to income, asset ownership, distribution levels and diversity of share ownership, and the various REIT qualification requirements imposed under the Code. Given the complex nature of the REIT qualification requirements, the ongoing importance of factual determinations and the possibility of future changes in the circumstances of the Combined Company, there can be no assurance that the actual operating results of the Combined Company will satisfy the requirements for taxation as a REIT under the Code for any particular tax year.

It is a condition to the obligation of STAR to complete the STAR III Merger that STAR receive an opinion of DLA Piper (US) LLP (or other counsel reasonably acceptable to STAR) to the effect that for all taxable periods commencing with its taxable year ended December 31, 2016, STAR III has been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code, and its actual method of operation has enabled STAR III to meet, through the closing date of the STAR III Merger, the requirements for qualification and taxation as a REIT under the Code, which opinion will be subject to customary exceptions, assumptions and qualifications and will be based on representations made by STAR III regarding factual matters. This opinion will not be binding on the IRS or the courts.

Tax Liabilities and Attributes Inherited from STAR III

If STAR III failed to qualify as a REIT for any of its taxable years for which the applicable period for assessment had not expired, STAR III would be liable for (and the Combined Company would be obligated to pay) U.S. federal corporate income tax on its taxable income for such years, and, assuming the STAR III Merger qualified as a reorganization within the meaning of Section 368(a) of the Code, the Combined Company must distribute any earnings and profits of STAR III by the close of the taxable year in which the STAR III Merger occurs and would be subject to tax on thebuilt-in gain on each STAR III asset existing at the time of the STAR III Merger if the Combined Company were to dispose of the STAR III asset in a taxable transaction during the five-year period following the STAR III Merger. Such tax would be imposed at the highest regular corporate rate in effect as of the date of the sale. Moreover, even if STAR III qualified as a REIT at all relevant times, the Combined Company similarly would be liable for other unpaid taxes (if any) of STAR III (such as the 100% tax on gains from any sales treated as “prohibited transactions”). Furthermore, after the STAR III Merger the asset and gross income tests applicable to REITs will apply to all of the assets of the Combined Company, including the assets the Combined Company acquires from STAR III, and to all of the gross income of the Combined Company, including the income derived from the assets the Combined Company acquires from STAR III. As a result, the nature of the assets that the Combined Company acquires from STAR III and the gross income the Combined Company derives from such assets will be taken into account in determining the qualification of the Combined Company as a REIT.

Qualification as a REIT requires STAR III to satisfy numerous requirements, some on an annual and others on a quarterly basis, as described below with respect to STAR III. There are only limited judicial and administrative interpretations of these requirements, and qualification as a REIT involves the determination of various factual matters and circumstances which were not entirely within the control of STAR III.

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Material U.S. Federal Income Tax Considerations Relating to the Combined Company’s Treatment as a REIT and to Holders of the STAR Common Stock

This section summarizes the material U.S. federal income tax consequences generally resulting from the election of STAR to be taxed as a REIT and the acquisition, ownership and disposition of the STAR Common Stock. The sections of the Code and the corresponding Treasury regulations that relate to the qualification and taxation as a REIT are highly technical and complex. You are urged to consult your tax advisor regarding the specific tax consequences to you of the acquisition, ownership and disposition of the securities of the Combined Company and of the election of STAR to be taxed as a REIT. Specifically, you should consult your tax advisor regarding the federal, state, local, foreign and other tax consequences of such acquisition, ownership, disposition and election, and regarding potential changes in applicable tax laws.

Taxation of the Combined Company

STAR has elected to be taxed as a REIT under Sections 856 through 860 of the Code commencing with its taxable year ended December 31, 2014. STAR believes that it has been organized and has operated in conformity with the requirements for qualification and taxation as a REIT under the Code beginning with its taxable year ended December 31, 2014, and that its intended manner of operation will enable the Combined Company to continue to meet the requirements for qualification as a REIT for U.S. federal income tax purposes. However, qualification and taxation as a REIT depend upon the Combined Company’s ability to meet the various qualification tests imposed under the Code, including through actual operating results, asset composition, distribution levels and diversity of stock ownership. Accordingly, no assurance can be given that STAR has been organized and has operated, or that the Combined Company will continue to be organized and operate, in a manner so as to qualify or remain qualified as a REIT. See “—Failure to Qualify” for potential tax consequences if the Combined Company fails to qualify as a REIT.

Provided the Combined Company qualifies for taxation as a REIT, it generally will not be required to pay U.S. federal corporate income taxes on its REIT taxable income that is currently distributed to its stockholders. This treatment substantially eliminates the “double taxation” (i.e. taxation at both the corporate and the stockholder levels) that generally results from investment in a C corporation. The Combined Company will, however, be subject to U.S. federal income taxes as follows:

• First, the Combined Company will be required to pay regular U.S. federal corporate income tax on any REIT taxable income, including net capital gain, that it does not distribute to stockholders during, or within a specified time period after, the calendar year in which the income is earned.

• Second, if the Combined Company has (1) net income from the sale or other disposition of “foreclosure property” held primarily for sale to customers in the ordinary course of business or (2) other nonqualifying income from foreclosure property, the Combined Company will be required to pay regular U.S. federal corporate income tax on this income. To the extent that income from foreclosure property is otherwise qualifying income for purposes of the 75% gross income test, this tax is not applicable. Subject to certain other requirements, foreclosure property generally is defined as property the Combined Company acquired through foreclosure or after a default on a loan secured by the property or a lease of the property. See “—Foreclosure Property.”

• Third, the Combined Company will be required to pay a 100% tax on any net income from prohibited transactions. Prohibited transactions are, in general, sales or other taxable dispositions of property, other than foreclosure property, held as inventory or primarily for sale to customers in the ordinary course of business.

• Fourth, if the Combined Company fails to satisfy the 75% gross income test or the 95% gross income test, as described below, but has otherwise maintained its qualification as a REIT because certain other requirements are met, it will be required to pay a tax equal to (1) the greater of (A) the amount by which it fails to satisfy the 75% gross income test and (B) the amount by which it fails to satisfy the 95% gross income test, multiplied by (2) a fraction intended to reflect its profitability.

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• Fifth, if the Combined Company fails to satisfy any of the asset tests (other than ade minimis failure of the 5% or 10% asset tests), as described below, due to reasonable cause and not due to willful neglect, and the Combined Company nonetheless maintains its REIT qualification because of specified cure provisions, it will be required to pay a tax equal to the greater of $50,000 or the U.S. federal corporate income tax rate multiplied by the net income generated by the nonqualifying assets that caused the Combined Company to fail such test.

• Sixth, if the Combined Company fails to satisfy any provision of the Code that would result in its failure to qualify as a REIT (other than a violation of the gross income tests or certain violations of the asset tests, as described below) and the violation is due to reasonable cause and not due to willful neglect, the Combined Company may retain its REIT qualification, but it will be required to pay a penalty of $50,000 for each such failure.

• Seventh, the Combined Company will be required to pay a 4% nondeductible excise tax to the extent it fails to distribute during each calendar year at least the sum of (1) 85% of its ordinary income for the year, (2) 95% of its capital gain net income for the year, and (3) any undistributed taxable income from prior periods.

• Eighth, if the Combined Company acquires any asset from a corporation that is or has been a C corporation in a transaction in which the Combined Company’s tax basis in the asset is less than the fair market value of the asset, in each case determined as of the date on which it acquired the asset, and it subsequently recognizes gain on the disposition of the asset during the five-year period beginning on the date on which it acquired the asset, then it generally will be required to pay regular U.S. federal corporate income tax on this gain to the extent of the excess of (1) the fair market value of the asset over (2) its adjusted tax basis in the asset, in each case determined as of the date on which it acquired the asset.

• Ninth, the Combined Company’s subsidiaries that are C corporations, including its TRSs described below, generally will be required to pay regular U.S. federal corporate income tax on their earnings.

• Tenth, the Combined Company will be required to pay a 100% excise tax on transactions with its TRSs that are not conducted on anarm’s-length basis.

The Combined Company and its subsidiaries may be subject to a variety of taxes other than U.S. federal income tax, including payroll taxes and state and local income, property and other taxes on its assets and operations.

Requirements for Qualification as a REIT

The Code defines a REIT as a corporation, trust or association that satisfied each of the following requirements:

(1) It is managed by one or more trustees or directors;

(2) Its beneficial ownership is evidenced by transferable shares of stock, or by transferable shares or certificates of beneficial ownership;

(3) It would be taxable as a domestic corporation, but for Sections 856 through 860 of the Code;

(4) It is not a financial institution or an insurance company within the meaning of certain provisions of the Code;

(5) It is beneficially owned by 100 or more persons;

(6) Not more than 50% in value of the outstanding stock or shares of beneficial interest of which are owned, actually or constructively, by five or fewer individuals, which the U.S. federal income tax laws define to include certain entities, during the last half of each taxable year;

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(7) It elects to be a REIT, or has made such election for a previous taxable year, and satisfies all relevant filing and other administrative requirements established by the IRS that must be met to qualify to be taxed as a REIT for U.S. federal income tax purposes;

(8) It uses a calendar year for U.S. federal income tax purposes and complies with the recordkeeping requirements of the U.S. federal income tax laws; and

(9) It meets certain other requirements, described below, regarding the sources of its gross income, the nature and diversification of its assets and the distribution of its income.

The Code provides that requirements (1) through (4), and (8) must be satisfied during the entire taxable year and that condition (5) must be met during at least 335 days of a taxable year of 12 months, or during a proportionate part of a taxable year of less than 12 months. Conditions (5) and (6) do not apply until after the first taxable year for which an election is made to be taxed as a REIT (which, in STAR’s case, was 2014). For purposes of condition (6), the term “individual” includes a supplemental unemployment compensation benefit plan, a private foundation or a portion of a trust permanently set aside or used exclusively for charitable purposes, but generally does not include a qualified pension plan or profit sharing trust. For purposes of requirement (8) above, STAR has and the Combined Company will continue to have a calendar taxable year, and thereby satisfies this requirement.

STAR believes that it has been organized and has operated in a manner that has allowed STAR, and will continue to allow the Combined Company, to satisfy conditions (1) through (9) during the relevant time periods. In addition, STAR’s charter provides for restrictions regarding ownership and transfer of STAR’s shares that are intended to assist it in continuing to satisfy the share ownership requirements described in conditions (5) and (6) above. A description of the share ownership and transfer restrictions relating to STAR’s common stock is contained in the discussion in this joint proxy statement/prospectus under the heading “Description of Capital Stock—Restrictions on Ownership and Transfer.” These restrictions, however, do not ensure that STAR has previously satisfied, and may not ensure that the Combined Company will, in all cases, be able to continue to satisfy, the share ownership requirements described in conditions (5) and (6) above. If the Combined Company fails to satisfy these share ownership requirements, except as provided in the next sentence, its status as a REIT will terminate. If, however, the Combined Company complies with the rules contained in applicable Treasury Regulations that require the Combined Company to ascertain the actual ownership of its shares and it does not know, or would not have known through the exercise of reasonable diligence, that it failed to meet the requirement described in condition (6) above, it will be treated as having met this requirement. See “—Failure to Qualify.”

Ownership of Interests in Partnerships and Limited Liability Companies

The Combined Company owns various direct and indirect interests in entities that are partnerships and limited liability companies for state law purposes. A partnership or limited liability company that has a single owner, as determined under U.S. federal income tax laws, generally is disregarded from its owner for U.S. federal income tax purposes. Many of the partnerships and limited liability companies owned by the Combined Company, including STAR OP, currently are disregarded from their owners for U.S. federal income tax purposes because such entities are treated as having a single owner for U.S. federal income tax purposes. Consequently, the assets and liabilities, and items of income, deduction, and credit, of such entities will be treated as its assets and liabilities, and items of income, deduction, and credit, for U.S. federal income tax purposes, including the application of the various REIT qualification requirements.

An unincorporated domestic entity with two or more owners, as determined under the U.S. federal income tax laws, generally is taxed as a partnership for U.S. federal income tax purposes. In the case of a REIT that is an owner in an entity that is taxed as a partnership for U.S. federal income tax purposes, the REIT is treated as owning its proportionate share of the assets of the entity and as earning its allocable share of the gross income of the entity for purposes of the applicable REIT qualification tests. Thus, its proportionate share of the assets and

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items of gross income of STAR III OP, SIR OP, and any other partnership, joint venture, or limited liability company that is taxed as a partnership for U.S. federal income tax purposes is treated as the assets and items of gross income of the Combined Company for purposes of applying the various REIT qualification tests. For purposes of the 10% value test (described in “—Asset Tests”), its proportionate share is based on its proportionate interest in the equity interests and certain debt securities issued by the entity. For all of the other asset and income tests, its proportionate share is based on its proportionate interest in the capital of the entity. A brief summary of the rules governing the U.S. federal income taxation of partnerships and limited liability companies is set forth below in “—Tax Aspects of the Combined Company’s Ownership of Entities Taxable as Partnerships.”

The Combined Company has control of its operating partnerships and the subsidiary partnerships and limited liability companies and intends to operate them in a manner consistent with the requirements for the Combined Company’s qualification as a REIT. If the Combined Company becomes a limited partner ornon- managing member in any partnership or limited liability company and such entity takes or expects to take actions that could jeopardize the Combined Company’s status as a REIT or require it to pay tax, the Combined Company may be forced to dispose of its interest in such entity. In addition, it is possible that a partnership or limited liability company could take an action which could cause the Combined Company to fail a gross income or asset test, and that the Combined Company would not become aware of such action in time to dispose of its interest in the partnership or limited liability company or take other corrective action on a timely basis. In such a case, the Combined Company could fail to qualify as a REIT unless it were entitled to relief, as described below.

Ownership of Interests in Qualified REIT Subsidiaries

The Combined Company may from time to time own and operate certain properties through wholly-owned subsidiaries that it intends to be treated as “qualified REIT subsidiaries” under the Code. A corporation will qualify as the Combined Company’s qualified REIT subsidiary if the Combined Company owns 100% of the corporation’s outstanding stock and does not elect with the subsidiary to treat it as a TRS, as described below. A qualified REIT subsidiary is not treated as a separate corporation, and all assets, liabilities and items of income, gain, loss, deduction and credit of a qualified REIT subsidiary are treated as assets, liabilities and items of income, gain, loss, deduction and credit of the parent REIT for all purposes under the Code, including all REIT qualification tests. Thus, in applying the U.S. federal income tax requirements described in this discussion, any qualified REIT subsidiaries the Combined Company owns are ignored, and all assets, liabilities and items of income, gain, loss, deduction and credit of such corporations are treated as the Combined Company’s assets, liabilities and items of income, gain, loss, deduction and credit. A qualified REIT subsidiary is not subject to U.S. federal income tax, and the Combined Company’s ownership of the stock of a qualified REIT subsidiary will not violate the restrictions on ownership of securities, as described below under “—Asset Tests.”

Ownership of Interests in TRSs

The Combined Company and its operating partnerships, own interests in companies that have elected, together with the Combined Company, to be treated as the Combined Company’s TRSs, and it may acquire securities in additional TRSs in the future. A TRS is a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) other than a REIT in which a REIT directly or indirectly holds stock, and that has made a joint election with such REIT to be treated as a TRS. If a TRS owns more than 35% of the total voting power or value of the outstanding securities of another corporation, such other corporation will also be treated as a TRS.

Restrictions imposed on REITs and their TRSs are intended to ensure that TRSs will be subject to appropriate levels of U.S. federal income taxation. These restrictions limit the deductibility of interest paid or accrued by a TRS to its parent REIT and impose a 100% excise tax on transactions between a TRS and its parent REIT or the REIT’s residents that are not conducted on anarm’s-length basis, such as any redetermined rents, redetermined deductions, excess interest or redetermined TRS service income. In general, redetermined rents are

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rents from real property that are overstated as a result of any services furnished to any of its residents by a TRS, redetermined deductions and excess interest represent any amounts that are deducted by a TRS for amounts paid to its parent REIT that are in excess of the amounts that would have been deducted based on arm’s length negotiations, and redetermined TRS service income is income of a TRS that is understated as a result of services provided to its parent REIT or on its behalf. Rents will not constitute redetermined rents if they qualify for certain safe harbor provisions contained in the Code. Dividends paid to a parent REIT from a TRS, will be treated as dividend income received from a corporation. The foregoing treatment of TRSs may reduce the cash flow generated by the Combined Company and its subsidiaries in the aggregate and its ability to make distributions to its stockholders and may affect its compliance with the gross income tests and asset tests.

A TRS generally may be used by a REIT to undertake indirectly activities that the REIT requirements might otherwise preclude the REIT from doing directly, such as the provision of noncustomary resident services or the disposition of property held for sale to customers. See “—Gross Income Tests—Rents from Real Property” and “—Gross Income Tests—Prohibited Transactions.” A TRS is subject to U.S. federal income tax as a regular C corporation. A REIT’s ownership of securities of a TRS is not subject to the 5% or 10% asset test described below. See “—Asset Tests.”

Ownership of Interests in Subsidiary REITs

The Combined Company owns and may acquire direct or indirect interests in one or more entities that have elected or will elect to be taxed as REITs under the Code (each, a “Subsidiary REIT”). A Subsidiary REIT is subject to the various REIT qualification requirements and other limitations described herein that are applicable to the Combined Company. If a Subsidiary REIT were to fail to qualify as a REIT, then (i) that Subsidiary REIT would become subject to U.S. federal income tax and (ii) the Subsidiary REIT’s failure to qualify could have an adverse effect on the Combined Company’s ability to comply with the REIT income and asset tests, and thus could impair the Combined Company’s ability to qualify as a REIT unless it could avail itself of certain relief provisions.

Gross Income Tests

The Combined Company must satisfy two gross income tests annually to qualify and maintain its qualification as a REIT. First, at least 75% of its gross income for each taxable year generally must consist of the following:

• Rents from real property;

• interest on debt secured by mortgages on real property or on interests in real property and interest on debt secured by mortgages on both real and personal property if the fair market value of such personal property does not exceed 15% of the total fair market value of all such property;

• dividends or other distributions on, and gain from the sale of, stock or shares of beneficial interest in other REITs;

• gain from the sale of real estate assets (other than gain from prohibited transactions);

• income and gain derived from foreclosure property; and

• income derived from the temporary investment of new capital attributable to the issuance of its stock or a public offering of its debt with a maturity date of at least five years and that the Combined Company received during theone-year period beginning on the date on which the Combined Company received such new capital.

Second, in general, at least 95% of its gross income for each taxable year must consist of income that is qualifying for purposes of the 75% gross income test, other types of interest and dividends, gain from the sale or disposition of stock or securities (including interest and gain from Nonqualified Publicly Offered REIT Debt Instruments) or any combination of these.

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Cancellation of indebtedness income and gross income from a sale of property that the Combined Company holds primarily for sale to customers in the ordinary course of business will be excluded from gross income for purposes of the 75% and 95% gross income tests. In addition, gains from “hedging transactions,” as defined in “—Hedging Transactions,” that are clearly and timely identified as such will be excluded from gross income for purposes of the 75% and 95% gross income tests. Finally, certain foreign currency gains will be excluded from gross income for purposes of one or both of the gross income tests.

The following paragraphs discuss the specific application of certain relevant aspects of the gross income tests to the Combined Company.

Rents from Real Property.Rents the Combined Company receives from a resident will qualify as “rents from real property” for the purpose of satisfying the gross income requirements for a REIT described above only if all of the following conditions are met:

• The amount of rent is not based in whole or in part on the income or profits of any person. However, an amount the Combined Company receives or accrues generally will not be excluded from the term “rents from real property” solely because it is based on a fixed percentage or percentages of receipts or sales;

• Neither the Combined Company nor an actual or constructive owner of 10% or more of its capital stock actually or constructively owns 10% or more of the interests in the assets or net profits of anon-corporate resident, or, if the resident is a corporation, 10% or more of the total combined voting power of all classes of stock entitled to vote or 10% or more of the total value of all classes of stock of the resident. Rents the Combined Company receives from such a resident that is a TRS of the Combined Company, however, will not be excluded from the definition of “rents from real property” as a result of this condition if at least 90% of the space at the property to which the rents relate is leased to third parties, and the rents paid by the TRS are substantially comparable to rents paid by the Combined Company’s other residents for comparable space. Whether rents paid by a TRS are substantially comparable to rents paid by other residents is determined at the time the lease with the TRS is entered into, extended, and modified, if such modification increases the rents due under such lease;

• Rent attributable to personal property, leased in connection with a lease of real property, is not greater than 15% of the total rent received under the lease. If this condition is not met, then the portion of the rent attributable to personal property will not qualify as “rents from real property.” To the extent that rent attributable to personal property, leased in connection with a lease of real property, exceeds 15% of the total rent received under the lease, the Combined Company may transfer a portion of such personal property to a TRS; and

• The Combined Company generally may not operate or manage the property or furnish or render noncustomary services to its residents, subject to a 1%de minimis exception and except as provided below. The Combined Company may, however, perform services that are “usually or customarily rendered” in connection with the rental of space for occupancy only and are not otherwise considered “rendered to the occupant” of the property. Examples of these services include the provision of light, heat, or other utilities, trash removal and general maintenance of common areas. In addition, the Combined Company may employ an independent contractor from whom it derives no revenue to provide customary services to the Combined Company’s residents, or a TRS (which may be wholly or partially owned by the Combined Company) to provide both customary andnon-customary services to the Combined Company’s residents without causing the rent the Combined Company receives from those residents to fail to qualify as “rents from real property.”

The Combined Company generally does not intend, and, as the managing member of the general partner of its operating partnerships, it does not intend to permit its operating partnerships, to take actions it believes will cause it to fail to satisfy the rental conditions described above. However, there can be no assurance that the IRS would not challenge its conclusions, including the calculation of its personal property ratios, or that a court

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would agree with its conclusions. If such a challenge were successful, the Combined Company could fail to satisfy the 75% or 95% gross income test and thus potentially lose its REIT status.

Interest.For purposes of the 75% and 95% gross income tests, the term ‘‘interest’’ generally does not include any amount received or accrued, directly or indirectly, if the determination of such amount depends in whole or in part on the income or profits of any person. However, an amount received or accrued generally will not be excluded from the term ‘‘interest’’ solely because it is based on a fixed percentage or percentages of receipts or sales. In addition, an amount that is based on the income or profits of a debtor will be qualifying interest income as long as the debtor derives substantially all of its income from the real property securing the debt from leasing substantially all of its interest in such real property, but only to the extent that the amounts received by the debtor would be qualifying “rents from real property” if received directly by a REIT.

Interest on debt secured by mortgages on real property or on interests in real property generally is qualifying income for purposes of the 75% gross income test. Except as provided below, in cases where a mortgage loan is secured by both real property and other property, if the outstanding principal balance of a mortgage loan during the year exceeds the value of the real property securing the loan at the time the Combined Company committed to acquire the loan. Notwithstanding the foregoing, a mortgage loan secured by both real property and personal property shall be treated as a wholly qualifying real estate asset and all interest shall be qualifying income for purposes of the 75% income test if the fair market value of such personal property does not exceed 15% of the total fair market value of all such property, even if the real property collateral value is less than the outstanding principal balance of the loan.

Prohibited Transaction Income. Any gain that the Combined Company realizes on the sale of property (other than any foreclosure property) held as inventory or otherwise held primarily for sale to customers in the ordinary course of business, including its share of any such gain realized by its operating partnerships, either directly or through its subsidiary partnerships and limited liability companies, will be treated as income from a prohibited transaction that is subject to a 100% penalty tax, unless certain safe harbor exceptions apply. This prohibited transaction income may also adversely affect the Combined Company’s ability to satisfy the gross income tests for qualification as a REIT. Under existing law, whether property is held as inventory or primarily for sale to customers in the ordinary course of a trade or business is a question of fact that depends on all the facts and circumstances surrounding the particular transaction. As the managing member of the general partner of its operating partnerships, the Combined Company intends to cause its operating partnerships to hold its properties for investment with a view to long-term appreciation, to engage in the business of acquiring, developing and owning its properties and to make occasional sales of the properties as are consistent with its investment objectives. The Combined Company does not intend, and does not intend to permit its operating partnerships or its subsidiary partnerships or limited liability companies, to enter into any sales that are prohibited transactions.

However, the IRS may successfully contend that some or all of the sales made by the Combined Company’s operating partnerships or its subsidiary partnerships or limited liability companies are prohibited transactions. The Combined Company would be required to pay the 100% penalty tax on its allocable share of the gains resulting from any such sales. The 100% penalty tax will not apply to gains from the sale of assets that are held through a TRS, but such income will be subject to regular U.S. federal corporate income tax.

Hedging Transactions.From time to time, the Combined Company may enter into hedging transactions with respect to one or more of its assets or liabilities. The Combined Company’s hedging activities may include entering into interest rate swaps, caps, and floors, options to purchase these items, and futures and forward contracts. Income from a hedging transaction, including gain from the sale or disposition of such a transaction, that is clearly identified as a hedging transaction as specified in the Code will not constitute gross income under, and thus will be exempt from, the 75% and 95% gross income tests. The term “hedging transaction,” as used above, generally means (A) any transaction the Combined Company enters into in the normal course of its business primarily to manage risk of (1) interest rate changes or fluctuations with respect to borrowings made or to be made by it to acquire or carry real estate assets, or (2) currency fluctuations with respect to an item of

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qualifying income under the 75% or 95% gross income test or any property which generates such income and (B) new transactions entered into to hedge the income or loss from prior hedging transactions, where the property or indebtedness which was the subject of the prior hedging transaction was extinguished or disposed of. To the extent that the Combined Company does not properly identify such transactions as hedges or it hedges with other types of financial instruments, the income from those transactions is not likely to be treated as qualifying income for purposes of the gross income tests. The Combined Company intends to structure any hedging transactions in a manner that does not jeopardize its status as a REIT.

TRS Income.To the extent the Combined Company’s TRSs pay dividends or interest, its allocable share of such dividend or interest income will qualify under the 95%, but not the 75%, gross income test (except to the extent the interest is paid on a loan that is adequately secured by real property). The Combined Company will monitor the amount of the dividend and other income from its TRSs and will take actions intended to keep this income, and any other nonqualifying income, within the limitations of the gross income tests. Although the Combined Company expects these actions will be sufficient to prevent a violation of the gross income tests, it cannot guarantee that such actions will in all cases prevent such a violation.

Failure to Satisfy Gross Income Tests.The Combined Company intends to monitor its sources of income, including anynon-qualifying income received by it, and manage its assets so as to ensure its compliance with the gross income tests. If the Combined Company fails to satisfy one or both of the 75% or 95% gross income tests for any taxable year, the Combined Company may nevertheless qualify as a REIT for the year if it is entitled to relief under certain provisions of the Code. The Combined Company generally may make use of the relief provisions if: (1) its failure to meet these tests was due to reasonable cause and not due to willful neglect; and (2) following its identification of the failure to meet the 75% or 95% gross income tests for any taxable year, it files a schedule with the IRS setting forth each item of its gross income for purposes of the 75% or 95% gross income tests for such taxable year in accordance with Treasury Regulations to be issued.

It is not possible, however, to state whether in all circumstances the Combined Company would be entitled to the benefit of these relief provisions. As discussed above in “—General,” even if these relief provisions apply, and the Combined Company retains its status as a REIT, a tax would be imposed with respect to its nonqualifying income.

Asset Tests

At the close of each calendar quarter of its taxable year, the Combined Company must also satisfy certain tests relating to the nature and diversification of its assets. First, at least 75% of the value of the Combined Company’s total assets must generally consist of:

• Cash or cash items, including certain receivables and shares in certain money market funds;

• Government securities;

• Interests in real property, including leaseholds and options to acquire real property and leaseholds;

• Interests in mortgage loans secured by real property, and interests in mortgage loans secured by both real property and personal property if the fair market value of such personal property does not exceed 15% of the total fair market value of all such property;

• Stock or shares of beneficial interest in other REITs;

• Investments in stock or debt instruments during theone-year period following its receipt of new capital that the Combined Company raises through equity offerings or public offerings of debt with at least a five-year term;

• debt instruments of publicly offered REITs; and

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• personal property leased in connection with a lease of real property for which the rent attributable to personal property is not greater than 15% of the total rent received under the lease.

Second, under the “5% asset test,” of the Combined Company’s assets that are not qualifying assets for purposes of the 75% asset test described above, the value of the Combined Company’s interest in any one issuer’s securities may not exceed 5% of the value of its total assets.

Third, of the Combined Company’s assets that are not qualifying assets for purposes of the 75% asset test described above, the Combined Company may not own more than 10% of the voting power of any one issuer’s outstanding securities, or the “10% vote test,” or more than 10% of the value of any one issuer’s outstanding securities, or the “10% value test.”

Fourth, no more than 20% (25% for taxable years beginning before December 31, 2017) of the value of the Combined Company’s total assets may consist of the securities of one or more TRSs.

Fifth, no more than 25% of the value of the Combined Company’s total assets may consist of the securities of TRSs and other assets that are not qualifying assets for purposes of the 75% asset test.

Sixth, not more than 25% of the value of the Combined Company’s total assets may be represented by debt instruments of “publicly offered REITs” to the extent those debt instruments are not secured by real property or an interest in real property.

For purposes of the 5% asset test, the 10% vote test and the 10% value test, the term “securities” does not include securities that qualify under the 75% asset test, securities of a TRS and equity interests in an entity taxed as a partnership for U.S. federal income tax purposes. For purposes of the 10% value test, the term “securities” also does not include: certain “straight debt” securities; any loan to an individual or an estate; most rental agreements and obligations to pay rent; any debt instrument issued by an entity taxed as a partnership for U.S. federal income tax purposes in which the Combined Company is an owner to the extent of its proportionate interest in the debt and equity securities of the entity; and any debt instrument issued by an entity taxed as a partnership for U.S. federal income tax purposes if at least 75% of the entity’s gross income, excluding income from prohibited transactions, is qualifying income for purposes of the 75% gross income test described above in “—Gross Income Tests.”

From time to time the Combined Company may own securities (including debt securities) of issuers that do not qualify as a REIT, a qualified REIT subsidiary or a TRS. The Combined Company intends that its ownership of any such securities will be structured in a manner that allows it to comply with the asset tests described above. The Combined Company believes that the assets that the Combined Company holds satisfy the foregoing asset test requirements. The Combined Company will not obtain, nor is the Combined Company required to obtain under the U.S. federal income tax laws, independent appraisals to support its conclusions as to the value of its assets and securities. Moreover, the values of some assets may not be susceptible to a precise determination. As a result, there can be no assurance that the IRS will not contend that its ownership of securities and other assets violates one or more of the asset tests applicable to REITs.

Failure to Satisfy Asset Tests.The Combined Company will monitor the status of its assets for purposes of the various asset tests and will manage its portfolio in order to comply at all times with such tests. Nevertheless, if the Combined Company fails to satisfy the asset tests at the end of a calendar quarter, it will not lose its REIT status if: (1) the Combined Company satisfied the asset tests at the end of the preceding calendar quarter; and (2) the discrepancy between the value of the Combined Company’s assets and the asset test requirements arose from changes in the market values of its assets and was not caused, in part or in whole, by the acquisition of one or morenon-qualifying assets. If the Combined Company did not satisfy the second condition described in the preceding sentence, the Combined Company still could avoid REIT disqualification by eliminating any discrepancy within 30 days after the close of the calendar quarter in which the discrepancy arose.

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In the event that the Combined Company violates the 5% asset test, the 10% vote test or the 10% value test described above, the Combined Company will not lose its REIT status if (1) the failure isde minimis(up to the lesser of 1% of its assets or $10 million) and (2) the Combined Company disposes of assets causing the failure or otherwise comply with the asset tests within six months after the last day of the quarter in which the Combined Company identifies such failure. In the event of a failure of any of such asset tests other than ade minimisfailure, as described in the preceding sentence, the Combined Company will not lose its REIT status if (1) the failure was due to reasonable cause and not to willful neglect, (2) the Combined Company files a description of each asset causing the failure with the IRS, (3) the Combined Company disposes of assets causing the failure or otherwise comply with the asset tests within six months after the last day of the quarter in which the Combined Company identifies the failure, and (4) the Combined Company pays a tax equal to the greater of $50,000 or the highest U.S. federal corporate income tax rate multiplied by the net income from thenon-qualifying assets during the period in which the Combined Company failed to satisfy the asset tests.

Annual Distribution Requirements

To maintain the Combined Company’s qualification as a REIT, each taxable year it is required to distribute dividends, other than capital gain dividends, to its stockholders in an amount at least equal to the sum of:

• 90% of its REIT taxable income; and

• 90% of itsafter-tax net income, if any, from foreclosure property; minus

• the excess of the sum of certain items ofnon-cash income over 5% of its REIT taxable income.

For these purposes, the Combined Company’s REIT taxable income is computed without regard to the dividends paid deduction and its net capital gain. In addition, for purposes of this test,non-cash income generally means income attributable to leveled stepped rents, original issue discount, cancellation of indebtedness, or a like-kind exchange that is later determined to be taxable.

The Combined Company generally must pay, or be treated as paying, the distributions described above in the taxable year to which they relate. Dividends declared during the last three months of the taxable year, payable to stockholders of record on a specified date during such period and paid during January of the following year, will be treated as paid by the Combined Company and received by its stockholders on December 31 of the year in which they are declared. Additionally, at the Combined Company’s election, a distribution will be treated as paid in a taxable year if it is declared before the Combined Company timely files its tax return for such year and paid on or before the first regular dividend payment after such declaration, provided such payment is made during the12-month period following the close of such year. These distributions are treated as received by the Combined Company’s stockholders in the year in which they are paid. This is so even though these distributions relate to the prior year for purposes of the 90% distribution requirement.

In order to be taken into account for purposes of the Combined Company’s distribution requirement, except as provided below, the amount distributed must not be preferential-i.e., every stockholder of the class of stock to which a distribution is made must be treated the same as every other stockholder of that class, and no class of stock may be treated other than according to its dividend rights as a class. This preferential limitation will not apply to distributions made by the Combined Company, provided it qualifies as a “publicly offered REIT.” STAR believes that it is, and expects the Combined Company will continue to be, a publicly offered REIT. However, Subsidiary REITs it may own from time to time may not be publicly offered REITs.

To the extent that the Combined Company does not distribute all of its net capital gain, or distributes at least 90%, but less than 100%, of its REIT taxable income, it will be required to pay regular U.S. federal corporate income tax on the undistributed amount. STAR believes that it has made, and the Combined Company intends to continue to make, timely distributions sufficient to satisfy these annual distribution requirements and to minimize its corporate tax obligations. In this regard, the partnership agreements of the Combined Company’s operating

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partnerships authorizes the Combined Company to take such steps as may be necessary to cause its operating partnerships to distribute to its partners an amount sufficient to permit the Combined Company to meet these distribution requirements and to minimize its corporate tax obligation.

Under some circumstances, the Combined Company may be able to rectify an inadvertent failure to meet the 90% distribution requirement for a year by paying “deficiency dividends” to its stockholders in a later year, which may be included in its deduction for dividends paid for the earlier year. In that case, the Combined Company may be able to avoid being taxed on amounts distributed as deficiency dividends, subject to the 4% excise tax described below. However, the Combined Company will be required to pay interest to the IRS based upon the amount of any deduction claimed for deficiency dividends. While the payment of a deficiency dividend will apply to a prior year for purposes of the Combined Company’s REIT distribution requirements, it will be treated as an additional distribution to the Combined Company’s stockholders in the year such dividend is paid. In addition, if a dividend the Combined Company has paid is treated as a preferential dividend, in lieu of treating the dividend as not counting toward satisfying the 90% distribution requirement, the IRS may provide a remedy to cure such failure if the IRS determines that such failure is (or is of a type that is) inadvertent or due to reasonable cause and not due to willful neglect.

Furthermore, the Combined Company will be required to pay a 4% excise tax to the extent it fails to distribute during each calendar year at least the sum of 85% of its ordinary income for such year, 95% of its capital gain net income for the year and any undistributed taxable income from prior periods. Any ordinary income and net capital gain on which corporate income tax is imposed for any year is treated as an amount distributed during that year for purposes of calculating this excise tax.

STAR expects that the Combined Company’s REIT taxable income will be less than its cash flow because of depreciation and othernon-cash charges included in computing REIT taxable income. Accordingly, STAR anticipates that the Combined Company generally will have sufficient cash or liquid assets to enable it to satisfy the distribution requirements described above. However, from time to time, the Combined Company may not have sufficient cash or other liquid assets to meet these distribution requirements due to timing differences between the actual receipt of income and actual payment of deductible expenses, and the inclusion of income and deduction of expenses in determining its taxable income. In addition, the Combined Company may decide to retain its cash, rather than distribute it, in order to repay debt or for other reasons. If these timing differences occur, the Combined Company may borrow funds to pay dividends or pay dividends in the form of taxable stock distributions in order to meet the distribution requirements, while preserving its cash.

Like-Kind Exchanges

The Combined Company may dispose of real property that is not held primarily for sale in transactions intended to qualify as like-kind exchanges under the Code. Such like-kind exchanges are intended to result in the deferral of gain for U.S. federal income tax purposes. The failure of any such transaction to qualify as a like-kind exchange could require the Combined Company to pay U.S. federal income tax, possibly including the 100% prohibited transaction tax, or deficiency dividends, depending on the facts and circumstances surrounding the particular transaction.

Foreclosure Property

The foreclosure property rules permit the Combined Company (by its election) to foreclose or repossess properties without being disqualified as a REIT as a result of receiving income that does not qualify under the gross income tests. However, in such a case, the Combined Company would be subject to the U.S. federal corporate income tax on the netnon-qualifying income from “foreclosure property,” and theafter-tax amount would increase the dividends it would be required to distribute to stockholders. See “—Annual Distribution Requirements.” This corporate tax would not apply to income that qualifies under the REIT 75% income test.

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Foreclosure property treatment will end on the first day on which the Combined Company enters into a lease of the applicable property that will give rise to income that does not qualify under the REIT 75% income test, but will not end if the lease will give rise only to qualifying income under such test. Foreclosure property treatment also will end if any construction takes place on the property (other than completion of a building or other improvement that was more than 10% complete before default became imminent). Foreclosure property treatment (other than for qualified health care property) is available for an initial period of three years and may, in certain circumstances, be extended for an additional three years. Foreclosure property treatment for qualified health care property is available for an initial period of two years and may, in certain circumstances, be extended for an additional four years.

Failure to Qualify

If the Combined Company discovers a violation of a provision of the Code that would result in its failure to qualify as a REIT, certain specified cure provisions may be available to it. Except with respect to violations of the gross income tests and asset tests (for which the cure provisions are described above), and provided the violation is due to reasonable cause and not due to willful neglect, these cure provisions generally impose a $50,000 penalty for each violation in lieu of a loss of REIT status. If the Combined Company fails to satisfy the requirements for taxation as a REIT in any taxable year, and the relief provisions do not apply, it will be required to pay regular U.S. federal corporate income tax, including any applicable alternative minimum tax for taxable years beginning before January 1, 2018, on its taxable income. Distributions to stockholders in any year in which the Combined Company fails to qualify as a REIT will not be deductible by it. As a result, STAR anticipates that the Combined Company’s failure to qualify as a REIT would reduce the cash available for distribution by it to its stockholders. In addition, if the Combined Company fails to qualify as a REIT, it will not be required to distribute any amounts to its stockholders and all distributions to stockholders will be taxable as regular corporate dividends to the extent of its current and accumulated earnings and profits. In such event, corporate distributees may be eligible for the dividends-received deduction. In addition,non-corporate stockholders, including individuals, may be eligible for the preferential tax rates on qualified dividend income.Non-corporate stockholders, including individuals, generally may deduct up to 20% of dividends from a REIT, other than capital gain dividends and dividends treated as qualified dividend income, for taxable years beginning after December 31, 2017 and before January 1, 2026. If the Combined Company fails to qualify as a REIT, such stockholders may not claim this deduction with respect to dividends paid by it. Unless entitled to relief under specific statutory provisions, the Combined Company would also be ineligible to elect to be treated as a REIT for the four taxable years following the year for which it loses its qualification. It is not possible to state whether in all circumstances the Combined Company would be entitled to this statutory relief.

Tax Aspects of the Combined Company’s Ownership of Interests in Entities Taxable as Partnerships

The Combined Company may own two or more operating partnerships, including STAR III OP, STAR OP and SIR OP. Each of STAR III OP and SIR OP is treated as a partnership for U.S. federal tax purposes. The following discussion summarizes the material U.S. federal income tax considerations that are applicable to our direct and indirect investments in entities that are treated as partnerships for U.S. federal income tax purposes. The following discussion does not address state or local tax laws or any U.S. federal tax laws other than income tax laws.

Classification as Partnerships

We are required to include in our income our distributive share of each partnership’s income and are allowed to deduct our distributive share of each partnership’s losses, but only if the partnership is classified for U.S. federal income tax purposes as a partnership rather than as a corporation or an association treated as a corporation. An unincorporated entity with at least two owners, as determined for U.S. federal income tax purposes, will be classified as a partnership, rather than as a corporation, for U.S. federal income tax purposes if it: (1) is treated as a partnership under the Treasury Regulations relating to entity classification, or the“check-the-box regulations”; and (2) is not a “publicly traded partnership.”

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Under thecheck-the-box regulations, an unincorporated entity with at least two owners may elect to be classified either as an association treated as a corporation or as a partnership for U.S. federal income tax purposes. If such an entity does not make an election, it generally will be taxed as a partnership for U.S. federal income tax purposes. Each of STAR III OP and SIR OP intends to be classified as a partnership for U.S. federal income tax purposes and will not elect to be treated as an association treated as a corporation.

A publicly traded partnership is a partnership whose interests are traded on an established securities market or are readily tradable on a secondary market or the substantial equivalent thereof. A publicly traded partnership generally is treated as a corporation for U.S. federal income tax purposes, but will not be so treated if, for each taxable year beginning after December 31, 1987 in which it was classified as a publicly traded partnership, at least 90% of the partnership’s gross income consisted of specified passive income, including real property rents, gains from the sale or other disposition of real property, interest, and dividends, or the “90% passive income exception.” The Treasury Regulations provide limited safe harbors from treatment as a publicly traded partnership. Pursuant to one of those safe harbors, interests in a partnership will not be treated as readily tradable on a secondary market or the substantial equivalent thereof if (1) all interests in the partnership were issued in a transaction or transactions that were not required to be registered under the Securities Act, and (2) the partnership does not have more than 100 partners at any time during the partnership’s taxable year. In determining the number of partners in a partnership, a person owning an interest in a partnership, grantor trust, or S corporation that owns an interest in the partnership is treated as a partner in the partnership only if (1) substantially all of the value of the owner’s interest in the entity is attributable to the entity’s direct or indirect interest in the partnership and (2) a principal purpose of the use of the entity is to permit the partnership to satisfy the100-partner limitation. If any partnership does not qualify for any safe harbor and is treated as a publicly traded partnership, we believe that such partnership would have sufficient qualifying income to satisfy the 90% passive income exception and, therefore, would not be treated as a corporation for U.S. federal income tax purposes.

We have not requested, and do not intend to request, a ruling from the IRS that any of our subsidiary partnerships, including STAR III OP and SIR OP, is or will be classified as a partnership for U.S. federal income tax purposes. If, for any reason, a subsidiary partnership were treated as a corporation, rather than as a partnership, for U.S. federal income tax purposes, we may not be able to qualify as a REIT, unless we qualify for certain statutory relief provisions. See “—Gross Income Tests” and “—Asset Tests.” In addition, any change in a subsidiary partnership’s status for U.S. federal income tax purposes might be treated as a taxable event, in which case we might incur tax liability without any related cash distribution. See “—Annual Distribution Requirements.” Further, items of income and deduction of the subsidiary partnership would not pass through to us, and we would be treated as a shareholder for U.S. federal income tax purposes. Consequently, the subsidiary partnership would be required to pay income tax at U.S. federal corporate income tax rates on its net income, and distributions to us would constitute dividends that would not be deductible in computing the partnership’s taxable income.

Allocations of Income, Gain, Loss and Deduction

Although a partnership agreement (or limited liability company agreement) generally will determine the allocation of income and losses among partners, the allocations will be disregarded for tax purposes if they do not comply with the provisions of the U.S. federal income tax laws governing partnership allocations. If an allocation is not recognized for U.S. federal income tax purposes, the item subject to the allocation will be reallocated in accordance with the partners’ interests in the partnership, which will be determined by taking into account all of the facts and circumstances relating to the economic arrangement of the partners with respect to such item.

Tax Allocations With Respect to Contributed Properties

Under Section 704(c) of the Code, income, gain, loss and deduction attributable to appreciated or depreciated property that is contributed to a partnership in exchange for an interest in the partnership must be allocated in a manner so that the contributing partner is charged with the unrealized gain or benefits from the

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unrealized loss associated with the property at the time of the contribution. The amount of the unrealized gain or unrealized loss generally is equal to the difference between the fair market value or book value and the adjusted tax basis of the contributed property at the time of contribution (this difference is referred to as abook-tax difference), as adjusted from time to time. These allocations are solely for U.S. federal income tax purposes and do not affect the book capital accounts or other economic or legal arrangements among the partners.

STAR III OP and SIR OP may, from time to time, acquire interests in property in exchange for interests in the acquiring operating partnership. In that case, the tax basis of these property interests generally will carry over to the acquiring operating partnership, notwithstanding their different book (i.e., fair market) value. The partnership agreement requires that income and loss allocations with respect to these properties be made in a manner consistent with Section 704(c) of the Code. Treasury Regulations issued under Section 704(c) of the Code provide partnerships with a choice of several methods of accounting forbook-tax differences. Depending on the method the Combined Company chooses or has agreed to in connection with any particular contribution, the carryover basis of each of the contributed interests in the properties in the hands of the operating partnerships (1) could cause the Combined Company to be allocated lower amounts of depreciation deductions for tax purposes than would be allocated to it if any of the contributed properties were to have a tax basis equal to its respective fair market value at the time of the contribution and (2) could cause the Combined Company to be allocated taxable gain in the event of a sale of such contributed interests or properties in excess of the economic or book income allocated to it as a result of such sale, with a corresponding benefit to the other partners in the Combined Company’s operating partnerships. An allocation described in clause (2) above might cause the Combined Company or the other partners to recognize taxable income in excess of cash proceeds in the event of a sale or other disposition of property, which might adversely affect the Combined Company’s ability to comply with the REIT distribution requirements. See “—Taxation of the Combined Company—Requirements for Qualification as a REIT” and “—Annual Distribution Requirements.”

Any property acquired by STAR III OP or SIR OP in a taxable transaction will initially have a tax basis equal to its fair market value, and Section 704(c) of the Code generally will not apply.

Partnership Audit Rules

The Bipartisan Budget Act of 2015 changed the rules applicable to U.S. federal income tax audits of partnerships. Under the new rules (which are generally effective for taxable years beginning after December 31, 2017), among other changes and subject to certain exceptions, any audit adjustment to items of income, gain, loss, deduction, or credit of a partnership (and any partner’s distributive share thereof) is determined, and taxes, interest, or penalties attributable thereto are assessed and collected, at the partnership level. Although it is uncertain how certain aspects of these new rules will be implemented, it is possible that they could result in partnerships in which the Combined Company directly or indirectly invests, including STAR III OP and SIR OP, being required to pay additional taxes, interest and penalties as a result of an audit adjustment, and the Combined Company, as a direct or indirect partner of these partnerships, could be required to bear the economic burden of those taxes, interest, and penalties even though the Combined Company, as a REIT, may not otherwise have been required to pay additional corporate-level taxes as a result of the related audit adjustment. The changes created by these new rules are sweeping and in many respects dependent on the promulgation of future regulations or other guidance by the U.S. Department of the Treasury. Investors are urged to consult their tax advisors with respect to these changes and their potential impact on their investment in the Combined Company’s common stock.

Material U.S. Federal Income Tax Consequences to Holders of the Combined Company’s Common Stock

The following summary describes the principal United States federal income tax consequences to you of purchasing, owning and disposing of the Combined Company’s common stock. You should consult your tax advisors concerning the application of United States federal income tax laws to your particular situation as well as any consequences of the acquisition, ownership and disposition of the Combined Company’s common stock arising under the laws of any state, local or foreign taxing jurisdiction.

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Taxation of Taxable U.S. Holders of the Combined Company’s Common Stock

Distributions Generally.If the Combined Company qualifies as a REIT, distributions made out of its current or accumulated earnings and profits that it does not designate as capital gain dividends will be ordinary dividend income to taxable U.S. holders when actually or constructively received. A corporate U.S. holder will not qualify for the dividends-received deduction generally available to corporations. Ordinary dividends paid by the Combined Company also generally will not qualify for the preferential long-term capital gain tax rate applicable to “qualified dividends” unless certain holding period requirements are met and such dividends are attributable to (i) qualified dividends received by the Combined Company fromnon-REIT corporations, such as any TRSs, or (ii) income recognized by the Combined Company and on which the Combined Company has paid U.S. federal corporate income tax. The Combined Company does not expect a meaningful portion of its ordinary dividends to be eligible for taxation as qualified dividends. However, under the Tax Act, for taxable years beginning after December 31, 2017 and before January 1, 2026, stockholders that are individuals, trusts or estates generally may deduct up to 20% of certain qualified business income, including “qualified REIT dividends” (generally, dividends received by a REIT shareholder that are not designated as capital gain dividends or qualified dividend income), subject to certain limitations.

Any distribution declared by the Combined Company in October, November or December of any year on a specified date in any such month shall be treated as both paid by the Combined Company and received by the Combined Company’s stockholders on December 31 of that year, provided that the distribution is actually paid by the Combined Company no later than January 31 of the following year. Distributions made by the Combined Company in excess of accumulated earnings and profits will be treated as a nontaxable return of capital to the extent of a U.S. holder’s basis and will reduce the basis of the U.S. holder’s shares. Any distributions by the Combined Company in excess of accumulated earnings and profits and in excess of a U.S. holder’s basis in the U.S. holder’s shares of the Combined Company stock will be treated as gain from the sale of such shares. See “Dispositions of the Combined Company’s Common Stock” below.

Capital Gain Dividends.Distributions to U.S. holders that the Combined Company properly designates as capital gain dividends will be taxed as long term capital gains (to the extent they do not exceed the Combined Company’s actual net capital gain for the taxable year), without regard to the period for which a U.S. holder held the Combined Company’s shares. However, U.S. holders that are corporations may be required to treat up to 20% of certain capital gain dividends as ordinary income.

Retention of Net Capital Gains. If the Combined Company elects to retain and pay income tax on any net long-term capital gain, each of the Combined Company’s U.S. holders would include in income, aslong-term capital gain, its proportionate share of this net long-term capital gain. Each of the Combined Company’s U.S. holders would also receive a refundable tax credit for its proportionate share of the tax paid by the Combined Company on such retained capital gains and increase the basis of its shares of the Combined Company’s stock in an amount equal to the amount of includable capital gains reduced by the share of refundable tax credit.

Dispositions of the Combined Company’s Common Stock.If a U.S. holder sells or disposes of shares of the Combined Company’s common stock, the holder will recognize gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the amount of cash and the fair market value of any property received on the sale or other disposition and the holder’s adjusted tax basis in the shares. This gain or loss, except as provided below, will be long-term capital gain or loss if the holder has held such common stock for more than one year. However, if a U.S. holder recognizes a loss upon the sale or other disposition of common stock that it has held for six months or less, after applying certain holding period rules, the loss recognized will be treated as a long-term capital loss to the extent the U.S. holder received distributions from the Combined Company which were required to be treated as long-term capital gains.

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Taxation ofTax-Exempt Holders of the Combined Company’s Common Stock

Tax-exempt entities are generally exempt from U.S. federal income taxation. However, they are subject to taxation on their unrelated business taxable income, which we refer to as UBTI. Distributions made by the Combined Company and gain arising upon a sale of shares of the Combined Company’s common stock generally should not be UBTI to atax-exempt holder, except as described below. This income or gain will be UBTI, however, to the extent atax-exempt holder holds its shares as “debt-financed property” within the meaning of the Code. Generally, “debt-financed property” is property the acquisition or holding of which was financed through a borrowing by thetax-exempt holder.

Fortax-exempt holders that are social clubs, voluntary employee benefit associations or supplemental unemployment benefit trusts exempt from U.S. federal income taxation under Sections 501(c)(7), (c)(9) or (c)(17) of the Code, respectively, income from an investment in the Combined Company’s shares will constitute UBTI unless the organization is able to properly claim a deduction for amounts set aside or placed in reserve for specific purposes so as to offset the income generated by its investment in the Combined Company’s shares. These prospective investors should consult their tax advisors concerning these “set aside” and reserve requirements.

Notwithstanding the above, however, a portion of the dividends paid by a “pension-held REIT” may be treated as UBTI as to certain trusts that hold more than 10%, by value, of the interests in the REIT. A REIT will not be a “pension-held REIT” if it is able to satisfy the “not closely held” requirement without relying on the “look-through” exception with respect to certain trusts or if such REIT is not “predominantly held” by “qualified trusts.” As a result of restrictions on ownership and transfer of the Combined Company’s stock contained in the Combined Company’s charter, STAR does not expect the Combined Company to be classified as a “pension-held REIT,” and as a result, the tax treatment described above should be inapplicable to its holders.

Taxation ofNon-U.S. Holders of the Combined Company’s Common Stock

The rules governingnon-U.S. holders are complex, and no attempt is made herein to provide more than a brief summary of such rules. The Combined Company urgesnon-U.S. holders to consult their tax advisors to determine the impact of U.S. federal, state, local andnon-U.S. income and other tax laws and any applicable tax treaty on the acquisition, ownership and disposition of shares of its common stock, including any reporting requirements.

Distributions Generally.Distributions made by the Combined Company tonon-U.S. holders that are not attributable to gains from sales or exchanges by the Combined Company of United States real property interests, or USRPIs, and that are not designated by the Combined Company as capital gain dividends will be treated as ordinary dividends to the extent that they are made out of the Combined Company’s current or accumulated earnings and profits. Such distributions ordinarily will be subject to withholding of U.S. federal income tax at a 30% rate on the gross amount of the dividend paid, unless reduced or eliminated by an applicable income tax treaty. The Combined Company expects to withhold U.S. federal income tax at the rate of 30% on the gross amount of any such dividends paid to anon-U.S. holder unless a lower treaty rate applies and thenon-U.S. holder has filed an applicable IRS FormW-8 with STAR or the Combined Company, certifying thenon-U.S. holder’s entitlement to treaty benefits.

If the investment in the Combined Company stock is treated as effectively connected with the conduct by thenon-U.S. holder of a U.S. trade or business, thenon-U.S. holder generally will be subject to a tax at the rates applicable to ordinary income, in the same manner as a U.S. holders is taxed with respect to ordinary dividend income (and also may be subject to the 30% branch profits tax in the case of anon-U.S. holder that is a foreign corporation that is not entitled to any treaty exemption). In general, anon-U.S. holder will not be considered to be engaged in a U.S. trade or business solely as a result of its ownership of STAR stock unless suchnon-U.S. holder has filed an IRS FormW-8ECI with STAR or the Combined Company.

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Distributions in excess of the Combined Company’s current and accumulated earnings and profits will not be taxable to anon-U.S. holder to the extent that such distributions do not exceed the adjusted tax basis of the holder’s common stock. Instead, the excess portion of such distribution will reduce thenon-U.S. holder’s tax basis in its Combined Company stock. To the extent that such distributions exceed thenon-U.S. holder’s adjusted tax basis in such common stock, they generally will give rise to gain from the sale or exchange of such stock, the tax treatment of which is described below. However, such excess distributions may be treated as dividend income for certainnon-U.S. holders. For withholding purposes, STAR expects the Combined Company to treat all distributions as made out of its current or accumulated earnings and profits. However, amounts withheld may be refundable if it is subsequently determined that the distribution was, in fact, in excess of the Combined Company’s current and accumulated earnings and profits, provided that certain conditions are met.

Capital Gain Dividends and Distributions Attributable to a Sale or Exchange of United States Real Property Interests.Distributions to anon-U.S. holder that the Combined Company properly designates as capital gain dividends, other than those arising from the disposition of a USRPI, generally should not be subject to U.S. federal income taxation, unless:

• the investment in the Combined Company’s common stock is treated as effectively connected with the conduct by thenon-U.S. holder of a trade or business within the United States (and, if required by an applicable income tax treaty, thenon-U.S. holder maintains a permanent establishment in the United States to which such dividends are attributable), in which case thenon-U.S. holder will be subject to the same treatment as U.S. holders with respect to such gain, except that anon-U.S. holder that is a corporation may also be subject to a branch profits tax of up to 30%, as discussed above; or

• thenon-U.S. holder is a nonresident alien individual who is present in the United States for 183 days or more during the taxable year and certain other conditions are met, in which case thenon-U.S. holder will be subject to U.S. federal income tax at a rate of 30% on thenon-U.S. holder’s capital gains (or such lower rate specified by an applicable income tax treaty), which may be offset by U.S. source capital losses of suchnon-U.S. holder (even though the individual is not considered a resident of the United States), provided thenon-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses.

Pursuant to FIRPTA, distributions to anon-U.S. holder that are attributable to gain from sales or exchanges by the Combined Company of USRPIs, whether or not designated as capital gain dividends, will cause thenon-U.S. holder to be treated as recognizing such gain as income effectively connected with a U.S. trade or business.Non-U.S. holders generally would be taxed at the regular graduated rates applicable to U.S. holders, subject to any applicable alternative minimum tax and a special alternative minimum tax in the case of nonresident alien individuals. The Combined Company also will be required to withhold and to remit to the IRS 21% of any distribution tonon-U.S. holders attributable to gain from sales or exchanges by the Combined Company of USRPIs. Distributions subject to FIRPTA may also be subject to a 30% branch profits tax in the hands of anon-U.S. holder that is a corporation. The amount withheld is creditable against thenon-U.S. holder’s U.S. federal income tax liability. However, distributions to certainnon-U.S. publicly traded shareholders that meet certain record-keeping and other requirements (“qualified shareholders”) are exempt from FIRPTA, except to the extent owners of such qualified shareholders that are not also qualified shareholders own, actually or constructively, more than 10% of the Combined Company’s capital stock. Furthermore, distributions to “qualified foreign pension funds” or entities all of the interests of which are held by “qualified foreign pension funds” are exempt from FIRPTA.Non-U.S. holders should consult their tax advisors regarding the application of these rules.

Retention of Net Capital Gains.Although the law is not clear on the matter, it appears that amounts the Combined Company designates as retained net capital gains in respect of its common stock should be treated with respect tonon-U.S. holders as actual distributions of capital gain dividends. Under this approach, thenon-U.S. holders may be able to offset as a credit against their U.S. federal income tax liability their proportionate share of the tax paid by the Combined Company on such retained net capital gains and to receive from the IRS a refund to the extent their proportionate share of such tax paid by the Combined Company exceeds their actual U.S. federal income tax liability. If the Combined Company were to designate any portion of its net

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capital gain as retained net capital gain,non-U.S. holders should consult their tax advisors regarding the taxation of such retained net capital gain.

Dispositions of the Combined Company’s Common Stock.Gain realized by anon-U.S. holder upon the sale, exchange or other taxable disposition of the Combined Company’s common stock generally will not be subject to U.S. federal income tax unless such stock constitutes a USRPI. The Combined Company’s common stock will not constitute a USRPI so long as it is a “domestically controlled qualified investment entity.” A “domestically controlled qualified investment entity” includes a REIT in which at all times during a five-year testing period less than 50% in value of its stock is held directly or indirectly bynon-United States persons, subject to certain rules. STAR believes, but cannot guarantee, that the Combined Company will be a “domestically controlled qualified investment entity.”

In addition, dispositions of the Combined Company’s common stock by qualified shareholders are exempt from FIRPTA, except to the extent owners of such qualified shareholders that are not also qualified shareholders own, actually or constructively, more than 10% of the Combined Company’s capital stock. Furthermore, dispositions of the Combined Company’s common stock by “qualified foreign pension funds” or entities all of the interests of which are held by “qualified foreign pension funds” are exempt from FIRPTA.Non-U.S. holders should consult their tax advisors regarding the application of these rules.

Notwithstanding the foregoing, gain from the sale, exchange or other taxable disposition of the Combined Company’s common stock not otherwise subject to FIRPTA will be taxable to anon-U.S. holder if either:

• the gain is treated as effectively connected with the conduct by thenon-U.S. holder of a trade or business within the United States (and, if required by an applicable income tax treaty, thenon-U.S. holder maintains a permanent establishment in the United States to which such gain is attributable), in which case thenon-U.S. holder will be subject to the same treatment as U.S. holders with respect to such gain, except that anon-U.S. holder that is a corporation may also be subject to the 30% branch profits tax (or such lower rate as may be specified by an applicable income tax treaty) on such gain, as adjusted for certain items; or

• thenon-U.S. holder is a nonresident alien individual who is present in the United States for 183 days or more during the taxable year and certain other conditions are met, in which case thenon-U.S. holder will be subject to a 30% tax on its capital gains (or such lower rate specified by an applicable income tax treaty).

If gain on the sale, exchange or other taxable disposition of the Combined Company’s common stock were subject to taxation under FIRPTA, thenon-U.S. holder would be required to file a U.S. federal income tax return and would be subject to regular U.S. federal income tax with respect to such gain in the same manner as a taxable U.S. holder (subject to any applicable alternative minimum tax and a special alternative minimum tax in the case of nonresident alien individuals). In addition, if the sale, exchange or other taxable disposition of the Combined Company’s common stock were subject to taxation under FIRPTA, the purchaser of such common stock generally would be required to withhold and remit to the IRS 15% of the purchase price.

Information Reporting and Backup Withholding

U.S. Holders

The Combined Company will report to its U.S. holders and to the IRS the amount of distributions paid during each calendar year and the amount of tax withheld, if any, with respect thereto.A U.S. holder may be subject to information reporting and backup withholding when such holder receives payments on the Combined Company’s common stock or proceeds from the sale or other taxable disposition of such stock. Certain U.S. holders are exempt from backup withholding, including corporations and certaintax-exempt organizations. A U.S. holder will be subject to backup withholding if such holder is not otherwise exempt and:

• the holder fails to furnish the holder’s taxpayer identification number, which for an individual is ordinarily his or her social security number;

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• the holder furnishes an incorrect taxpayer identification number;

• the applicable withholding agent is notified by the IRS that the holder previously failed to properly report payments of interest or dividends; or

• the holder fails to certify under penalties of perjury that the holder has furnished a correct taxpayer identification number and that the IRS has not notified the holder that the holder is subject to backup withholding.

A holder who does not provide the Combined Company with its correct taxpayer identification number also may be subject to penalties imposed by the IRS. Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a U.S. holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS. U.S. holders should consult their tax advisors regarding their qualification for an exemption from backup withholding and the procedures for obtaining such an exemption.

Non-U.S. Holders

Payments of dividends on the Combined Company’s common stock generally will not be subject to backup withholding, provided the applicable withholding agent does not have actual knowledge or reason to know the holder is a United States person and the holder either certifies itsnon-U.S. status, such as by furnishing a valid IRS FormW-8BEN,W-8BEN-E orW-8ECI, or otherwise establishes an exemption. However, information returns are required to be filed with the IRS in connection with any dividends on the Combined Company’s common stock paid to thenon-U.S. holder, regardless of whether any tax was actually withheld. In addition, proceeds of the sale or other taxable disposition of such stock within the United States or conducted through certain U.S.-related brokers generally will not be subject to backup withholding or information reporting, if the applicable withholding agent receives the certification described above and does not have actual knowledge or reason to know that such holder is a United States person, or the holder otherwise establishes an exemption. Proceeds of a disposition of such stock conducted through anon-U.S. office of anon-U.S. broker generally will not be subject to backup withholding or information reporting.

Copies of information returns that are filed with the IRS may also be made available under the provisions of an applicable treaty or agreement to the tax authorities of the country in which thenon-U.S. holder resides or is established.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against anon-U.S. holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.

Medicare Contribution Tax on Unearned Income

Certain U.S. holders that are individuals, estates or trusts are required to pay an additional 3.8% tax on, among other things, dividends on stock and capital gains from the sale or other disposition of stock, subject to certain limitations. U.S. holders should consult their tax advisors regarding the effect, if any, of these rules on their ownership and disposition of the Combined Company’s common stock.

Additional Withholding Tax on Payments Made to Foreign Accounts

Withholding taxes may be imposed under Sections 1471 to 1474 of the Code (such sections commonly referred to as the Foreign Account Tax Compliance Act, or FATCA) on certain types of payments made tonon-U.S. financial institutions and certain othernon-U.S. entities. Specifically, a 30% withholding tax may be imposed on dividends on the Combined Company’s common stock or gross proceeds from the sale or other disposition of the Combined Company’s common stock, in each case paid to a “foreign financial institution” or a

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“non-financial foreign entity” (each as defined in the Code), unless (1) the foreign financial institution undertakes certain diligence and reporting obligations, (2) thenon-financial foreign entity either certifies it does not have any “substantial United States owners” (as defined in the Code) or furnishes identifying information regarding each substantial United States owner, or (3) the foreign financial institution ornon-financial foreign entity otherwise qualifies for an exemption from these rules. If the payee is a foreign financial institution and is subject to the diligence and reporting requirements in clause (1) above, it must enter into an agreement with the U.S. Department of the Treasury requiring, among other things, that it undertake to identify accounts held by certain “specified United States persons” or “United States owned foreign entities” (each as defined in the Code), annually report certain information about such accounts, and withhold 30% on certain payments tonon-compliant foreign financial institutions and certain other account holders. Foreign financial institutions located in jurisdictions that have an intergovernmental agreement with the United States governing FATCA may be subject to different rules.

Under the applicable Treasury Regulations and administrative guidance, withholding under FATCA generally applies to payments of dividends on the Combined Company’s common stock and to payments of gross proceeds from a sale or redemption of the Combined Company’s common stock. However, under recently proposed Treasury Regulations that may be relied on pending finalization, the withholding tax on gross proceeds would be eliminated and, consequently, FATCA withholding on gross proceeds is not currently expected to apply. Because the Combined Company may not know the extent to which a distribution is a dividend for U.S. federal income tax purposes at the time it is made, for purposes of these withholding rules it may treat the entire distribution as a dividend.

Prospective investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment in the Combined Company’s common stock.

Other Tax Consequences

State, local andnon-U.S. income tax laws may differ substantially from the corresponding U.S. federal income tax laws, and this discussion does not purport to describe any aspect of the tax laws of any state, local ornon-U.S. jurisdiction, or any U.S. federal tax other than the income tax. You should consult your tax advisor regarding the effect of state, local andnon-U.S. tax laws with respect to the Combined Company’s tax treatment as a REIT and on an investment in the Combined Company’s common stock.

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ACCOUNTING TREATMENT

STAR prepares its financial statements in accordance with U.S. generally accepted accounting principles, which we refer to as GAAP. The STAR III Merger will be accounted for by using the business combination accounting rules, which requires the application of a screen test to evaluate if substantially all the fair value of the acquired properties is concentrated in a single identifiable asset or group of similar identifiable assets to determine whether a transaction is accounted for as an asset acquisition or business combination. In addition, the rules require the identification of the acquirer; the determination of the acquisition date; the determination of the fair value of consideration; and the recognition and measurement, at relative fair value, of the identifiable assets acquired, liabilities assumed and any noncontrolling interest in the consolidated subsidiaries of the acquiree. After consideration of all applicable factors pursuant to the business combination accounting rules, the STAR III Merger will be treated as an asset acquisition under GAAP.

ISSUANCE OF SHARES IN THE STAR III MERGER

STAR will appoint DST Systems, Inc. as the exchange agent to record the issuance on the stock records of STAR of the amount of STAR Common Stock equal to the merger consideration that is issuable to each holder of shares of STAR III Common Stock (including any fractional shares thereof). Shares of STAR Common Stock issuable as merger consideration in exchange for shares of STAR III Common Stock will be in uncertificated book-entry form.

STAR stockholders need not take any action with respect to their book-entry shares.

DISTRIBUTIONS

The STAR III Merger Agreement permits each of STAR III and STAR to continue to pay distributions to their respective stockholders in the ordinary course of business. The payment of distributions will be coordinated by STAR III and STAR so that if either STAR III stockholders or STAR stockholders receive a regular distribution for any particular period prior to the closing of the STAR III Merger, the stockholders of the other company will also receive a distribution for the same period.

DEREGISTRATION OF STAR III COMMON STOCK

If the STAR III Merger is completed, STAR III Common Stock will be deregistered under the Exchange Act, and STAR III will no longer file periodic reports with the SEC.

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THE STAR III MERGER AGREEMENT

This section of this proxy statement/prospectus summarizes the material provisions of the STAR III Merger Agreement, which is attached as Annex A to this proxy statement/prospectus. This summary is qualified in its entirety by reference to Annex A. As a stockholder, you are not a third party beneficiary of the STAR III Merger Agreement and therefore you may not directly enforce any of its terms and conditions.

This summary may not contain all of the information about the STAR III Merger Agreement that is important to you. STAR III and STAR urge you to carefully read the full text of the STAR III Merger Agreement because it is the legal document that governs the STAR III Merger. The STAR III Merger Agreement is not intended to provide you with any factual information about STAR III or STAR. In particular, the assertions embodied in the representations and warranties contained in the STAR III Merger Agreement (and summarized below) are qualified by information that each of STAR III and STAR filed with the SEC prior to the effective date of the STAR III Merger Agreement, as well as by certain disclosure letters each of the parties delivered to the other in connection with the signing of the STAR III Merger Agreement, which modify, qualify and create exceptions to the representations and warranties set forth in the STAR III Merger Agreement. Moreover, some of those representations and warranties may not be accurate or complete as of any specified date, may apply contractual standards of materiality in a way that is different from what may be viewed as material by investors or that is different from standards of materiality generally applicable under the U.S. federal securities laws or may not be intended as statements of fact, but rather as a way of allocating risk among the parties to the STAR III Merger Agreement. The representations and warranties and other provisions of the STAR III Merger Agreement and the description of such provisions in this proxy statement/prospectus should not be read alone but instead should be read in conjunction with the other information contained in the reports, statements and filings that each of STAR III and STAR files with the SEC and the other information in this proxy statement/prospectus. See “Where You Can Find More Information” on page 223.

STAR III and STAR acknowledge that, notwithstanding the inclusion of the foregoing cautionary statements, each of them is responsible for considering whether additional specific disclosures of material information regarding material contractual provisions are required to make the statements in this proxy statement/prospectus not misleading. STAR III and STAR III OP are collectively referred to herein as the STAR III parties, and STAR, Merger Sub and STAR OP, are collectively referred to herein as the STAR parties.

Form, Effective Time and Closing of the STAR III Merger

The STAR III Merger Agreement provides for the combination of STAR III and STAR through the merger of STAR III with and into Merger Sub, with Merger Sub surviving the STAR III Merger as the Surviving Entity upon the terms and subject to the conditions set forth in the STAR III Merger Agreement. The STAR III Merger will become effective at such time as the articles of merger (“Articles of Merger”) are accepted for record by the State Department of Assessments and Taxation of Maryland (“SDAT”) or on such later date and time agreed to by STAR III and STAR and specified in the articles of merger (not to exceed thirty days from the date the articles of merger are accepted for record by the SDAT).

The STAR III Merger Agreement provides that the closing of the STAR III Merger will take place at 10:00 a.m. Eastern time no later than the third business day following the date on which the last of the conditions to closing of the STAR III Merger described under “—Conditions to Completion of the STAR III Merger” have been satisfied or waived (other than the conditions that by their terms are required to be satisfied and waived at the closing, but subject to the satisfaction or waiver of such conditions) or such other date as agreed to by STAR III and STAR.

Consideration to be Received in the STAR III Merger

If the STAR III Merger is completed, then at the effective time of the STAR III Merger, each share of STAR III Common Stock, or fraction thereof, issued and outstanding immediately prior to the effective time of

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the STAR III Merger will be automatically converted into the right to receive 1.430 shares of STAR Common Stock (or fraction thereof) (the “Merger Consideration”). The cancellation and conversion of the shares of STAR III Common Stock into the right to receive the STAR III Merger Consideration will occur automatically at the effective time of the STAR III Merger. In accordance with the STAR III Merger Agreement, STAR will appoint DST Systems, Inc. as the transfer agent to record the issuance on the stock records of STAR of the amount of STAR Common Stock equal to the stock consideration that is issuable to each holder of shares of STAR III Common Stock (including any fractional shares thereof).

No Appraisal Rights

No dissenters’ or appraisal rights, or rights of objecting stockholders under Title 3, Subtitle 2 of the MGCL, will be available to holders of STAR III Common Stock with respect to the STAR III Merger pursuant to the STAR III Merger Agreement.

Representations and Warranties

The STAR III Merger Agreement contains a number of representations and warranties made by each of the STAR III Parties and STAR Parties. The representations and warranties were made by the respective parties as of the date of the STAR III Merger Agreement and do not survive the effective time of the STAR III Merger or any earlier termination of the STAR III Merger Agreement. Certain of these representations and warranties are subject to specified exceptions and qualifications contained in the STAR III Merger Agreement, information of each of STAR III and STAR filed with the SEC prior to the date of the STAR III Merger Agreement, or the disclosure letters delivered to other parties in connection therewith.

Representations and Warranties of the STAR III Parties

The STAR III Parties made representations and warranties in the STAR III Merger Agreement relating to, among other things:

• corporate organization, valid existence, organizational documents, good standing, qualification to do business, and subsidiaries;

• capitalization;

• due authorization, execution, delivery and enforceability of the STAR III Merger Agreement;

• board and special committee approvals;

• absence of any conflict with or violation of organizational documents or applicable laws, and the absence of any violation or breach of, or default or consent requirements under, certain agreements;

• permits and compliance with law;

• SEC filings and financial statements;

• internal accounting controls, compliance with the Sarbanes-Oxley Act, and the absence of improper payments;

• no undisclosed liabilities;

• absence of material changes to the conduct of STAR III’s business since December 31, 2018 or any “material adverse effect” (described below) to STAR III since December 31, 2018;

• labor and other employment matters and employee benefit plans;

• material contracts;

• litigation;

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• environmental matters;

• intellectual property;

• real properties and leases;

• tax matters, including qualification as a REIT;

• insurance;

• receipt of the opinion of Houlihan Lokey, STAR III Special Committee’s financial advisor;

• broker’s, finder’s, investment banker’s, or other similar fees;

• inapplicability of the Investment Company Act;

• exemption of the STAR III Merger from anti-takeover statutes;

• stockholder vote in connection with the STAR III Merger;

• related-party transactions; and

• limitation on warranties and disclaimer of other representations and warranties.

Representations and Warranties of the STAR Parties

The STAR Parties made representations and warranties in the STAR III Merger Agreement relating to, among other things:

• corporate organization, valid existence, organizational documents, good standing, qualification to do business, and subsidiaries;

• capitalization;

• due authorization, execution, delivery and enforceability of the STAR III Merger Agreement;

• board and special committee approvals;

• absence of any conflict with or violation of organizational documents or applicable laws, and the absence of any violation or breach of, or default or consent requirements under, certain agreements;

• permits and compliance with law;

• SEC filings and financial statements;

• internal accounting controls, compliance with the Sarbanes-Oxley Act, and the absence of improper payments;

• no undisclosed liabilities;

• absence of material changes to the conduct of STAR’s and Merger Sub’s business since December 31, 2018 or any “material adverse effect” (described below) to STAR or Merger Sub since December 31, 2018;

• labor and other employment matters and employee benefit plans;

• material contracts;

• litigation;

• environmental matters;

• intellectual property;

• real properties and leases;

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• tax matters, including qualification as a REIT;

• insurance;

• receipt of an opinion from the STAR Special Committee’s financial advisor;

• broker’s, finder’s, investment banker’s, or other similar fees;

• inapplicability of the Investment Company Act;

• exemption of the STAR III Merger from anti-takeover statutes;

• related-party transactions; and

• limitation on warranties and disclaimer of other representations and warranties.

Definition of “Material Adverse Effect”

Many of the representations of the STAR III Parties and the STAR Parties are qualified by a “material adverse effect” standard (for example, they will be deemed to be true and correct unless their failure to be true or correct, individually or in the aggregate, has had or would reasonably be expected to have a material adverse effect). For the purposes of the STAR III Merger Agreement, “material adverse effect” means any event, circumstance, change, effect, development, condition, or occurrence (a) that would have a material adverse effect on the business, assets, liabilities, condition (financial or otherwise) or results of operations of STAR III and its subsidiaries, taken as a whole, or STAR and its subsidiaries, taken as a whole, as applicable, or (b) that would prevent or materially impair the ability of the STAR III Parties or the STAR Parties to consummate the STAR III Merger before April 30, 2020, the Outside Date.

However, any event, circumstance, change, effect, development, condition or occurrence to the extent arising out of or resulting from the following will not be taken into account when determining whether a material adverse effect has occurred or is reasonably likely to exist or occur with respect to clause (a) above for the applicable party:

(i) any changes that affect the multifamily industry generally;

(ii) any changes in the United States or global economy or capital, financial or securities markets generally, including changes in interest or exchange rates;

(iii) any changes in legal, regulatory, or political conditions;

(iv) the commencement, escalation or worsening of a war or armed hostilities or the occurrence of acts of terrorism or sabotage;

(v) the execution and delivery of the STAR III Merger Agreement, or the public announcement of the STAR III Merger or other transactions contemplated by the STAR III Merger Agreement;

(vi) the taking of any action expressly required by the STAR III Merger Agreement, or the taking of any action at the written request or with the prior written consent of STAR III or STAR, as applicable,

(vii) earthquakes, hurricanes, floods or other natural disasters;

(viii) changes in law or GAAP or the interpretation thereof;

(ix) any failure of STAR III or STAR, as applicable, to meet any projections or forecasts or any estimates of earnings, revenues or other metrics for any period (provided, that any event, circumstance, change, effect, development, condition, or occurrence giving rise to such failure may be taken into account in determining whether there was a material adverse effect); and

(x) any action made or initiated by any holder of STAR III or STAR common stock, as applicable, including any derivative claims, arising out of or relating to the STAR III Merger Agreement or the

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transactions contemplated by the STAR III Merger Agreement, except which, in the case of each of clauses (i), (ii), (iii), (iv), (vii) and (viii) above do not disproportionately affect STAR III and its subsidiaries, taken as a whole, or STAR and its subsidiaries, taken as a whole, relative to others in industries in which STAR III and its subsidiaries and STAR and its subsidiaries operate and in the geographic regions in which they operate.

Conditions to Completion of the STAR III Merger

Mutual Closing Conditions

The obligation of each of the STAR III Parties and the STAR Parties to complete the STAR III Merger is subject to the satisfaction or waiver, on or prior to the closing date, of the following conditions:

• approval of the STAR III Merger and the STAR III Charter Amendment by the STAR III stockholders, and the STAR III Charter Amendment shall have become effective pursuant to the MGCL;

• the absence of any judgment, injunction, order or decree issued by any governmental authority of competent jurisdiction prohibiting the consummation of the STAR III Merger, and the absence of any law that has been enacted, entered, promulgated or enforced by any governmental authority after the date of the STAR III Merger Agreement that prohibits, restrains, enjoins or makes illegal the consummation of the STAR III Merger or the other transactions contemplated by the STAR III Merger Agreement; and

• the registration statement on FormS-4 shall have been declared effective and no stop order suspending the effectiveness of the registration statement on FormS-4 shall have been issued, and no proceedings for that purpose shall have been initiated by the SEC that have not been withdrawn.

Additional Closing Conditions for the Benefit of the STAR III Parties

The obligation of the STAR III Parties to complete the STAR III Merger is subject to the satisfaction or waiver, on or prior to the closing date, of the following additional conditions:

• the accuracy in all material respects as of the date of the STAR III Merger Agreement and the effective time of the STAR III Merger of certain representations and warranties made in the STAR III Merger Agreement by the STAR Parties regarding (i) the organization and qualification of the STAR Parties, (ii) the authority to enter into and approval of the STAR III Merger and STAR III Merger Agreement, (iii) the absences of conflicts, breaches or consent requirements in connection with the STAR III Merger, (iv) certain aspects of STAR’s capital structure, (v) the inapplicability of the Investment Company Act, (vi) the absence of broker’s, finder’s, investment banker’s or other similar fees, (vii) the receipt of the opinion dated August 5, 2019 of the STAR III Special Committee’s financial advisor, and (viii) the exemption of the STAR III Merger from anti-takeover statutes.

• the accuracy in all butde minimis respects as of the date of the STAR III Merger Agreement and the effective time of the STAR III Merger of representations and warranties made in the STAR III Merger Agreement by the STAR Parties regarding certain other aspects of its capital structure;

• the accuracy as of the date of the STAR III Merger Agreement and the effective time of the STAR III Merger of all other representations and warranties of the STAR Parties contained in the STAR III Merger Agreement, except (a) representations and warranties made as of a specific date shall be true and correct only on such date, and (b) where the failure of such representations or warranties to be true and correct does not have, and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on STAR and its subsidiaries taken as a whole;

• the STAR Parties must have performed and complied in all material respects with all agreements and covenants required by the STAR III Merger Agreement to be performed or complied with by them on or prior to the effective time of the STAR III Merger;

• on the closing date, no circumstance shall exist that constitutes a material adverse effect (as described above) as to the STAR Parties;

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• STAR III must have received a certificate, dated the date of the closing of the STAR III Merger, signed by the chief executive officer and chief financial officer of STAR, certifying to the effect that the conditions described in the five preceding bullet points have been satisfied;

• STAR III must have received the written opinion of Morrison & Foerster dated as of the closing date, regarding STAR’s qualification and taxation as a REIT under the Code commencing with STAR’s taxable year that ended on December 31, 2014;

• STAR III must have received the written opinion of DLA Piper LLP (US) (“DLA Piper”) to the effect that the STAR III Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code; and

• STAR or STAR III must have received a written opinion of Venable LLP, to the effect that the issuance of the STAR III Merger Consideration has been duly authorized and, when and if issued in connection with the STAR III Merger in accordance with the resolutions of the STAR Board, the STAR III Merger Agreement and the Articles of Merger, the STAR III Merger Consideration will be validly issued, fully paid and nonassessable.

Additional Closing Conditions for the Benefit of the STAR Parties

The obligation of the STAR Parties to complete the STAR III Merger is subject to the satisfaction or waiver, on or prior to the closing date, of the following additional conditions:

• the accuracy in all material respects as of the date of the STAR III Merger Agreement and the effective time of the STAR III Merger of certain representations and warranties made in the STAR III Merger Agreement by the STAR III Parties regarding (i) the organization and qualification of the STAR III Parties, (ii) authority to enter into and approval of the STAR III Merger and the STAR III Merger Agreement, (iii) the absence of conflicts, breaches or consent requirements in connection with the STAR III Merger, (iv) certain aspects of STAR III’s capital structure, (v) the inapplicability of the Investment Company Act, (vi) the absence of broker’s, finder’s, investment banker’s or other similar fees, (vii) the receipt of the opinion dated August 5, 2019 of the STAR III Special Committee’s financial advisor and (viii) the exemption of the STAR III Merger from anti-takeover statutes;

• the accuracy in all butde minimis respects as of the date of the STAR III Merger Agreement and the effective time of the STAR III Merger of representations and warranties made in the STAR III Merger Agreement by the STAR III Parties regarding certain other aspects of its capital structure;

• the accuracy as of the date of the STAR III Merger Agreement and the effective time of the STAR III Merger of all other representations and warranties of the STAR III Parties contained in the STAR III Merger Agreement, except (a) representations and warranties made as of a specific date shall be true and correct only on such date, and (b) where the failure of such representations or warranties to be true and correct does not have, and would not reasonably be expected to have, individually or in the aggregate, a material adverse effect on STAR III and its subsidiaries taken as a whole;

• the STAR III Parties must have performed and complied in all material respects with all agreements and covenants required by the STAR III Merger Agreement to be performed or complied with by them on or prior to the effective time of the STAR III Merger;

• on the closing date, no circumstance shall exist that constitutes a material adverse effect (as described above) as to the STAR III Parties;

• STAR must have received a certificate, dated the date of the closing of the STAR III Merger, signed by the chief executive officer and chief financial officer of STAR III, certifying to the effect that the conditions described in the five preceding bullet points have been satisfied;

• STAR must have received the written opinion of DLA Piper, dated as of the closing date, regarding STAR III’s qualification and taxation as a REIT under the Code commencing with STAR III’s taxable year that ended on December 31, 2016; and

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• STAR must have received the written opinion of Morrison & Foerster to the effect that the STAR III Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code.

Covenants and Agreements

Conduct of the Business of STAR III Pending the STAR III Merger

STAR III has agreed to certain restrictions on itself and its subsidiaries until the earlier of the effective time of the STAR III Merger or the valid termination of the STAR III Merger Agreement. In general, except with STAR’s prior written consent (which consent shall not be unreasonably withheld, delayed, or conditioned), or as may be expressly required or permitted pursuant to the STAR III Merger Agreement, or to the extent required by law, STAR III has agreed that it will, and will cause each of its subsidiaries to, conduct its business in all material respects in the ordinary course and in a manner consistent with past practice, and use all reasonable efforts to (i) preserve intact its current business organization, goodwill, ongoing business and significant relationships with third parties, and (ii) maintain the status of STAR III as a REIT.

Without limiting the foregoing, STAR III has also agreed that, except with STAR’s prior written approval (which consent shall not be unreasonably withheld, delayed, or conditioned), or as may be expressly required or permitted pursuant to the STAR III Merger Agreement or the disclosure letter attached thereto, or to the extent required by law, it will not, and it will not permit any of its subsidiaries to:

• amend or propose to amend its bylaws or charter, the certificate of limited partnership of STAR III OP, or the STAR III OP Partnership Agreement, or such equivalent organizational or governing documents of any subsidiary of STAR III, or waive the stock ownership limit or create an excepted holder limit (as defined in the STAR III Charter) under the STAR III Charter;

• adjust, split, combine, reclassify, or subdivide any shares of stock or other ownership interests of STAR III or its subsidiaries;

• declare, set apart, or pay any dividend on or make any other actual, constructive or deemed distributions (whether in cash, stock, property or otherwise) with respect to shares of capital stock of STAR III or any STAR III subsidiary or other equity securities or ownership interests of STAR III or any STAR III subsidiary or otherwise make any payment to its or their stockholders or other equity holders in their capacity as such, except for (A) the declaration and payment by STAR III of regular dividends in accordance with past practice at a daily rate not to exceed $0.004098 per share of STAR III Class A common stock, $0.004098 per share of STAR III Class R common stock, or $0.004098 per share of STAR III Class T common stock, each such daily rate as may be adjusted to account for a365-day year, (B) the declaration and payment by STAR III OP of regular distributions in accordance with past practice and for any interim period through the Closing Date on the units of STAR III OP (the “STAR III OP Units”), (C) the declaration and payment of dividends or other distributions to STAR III by any directly or indirectly wholly owned STAR III subsidiary, and (D) distributions by any STAR III subsidiary that is not wholly owned directly or indirectly by STAR III; provided, that, notwithstanding the foregoing restrictions and limitations, STAR III shall be permitted to make distributions reasonably necessary to maintain its status as a REIT under the Code and avoid or reduce the imposition of any entity level income or excise tax under the Code;

• redeem, repurchase, or otherwise acquire, directly or indirectly, any shares of STAR III’s capital stock or other equity interests of STAR III or any STAR III subsidiary, other than share repurchases for death and disability under STAR III’s share repurchase plan;

• except for transactions among STAR III and one or more wholly owned subsidiaries of STAR III or among one or more wholly owned subsidiaries of STAR III, issue, sell, pledge, dispose, encumber or grant any shares of the capital stock of STAR III or any STAR III subsidiary (including STAR III OP Units), or authorize the issuance, sale, pledge, disposition, grant, transfer or any lien against, or otherwise enter into any contract or understanding with respect to the voting of, any shares of STAR III

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or any of STAR III’s subsidiaries’ capital stock (including STAR III OP Units) or any options, warrants, convertible securities or other rights of any kind to acquire any shares, capital stock, or other equity interests of STAR III or any STAR III subsidiary;

• acquire or agree to acquire (including by merger, consolidation or acquisition of stock or assets) any material assets, except (i) acquisitions by STAR III or any wholly owned subsidiary of STAR III of or from an existing wholly owned subsidiary of STAR III and (ii) other acquisitions in the ordinary course of business;

• sell, mortgage, pledge, lease, assign, transfer, dispose of or encumber, or effect a deed in lieu of foreclosure with respect to, any property or assets, except in the ordinary course of business consistent with past practice;

• incur, create, assume, refinance, replace or prepay any indebtedness for borrowed money or guarantee such indebtedness of another person, or issue, sell or amend the terms of any debt securities or rights to acquire any debt securities of STAR III or any STAR III subsidiary, with certain exceptions;

• make any loans, advances or capital contributions to, or investments in, any other person (including to any of its officers, directors, affiliates, agents or consultants), make any change in its existing borrowing or lending arrangements for or on behalf of such persons, or enter into any “keep well” or similar agreement to maintain the financial condition of another entity, with certain exceptions;

• other than in the ordinary course of business, enter into, renew, modify, amend or terminate, or waive, release, compromise or assign any rights or claims under, any STAR III material contract (or any contract that, if existing as of the date of the STAR III Merger Agreement, would be a STAR III material contract), except as expressly permitted by the STAR III Merger Agreement;

• authorize, make or commit to make any capital expenditures other than in the ordinary course of business or to address obligations under existing contracts, or in conjunction with emergency repairs;

• make any payment of any liability of STAR III or any STAR III subsidiary before it comes due in accordance with its terms, except in the ordinary course of business consistent with past practices or as otherwise permitted by the STAR III Merger Agreement;

• waive, release, assign, settle or compromise (A) any legal action, suit, investigation, arbitration or proceeding, in each case made or pending against STAR III or any STAR III subsidiary (1) exceeding $500,000 individually or $1,000,000 in the aggregate or the amounts reserved for such purposes in the most recent balance sheet as of the date the STAR III Merger Agreement was executed (unless payable under a property insurance policy), (2) that involves injunctive relief or (3) that provides for the admission of material liability (excluding in each case any matter related to taxes), and (B) any legal action, suit, investigation, arbitration or proceeding involving any present, former or purported holder or group of holders of STAR III Common Stock other than in accordance with the STAR III Merger Agreement;

• (i) increase in any manner the amount, rate or terms of compensation or benefits of any of STAR III’s current or former employees, officers or directors, with certain exceptions, or (ii) enter into, adopt, amend or terminate any employment, bonus, severance or retirement contract or other compensation or STAR III benefit plan, except as may be required to comply with applicable law;

• fail to maintain all financial books and records in all material respects in accordance with GAAP or make any material change to its methods of accounting in effect on August 1, 2019, except as required by a change in GAAP or in applicable law, or make any change with respect to accounting policies, principles or practices unless required by GAAP or the SEC;

• enter into any new line of business;

• form any new, or consent to any amendment or modification of the terms of existing, funds, joint ventures, ornon-traded real estate investment trusts or other pooled investment vehicles;

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• fail to duly and timely file all material reports and other material documents required to be filed with the SEC or any other governmental authority, subject to extensions permitted by law or applicable rules and regulations;

• enter into or modify in a manner adverse to STAR III any STAR III Tax Protection Agreement (as defined in the STAR III Merger Agreement), make, change or rescind any material election relating to taxes (other than making its initial REIT election), change a material method of tax accounting, file or amend any material tax return, settle or compromise any material federal, state, local or foreign tax liability, audit, claim or assessment, enter into any material closing agreement related to taxes, or knowingly surrender any right to claim any material tax refund, give or request any waiver of a statute of limitation with respect to any material tax refund, with certain exceptions;

• take any action, or fail to take any action, which action or failure would reasonably be expected to cause (A) STAR III to fail to qualify as a REIT or (B) any STAR III subsidiary to cease to be treated as any of (x) a partnership or disregarded entity for U.S. federal income tax purposes or (y) a qualified REIT subsidiary or a taxable REIT subsidiary under the applicable provisions of Section 856 of the Code, as the case may be;

• adopt a plan of merger, complete or partial liquidation or resolutions providing for or authorizing such merger, liquidation or a dissolution, consolidation, recapitalization or bankruptcy reorganization, except by a STAR III subsidiary in connection with any permitted acquisitions in a manner that would not reasonably be expected to be materially adverse to STAR III or to prevent or impair the ability of the STAR III Parties to consummate the STAR III Merger;

• amend or modify the compensation terms or any other obligations of STAR III contained in the engagement letter with Houlihan Lokey in a manner adverse to STAR III or any STAR III subsidiary or engage other financial advisors in connection with the transactions contemplated by the STAR III Merger Agreement;

• make any payment, loan, distribution or transfer of assets to STAR III Advisor or its affiliates (other than STAR III and any STAR III subsidiary) except in such amount and as expressly contemplated by the STAR III Merger Agreement or the STAR III Advisory Agreement;

• take any action (or fail to take any action) that would make dissenters’, appraisal or similar rights available to the holders of STAR III Common Stock with respect to the STAR III Merger;

• permit any liens or encumbrances other than those permitted by the STAR III Merger Agreement; or

• authorize, or enter into any contract, agreement, commitment or arrangement to do any of the foregoing.

Conduct of the Business of STAR Pending the STAR III Merger

STAR has agreed to certain restrictions on itself and its subsidiaries until the earlier of the effective time of the STAR III Merger or the valid termination of the STAR III Merger Agreement. In general, except with STAR III’s prior written consent (which consent shall not be unreasonably withheld, delayed, or conditioned), or as may be expressly required or permitted pursuant to the STAR III Merger Agreement, as may be required by the SIR Merger Agreement, or to the extent required by law, STAR has agreed that it will, and will cause each of its subsidiaries to, conduct its business in all material respects in the ordinary course and in a manner consistent with past practice, and use all reasonable efforts to (i) preserve intact its current business organization, goodwill, ongoing business and significant relationships with third parties, and (ii) maintain the status of STAR as a REIT.

Without limiting the foregoing, STAR has also agreed that, except with STAR III’s prior written approval (which consent shall not be unreasonably withheld, delayed, or conditioned), or as may be expressly required or

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permitted pursuant to the STAR III Merger Agreement, or the disclosure letter attached thereto, or the extent required by law, it will not, and it will not permit any of its subsidiaries to:

• amend or propose to amend its bylaws or charter, the certificate of limited partnership of STAR OP, the STAR OP Partnership Agreement, or such equivalent organizational or governing documents of any subsidiary of STAR, or waive the stock ownership limit or create an excepted holder limit (as defined in the STAR Charter) under the STAR Charter;

• adjust, split, combine, reclassify, or subdivide any shares of stock or other ownership interests of STAR or its subsidiaries;

• declare, set apart, or pay any dividend on or make any other actual, constructive or deemed distributions (whether in cash, stock, property or otherwise) with respect to shares of capital stock of STAR or any STAR subsidiary or other equity securities or ownership interests of STAR or any STAR subsidiary or otherwise make any payment to its or their stockholders or other equity holders in their capacity as such, except for (A) the declaration and payment by STAR of regular dividends in accordance with past practice at a daily rate not to exceed $0.002459 per share, as such daily rate as may be adjusted to account for a365-day year, (B) the declaration and payment by the STAR OP of regular distributions in accordance with past practice and for any interim period through the Closing Date on the interests of STAR OP (the “STAR OP Interests”); (C) the declaration and payment of dividends or other distributions to STAR by any directly or indirectly wholly owned STAR subsidiary, and (D) distributions by any STAR subsidiary that is not wholly owned directly or indirectly by STAR; provided, that, notwithstanding the foregoing restrictions and limitations, STAR shall be permitted to make distributions reasonably necessary to maintain its status as a REIT under the Code and avoid or reduce the imposition of any entity level income or excise tax under the Code;

• redeem, repurchase, or otherwise acquire, directly or indirectly, any shares of STAR’s capital stock or other equity interests of STAR or any STAR subsidiary, other than share repurchases for death or disability under STAR’s share repurchase plan;

• except for transactions among STAR and one or more wholly owned subsidiaries of STAR or among one or more wholly owned subsidiaries of STAR, issue, sell, pledge, dispose, encumber or grant any shares of the capital stock of STAR or any STAR subsidiary (including STAR OP Interests), or authorize the issuance, sale, pledge, disposition, grant, transfer or any lien against, or otherwise enter into any contract or understanding with respect to the voting of, any shares of STAR or any of STAR’s subsidiaries’ capital stock (including STAR OP Interests) or any options, warrants, convertible securities or other rights of any kind to acquire any shares, capital stock, or other equity interests of STAR or any STAR subsidiary;

• acquire or agree to acquire (including by merger, consolidation or acquisition of stock or assets) any material assets, except (i) acquisitions by STAR or any wholly owned subsidiary of STAR of or from an existing wholly owned subsidiary of STAR and (ii) other acquisitions in the ordinary course of business;

• sell, mortgage, pledge, lease, assign, transfer, dispose of or encumber, or effect a deed in lieu of foreclosure with respect to, any property or assets, except in the ordinary course of business consistent with past practice;

• incur, create, assume, refinance, replace or prepay any indebtedness for borrowed money or guarantee such indebtedness of another person, or issue, sell or amend the terms of any debt securities or rights to acquire any debt securities of STAR or any STAR subsidiary, with certain exceptions;

• make any loans, advances or capital contributions to, or investments in, any other person (including to any of its officers, directors, affiliates, agents or consultants), make any change in its existing borrowing or lending arrangements for or on behalf of such persons, or enter into any “keep well” or similar agreement to maintain the financial condition of another entity, with certain exceptions;

• other than in the ordinary course of business, enter into, renew, modify, amend or terminate, or waive, release, compromise or assign any rights or claims under, any STAR material contract (or any contract

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that, if existing as of the date of the STAR III Merger Agreement, would be a STAR material contract), except as expressly permitted by the STAR III Merger Agreement;

• authorize, make or commit to make any capital expenditures other than in the ordinary course of business or to address obligations under existing contracts, or in conjunction with emergency repairs;

• make any payment of any liability of STAR or any STAR subsidiary before it comes due in accordance with its terms, except in the ordinary course of business consistent with past practices or as otherwise permitted by the STAR III Merger Agreement;

• waive, release, assign, settle or compromise (A) any legal action, suit, investigation, arbitration or proceeding, in each case made or pending against STAR or any STAR subsidiary (1) exceeding $1,000,000 individually or $1,500,000 in the aggregate or the amounts reserved for such purposes in the most recent balance sheet as of the date the STAR III Merger Agreement was executed (unless payable under a property insurance policy), (2) that involves injunctive relief or (3) that provides for the admission of material liability (excluding in each case any matter related to taxes), and (B) any legal action, suit, investigation, arbitration or proceeding involving any present, former or purported holder or group of holders of STAR common stock other than in accordance with the STAR III Merger Agreement;

• (i) increase in any manner the amount, rate or terms of compensation or benefits of any of STAR’s current or former employees, officers or directors, with certain exceptions, or (ii) enter into, adopt, amend or terminate any employment, bonus, severance or retirement contract or other compensation or STAR benefit plan, except as may be required to comply with applicable law;

• fail to maintain all financial books and records in all material respects in accordance with GAAP or make any material change to its methods of accounting in effect on August 1, 2019, except as required by a change in GAAP or in applicable law, or make any change with respect to accounting policies, principles or practices unless required by GAAP or the SEC;

• enter into any new line of business;

• form any new, or consent to any amendment or modification of the terms of existing, funds, joint ventures, ornon-traded real estate investment trusts or other pooled investment vehicles;

• fail to duly and timely file all material reports and other material documents required to be filed with the SEC or any other governmental authority, subject to extensions permitted by law or applicable rules and regulations;

• enter into or modify in a manner adverse to STAR any STAR Tax Protection Agreement (as defined in the STAR III Merger Agreement), make, change or rescind any material election relating to taxes, change a material method of tax accounting, file or amend any material tax return, settle or compromise any material federal, state, local or foreign tax liability, audit, claim or assessment, enter into any material closing agreement related to taxes, or knowingly surrender any right to claim any material tax refund, give or request any waiver of a statute of limitation with respect to any material tax return, with certain exceptions;

• take any action, or fail to take any action, which action or failure would reasonably be expected to cause (A) STAR to fail to qualify as a REIT or (B) any STAR subsidiary to cease to be treated as any of (x) a partnership or disregarded entity for U.S. federal income tax purposes or (y) a qualified REIT subsidiary or a taxable REIT subsidiary under the applicable provisions of Section 856 of the Code, as the case may be;

• adopt a plan of merger, complete or partial liquidation or resolutions providing for or authorizing such merger, liquidation or a dissolution, consolidation, recapitalization or bankruptcy reorganization, except by a STAR subsidiary in connection with any permitted acquisitions in a manner that would not reasonably be expected to be materially adverse to STAR or to prevent or impair the ability of the STAR Parties to consummate the STAR III Merger;

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• amend or modify the compensation terms or any other obligations of STAR contained in the engagement letter with Robert A. Stanger & Co., Inc. in a manner adverse to STAR or any STAR subsidiary or engage other financial advisors in connection with the transactions contemplated by the STAR III Merger Agreement;

• make any payment, loan, distribution or transfer of assets to STAR Advisor or its Affiliates (other than STAR and any STAR subsidiary) except in such amount and as expressly contemplated by the STAR III Merger Agreement or the STAR Advisory Agreement;

• take any action (or fail to take any action) that would make, dissenters’, appraisal, or similar rights available to the holders of STAR Common Stock with respect to the STAR III Merger Agreement;

• permit any liens or encumbrances other than those permitted by the STAR III Merger Agreement; or

• authorize, or enter into any contract, agreement, commitment or arrangement to do any of the foregoing.

The STAR III Merger Agreement also provides that any amendment to the SIR Merger Agreement requires the prior approval of STAR III, which approval shall not be unreasonably withheld, delayed or conditioned.

FormS-4; Proxy Statement and Prospectus; STAR III Stockholders Meeting

STAR III agreed to prepare and cause to be filed with the SEC the proxy statement included in this proxy statement/prospectus, and STAR agreed to prepare and file a registration statement on FormS-4 with respect to the STAR III Merger, which includes this proxy statement/prospectus, in each case as promptly as reasonably practicable. STAR III and STAR also agreed to use their reasonable best efforts to (i) have the FormS-4 declared effective under the Securities Act as promptly as practicable after filing, (ii) ensure that the FormS-4 complies in all material respects with the applicable provisions of the Exchange Act and Securities Act, and (iii) to keep the FormS-4 effective for so long as necessary to complete the STAR III Merger.

STAR III agreed to use its reasonable best efforts to cause this proxy statement/prospectus to be mailed to its stockholders entitled to vote at the STAR III Special Meeting and to hold the STAR III Special Meeting as soon as practicable after the FormS-4 is declared effective. STAR III further agreed to include in the proxy statement/prospectus its recommendation to its stockholders that they approve the STAR III Merger and to use its reasonable best efforts to obtain its stockholder approval.

Access to Information; Confidentiality

The STAR III Merger Agreement requires STAR III, on the one hand, and STAR, on the other, to cause each of their respective subsidiaries to provide, with limited exceptions, to the other reasonable access during normal business hours and upon reasonable advance notice to all of their respective properties, offices, books, contracts, personnel, and records, and a copy of each report, schedule, registration statement and other document filed by it after the date of the STAR III Merger Agreement but before the earlier of (1) the effective date of the STAR III Merger, and (2) the date on which the STAR III Merger Agreement is terminated, pursuant to the requirements of federal or state securities laws (to the extent not publicly available) and all other information (financial or otherwise) concerning its business, properties, and personnel as such other party may reasonably request.

Each of STAR III and STAR will hold, and will cause its representatives and affiliates to hold, any nonpublic information in confidence to the extent required by and in accordance with, and will otherwise comply with, the terms of their existing confidentiality agreements.

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No Solicitation and Change in Recommendation with an Acquisition Proposal

Pursuant to the terms of the STAR III Merger Agreement, until 11:59 p.m. (New York City time) on September 19, 2019 (the “Go Shop Period End Time”), STAR III had a “go shop” right that allowed STAR III and its subsidiaries, directly or indirectly, to do the following:

• initiate, solicit, encourage or facilitate any inquiries or the making of any proposal, offer or other action that constitutes, or may reasonably be expected to lead to, any Acquisition Proposal (as later defined), including by way of (A) contacting third parties, (B) broadly disseminating public disclosure or (C) providing access to the properties, offices, assets, books, records and personnel of STAR III and its subsidiaries and furnishingnon-public information pursuant to (but only pursuant to) one or more acceptable confidentiality agreements; provided, however, that STAR III had previously or contemporaneously furnished, made available or provided access to suchnon-public information to STAR;

• enter into, continue or otherwise participate in any discussions or negotiations with any person relating to, or in furtherance of such inquiries, proposals, offers or other actions or to obtain, an Acquisition Proposal;

• release any person from, or refrain from enforcing, any standstill agreement or similar obligation to STAR III or its subsidiaries; or

• disclose to the STAR III stockholders any information required to be disclosed under applicable law; provided, however, that to the extent any such disclosure addresses the STAR III Merger or an Acquisition Proposal, such disclosure would be deemed to be an Adverse Recommendation Change (as later defined) if the disclosure has the effect of withdrawing or adversely modifying, or is not accompanied by an express publicre-affirmation of the recommendation of the STAR III Board in favor of the STAR III Merger and the STAR III Merger Agreement.

From and after the Go Shop Period End Time, STAR III must promptly (and in any event no later than 48 hours) notify STAR in writing if (i) any Acquisition Proposal is received by STAR III or any subsidiary of STAR III, (ii) any request for information relating to STAR III or any subsidiary of STAR III from any person who informs STAR III or any subsidiary of STAR III that it is considering making or has made an Acquisition Proposal, or (iii) any discussions or negotiations are sought to be initiated with STAR III or any subsidiary of STAR III regarding any Acquisition Proposal, in each case from a person that is not a Go Shop Bidder (as later defined). In such instances, STAR III shall notify STAR in writing of the identity of such person or group making, and the material terms and conditions of, such Acquisition Proposal, request or inquiry (including with such notice copies of any written Acquisition Proposal, including any proposed transaction agreement and related transaction documents and financing commitments, if any, and a written summary of the material terms of the Acquisition Proposal not made in writing (including any material terms proposed orally or supplementally)), and thereafter shall promptly (and in any event no later than 48 hours after the occurrence of such developments, discussions or negotiations or receipt of materials) (A) keep STAR reasonably informed of all material developments, discussions and negotiations concerning any such Acquisition Proposal, request or inquiry and (B) provide STAR with any written supplements or written additions to any written Acquisition Proposal. STAR III agreed that it and its subsidiaries will not enter into any agreement with any person or persons or entities subsequent to the date of the STAR III Merger Agreement that prohibits STAR III from providing any information to STAR in accordance with the STAR III Merger Agreement.

Beginning at the Go Shop Period End Time, except as described below, and except with respect to a Go Shop Bidder, the STAR III Merger Agreement provides that STAR III may not, and will cause its subsidiaries not to, do any of the following:

• initiate, solicit, knowingly encourage or facilitate any inquiries, proposals or offers for, or engage in any negotiations concerning, or provide any confidential or nonpublic information or data to, or have any discussions with, any persons relating to any inquiry, proposal, offer or other action that constitutes, or may reasonably be expected to lead to, any Acquisition Proposal;

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• enter into, continue or otherwise participate in any discussions or negotiations with any person, other than a STAR Party, regarding or otherwise in furtherance of, or furnish to any person anynon-public information in connection with or for the purpose of encouraging or facilitating any inquiry, proposal, offer, or other action that constitutes, or could reasonably be expected to lead to, or to otherwise obtain an Acquisition Proposal;

• release any person from or fail to enforce any standstill agreement or similar obligation to STAR III or its subsidiaries, with certain exceptions;

• enter into any agreement in principle, arrangement, understanding, contract or agreement (whether binding or not) contemplating or otherwise relating to an Acquisition Proposal; or

• take any action to exempt any person from any takeover statute or similar restrictive provision of the STAR III Charter and related documents.

Except with respect to a Go Shop Bidder and as otherwise permitted by Section 7.3 of the STAR III Merger Agreement, STAR III shall, and shall cause each of its subsidiaries and representatives, to, immediately cease any discussions, negotiations or communications with any person with respect to any Acquisition Proposal or potential Acquisition Proposal and shall immediately terminate all physical and electronic data room access previously granted to any such person and exercise and use reasonable best efforts to enforce any contractual rights available to STAR III to cause such person to return and/or destroy allnon-public information to the extent permitted pursuant to any confidentiality agreement and immediately terminate all physical and electronic data room access granted to such persons.

After the Go Shop Period End Time and prior to obtaining the necessary approvals of the STAR III stockholders, STAR III and its subsidiaries and their respective representatives may continue to take any of the actions listed above that were permitted during the Go Shop Period with respect to any proposals or offers regarding any Acquisition Proposal submitted by a Go Shop Bidder on or before the Go Shop Period End Time or with respect to any amended or modified proposal or offer with respect to any Acquisition Proposal submitted by a Go Shop Bidder after the Go Shop Period End Time if the STAR III Special Committee has determined in good faith after consultation with outside legal counsel and outside financial advisors that such Acquisition Proposal is or is reasonably likely to lead to a Superior Proposal (as later defined).

Notwithstanding anything in the STAR III Merger Agreement to the contrary, at any time after the Go Shop Period End Time and prior to obtaining the necessary approvals of the STAR III stockholders, STAR III may, if and only to the extent that the STAR III Special Committee has either determined that an Acquisition Proposal constitutes a Superior Proposal or determined in good faith after consultation with outside legal counsel and outside financial advisors that an Acquisition Proposal could reasonably be expected to lead to a Superior Proposal:

• provide information in response to a request by a person who has made a written Acquisition Proposal that did not result from a breach by STAR III of thenon-solicitation provisions in the STAR III Merger Agreement; and

• engage or participate in any discussions or negotiations with any person who has made such a written Acquisition Proposal.

Except as described below, the STAR III Special Committee and the STAR III Board may not (a) change, qualify, withhold, withdraw or modify, or publicly propose to change, qualify, withhold, withdraw or modify, in a manner adverse to STAR, the STAR III Board recommendation, (b) authorize, approve, endorse, declare advisable, adopt or recommend or propose to publicly authorize, approve, endorse, declare advisable, adopt or recommend, any Acquisition Proposal, (c) authorize, cause or permit STAR III or any subsidiary of STAR III to enter into any Alternative Acquisition Agreement, or (d) fail to make the STAR III Board recommendation or fail to include the STAR III Board recommendation in the proxy statement (each of the actions described in (a), (b) or (d) are referred to as an “Adverse Recommendation Change”).

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Notwithstanding anything to the contrary above, at any time prior to obtaining the necessary approvals of the STAR III stockholders, STAR III has the right, upon receipt of a written Acquisition Proposal (whether or not from a Go Shop Bidder) that constituted a Superior Proposal that did not result from a breach of thenon-solicitation provisions of the STAR III Merger Agreement, to give notice of its intention to terminate the STAR III Merger Agreement to enter into an Alternative Acquisition Agreement for such Superior Proposal and/or effect an Adverse Recommendation Change, subject to the following conditions:

• the foregoing determination must have been upon the determination that failing to take such action would be inconsistent with the directors’ duties under applicable law;

• STAR III must have notified STAR in writing that the STAR III Board intends to take such action at least five (5) business days in advance of effecting an Adverse Recommendation Change, which notice must specify the material terms of the Superior Proposal and attach the most current version of such proposal; and

• during the five business days after STAR received such notice, STAR III must have offered to negotiate with and, if accepted, negotiated with STAR (and negotiate in good faith) with respect to making adjustments to the terms of the STAR III Merger Agreement that the subject Superior Proposal no longer was a Superior Proposal.

For purposes of the STAR III Merger Agreement, unless already defined above:

“Acquisition Proposal” means any bona fide proposal or offer from any person (other than STAR or any of STAR’s subsidiaries), whether in one transaction or a series of related transactions, relating to any (a) merger, consolidation, share exchange, business combination or similar transaction involving STAR III or any subsidiary of STAR III that would constitute a “significant subsidiary” (as defined in Rule1-02 of RegulationS-X), (b) sale or other disposition, by merger, consolidation, share exchange, business combination or any similar transaction, of any assets of STAR III or any subsidiary of STAR III representing 20% or more of the consolidated assets of STAR III and the subsidiaries of STAR III, taken as a whole, (c) issue, sale or other disposition by STAR III or any subsidiaries of STAR III of (including by way of merger, consolidation, share exchange, business combination or any similar transaction) securities (or options, rights or warrants to purchase, or securities convertible into, such securities) representing 20% or more of the votes associated with the outstanding shares of STAR III Common Stock, (d) tender offer or exchange offer in which any person or “group” (as such term is defined under the Exchange Act) shall acquire beneficial ownership (as such term is defined in Rule13d-3 under the Exchange Act), or the right to acquire beneficial ownership, of 20% or more of the votes associated with the outstanding shares of STAR III Common Stock, (e) recapitalization, restructuring, liquidation, dissolution or other similar type of transaction with respect to STAR III in which a third party shall acquire beneficial ownership of 20% or more of the outstanding shares of STAR III Common Stock, or (f) transaction that is similar in form, substance or purpose to any of the foregoing transactions; provided, however, that the term “Acquisition Proposal” shall not include (i) the STAR III Merger or any of the other transactions contemplated by the STAR III Merger Agreement, (ii) any merger, consolidation, business combination, reorganization, recapitalization or similar transaction solely among STAR III and one or more of the subsidiaries of STAR III or solely among the subsidiaries of STAR III, or (iii) was solicited by any STAR III Party or their representative in breach of the STAR III Merger Agreement.

“Alternative Acquisition Agreement” means any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, Merger Agreement or similar agreement (other than an acceptable confidentiality agreement) relating to any Acquisition Proposal.

“Go Shop Bidder” means any person (including its controlled affiliates and representatives) that submits a written proposal or offer regarding an Acquisition Proposal prior to the Go Shop Period End Time that has not been withdrawn and that the STAR III Special Committee determines, in good faith, after consultation with its financial advisors and outside legal counsel, prior to the Go Shop Period End Time (or in the case of any Acquisition Proposal received less than five (5) business days before the date of the Go Shop End Time,

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not later than five (5) business days after the receipt of such Acquisition Proposal), has resulted in, or would be reasonably expected to result in, a Superior Proposal.

“Superior Proposal” means a written Acquisition Proposal (except for purposes of this definition, the references in the definition of “Acquisition Proposal” to “20%” shall be replaced with “50%”) which the STAR III Board (based on the recommendation of the STAR III Special Committee) determines in its good faith judgment (after consultation with its outside legal and financial advisors and after taking into account (a) all of the terms and conditions of the Acquisition Proposal and the STAR III Merger Agreement (as it may be proposed to be amended by STAR) and (b) the feasibility and certainty of consummation of such Acquisition Proposal on the terms proposed (taking into account all legal, financial, regulatory, and other aspects of such Acquisition Proposal and conditions to consummation thereof) to be more favorable from a financial point of view to the stockholders of STAR III (in their capacities as stockholders) than the STAR III Merger and the other transactions contemplated by the STAR III Merger Agreement (as it may be proposed to be amended by STAR).

Consents and Approvals

Each of STAR III and STAR has agreed to use its reasonable best efforts to take, or cause to be taken, all actions and to do, or cause to be done, and to assist and cooperate with the other party in doing, all things necessary, proper or advisable under applicable law or pursuant to any contract to consummate and make effective, as promptly as practicable, the STAR III Merger and other transactions pursuant to the STAR III Merger Agreement, including the taking of all actions necessary to satisfy each party’s conditions to closing, obtaining of all necessary advisable actions or nonactions, waivers, consents and approvals from governmental entities or other persons in connection with the consummation of the STAR III Merger pursuant to the STAR III Merger Agreement, preparing and filing any applications, notices, registrations and requests as may be required or advisable to be filed with or submitted to any governmental authority in order to consummate the STAR III Merger and other transactions pursuant to the STAR III Merger Agreement, and the taking of all reasonable steps as may be necessary or advisable to obtain an approval or waiver from, or to avoid an action or proceeding by, any governmental authority or other persons necessary in connection with the consummation of the STAR III Merger and other transactions pursuant to the STAR III Merger Agreement, defending any lawsuits or other legal proceedings challenging the consummation of the STAR III Merger or the other transactions contemplated by the STAR III Merger Agreement, and executing and delivering any additional instruments necessary or advisable to consummate the STAR III Merger and the other transactions contemplated by the STAR III Merger Agreement and to fully carry out the purposes of the STAR III Merger Agreement; provided, that neither STAR III nor STAR will have any obligation (a) to propose, negotiate, commit to or effect, by consent decree, hold separate order or otherwise, the sale, divestiture or disposition of any assets or businesses of such company, any of its subsidiaries (including subsidiaries of STAR after the closing date) or their affiliates or (B) otherwise to take or commit to take any actions that would limit the freedom of such company, its subsidiaries (including subsidiaries of STAR after the closing date) or their affiliates with respect to, or their ability to retain, one or more of their businesses, product lines or assets.

Each of STAR III and STAR has agreed to give any notices to any person, and each of STAR III and STAR will use its reasonable best efforts to obtain any consents from any person that are necessary, proper or advisable to consummate the STAR III Merger and the other transactions contemplated by the STAR III Merger Agreement. Each of the parties will, and shall cause their respective affiliates to, furnish to the other such necessary information and reasonable assistance as the other may request in connection with the preparation of any required applications, notices, registrations and requests as may be required or advisable to be filed with any governmental authority and will cooperate in responding to any inquiry from a governmental authority, including promptly informing the other party of such inquiry, consulting in advance before making any presentations or submissions to a governmental authority, and supplying each other with copies of all material correspondence, filings or communications between either party and any governmental authority with respect to the STAR III Merger Agreement. To the extent reasonably practicable, the parties or their representatives will generally have

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the right to review in advance and each of the parties will consult the others on, all the information relating to the other and each of their affiliates that appears in any filing made with, or written materials submitted to, any governmental authority in connection with the STAR III Merger and the other transactions contemplated by the STAR III Merger Agreement. To the extent reasonably practicable, none of the parties may participate independently in any meeting or engage in any substantive conversation with any governmental authority in respect of any filing, investigation or other inquiry without giving the other party prior notice of such meeting or engage in any substantive conversation and, to the extent permitted by applicable law, without giving the other party the opportunity to attend or participate in any such meeting with such governmental authority.

Notification of Certain Actions; Litigation

The parties have agreed to give prompt notice to each other:

• in the event of any notice or other communication received by such party from (i) any governmental authority in connection with the STAR III Merger, the STAR III Merger Agreement, or the transactions contemplated thereby, or (ii) any person alleging that the consent of such person may be required in connection with the STAR III Merger, the STAR III Merger Agreement, or the transactions contemplated thereby;

• if (i) any representation or warranty made by such party in the STAR III Merger Agreement becomes untrue or inaccurate such that it would be reasonable to expect that the closing conditions set forth in the STAR III Merger Agreement would be incapable of being satisfied by the outside closing date or (ii) such party fails to comply with or satisfy in any material respect any covenant, condition, or agreement to be complied with or satisfied by it pursuant to the STAR III Merger Agreement; and

• of any action commenced, or to the knowledge of such party, threatened against, relating to or involving such party or any of their subsidiaries, which relates to the STAR III Merger Agreement, the STAR III Merger, or the other transactions contemplated thereby.

The parties have each agreed to give the other party the opportunity to reasonably participate in the defense and settlement of any stockholder litigation against such party and/or its directors relating to the STAR III Merger Agreement and the transactions contemplated thereby.

Publicity

STAR III and STAR have agreed, subject to certain exceptions, that they and their respective affiliates will receive consent (which consent shall not be unreasonably withheld, delayed or conditioned) from the other party before issuing any press release or other public announcement with respect to the STAR III Merger or the STAR III Merger Agreement.

Directors’ and Officers’ Insurance and Indemnification

For a period of six years after the effective time of the STAR III Merger, pursuant to the terms of the STAR III Merger Agreement and subject to certain limitations, STAR will, and will cause the Surviving Entity to, indemnify, defend and hold harmless the current or former managers, directors, officers, partners, members, trustees, employees, agents, fiduciaries or other individuals of STAR III or any of the STAR III subsidiaries (the “Indemnified Parties”) for any action or omission or alleged action or omission at or prior to the effective time of the STAR III Merger, including with respect to the transactions contemplated by the STAR III Merger Agreement. STAR and the STAR III Merger Sub have agreed that all rights to indemnification and exculpation, and advancement of expenses, from liabilities for acts provided in (i) the governing documents of STAR III or similar organizational documents or agreements of any subsidiary of STAR III and (ii) any indemnification agreements of STAR III will survive the STAR III Merger and will continue in full force and effect in accordance with their terms. For a period of six years after the effective time of the STAR III Merger, the

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organizational documents of STAR and the Surviving Entity and the organizational documents of any subsidiary of STAR or subsidiary of STAR III will not have indemnification and director and officer liability limitation provisions less favorable than such provisions in the STAR III organizational documents, or, if applicable, similar organizational documents or agreements of any subsidiary of STAR III.

If any Indemnified Party reasonably believes that representation by counsel designated by STAR or the Surviving Entity in connection with any action, suit, proceeding, investigation or inquiry results in a conflict of interest, such Indemnified Party shall have the right to employ such person’s own separate counsel, at STAR’s or the Surviving Entity’s expense; provided, however, that such separate counsel shall, to the extent consistent with its professional responsibilities, cooperate with STAR or the Surviving Entity and any counsel designated by STAR or the Surviving Entity.

STAR III will obtain extended reporting period coverage under STAR III’s existing insurance programs for a period of six years after the effective time of the STAR III Merger, to be effective as of the effective time of the STAR III Merger.

New Convertible Stock

Pursuant to the STAR III Merger Agreement, if, prior to the closing of the STAR III Merger, STAR Advisor requests that, in lieu of the Subordinated Incentive Listing Fee, Subordinated Share of Net Sales Proceeds, and Performance Fee provided for and defined in the Amended STAR Advisory Agreement, STAR issue, at the closing, the New Convertible Stock in exchange for the convertible stock STAR Advisor currently owns, then subject to the consent of each of STAR and STAR III, upon the approval of each of their respective special committees (which consent shall not be unreasonably withheld, delayed or conditioned), the STAR Parties and STAR III Parties shall amend the STAR III Merger Agreement, and take all necessary actions, to provide for the Exchange, including amending the Amended STAR Advisory Agreement, to issue the New Convertible Stock in the Exchange. The New Convertible Stock shall have economic terms and conditions that are substantially similar to the terms set forth in the Amended STAR Advisory Agreement regarding the Subordinated Incentive Listing Fee, Subordinated Share of Net Sales Proceeds and Performance Fee. STAR Advisor intends to request, prior to the consummation of either of the Mergers, the issuance of New Convertible Stock in lieu of the incentive, termination and performance fees.

Termination of the STAR III Merger Agreement

Termination by Mutual Agreement

STAR III and STAR may, by written consent, mutually agree to terminate the STAR III Merger Agreement before completing the STAR III Merger, even after the approval of STAR III stockholders.

Termination by Either STAR III or STAR

The STAR III Merger Agreement may also be terminated prior to the effective time of the STAR III Merger by either STAR III (with prior approval of the STAR III Special Committee) or STAR (with prior approval of the STAR Special Committee) if any of the following occur:

• The STAR III Merger has not occurred on or before the Outside Date. However, the right to terminate due to the failure of the STAR III Merger to occur on or before the Outside Date will not be available to STAR III or STAR if the failure of STAR III or STAR to perform or comply in all material respects with any of their respective obligations, covenants or agreements under the STAR III Merger Agreement caused the failure of the STAR III Merger to be consummated on the outside date.

• There is any final,non-appealable order issued by a governmental authority of competent jurisdiction that permanently restrains or otherwise prohibits the transactions contemplated by the STAR III Merger Agreement. The right to terminate due to the issuance of such an order will not be available to STAR III or STAR if the issuance of such final, non- appealable order was primarily due to the failure of STAR III or STAR to perform or comply in all material respects with any of their respective obligations, covenants or agreements under the STAR III Merger Agreement.

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• The approvals of the STAR III stockholders of the STAR III Merger and STAR III Charter Amendment have not been obtained at the STAR III Special Meeting. The right to terminate due to the failure to receive the requisite approvals of the STAR III stockholders will not be available to STAR III or STAR if such failure was primarily due to the failure of STAR III or STAR to perform or comply in all material respects with any of their respective obligations, covenants or agreements under the STAR III Merger Agreement.

Termination by STAR III

The STAR III Merger Agreement may also be terminated prior to the effective time of the STAR III Merger by STAR III (with the prior approval of the STAR III Special Committee) upon either of the following:

1) any of the STAR Parties shall have breached or failed to perform any of its representations, warranties, covenants or other agreements set forth in the STAR III Merger Agreement, which breach or failure to perform (A) would result in a failure of STAR to satisfy certain closing conditions, and (B) cannot be cured or, if curable, is not cured by STAR by the earlier of 20 days following written notice of such breach or failure from STAR III to STAR and two (2) business days before the Outside Date; provided, however, that STAR III shall not have the right to terminate the STAR III Merger Agreement pursuant to the foregoing if any of the STAR III Parties is then in breach of any of their respective representations, warranties, covenants or agreements set forth in the STAR III Merger Agreement such that STAR III would not satisfy certain closing conditions; or

2) if, at any time prior to obtaining the necessary approvals of the STAR III stockholders, in order to enter into an Alternative Acquisition Agreement with respect to a Superior Proposal in accordance with the STAR III Merger Agreement, so long as the termination fee payment described in “ – Termination Fee” is made in full to STAR prior to or concurrently with such termination.

Termination by STAR

The STAR III Merger Agreement may also be terminated prior to the effective time of the STAR III Merger by STAR (with the prior approval of the STAR Special Committee) upon either of the following:

1) any of the STAR III Parties shall have breached or failed to perform any of its representations, warranties, covenants or other agreements set forth in the STAR III Merger Agreement, which breach or failure to perform (A) would result in a failure of STAR III to satisfy certain closing conditions, and (B) cannot be cured or, if curable, is not cured by STAR III by the earlier of 20 days following written notice of such breach or failure from STAR to STAR III and two (2) business days before the Outside Date; provided, however, that STAR shall not have the right to terminate the STAR III Merger Agreement pursuant to the foregoing if STAR or Merger Sub is then in breach of any of their respective representations, warranties, covenants or agreements set forth in the STAR III Merger Agreement such that STAR would not satisfy certain closing conditions; or

2) if, at any time prior to obtaining the necessary approvals of the STAR III stockholders, (A) the STAR III Board has made an Adverse Recommendation Change, (B) a tender offer or exchange offer for any shares of STAR III Common Stock that constitutes an Acquisition Proposal (other than by STAR or any of its affiliates) is commenced and the STAR III Board fails to recommend against acceptance of such tender offer or exchange offer by the STAR III stockholders and to publicly reaffirm the STAR III Board recommendation within ten business days of being requested to do so by STAR, or (C) if STAR III shall have violated any of its obligations described above in “—Covenants and Agreements—No Solicitation and Change in Recommendation with Acquisition Proposal.”

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Termination Fee

STAR III agreed to pay STAR a termination payment in the amount of $2,660,000 (the “Go Shop Termination Payment”) or $5,320,000 (the “STAR III Termination Payment”), as applicable, if the STAR III Merger Agreement is terminated by:

1) (i) (a) STAR due to STAR III’s failure to perform any obligation set forth in the STAR III Merger Agreement and prior to the failure to perform giving rise to such right of termination, an Acquisition Proposal (with, for all purposes of this provision, all percentages included in the definition of “Acquisition Proposal” increased to 50%) has been publicly announced, disclosed or otherwise communicated by the STAR III Board or any person has publicly announced an intention to make such an Acquisition Proposal or (b) either STAR III or STAR because the effective time of the STAR III Merger has not occurred before the Outside Date or the STAR III stockholders do not approve the STAR III Merger, and prior to the STAR III Special Meeting, an Acquisition Proposal with respect to STAR III has been publicly announced, disclosed or otherwise communicated to STAR III’s stockholders (and not withdrawn) or any person shall have publicly announced an intention to make such an Acquisition Proposal and (ii) within 12 months after the date of such termination, a transaction in respect of an Acquisition Proposal with respect to STAR III is consummated or STAR III enters into a definitive agreement in respect of an Acquisition Proposal with respect to STAR III that is later consummated;

2) STAR III in order to enter into an Alternative Acquisition Agreement with respect to a Superior Proposal; or

3) STAR pursuant to item (2) under “—Termination by STAR” above.

STAR III will pay STAR or its designee (i) the Go Shop Termination Payment solely in connection with items (2) and (3) above, if such termination or the event giving rise to the termination right, as applicable, occurs within five business days after (x) the Go Shop Period End Time or (y) the negotiation period called for after timely delivery of a STAR III Change Notice with respect to a Go Shop Bidder or (ii) the STAR III Termination Payment in connection with item (1) above and in connection with items (2) and (3) above, if such termination or the event giving rise to STAR III’s or STAR’s termination right, as applicable, occurs on or after the sixth business day following the Go Shop Period End Time or, if applicable, the negotiation period called for after timely delivery of a STAR III Change Notice with respect to a Go Shop Bidder.

Miscellaneous Provisions

Payment of Expenses

All expenses incurred in connection with the STAR III Merger Agreement and the other transactions contemplated by the STAR III Merger Agreement will be paid by the party incurring such expenses, provided that STAR III and STAR will share equally the FormS-4 filing fees as may be required to consummate the transactions contemplated by the STAR III Merger Agreement.

Specific Performance

The parties to the STAR III Merger Agreement agree that irreparable harm would occur to thenon-breaching party if any of the provisions of the STAR III Merger Agreement were not performed in accordance with their specific terms or were otherwise breached, and that monetary damages, even if available, would not be an adequate remedy in the event of a breach. Accordingly, the parties agreed that, at any time prior to the termination of the STAR III Merger Agreement, the parties shall be entitled to an injunction or injunctions to prevent one or more breaches of the STAR III Merger Agreement and to enforce specifically the terms and provisions of the STAR III Merger Agreement, and each party waived any requirement for the securing or posting of any bond in connection with such remedy, this being in addition to any other remedy to which such party is entitled at law or in equity.

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Amendment

The parties to the STAR III Merger Agreement may amend the STAR III Merger Agreement by written agreement executed and delivered by their duly authorized officers, provided that, after approval of the STAR III Merger by the STAR III stockholders, no amendment may be made which changes the form or amount of the consideration to be delivered to the holders of STAR III Common Stock or which by applicable law requires further approval by the STAR III stockholders, without the approval of such stockholders.

Waiver

Prior to the effective time of the STAR III Merger, the parties may extend the time for performance of any obligation of the other or waive any inaccuracy in the representations and warranties of the other or the other party’s compliance with any agreement or condition contained in the STAR III Merger Agreement to the extent permitted by law.

Governing Law

The STAR III Merger Agreement is governed by the laws of the State of Maryland, without giving effect to conflicts of laws principles.

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RELATED AGREEMENTS

Concurrently with the execution of the STAR III Merger Agreement on August 5, 2019:

(1) STAR III entered into the First Amendment to the STAR III OP Partnership Agreement by and between STAR III, which owns both a general partner interest in STAR III OP, and STAR III Advisor, which owns a special limited partner interest in STAR III OP. The First Amendment will become effective at the earlier of (i) the date that STAR III merges with and into Merger Sub and (ii) upon payment of certain consideration owed to STAR III Advisor in connection with consummation of a Superior Proposal. The primary purpose of the First Amendment is to revise the economic interests of STAR III Advisor by providing that STAR III Advisor will not receive any special allocations with respect to a “Special Limited Partner Interest” (as defined in the STAR III OP Partnership Agreement) pursuant to the STAR III OP Partnership Agreement in connection with the STAR III Merger; and

(2) STAR III, STAR III OP and STAR III Advisor entered into the Termination Agreement, effective as of August 5, 2019. Pursuant to the Termination Agreement, the STAR III Advisory Agreement will be terminated at the effective time of the STAR III Merger. Also pursuant to the Termination Agreement, STAR III Advisor waived any disposition fee it otherwise would be entitled to pursuant to the STAR III Advisory Agreement and agreed to reimburse STAR III for its costs if the STAR III stockholders reject the STAR III Merger at a meeting of stockholders; and

(3) STAR and STAR Advisor entered into the Amended STAR Advisory Agreement, which shall become effective at the effective time of the STAR III Merger. The Amended STAR Advisory Agreement will amend STAR’s existing advisory agreement, dated as of December 13, 2013, as amended, to lower or change the form of consideration of certain fees as more fully described in the table below.

	Current Rates							Proposed Combined Company Rates Per Amended STAR Advisory Agreement
Type of Fee	SIR		STAR			STAR III
Investment Management(1)		0.8%		1.0	%		1.0%		1.0% (50% cash & 50% stock)
Acquisition		2.0%		1.0	%		2.0%		0.5%
Disposition(2)		1.5%		1.0	%		1.5%		0.5%
Financing		N/A		1.0	%		N/A		0.5%
Refinancing		0.5%		0.75	%		0.75%		0.5% (all stock)

(1) The basis for the current STAR III investment management fee is the value of investment, as defined in the STAR III Advisory Agreement, and would change to the cost of investment, as defined in the Amended STAR Advisory Agreement, effective upon the STAR III Merger.

(2) The current SIR disposition fee for asset sales is 1.5% of the contract sales price. If SIR is sold in a final liquidity event, the disposition fee is tiered ranging from 0.5% to 1.5% based on price paid per share to stockholders. The current STAR III disposition fee for asset sales is 1.5% of gross sales price. If there is a final liquidity event for STAR III, the disposition fee is 1.0% of the total consideration paid, subject to an increase to 1.5% at the sole discretion of STAR III’s independent directors.

The Amended STAR Advisory Agreement also provides for a Subordinated Incentive Listing Fee, Subordinated Share of Net Sales Proceeds and Performance Fee (each as defined in the Amended STAR Advisory Agreement) designed to mirror the economics of the convertible stock owned by STAR Advisor. The terms of the Subordinated Share of Net Sales Proceeds, Subordinated Incentive Listing Fee and Performance Fee are as follows:

Subordinated Share of Net Sales Proceeds. The Subordinated Share of Net Sales Proceeds shall be payable to the STAR Advisor in an amount equal to 15.0% of net sales proceeds remaining after STAR has paid distributions not less than the sum of a 6% return to stockholders (“6% Return”) and 100% of invested capital, as of each determination date less any Subordinated Incentive Listing Fee previously paid to the STAR Advisor but

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not below zero. This fee shall be payable in cash; provided that the STAR Advisor shall have the option to elect shares in lieu of cash. In no event will STAR pay a Subordinated Share of Net Sales Proceeds in excess of the amount that would be presumptively reasonable under the STAR Charter.

Subordinated Incentive Listing Fee. Upon a listing of STAR Common Stock on a securities exchange (a “Listing”), the STAR Advisor shall be entitled to the Subordinated Incentive Listing Fee in an amount equal to 15.0% of the amount by which (i) the enterprise value plus distributions paid by STAR prior to Listing, exceeds (ii) the sum of (A) 100% of invested capital at the date of Listing and (B) the total distributions required to pay the 6.0% Return through the date that enterprise value is determined less (C) any Subordinated Share of Net Sales Proceeds previously paid but not below zero. This fee shall be payable in cash; provided that STAR shall have the option to pay such amount in STAR Common Stock in lieu of cash, and such shares of STAR Common Stock would be issued 30 trading days after the Listing date, at a price per share of STAR Common Stock equal to the average closing price of the shares of STAR Common Stock over the 30 trading days immediately preceding the date of such payment.

Performance Fee. Upon termination of the STAR Advisor, unless such termination is by STAR because of (A) a material breach of the Amended STAR Advisory Agreement by STAR Advisor, or (B) fraud, criminal conduct, willful misconduct, gross negligence or negligent breach of a fiduciary duty by the STAR Advisor, the STAR Advisor shall be entitled to receive a payment of the Performance Fee equal to 15.0% of the amount by which the enterprise value on the termination date, plus distributions paid by STAR through the termination date, exceeds (i) the sum of (X) 100% of the invested capital at the termination date and (Y) the total distributions required to pay the 6% Return through the termination date, less any Subordinated Share of Net Sales Proceeds and Subordinated Incentive Listing Fees previously paid but not below zero. STAR shall have the option to pay such Performance Fee in cash or STAR Common Stock at the time of such termination. In the event STAR pays such Performance Fee in STAR Common Stock, such shares of STAR Common stock would be issued at a price per share as determined in the definition of Enterprise Value under the STAR Advisory Agreement; provided that if the shares of STAR Common Stock are listed at the time of the termination, then the enterprise value shall equal the average closing price of the shares of STAR Common Stock over the 30 trading days immediately preceding the date of such election of the shares of STAR Common Stock.

The 6% Return shall be an aggregate amount equal to a 6.0% cumulative, non-compounded, annual return on Invested Capital commencing on the date of original issuance of each share of common stock by STAR, SIR and STAR III, as applicable.

Pursuant to the STAR III Merger Agreement, prior to the consummation of either of the Mergers, STAR Advisor intends to request to receive a new class of convertible stock in exchange for the convertible stock owned by STAR Advisor in lieu of the Subordinated Incentive Listing Fee, Subordinated Share of Net Sales Proceeds and Performance Fee provided for in the Amended STAR Advisory Agreement; provided that such request must be made prior to the consummation of the STAR III Merger.

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DESCRIPTION OF CAPITAL STOCK

The following is a summary of certain terms of STAR’s capital stock, the STAR Charter, STAR’s bylaws, and certain provisions of the MGCL governing real estate investment trusts formed under Maryland law. The following summary is not complete and is subject to, and qualified in its entirety by reference to, the applicable provisions of the STAR Charter and bylaws and the applicable provisions of the MGCL. The following summary should be read in conjunction with the STAR Charter and bylaws and the applicable provisions of the MGCL for complete information on STAR’s capital stock. To obtain copies of the STAR Charter and bylaws, see “Where You Can Find More Information” on page 223.

When used in this section, unless otherwise specifically stated or the context requires otherwise, the terms “we,” “us” or “our” refer to STAR and references to “our common stock” refer to STAR Common Stock.

Under the STAR Charter, we have authority to issue a total of 1,100,000,000 shares of capital stock. Of the total number of shares of capital stock authorized, 999,999,000 shares are classified as common stock with a par value of $0.01 per share, 1,000 shares are classified as convertible stock with a par value of $0.01 per share and 100,000,000 shares are classified as preferred stock with a par value of $0.01 per share. Our board of directors, with the approval of a majority of the entire board of directors and without any action by our stockholders, may amend the STAR Charter from time to time to increase or decrease the aggregate number of shares of capital stock or the number of shares of capital stock of any class or series that we have authority to issue. As of September 30, 2019, 52,341,643 shares of our common stock were issued and outstanding, 1,000 shares of our convertible stock were issued and outstanding and no shares of preferred stock were issued and outstanding.

Common Stock

The holders of shares of our common stock are entitled to one vote per share on all matters voted on by stockholders, including the election of our directors. The STAR Charter does not provide for cumulative voting in the election of directors. Therefore, the holders of a majority of the outstanding shares of our common stock can elect our entire board of directors. Subject to any preferential rights of any outstanding series of preferred stock, the holders of shares of our common stock are entitled to such distributions as may be authorized from time to time by our board of directors out of legally available funds and declared by us and, upon liquidation, are entitled to receive all assets available for distribution to stockholders. All shares of our common stock will be fully paid andnon-assessable shares of common stock. Holders of shares of our common stock do not have preemptive rights, which means that stockholders will not have an automatic option to purchase any new shares of common stock that we issue, or have appraisal rights, unless our board of directors determines that appraisal rights apply, with respect to all or any classes or series of our stock, to one or more transactions occurring after the date of such determination in connection with which stockholders would otherwise be entitled to exercise such rights. Stockholders are not liable for our acts or obligations.

Our board of directors has authorized the issuance of shares of our capital stock without certificates; therefore, we will not issue certificates for shares of our common stock. Shares of our common stock will be held in “uncertificated” form which will eliminate the physical handling and safekeeping responsibilities inherent in owning transferable share certificates and eliminate the need to return a duly executed share certificate to effect a transfer. DST Systems, Inc. acts as our registrar and as the transfer agent for shares of our common stock.

Preferred Stock

The STAR Charter authorizes our board of directors to classify and reclassify any unissued shares of our common stock and preferred stock into other classes or series of stock. Prior to issuance of shares of each class or series, our board of directors is required by the MGCL and by the STAR Charter to set, subject to the STAR Charter restrictions on ownership and transfer of our stock, the terms, preferences, conversion or other rights,

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voting powers, restrictions, limitations as to dividends or other distributions, qualifications and terms or conditions of redemption for each class or series. Thus, our board of directors could authorize the issuance of shares of common stock or preferred stock with terms and conditions which could have the effect of delaying, deferring or preventing a transaction or change in control that might involve a premium price for holders of our common stock or otherwise be in their best interest. Our board of directors has no present plans to issue preferred stock, but may do so at any time in the future without stockholder approval. The issuance of preferred stock must be approved by a majority of our independent directors not otherwise interested in the transaction, who will have access, at our expense, to our legal counsel or to independent legal counsel.

Convertible Stock

Our authorized capital stock includes 1,000 shares of convertible stock, par value $0.01 per share. We have issued all of such shares to STAR Advisor for an aggregate purchase price of $1,000. No additional consideration is due upon the conversion of the convertible stock. There will be no distributions paid on shares of convertible stock. The conversion of the convertible stock into shares of common stock will decrease the percentage of our shares of common stock owned by current stockholders. However, at no time will the conversion of the convertible stock into shares of common stock result in STAR Advisor holding a majority of the outstanding shares of our common stock.

Except in limited circumstances, shares of convertible stock will not be entitled to vote on any matter, or to receive notice of, or to participate in, any meeting of our stockholders at which they are not entitled to vote. However, the affirmative vote of the holders of more thantwo-thirds of the outstanding shares of convertible stock will be required (1) for any amendment, alteration or repeal of any provision of the STAR Charter that materially and adversely changes the rights of the convertible stock and (2) to effect a merger of our company into another entity, or a merger of another entity into our company, unless in each case each share of convertible stock (A) will remain outstanding without a material and adverse change to its terms and rights or (B) will be converted into or exchanged for shares of stock or other ownership interest of the surviving entity having rights identical to that of our convertible stock (except for changes that do not materially and adversely affect the holders of our convertible stock).

Each outstanding share of our convertible stock will convert into the number of shares of our common stock described below if:

• we have made total distributions on the then-outstanding shares of our common stock equal to the original issue price of those shares plus an aggregate 6.0% cumulative,non-compounded, annual return on the original issue price of those shares;

• we list our common stock for trading on a national securities exchange, which we consider to include any major U.S. securities exchange and any foreign securities exchange that provides comparable liquidity to our stockholders; or

• our advisory agreement is terminated or not renewed (other than for “cause” as defined in our advisory agreement).

Upon the occurrence of any of the triggering events described above, each share of convertible stock will be converted into a number of shares of common stock equal to 1/1000 of the quotient of (A) 15% of the amount, if any, by which (1) our “enterprise value” (as determined in accordance with the provisions of the STAR Charter) as of the date of the event triggering the conversion plus the total distributions paid to our stockholders through such date on the then outstanding shares of our common stock exceeds (2) the aggregate purchase price paid for those outstanding shares of common stock plus an aggregate 6.0% cumulative,non-compounded, annual return on the price paid for those outstanding shares of common stock, divided by (B) our enterprise value divided by the number of outstanding shares of common stock on anas-converted basis, in each case, as of the date of the event triggering the conversion. In the case of a conversion upon a listing, the number of shares to be issued will

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be calculated over a period of 30 trading days which shares are listed or quoted for trading after the date of listing. In the event of a termination or nonrenewal of our advisory agreement for cause, the convertible stock will be redeemed by us for $1.00. “Cause” is defined in our advisory agreement to mean fraud, criminal conduct, willful misconduct, gross negligence or negligent breach of fiduciary duty by STAR Advisor or a material breach of our advisory agreement by STAR Advisor.

The conversion formula will result in the convertible stock converting into a number of shares equal to approximately 15% of our outstanding common stock if the conversion occurs after stockholders have received at least the aggregate purchase price paid for the outstanding shares of our common stock plus an aggregate 6.0% cumulative,non-compounded annual return on the price paid for those outstanding shares. Due to the fact this conversion trigger is based upon our payment of distributions equal to the aggregate purchase price paid for the then outstanding shares plus an aggregate 6.0% cumulative,non-compounded annual return on that aggregate purchase price, and investors who have held their shares of our common stock for differing lengths of time may have received differing returns on their investments as of the date of the conversion trigger, there is no assurance that each individual stockholder will receive a return of its invested capital plus at least a 6.0% cumulative annual return on such investment upon such a triggering event.

As used above and in the STAR Charter, “enterprise value” as of a specific date means our actual value as a going concern on the applicable date based on the difference between (A) the actual value of all of our assets as determined by our board of directors, including a majority of the independent directors, and (B) all of our liabilities as set forth on our balance sheet for the period ended immediately prior to the determination date, provided that (1) if such enterprise value is being determined in connection with a change of control that establishes our net worth, then the enterprise value shall be the net worth established thereby and (2) if such enterprise value is being determined in connection with the listing of our common stock for trading on a national securities exchange, then the enterprise value shall be the number of outstanding shares of common stock multiplied by the closing price of a single share of common stock, averaged over a period of 30 trading days, as mutually agreed upon by our board of directors, including a majority of the independent directors, and STAR Advisor. If the holder of shares of convertible stock disagree with the value determined by our board of directors, then we and the holder of the convertible stock shall name one appraiser each and those two named appraisers shall promptly agree in good faith to the appointment of a third appraiser whose determination of our enterprise value shall be final and binding on the parties. The cost of such appraisal will be shared evenly between us and STAR Advisor.

The STAR Charter provides that if we:

• reclassify or otherwise recapitalize our outstanding common stock (except to change the par value, or to change from no par value to par value, or to subdivide or otherwise split or combine shares); or

• consolidate or merge with another entity in a transaction in which we are either (1) not the surviving entity or (2) the surviving entity but that results in a reclassification or recapitalization of our common stock (except to change the par value, or to change from no par value to par value, or to subdivide or otherwise split or combine shares),

then we or the successor or purchasing business entity must provide that the holder of each share of our convertible stock outstanding at the time one of the events triggering conversion described above occurs will continue to have the right to convert the convertible stock upon such a triggering event. After one of the above transactions occurs, the convertible stock will be convertible into the kind and amount of stock and other securities and property received by the holders of common stock in the transaction that occurred, such that upon conversion, the holders of convertible stock will realize as nearly as possible the same economic rights and effects as described above in the description of the conversion of our convertible stock. This right will apply to successive reclassifications, recapitalizations, consolidations and mergers until the convertible stock is converted.

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Pursuant to the STAR III Merger Agreement, we will cause all shares of our convertible stock to be redeemed for no consideration prior to the effective time of the STAR III Merger.

Pursuant to the STAR III Merger Agreement, if, prior to the closing date of the STAR III Merger, STAR Advisor requests that, in lieu of the Subordinated Incentive Listing Fee, Subordinated Share of Net Sales Proceeds and Performance Fee, provided for and defined in the Amended STAR Advisory Agreement, STAR issue, at the closing, New Convertible Stock in exchange for the convertible stock STAR Advisor currently owns, then subject to the consent of each of STAR and STAR III, upon the approval of each of their respective special committees (which consent shall not be unreasonably withheld, delayed or conditioned), the STAR Parties and STAR III Parties shall amend the STAR III Merger Agreement, and take all necessary actions, to provide for the Exchange, including amending the Amended and Restated STAR Advisory Agreement, to issue the New Convertible Stock in the Exchange. The New Convertible Stock shall have economic terms and conditions that are substantially similar to the terms set forth in the Amended STAR Advisory Agreement regarding incentive and performance fees the Subordinated Incentive Listing Fee, Subordinated Share of Net Sales Proceeds and Performance Fee. STAR Advisor intends to request, prior to the consummation of either of the Mergers, the issuance of New Convertible Stock in lieu of the incentive, termination and performance fees.

Our board of directors will oversee the conversion of the convertible stock to ensure that the number of shares of common stock issuable in connection with the conversion is calculated in accordance with the terms of the STAR Charter. Further, if in the judgment of our board of directors full conversion of the convertible stock would cause a holder of our stock other than an Excepted Holder, as defined in the STAR Charter, to violate the limitations on the ownership and transfer of shares of common stock which prohibit, among other things, (1) any person or entity from owning or acquiring, directly or indirectly, more than 9.8% of the value of our then outstanding capital stock or more than 9.8% of the value or number of shares, whichever is more restrictive, of our then outstanding common stock or (2) any transfer of shares or other event or transaction that would result in the beneficial ownership of our outstanding shares of capital stock by fewer than 100 persons or would otherwise cause us to fail to qualify as a REIT, then only such number of shares of convertible stock (or fraction of a share thereof) will be converted into shares of our common stock such that no holder of our stock (other than an Excepted Holder) would violate such limitations, and the conversion of the remaining shares of convertible stock will be deferred until the earliest date after our board of directors determines that such conversion will not violate such limitations. Any such deferral will not otherwise alter the terms of the convertible stock.

Meetings, Special Voting Requirements and Access To Records

An annual meeting of the stockholders will be held each year on a specific date and time set by our board of directors. Special meetings of stockholders may be called only upon the request of a majority of the directors, a majority of the independent directors, the chairman, the chief executive officer or the president and will be called by our secretary to act on any matter that may properly be considered at a meeting of stockholders upon the written request of stockholders entitled to cast at least 10% of the votes entitled to be cast on such matter at the meeting. Upon receipt of a written request of eligible stockholders, either in person or by mail, stating the purpose of the meeting, we will provide all stockholders, within ten days after receipt of such request, with written notice either in person or by mail, of such meeting and the purpose thereof. Such meeting will be held on a date not less than 15 nor more than 60 days after the distribution of such notice, at a time and place specified in the request, or if none is specified, at a time and place convenient to stockholders. The presence either in person or by proxy of stockholders entitled to cast at least 50% of the votes entitled to be cast at the meeting on any matter will constitute a quorum. Generally, the affirmative vote of a majority of all votes cast is necessary to take stockholder action, except as provided in the following paragraph and except that the affirmative vote of a majority of the shares represented in person or by proxy at a meeting at which a quorum is present is required to elect a director.

Under the MGCL and the STAR Charter, stockholders are generally entitled to vote at a duly held meeting at which a quorum is present on (1) the amendment of the STAR Charter, (2) our dissolution or (3) our merger, conversion or consolidation, a statutory share exchange or the sale or other disposition of all or substantially all

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of our assets. These matters require the affirmative vote of stockholders entitled to cast at least a majority of the votes entitled to be cast on the matter.

With respect to stock owned by STAR Advisor, directors, or any of their affiliates, neither STAR Advisor nor such directors, nor any of their affiliates may vote or consent on matters submitted to stockholders regarding the removal of the advisor, such directors or any of their affiliates or any transaction between us and any of them. In determining the requisite percentage in interest of shares necessary to approve a matter on which STAR Advisor, our directors or their affiliates may not vote or consent, any shares owned by any of them shall not be included.

The advisory agreement, including the selection of our advisor, is approved annually by our directors including a majority of the independent directors. While the stockholders do not have the ability to vote to replace STAR Advisor or to select a new advisor, stockholders do have the ability, by the affirmative vote of a majority of all the votes entitled to be cast generally in the election of directors, to remove a director from our board of directors. Any stockholder will be permitted access to all of our corporate records at all reasonable times and may inspect and copy any of them for a reasonable copying charge. Inspection of our records by the office or agency administering the securities laws of a jurisdiction will be provided upon reasonable notice and during normal business hours. An alphabetical list of the names, addresses and telephone numbers of our stockholders, along with the number of shares of our common stock held by each of them, will be maintained as part of our books and records and will be available for inspection by any stockholder or the stockholder’s designated agent at our office. The stockholder list will be updated at least quarterly to reflect changes in the information contained therein. A copy of the list will be mailed to any stockholder who requests the list within ten days of the request. A stockholder may request a copy of the stockholder list in connection with matters relating to voting rights and the exercise of stockholder rights under federal proxy laws. A stockholder requesting a list will be required to pay the reasonable costs of postage and duplication. We have the right to request that a requesting stockholder represent to us that the list will not be used to pursue commercial interests unrelated to the stockholder’s interest in us. If a proper request for the stockholder list is not honored, then the requesting stockholder will be entitled to recover certain costs incurred in compelling the production of the list as well as actual damages suffered by reason of the refusal or failure to produce the list. However, a stockholder will not have the right to, and we may require a requesting stockholder to represent that it will not, secure the stockholder list or other information for the purpose of selling or using the list for a commercial purpose not related to the requesting stockholder’s interest in our affairs.

Tender Offers

The STAR Charter provides that any tender offer made by any person, including any “mini-tender” offer, must comply with most of the provisions of Regulation 14D of the Exchange Act, including the notice and disclosure requirements. Among other things, the offeror must provide us notice of such tender offer at least ten business days before initiating the tender offer. If the offeror does not comply with the provisions set forth above, thenon-complying offeror will be responsible for all of our expenses in connection with that offeror’s noncompliance. The STAR Charter also prohibits any stockholder from transferring shares of stock to a person who makes a tender offer which does not comply with such provisions unless such stockholder has first offered such shares of stock to us at the tender offer price in thenon-compliant tender offer.

Restriction on Ownership of Shares of Capital Stock

For us to qualify as a REIT, no more than 50% in value of the outstanding shares of our stock may be owned, directly or indirectly through the application of certain attribution rules under the Internal Revenue Code, by any five or fewer individuals, as defined in the Internal Revenue Code to include specified entities, during the last half of any taxable year. In addition, the outstanding shares of our stock must be owned by 100 or more persons independent of us and each other during at least 335 days of a12-month taxable year or during a proportionate part of a shorter taxable year, excluding our first taxable year for which we elect to be taxed as a REIT. In addition, we must meet requirements regarding the nature of our gross income to qualify as a REIT. One of these requirements is that at least 75% of our gross income for each calendar year must consist of rents

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from real property and income from other real property investments. The rents received by our operating partnership from any resident will not qualify as rents from real property, which could result in our loss of REIT status, if we own, actually or constructively within the meaning of certain provisions of the Internal Revenue Code, 10% or more of the ownership interests in that resident. To assist us in preserving our status as a REIT, among other purposes, the STAR Charter contains limitations on the ownership and transfer of shares of stock which prohibit: (1) any person or entity from owning or acquiring, directly or indirectly, more than 9.8% of the value of our then outstanding capital stock or more than 9.8% of the value or number of shares, whichever is more restrictive, of our then outstanding common stock and (2) any transfer of or other event or transaction with respect to shares of capital stock that would result in the beneficial ownership of our outstanding shares of capital stock by fewer than 100 persons. In addition, the STAR Charter prohibits any transfer of, or other event with respect to, shares of our capital stock that (1) would result in us being “closely held” within the meaning of Section 856(h) of the Internal Revenue Code, (2) would cause us to own, actually or constructively, 9.8% or more of the ownership interests in a resident of our real property or the real property of our operating partnership or any direct or indirect subsidiary of our operating partnership or (3) would otherwise cause us to fail to qualify as a REIT.

The STAR Charter provides that the shares of our capital stock that, if transferred, would: (1) result in a violation of the 9.8% ownership limit; (2) result in us being “closely held” within the meaning of Section 856(h) of the Internal Revenue Code; (3) cause us to own an interest in a tenant that is described in Section 856(d)(2)(B) of the Internal Revenue Code if the income derived by us from such tenant would cause us to fail to satisfy any of the gross income requirements of Section 856(a)(5) of the Internal Revenue Code; or (4) otherwise cause us to fail to qualify as a REIT, will be transferred automatically to a trust effective on the day before the purported transfer of such shares of our capital stock. We will designate a trustee of the share trust that will not be affiliated with us or the purported transferee or record holder. We will also name a charitable organization as beneficiary of the share trust. The trustee will receive all distributions on the shares of our capital stock in the share trust and will hold such distributions in trust for the benefit of the beneficiary. The trustee also will vote the shares of capital stock in the share trust and, subject to Maryland law, will have the authority to rescind as void any vote cast by the intended transferee prior to our discovery that the shares have been transferred to the share trust and to recast the vote in accordance with the desires of the trustee acting for the benefit of the charitable beneficiary. However, if we have already taken irreversible corporate action, then the trustee will not have the authority to rescind and recast the vote. The intended transferee will acquire no rights in such shares of capital stock, unless, in the case of a transfer that would cause a violation of the 9.8% ownership limit, the transferee is exempted (prospectively or retroactively) by our board of directors from the ownership limit based upon receipt of information (including certain representations and undertakings from the intended transferee) that the ownership by such transferee would not violate the provisions of the Internal Revenue Code for our qualification as a REIT. If the transfer to the share trust would not be effective for any reason to prevent a violation of the foregoing limitations on ownership and transfer, then the transfer of that number of shares that otherwise would cause the violation will be null and void, with the intended transferee acquiring no rights in such shares. In addition, the STAR Charter provides that any transfer of shares of our capital stock that would result in shares of our capital stock being beneficially owned by fewer than 100 persons will be null and void and the intended transferee will acquire no rights in such shares of our capital stock.

Within 20 days of receiving notice from us that shares of our stock have been transferred to the trust, the trustee will sell the shares to a person designated by the trustee, whose ownership of the shares will not violate the above ownership limitations. Upon the sale, the interest of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the intended transferee and to the charitable beneficiary as follows. The intended transferee will receive the lesser of (1) the price paid by the intended transferee for the shares or, if the intended transferee did not give value for the shares in connection with the event causing the shares to be held in the share trust (e.g., a gift, devise or other similar transaction), the “market price” (as defined in the STAR Charter) of the shares on the day of the event causing the shares to be held in the share trust and (2) the price received by the trustee from the sale or other disposition of the shares. The trustee may reduce the amount payable to the intended transferee by the amount of dividends and other

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distributions which have been paid to the intended transferee and are owed by the intended transferee to the trustee. Any net sales proceeds in excess of the amount payable to the intended transferee will be paid immediately to the charitable beneficiary. If, prior to our discovery that shares of our stock have been transferred to the share trust, the shares are sold by the intended transferee, then (1) the shares shall be deemed to have been sold on behalf of the share trust and (2) to the extent that the intended transferee received an amount for the shares that exceeds the amount he was entitled to receive, the excess shall be paid to the trustee upon demand.

In addition, shares of our stock held in the share trust will be deemed to have been offered for sale to us, or our designee, at a price per share equal to the lesser of (1) the price per share in the transaction that resulted in the transfer to the share trust (or, in the case of a devise or gift, the market price at the time of the devise or gift) and (2) the market price on the date we, or our designee, accept the offer. We will have the right to accept the offer until the trustee has sold the shares. Upon a sale to us, the interest of the charitable beneficiary in the shares sold will terminate and the trustee will distribute the net proceeds of the sale to the intended transferee. We may reduce the amount payable to the intended transferee by the amount of dividends and other distributions which have been paid to the intended transferee and are owed by the intended transferee to the trustee. We may pay the amount of such reduction to the trustee for the benefit of the charitable beneficiary.

Any person who acquires or attempts or intends to acquire shares of our capital stock in violation of the foregoing restrictions or who owns shares of our capital stock that were transferred to any such trust is required to give immediate written notice to us or, in the case of a proposed or attempted transaction, at least 15 days prior written notice. In both cases, such persons must provide to us such other information as we may request to determine the effect, if any, of such event on our status as a REIT. The foregoing restrictions will continue to apply until our board of directors determines it is no longer in our best interest to attempt to, or to continue to, qualify as a REIT or that compliance is no longer required for REIT qualification.

The ownership limits do not apply to a person or persons that our board of directors exempts (prospectively or retroactively) from the ownership limit upon appropriate assurances that our qualification as a REIT is not jeopardized, including certain representations and undertakings required by the STAR Charter. Any person who owns more than 5.0% (or such lower percentage applicable under Treasury regulations) of the outstanding shares of our capital stock during any taxable year will be asked to deliver a statement or affidavit setting forth the number of shares of our capital stock beneficially owned.

Distributions

We expect to continue paying monthly distributions unless our results of operations, our general financial condition, the general economic condition or other factors prohibit us from doing so. The timing and amount of distributions will be determined by our board of directors in its discretion and may vary from time to time.

Generally, our policy is to pay distributions from cash flow from operations. Because we may receive income from interest or rents at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund capital expenditures and other expenses, we expect that from time to time during our operational stage, we will declare distributions in anticipation of cash flow that we expect to receive during a later period, and we expect to pay these distributions in advance of our actual receipt of these funds. In these instances, our board of directors has the authority under our organizational documents, to the extent permitted by Maryland law, to fund distributions from sources such as borrowings, offering proceeds or the deferral of fees and expense reimbursements by STAR Advisor in its sole discretion. We have not established a limit on the amount of proceeds we may use from our public offering to fund distributions. If we pay distributions from sources other than cash flow from operations, we will have fewer funds available for investments and our stockholders’ overall return on their investment in us may be reduced. As of December 31, 2018, 15%, 14% and 72% of distributions, including shares issued pursuant to our distribution reinvestment plan, have been funded from our revolving line of credit, the refinancing of our outstanding debt, offering proceeds and cash flows from operations, respectively.

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To maintain our qualification as a REIT, we must make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). If we meet the REIT qualification requirements, we generally will not be subject to federal income tax on the income that we distribute to our stockholders each year.

We have not established a minimum distribution level, and the STAR Charter does not require that we make distributions to our stockholders.

Distribution Reinvestment Plan

Pursuant to our distribution reinvestment plan, stockholders may elect to have their cash distributions reinvested in shares of our common stock. In connection with the determination of our estimated value per share of our common stock, our board of directors determined a price per share for the distribution reinvestment plan of $14.85, $15.18, and $15.84, effective March 1, 2017, April 1, 2018, and April 1, 2019; provided, however, that our board of directors may, in its sole discretion, from time to time, change this price based upon changes in our estimated value per share and other factors that our board of directors deems relevant. If we determine to change the price at which we offer shares pursuant to our distribution reinvestment plan, we do not anticipate that we will do so more frequently than quarterly. Stockholders may elect to participate in the distribution reinvestment plan by completing enrollment form or by other written notice to the plan administrator. Participation in the plan will begin with the next distribution made after acceptance of such written notice. Our board of directors may terminate the distribution reinvestment plan at its discretion at any time upon ten days’ notice to our stockholders. Participation in the plan may also be terminated with respect to any person to the extent that a reinvestment of distributions in shares of our common stock would cause the share ownership limitations contained in the STAR Charter to be violated. Following any termination of our distribution reinvestment plan, all subsequent distributions to stockholders will be made in cash. No sales commissions or dealer manager fees are payable on shares sold through our distribution reinvestment plan.

Participants may acquire shares of our common stock pursuant to our distribution reinvestment plan until the earliest date upon which (1) all the common stock registered in this or future offerings to be offered under our distribution reinvestment plan is issued, (2) the offering related to our distribution reinvestment plan terminates, and we elect to deregister with the SEC the unsold amount of our common stock registered to be offered under our distribution reinvestment plan or (3) there is more than a de minimis amount of trading in shares of our common stock, at which time any registered shares of our common stock then available under our distribution reinvestment plan will be sold at a price equal to the fair market value of the shares of our common stock, as determined by our board of directors by reference to the applicable sales price with respect to the most recent trades occurring on or prior to the relevant distribution date. In any case, the price per share will be equal to the then-prevailing market price, which will equal the price on the national securities exchange on which such shares of common stock are listed at the date of purchase.

Holders of limited partnership interests in our operating partnership may also participate in the distribution reinvestment plan and have cash otherwise distributable to them by our operating partnership invested in our common stock at the same price as shares of our common stock.

Stockholders who elect to participate in the distribution reinvestment plan, and who generally are subject to United States federal income taxation laws, will incur a tax liability on an amount equal to the fair value on the relevant distribution date of the shares of our common stock purchased with reinvested distributions, even though such stockholders have elected not to receive the distributions used to purchase those shares of common stock in cash. However, the tax consequences of participating in our distribution reinvestment plan will vary depending upon each participant’s particular circumstances, and stockholders are urged to consult their tax advisor regarding the specific tax consequences of participation in the distribution reinvestment plan.

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All material information regarding the distributions to stockholders and the effect of reinvesting the distributions, including tax consequences, will be provided to our stockholders at least annually. Each stockholder participating in the distribution reinvestment plan will have an opportunity to withdraw from the plan at least annually after receiving this information.

Share Repurchase Plan

Our share repurchase plan may provide an opportunity for stockholders to have their shares of common stock repurchased by us, subject to certain restrictions and limitations. Notwithstanding anything in this share repurchase plan to the contrary, in connection with the pending merger transactions with STAR III and SIR, beginning with repurchases made on the repurchase date (as defined below) with respect to the third quarter of 2019, we will only repurchase shares in connection with the death or disability (as defined below) of a stockholder in accordance with the terms described herein. We expect the board of directors of the STAR/STAR III Combined Company to determine the terms of the share repurchase plan at a later date following consummation of the STAR Merger.

No shares can be repurchased under our share repurchase plan until after the first anniversary of the date of purchase of such shares; provided, however, that this holding period shall not apply to repurchases requested within two years after the death or disability of a stockholder.

On March 14, 2018, our board of directors determined to amend the terms of our share repurchase plan effective as of April 15, 2018 to (1) limit the amount of shares repurchased pursuant to our share repurchase plan each quarter to $2,000,000 and (2) revise the repurchase price to an amount equal to 93% of the most recently publicly disclosed estimated value per share. The share repurchase price is further reduced based on how long the stockholder has held the shares as follows:

Share Purchase Anniversary	Repurchase Price on Repurchase Date(1)
Less than 1 year	No Repurchase Allowed
1 year	92.5% of the Share Repurchase Price(4)
2 years	95.0% of the Share Repurchase Price(4)
3 years	97.5% of the Share Repurchase Price(4)
4 years	100.0% of the Share Repurchase Price(4)
In the event of a stockholder’s death or disability(2)	Average Issue Price for Shares(3)

(1) As adjusted for any stock dividends, combinations, splits, recapitalizations or any similar transaction with respect to the shares of common stock. Repurchase price includes the full amount paid for each share, including all sales commissions and dealer manager fees.

(2) The required one year holding period to be eligible for shares to be repurchased under our share repurchase plan does not apply in the event of death or disability of a stockholder. For purposes of our share repurchase plan, a “disability” means (a) the stockholder has received a determination of disability based upon a physical or mental condition or impairment arising after the date the stockholder acquired the shares to be repurchased, and (b) the determination of such disability was made by the governmental agency responsible for reviewing and awarding the disability retirement benefits that the stockholder could be eligible to receive, which we refer to as the “applicable governmental agency.” The applicable governmental agencies are limited to the following: (i) the Social Security Administration; (ii) the U.S. Office of Personnel Management with respect to disability benefits under the Civil Service Retirement System, or CSRS; or (iii) the Veteran’s Administration; and in each case, the agency charged with administering disability benefits at that time on behalf of one of the applicable governmental agencies. Disability determinations by governmental agencies other than those listed above, including, but not limited to, worker’s compensation insurance or the administration or enforcement of the Rehabilitation Act of 1973, as amended, or the ADA will not entitle a stockholder to the terms available for the repurchase of shares. Repurchase requests

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following an award by the applicable governmental agency of disability, such as the Social Security Administration Notice of Award, a U.S. Office of Personnel Management determination of disability under CSRS, a Veteran’s Administration record of disability-related discharge, as the case may be, or such other documentation issued by the applicable governmental agency that we deem acceptable and demonstrates an award of the disability benefits. As the following disabilities generally do not entitle a worker to Social Security or related disability benefits, they will not qualify as a “disability” for purposes of our share repurchase plan: (a) disabilities occurring after the legal retirement age; (b) temporary disabilities; and (c) disabilities that do not render a worker incapable of performing substantial gainful activity. However, where a stockholder requests the repurchase of shares due to a disability and the stockholder does not have a disability that meets the definition described above, but is subject to similar circumstances, we may repurchase the stockholder’s shares, in the sole discretion of our board of directors.

(3) The purchase price per share for shares repurchased upon the death or disability of a stockholder will be equal to the average issue price per share for all of the stockholder’s shares.

(4) The “Share Repurchase Price” equals 93% of the Estimated Value per Share. The “Estimated Value per Share” is the most recently publicly disclosed estimated value per share determined by our board of directors.

The purchase price per share for shares repurchased pursuant to our share repurchase plan will be further reduced by the aggregate amount of net proceeds per share, if any, distributed to our stockholders prior to the repurchase date as a result of the sale of one or more of our assets that constitutes a return of capital distribution as a result of such sales.

Repurchases of shares of our common stock will be made quarterly upon written request to us at least 15 days prior to the end of the applicable quarter. Repurchase requests will be honored approximately 30 days following the end of the applicable quarter, which end of the applicable quarter we refer to as the repurchase date. Stockholders may withdraw their repurchase request at any time up to three business days prior to the repurchase date.

We cannot guarantee that the funds set aside for the share repurchase plan will be sufficient to accommodate all repurchase requests made in any quarter. In the event that we do not have sufficient funds available to repurchase all of the shares of our common stock for which repurchase requests have been submitted in any quarter, priority will be given to repurchase requests in the case of the death or disability of a stockholder. If we repurchase less than all of the shares subject to a repurchase request in any quarter, with respect to any shares which have not been repurchased, you can (1) withdraw your request for repurchase or (2) ask that we honor your request in a future quarter, if any, when such repurchases can be made pursuant to the limitations of the share repurchase plan and when sufficient funds are available. Such pending requests will be honored among all requests for redemptions in any given repurchase period as follows: first, pro rata as to repurchases sought upon a stockholder’s death or disability; and, next, pro rata as to other repurchase requests.

We are not obligated to repurchase shares of our common stock under the share repurchase plan. The share repurchase plan limits the number of shares to be repurchased in any calendar year to (1) 5% of the weighted average number of shares of our common stock outstanding during the prior calendar year and (2) those that could be funded from the net proceeds from the sale of shares under our distribution reinvestment plan in the prior calendar year, plus such additional funds as may be reserved for that purpose by our board of directors. Such sources of funds could include cash on hand, cash available from borrowings and cash from liquidations of securities investments as of the end of the applicable month, to the extent that such funds are not otherwise dedicated to a particular use, such as working capital, cash distributions to stockholders or purchases of real estate assets. There is no fee in connection with a repurchase of shares of our common stock.

Our board of directors may, in its sole discretion, amend, suspend, or terminate the share repurchase plan at any time upon 30 days’ notice to our stockholders if it determines that the funds available to fund the share repurchase plan are needed for other business or operational purposes or that amendment, suspension or

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termination of the share repurchase plan is in the best interest of our stockholders. Therefore, you may not have the opportunity to make a repurchase request prior to any potential termination of our share repurchase plan. The share repurchase plan will terminate in the event that a secondary market develops for our shares of common stock.

Business Combinations

Under the MGCL, business combinations between a Maryland corporation and an interested stockholder or the interested stockholder’s affiliate are prohibited for five years after the most recent date on which the stockholder becomes an interested stockholder. For this purpose, the term “business combinations” includes mergers, consolidations, share exchanges or, in circumstances specified in the MGCL, asset transfers and issuances or reclassifications of equity securities. An “interested stockholder” is defined for this purpose as: (1) any person who beneficially, directly or indirectly, owns 10% or more of the voting power of the corporation’s outstanding voting stock; or (2) an affiliate or associate of the corporation who, at any time within thetwo-year period prior to the date in question, was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then outstanding stock of the corporation. A person is not an interested stockholder under the MGCL if the board of directors approved in advance the transaction by which he or she otherwise would become an interested stockholder. However, in approving the transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board of directors.

After the five-year prohibition, any business combination between the corporation and an interested stockholder generally must be recommended by the board of directors of the corporation and approved by the affirmative vote of at least: (1) 80% of the votes entitled to be cast by holders of outstanding shares of voting stock of the corporation and(2) two-thirds of the votes entitled to be cast by holders of voting stock of the corporation other than shares of stock held by the interested stockholder or its affiliate with whom the business combination is to be effected, or held by an affiliate or associate of the interested stockholder, voting together as a single voting group.

These super majority vote requirements do not apply if the corporation’s common stockholders receive a minimum price, as defined under the MGCL, for their shares of common stock in the form of cash or other consideration in the same form as previously paid by the interested stockholder for its shares of common stock.

None of these provisions of the MGCL will apply, however, to business combinations that are approved or exempted by the board of directors of the corporation prior to the time that the interested stockholder becomes an interested stockholder. Pursuant to the business combination statute, our board of directors has exempted any business combination involving us and any person. Consequently, the five-year prohibition and the super majority vote requirements will not apply to business combinations between us and any person. As a result, any person may be able to enter into business combinations with us that may not be in the best interest of our stockholders, without compliance with the super majority vote requirements and other provisions of the statute.

Should our board of directors opt into the business combination statute in the future, it may discourage others from trying to acquire control of us and increase the difficulty of consummating any offer.

Control Share Acquisitions

The MGCL provides that control shares of a Maryland corporation acquired in a control share acquisition have no voting rights except to the extent approved by a vote of stockholders entitled to casttwo-thirds of the votes entitled to be cast on the matter. Shares of common stock owned by the acquirer, by officers or by employees who are directors of the corporation are not entitled to vote on the matter. “Control shares” are voting shares of stock which, if aggregated with all other shares of stock owned by the acquirer or with respect to which the acquirer has

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the right to vote or to direct the voting of, other than solely by virtue of a revocable proxy, would entitle the acquirer to exercise voting power in electing directors within one of the following ranges of voting powers:

• one-tenth or more but less thanone-third;

• one-third or more but less than a majority; or

• a majority or more of all voting power.

Control shares do not include shares of stock the acquiring person is then entitled to vote as a result of having previously obtained stockholder approval or shares acquired directly from the corporation. Except as otherwise specified in the statute, a “control share acquisition” means the acquisition of issued and outstanding control shares. Once a person who has made or proposes to make a control share acquisition has undertaken to pay expenses and has satisfied other required conditions, the person may compel the board of directors to call a special meeting of stockholders to be held within 50 days of demand to consider the voting rights of the shares of stock. If no request for a meeting is made, the corporation may itself present the question at any stockholders meeting. If voting rights are not approved for the control shares at the meeting or if the acquiring person does not deliver an “acquiring person statement” for the control shares as required by the statute, the corporation may redeem any or all of the control shares for their fair value, except for control shares for which voting rights have previously been approved. Fair value is to be determined for this purpose without regard to the absence of voting rights for the control shares, and is to be determined as of the date of any meeting of stockholders at which the voting rights for control shares are considered and not approved or, if no meeting is held, the date of the last control share acquisition.

If voting rights for control shares are approved at a stockholders’ meeting and the acquirer becomes entitled to vote a majority of the shares of stock entitled to vote, all other stockholders may exercise appraisal rights. The fair value of the shares of stock as determined for purposes of these appraisal rights may not be less than the highest price per share paid in the control share acquisition. Some of the limitations and restrictions otherwise applicable to the exercise of dissenters’ rights do not apply in the context of a control share acquisition.

The control share acquisition statute does not apply to shares of stock acquired in a merger or consolidation or on a stock exchange if the corporation is a party to the transaction or to acquisitions approved or exempted by the charter or bylaws of the corporation. As permitted by the MGCL, we have provided in our bylaws that the control share provisions of the MGCL will not apply to any acquisition by any person of shares of our stock, but our board of directors retains the discretion to opt into these provisions in the future.

Advance Notice of Director Nominations and New Business

Our bylaws provide that with respect to an annual meeting of stockholders, nominations of individuals for election to our board of directors and the proposal of business to be considered by a stockholder may be made only (1) pursuant to our notice of the meeting, (2) by or at the direction of our board of directors or (3) by a stockholder who is a stockholder of record both at the time of giving the advance notice required by our bylaws and at the time of the meeting, who is entitled to vote at the meeting in the election of each individual so nominated or on any such other business and who has complied with the advance notice procedures of our bylaws. With respect to special meetings of stockholders, only the business specified in our notice of the meeting may be brought before the meeting. Nominations of individuals for election to our board of directors at a special meeting may be made only (1) by or at the direction of our board of directors or (2) provided that the special meeting has been called in accordance with our bylaws for the purpose of electing directors, by a stockholder who is a stockholder of record both at the time of giving the advance notice required by our bylaws and at the time of the meeting, who is entitled to vote at the meeting in the election of each individual so nominated and who has complied with the advance notice provisions of our bylaws.

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Subtitle 8

Subtitle 8 of Title 3 of the MGCL, or Subtitle 8, permits a Maryland corporation with a class of equity securities registered under the Exchange Act and at least three independent directors to elect to be subject, by provision in its charter or bylaws or a resolution of its board of directors and notwithstanding any contrary provision in its charter or bylaws, to any or all of five provisions:

• a classified board of directors;

• atwo-thirds vote requirement for removing a director;

• a requirement that the number of directors be fixed only by vote of the directors;

• a requirement that vacancies on the board of directors be filled only by the remaining directors and for the remainder of the full term of the class of directors in which the vacancy occurred; and

• a majority requirement for the calling of a stockholder-requested special meeting of stockholders.

We have elected to provide that, at such time as we are eligible to make a Subtitle 8 election, vacancies on our board of directors may be filled only by the remaining directors and for the remainder of the full term of the directorship in which the vacancy occurred. Through provisions in the STAR Charter and bylaws unrelated to Subtitle 8, we vest in our board of directors the exclusive power to fix the number of directorships provided that the number is not fewer than three. We have not elected to be subject to the other provisions of Subtitle 8.

Restrictions onRoll-Up Transactions

In connection with a proposed“roll-up transaction,” which, in general terms, is any transaction involving our acquisition, merger, conversion or consolidation, directly or indirectly, and the issuance of securities of an entity that would be created or would survive after the successful completion of theroll-up transaction, we will obtain an appraisal of all of our properties from an independent expert. In order to qualify as an independent expert for this purpose, the person or entity must have no material current or prior business or personal relationship with the STAR Advisor or our directors and must be engaged to a substantial extent in the business of rendering opinions regarding the value of assets of the type held by us. Our properties will be appraised on a consistent basis, and the appraisal will be based on the evaluation of all relevant information and will indicate the value of our properties as of a date immediately prior to the announcement of the proposedroll-up transaction. If the appraisal will be included in a prospectus used to offer the securities of an entity that would be created or would survive after the successful completion of aroll-up transaction, the appraisal will be filed with the SEC and, if applicable, the states in which registration of such securities is sought, as an exhibit to the registration statement for the offering. The appraisal will assume an orderly liquidation of properties over a12-month period. The terms of the engagement of such independent expert will clearly state that the engagement is for our benefit and the benefit of our stockholders. We will include a summary of the independent appraisal, indicating all material assumptions underlying the appraisal, in a report to the stockholders in connection with a proposedroll-up transaction.

In connection with a proposedroll-up transaction, the person sponsoring theroll-up transaction must offer to common stockholders who vote against the proposal a choice of:

• accepting the securities of the entity that would be created or would survive after the successful completion of theroll-up transaction offered in the proposedroll-up transaction; or

• one of the following:

• remaining stockholders and preserving their interests in us on the same terms and conditions as existed previously; or

• receiving cash in an amount equal to their pro rata share of the appraised value of our net assets.

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We are prohibited from participating in any proposedroll-up transaction:

• which would result in common stockholders having voting rights in the entity that would be created or would survive after the successful completion of theroll-up transaction that are less than those provided in the STAR Charter, including rights with respect to the election and removal of directors, annual and special meetings, amendment of the charter and our dissolution;

• which includes provisions that would operate as a material impediment to, or frustration of, the accumulation of shares by any purchaser of the securities of the entity that would be created or would survive after the successful completion of theroll-up transaction, except to the minimum extent necessary to preserve the tax status of such entity, or which would limit the ability of an investor to exercise the voting rights of its securities of the entity that would be created or would survive after the successful completion of theroll-up transaction on the basis of the number of shares held by that investor;

• in which our common stockholders’ rights to access the records of the entity that would be created or would survive after the successful completion of theroll-up transaction will be less than those provided in the STAR Charter and described in “-Meetings, Special Voting Requirements and Access To Records” above; or

• in which we would bear any of the costs of theroll-up transaction if our common stockholders reject theroll-up transaction.

Reports to Stockholders

The STAR Charter requires that we prepare an annual report and deliver it to our stockholders within 120 days after the end of each fiscal year. Among the matters that must be included in the annual report are:

• financial statements that are prepared in accordance with GAAP and are audited by our independent registered public accounting firm;

• the ratio of the costs of raising capital during the year to the capital raised, if applicable;

• the aggregate amount of investment management fees and the aggregate amount of other fees paid to STAR Advisor and any affiliate of STAR Advisor by us or third parties doing business with us during the year;

• our total operating expenses for the year, stated as a percentage of our average invested assets and as a percentage of our net income;

• a report from the independent directors that our policies are in the best interests of our stockholders and the basis for such determination; and

• separately stated, full disclosure of all material terms, factors and circumstances surrounding any and all transactions involving us and STAR Advisor, a director or any affiliate thereof during the year. Our independent directors are specifically charged with a duty to examine and comment in the report on the fairness of any such transactions.

We are also subject to the informational reporting requirements of the Exchange Act, and accordingly, we file annual reports, quarterly reports, proxy statements and other information with the SEC. In addition, we will provide you directly with periodic updates, including annual and quarterly reports.

Stockholders may authorize us to provide such periodic updates by sending instructions in writing in a form acceptable to us to receive such periodic updates electronically. Unless stockholders elect in writing to receive such periodic updates electronically, all documents will be provided in paper form by mail. Stockholders must have internet access to use electronic delivery. While we impose no additional charge for this service, there may be potential costs associated with electronic delivery, such ason-line charges. The periodic updates will be

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available on our website. Stockholders may access and print all periodic updates provided through this service. As periodic updates become available, we will notify you by sending you ane-mail message that will include instructions on how to retrieve the periodic updates. If oure-mail notification is returned to us as “undeliverable,” we will contact you to obtain your updatede-mail address. If we are unable to obtain a valide-mail address for you, we will resume sending a paper copy by regular U.S. mail to your address of record. You may revoke your consent for electronic delivery at any time and we will resume sending you a paper copy of all periodic updates. You will have the option to “unsubscribe” from the election of electronic delivery of documents on our website. In addition, every electronic communication sent by us will include a website link that will direct you to the website page where such changes to the election to receive electronic delivery of documents can be made. However, in order for us to be properly notified, your revocation must be given to us within a reasonable time before electronic delivery has commenced. We will provide you with paper copies at any time upon request. Such request will not constitute revocation of your consent to receive periodic updates electronically.

In addition to providing information mandated by the STAR Charter and the Securities Act and Exchange Act as set forth above, we intend to post on our website atwww.SteadfastREITs.com, and file with the SEC, certain operational data each quarter with respect to our portfolio. We believe that posting this additional operational data will benefit investors by consistently providing current information and greater transparency with respect to the performance of our investments.

Estimated Value Per Share

In addition to the information described under “—Reports to Stockholders” above, we expect to disclose an updated estimated NAV per share of our common stock on at least an annual basis, in a current report on Form8-K or other periodic report. Our estimated value per share may not be indicative of the price that our stockholders would receive if they sold our shares in anarm’s-length transaction, if our shares were actively traded or if we were liquidated. In addition, the proceeds received from a liquidation of our assets is expected to be substantially less than the price a stockholder paid for such shares.

Exclusive Forum for Certain Claims

Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or, if that Court does not have jurisdiction, the United States District Court for the District of Maryland, Baltimore Division, will be the sole and exclusive forum for (a) any derivative action or proceeding brought on behalf of our company, (b) any action asserting a claim of breach of any duty owed by any of our directors or officers or employees to us or to our stockholders, (c) any action asserting a claim against us or any of our directors or officers or employees arising pursuant to any provision of the MGCL or the STAR Charter or bylaws or (d) any action asserting a claim against us or any of our directors or officers or employees that is governed by the internal affairs doctrine.

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COMPARISON OF RIGHTS OF THE STAR III STOCKHOLDERS AND

THE STAR STOCKHOLDERS

If the STAR III Merger is consummated, STAR III stockholders will become STAR stockholders. The rights of STAR III stockholders are currently governed by and subject to the provisions of the MGCL and the STAR III Charter and STAR III bylaws. Upon consummation of the STAR III Merger, the rights of the former STAR III stockholders who receive STAR Common Stock in connection with the STAR III Merger will continue to be governed by the MGCL and will be governed by the STAR Charter and STAR bylaws, rather than the STAR III Charter and STAR III bylaws.

The following is a summary of the material differences between the rights of STAR III stockholders and STAR stockholders (which will be the rights of stockholders of the STAR III/STAR Combined Company following the STAR III Merger), but does not purport to be a complete description of those differences or a complete description of the terms of the STAR Common Stock subject to issuance in the STAR III Merger. The following summary is qualified in its entirety by reference to the relevant provisions of (i) Maryland law; (ii) the STAR Charter; (iii) the STAR III Charter; (iv) the STAR bylaws; and (v) the STAR III bylaws.

Furthermore, the identification of some of the differences in the rights of such holders as material is not intended to indicate that other differences that may be equally important do not exist. You are urged to read carefully the relevant provisions of Maryland law, as well as the governing corporate instruments of each of STAR and STAR III, copies of which are available, without charge, to any person or entity, including any beneficial owner to whom this joint proxy statement/prospectus is delivered, by following the instructions listed under “Where You Can Find More Information.”

	Rights of STAR Stockholders (which will be the rights of stockholders of the STAR III/STAR Combined Company following the STAR III Merger)	Rights of STAR III Stockholders
Authorized  Capital Stock	STAR is authorized to issue an aggregate of 1,100,000,000 shares of capital stock, consisting of 999,999,000 shares of common stock, $0.01 par value per share, 100,000,000 shares of preferred stock, $0.01 par value per share, and 1,000 shares ofnon-participating,non-voting convertible stock, $0.01 par value per share. As of December 16, 2019, there were 52,607,695 shares of STAR common stock issued and outstanding, respectively (which included 7,497 unvested restricted shares), 1,000 shares ofnon-participating,non-voting convertible stock issued and outstanding, and no shares of STAR preferred stock issued and outstanding.	STAR III is authorized to issue an aggregate of 1,300,000,000 shares of capital stock, consisting of 1,200,000,000 shares of common stock, $0.01 par value per share, of which 480,000,000 shares are classified as Class A common stock, 240,000,000 are classified as Class R common stock, and 480,000,000 are classified as Class T common stock, and 100,000,000 shares of preferred stock, $0.01 par value per share. As of December 16, 2019, there were 8,572,832 shares of STAR III Common Stock issued and outstanding, respectively (which included 4,500 unvested restricted shares). As of December 16, 2019, there were 3,469,447 shares of Class A common stock issued and outstanding, respectively, 475,208 shares of Class R common stock issued and outstanding, respectively, and 4,628,177 shares of Class T common stock issued and outstanding, respectively. As of December 16, 2019, there were no shares of STAR III preferred stock issued and outstanding.

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	Rights of STAR Stockholders (which will be the rights of stockholders of the STAR III/STAR Combined Company following the STAR III Merger)	Rights of STAR III Stockholders
Voting Rights	STAR only has one class of common stock. Holders of STAR Common Stock vote together as a single class.	The STAR III Charter provides that the Class A, Class R and Class T common stock shall vote together as a single class on all actions to be taken by the STAR III stockholders; provided, however, the affirmative vote of a majority of the then outstanding shares of Class A, Class R or Class T common stock, as the case may be, with no other class of common stock voting, except the applicable class of common stock voting as a separate class, shall be required (A) to amend the STAR III Charter if such amendment would materially and adversely affect the rights, preferences and privileges of such class of common stock; (B) on any matter submitted to STAR III stockholders that relates solely to such class of common stock; and (C) on any matter submitted to STAR III stockholders in which the interests of such class of common stock differ from the interests of any other class of common stock.
Common Stock Liquidation Rights	In the event of any voluntary or involuntary liquidation, dissolution or winding up of STAR, or any liquidating distribution of STAR’s assets, the holders of shares of common stock will be entitled to receive, ratably with each other holder of shares of common stock, that portion of such aggregate assets available for distribution as the number of outstanding shares of common stock held by such holder bears to the total number of outstanding shares of common stock.	In the event of any voluntary or involuntary liquidation, dissolution or winding up of STAR III, or any distribution of the STAR III’s assets, out of the assets legally available for distribution to the holders of STAR III Common Stock, the holder of each share of Class A, Class R and Class T common stock shall be entitled to be paid a liquidation payment equal to the net asset value per share of the applicable class of common stock.

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SUBMISSION OF FUTURE STOCKHOLDER PROPOSALS

2020 STAR III Annual Meeting of Stockholders

STAR III will not hold an annual meeting of stockholders in 2020 if the STAR III Merger is completed because STAR III will have been merged out of existence in the STAR III Merger. However, if the STAR III Merger Agreement is terminated for any reason, STAR III expects to hold an annual meeting of stockholders in the second half of 2020.

Since the date of any such 2020 annual meeting is expected to be changed by more than 30 days from November 6, 2020, a Rule14a-8 proposal by a stockholder to be timely must be delivered not later than a reasonable time before STAR III begins to print and mail its proxy materials. Stockholder proposals must otherwise comply with applicable law, including Rule14a-8 of the Exchange Act, and must be directed to the Secretary, Steadfast Apartment REIT III, Inc., 18100 Von Karman Avenue, Suite 500, Irvine, California 92612. STAR III will make a public announcement of such postponed annual meeting date, when and if determined.

If STAR III holds an annual meeting in 2020, for stockholder proposals (other than those made pursuant to Rule14a-8) and nominations to be brought before the 2020 annual meeting, STAR III’s bylaws provide that any eligible proposing stockholder must give written notice to STAR III’s secretary. STAR III’s current bylaws require that such notice be received by STAR III not earlier than the 150th day prior to the date of the 2020 annual meeting and not later than 5:00 p.m., Pacific Time, on the later of: (i) the 120th day prior to the date of the 2020 annual meeting; and (ii) the tenth day following the day on which public announcement of the date of the 2020 annual meeting is first made.

220

LEGAL MATTERS

It is a condition to the STAR III Merger that STAR III and STAR receive (i) opinions from DLA Piper LLP (US) and Morrison & Foerster LLP (or such other counsel reasonably satisfactory to STAR III and STAR, respectively), respectively, concerning the U.S. federal income tax consequences of the STAR III Merger and (ii) opinions from Morrison & Foerster LLP (or such counsel reasonably satisfactory to STAR III) and DLA Piper LLP (US) (or such other counsel reasonably satisfactory to STAR), respectively, regarding STAR’s and STAR III’s respective qualification as REITs. The opinions in (i) and (ii) above are issued (A) upon the filing of aPre-Effective Amendment No. 1 to Registration Statement on FormS-4 (SEC FileNo. 333-234513) and (B) upon the closing of the STAR III Merger. The validity of the shares of STAR to be issued in the STAR III Merger will be passed upon for STAR by Venable LLP.

221

EXPERTS

The consolidated financial statements and schedule of Steadfast Apartment REIT III, Inc., Steadfast Apartment REIT, Inc., and Steadfast Income REIT, Inc. at December 31, 2018 and 2017, and for each of the three years in the period ended December 31, 2018, included in the Proxy Statement of Steadfast Apartment REIT III, Inc., which is referred to and made a part of this Prospectus and Registration Statement, have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their reports appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

222

WHERE YOU CAN FIND MORE INFORMATION

STAR III and STAR each file annual, quarterly, and current reports, proxy statements and other information with the SEC. You may read and copy the registration statement and any other documents filed by STAR III and STAR at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at1-800-SEC-0330 for further information on the Public Reference Room. STAR III and STAR’s SEC filings are also available to the public at the SEC’s Internet site at http://www.sec.gov. This reference to the SEC’s Internet site is intended to be an inactive textual reference only. Investors may also consult STAR III’s or STAR’s website for more information about STAR III or STAR, respectively. STAR III’s and STAR’s website iswww.SteadfastREITs.com. Information included on these websites is not incorporated by reference into this proxy statement/prospectus.

STAR has filed with the SEC a registration statement of which this proxy statement/prospectus forms a part. The registration statement registers the STAR Common Stock to be issued to the STAR III stockholders in connection with the STAR III Merger. The registration statement, including the exhibits and schedules thereto, contains additional relevant information about STAR Common Stock. The rules and regulations of the SEC allow STAR III and STAR to omit certain information included in the registration statement from this proxy statement/prospectus.

You may request a copy of these filings, at no cost, by contacting Investor Relations, Steadfast Apartment REIT, Inc., 18100 Von Karman Avenue, Suite 500, Irvine, California 92612, or by telephone at (877)240-7264.

223

INDEX TO UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS

Pro Forma Condensed Combined Consolidated Financial Statements (Unaudited)

	Page
Introduction		F-2
Unaudited Pro Forma Condensed Combined Balance Sheets as of September  30, 2019		F-4
Unaudited Pro Forma Condensed Combined Statements of Operations for the Nine Months Ended September 30, 2019		F-6
Unaudited Pro Forma Condensed Combined Statements of Operations for the Year Ended December 31, 2018		F-8
Notes to Unaudited Pro Forma Condensed Combined Financial Statements		F-10

F-1

UNAUDITED PRO FORMA CONDENSED COMBINED CONSOLIDATED FINANCIAL INFORMATION OF STEADFAST APARTMENT REIT, INC.

As of and For the Nine Months Ended September 30, 2019 and For the Year Ended December 31, 2018

The following unaudited pro forma condensed combined consolidated financial information sets forth:

• the historical consolidated financial information of Steadfast Apartment REIT, Inc. (“STAR”) as of and for the nine months ended September 30, 2019, derived from STAR’s unaudited consolidated financial statements, and the historical consolidated statement of operations for the year ended December 31, 2018, derived from STAR’s audited consolidated financial statements;

• the historical financial information of Steadfast Apartment REIT III, Inc. (“STAR III”) as of and for the nine months ended September 30, 2019, derived from STAR III’s unaudited consolidated financial statements, and the historical consolidated statement of operations for the year ended December 31, 2018, derived from STAR III’s audited consolidated financial statements;

• the historical financial information of Steadfast Income REIT, Inc. (“SIR”) as of and for the nine months ended September 30, 2019, derived from SIR’s unaudited consolidated financial statements, and the historical consolidated statement of operations for the year ended December 31, 2018, derived from SIR’s audited consolidated financial statements;

• pro forma adjustments to give effect to STAR’s merger with STAR III on STAR’s consolidated balance sheet as of September 30, 2019, as if the merger closed on September 30, 2019 (the “STAR III Merger”);

• pro forma adjustments to give effect of the STAR III Merger and the merger with SIR on STAR’s consolidated balance sheet as of September 30, 2019 (the “SIR Merger”), as if both mergers closed on September 30, 2019;

• pro forma adjustments to give effect to STAR’s merger with STAR III on STAR’s consolidated statements of operations for the nine months ended September 30, 2019 and for the year ended December 31, 2018, as if the merger closed on January 1, 2018; and

• pro forma adjustments to give effect of the STAR III Merger and the SIR Merger on STAR’s consolidated statements of operations for the nine months ended September 30, 2019 and for the year ended December 31, 2018, as if both mergers closed on January 1, 2018.

These unaudited pro forma condensed combined consolidated financial statements are prepared for informational purposes only and are based on assumptions and estimates considered appropriate by STAR’s management; however, they are not necessarily indicative of what STAR’s consolidated financial condition or results of operations actually would have been assuming the merger with STAR III and/or SIR had been consummated as of the dates previously indicated, nor do they purport to represent the consolidated financial position or results of operations for future periods. During the period from January 1, 2018 to September 30, 2019, STAR disposed of Randall Highlands Apartments and STAR III acquired Cottage Trails at Culpepper Landing, neither of which exceeded the significance level that requires the presentation of pro forma financial information pursuant to Regulation S-X, Article 11. As such, the following Pro Forma Statements of Operations for the nine months ended September 30, 2019 and the year ended December 31, 2018 do not include pro forma adjustments to present the impact of these insignificant acquisitions and dispositions as if they occurred on January 1, 2018. These unaudited pro forma condensed combined consolidated financial statements do not include the impact of any synergies that may be achieved through the merger nor any strategies that STAR’s management may consider in order to continue to efficiently manage its operations. This pro forma condensed combined consolidated financial information should be read in conjunction with:

• STAR’s unaudited consolidated financial statements and the related notes thereto as of and for the nine months ended September 30, 2019, attached as Annex G to this proxy statement/prospectus;

F-2

• STAR’s audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2018, included herein as Annex F to this proxy statement/prospectus;

• STAR III’s unaudited consolidated financial statements and the related notes thereto as of and for the nine months ended September 30, 2019, attached as Annex E to this proxy statement/prospectus;

• STAR III’s audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2018, attached as Annex D to this proxy statement/prospectus;

• SIR’s unaudited consolidated financial statements and the related notes thereto as of and for the nine months ended September 30, 2019, attached as Annex I to this proxy statement/prospectus; and

• SIR’s audited consolidated financial statements and the related notes thereto as of and for the year ended December 31, 2018, attached as Annex H to this proxy statement/prospectus.

STAR’s merger with STAR III and/or SIR will be accounted for as an asset acquisition under Accounting Standards Codification (“ASC”) 805:Business Combinations. The total purchase price will be allocated to the individual assets acquired and liabilities assumed based upon their relative fair values. Intangible assets will be recognized at their relative fair values in accordance with ASC 350:Intangibles—Goodwill and Other. The allocation of the purchase price reflected in these unaudited pro forma condensed combined consolidated financial statements has not been finalized and is based upon preliminary estimates of these fair values, which is the best available information at the current time. A final determination of the fair values of the individual assets acquired and liabilities assumed will be based on actual valuations as of the date the merger closes. Consequently, amounts preliminarily allocated to the tangible and intangible assets acquired and liabilities assumed could change significantly from those used in the unaudited pro forma condensed combined consolidated financial statements and could result in a material change in depreciation and amortization of tangible and intangible assets and liabilities as well as revenues and expenses. The completion of the valuations, the impact of ongoing integration activities, and other changes in tangible and intangible assets and liabilities that occur could cause material differences in the information presented.

F-3

STEADFAST APARTMENT REIT, INC.

UNAUDITED PRO FORMA BALANCE SHEETS

As of September 30, 2019

	STAR Historical (A)			STAR III Historical (A)			STAR/ STAR III Merger Adjustments				Pro Forma Total
Assets:
Real Estate:
Land	$	161,613,722		$	45,908,171		$	1,144,917		B	$	208,666,810
Building and improvements		1,401,105,029			362,143,004			53,066,672		B		1,816,314,705
Tenant origination and absorption costs		—			—			11,816,899		B		11,816,899
Total real estate held for investment, cost		1,562,718,751			408,051,175			66,028,488				2,036,798,414
Less accumulated depreciation and amortization		(268,924,964	)		(32,960,809	)		32,960,809		C		(268,924,964	)
Total real estate held for investment, net		1,293,793,787			375,090,366			98,989,297				1,767,873,450
Real estate held for development		4,305,247			—			—				4,305,247
Total real estate, net		1,298,099,034			375,090,366			98,989,297				1,772,178,697
Cash and cash equivalents		74,816,801			21,803,455			(12,632,275	)	D		83,987,981
Restricted cash		47,261,216			3,863,665			—				51,124,881
Rents and other receivables		1,849,239			1,380,692			—				3,229,931
Other assets		4,174,228			647,514			—				4,821,742
Total assets	$	1,426,200,518		$	402,785,692		$	86,357,022			$	1,915,343,232
Liabilities:
Accounts payable and accrued liabilities	$	32,023,162		$	7,850,899		$	—			$	39,874,061
Notes payable:
Mortgage notes payable, net		551,806,409			287,517,455			(2,097,459	)	E		837,226,405
Credit facility, net		548,358,514			—			—				548,358,514
Notes payable total, net		1,100,164,923			287,517,455			(2,097,459	)			1,385,584,919
Distributions payable		3,873,086			1,056,993			—				4,930,079
Due to affiliates		2,677,408			636,953			—				3,314,361
Total liabilities		1,138,738,579			297,062,300			(2,097,459	)			1,433,703,420
Commitments and Contingencies
Redeemable common stock		1,182,360			4,149,979			(4,149,979	)	F		1,182,360
Stockholders’ equity:
Preferred stock		—			—			—				—
Common stock		523,416			85,729			36,858		G		646,003
Convertible stock		10			—			—		G		10
Additional paid-in capital		694,224,617			172,930,174			21,125,112		G		888,279,903
Cumulative distributions and net losses		(408,468,464	)		(71,442,490	)		71,442,490		H		(408,468,464	)
Total stockholders’ equity		286,279,579			101,573,413			92,604,460				480,457,452
Total liabilities and stockholders’ equity	$	1,426,200,518		$	402,785,692		$	86,357,022			$	1,915,343,232

F-4

STEADFAST APARTMENT REIT, INC.

UNAUDITED PRO FORMA BALANCE SHEETS

As of September 30, 2019

	Pro Forma Combined STAR & STAR III (A.1)			SIR Historical (A)			SIR Pro Forma Merger Adjustments				Combined Pro Forma Total
Assets:
Real Estate:
Land	$	208,666,810		$	89,822,014		$	34,236,318		B	$	332,725,142
Building and improvements		1,816,314,705			804,194,436			122,214,316		B		2,742,723,457
Tenant origination and absorption costs		11,816,899			—			25,739,610		B		37,556,509
Total real estate held for investment, cost		2,036,798,414			894,016,450			182,190,244				3,113,005,108
Less accumulated depreciation and amortization		(268,924,964	)		(190,527,296	)		190,527,296		C		(268,924,964	)
Total real estate held for investment, net		1,767,873,450			703,489,154			372,717,540				2,844,080,144
Real estate held for development		4,305,247			—			—				4,305,247
Total real estate, net		1,772,178,697			703,489,154			372,717,540				2,848,385,391
Cash and cash equivalents		83,987,981			120,202,920			(21,757,550	)	D		182,433,351
Restricted cash		51,124,881			9,362,825			—				60,487,706
Investment in unconsolidated joint venture		—			13,316,283			12,807,303		D.1		26,123,586
Rents and other receivables		3,229,931			2,501,546			—				5,731,477
Other assets		4,821,742			2,496,144			—				7,317,886
Total assets	$	1,915,343,232		$	851,368,872		$	363,767,293			$	3,130,479,397
Liabilities:
Accounts payable and accrued liabilities	$	39,874,061		$	20,356,476		$	—			$	60,230,537
Notes payable:
Mortgage notes payable, net		837,226,405			498,426,493			(4,071,876	)	E		1,331,581,022
Credit facility, net		548,358,514			—			—		E		548,358,514
Notes payable total, net		1,385,584,919			498,426,493			(4,071,876	)			1,879,939,536
Distributions payable		4,930,079			3,371,492			—				8,301,571
Due to affiliates		3,314,361			1,645,472			—				4,959,833
Total liabilities		1,433,703,420			523,799,933			(4,071,876	)			1,953,431,477
Commitments and Contingencies
Redeemable common stock		1,182,360			1,289,113			(1,289,113	)			1,182,360
Stockholders’ equity:
Preferred stock		—			—			—				—
Common stock		646,003			739,839			(300,819	)	G.1		1,085,023
Convertible stock		10			10			(10	)	G.1		10
Additional paid-in capital		888,279,903			650,253,927			44,715,161		G.1		1,583,248,991
Cumulative distributions and net losses		(408,468,464	)		(324,713,950	)		324,713,950		H		(408,468,464	)
Total stockholders’ equity		480,457,452			326,279,826			369,128,282				1,175,865,560
Total liabilities and stockholders’ equity	$	1,915,343,232		$	851,368,872		$	363,767,293			$	3,130,479,397

F-5

STEADFAST APARTMENT REIT, INC.

UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS

For the Nine Months Ended September 30, 2019

	STAR Historical (A)			STAR III Historical (A)			STAR and STAR III Merger Adjustments				Pro Forma Total
Revenues:
Rental income	$	129,166,798		$	30,070,531		$	—			$	159,237,329
Other income		2,055,689			731,453			—				2,787,142
Total revenues		131,222,487			30,801,984			—				162,024,471
Expenses:
Operating, maintenance and management		32,325,417			7,996,145			—				40,321,562
Real estate taxes and insurance		19,111,364			4,422,914			—				23,534,278
Fees to affiliates		19,248,909			5,586,812			334,752		B		25,170,473
Depreciation and amortization		55,430,404			11,574,455			1,674,402		C		68,679,261
Interest expense		36,962,055			10,014,805			(82,092	)	D		46,894,768
Loss on debt extinguishment		41,609			167,469			—				209,078
General and administrative expenses		6,173,895			3,682,249			(2,780,275	)	E		7,075,869
Total expenses		169,293,653			43,444,849			(853,213	)			211,885,289
(Loss) income before other income (expense)	$	(38,071,166	)	$	(12,642,865	)	$	853,213			$	(49,860,818	)
Other income (expense):
Gain on sale of real estate, net		3,329,078			—			—				3,329,078
Other income					875,000							875,000
Total other income (expense)	$	3,329,078		$	875,000		$	—			$	4,204,078
Net (loss) income	$	(34,742,088	)	$	(11,767,865	)	$	853,213			$	(45,656,740	)
Net (loss) income per common share—basic and diluted	$	(0.67	)	$	(1.37	)		N/A			$	(0.71	)
Weighted-average number of common shares outstanding, basic and diluted		52,096,357			8,608,114			3,737,152		F		64,441,623

F-6

STEADFAST APARTMENT REIT, INC.

UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS

For the Nine Months Ended September 30, 2019

	Pro Forma Combined STAR & STAR III (A.1)			SIR Historical (A)			SIR Pro Forma Adjustments (A.2)			SIR Pro Forma Total			SIR Pro Forma Merger Adjustments				Combined Pro Forma Total
Revenules:
Rental income	$	159,237,329		$	84,948,693		$	(6,503,660	)	$	78,445,033		$	—			$	237,682,362
Other income		2,787,142			3,218,233			(190,540	)		3,027,693			—				5,814,835
Total revenues		162,024,471			88,166,926			(6,694,200	)		81,472,726			—				243,497,197
Expenses:
Operating, maintenance and management		40,321,562			21,720,715			(2,510,587	)		19,210,128			—				59,531,690
Real estate taxes and insurance		23,534,278			13,376,128			(943,390	)		12,432,738			—				35,967,016
Fees to affiliates		25,170,473			11,083,920			(668,720	)		10,415,200			2,683,851		B		38,269,524
Depreciation and amortization		68,679,261			25,961,590			(531,447	)		25,430,143			4,709,683		C		98,819,087
Interest expense		46,894,768			20,505,685			(970,389	)		19,535,296			(554,591	)	D		65,875,473
Loss on debt extinguishment		209,078			3,432,058			(1,796,532	)		1,635,526			—				1,844,604
General and administrative expenses		7,075,869			6,181,745			(49,112	)		6,132,633			(2,119,829	)	E		11,088,673
Total expenses		211,885,289			102,261,841			(7,470,177	)		94,791,664			4,719,114				311,396,067
(Loss) income before other income (expense)		(49,860,818	)		(14,094,915	)		775,977			(13,318,938	)		(4,719,114	)			(67,898,870	)
Other income (expense):
Equity in loss of unconsolidated joint venture		—			(427,816	)		—			(427,816	)		164,655		E.1		(263,161	)
Gain on sale of real estate, net		3,329,078			86,800,659			(86,888,796	)		(88,137	)		—				3,240,941
Other income		875,000			—			—			—			—				875,000
Total other income (expense)	$	4,204,078		$	86,372,843		$	(86,888,796	)	$	(515,953	)	$	164,655			$	3,852,780
Net (loss) income	$	(45,656,740	)	$	72,277,928		$	(86,112,819	)	$	(13,834,891	)	$	(4,554,459	)		$	(64,046,090	)
Net loss income per common share— basic and diluted	$	(0.71	)	$	0.97			N/A		$	(0.19	)		N/A			$	(0.59	)
Weighted-average number of common shares outstanding basic and diluted		64,441,623			74,278,776			—			74,278,776			(30,241,216	)	F		108,479,183

F-7

STEADFAST APARTMENT REIT, INC.

UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS

For the Year Ended December 31, 2018

	STAR Historical (A)			STAR III Historical (A)			STAR and STAR III Merger Adjustments				Pro Forma Total
Revenues:
Rental income	$	150,900,039		$	33,451,624		$	—			$	184,351,663
Other income		19,063,191			4,458,006			—				23,521,197
Total revenues		169,963,230			37,909,630			—				207,872,860
Expenses:
Operating, maintenance and management		42,446,994			10,429,818			—				52,876,812
Real estate taxes and insurance		23,501,730			5,237,606			—				28,739,336
Fees to affiliates		25,976,226			5,799,201			593,306		B		32,368,733
Depreciation and amortization		70,993,280			16,659,117			1,006,026		C		88,658,423
Interest expense		44,374,484			11,657,873			(87,572	)	D		55,944,785
Loss on debt extinguishment		4,975,497			—			—		E		4,975,497
General and administrative expenses		6,795,365			3,491,624			(1,126,890	)	F		9,160,099
Total expenses		219,063,576			53,275,239			384,870				272,723,685
Net loss (income)	$	(49,100,346	)	$	(15,365,609	)	$	(384,870	)		$	(64,850,825	)
Net loss per common share—basic and diluted	$	(0.96	)	$	(1.96	)		N/A			$	(1.02	)
Weighted-average number of common shares outstanding, basic and diluted		51,312,947			7,839,352			4,496,296		G		63,648,595

F-8

STEADFAST APARTMENT REIT, INC.

UNAUDITED PRO FORMA STATEMENTS OF OPERATIONS

For the Year Ended December 31, 2018

	Pro Forma Combined STAR & STAR III (A.1)			SIR Historical (A)			SIR Pro Forma Adjustments (A.2)			SIR Pro Forma Total			SIR Pro Forma Merger Adjustments				Combined Pro Forma Total
Revenues:
Rental income	$	184,351,663		$	124,498,400		$	(32,614,052	)	$	91,884,348		$	—			$	276,236,011
Other income		23,521,197			17,490,459			(4,441,525	)		13,048,934			—				36,570,131
Total revenues		207,872,860			141,988,859			(37,055,577	)		104,933,282			—				312,806,142
Expenses:
Operating, maintenance and management		52,876,812			38,512,239			(12,758,612	)		25,753,627			—				78,630,439
Real estate taxes and insurance		28,739,336			24,230,326			(5,941,717	)		18,288,609			—				47,027,945
Fees to affiliates		32,368,733			15,879,702			(3,592,381	)		12,287,321			3,750,906		B		48,406,960
Depreciation and amortization		88,658,423			46,109,794			(9,342,571	)		36,767,223			3,419,211		C		128,844,857
Interest expense		55,944,785			33,158,759			(6,451,866	)		26,706,893			(617,126	)	D		82,034,552
Loss on debt extinguishment		4,975,497			3,621,665			1,792,103			5,413,768			—		E		10,389,265
General and administrative expenses		9,160,099			6,269,238			(755,815	)		5,513,423			(324,726	)	F		14,348,796
Total expenses		272,723,685			167,781,723			(37,050,859	)		130,730,864			6,228,265				409,682,814
(Loss) income before other income (expense)	$	(64,850,825	)	$	(25,792,864	)	$	(4,718	)	$	(25,797,582	)	$	(6,228,265	)		$	(96,876,672	)
Other income (expense)
Equity in loss of unconsolidated joint venture		—			(3,339,202	)		—			(3,339,202	)		530,940		F.1		(2,808,262	)
Gain on sale of real estate, net		—			118,215,618			86,889,096			205,104,714			—				205,104,714
Total other income (expense)	$	—		$	114,876,416		$	86,889,096		$	201,765,512		$	530,940			$	202,296,452
Net (loss) income	$	(64,850,825	)	$	89,083,552		$	86,884,378		$	175,967,930		$	(5,697,325	)		$	105,419,780
Net (loss) income per common share—basic and diluted	$	(1.02	)	$	1.19			N/A		$	2.34			N/A			$	0.98
Weighted-average number of common shares outstanding, basic and diluted		63,648,595			75,062,053			—			75,062,053			(30,979,316	)	G		107,731,332

F-9

STEADFAST APARTMENT REIT, INC.

NOTES TO UNAUDITED PRO FORMA BALANCE SHEET

As of September 30, 2019

NOTE 1—BASIS OF PRO FORMA PRESENTATION

Steadfast Apartment REIT, Inc. (“STAR”) is a real estate investment trust (“REIT”) that owns and operates a diverse portfolio of multifamily properties located in targeted markets throughout the United States.

On August 5, 2019, STAR entered into a definitive merger agreement (the “STAR III Merger Agreement”) with Steadfast Apartment REIT III, Inc. (“STAR III”). Under the terms of the STAR III Merger Agreement, STAR III stockholders will receive 1.43 shares of STAR’s common stock in exchange for each share of of STAR III’s common stock. Subject to the terms and conditions of the STAR III Merger Agreement, STAR III will merge with and into SIII Subsidiary, LLC, a wholly owned subsidiary of STAR (“STAR III Merger Sub”), with STAR III Merger Sub surviving the merger (the “STAR III Merger”), such that following the STAR III Merger, the surviving entity will continue as a wholly owned subsidiary of STAR. In accordance with the applicable provisions of the MGCL, the separate existence of STAR III shall cease.

On August 5, 2019, STAR entered into a definitive merger agreement (the “SIR Merger Agreement”) and, together with the STAR III Merger Agreement (the “Merger Agreements”) with Steadfast Income REIT, Inc. (“SIR”). Under the terms of the SIR Merger Agreement, SIR stockholders will receive 0.59340 shares of STAR’s common stock in exchange for each share of SIR’s common stock. Subject to the terms and conditions of the SIR Merger Agreement, SIR will merge with and into SI Subsidiary, LLC, a wholly owned subsidiary of STAR (“SIR Merger Sub”), with SIR Merger Sub surviving the merger (the “SIR Merger”), such that following the SIR Merger, the surviving entity will continue as a wholly owned subsidiary of STAR. In accordance with the applicable provisions of the Maryland General Corporation Law (the “MGCL”), the separate existence of SIR shall cease.

Concurrently with the entry into the STAR III Merger Agreement and the SIR Merger Agreement, STAR and Steadfast Apartment Advisor, LLC (“STAR Advisor”) entered into the Amended and Restated STAR Advisory Agreement (the “Amended STAR Advisory Agreement”), which shall become effective at the effective time of the earlier of the SIR Merger or the STAR III Merger. The Amended STAR Advisory Agreement will amend STAR’s existing advisory agreement, dated as of December 13, 2013, as amended.

The consummation of STAR’s merger with STAR III is not contingent upon the completion of the merger between STAR and SIR and the consummation of the merger between STAR and SIR is not contingent upon the consummation of the merger between STAR and STAR III.

NOTE 2—PRELIMINARY PURCHASE PRICE ALLOCATION

The total preliminary estimated purchase price of STAR III of approximately $194.2 million was determined based on 1.43 shares of STAR III common stock per share of STAR common stock based on 8,572,520 total shares as of September 30, 2019, which consisted of 8,570,270 shares outstanding and 2,250 granted and unvested shares under the STAR III Incentive Plan.

The total preliminary estimated purchase price of SIR of approximately $695.4 million was determined based on 0.5934 shares of SIR common stock per share of STAR common stock based on 73,983,866 total shares as of September 30, 2019, which consisted of 73,978,241 shares outstanding and 5,625 granted and unvested shares under the SIR Incentive Plan.

F-10

The following table summarizes the preliminary estimated purchase price of STAR III and SIR as of September 30, 2019:

	September 30, 2019
	STAR III		SIR
Class A common stock issued and outstanding		3,466,447		—
Class R common stock issued and outstanding		475,208		—
Class T common stock issued and outstanding		4,630,865		—
Common stock issued and outstanding		—		73,983,866
Total Common stock issued and outstanding		8,572,520		73,983,866
Exchange ratio		1.43		0.5934
Implied STAR common stock issued as consideration		12,258,704		43,902,026
STAR’s most recently disclosed estimated value per share		15.84		15.84
Value of implied STAR common stock issued as consideration	$	194,177,872	$	695,408,108

The unaudited pro forma condensed combined financial information includes various assumptions, including those related to the preliminary purchase price allocation of the assets acquired and liabilities assumed by STAR based on management’s best estimates of relative fair value. The final purchase price allocation may vary based on final appraisals, valuations and analyses of the relative fair value of the acquired assets and assumed liabilities. Accordingly, the pro forma adjustments are preliminary and have been made solely for illustrative purposes.

The following table shows the preliminary allocation of the purchase price of STAR III and SIR to the acquired identifiable assets and liabilities assumed as of September 30, 2019:

	September 30, 2019
	STAR III			SIR
Land	$	46,107,930		$	122,030,848
Building and improvements		407,372,539			911,773,580
Acquired intangible assets		11,579,531			25,318,948
Other assets, net		27,695,326			134,563,435
Investment in unconsolidated joint venture		—			25,418,370
Mortgage notes payable		(289,032,608	)		(498,323,633	)
Accounts payable due to affiliates		(636,953	)		(1,645,472	)
Accounts payable and other liabilities		(8,907,893	)		(23,727,968	)
Total estimated purchase price	$	194,177,872		$	695,408,108

NOTE 3—PRO FORMA ADJUSTMENTS

The pro forma adjustments are based on our preliminary estimates and assumptions that are subject to change. The following adjustments have been reflected in the unaudited pro forma condensed combined financial information:

Adjustments to the unaudited pro forma condensed combined balance sheets

A. Reflects STAR’s, STAR III’s and SIR’s historical unaudited condensed combined consolidated balance sheets as of September 30, 2019, derived from STAR’s, STAR III’s and SIR’s Quarterly Reports on Form10-Q for the period ended September 30, 2019, each as filed with the Securities and Exchange Commission (“SEC”) on November 8, 2019.

F-11

A.1 Reflects the pro forma combined STAR’s and STAR III’s unaudited condensed combined consolidated balance sheets as of September 30, 2019, derived from STAR’s and STAR III’s Quarterly Reports on Form10-Q for the period ended September 30, 2019, each as filed with the SEC on November 9, 2019, after adjusting for pro forma merger adjustments pertaining to the STAR III Merger.

B. The acquired real estate related identifiable assets and liabilities assumed in connection with the STAR III Merger and the SIR Merger are reflected in the unaudited pro forma condensed combined balance sheet at a preliminary relative fair value. The preliminary relative fair value is based, in part, on a valuation prepared by STAR’s management with assistance of a third-party valuation advisor. The acquired assets and assumed liabilities for an acquired property generally include, but are not limited to: land, buildings and improvements, identified tangible and intangible assets and liabilities associated within-place leases, including tenant improvements, value of above-market and below-market leases, and value of acquiredin-place leases.

The adjustments reflected in the unaudited condensed combined balance sheets for real estate assets, intangible assets and intangible liabilities represent the differences between the preliminary relative fair value of the properties to be acquired by STAR in connection with the STAR III Merger on a combined basis and STAR III’s historical balances for such properties, and the preliminary relative fair value of the properties to be acquired by STAR in the SIR Merger and SIR’s historical balances for such properties, which are presented as follows:

	September 30, 2019
	STAR Historical		STAR III Historical		Preliminary Purchase Price Adjustment		Capitalized Transaction Costs(1)		Total Adjustment		Total Combined
Land	$	161,613,722	$	45,908,171	$	199,759	$	945,158	$	1,144,917	$	208,666,810
Building and improvements, net		1,401,105,029		362,143,004		45,229,535		7,837,137		53,066,672		1,816,314,705
Acquired intangible assets, net		—		—		11,579,531		237,368		11,816,899		11,816,899
Total real estate held for investment, net	$	1,562,718,751	$	408,051,175	$	57,008,825	$	9,019,663	$	66,028,488	$	2,036,798,414

	September 30, 2019
	Pro Forma Combined STAR & STAR III		SIR Historical		Preliminary Purchase Price Adjustment		Capitalized Transaction Costs(2)		Total Adjustment		Total Combined
Land	$	208,666,810	$	89,822,014	$	32,208,834	$	2,027,484	$	34,236,318	$	332,725,142
Building and improvements, net		1,816,314,705		804,194,436		107,579,144		14,635,172		122,214,316		2,742,723,457
Acquired intangible assets, net		11,816,899		—		25,318,948		420,662		25,739,610		37,556,509
Investment in unconsolidated joint venture		—		13,316,283		12,102,087		705,216		12,807,303		26,123,586
Total real estate held for investment, net	$	2,036,798,414	$	907,332,733	$	177,209,013	$	17,788,534	$	194,997,547	$	3,139,128,694

1. From inception through September 30, 2019, STAR is expected to incur a total of $17,717,779, of which $9,019,663 will be capitalized to real estate held for investment in the STAR III Merger. A total of $7,543,650 will be paid to related parties upon consummation of the STAR III Merger.

F-12

2. From inception through September 30, 2019, STAR is expected to incur a total of $26,486,652 of which $17,788,534 will be capitalized to real estate held for investment in the SIR Merger. A total of $16,312,522 will be paid to related parties upon consummation of the SIR Merger.

The preliminary allocation of the values of the real estate and real estate related assets and liabilities, exclusive of estimated capitalized transaction costs, is as follows:

	September 30, 2019
	STAR III		SIR
Assets:
Total real estate investments	$	453,480,469	$	1,033,804,428
Acquired intangibles		11,579,531		25,318,948
Investment in unconsolidated JV		—		25,418,370
Other assets		27,695,326		134,563,435
Total assets:	$	492,755,326	$	1,219,105,181
Liabilities:
Mortgage Notes payable	$	289,032,608	$	498,323,633
Other		9,544,846		25,373,440
Total liabilities:	$	298,577,454	$	523,697,073
Estimated fair value of net assets acquired	$	194,177,872	$	695,408,108

The fair values of the tangible assets of an acquired property (which includes land, buildings and improvements) are determined by valuing the property as if it were vacant, and the“as-if-vacant” value is then allocated to land and buildings and improvements based on management’s determination of the relative fair value of these assets. Management determines theas-if-vacant fair value of a property using methods similar to those used by independent appraisers.

The fair values of above-market and below-marketin-place leases are recorded based on the present value (using an interest rate which reflects the risks associated with the leases acquired) of the difference between (i) the contractual amounts to be paid pursuant to thein-place leases and (ii) an estimate of fair market lease rates for the correspondingin-place leases, measured over a period equal to the remainingnon-cancelable term of the lease including any fixed rate bargain renewal periods, with respect to a below-market lease. The above-market and below-market lease values are capitalized as intangible lease assets or liabilities. Above-market lease values are amortized as an adjustment of rental income over the remaining terms of the respective leases. Below-market leases are amortized as an adjustment of rental income over the remaining terms of the respective leases, including any fixed rate bargain renewal periods. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of above-market and below-marketin-place lease values related to that lease would be recorded as an adjustment to rental income.

The fair values ofin-place leases include an estimate of direct costs associated with obtaining a new tenant and opportunity costs associated with lost rentals that are avoided by acquiring anin-place lease. Direct costs associated with obtaining a new tenant include commissions, tenant improvements, and other direct costs and are estimated based on management’s consideration of current market costs to execute a similar lease. The value of opportunity costs is calculated using the contractual amounts to be paid pursuant to thein-place leases over a market absorption period for a similar lease. The fair value ofin-place leases are capitalized as intangible lease assets. These lease intangible assets are amortized to expense over the remaining terms of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts ofin-place lease assets relating to that lease would be expensed.

C. Removes accumulated depreciation and amortization of STAR III and SIR’s real estate assets, as applicable, as of September 30, 2019.

F-13

D. Reflects the net change in cash and cash equivalents to consummate the STAR III Merger and the SIR Merger, as applicable assuming such merger occurred on September 30, 2019, which represents the payment of merger related transaction costs and loan assumption fees.

D.1 Represents the difference between the preliminary fair value of SIR’s Investment in an unconsolidated joint venture to be acquired by STAR in connection with the SIR Merger and SIR’s historical balances with respect to such unconsolidated joint venture. The investment in an unconsolidated joint venture represents a 10% interest in a joint venture which owns 20 multifamily properties with 4,584 apartment homes. Management relied on the appraised values of the multifamily properties in the unconsolidated joint venture provided by third-party valuation advisor. The fair value of other assets and liabilities of the unconsolidated joint venture were determined by management on the basis of carrying values due to the short duration between the origination of the instruments and their expected realization. Management calculated the amount that STAR would receive in a hypothetical liquidation of the real estate at its appraised value and the other assets and liabilities at their fair values based on the profit participation thresholds contained in the joint venture agreement. The resulting amount was the fair value assigned to the 10% interest in the unconsolidated joint venture. The investment in an unconsolidated joint venture also includes capitalized acquisition costs, which are amortized to the statement of operations.

E. Reflect adjustments to outstanding debt to consummate the STAR III Merger and SIR Merger whereby STAR is to assume the entire balance of STAR III’s and SIR’s outstanding notes payable as of September 30, 2019:

	September 30, 2019
	STAR III			SIR
Write-off of deferred financing costs	$	1,760,551		$	4,158,093
Fair value debt adjustment		(245,398	)		(4,260,953	)
STAR III’s and SIR’s estimated loan assumption costs		(3,612,612	)		(3,969,016	)
Total	$	(2,097,459	)	$	(4,071,876	)

F. Reflects the adjustment to redeemable STAR common stock of STAR III that will not be recorded at the time of the closing of the STAR III Merger pursuant to STAR’s amended and restated share repurchase plan.

G. Represents an increase in STAR common stock of $122,587 for the issuance of approximately 12,258,704 shares of STAR common stock in the STAR III Merger at an assumed value of $15.84 per share, STAR’s most recently disclosed estimated value per share, offset by the elimination of STAR III’s common stock. STAR’s 1,000 shares of non-participating, non-voting convertible stock with a par value of $0.01 per share will be repurchased by STAR for no consideration upon the consummation of the STAR III Merger and 1,000 shares of non-participating, non-voting convertible stock with a par value of $0.01 per share will be issued by STAR to STAR Advisor upon the consummation of the STAR III Merger.

G.1 Represents an increase in common stock of $439,020 for the issuance of approximately 43,902,026 shares of STAR common stock in the SIR Merger at an assumed value of $15.84 per share, STAR’s most recently disclosed estimated value per share, offset by the elimination of SIR’s common stock and convertible stock. SIR’s 1,000 sharesof non-participating, non-voting convertible stock with a par value of $0.01 per share will be repurchased by SIR for no consideration, upon the consummation of the SIR Merger.

F-14

The table below summarizes the pro forma adjustments related to common stock and additional paid-in capital related to pro forma adjustment G and G.1:

	September 30, 2019
	STAR III		SIR
Common stock:
Historical common stock	$	85,729	$	739,839
Pro forma adjustment		36,858		(300,819	)
Total pro forma common stock issued in the STAR III Merger and the SIR Merger	$	122,587	$	439,020
Additional paid-in capital:
Historical additional paid-in capital	$	172,930,174	$	650,253,927
Pro forma adjustment		21,125,112		44,715,161
Total pro forma additional paid-in capital issued in the STAR III Merger and the SIR Merger	$	194,055,286	$	694,969,088

H. Reflects the adjustment to remove STAR III’s and SIR’s cumulative distributions and net losses that will not be recorded at the time of the closing of the STAR III Merger and the SIR Merger, respectively.

F-15

STEADFAST APARTMENT REIT, INC.

NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS

For the Nine Months Ended September 30, 2019

Adjustments to the unaudited pro forma condensed combined statements of operations for the nine months ended September 30, 2019

A. Reflects STAR’s, STAR III’s and SIR’s historical consolidated statements of operations for the nine months ended September 30, 2019, derived from STAR’s, STAR III’s and SIR’s Quarterly Reports on Form10-Q for the period ended September 30, 2019 each as filed with the SEC on November 8, 2019.

A.1 Reflects the pro forma combined unaudited condensed combined consolidated statement of operations of STAR and STAR III for the nine months ended September 30, 2019, derived from STAR’s and STAR III’s Quarterly Reports on Form10-Q for the period ended September 30, 2019, as filed with the SEC on November 8, 2019, after adjusting for pro forma merger adjustments pertaining to the STAR III Merger.

A.2 Reflects adjustments for properties disposed of by SIR during the nine months ended September 30, 2019 to reflect their results as if they had been disposed of on January 1, 2018.

B. Represents adjustments made to fees to affiliates for the nine months ended September 30, 2019 to include the fees to affiliates (not reflected in the historical statements of operations of STAR) for the nine months ended September 30, 2019 that would be due to affiliates and to exclude the fees to affiliates (reflected in the historical statements of operations of STAR) that would not have been due to affiliates for the nine months ended September 30, 2019 had the STAR III Merger and SIR Merger occurred on January 1, 2018 offset by the elimination of fees due to affiliates of STAR III and SIR, as applicable. The pro forma adjustments to fees to affiliates are calculated as follows:

• Investment Management Fees: Investment management fees are payable to the STAR Advisor, based on an annual fee, payable monthly 50% in cash and 50% in shares of STAR’s common stock, of 1.0% of the acquisition cost of each of STAR III and SIR, including acquisition fees, acquisition expenses and any debt attributable to the acquisitions of STAR III and SIR, as set out in the Amended STAR Advisory Agreement. Historically, STAR III’s investment management fees were based on an annual fee, payable monthly, of 1.0% of the fair value of the STAR III real estate properties, including acquisition fees, acquisition expenses and any debt attributable to the acquisition of STAR III real estate properties, as set out in the STAR III Advisory Agreement and SIR’s investment management fees were based on an annual fee, payable monthly, of 0.80% of the cost of investments of the SIR real estate properties, including acquisition fees, acquisition expenses and any debt attributable to the acquisition of SIR real estate properties, as set out in the SIR advisory agreement.

The table below summarizes the pro forma adjustments related to investment management fees:

	Fees to affiliates For the Nine Months Ended September 30, 2019
	STAR III			SIR
Remove historical investment management fees	$	(3,321,627	)	$	(5,903,499	)
Add investment management fees based on Amended STAR Advisory Agreement		3,656,379			8,587,350
	$	334,752		$	2,683,851

C. Represents the estimated depreciation and amortization of real estate assets assuming the STAR III Merger and SIR Merger occurred on January 1, 2018, using the relative fair values calculated as of September 30, 2019. Depreciation expense on the purchase price of STAR III’s and SIR’s building, building improvement and furniture and fixtures is recognized using the straight-line method over an estimated useful life of 27.5 years, 10 years and 5 years, respectively.

F-16

The following table summarizes the pro forma adjustments to depreciation and amortization by asset category for the properties acquired in the STAR III Merger and the SIR Merger that would have been recorded for the nine months ended September 30, 2019:

	Depreciation and Amortization Expense For the Nine Months Ended September 30, 2019
	STAR III			SIR
Buildings and improvements	$	13,248,857		$	30,139,826
Less: historical depreciation and amortization		(11,574,455	)		(25,430,143	)
Adjustment to depreciation and amortization	$	1,674,402		$	4,709,683

D. Represents the estimated interest expense assuming the STAR III Merger and SIR Merger had occurred on January 1, 2018.

The following table summarizes the pro forma interest expense adjustment associated with the debt assumed in the STAR III Merger and the SIR Merger that would have been recorded for the nine months ended September 30, 2019:

	Interest Expense For the Nine Months Ended September 30, 2019
	STAR III			SIR
Amortization of loan premium	$	(49,073	)	$	(124,535	)
Amortization of deferred financing costs associated with debt assumed by STAR(1)		159,315			250,783
Less: historical amortization of deferred financing costs		(192,334	)		(680,838	)
Adjustment to interest expense	$	(82,092	)	$	(554,590	)

(1) In assuming the existing notes payable of STAR III and SIR, STAR will pay a loan assumption fee to the various lenders of 1.0% of the principal amount of the assumed debt.

E. Represents the reversal of historical general and administrative expenses incurred by STAR, STAR III and SIR related to the STAR III Merger and SIR Merger as they reflect nonrecurring charges directly attributable to the transactions.

The management of STAR expects that the STAR III Merger and the SIR Merger will create general and administrative cost savings, including costs associated with corporate administrative functions. There can be no assurance that STAR as a combined company will be successful in achieving these anticipated costs savings. Since these savings are not currently factually supportable, no adjustments to historical general and administrative expenses have been included.

E.1 Represents adjustments to equity in loss of unconsolidated joint venture to remove historical amortization of outside basis difference and add amortization of outside basis difference resulting from the STAR III Merger and the SIR Merger.

F. Reflects the adjustments in weighted-average basic and diluted common stock issued to STAR III and SIR, as applicable, in accordance with the exchange ratios set forth in the applicable Merger Agreement as consideration, assuming the mergers closed on January 1, 2018.

F-17

The following table summarizes the pro forma weighted-average basic and diluted common stock adjustment in the STAR III Merger and the SIR Merger that would have been recorded for the nine months ended September 30, 2019:

	For the Nine Months Ended September 30, 2019
	STAR III			SIR
Historical weighted-average basic and diluted common stock		(8,608,114	)		(74,278,776	)
Implied STAR common stock issued as consideration		12,258,704			43,902,027
		3,650,590			(30,376,749	)
Average common stock issued upon payment of investment management fees(1)		86,562			135,533
Adjustment to weighted-average basic and diluted common stock		3,737,152			(30,241,216	)

(1) Represents 50% of the average investment management fees based on Amended STAR Advisory Agreement (see above B), divided by STAR’s most recently disclosed estimated value per share of $15.84.

F-18

STEADFAST APARTMENT REIT, INC.

NOTES TO UNAUDITED PRO FORMA STATEMENT OF OPERATIONS

For the Year Ended December 31, 2018

Adjustments to the audited pro forma condensed combined statements of operations for the year ended December 31, 2018

A. Reflects the historical consolidated statements of operations of each of STAR, STAR III and SIR for the year ended December 31, 2018 derived from STAR’s, STAR III’s and SIR’s Annual Reports on Form10-K for the year ended December 31, 2018 as filed with the SEC on March 15, 2019.

A.1 Reflects the pro forma combined unaudited condensed combined consolidated statements of operations of STAR and STAR III for the year ended December 31, 2018, derived from STAR’s and STAR III’s Annual Reports on Form10-K for the year ended December 31, 2018, as filed with the SEC on March 15, 2019 after adjusting for pro forma merger adjustments pertaining to the STAR III Merger.

A.2 Reflects adjustments for properties acquired by and disposed of by SIR during the year ended December 31, 2018 to reflect their results as if they had been acquired or disposed of, as applicable, on January 1, 2018.

B. Represents adjustments made to fees to affiliates for the for the year ended December 31, 2018 to include the fees to affiliates (not reflected in the historical statements of operations of STAR) for the year ended December 31, 2018 that would be due to affiliates and to exclude the fees to affiliates (reflected in the historical statements of operations of STAR) that would not have been due to affiliates for the year ended December 31, 2018 had the STAR III Merger and SIR Merger occurred on January 1, 2018 offset by the elimination of fees due to affiliates of STAR III and SIR, as applicable. The pro forma adjustments to fees to affiliates are calculated as follows:

• Investment Management Fees: Investment management fees are payable to the STAR Advisor, based on an annual fee, payable monthly 50% in cash and 50% in shares of STAR common stock, of 1.0% of the acquisition cost of each of STAR III and SIR, including acquisition fees, acquisition expenses and any debt attributable to the acquisition of STAR III and SIR, as set out in the Amended STAR Advisory Agreement. Historically, STAR III’s investment management fees were based on an annual fee, payable monthly, of 1.0% of the fair value of the STAR III real estate properties, including acquisition fees, acquisition expenses and any debt attributable to the acquisition of STAR III real estate properties, as set out in the STAR III Advisory Agreement and SIR’s investment management fees were based on an annual fee, payable monthly, of 0.80% of the cost of investments of the SIR real estate properties, including acquisition fees, acquisition expenses and any debt attributable to the acquisition of SIR real estate properties, as set out in the SIR advisory agreement.

The table below summarizes the pro forma adjustments related to investment management fees:

	Fees to affiliates For the Year Ended December 31, 2018
	STAR III			SIR
Remove historical investment management fees	$	(4,167,442	)	$	(7,698,894	)
Add investment management fees based on Amended STAR Advisory Agreement		4,760,748			11,449,800
	$	593,306		$	3,750,906

C. Represents the estimated depreciation and amortization of real estate assets assuming the STAR III Merger and the SIR Merger occurred on January 1, 2018, using the relative fair values calculated as of December 31, 2018. Depreciation expense on the purchase price of STAR III’s and SIR’s building, building improvements and furniture and fixtures is recognized using the straight-line method over an estimated useful life of 27.5 years, 10 years and 5 years, respectively.

F-19

The following table summarizes the pro forma adjustments to depreciation and amortization by asset category for the properties acquired in the SIR Merger and the STAR III Merger that would have been recorded for the year ended December 31, 2018:

	Depreciation and Amortization Expense For the Year Ended December 31, 2018
	STAR III			SIR
Buildings and improvements	$	17,665,143		$	40,186,434
Less: historical depreciation and amortization		(16,659,117	)		(36,767,223	)
Adjustment to depreciation and amortization	$	1,006,026		$	3,419,211

D. Represents the estimated interest expense assuming the STAR III Merger and the SIR Merger had occurred on January 1, 2018.

The following table summarizes the pro forma interest expense adjustment associated with the debt assumed in the STAR III Merger and SIR Merger that would have been recorded for the year ended December 31, 2018:

	Interest Expense For the Year Ended December 31, 2018
	STAR III			SIR
Amortization of loan premium	$	(65,430	)	$	(166,047	)
Amortization of deferred financing costs associated with debt assumed by STAR(1)		212,420			334,377
Less: historical amortization of deferred financing costs		(234,562	)		(785,456	)
Adjustment to interest expense	$	(87,572	)	$	(617,126	)

(1) In assuming the existing notes payable of STAR III and SIR, STAR will pay a loan assumption fee to the various lenders of up to 1.0% of the principal amount of the assumed debt.

E. The following material nonrecurring items are not reflected in the unaudited pro forma statement of operations for the year ended December 31, 2018 that otherwise would have been if the STAR III Merger and SIR Merger occurred on January 1, 2018:

Loss on debt extinguishment:

	For the Year Ended December 31, 2018
	STAR III			SIR
Write off of deferred financing costs, net associated with STAR III’s and SIR’s notes payable		(1,760,551	)		(4,158,093	)
Loss on debt extinguishment		(1,760,551	)		(4,158,093	)

F. Represents the reversal of historical general and administrative expenses incurred by STAR, STAR III and SIR related to the STAR III Merger and SIR Merger as they reflect nonrecurring charges directly attributable to the transaction.

Management of STAR expects that the STAR III Merger and SIR Merger will create general and administrative cost savings, including costs associated with corporate administrative functions. There can be no assurance that STAR as a combined company will be successful in achieving these anticipated costs savings. Since these savings are not currently factually supportable, no adjustments to historical general and administrative expenses have been included.

F-20

F.1 Represents adjustments to equity in loss of unconsolidated joint venture to remove historical amortization of outside basis difference and add amortization of outside basis difference resulting from the STAR III Merger and the SIR Merger.

G. Reflects the adjustment in weighted-average basic and diluted common stock issued to SIR and STAR III, as applicable, in accordance with the exchange ratios set forth in the applicable Merger Agreement as consideration, assuming the mergers closed on January 1, 2018.

The following table summarizes the pro forma weighted-average basic and diluted common stock adjustment in the STAR III Merger and the SIR Merger that would have been recorded for the year ended December 31, 2018:

	For the Year Ended December 31, 2018
	STAR III			SIR
Historical weighted-average basic and diluted common stock		(7,839,352	)		(75,062,053	)
Implied STAR common stock issued as consideration		12,258,704			43,902,027
		4,419,352			(31,160,026	)
Average common stock issued upon payment of investment management fees(1)		76,944			180,710
Adjustment to weighted-average basic and diluted common stock		4,496,296			(30,979,316	)

(1) Represents 50% of the average investment management fees based on Amended STAR Advisory Agreement (see above B), divided by STAR’s most recently disclosed estimated value per share of $15.84.

F-21

Annex A

AGREEMENT AND PLAN OF MERGER

AMONG

STEADFAST APARTMENT REIT, INC.,

STEADFAST APARTMENT REIT OPERATING PARTNERSHIP, L.P.,

SIII SUBSIDIARY, LLC,

STEADFAST APARTMENT REIT III, INC., AND

STEADFAST APARTMENT REIT III OPERATING PARTNERSHIP, L.P.

DATED AS OF AUGUST 5, 2019

TABLE OF CONTENTS

		Page
ARTICLE 1 DEFINITIONS			A-2
Section 1.1	Definitions		A-2
Section 1.2	Interpretation and Rules of Construction		A-11
ARTICLE 2 THE MERGER			A-11
Section 2.1	The Merger; Other Transactions		A-11
Section 2.2	Closing		A-12
Section 2.3	Effective Time		A-12
Section 2.4	Organizational Documents of the Surviving Entity		A-12
Section 2.5	Managers of the Surviving Entity		A-12
Section 2.6	Tax Treatment of Merger		A-12
ARTICLE 3 EFFECTS OF THE MERGER			A-13
Section 3.1	Effects of the Merger		A-13
Section 3.2	Restricted STAR III Shares		A-14
Section 3.3	Exchange Agent; Exchange Procedures; Distributions with Respect to Unexchanged Shares		A-14
Section 3.4	Withholding Rights		A-15
Section 3.5	Dissenters Rights		A-16
Section 3.6	General Effects of the Merger		A-16
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF THE STAR III PARTIES			A-16
Section 4.1	Organization and Qualification; Subsidiaries		A-16
Section 4.2	Authority; Approval Required		A-17
Section 4.3	No Conflict; Required Filings and Consents		A-18
Section 4.4	Capital Structure		A-19
Section 4.5	SEC Documents; Financial Statements; Internal Controls; Off Balance Sheet Arrangements; Investment Company Act; Anti-Corruption Laws		A-20
Section 4.6	Absence of Certain Changes or Events		A-22
Section 4.7	No Undisclosed Liabilities		A-22
Section 4.8	Permits; Compliance with Law		A-23
Section 4.9	Litigation		A-23
Section 4.10	Properties		A-23
Section 4.11	Environmental Matters		A-24
Section 4.12	Material Contracts		A-25
Section 4.13	Taxes		A-27
Section 4.14	Intellectual Property		A-29
Section 4.15	Insurance		A-29
Section 4.16	Benefit Plans		A-30
Section 4.17	Related Party Transactions		A-30
Section 4.18	Brokers		A-30
Section 4.19	Opinion of Financial Advisor		A-31
Section 4.20	Takeover Statutes		A-31
Section 4.21	Information Supplied		A-31
Section 4.22	No Other Representations and Warranties		A-31

A-i

		Page
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF THE STAR PARTIES			A-32
Section 5.1	Organization and Qualification; Subsidiaries		A-32
Section 5.2	Authority		A-33
Section 5.3	No Conflict; Required Filings and Consents		A-34
Section 5.4	Capital Structure		A-35
Section 5.5	SEC Documents; Financial Statements; Internal Controls; Off Balance Sheet Arrangements; Investment Company Act; Anti-Corruption Laws		A-36
Section 5.6	Absence of Certain Changes or Events		A-38
Section 5.7	No Undisclosed Liabilities		A-38
Section 5.8	Permits; Compliance with Law		A-38
Section 5.9	Litigation		A-39
Section 5.10	Properties		A-39
Section 5.11	Environmental Matters		A-40
Section 5.12	Material Contracts		A-40
Section 5.13	Taxes		A-42
Section 5.14	Intellectual Property		A-44
Section 5.15	Insurance		A-45
Section 5.16	Benefit Plans		A-45
Section 5.17	Related Party Transactions		A-46
Section 5.18	Brokers		A-46
Section 5.19	Opinion of Financial Advisor		A-46
Section 5.20	Takeover Statutes		A-46
Section 5.21	Information Supplied		A-46
Section 5.22	Ownership of Merger Sub; No Prior Activities		A-47
Section 5.23	Financing		A-47
Section 5.24	No Other Representations and Warranties		A-47
ARTICLE 6 COVENANTS RELATING TO CONDUCT OF BUSINESS PENDING THE MERGER			A-48
Section 6.1	Conduct of Business by STAR III		A-48
Section 6.2	Conduct of Business by STAR		A-51
Section 6.3	No Control of Other Parties’ Business		A-54
ARTICLE 7 ADDITIONAL COVENANTS			A-55
Section 7.1	Preparation of theForm S-4 and the Proxy Statement; Stockholder Approval		A-55
Section 7.2	Access to Information; Confidentiality		A-56
Section 7.3	No Solicitation of Transactions		A-57
Section 7.4	Public Announcements		A-62
Section 7.5	Appropriate Action; Consents; Filings		A-62
Section 7.6	Notification of Certain Matters; Transaction Litigation		A-63
Section 7.7	Indemnification; Directors’ and Officers’ Insurance		A-64
Section 7.8	Dividends		A-65
Section 7.9	Takeover Statutes		A-66
Section 7.10	Obligations of the Parties		A-66
Section 7.11	New Convertible Stock		A-66
Section 7.12	Tax Matters		A-66
Section 7.13	STAR III Designee		A-67
Section 7.14	STAR Convertible Stock		A-67
Section 7.15	Section 16 Matters		A-67

A-ii

		Page
ARTICLE 8 CONDITIONS			A-68
Section 8.1	Conditions to Each Party’s Obligation to Effect the Merger		A-68
Section 8.2	Conditions to Obligations of the STAR Parties		A-68
Section 8.3	Conditions to Obligations of the STAR III Parties		A-69
ARTICLE 9 TERMINATION, FEES AND EXPENSES, AMENDMENT AND WAIVER			A-70
Section 9.1	Termination		A-70
Section 9.2	Effect of Termination		A-72
Section 9.3	Fees and Expenses		A-72
Section 9.4	Amendment		A-74
ARTICLE 10 GENERAL PROVISIONS			A-74
Section 10.1	Nonsurvival of Representations and Warranties and Certain Covenants		A-74
Section 10.2	Notices		A-74
Section 10.3	Severability		A-75
Section 10.4	Counterparts		A-75
Section 10.5	Entire Agreement; No Third-Party Beneficiaries		A-75
Section 10.6	Extension; Waiver		A-76
Section 10.7	Governing Law; Venue		A-76
Section 10.8	Assignment		A-76
Section 10.9	Specific Performance		A-76
Section 10.10	Waiver of Jury Trial		A-77
Section 10.11	Authorship		A-77

EXHIBITS

Exhibit A – Termination Agreement

Exhibit B – Amended and Restated STAR Advisory Agreement

Exhibit C – STAR III Operating Partnership Agreement Amendment

Exhibit D – STAR III Charter Amendment

DISCLOSURE LETTERS

STAR Disclosure Letter

STAR III Disclosure Letter

A-iii

AGREEMENT AND PLAN OF MERGER

THIS AGREEMENT AND PLAN OF MERGER, dated as of August 5, 2019 (this “Agreement”), is among Steadfast Apartment REIT III, Inc., a Maryland corporation (“STAR III”), Steadfast Apartment REIT III Operating Partnership, L.P., a Delaware limited partnership and the operating partnership of STAR III (“STAR III Operating Partnership”), Steadfast Apartment REIT, Inc., a Maryland corporation (“STAR”), SIII Subsidiary, LLC, a Maryland limited liability company and a wholly owned subsidiary of STAR (“Merger Sub”), and Steadfast Apartment REIT Operating Partnership, L.P., a Delaware limited partnership and the operating partnership of STAR (“STAR Operating Partnership”). Each of STAR III, STAR III Operating Partnership, STAR, Merger Sub, and STAR Operating Partnership is sometimes referred to herein as a “Party” and collectively as the “Parties.” Capitalized terms used but not otherwise defined herein have the meanings ascribed to them inArticle 1.

WHEREAS, the Parties wish to effect a business combination in which STAR III will be merged with and into Merger Sub (the “Merger”), with Merger Sub being the surviving company, and each share of STAR III Common Stock issued and outstanding immediately prior to the Merger Effective Time that is not cancelled and retired pursuant to this Agreement will be converted into the right to receive the Merger Consideration, upon the terms and subject to the conditions set forth in this Agreement and in accordance with the Maryland General Corporation Law (the “MGCL”) and the Maryland Limited Liability Company Act (“MLLCA”);

WHEREAS, on the recommendation of the special committee (the “STAR III Special Committee”) of the Board of Directors of STAR III (the “STAR III Board”), the STAR III Board has (a) determined that this Agreement, the STAR III Charter Amendment, the Merger and the other transactions contemplated by this Agreement are advisable and in the best interests of STAR III and its stockholders, (b) authorized and approved this Agreement, the STAR III Charter Amendment, the Merger and the other transactions contemplated by this Agreement, (c) directed that the Merger and the STAR III Charter Amendment be submitted for consideration at the Stockholders Meeting, and (d) recommended the approval of the Merger and the STAR III Charter Amendment by the STAR III stockholders;

WHEREAS, STAR III, as the sole general partner of STAR III Operating Partnership, has authorized and approved this Agreement and the transactions contemplated by this Agreement and determined that this Agreement and the transactions contemplated by this Agreement are advisable;

WHEREAS, on the recommendation of the special committee (the “STAR Special Committee”) of the Board of Directors of STAR (the “STAR Board”), the STAR Board has (a) determined that this Agreement, the Merger and the other transactions contemplated by this Agreement are advisable and in the best interests of STAR and its stockholders, and (b) authorized and approved this Agreement, the Merger and the other transactions contemplated by this Agreement;

WHEREAS, STAR, in its capacity as the sole member of Merger Sub, has taken all actions required for the execution of this Agreement by Merger Sub and to adopt and approve this Agreement and to approve the consummation by Merger Sub of the Merger and the other transactions contemplated by this Agreement;

WHEREAS, STAR, as the sole general partner of STAR Operating Partnership, has authorized and approved this Agreement and the transactions contemplated by this Agreement and determined that this Agreement and the transactions contemplated by this Agreement are advisable;

WHEREAS, for U.S. federal income tax purposes, it is intended that the Merger shall qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Code, and this Agreement is intended to be and is adopted as a “plan of reorganization” for the Merger for purposes of Sections 354 and 361 of the Code;

WHEREAS, concurrently with the execution and delivery of this Agreement, STAR III, the STAR III Operating Partnership, and STAR III Advisor have entered into the Termination Agreement attached as

A-1

Exhibit A (the “Termination Agreement”), which provides for, among other things, the termination of the STAR III Advisory Agreement at the Merger Effective Time;

WHEREAS, concurrently with the execution and delivery of this Agreement, STAR, the STAR Operating Partnership and STAR Advisor have entered into the Amended and Restated STAR Advisory Agreement attached asExhibit B (the “Amended and Restated STAR Advisory Agreement”), which shall be effective at the Merger Effective Time;

WHEREAS, concurrently with the execution and delivery of this Agreement, STAR III has entered into an amendment to STAR III Operating Partnership Agreement attached asExhibit C (the “STAR III Operating Partnership Agreement Amendment”), which shall be effective at the Merger Effective Time; and

WHEREAS, each of the Parties desire to make certain representations, warranties, covenants and agreements in connection with the Merger, and to prescribe various conditions to the Merger.

NOW THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, agree as follows:

ARTICLE 1

DEFINITIONS

Section 1.1Definitions.

(a) For purposes of this Agreement:

“Acceptable Confidentiality Agreement” means a confidentiality agreement with a term of at least 18 months and that contains an18-month standstill provision and an18-monthnon-solicitation provision and that is not materially less favorable in the aggregate to STAR III than theNon-Disclosure Agreement, dated as of September 28, 2018, by and between STAR and STAR III.

“Action” means any claim, action, cause of action, suit, litigation, proceeding, arbitration, mediation, interference, audit, assessment, hearing, or other legal proceeding (whether sounding in contract, tort or otherwise, whether civil or criminal and whether brought, conducted, tried or heard by or before any Governmental Authority).

“Affiliate” of a specified Person means a Person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person.

“Alternative Acquisition Agreement” means any letter of intent, memorandum of understanding, agreement in principle, acquisition agreement, merger agreement or other similar agreement (other than an Acceptable Confidentiality Agreement) relating to any Acquisition Proposal.

“Anti-Corruption Laws” means (i) the U.S. Foreign Corrupt Practices Act of 1977, as amended, and the rules and regulations promulgated thereunder, and (ii) any anti-bribery, anti-corruption or similar applicable Law of any other jurisdiction.

“Benefit Plan” means any “employee benefit plan” (within the meaning of Section 3(3) of ERISA) and any employment, consulting, termination, severance, change in control, separation, retention equity option, equity appreciation rights, restricted equity, phantom equity, equity-based compensation, profits interest unit, outperformance, equity purchase, deferred compensation, bonus, incentive compensation, fringe benefit, health,

A-2

medical, dental, disability, accident, life insurance, welfare benefit, cafeteria, vacation, paid time off, perquisite, retirement, pension, or savings or any other compensation or employee benefit plan, agreement, program, policy, practice, understanding or other arrangement, whether or not subject to ERISA.

“Book-Entry Share” means, with respect to any Party, a book-entry share registered in the transfer books of such Party.

“Business Day” means any day other than a Saturday, Sunday or any day on which banks located in New York, New York are authorized or required to be closed.

“Charter” means the charter of an entity, in each case, as amended, restated or supplemented and in effect on the date hereof.

“Code” means the Internal Revenue Code of 1986, as amended, and the rules and regulations promulgated thereunder.

“Confidentiality Agreements” means (i) theNon-Disclosure Agreement, dated as of September 28, 2018, as may be amended, by and between STAR and STAR III, and (ii) the Letter Agreement, dated as of June 10, 2019, as may be amended, by and among SIR, STAR III and STAR, collectively.

“Contract” means any written or oral contract, agreement, indenture, note, bond, instrument, lease, conditional sales contract, mortgage, license, guaranty, binding commitment or other agreement.

“Environmental Law” means any Law (including common law) relating to the pollution (or cleanup thereof) or protection of the natural resources, endangered or threatened species, or environment (including ambient air, soil, surface water, groundwater, land surface or subsurface land), or human health or safety (as such matters relate to Hazardous Substances), including Laws relating to the use, handling, presence, transportation, treatment, generation, processing, recycling, remediation, storage, disposal, release or discharge of Hazardous Substances.

“Environmental Permit” means any permit, approval, license, exemption, action, consent or other authorization issued, granted, given, authorized by or required under any applicable Environmental Law.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended, and the rules and regulations promulgated thereunder.

“ERISA Affiliate” means, with respect to an entity (the “Referenced Entity”), any other entity, which, together with the Referenced Entity, would be treated as a single employer under Code Section 414 or ERISA Section 4001.

“Exchange Act” means the U.S. Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

“Exchange Ratio” means 1.430 shares of STAR Common Stock for each share of STAR III Common Stock.

“Expenses” means all expenses (including all fees and expenses of counsel, accountants, investment bankers, experts and consultants to a Party and its Affiliates) incurred by a Party or on its behalf in connection with or related to the authorization, preparation, negotiation, execution and performance of this Agreement and the other agreements and documents contemplated hereby, the preparation, printing, filing and mailing of the Proxy Statement, the preparation, printing and filing of theForm S-4 and all SEC and other regulatory filing fees incurred in connection with the Proxy Statement, the solicitation of stockholder approval, engaging the services of the Exchange Agent, obtaining any third party consents, making any other filings with the SEC and all other matters related to the closing of the Merger and the other transactions contemplated by this Agreement.

A-3

“Full Termination Payment” means $5,320,000.

“Fundamental Representations” means the representations and warranties contained in:Section 4.1 (Organization and Qualification; Subsidiaries);Section 4.2 (Authority; Approval Required);Section 4.3(a) (No Conflict; Required Filings and Consents);Section 4.4 (Capital Structure);Section 4.5(g) (Investment Company Act);Section 4.18 (Brokers);Section 4.19 (Opinion of Financial Advisor);Section 4.20 (Takeover Statutes);Section 5.1 (Organization and Qualification; Subsidiaries);Section 5.2 (Authority);Section 5.3(a) (No Conflict; Required Filings and Consents);Section 5.4 (Capital Structure);Section 5.5(g) (Investment Company Act);Section 5.18 (Brokers);Section 5.19 (Opinion of Financial Advisor); andSection 5.20 (Takeover Statutes).

“GAAP” means the United States generally accepted accounting principles.

“Go Shop Termination Payment” means $2,660,000.

“Governmental Authority” means the United States (federal, state or local) government or any foreign government, or any other governmental or quasi-governmental regulatory, judicial or administrative authority, instrumentality, board, bureau, agency, commission, self-regulatory organization, arbitration panel or similar entity.

“Hazardous Substances” means (i) those materials, substances, chemicals, wastes, products, compounds, solid, liquid, gas, minerals in each case, whether naturally occurred orman-made, that is listed in, defined in or regulated under any Environmental Law, including the following federal statutes and their state and local counterparts, as each may be amended from time to time, and all regulations thereunder, including: the Comprehensive, Environmental Response, Compensation and Liability Act, as amended by the Superfund Amendments and Reauthorization Act of 1986, 42 U.S.C. §§ 9601 et seq.; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976, as amended by the Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. §§ 6901 et seq.; the Federal Water Pollution Control Act of 1972, as amended by the Clean Water Act of 1977, 33 U.S.C. §§ 1251 et seq.; the Toxic Substances Control Act of 1976, as amended, 15 U.S.C. §§ 2601 et seq.; the Emergency Planning and CommunityRight-to-Know Act of 1986, 42 U.S.C. §§ 11001 et seq.; the Clean Air Act of 1966, as amended by the Clean Air Act Amendments of 1990, 42 U.S.C. §§ 7401 et seq.; and the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. §§ 651 et seq.; (ii) petroleum and petroleum-derived products, including crude oil and any fractions thereof; and (iii) polychlorinated biphenyls, urea formaldehyde foam insulation, mold, methane, asbestos in any form, radioactive materials or wastes and radon.

“Indebtedness” means, with respect to any Person and without duplication, (i) the principal of and premium (if any) of all indebtedness, notes payable, accrued interest payable or other obligations for borrowed money, whether secured or unsecured, (ii) all obligations under conditional sale or other title retention agreements, or incurred as financing, in either case with respect to property acquired by such Person, (iii) all obligations issued, undertaken or assumed as the deferred purchase price for any property or assets, (iv) all obligations under capital leases, (v) all obligations in respect of bankers acceptances or letters of credit, (vi) all obligations under interest rate cap, swap, collar or similar transaction or currency hedging transactions (valued at the termination value thereof), (vii) any guarantee of any of the foregoing, whether or not evidenced by a note, mortgage, bond, indenture or similar instrument and (viii) any agreement to provide any of the foregoing.

“Intellectual Property” means all United States and foreign (i) patents, patent applications and all related continuations,continuations-in-part, divisionals, reissues,re-examinations, substitutions and extensions thereof, (ii) trademarks, service marks, trade dress, logos, trade names, corporate names, Internet domain names, design rights and other source identifiers, together with the goodwill symbolized by any of the foregoing, (iii) registered and unregistered copyrights and rights in copyrightable works, (iv) rights in confidential and proprietary information, including trade secrets,know-how, ideas, formulae, invention disclosure, models, algorithms and methodologies, (v) all rights in the foregoing and in other similar intangible assets, and (vi) all applications and registrations for the foregoing.

A-4

“Investment Company Act” means the Investment Company Act of 1940, as amended, and the rules and regulations promulgated thereunder.

“IRS” means the United States Internal Revenue Service or any successor agency.

“Knowledge” means (i) with respect to any STAR III Party, the actual knowledge of the persons named in Schedule A to the STAR III Disclosure Letter and (ii) with respect to any STAR Party, the actual knowledge of the persons named in Schedule A to the STAR Disclosure Letter.

“Law” means any and all domestic (federal, state or local) or foreign laws, rules, regulations and Orders promulgated by any Governmental Authority.

“Lien” means with respect to any asset (including any security), any mortgage, deed of trust, claim, condition, covenant, lien, pledge, hypothecation, charge, security interest, preferential arrangement, option or other third party right (including right of first refusal or first offer), restriction, right of way, easement, or title defect or encumbrance of any kind in respect of such asset, including any restriction on the use, voting, transfer, receipt of income or other exercise of any attributes of ownership; other than transfer restrictions arising under applicable securities Laws.

“Material Contract” means any STAR III Material Contract or any STAR Material Contract, as applicable.

“Merger Sub Governing Documents” means the articles of organization and operating agreement of Merger Sub, as in effect on the date hereof.

“Order” means a judgment, injunction, order or decree of any Governmental Authority.

“Permitted Liens” means any of the following: (i) Liens for Taxes or governmental assessments, charges or claims of payment not yet due, being contested in good faith or for which adequate accruals or reserves have been established; (ii) Liens that are carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other similar Liens arising in the ordinary course of business if the underlying obligations are not past due; (iii) with respect to any real property, Liens that are zoning regulations, entitlements or other land use or environmental regulations by any Governmental Authority that do not materially impact the intended use of the real property; (iv) with respect to STAR III, Liens that are disclosed onSection 5.10 of the STAR III Disclosure Letter, and with respect STAR, Liens that are disclosed onSection 5.10 of the STAR Disclosure Letter; (v) with respect to STAR III, Liens that are disclosed on the consolidated balance sheet of STAR III dated December 31, 2018, or notes thereto (or securing liabilities reflected on such balance sheet), and with respect to STAR, Liens that are disclosed on the consolidated balance sheet of STAR dated December 31, 2018, or notes thereto (or securing liabilities reflected on such balance sheet); (vi) with respect to STAR III or STAR, arising pursuant to any Material Contracts of such Party; (vii) with respect to any real property of STAR III or STAR, Liens that are recorded in a public record or disclosed on existing title policies made available to the other Party prior to the date hereof; or (viii) with respect to STAR III or STAR, Liens that were incurred in the ordinary course of business since December 31, 2018 and that do not materially interfere with the use, operation or transfer of, or any of the benefits of ownership of, the property of such Party and its subsidiaries, taken as a whole.

“Person” or “person” means an individual, corporation, partnership, limited partnership, limited liability company, group (including a “person” as defined in Section 13(d)(3) of the Exchange Act), trust, association or other entity or organization (including any Governmental Authority or a political subdivision, agency or instrumentality of a Governmental Authority).

“Proxy Statement” means the proxy statement relating to the Stockholders Meeting together with any amendment or supplements thereto.

A-5

“REIT” shall have the meaning ascribed to it under Section 856 (among other applicable sections) of the Code.

“Representative” means, with respect to any Person, such Person’s directors, officers, employees, advisors (including attorneys, accountants, consultants, investment bankers, and financial advisors), agents and other representatives.

“SEC” means the U.S. Securities and Exchange Commission (including the staff thereof).

“Securities Act” means the U.S. Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

“SIR Merger Agreement” means the Agreement and Plan of Merger dated as of the date hereof among STAR, the STAR Operating Partnership, SI Subsidiary, LLC, Steadfast Income REIT, Inc. and Steadfast Income REIT Operating Partnership, L.P.

“STAR Advisor” means Steadfast Apartment Advisor, LLC, a Delaware limited liability company and the external investment advisor to STAR.

“STAR Advisory Agreement” means the Amended and Restated Advisory Agreement, as amended, dated as of November 26, 2010, by and among STAR, STAR Operating Partnership and the STAR Advisor.

“STAR Bylaws” means the Bylaws of STAR, as amended and in effect on the date hereof.

“STAR Charter” means the Charter of STAR.

“STAR DRP” means the distribution reinvestment plan of STAR.

“STAR Equity Incentive Plan” means STAR’s 2010 Restricted Share Plan, as may be amended.

“STAR Governing Documents” means the STAR Bylaws, the STAR Charter, the certificate of limited partnership of the STAR Operating Partnership and the STAR Partnership Agreement.

“STAR SRP” means STAR’s share repurchase plan.

“STAR III Advisor” means Steadfast Apartment Advisor III, LLC, a Delaware limited liability company and the external investment advisor to STAR III and STAR III Operating Partnership.

“STAR III Advisory Agreement” means the Amended and Restated Advisory Agreement by and among STAR III, STAR III Operating Partnership and STAR III Advisor, dated as of July 25, 2016, as amended and restated.

“STAR III Bylaws” means the Bylaws of STAR III, as amended and in effect on the date hereof.

“STAR III Charter” means the Charter of STAR III.

“STAR III Charter Amendment” means that amendment to the STAR III Charter, substantially in the form attached hereto asExhibit D.

“STAR III Equity Incentive Plan” means STAR III’s 2014 Amended and Restated Restricted Share Plan.

“STAR III Governing Documents” means the STAR III Bylaws, the STAR III Charter, the certificate of limited partnership of STAR III Operating Partnership, and the STAR III Partnership Agreement.

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“STAR III Material Adverse Effect” means any event, circumstance, change, effect, development, condition or occurrence that, individually or in the aggregate, (i) would have a material adverse effect on the business, assets, liabilities, condition (financial or otherwise) or results of operations of STAR III and the STAR III Subsidiaries, taken as a whole, or (ii) would prevent or materially impair the ability of STAR III Parties to consummate the Merger before the Outside Date;provided, that, for purposes of the foregoing clause (i), “STAR III Material Adverse Effect” shall not include any event, circumstance, change, effect, development, condition or occurrence to the extent arising out of or resulting from (A) any failure of STAR III to meet any projections or forecasts or any estimates of earnings, revenues or other metrics for any period (provided, that any event, circumstance, change, effect, development, condition or occurrence giving rise to such failure may be taken into account in determining whether there has been a STAR III Material Adverse Effect), (B) any changes that affect the multifamily industry generally, (C) any changes in the United States or global economy or capital, financial or securities markets generally, including changes in interest or exchange rates, (D) any changes in the legal, regulatory or political conditions in the United States or in any other country or region of the world, (E) the commencement, escalation or worsening of a war or armed hostilities or the occurrence of acts of terrorism or sabotage occurring after the date hereof, (F) the execution and delivery of this Agreement, or the public announcement of the Merger or the other transactions contemplated by this Agreement, (G) the taking of any action expressly required by this Agreement, or the taking of any action at the written request or with the prior written consent of STAR, (H) earthquakes, hurricanes, floods or other natural disasters, (I) changes in Law or GAAP (or the interpretation thereof), or (J) any Action made or initiated by any holder of STAR III Common Stock, including any derivative claims, arising out of or relating to this Agreement or the transactions contemplated by this Agreement, which in the case of each of clauses (B), (C), (D), (E), (H) and (I) do not disproportionately affect STAR III and the STAR III Subsidiaries, taken as a whole, relative to others in the industry and in the geographic regions in which STAR III and the STAR III Subsidiaries operate, but any effects resulting from the matters referred to in this proviso shall be excluded only to the extent such matters occur after the date hereof.

“STAR III OP Units” means the OP units in STAR III Operating Partnership.

“STAR III Parties” means STAR III and STAR III Operating Partnership.

“STAR III Partnership Agreement” means the Amended and Restated Agreement of Limited Partnership, dated as of June 10, 2014, of the STAR III Operating Partnership, as amended through the date hereof.

“STAR III Properties” means each real property owned, or leased (including ground leased) as lessee or sublessee, by STAR III or any STAR III Subsidiary as of the date of this Agreement (including all of STAR III’s or any STAR III Subsidiary’s right, title and interest in and to buildings, structures and other improvements and fixtures located on or under such real property and all easements, rights and other appurtenances to such real property).

“STAR III SRP” means STAR III’s share repurchase program.

“STAR III Subsidiary” means (a) any corporation of which more than fifty percent (50%) of the outstanding voting securities is, directly or indirectly, owned by STAR III, and (b) any partnership, limited liability company, joint venture or other entity of which more than fifty percent (50%) of the total equity interest is, directly or indirectly, owned by STAR III or of which STAR III or any STAR III Subsidiary is a general partner, manager, managing member or the equivalent, including the STAR III Operating Partnership.

“STAR Material Adverse Effect” means any event, circumstance, change, effect, development, condition or occurrence that individually or in the aggregate, (i) would have a material adverse effect on the business, assets, liabilities, condition (financial or otherwise) or results of operations of STAR and the STAR Subsidiaries, taken as a whole, or (ii) would prevent or materially impair the ability of STAR Parties to consummate the Merger before the Outside Date;provided, that, for purposes of the foregoing clause (i), “STAR Material Adverse

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Effect” shall not include any event, circumstance, change, effect, development, condition or occurrence to the extent arising out of or resulting from (A) any failure of STAR to meet any projections or forecasts or any estimates of earnings, revenues or other metrics for any period (provided, that any event, circumstance, change, effect, development, condition or occurrence giving rise to such failure may be taken into account in determining whether there has been a STAR Material Adverse Effect), (B) any changes that generally affect the multifamily industry in which STAR operates, (C) any changes in the United States or global economy or capital, financial or securities markets generally, including changes in interest or exchange rates, (D) any changes in the legal, regulatory or political conditions in the United States or in any other country or region of the world, (E) the commencement, escalation or worsening of a war or armed hostilities or the occurrence of acts of terrorism or sabotage occurring after the date hereof, (F) the execution and delivery of this Agreement, or the public announcement of the Merger or the other transactions contemplated by this Agreement, (G) the taking of any action expressly required by this Agreement, or the taking of any action at the written request or with the prior written consent of STAR III, (H) earthquakes, hurricanes, floods or other natural disasters, (I) changes in Law or GAAP (or the interpretation thereof), or (J) any Action made or initiated by any holder of STAR Common Stock, including any derivative claims, arising out of or relating to this Agreement or the transactions contemplated by this Agreement, which in the case of each of clauses (B), (C), (D), (E), (H) and (I) do not disproportionately affect STAR and the STAR Subsidiaries, taken as a whole, relative to others in the industry and in the geographic regions in which STAR and the STAR Subsidiaries operate, but any effects resulting from the matters referred to in this proviso shall be excluded only to the extent such matters occur after the date hereof.

“STAR OP Interests” means the units of limited partnership interests in the STAR Operating Partnership.

“STAR Parties” means STAR, Merger Sub and STAR Operating Partnership.

“STAR Partnership Agreement” means the Limited Partnership Agreement of the STAR Operating Partnership dated as of September 3, 2013, as amended through the date hereof.

“STAR Properties” means each real property, or interest therein, owned, or leased (including ground leased) as lessee or sublessee, by STAR or any STAR Subsidiary as of the date of this Agreement (including all of STAR’s or any STAR Subsidiary’s right, title and interest in and to buildings, structures and other improvements and fixtures located on or under such real property and all easements, rights and other appurtenances to such real property).

“STAR Subsidiary” means (a) any corporation of which more than fifty percent (50%) of the outstanding voting securities is, directly or indirectly, owned by STAR, and (b) any partnership, limited liability company, joint venture or other entity of which more than fifty percent (50%) of the total equity interest is, directly or indirectly, owned by STAR or of which STAR or any STAR Subsidiary is a general partner, manager, managing member or the equivalent.

“Stockholder Approval” means the affirmative vote of the holders of a majority of the outstanding shares of STAR III Common Stock entitled to vote at the Stockholders Meeting on the Merger and STAR III Charter Amendment, not including for purposes of the Merger those shares of STAR III Common Stock owned by the STAR III Advisor, any director of STAR III or any of their respective Affiliates, which may not be voted on the Merger.

“Stockholders Meeting” means the meeting of the holders of shares of STAR III Common Stock exclusively for the purpose of seeking the Stockholder Approval, including any postponement or adjournment thereof.

“Tax” or “Taxes” means any federal, state, local and foreign income, gross receipts, capital gains, withholding, property, recording, stamp, transfer, sales, use, abandoned property, escheat, franchise, employment, payroll, excise, environmental and any other taxes, duties, assessments or similar governmental charges, together with penalties, interest or additions imposed with respect to such amounts by the U.S. or any Governmental Authority, whether computed on a separate, consolidated, unitary, combined or any other basis.

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“Tax Return” means any return, declaration, report, claim for refund, or information return or statement relating to Taxes filed or required to be filed with a Governmental Authority, including any schedule or attachment thereto, and including any amendment thereof.

“Termination Payment” means either the Go Shop Termination Payment or the Full Termination Payment, as applicable.

“Wholly Owned STAR Subsidiary” means STAR Operating Partnership and any wholly owned subsidiary of STAR or the STAR Operating Partnership.

“Wholly Owned STAR III Subsidiary” means the STAR III Operating Partnership and any wholly owned subsidiary of STAR III or the STAR III Operating Partnership.

(b) In addition to the terms defined inSection 1.1(a), the following terms have the respective meanings set forth in the sections set forth below opposite such term:

Defined Term	Location of Definition
Acquisition Proposal	Section 7.3(i)(i)
Adverse Recommendation Change	Section 7.3(d)
Agreement	Preamble
Amended and Restated STAR Advisory Agreement	Recitals
Articles of Merger	Section 2.3
Closing	Section 2.2
Closing Date	Section 2.2
DLA Piper	Section 7.12(c)
Escrow Agreement	Section 9.3(f)
Exchange	Section 7.11
Exchange Agent	Section 3.3(a)
Exchange Fund	Section 3.3(a)
Form S-4	Section 7.1(a)
Go Shop Bidder	Section 7.3(a)
Go Shop Period End Time	Section 7.3(a)
Indemnified Parties	Section 7.7(b)
Interim Period	Section 6.1(a)
Letter of Transmittal	Section 3.3(b)
Merger	Recitals
Merger Consideration	Section 3.1(a)(i)
Merger Effective Time	Section 2.3
Merger Sub	Preamble
MGCL	Recitals
MLLCA	Recitals
Morrison	Section 7.12(b)
New Convertible Stock	Section 7.11
Outside Date	Section 9.1(b)(i)
Party(ies)	Preamble
Permits	Section 4.8(a)
Qualified REIT Subsidiary	Section 4.1(c)
Qualifying REIT Income	Section 9.3(f)(i)
Registered Securities Restricted STAR III Share Restricted STAR III Share Award	Section 7.1(a) Section 3.2(a) Section 3.2(a)
Sarbanes-Oxley Act	Section 4.5(a)
SDAT	Section 2.3

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Defined Term	Location of Definition
STAR	Preamble
STAR Board	Recitals
STAR Common Stock	Section 5.4(a)
STAR Convertible Stock	Section 5.4(a)
STAR Disclosure Letter	Article 5
STAR Financial Advisor	Section 5.19
STAR III	Preamble
STAR III Board	Recitals
STAR III Board Recommendation	Section 4.2(c)
STAR III Change Notice	Section 7.3(e)(i)
STAR III Class A Common Stock	Section 4.4(a)
STAR III Class R Common Stock	Section 4.4(a)
STAR III Class T Common Stock	Section 4.4(a)
STAR III Common Stock	Section 4.4(a)
STAR III Disclosure Letter	Article 4
STAR III Financial Advisor	Section 4.19
STAR III Insurance Policies	Section 4.15
STAR III Material Contract	Section 4.12(b)
STAR III Operating Partnership	Preamble
STAR III Organizational Documents	Section 7.7(b)
STAR III Operating Partnership Agreement Amendment	Recitals
STAR III Permits	Section 4.8(a)
STAR III Preferred Stock	Section 4.4(a)
STAR III Related Party Agreements	Section 4.17
STAR III SEC Documents	Section 4.5(a)
STAR III Special Committee	Recitals
STAR III Subsidiary Partnership	Section 4.13(h)
STAR III Tax Protection Agreements	Section 4.13(h)
STAR III Terminating Breach	Section 9.1(d)(i)
STAR III Voting Debt	Section 4.4(d)
STAR Insurance Policies	Section 5.15
STAR Material Contract	Section 5.12(b)
STAR Operating Partnership	Preamble
STAR Permits	Section 5.8(a)
STAR Preferred Stock	Section 5.4(a)
STAR Related Party Agreements	Section 5.17
STAR SEC Documents	Section 5.5(a)
STAR Special Committee	Recitals
STAR Subsidiary Partnership	Section 5.13(h)
STAR Tax Protection Agreements	Section 5.13(h)
STAR Terminating Breach	Section 9.1(c)(i)
STAR Voting Debt	Section 5.4(d)
Superior Proposal	Section 7.3(i)(ii)
Surviving Entity	Section 2.1
Takeover Statutes	Section 4.20
Taxable REIT Subsidiary	Section 4.1(c)
Termination Agreement	Recitals
Transfer Taxes	Section 7.12(d)

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Section 1.2Interpretation and Rules of Construction. In this Agreement, except to the extent otherwise provided or that the context otherwise requires:

(a) when a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference is to an Article or Section of, or Exhibit or Schedule to, this Agreement unless otherwise indicated;

(b) the table of contents and headings for this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement;

(c) whenever the words “include,” “includes” or “including” are used in this Agreement, they are deemed to be followed by the words “without limiting the generality of the foregoing” unless expressly provided otherwise;

(d) “or” shall be construed in the inclusive sense of “and/or”;

(e) the words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement, except to the extent otherwise specified;

(f) all references herein to “$” or dollars shall refer to United States dollars;

(g) no specific provision, representation or warranty shall limit the applicability of a more general provision, representation or warranty;

(h) it is the intent of the Parties that each representation, warranty, covenant, condition and agreement contained in this Agreement shall be given full, separate, and independent effect and that such provisions are cumulative;

(i) the phrase “ordinary course of business” shall be deemed to be followed by the words “consistent with past practice” and similar in nature and magnitude to actions customarily taken without any authorization by the board of directors in the course of normalday-to-day operations whether or not such words actually follow such phrase;

(j) references to a Person are also to its successors and permitted assigns;

(k) any reference in this Agreement to a date or time shall be deemed to be such date or time in the City of New York, New York, U.S.A., unless otherwise specified;

(l) all terms defined in this Agreement have the defined meanings when used in any certificate or other document made or delivered pursuant hereto, unless otherwise defined therein; and

(m) the definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms.

ARTICLE 2

THE MERGER

Section 2.1TheMerger; Other Transactions. Upon the terms and subject to the satisfaction or waiver of the conditions set forth in this Agreement, and in accordance with the MGCL and MLLCA, at the Merger Effective Time, STAR III shall be merged with and into Merger Sub, whereupon the separate existence of STAR III will

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cease, with Merger Sub surviving the Merger (Merger Sub, as the surviving entity upon consummation of the Merger, the “Surviving Entity”), such that following the Merger, the Surviving Entity will be a wholly owned subsidiary of STAR. The Merger shall have the effects set forth in the applicable provisions of the MGCL, the MLLCA and this Agreement.

Section 2.2Closing. The closing of the Merger (the “Closing”) will take place (a) by electronic exchange of documents and signatures at 10:00 a.m., Eastern time no later than the third (3^rd) Business Day after all the conditions set forth inArticle 8 (other than those conditions that by their nature are to be satisfied or waived at the Closing, but subject to the satisfaction or valid waiver of such conditions) shall have been satisfied or validly waived by the Party entitled to the benefit of such condition (subject to applicable Law), or (b) such other place or date as may be agreed in writing by STAR III and STAR. The date on which Closing actually takes place is referred to herein as the “Closing Date”.

Section 2.3Effective Time. On the Closing Date, STAR III, STAR and Merger Sub shall (i) cause articles of merger with respect to the Merger to be duly executed and filed with the State Department of Assessments and Taxation of Maryland (the “SDAT”) in accordance with the MGCL and MLLCA (the “Articles of Merger”) and (ii) make any other filings, recordings or publications required to be made by STAR III, STAR or the Surviving Entity under the MGCL or MLLCA in connection with the Merger. The Merger shall become effective at such time as the Articles of Merger are accepted for record by the SDAT or on such other date and time (not to exceed thirty (30) days after the Articles of Merger are accepted for record by the SDAT) as specified in the Articles of Merger (such date and time, the “Merger Effective Time”), it being understood and agreed that the Parties shall cause the Merger Effective Time to occur on the Closing Date. The Articles of Merger shall provide that the name of the Surviving Entity shall be “SIII SUBSIDIARY, LLC.”

Section 2.4Organizational Documents of the Surviving Entity.

(a) At the Merger Effective Time, the STAR Charter shall remain in effect as the charter of STAR until thereafter amended in accordance with applicable Law and the applicable provisions of the STAR Charter.

(b) At the Merger Effective Time and by virtue of the Merger, (i) the articles of organization of the Merger Sub shall be the articles of organization of the Surviving Entity, until thereafter amended in accordance with applicable Law and the applicable provisions of such articles of organization, and (ii) the operating agreement of the Merger Sub shall be the operating agreement of the Surviving Entity, until thereafter amended in accordance with applicable Law and the applicable provisions of the Surviving Entity’s articles of organization and operating agreement.

Section 2.5Managers of the Surviving Entity. At the Merger Effective Time, by virtue of the Merger, STAR shall serve as the manager of the Surviving Entity.

Section 2.6Tax Treatment of Merger. The Parties intend that, for United States federal income tax purposes (and, where applicable, state and local income tax purposes) the Merger shall qualify as a reorganization within the meaning of Section 368(a) of the Code, and that this Agreement shall be, and is hereby adopted as, a plan of reorganization for purposes of Section 354 and 361 of the Code. Unless otherwise required by a final determination within the meaning of Section 1313(a) of the Code (or a similar determination under applicable state of local Law), all Parties shall file all United States federal, state and local Tax Returns in a manner consistent with the intended tax treatment of the Merger described in thisSection 2.6, and no Party shall take a position inconsistent with such treatment.

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ARTICLE 3

EFFECTS OF THE MERGER

Section 3.1Effectsof the Merger.

(a)The Merger. At the Merger Effective Time and by virtue of the Merger and without any further action on the part of STAR III, STAR or Merger Sub or the holders of any securities of STAR III, STAR or Merger Sub:

(i) Except as provided inSection 3.1(a)(ii) andSection 3.1(a)(iii) and subject toSection 3.1(b),Section 3.1(d),Section 3.2 andSection 3.4, each share of STAR III Common Stock outstanding immediately prior to the Merger Effective Time will be converted into the right to receive from STAR for each share of STAR III Common Stock, the number of shares of STAR Common Stock equal to the Exchange Ratio, subject to the treatment of fractional shares of STAR Common Stock in accordance withSection 3.1(d) (the “Merger Consideration”); from and after the Merger Effective Time, all such shares of STAR III Common Stock shall no longer be outstanding and shall automatically be cancelled and shall cease to exist, and each holder of a share of STAR III Common Stock, including any Restricted STAR III Share, shall cease to have any rights with respect thereto, except for the right to receive the Merger Consideration therefor in accordance with this Agreement;

(ii) Each share of STAR III Common Stock, if any, then held by any Wholly Owned STAR III Subsidiary shall automatically be retired and shall cease to exist, and no Merger Consideration shall be paid, nor shall any other payment or right inure or be made with respect thereto in connection with or as a consequence of the Merger;

(iii) Each share of STAR III Common Stock, if any, then held by STAR or any Wholly Owned STAR Subsidiary shall no longer be outstanding and shall automatically be retired and shall cease to exist, and no Merger Consideration shall be paid, nor shall any other payment or right inure or be made with respect thereto in connection with or as a consequence of the Merger; and

(iv) Each membership interest of Merger Sub issued and outstanding immediately prior to the Merger Effective Time shall remain the only issued and outstanding membership interests of the Surviving Entity and STAR shall remain the sole member of Merger Sub.

(b)Adjustment of the Merger Consideration. Between the date of this Agreement and the Merger Effective Time, if either of STAR or STAR III should split, combine or otherwise reclassify the STAR Common Stock or the STAR III Common Stock or makes a dividend or other distribution in shares of the STAR Common Stock or the STAR III Common Stock (including any dividend or other distribution of securities convertible into STAR Common Stock or STAR III Common Stock) or engages in a reclassification, reorganization, recapitalization or exchange or other like change, then (without limiting any other rights of the Parties hereunder), the Exchange Ratio shall be ratably adjusted to reflect fully the effect of any such change, and thereafter all references to the Exchange Ratio shall be deemed to be the Exchange Ratio as so adjusted.

(c)Transfer Books. From and after the Merger Effective Time, the share transfer books of STAR III shall be closed, and thereafter there shall be no further registration of transfers of STAR III Common Stock. From and after the Merger Effective Time, Persons who held outstanding STAR III Common Stock immediately prior to the Merger Effective Time shall cease to have rights with respect to such shares, except as otherwise provided for in this Agreement or by applicable Law. On or after the Merger Effective Time, any Book-Entry Shares of STAR III Common Stock presented to the Exchange Agent, STAR, the Surviving Entity or the transfer agent shall be exchanged for the Merger Consideration with respect to STAR III Common Stock formerly represented thereby.

(d)Fractional Shares. No scrip representing fractional shares of STAR Common Stock shall be issued upon the surrender for exchange of Book-Entry Shares in excess of 1/10,000^th of a share and, in lieu of receiving any such excess fractional share of STAR Common Stock, the number of shares such holder shall be entitled to receive shall be rounded up to the nearest 1/10,000^th of a share.

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Section 3.2RestrictedSTAR III Shares.

(a) As of the Merger Effective Time, each Restricted STAR III Share granted under the STAR III Equity Incentive Plan on which restrictions have not yet lapsed (“Restricted STAR III Share”) and which is outstanding immediately prior to the Merger Effective Time (“RestrictedSTAR III Share Award”) shall cease to represent any rights with respect to shares of STAR III Common Stock pursuant to the terms of the applicable STAR III Equity Incentive Plan or the related Restricted STAR Share Award agreement by reason of the Merger, and the holder thereof shall be entitled to the Merger Consideration as set forth inSection 3.1(a)(i). The number of shares of STAR III Common Stock subject to each such Restricted STAR III Share Award shall be equal to the product of (x) the total number of shares of STAR III Common Stock subject to the Restricted STAR III Share Award multiplied by (y) the Exchange Ratio, rounded down to the nearest share of STAR III Common Stock. STAR or STAR III, as applicable, shall be entitled to deduct and withhold such amounts as may be required to be deducted and withheld under the Code and any applicable state or local Tax laws with respect to the lapsing of any restrictions on Restricted STAR III Share Awards pursuant to thisSection 3.2(a).

(b) Prior to the Merger Effective Time, STAR III, the STAR III Board, STAR, and the STAR Board shall adopt any resolutions and take any actions (including obtaining consents or providing any required or advisable notices) necessary to effectuate the provisions of thisSection 3.2.

Section 3.3Exchange Agent;Exchange Procedures;Distributions with Respect to Unexchanged Shares.

(a) Prior to the Merger Effective Time, STAR shall appoint DST Systems, Inc. as the exchange agent (or any successor exchange agent for STAR III, (the “Exchange Agent”) to act as the agent for the purpose of paying the Merger Consideration for the Book-Entry Shares. At or promptly following the Merger Effective Time, STAR shall deposit with the Exchange Agent for the sole benefit of the holders of shares of STAR III Common Stock, for exchange in accordance with thisArticle 3, Book-Entry shares representing shares of STAR Common Stock to be issued pursuant toSection 3.1(a)(i) equal to the aggregate Merger Consideration (the “Exchange Fund”). In addition to the foregoing, after the Merger Effective Time on the appropriate payment date, if applicable, STAR shall provide or shall cause to be provided to the Exchange Agent any dividends or other distributions payable on such shares of STAR Common Stock, with both a record and payment date after the Merger Effective Time and prior to the surrender of the STAR III Common Stock in exchange for the Merger Consideration, pursuant toSection 3.3(d), such dividends or other distributions shall be deemed to be part of the Exchange Fund. STAR shall cause the Exchange Agent to make, and the Exchange Agent shall make delivery of, the Merger Consideration out of the Exchange Fund in accordance with this Agreement. The Exchange Fund shall not be used for any other purpose.

(b) As soon as reasonably practicable after the Merger Effective Time (but in no event later than two (2) Business Days thereafter), STAR shall cause the Exchange Agent to mail (and to make available for collection by hand) to each holder of record of a Book-Entry Share representing shares of STAR III Common Stock (A) a letter of transmittal (a “Letter of Transmittal”) in customary form as prepared by STAR and reasonably acceptable to the STAR III Special Committee (which shall specify, among other things, that delivery shall be effected, and risk of loss and title to the Book-Entry Shares, as applicable, shall pass, only upon proper transfer of any Book-Entry Shares to the Exchange Agent) and (B) instructions for use in effecting the transfer of Book-Entry Shares in exchange for the Merger Consideration into which the number of shares of STAR III Common Stock previously represented by Book-Entry Share shall have been converted pursuant to this Agreement.

(c) Upon (A) transfer of any Book-Entry Share representing shares of STAR III Common Stock to the Exchange Agent, together with a properly completed and validly executed Letter of Transmittal or (B) receipt of an “agent’s message” by the Exchange Agent (or such other evidence, if any, of transfer as the Exchange Agent may reasonably request) in the case of transfer of a Book-Entry Share, and such other documents as may reasonably be required by the Exchange Agent, the holder of such Book-Entry Share representing shares of

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STAR III Common Stock shall be entitled to receive in exchange therefor (i) the Merger Consideration into which such shares of STAR III Common Stock shall have been converted pursuant to this Agreement and (ii) certain dividends and distributions in accordance withSection 3.3(a) andSection 3.3(d), if any, after the Exchange Agent’s receipt of such Book-Entry Share or “agent’s message” or other evidence, and the Book-Entry Share so transferred shall be forthwith cancelled. The Exchange Agent shall accept such Book-Entry Shares upon compliance with such reasonable terms and conditions as the Exchange Agent may impose to effect an orderly exchange thereof in accordance with customary exchange practices. Until surrendered or transferred as contemplated by thisSection 3.3, each Book-Entry Share representing shares of STAR III Common Stock shall be deemed, at any time after the Merger Effective Time to represent only the right to receive, upon such surrender, the Merger Consideration as contemplated by thisArticle 3. No interest shall be paid or accrued for the benefit of holders of the Book-Entry Shares on the Merger Consideration payable upon the surrender of the Book-Entry Shares.

(d) No dividends or other distributions declared or made after the Merger Effective Time with respect to STAR Common Stock with a record date after the Merger Effective Time shall be paid to any holder entitled by reason of the Merger to receive Book-Entry shares representing STAR Common Stock until such holder shall have transferred its Book-Entry Share pursuant to thisSection 3.3. Subject to applicable Law, following surrender of any such Book-Entry shares, such holder shall be paid, in each case, without interest, (i) the amount of any dividends or other distributions theretofore paid with respect to the shares of STAR Common Stock represented by the Book-Entry shares received by such holder and having a record date on or after the Merger Effective Time and a payment date prior to such surrender and (ii) at the appropriate payment date or as promptly as practicable thereafter, the amount of any dividends or other distributions payable with respect to such shares of STAR Common Stock and having a record date on or after the Merger Effective Time but prior to such surrender and a payment date on or after such surrender.

(e) In the event of a transfer of ownership of shares of STAR III Common Stock that is not registered in the transfer records of STAR III, it shall be a condition of payment that any Book-Entry Share transferred in accordance with the procedures set forth in thisSection 3.3 shall be properly endorsed or shall be otherwise in proper form for transfer, and that the Person requesting such payment shall have paid any Taxes required by reason of the payment of the Merger Consideration to a Person other than the registered holder of the Book-Entry Share transferred or shall have established to the reasonable satisfaction of STAR that such Tax either has been paid or is not applicable.

(f) Any portion of the Exchange Fund that remains undistributed to the holders of STAR III Common Stock for six (6) months after the Merger Effective Time shall be delivered to STAR upon demand, and any former holders of STAR III Common Stock prior to the Merger who have not theretofore complied with thisArticle 3 shall thereafter look only to STAR for payment of their claims with respect thereto.

(g) None of the STAR Parties, the STAR III Parties, the Surviving Entity, the Exchange Agent, or any employee, officer, director, agent or Affiliate of such entities, shall be liable to any Person in respect of the Merger Consideration if the Exchange Fund (or the appropriate portion thereof) has been delivered to a public official pursuant to any applicable abandoned property, escheat or similar Law. Any amounts remaining unclaimed by holders of any shares of STAR III Common Stock immediately prior to the time at which such amounts would otherwise escheat to, or become property of, any Governmental Authority shall, to the extent permitted by applicable Law, become the property of STAR free and clear of any claims or interest of such holders or their successors, assigns or personal representatives previously entitled thereto.

Section 3.4Withholding Rights. Each and any STAR Party, STAR III Party, the Surviving Entity, or the Exchange Agent, as applicable, shall be entitled to deduct and withhold from the Merger Consideration and any other amounts otherwise payable pursuant to this Agreement to any holder of STAR III Common Stock such amounts as it is required to deduct and withhold with respect to such payments under the Code or any other provision of state, local or foreign Tax Law. Any such amounts so deducted and withheld shall be paid over to

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the applicable Governmental Authority in accordance with applicable Law and shall be treated for all purposes of this Agreement as having been paid to the Person in respect of which such deduction and withholding was made.

Section 3.5Dissenters Rights. No dissenters’ or appraisal rights shall be available with respect to the Merger or the other transactions contemplated by this Agreement.

Section 3.6General Effects of the Merger. At the Merger Effective Time, the effect of the Merger shall be as set forth in this Agreement and the Articles of Merger and as provided in the applicable provisions of the MGCL and the MLLCA. Without limiting the generality of the foregoing, and subject thereto, at the Merger Effective Time, all of the property, rights, privileges, powers and franchises of STAR III and Merger Sub shall vest in the Surviving Entity, and all debts, liabilities and duties of STAR III and Merger Sub shall become the debts, liabilities and duties of the Surviving Entity.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF THE STAR III PARTIES

Except (a) as set forth in the disclosure letter prepared by the STAR III Parties and delivered by the STAR III Parties to the STAR Parties prior to the execution and delivery of this Agreement (the “STAR III Disclosure Letter”) (it being acknowledged and agreed that disclosure of any item in any section or subsection of the STAR III Disclosure Letter shall be deemed disclosed with respect to the section or subsection of this Agreement to which it corresponds and any other section or subsection of this Agreement to the extent the applicability of such disclosure is reasonably apparent on its face (it being understood that to be so reasonably apparent on its face, it is not required that the other Sections be cross-referenced);provided, that no disclosure shall qualify any Fundamental Representation unless it is set forth in the specific section or subsection of the STAR III Disclosure Letter corresponding to such Fundamental Representation;provided further, that nothing in the STAR III Disclosure Letter is intended to broaden the scope of any representation or warranty of the STAR III Parties made herein) or (b) as disclosed in the STAR III SEC Documents publicly available, filed with, or furnished to, as applicable, the SEC on or after March 31, 2019 and prior to the date of this Agreement (excluding any information or documents incorporated by reference therein, or filed as exhibits thereto, and excluding any disclosures contained in such documents under the headings “Risk Factors” or “Forward Looking Statements” or any other disclosures contained or referenced therein to the extent they are cautionary,non-specific, predictive or forward-looking in nature), and then only to the extent that the relevance of any disclosed event, item or occurrence in such STAR III SEC Documents to a matter covered by a representation or warranty set forth in thisArticle 4 is reasonably apparent on its face;provided, that the disclosures in the STAR III SEC Documents shall not be deemed to qualify (i) any Fundamental Representations, which matters shall only be qualified by specific disclosure in the respective corresponding Section of the STAR III Disclosure Letter, and (ii) Section 4.5(a)-(b) (SEC Documents; Financial Statements),Section 4.6(c) (Absence of Certain Changes or Events) andSection 4.7 (No Undisclosed Liabilities), the STAR III Parties hereby jointly and severally represent and warrant as of the date hereof (except to the extent that such representations and warranties expressly relate to another date, in which case as of such other date) to the STAR Parties that:

Section 4.1Organization and Qualification; Subsidiaries.

(a) STAR III is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Maryland and has the requisite corporate power and authority to own, lease and, to the extent applicable, operate its properties and to carry on its business as it is now being conducted. STAR III is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, operated or leased by it or the nature of its business makes such qualification, licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that, individually or in the aggregate, would not reasonably be expected to have a STAR III Material Adverse Effect.

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(b) Each STAR III Subsidiary is duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, as the case may be, and has the requisite organizational power and authority to own, lease and, to the extent applicable, operate its properties and to carry on its business as it is now being conducted. Each STAR III Subsidiary is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, operated or leased by it or the nature of its business makes such qualification, licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that, individually or in the aggregate, would not reasonably be expected to have a STAR III Material Adverse Effect.

(c)Section 4.1(c) of the STAR III Disclosure Letter sets forth a true and complete list of the STAR III Subsidiaries and their respective jurisdictions of incorporation or organization, as the case may be, the jurisdictions in which STAR III and the STAR III Subsidiaries are qualified or licensed to do business, and the type of and percentage of interest held, directly or indirectly, by STAR III in each STAR III Subsidiary, including a list of each STAR III Subsidiary that is a “qualified REIT subsidiary” within the meaning of Section 856(i)(2) of the Code (each a “Qualified REIT Subsidiary”) or a “taxable REIT subsidiary” within the meaning of Section 856(1) of the Code (each a “Taxable REIT Subsidiary”) and each STAR III Subsidiary that is an entity taxable as a corporation which is neither a Qualified REIT Subsidiary nor a Taxable REIT Subsidiary.

(d) Neither STAR III nor any STAR III Subsidiary directly or indirectly owns any equity interest or investment (whether equity or debt) in any Person (other than in the STAR III Subsidiaries and investments in short-term investment securities).

(e) STAR III has made available to STAR complete and correct copies of the STAR III Governing Documents. Each of STAR III and the STAR III Operating Partnership is in compliance with the terms of its STAR III Governing Documents in all material respects. True and complete copies of STAR III’s and the STAR III Operating Partnership’s minute books, as applicable, have been made available by STAR III to STAR.

(f) STAR III has not exempted any “Person” from the “Aggregate Share Ownership Limit” or the “Common Share Ownership Limit” or established or increased an “Excepted Holder Limit,” as such terms are defined in the STAR III Charter, which exemption or Excepted Holder Limit is currently in effect.

Section 4.2Authority; Approval Required.

(a) Each of the STAR III Parties has the requisite corporate or limited partnership power and authority, as applicable, to execute and deliver this Agreement, to perform its obligations hereunder and, subject only to receipt of the Stockholder Approval, to consummate the transactions contemplated by this Agreement, including the Merger. The execution and delivery of this Agreement by each of the STAR III Parties and the consummation by the STAR III Parties of the transactions contemplated by this Agreement have been duly and validly authorized by all necessary corporate and limited partnership action, and no other corporate or limited partnership proceedings on the part of the STAR III Parties are necessary to authorize this Agreement or the Merger or to consummate the other transactions contemplated by this Agreement, subject to receipt of the Stockholder Approval, the filing of Articles of Amendment relating to the STAR III Charter Amendment with and acceptance for record of such Articles of Amendment by the SDAT and the filing of the Articles of Merger with, and acceptance for record of the Articles of Merger by, the SDAT.

(b) This Agreement has been duly executed and delivered by the STAR III Parties, and assuming due authorization, execution and delivery by the STAR Parties, constitutes a legally valid and binding obligation of the STAR III Parties enforceable against the STAR III Parties in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law).

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(c) On the recommendation of the STAR III Special Committee, the STAR III Board (including a majority of directors and independent directors not otherwise interested in the Merger) has (i) determined that the terms of this Agreement, the Merger, the STAR III Charter Amendment, the STAR III Operating Partnership Agreement Amendment, the Termination Agreement and the other transactions contemplated by this Agreement are advisable and in the best interest of STAR III and its stockholders and, with respect to this Agreement, the STAR III Operating Partnership Agreement Amendment and the Merger, are fair and reasonable to STAR III and on terms and conditions no less favorable to STAR III than those available from unaffiliated third parties, and (ii) approved, authorized and adopted this Agreement, the Merger, the Termination Agreement, the STAR III Operating Partnership Agreement Amendment and the other transactions contemplated by this Agreement, (iii) directed that the Merger and the STAR III Charter Amendment be submitted to a vote of the holders of STAR III Common Stock and (iv) except as may be permitted pursuant toSection 7.3, resolved to include in the Proxy Statement the STAR III Board recommendation to holders of STAR III Common Stock to vote in favor of approval of the Merger and the STAR III Charter Amendment (such recommendation, the “STAR III Board Recommendation”), which resolutions remain in full force and effect and have not been subsequently rescinded, modified or withdrawn in any way, except as may be permitted after the date hereof bySection 7.3.

(d) The Stockholder Approval is the only vote of the holders of securities of STAR III or the STAR III Operating Partnership required to approve the Merger, the STAR III Charter Amendment and the other transactions contemplated by this Agreement.

Section 4.3No Conflict; Required Filings and Consents.

(a) The execution and delivery of this Agreement by each of the STAR III Parties do not, and the performance of this Agreement and its obligations hereunder will not, (i) assuming receipt of the Stockholder Approval, conflict with or violate any provision of (A) the STAR III Governing Documents or (B) any equivalent organizational or governing documents of any other STAR III Subsidiary, (ii) assuming that all consents, approvals, authorizations and permits described inSection 4.3(b) have been obtained, all filings and notifications described inSection 4.3(b) have been made and any waiting periods thereunder have terminated or expired, conflict with or violate any Law applicable to STAR III or any STAR III Subsidiary or by which any property or asset of STAR III or any STAR III Subsidiary is bound, or (iii) require any consent or approval (except as contemplated bySection 4.3(b)) under, result in any breach of any obligation or any loss of any benefit or material increase in any cost or obligation of STAR III or any STAR III Subsidiary under, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to any other Person any right of termination, acceleration or cancellation (with or without notice or the lapse of time or both) of, or give rise to any right of purchase, first offer or forced sale under or result in the creation of a Lien on any property or asset of STAR III or any STAR III Subsidiary pursuant to, any Contract or Permit to which STAR III or any STAR III Subsidiary is a party, except, as to clauses (ii) and (iii) above, for any such conflicts, violations, breaches, defaults or other occurrences which, individually or in the aggregate, would not reasonably be expected to have a STAR III Material Adverse Effect.

(b) Except as set forth inSection 4.3(b) of the STAR III Disclosure Letter, no consents or approvals of, or filings or registrations with, any Governmental Authority or with any third party are required to be made or obtained by STAR III or any STAR III Subsidiary in connection with the execution, delivery and performance by the STAR III Parties of this Agreement. As of the date hereof, to the Knowledge of STAR III, the STAR III Parties are not aware of any reason why the necessary approvals referenced in the preceding sentence will not be received in order to permit consummation of the Merger on a timely basis. The execution and delivery of this Agreement by each of the STAR III Parties do not, and the performance of this Agreement and its obligations hereunder will not, (i) constitute a breach or violation of, or a default under, or give rise to any Lien or any acceleration of remedies, penalty, increase in material benefit payable or right of termination under, any applicable Law, any Contract or other instrument or agreement of STAR III or any STAR III Subsidiary or to which STAR III, any STAR III Subsidiary or any of their Properties is subject or bound, or (ii) require STAR III or STAR III Subsidiary to obtain any consent or approval under any such law, Contract or other instrument or

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agreement, except for (A) the Proxy Statement, theForm S-4 and the declaration of effectiveness of theForm S-4, and such reports under, and other compliance with, the Exchange Act and the Securities Act as may be required in connection with this Agreement and the transactions contemplated by this Agreement, (B) the filing of the Articles of Amendment relating to the STAR III Charter Amendment with, and the acceptance for record of such Articles of Amendment by, the SDAT, (C) the filing of the Articles of Merger with, and the acceptance for record of the Articles of Merger by, the SDAT pursuant to the MGCL and the MLLCA, (D) such filings and approvals as may be required by any applicable state securities or “blue sky” Laws, (E) the consents, authorizations, orders or approvals of each Governmental Authority or third party listed inSection 4.3(b) of the STAR III Disclosure Letter, and (F) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications which, individually or in the aggregate, would not reasonably be expected to have a STAR III Material Adverse Effect.

Section 4.4Capital Structure.

(a) The authorized capital stock of STAR III consists of 1,300,000,000 shares of capital stock, consisting of (x) 1,200,000,000 shares are designated as common stock with par value of $0.01 per share (“STAR III Common Stock”), of which 480,000,000 shares are classified as Class A common stock (“STAR III Class A Common Stock”), 240,000,000 shares are classified as Class R common stock (“STAR III Class R Common Stock”) and 480,000,000 shares are classified as Class T common stock (“STAR III Class T Common Stock”), and (y) 100,000,000 shares are designated as preferred stock with a par value of $0.01 per share (“STAR III Preferred Stock”). At the close of business on August 1, 2019, (i) 3,466,447 shares of the STAR III Class A Common Stock were issued and outstanding, (ii) 475,208 shares of the STAR III Class R Common Stock were issued and outstanding, (iii) 4,630,865 shares of the STAR III Class T Common Stock were issued and outstanding, (iv) no shares of STAR III Preferred Stock were issued and outstanding, (iv) 388,000 shares of STAR III Common Stock were available for grant under the STAR III Equity Incentive Plan, and (v) no shares of STAR III Common Stock were reserved for issuance upon redemption of STAR III OP Interests. All of the outstanding shares of capital stock of STAR III are duly authorized, validly issued, fully paid and nonassessable and were issued in compliance with applicable securities Laws. Except as set forth in thisSection 4.4, there is no other outstanding capital stock of STAR III.

(b) At the close of business on August 1, 2019, zero STAR III OP Units were issued and outstanding, of which zero STAR III OP Units were held by limited partners other than STAR III.Section 4.4(b) of the STAR III Disclosure Letter sets forth a list of all of the partners of STAR III Operating Partnership as of the date hereof, together with the amount of STAR III OP Units held by each such partner. All the STAR III OP Units held by STAR III are directly owned by STAR III, free and clear of all Liens other than Permitted Liens and free of preemptive rights. All of the STAR III OP Units are duly authorized and validly issued and were issued in compliance with applicable securities Laws.

(c) All of the outstanding shares of capital stock of each of the STAR III Subsidiaries that is a corporation are duly authorized, validly issued, fully paid and nonassessable. All equity interests in each of the STAR III Subsidiaries that is a partnership or limited liability company are duly authorized and validly issued. All shares of capital stock of (or other ownership interests in) each of the STAR III Subsidiaries which may be issued upon exercise of outstanding options or exchange rights are duly authorized and, upon issuance will be validly issued, fully paid and nonassessable. STAR III or the STAR III Operating Partnership owns, directly or indirectly, all of the issued and outstanding capital stock and other ownership interests of each of the STAR III Subsidiaries, free and clear of all Liens, other than Permitted Liens, and free of preemptive rights.

(d) There are no bonds, debentures, notes or other Indebtedness having general voting rights (or convertible into securities having such rights) of STAR III or any STAR III Subsidiary issued and outstanding (“STAR III Voting Debt”). There are no outstanding subscriptions, securities options, warrants, calls, rights, profits interests, stock appreciation rights, phantom stock, convertible securities, preemptive rights, anti-dilutive rights, rights of first refusal or other similar rights, agreements, arrangements, undertakings or commitments of

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any kind to which STAR III or any of the STAR III Subsidiaries is a party or by which any of them is bound obligating STAR III or any of the STAR III Subsidiaries to (i) issue, transfer or sell or create, or cause to be issued, transferred or sold or created any additional shares of capital stock or other equity interests or phantom stock or other contractual rights the value of which is determined in whole or in part by the value of any equity security of STAR III or any STAR III Subsidiary or securities convertible into or exchangeable for such shares or equity interests, (ii) issue, grant, extend or enter into any such subscriptions, options, warrants, calls, rights, profits interests, stock appreciation rights, phantom stock, convertible securities or other similar rights, agreements, arrangements, undertakings or commitments or (iii) redeem, repurchase or otherwise acquire any such shares of capital stock, STAR III Voting Debt or other equity interests.

(e) Neither STAR III nor any STAR III Subsidiary is a party to or bound by any Contracts concerning the voting (including voting trusts and proxies) of any capital stock of STAR III or any of the STAR III Subsidiaries. Neither STAR III nor any STAR III Subsidiary has granted any registration rights on any of its capital stock other than as set forth inSection 4.4(e) of the STAR III Disclosure Letter. No STAR III Common Stock is owned by any STAR III Subsidiary.

(f) STAR III does not have a “poison pill” or similar stockholder rights plan.

(g) All dividends or other distributions on the shares of STAR III Common Stock or STAR III OP Units and any material dividends or other distributions on any securities of any STAR III Subsidiary which have been authorized or declared prior to the date hereof have been paid in full (except to the extent such dividends have been publicly announced and are not yet due and payable).

Section 4.5SEC Documents; Financial Statements; Internal Controls; Off Balance Sheet Arrangements; Investment Company Act; Anti-Corruption Laws.

(a) STAR III has timely filed with, or furnished (on a publicly available basis) to the SEC, all forms, documents, certifications, statements, schedules, registration statements, prospectuses, reports and exhibits required to be filed or furnished by STAR III under the Exchange Act or the Securities Act (together with all certifications required pursuant to the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations promulgated thereunder (the “Sarbanes-Oxley Act”)) since January 1, 2016 (the forms, documents, financial statements (including those referenced inSection 4.5(d)) and reports filed with the SEC since January 1, 2016 and those filed with the SEC since the date of this Agreement, if any, including any amendments thereto, the “STAR III SEC Documents”). STAR III has timely paid all fees due in connection with any STAR III SEC Document. As of their respective filing dates (or the date of their most recent amendment, supplement or modification, in each case, to the extent filed and publicly available prior to the date of this Agreement), the STAR III SEC Documents (i) complied, or with respect to STAR III SEC Documents filed after the date hereof, will comply, in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, the Sarbanes-Oxley Act and the applicable rules and regulations of the SEC thereunder, and (ii) did not, or with respect to STAR III SEC Documents filed after the date hereof, will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. None of the STAR III SEC Documents is, to the Knowledge of STAR III, the subject of ongoing SEC review or threatened review, and STAR III does not have any outstanding and unresolved comments from the SEC with respect to any STAR III SEC Documents. There are no internal investigations, any SEC inquiries or investigations or other governmental inquiries or investigations pending or, to the Knowledge of STAR III, threatened. None of the STAR III SEC Documents is the subject of any confidential treatment request by STAR III.

(b) STAR III has made available to STAR complete and correct copies of all written correspondence between the SEC, on the one hand, and STAR III, on the other hand, since December 31, 2016. No STAR III Subsidiary is separately subject to the periodic reporting requirements of Section 13(a) or Section 15(d) of the Exchange Act.

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(c) At all applicable times, STAR III has complied in all material respects with the applicable provisions of the Sarbanes-Oxley Act and the applicable rules and regulations thereunder, as amended from time to time.

(d) The consolidated audited and unaudited financial statements of STAR III and the STAR III Subsidiaries included, or incorporated by reference, in the STAR III SEC Documents, including the related notes and schedules (as amended, supplemented or modified by later STAR III SEC Documents, in each case, to the extent filed and publicly available prior to the date of this Agreement), (i) have been or will be, as the case may be, prepared from, are in accordance with, and accurately reflect the books and records of STAR III and STAR III Subsidiaries in all material respects, (ii) complied or will comply, as the case may be, as of their respective dates in all material respects with the then-applicable accounting requirements of the Securities Act and the Exchange Act and the published rules and regulations of the SEC with respect thereto, (iii) have been or will be, as the case may be, prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto, or, in the case of the unaudited financial statements, for normal and recurringyear-end adjustments and as may be permitted by the SEC onForm 10-Q,Form 8-K,Regulation S-X or any successor or like form under the Exchange Act, which such adjustments are not, in the aggregate, material to STAR III) and (iv) fairly present, or will fairly present, as the case may be, in all material respects (subject, in the case of unaudited financial statements, for normal and recurringyear-end adjustments, none of which is material), the consolidated financial position of STAR III and the STAR III Subsidiaries, taken as a whole, as of their respective dates and the consolidated statements of operations, stockholders’ equity and cash flows of STAR III and the STAR III Subsidiaries for the periods presented therein. There are no internal investigations, any SEC inquiries or investigations or other governmental inquiries or investigations pending or, to the Knowledge of STAR III, threatened, in each case regarding any accounting practices of STAR III.

(e) Since December 31, 2016, (A) STAR III has designed and maintained disclosure controls and procedures (as defined in Rules13a-15(e) and15d-15(e) under the Exchange Act) that are effective to ensure that material information required to be disclosed by STAR III in the reports that it files or furnishes under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to STAR III’s management as appropriate to allow timely decisions regarding required disclosure and to make the certifications of the Chief Executive Officer and Chief Financial Officer of STAR III required under the Exchange Act with respect to such reports, and (B) such disclosure controls and procedures are effective in timely alerting STAR III’s management to material information required to be included in STAR III’s periodic reports required under the Exchange Act. STAR III and STAR III Subsidiaries have designed and maintained a system of internal control over financial reporting (as defined inRule 13a-15(f) and15d-15(f) under the Exchange Act) sufficient to provide reasonable assurances (i) regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP, (ii) that transactions are executed in accordance with management’s general or specific authorizations, (iii) that transactions are recorded as necessary to permit preparation of financial statements and to maintain asset accountability, (iv) that access to assets is permitted only in accordance with management’s general or specific authorization, (v) that the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences and (vi) accounts, notes and other receivables and inventory are recorded accurately, and proper and adequate procedures are implemented to effect the collection thereof on a current and timely basis. STAR III has disclosed to STAR III’s auditors and audit committee (and made summaries of such disclosures available to STAR) (1) any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect in any material respect STAR III’s ability to record, process, summarize and report financial information and (2) any fraud, whether or not material, that involves management or other employees who have a significant role in internal control over financial reporting.

(f) STAR III is not, and none of the STAR III Subsidiaries are, a party to, and neither STAR III nor any STAR III Subsidiary has any commitment to become a party to, any joint venture,off-balance sheet partnership or any similar Contract or arrangement, including any Contract relating to any transaction or relationship

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between or among STAR III and any STAR III Subsidiary, on the one hand, and any unconsolidated Affiliate of STAR III or any STAR III Subsidiary, including any structured finance, special purpose or limited purpose entity or Person, on the other hand, or any“off-balance sheet arrangements” (as defined in Item 303(a) ofRegulation S-K of the SEC), where the result, purpose or effect of such Contract is to avoid disclosure of any material transaction involving, or material liabilities of, STAR III, any STAR III Subsidiary or STAR III’s or such STAR III Subsidiary’s audited financial statements or other STAR III SEC Documents.

(g) Neither STAR III nor any STAR III Subsidiary is required to be registered as an investment company under the Investment Company Act.

(h) STAR III, STAR III Subsidiaries and their controlled Affiliates (including in each case any of their officers, directors or employees) have complied with the Anti-Corruption Law. Neither STAR III nor any STAR III Subsidiary nor, to the Knowledge of STAR III, any director, officer or Representative of STAR III or any STAR III Subsidiary has (i) used any corporate funds for any unlawful contributions, gifts, entertainment or other unlawful expenses related to political activity, (ii) made, taken or will take any action in furtherance of any direct or indirect unlawful payment, promise to pay or authorization or approval of the payment or giving of money, property or gifts of anything of value, directly or indirectly to any foreign or domestic government official or employee, (iii) made, offered or taken an act in furtherance of any direct or indirect unlawful bribe, rebate, payoff, kickback or other unlawful payment to any foreign or domestic government official or employee, (iv) made any payment to any customer, supplier or tenant, or to any officer, director, partner, employee or agent of any such customer, supplier or tenant, for the unlawful sharing of fees to any such customer, supplier or tenant or any such officer, director, partner, employee or agent for the unlawful rebating of charges, (v) engaged in any other unlawful reciprocal practice, or made any other unlawful payment or given any other unlawful consideration to any such customer, supplier or tenant or any such officer, director, partner, employee or agent of such customer, officer or tenant, or (vi) taken any action or made any omission in violation of any applicable Law governing imports into or exports from the United States or any foreign country, or relating to economic sanctions or embargoes, corrupt practices, money laundering, or compliance with unsanctioned foreign boycotts, in each case, in violation of any applicable Anti-Corruption Law. Neither STAR III nor any STAR III Subsidiary has received any written communication that alleges that STAR III or any STAR III Subsidiary, or any of their respective Representatives, is, or may be, in violation of, or has, or may have, any liability under, any Anti-Corruption Law.

Section 4.6Absence of Certain Changes or Events. Except as set forth inSection 4.6 of the STAR III Disclosure Letter, since December 31, 2018 through the date of this Agreement, (a) STAR III and each STAR III Subsidiary has conducted its business in all material respects in the ordinary course of business consistent with past practice, (b) neither STAR III nor any STAR III Subsidiary has taken any action that would have been prohibited bySection 6.1(b) (Conduct of the Business of STAR III) if taken from and after the date of this Agreement and (c) there has not been any STAR III Material Adverse Effect or any event, circumstance, change, effect, development, condition or occurrence that, individually or in the aggregate with all other events, circumstances, changes, effects, developments, conditions or occurrences, would reasonably be expected to have a STAR III Material Adverse Effect.

Section 4.7No Undisclosed Liabilities. Except (a) as disclosed, reflected or reserved against on the balance sheet of STAR III dated as of December 31, 2018 (including the notes thereto), (b) for liabilities or obligations incurred in connection with the transactions contemplated by this Agreement and (c) for liabilities or obligations incurred in the ordinary course of business consistent with past practice since December 31, 2018, neither STAR III nor any STAR III Subsidiary has any liabilities or obligations (whether accrued, absolute, contingent or otherwise) that either alone or when combined with all other liabilities of a type not described in clauses (a), (b) or (c) above, has had, or would reasonably be expected to have, a STAR III Material Adverse Effect.

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Section 4.8Permits; Compliance with Law.

(a) Except for the authorizations, licenses, permits, certificates, approvals, variances, exemptions, orders, franchises, certifications and clearances that are the subject ofSection 4.10 andSection 4.11, which are addressed solely in those Sections, STAR III and each STAR III Subsidiary is in possession of all authorizations, licenses, permits, certificates, approvals, variances, exemptions, orders, franchises, certifications and clearances of any Governmental Authority (“Permits”) necessary for STAR III and each STAR III Subsidiary to own, lease and, to the extent applicable, operate its properties or to carry on its respective business substantially as they are being conducted as of the date hereof (the “STAR III Permits”), and all such STAR III Permits are valid and in full force and effect, except where the failure to be in possession of, or the failure to be valid or in full force and effect of, any of the STAR III Permits, individually, or in the aggregate, would not reasonably be expected to have a STAR III Material Adverse Effect. STAR III has paid all fees and assessments due and payable, in each case, in connection with all such Permits, except where failure to pay would not have a STAR III Material Adverse Effect. No event has occurred with respect to any of the STAR III Permits which permits, or after notice or lapse of time or both would permit, revocation or termination thereof or would result in any other material impairment of the rights of the holder of any such STAR III Permits. Neither STAR III nor any of the STAR III Subsidiaries has received any notice indicating, nor to the Knowledge of STAR III, is there any pending applicable petition, objection or other pleading with any Governmental Authority having jurisdiction or authority over the operations of STAR III or the STAR III Subsidiaries that impairs the validity of any STAR III Permit or which would reasonably be expected, if accepted or granted, to result in the revocation of any STAR III Permit, except where the impairment or revocation of any such STAR III Permits, individually, or in the aggregate, would not reasonably be expected to have a STAR III Material Adverse Effect.

(b) Neither STAR III nor any STAR III Subsidiary is, and for the past three (3) years has been, in conflict with, or in default or violation of, (i) any Law applicable to STAR III or any STAR III Subsidiary or by which any property or asset of STAR III or any STAR III Subsidiary is bound (except for compliance with Laws addressed inSection 4.10,Section 4.11,Section 4.13 andSection 4.14 which are solely addressed in those Sections), or (ii) any STAR III Permits (except for STAR III Permits addressed inSection 4.10 orSection 4.11, which are solely addressed in those Sections) except, in each case, for any such conflicts, defaults or violations that, individually or in the aggregate, would not reasonably be expected to have a STAR III Material Adverse Effect.

Section 4.9Litigation. Except as set forth inSection 4.9 of the STAR III Disclosure Letter, there is no material action, suit, proceeding or investigation to which STAR III or any STAR III Subsidiary is a party (either as plaintiff or defendant) pending or, to the Knowledge of STAR III, threatened before any Governmental Authority, and, to the Knowledge of STAR III, there is no basis for any such action, suit, proceeding or investigation. Neither STAR III nor any STAR III Subsidiary has been permanently or temporarily enjoined by any Order, judgment or decree of any Governmental Authority from engaging in or continuing to conduct the business of STAR III or the STAR III Subsidiaries. No Order of any Governmental Authority has been issued in any proceeding to which STAR III or any of the STAR III Subsidiaries is or was a party, or, to the Knowledge of STAR III, in any other proceeding, that enjoins or requires STAR III or any of the STAR III Subsidiaries to take action of any kind with respect to its businesses, assets or properties. Since January 1, 2019, none of STAR III, any STAR III Subsidiary or any Representative of the foregoing has received or made any settlement offer for any material Action to which STAR III or any STAR III Subsidiary is a party or potentially could be a party (in each case, either as plaintiff or defendant), other than settlement offers that do not exceed $1,000,000 individually.

Section 4.10Properties.

(a) STAR III has made available to STAR a list of each parcel of real property currently owned or ground leased by STAR III or any STAR III Subsidiary, together with the applicable STAR III Subsidiary owning or leasing such property. Except as disclosed in title insurance policies and reports (and the documents or

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surveys referenced in such policies and reports): (A) STAR III or a STAR III Subsidiary owns fee simple title to each of the STAR III Properties, free and clear of Liens, except Permitted Liens; (B) except as has not had and would not, individually or in the aggregate, have a STAR III Material Adverse Effect, neither STAR III nor any STAR III Subsidiary has received written notice of any violation of any Law affecting any portion of any of the STAR III Properties issued by any Governmental Authority; and (C) except as would not, individually or in the aggregate, have a STAR III Material Adverse Effect, neither STAR III nor any STAR III Subsidiary has received notice to the effect that there are (1) condemnation or rezoning proceedings that are pending or threatened with respect to any of the STAR III Properties or (2) zoning, building or similar Laws, codes, ordinances, orders or regulations that are or will be violated by the continued maintenance, operation or use of any buildings or other improvements on any of the STAR III Properties or by the continued maintenance, operation or use of the parking areas.

(b) STAR III has not received written notice of, nor does STAR III have any Knowledge of, any material latent defects or adverse physical conditions affecting any of the STAR III Properties or the improvements thereon, except as would not, individually or in the aggregate, have a STAR III Material Adverse Effect.

(c) STAR III and the STAR III Subsidiaries have good title to, or a valid and enforceable leasehold interest in, all personal assets owned, used or held for use by them. Neither STAR III’s nor the STAR III Subsidiaries’ ownership of any such personal property is subject to any Liens, other than Permitted Liens.

(d) A policy of title insurance has been issued for each STAR III Property insuring, as of the effective date of such insurance policy, (i)(A) fee simple title interest held by STAR III or the applicable STAR III Subsidiary with respect to STAR III Properties that are not subject to ground leases and (B) a valid leasehold estate held by STAR III or the applicable STAR III Subsidiary that are subject to ground leases and (ii) to the Knowledge of STAR III, such insurance policies are in full force and effect, and no material claim has been made against any such policy that remains outstanding as of the date of hereof.

Section 4.11Environmental Matters. Except as, individually or in the aggregate, would not reasonably be expected to have a STAR III Material Adverse Effect: (i) no notification, demand, request for information, citation, summons, notice of violation or order has been received, no complaint has been filed, no penalty has been assessed and no investigation, action, suit or proceeding is pending or, to the Knowledge of STAR III, is threatened relating to STAR III or any of the STAR III Subsidiaries or any of their respective properties, and relating to or arising out of any Environmental Law or Hazardous Substance; (ii) STAR III and the STAR III Subsidiaries are, and for the past year, have been, in compliance with all Environmental Laws and all applicable Environmental Permits; (iii) STAR III and each of the STAR III Subsidiaries is in possession of all Environmental Permits necessary for STAR III and each STAR III Subsidiary to own, lease and, to the extent applicable, operate its properties or to carry on its respective business substantially as they are being conducted as of the date hereof, and all such Environmental Permits are valid and in full force and effect; (iv) any and all Hazardous Substances disposed of by STAR III and each STAR III Subsidiary was done so in accordance with all applicable Environmental Laws and Environmental Permits; (v) STAR III and the STAR III Subsidiaries are not subject to any order, writ, judgment, injunction, decree, stipulation, determination or award by any Governmental Authority pursuant to any Environmental Laws, any Environmental Permit or with respect to any Hazardous Substance; and (vi) there are no liabilities or obligations of STAR III or any of the STAR III Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise arising under or relating to any Environmental Law or any Hazardous Substance and there is no condition, situation or set of circumstances that would reasonably be expected to result in any such liability or obligation.

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Section 4.12Material Contracts.

(a) STAR III has made available to STAR a true, correct and complete copy of each Contract in effect as of the date hereof to which STAR III or any STAR III Subsidiary is a party or by which any of its properties or assets are bound that:

(i) is required to be filed with the SEC as an exhibit to STAR III’s Annual Report on Form10-K for the year ending December 31, 2018 or any subsequent current or periodic report pursuant to Item 601(b)(1), (2), (4), (9) or (10) of RegulationS-K promulgated under the Securities Act;

(ii) is required to be described pursuant to Item 404 of RegulationS-K promulgated under the Securities Act;

(iii) obligates the STAR III Parties or any other STAR III Subsidiary to makenon-contingent aggregate annual expenditures (other than principal and/or interest payments or the deposit of other reserves with respect to debt obligations) in excess of $1,000,000 and is not cancelable within ninety (90) days without material penalty to the STAR III Parties or any other STAR III Subsidiary;

(iv) contains anynon-compete or exclusivity provisions with respect to any line of business or geographic area that restricts the business of the STAR III Parties or any other STAR III Subsidiary, including upon consummation of the transactions contemplated by this Agreement, or that otherwise restricts the lines of business conducted by the STAR III Parties or any other STAR III Subsidiary or the geographic area in which the STAR III Parties or any other STAR III Subsidiary may conduct business;

(v) is a Contract that obligates the STAR III Parties or any other STAR III Subsidiary to indemnify any past or present directors, officers, or employees of the STAR III Parties or any other STAR III Subsidiary pursuant to which the STAR III Parties or any other STAR III Subsidiary is the indemnitor;

(vi) constitutes (A) an Indebtedness obligation of the STAR III Parties or any other STAR III Subsidiary with a principal amount as of the date hereof greater than $1,000,000 or (B) a Contract (including any so calledtake-or-pay or keepwell agreements) under which (1) any Person including STAR III or a STAR III Subsidiary, has directly or indirectly guaranteed Indebtedness, liabilities or obligations of STAR III or STAR III Subsidiary or (2) STAR III or a STAR III Subsidiary has directly or indirectly guaranteed Indebtedness, liabilities or obligations of any Person, including STAR III or another STAR III Subsidiary (in each case other than endorsements for the purpose of collection in the ordinary course of business);

(vii) requires the STAR III Parties or any other STAR III Subsidiary to dispose of or acquire assets or properties that (together with all of the assets and properties subject to such requirement in such Contract) have a fair market value in excess of $1,000,000, or involves any pending or contemplated merger, consolidation or similar business combination transaction;

(viii) constitutes an interest rate cap, interest rate collar, interest rate swap or other Contract relating to a swap or other hedging transaction of any type;

(ix) constitutes a loan to any Person (other than a Wholly Owned STAR III Subsidiary or the STAR III Operating Partnership) by STAR III or any STAR III Subsidiary in an amount in excess of $1,000,000;

(x) sets forth the operational terms of a joint venture, partnership, limited liability company or strategic alliance of the STAR III Parties or any STAR III Subsidiary with a third party;

(xi) prohibits the pledging of the capital stock of STAR III or any STAR III Subsidiary or prohibits the issuance of guarantees by any STAR III Subsidiary;

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(xii) contains covenants expressly limiting, in any material respect, the ability of STAR III or any STAR III Subsidiary to sell, transfer, pledge or otherwise, dispose of any material assets or business of STAR III or any STAR III Subsidiary;

(xiii) contains restrictions on the ability of STAR III or any STAR III Subsidiary to pay dividends or other distributions (other than pursuant to the organizational documents of STAR III and STAR III Subsidiaries);

(xiv) is with a Governmental Authority;

(xv) has continuing“earn-out” or other similar contingent purchase price payment obligations, in each case that could result in payments, individually or in the aggregate, in excess of $1,000,000;

(xvi) is an employment Contract or consulting Contract;

(xvii) provides severance, retention or transaction bonus payments, change of control payments or similar compensation;

(xviii) is a settlement agreement or release of claims with any current employee or with any former employee within the past five (5) years;

(xix) is a lease, sublease, license or other rental agreement or occupancy agreement (written or verbal) which grants any possessory interest in and to any space situated on or in the STAR III Properties or that otherwise gives rights with regard to the use of the STAR III Properties;

(xx) is a ground lease under which STAR III or a STAR III Subsidiary holds a leasehold interest in the STAR III Properties or any portion thereof; or

(xxi) is both (A) not made in the ordinary course of business consistent with past practice and (B) material to STAR III and the STAR III Subsidiaries, taken as a whole.

(b) Each Contract in any of the categories set forth inSection 4.12(a) to which the STAR III Parties or any other STAR III Subsidiary is a party or by which it is bound as of the date hereof is referred to herein as a “STAR III Material Contract.”

(c) Each STAR III Material Contract is legal, valid, binding and enforceable on the STAR III Parties and each other STAR III Subsidiary that is a party thereto and, to the Knowledge of STAR III, each other party thereto, and is in full force and effect, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at Law). The STAR III Parties and each other STAR III Subsidiary has performed all obligations required to be performed by it prior to the date hereof under each STAR III Material Contract and, to the Knowledge of STAR III, each other party thereto has performed all obligations required to be performed by it under such STAR III Material Contract prior to the date hereof. None of the STAR III Parties or any other STAR III Subsidiary, nor, to the Knowledge of STAR III, any other party thereto, is in breach or violation of, or default under, any STAR III Material Contract, and no event has occurred that, with notice or lapse of time or both, would constitute a violation, breach or default under any STAR III Material Contract, except where in each case such breach, violation or default, individually or in the aggregate, would not reasonably be expected to have a STAR III Material Adverse Effect. None of the STAR III Parties or any other STAR III Subsidiary has received notice of any violation or default under, or currently owes any termination, cancellation or other similar fees or any liquidated damages with respect to, any STAR III Material Contract, except for violations, defaults, fees or damages that, individually or in the aggregate, would not reasonably be expected to have a STAR III Material Adverse Effect. Since December 31, 2016, and as of the date hereof, neither STAR III nor any STAR III Subsidiary has received any written notice of the intention of any party to cancel, terminate, materially change the scope of rights under or fail to renew any STAR III Material Contract.

(d) Each management agreement pursuant to which any third party manages or operates any of the STAR III Properties on behalf of STAR III or any STAR III Subsidiary is valid, binding and in full force and

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effect as against STAR III or the applicable STAR III Subsidiary and, to the Knowledge of STAR III, as against the other party thereto. Neither STAR III nor any STAR III Subsidiary owes any termination, cancellation or other similar fees or any liquidated damages to any third party manager or operator.

Section 4.13Taxes.

(a) Each STAR III Party and each other STAR III Subsidiary has timely filed with the appropriate Governmental Authority all United States federal income Tax Returns and all other material Tax Returns required to be filed, taking into account any extensions of time within which to file such Tax Returns, and all such Tax Returns were complete and correct in all material respects. Each STAR III Party and each other STAR III Subsidiary has duly paid (or there has been paid on their behalf), or made adequate provisions in accordance with GAAP for, all material Taxes required to be paid by them, whether or not shown on any Tax Return. True and materially complete copies of all United States federal income Tax Returns that have been filed with the IRS by STAR III and each STAR III Subsidiary with respect to the taxable years ending on or after STAR III’s formation have been made available to STAR. No written claim has been proposed by any Governmental Authority in any jurisdiction where STAR III or any STAR III Subsidiary do not file Tax Returns that STAR III or any STAR III Subsidiary is or may be subject to Tax by such jurisdiction.

(b) Beginning with its initial taxable year ending on December 31, 2016, and through and including the Closing Date (determined as if STAR III’s current taxable year ended immediately prior to Closing), STAR III (i) has been organized and operated in conformity with the requirements to qualify as a REIT under the Code and the current and proposed method of operation for STAR III is expected to enable STAR III to continue to meet the requirements for qualification as a REIT through and including the Closing Date, and (ii) has not taken or omitted to take any action which would reasonably be expected to result in STAR III’s failure to qualify as a REIT, and no challenge to STAR III’s status as a REIT is pending or threatened in writing. No STAR III Subsidiary is a corporation for United States federal income tax purposes, other than a corporation that qualifies as a Qualified REIT Subsidiary or as a Taxable REIT Subsidiary. STAR III’s dividends paid deduction, within the meaning of Section 561 of the Code, for each taxable year, taking into account any dividends subject to Sections 857(b)(8) or 858 of the Code, has not been less than the sum of (i) STAR III’s REIT taxable income, as defined in Section 857(b)(2) of the Code, determined without regard to any dividends paid deduction for such year and (ii) STAR III’s net capital gain for such year.

(c) (i) There are no audits, investigations by any Governmental Authority or other proceedings pending or, to the Knowledge of STAR III, threatened with regard to any material Taxes or Tax Returns of STAR III or any STAR III Subsidiary; (ii) no material deficiency for Taxes of STAR III or any STAR III Subsidiary has been claimed, proposed or assessed in writing or, to the Knowledge of STAR III, threatened, by any Governmental Authority, which deficiency has not yet been settled except for such deficiencies which are being contested in good faith or with respect to which the failure to pay, individually or in the aggregate, would not reasonably be expected to have a STAR III Material Adverse Effect; (iii) neither STAR III nor any STAR III Subsidiary has waived any statute of limitations with respect to the assessment of material Taxes or agreed to any extension of time with respect to any material Tax assessment or deficiency for any open tax year; (iv) neither STAR III nor any STAR III Subsidiary is currently the beneficiary of any extension of time within which to file any material Tax Return; and (v) neither STAR III nor any STAR III Subsidiary has entered into any “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax Law).

(d) Each STAR III Subsidiary that is a partnership, joint venture or limited liability company and that has not elected to be a Taxable REIT Subsidiary has been since its formation treated for United States federal income tax purposes as a partnership, disregarded entity, or Qualified REIT Subsidiary, as the case may be, and not as a corporation, an association taxable as a corporation whose separate existence is respected for United States federal income tax purposes, or a “publicly traded partnership” within the meaning of Section 7704(b) of the Code that is treated as a corporation for U.S. federal income tax purposes under Section 7704(a) of the Code.

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(e) Neither STAR III nor any STAR III Subsidiary holds any asset the disposition of which would be subject to Treasury RegulationSection 1.337(d)-7, nor have they disposed of any such asset during its current taxable year.

(f) Since its inception, STAR III and the STAR III Subsidiaries have not incurred (i) any material liability for Taxes under Sections 857(b)(1), 857(b)(4), 857(b)(5), 857(b)(6)(A), 857(b)(7), 857(f), 860(c) or 4981 of the Code, (ii) any liability for Taxes under Sections 857(b)(5) (for income test violations), 856(c)(7)(C) (for asset test violations), or 856(g)(5)(C) (for violations of other qualification requirements applicable to REITs) and (iii) STAR III has not, and none of the STAR III Subsidiaries have, incurred any material liability for Tax other than (A) in the ordinary course of business consistent with past practice, or (B) transfer or similar Taxes arising in connection with sales of property. No event has occurred, and to the Knowledge of STAR III no condition or circumstances exists, which presents a material risk that any material liability for Taxes described clause (iii) of the preceding sentence or any liability for Taxes described in either clause (i) or (ii) of the preceding sentence will be imposed upon STAR III or any STAR III Subsidiary.

(g) STAR III and the STAR III Subsidiaries have complied, in all material respects, with all applicable Laws relating to the payment and withholding of Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 1445, 1446, 1471 and 3402 of the Code or similar provisions under any state, local and foreign Laws) and have duly and timely withheld and, in each case, have paid over to the appropriate taxing authorities all material amounts required to be so withheld and paid over on or prior to the due date thereof under all applicable Laws.

(h) There are no STAR III Tax Protection Agreements (as hereinafter defined) in force at the date of this Agreement (other than customary Tax indemnification provisions in commercial Contracts not primarily relating to Taxes), and, as of the date of this Agreement, no person has raised in writing, or to the Knowledge of STAR III threatened to raise, a material claim against STAR III or any STAR III Subsidiary for any breach of any STAR III Tax Protection Agreements. As used herein, “STAR III Tax Protection Agreements” means any written agreement to which STAR III or any STAR III Subsidiary is a party pursuant to which: (i) any liability to holders of limited partnership interests in a STAR III Subsidiary Partnership (as hereinafter defined) relating to Taxes may arise, whether or not as a result of the consummation of the transactions contemplated by this Agreement; and/or (ii) in connection with the deferral of income Taxes of a holder of limited partnership interests or limited liability company interests in a STAR III Subsidiary Partnership, STAR III or any STAR III Subsidiary has agreed to (A) maintain a minimum level of debt, continue a particular debt or provide rights to guarantee debt, (B) retain or not dispose of assets, (C) make or refrain from making Tax elections, and/or (D) only dispose of assets in a particular manner. As used herein, “STAR III Subsidiary Partnership” means a STAR III Subsidiary that is a partnership for United States federal income tax purposes.

(i) There are no Tax Liens upon any property or assets of STAR III or any STAR III Subsidiary except Liens for Taxes not yet due and payable or that are being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP.

(j) There are no Tax allocation or sharing agreements or similar arrangements with respect to or involving STAR III or any STAR III Subsidiary, and after the Closing Date neither STAR III nor any STAR III Subsidiary shall be bound by any such Tax allocation agreements or similar arrangements or have any liability thereunder for amounts due in respect of periods prior to the Closing Date.

(k) Neither STAR III nor any STAR III Subsidiary has requested or received any written ruling of a Governmental Authority or entered into any written agreement with a Governmental Authority with respect to any Taxes, and neither STAR III nor any STAR III Subsidiary is subject to written ruling of a Governmental Authority.

(l) Neither STAR III nor any STAR III Subsidiary (i) has been a member of an affiliated group filing a consolidated federal income Tax Return or any other unitary, combined, consolidated or similar Tax group or

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(ii) has any liability for the Taxes of any Person (other than any STAR III Subsidiary) under Treasury RegulationSection 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by Contract, or otherwise.

(m) Neither STAR III nor any STAR III Subsidiary has participated in any “reportable transaction” within the meaning of Treasury RegulationSection 1.6011-4(b).

(n) Neither STAR III nor any STAR III Subsidiary has constituted either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying fortax-free treatment under Section 355 of the Code (i) in the two (2) years prior to the date of this Agreement or (ii) in a distribution which could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) in conjunction with transactions contemplated by this Agreement.

(o) No written power of attorney that has been granted by STAR III or any STAR III Subsidiary (other than to STAR III or a STAR III Subsidiary) currently is in force with respect to any matter relating to Taxes.

(p) Neither STAR III nor any STAR III Subsidiary has taken any action or failed to take any action which action or failure would reasonably be expected to jeopardize the status of the Merger as a reorganization within the meaning of Section 368(a) of the Code, nor to the Knowledge of STAR III, is there any other fact or circumstance that could reasonably be expected to prevent, the Merger from qualifying as such a reorganization.

(q) STAR III is a “domestically controlled qualified investment entity” within the meaning of Section 897(h)(4)(B) of the Code.

Section 4.14Intellectual Property. Neither STAR III nor any STAR III Subsidiary: (a) owns any registered trademarks, patents or copyrights, (b) has any pending applications, registrations or recordings for any trademarks, patents or copyrights or (c) is a party to any Contracts with respect to use by STAR III or any STAR III Subsidiary of any trademarks or patents. Except as, individually or in the aggregate, would not reasonably be expected to have a STAR III Material Adverse Effect, (i) no Intellectual Property used by STAR III or any STAR III Subsidiary infringes or is alleged to infringe any Intellectual Property rights of any third party, (ii) no Person is misappropriating, infringing or otherwise violating any Intellectual Property of STAR III or any STAR III Subsidiary, and (iii) STAR III and the STAR III Subsidiaries own or are licensed to use, or otherwise possess valid rights to use, all Intellectual Property necessary to conduct the business of STAR III and the STAR III Subsidiaries as it is currently conducted. Since January 1, 2019, neither STAR III nor any STAR III Subsidiary has received any written or, to the Knowledge of STAR III, verbal complaint, claim or notice alleging misappropriation, infringement or violation of any Intellectual Property rights of any third party.

Section 4.15Insurance. STAR III and each STAR III Subsidiary maintain material insurance policies and all material fidelity bonds as set forth inSection 4.15 of the STAR III Disclosure Letter (which specifies the general type of insurance, insurer, policy number and aggregate limit) (the “STAR III Insurance Policies”). All such insurance policies are in full force and effect, and, as of the date hereof, no written notice of cancellation or termination has been received by STAR III or any STAR III Subsidiary with respect to any such policy which has not been replaced on substantially similar terms prior to the date of such cancellation, and there is no existing default or event which, with the giving of notice or lapse of time or both, would constitute a breach or default, by any insured thereunder, or permit termination or modification, of any of the policies, except as would not, individually or in the aggregate, reasonably be expected to have a STAR III Material Adverse Effect. Except as, individually or in the aggregate, would not reasonably be expected to have a STAR III Material Adverse Effect, all premiums currently due and payable under all STAR III Insurance Policies have been paid, and STAR III and the STAR III Subsidiaries have otherwise complied in all material respects with the terms and conditions of all STAR III Insurance Policies.

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Section 4.16Benefit Plans.

(a) Other than the STAR III Equity Incentive Plan, STAR III and the STAR III Subsidiaries do not and are not required to, and have not and have never been required to, maintain, sponsor or contribute to any Benefit Plans. Neither STAR III nor any STAR III Subsidiary has any contract, plan or commitment, whether or not legally binding, to create any Benefit Plan.

(b) Except as individually or in the aggregate, have not had and would not reasonably be expected to have STAR III Material Adverse Effect, none of STAR III, any STAR III Subsidiary or any of their respective ERISA Affiliates has incurred any obligation or liability with respect to or under any employee benefit plan, program or arrangement (including any agreement, program, policy or other arrangement under which any current or former employee, director or consultant has any present or future right to benefits) which has created or will create any obligation with respect to, or has resulted in or will result in any liability to STAR III or any STAR III Subsidiary.

(c) Except as individually or in the aggregate, have not had and would not reasonably be expected to have a STAR III Material Adverse Effect, the STAR III Equity Incentive Plan was established and has been administered in accordance with its terms and in compliance with all applicable Laws, including the Code.

(d) None of STAR III, any STAR III Subsidiaries or any of their respective ERISA Affiliates has ever maintained, contributed to, or participated in, or otherwise has any obligation or liability in connection with: (i) a “pension plan” under Section 3(2) of ERISA that is subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code, (ii) a “multiemployer plan” (as defined in Section 3(37) of ERISA), (iii) a “multiple employer welfare arrangement” (as defined in Section 3(40) of ERISA), or (iv) a “multiple employer plan” (as defined in Section 413(c) of the Code).

(e) No amount that could be received (whether in cash or property or the vesting of property) as a result of the Merger or any of the other transactions contemplated hereby (alone or in combination with any other event) by any Person who is a “disqualified individual” (as such term is defined in Treasury RegulationSection 1.280G-1) under any compensation arrangement could be characterized as an “excess parachute payment” (as such term is defined in Section 280G(b)(1) of the Code).

(f) The STAR III Equity Incentive Plan has been maintained and operated in compliance with Section 409A of the Code or an available exemption therefrom.

(g) Neither STAR III nor any STAR III Subsidiary is a party to or has any obligation under any Contract, the STAR III Equity Incentive Plan or otherwise to compensate any Person for excise Taxes payable pursuant to Section 4999 of the Code or for additional Taxes payable pursuant to Section 409A of the Code.

(h) Neither STAR III nor any STAR III Subsidiary has, or has ever had, any employees.

Section 4.17Related Party Transactions. Except as described in the publicly available STAR III SEC Documents filed with or furnished to the SEC on or after January 1, 2016 and prior to the date hereof, no agreements, arrangements or understandings between any of the STAR III Parties or any other STAR III Subsidiary (or binding on any of their respective properties or assets), on the one hand, and any other Person, on the other hand (other than those exclusively among STAR III and STAR III Subsidiaries) (the “STAR III Related Party Agreements”), are in existence that are not, but are required to be, disclosed under Item 404 ofRegulation S-K promulgated by the SEC.

Section 4.18Brokers. No broker, investment banker or other Person (other than the Persons listed inSection 4.18 of the STAR III Disclosure Letter, each in a fee amount not to exceed the amount set forth inSection 4.18 of the STAR III Disclosure Letter, pursuant to the terms of the engagement letter between STAR III

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and such Person, true, correct and complete copies of which have been provided to STAR prior to the date hereof) is entitled to any broker’s, finder’s or other similar fee or commission in connection with the Merger and the other transactions contemplated by this Agreement based upon arrangements made by or on behalf of the STAR III Parties or any other STAR III Subsidiary.

Section 4.19Opinion of Financial Advisor. The STAR III Special Committee has received the opinion of Houlihan Lokey Capital, Inc. (the “STAR III Financial Advisor”) (which if initially received verbally, will be confirmed by a written opinion), dated the date of this Agreement, to the effect that, as of the date of such opinion and based on and subject to the assumptions, limitations, qualifications and conditions set forth in its written opinion, the Exchange Ratio is fair, from a financial point of view, to the holders of shares of the STAR III Common Stock. STAR III will deliver to STAR a complete and correct copy of such opinion promptly after receipt thereof by the STAR III Special Committee solely for informational purposes. STAR III acknowledges that the opinion of the STAR Financial Advisor contemplated bySection 5.19 is for the benefit of the STAR Special Committee and that STAR III shall not be entitled to rely on that opinion for any purpose.

Section 4.20Takeover Statutes. Neither STAR III nor any STAR III Subsidiary is, nor at any time during the last two (2) years has been, an “interested stockholder” of STAR as defined inSection 3-601 of the MGCL. The STAR III Board has taken all action necessary to render inapplicable to the Merger the restrictions on business combinations contained in Subtitle 6 of Title 3 of the MGCL. The restrictions on control share acquisitions contained in Subtitle 7 of Title 3 of the MGCL are not applicable to the Merger. No other “business combination,” “control share acquisition,” “fair price,” “moratorium” or other takeover or anti-takeover statute or similar federal or state Law (collectively, “Takeover Statutes”) are applicable to this Agreement, the Merger or the other transactions contemplated by this Agreement. There is no stockholders’ rights plan or “poison pill” anti-takeover plan in effect to which STAR III or any STAR III Subsidiary is subject to, party to or otherwise bound. No dissenters’, appraisal or similar rights are available to the holders of STAR III Common Stock with respect to the Merger and the other transactions contemplated by this Agreement.

Section 4.21Information Supplied. None of the information relating to STAR III or any STAR III Subsidiary contained or incorporated by reference in the Proxy Statement or theForm S-4 or that is provided by STAR III or any STAR III Subsidiary in writing for inclusion or incorporation by reference in any document filed with any other Governmental Authority in connection with the transactions contemplated by this Agreement will (a) in the case of the Proxy Statement, at the time of the mailing thereof, at the time of the Stockholders Meeting, at the time theForm S-4 is declared effective or at the Merger Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, or (b) in the case of theForm S-4 or with respect to any other document to be filed by STAR III with the SEC in connection with the Merger or the other transactions contemplated by this Agreement, at the time of its filing with the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. All documents that STAR III is responsible for filing with the SEC in connection with the transactions contemplated by this Agreement, to the extent relating to STAR III, its officers, directors and partners and the STAR III Subsidiaries (or other information supplied by or on behalf of STAR III or any STAR III Subsidiaries for inclusion therein) will comply in all material respects with the applicable requirements of the Securities Act and the Exchange Act;provided, that no representation is made as to statements made or incorporated by reference by or on behalf of the STAR Parties.

Section 4.22No Other Representations and Warranties. Except for the representations or warranties expressly set forth in thisArticle 4, or any document, agreement, certificate or other instrument contemplated hereby, none of the STAR III Parties or any other Person on behalf of a STAR III Party has made any representation or warranty, expressed or implied, with respect to the STAR III Parties or any other STAR III Subsidiary, their respective businesses, operations, assets, liabilities, condition (financial or otherwise), results of operations, future operating or financial results, estimates, projections, forecasts, plans or prospects (including

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the reasonableness of the assumptions underlying such estimates, projections, forecasts, plans or prospects) or the accuracy or completeness of any information regarding the STAR III Parties or any other STAR III Subsidiary. In particular, without limiting the foregoing disclaimer, none of the STAR III Parties or any other Person on behalf of a STAR III Party makes or has made any representation or warranty to any STAR Party or any of their respective Affiliates or Representatives with respect to, except for the representations and warranties made by the STAR III Parties in thisArticle 4, or any document, agreement, certificate or other instrument contemplated hereby, any oral or written information presented to the STAR Parties or any of their respective Affiliates or Representatives in the course of their due diligence of the STAR III Parties, the negotiation of this Agreement or in the course of the transactions contemplated by this Agreement. Notwithstanding anything contained in this Agreement to the contrary, the STAR III Parties acknowledge and agree that none of the STAR Parties or any other Person has made or is making any representations or warranties relating to the STAR Parties whatsoever, express or implied, beyond those expressly given by any STAR Party inArticle 5, or any document, agreement, certificate or other instrument contemplated hereby, including any implied representation or warranty as to the accuracy or completeness of any information regarding any STAR Party furnished or made available to the STAR III Parties or any of their respective Representatives.

ARTICLE 5

REPRESENTATIONS AND WARRANTIES OF THE STAR PARTIES

Except (a) as set forth in the disclosure letter prepared by the STAR Parties and delivered by the STAR Parties to the STAR III Parties prior to the execution and delivery of this Agreement (the “STAR Disclosure Letter”) (it being acknowledged and agreed that disclosure of any item in any section or subsection of the STAR Disclosure Letter shall be deemed disclosed with respect to the section or subsection of this Agreement to which it corresponds and any other section or subsection of this Agreement to the extent the applicability of such disclosure is reasonably apparent on its face (it being understood that to be so reasonably apparent on its face, it is not required that the other Sections be cross-referenced);provided, that no disclosure shall qualify any Fundamental Representation unless it is set forth in the specific section or subsection of the STAR Disclosure Letter corresponding to such Fundamental Representation;provided,further, that nothing in the STAR Disclosure Letter is intended to broaden the scope of any representation or warranty of the STAR Parties made herein) or (b) as disclosed in the STAR SEC Documents publicly available, filed with, or furnished to, as applicable, the SEC on or after March 31, 2019 and prior to the date of this Agreement (excluding any information or documents incorporated by reference therein or filed as exhibits thereto and excluding any disclosures contained in such documents under the headings “Risk Factors” or “Forward Looking Statements” or any other disclosures contained or referenced therein to the extent they are cautionary,non-specific, predictive or forward-looking in nature), and then only to the extent that the relevance of any disclosed event, item or occurrence in such STAR SEC Documents to a matter covered by a representation or warranty set forth in thisArticle 5 is reasonably apparent on its face;provided, that the disclosures in the STAR SEC Documents shall not be deemed to qualify (i) any Fundamental Representations, which matters shall only be qualified by specific disclosure in the respective corresponding Section of the STAR Disclosure Letter, and (ii)Section 5.5(a)-Section 5.5(b) (SEC Documents; Financial Statements),Section 5.6(c) (Absence of Certain Changes or Events) andSection 5.7 (No Undisclosed Liabilities), the STAR Parties hereby jointly and severally represent and warrant as of the date hereof (except to the extent that such representations and warranties expressly relate to another date, in which case as of such other date) to the STAR III Parties that:

Section 5.1Organization and Qualification; Subsidiaries.

(a) STAR is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Maryland and has the requisite corporate power and authority to own, lease and, to the extent applicable, operate its properties and to carry on its business as it is now being conducted. Merger Sub is a limited liability company duly organized, validly existing and in good standing under the laws of the State of

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Maryland and has the requisite limited liability company power and authority to own, lease and, to the extent applicable, operate its properties and to carry on its business as it is now being conducted. Each of STAR and Merger Sub is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, operated or leased by it or the nature of its business makes such qualification, licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that, individually or in the aggregate, would not reasonably be expected to have a STAR Material Adverse Effect.

(b) Each STAR Subsidiary is duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, as the case may be, and has the requisite organizational power and authority to own, lease and, to the extent applicable, operate its properties and to carry on its business as it is now being conducted. Each STAR Subsidiary is duly qualified or licensed to do business, and is in good standing, in each jurisdiction where the character of the properties owned, operated or leased by it or the nature of its business makes such qualification, licensing or good standing necessary, except for such failures to be so qualified, licensed or in good standing that, individually or in the aggregate, would not reasonably be expected to have a STAR Material Adverse Effect.

(c)Section 5.1(c) of the STAR Disclosure Letter sets forth a true and complete list of the STAR Subsidiaries and their respective jurisdictions of incorporation or organization, as the case may be, the jurisdictions in which STAR and the STAR Subsidiaries are qualified or licensed to do business, and the type of and percentage of interest held, directly or indirectly, by STAR in each STAR Subsidiary, including a list of each STAR Subsidiary that is a Qualified REIT Subsidiary or a Taxable REIT Subsidiary and each STAR Subsidiary that is an entity taxable as a corporation which is neither a Qualified REIT Subsidiary nor a Taxable REIT Subsidiary.

(d) Neither STAR nor any STAR Subsidiary directly or indirectly owns any equity interest or investment (whether equity or debt) in any Person (other than in the STAR Subsidiaries and investments in short-term investment securities).

(e) STAR has made available to STAR III complete and correct copies of the STAR Governing Documents. Each of STAR and the STAR Operating Partnership is in compliance with the terms of its STAR Governing Documents in all material respects. True and complete copies of STAR’s and the STAR Operating Partnership’s minute books, as applicable, have been made available by STAR to STAR III.

(f) STAR has not exempted any “Person” from the “Aggregate Share Ownership Limit” or the “Common Share Ownership Limit” or established or increased an “Excepted Holder Limit,” as such terms are defined in the STAR Charter, which exemption or Excepted Holder Limit is currently in effect.

Section 5.2Authority.

(a) Each of the STAR Parties has the requisite corporate, limited liability company or limited partnership power and authority, as applicable, to execute and deliver this Agreement, to perform its obligations hereunder and to consummate the transactions contemplated by this Agreement, including the Merger. The execution and delivery of this Agreement by each of the STAR Parties and the consummation by the STAR Parties of the transactions contemplated by this Agreement have been duly and validly authorized by all necessary corporate, limited liability company and limited partnership action, and no other corporate, limited liability company or limited partnership proceedings on the part of the STAR Parties are necessary to authorize this Agreement or the Merger or to consummate the other transactions contemplated by this Agreement, subject to the filing of the Articles of Merger with, and acceptance for record of the Articles of Merger by, the SDAT.

(b) This Agreement has been duly executed and delivered by the STAR Parties, and assuming due authorization, execution and delivery by the STAR III Parties, constitutes a legally valid and binding obligation of the STAR Parties enforceable against the STAR Parties in accordance with its terms, except as such

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enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at law).

(c) On the recommendation of the STAR Special Committee, the STAR Board (including a majority of directors and independent directors not otherwise interested in the Merger) has (i) determined that the terms of this Agreement, the Merger and the other transactions contemplated by this Agreement are advisable and in the best interest of STAR and are fair and reasonable to STAR and, with respect to this Agreement and the Merger, on terms and conditions no less favorable to STAR than those available from unaffiliated third parties, and (ii) approved, authorized and adopted this Agreement and the consummation of the Merger and the other transactions contemplated by this Agreement, which resolutions remain in full force and effect and have not been subsequently rescinded, modified or withdrawn in any way, except as may be permitted after the date hereof bySection 7.3.

(d) STAR, as the sole member of Merger Sub, has approved this Agreement and the Merger.

Section 5.3No Conflict; Required Filings and Consents.

(a) The execution and delivery of this Agreement by each of the STAR Parties do not, and the performance of this Agreement and its obligations hereunder will not (i) conflict with or violate any provision of (A) the STAR Governing Documents or the Merger Sub Governing Documents or (B) any equivalent organizational or governing documents of any other STAR Subsidiary, (ii) assuming that all consents, approvals, authorizations and permits described inSection 5.3(b) have been obtained, all filings and notifications described inSection 5.3(b) have been made and any waiting periods thereunder have terminated or expired, conflict with or violate any Law applicable to STAR or any STAR Subsidiary or by which any property or asset of STAR or any STAR Subsidiary is bound, or (iii) require any consent or approval (except as contemplated bySection 5.3(b)) under, result in any breach of any obligation or any loss of any benefit or material increase in any cost or obligation of STAR or any STAR Subsidiary under, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to any other Person any right of termination, acceleration or cancellation (with or without notice or the lapse of time or both) of, or give rise to any right of purchase, first offer or forced sale under or result in the creation of a Lien on any property or asset of STAR or any STAR Subsidiary pursuant to, any Contract or Permit to which STAR or any STAR Subsidiary is a party, except, as to clauses (ii) and (iii) above, for any such conflicts, violations, breaches, defaults or other occurrences which, individually or in the aggregate, would not reasonably be expected to have a STAR Material Adverse Effect.

(b) Except as set forth inSection 5.3(b) of the STAR Disclosure Letter, no consents or approvals of, or filings or registrations with, any Governmental Authority or with any third party are required to be made or obtained by STAR or any STAR Subsidiary in connection with the execution, delivery and performance by the STAR Parties of this Agreement. As of the date hereof, to the Knowledge of STAR, the STAR Parties are not aware of any reason why the necessary approvals referenced in the preceding sentence will not be received in order to permit consummation of the Merger on a timely basis. The execution and delivery of this Agreement by each of the STAR Parties do not, and the performance of this Agreement and its obligations hereunder will not, (i) constitute a breach or violation of, or a default under, or give rise to any Lien or any acceleration of remedies, penalty, increase in material benefit payable or right of termination under, any applicable Law, any Contract or other instrument or agreement of STAR or any STAR Subsidiary or to which STAR, any STAR Subsidiary or any of their Properties is subject or bound, or (ii) require STAR or STAR Subsidiary to obtain any consent or approval under any such law, Contract or other instrument or agreement, except for (A) the Proxy Statement, theForm S-4 and the declaration of effectiveness of theForm S-4, and such reports under, and other compliance with, the Exchange Act and the Securities Act as may be required in connection with this Agreement and the transactions contemplated by this Agreement, (B) the filing of the Articles of Merger with, and the acceptance for record of the Articles of Merger by, the SDAT pursuant to the MGCL and the MLLCA, (C) such filings and

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approvals as may be required by any applicable state securities or “blue sky” Laws, (D) the consents, authorizations, orders or approvals of each Governmental Authority or third party listed inSection 5.3(b) of the STAR Disclosure Letter and (E) where failure to obtain such consents, approvals, authorizations or permits, or to make such filings or notifications which, individually or in the aggregate, would not reasonably be expected to have a STAR Material Adverse Effect.

Section 5.4Capital Structure.

(a) The authorized capital stock of STAR consists of 1,100,000,000 shares of capital stock, of which 999,999,000 shares are designated as common stock with par value of $0.01 per share (“STAR Common Stock”), 1,000 shares are designated asnon-participating,non-voting convertible stock with par value of $0.01 per share (“STAR Convertible Stock”), and 100,000,000 shares are designated as preferred stock with a par value of $0.01 per share (“STAR Preferred Stock”). At the close of business on August 1, 2019, (i) 52,229,664 shares of STAR Common Stock were issued and outstanding, (ii) 1,000 shares of STAR Convertible Stock were issued and outstanding, (iii) no shares of STAR Preferred Stock were issued and outstanding, (iv) 965,011 shares of STAR Common Stock were available for grant under the STAR Equity Incentive Plan, and (v) no shares of STAR Common Stock were reserved for issuance upon redemption of STAR OP Interests. All of the outstanding shares of capital stock of STAR are duly authorized, validly issued, fully paid and nonassessable and were issued in compliance with applicable securities Laws. Except as set forth in thisSection 5.4, there is no other outstanding capital stock of STAR.

(b) At the close of business on August 1, 2019, no STAR OP Interests were issued and outstanding, of which (i) no STAR OP Interests were held by limited partners other than STAR and (ii) no STAR OP Interests were issued and outstanding and were held by STAR Advisor through August 1, 2019.Section 5.4(b) of the STAR Disclosure Letter sets forth a list of all of the partners of STAR Operating Partnership as of the date hereof, together with the number of STAR OP Interests held by each such partner. All the STAR OP Interests held by STAR are directly owned by STAR or a Wholly Owned STAR Subsidiary, free and clear of all Liens other than Permitted Liens and free of preemptive rights. All of the STAR OP Interests are duly authorized and validly issued and were issued in compliance with applicable securities Laws.

(c) All of the outstanding shares of capital stock of each of the STAR Subsidiaries that is a corporation are duly authorized, validly issued, fully paid and nonassessable. All equity interests in each of the STAR Subsidiaries that is a partnership or limited liability company are duly authorized and validly issued. All shares of capital stock of (or other ownership interests in) each of the STAR Subsidiaries which may be issued upon exercise of outstanding options or exchange rights are duly authorized and, upon issuance will be validly issued, fully paid and nonassessable. STAR or the STAR Operating Partnership owns, directly or indirectly, all of the issued and outstanding capital stock and other ownership interests of each of the STAR Subsidiaries, free and clear of all Liens other than Permitted Liens and free of preemptive rights.

(d) There are no bonds, debentures, notes or other Indebtedness having general voting rights (or convertible into securities having such rights) of STAR or any STAR Subsidiary issued and outstanding (“STAR Voting Debt”). Except as set forth inSection 5.4(d) of the STAR Disclosure Letter, there are no outstanding subscriptions, securities options, warrants, calls, rights, profits interests, stock appreciation rights, phantom stock, convertible securities, preemptive rights, anti-dilutive rights, rights of first refusal or other similar rights, agreements, arrangements, undertakings or commitments of any kind to which STAR or any of the STAR Subsidiaries is a party or by which any of them is bound obligating STAR or any of the STAR Subsidiaries to (i) issue, transfer or sell or create, or cause to be issued, transferred or sold or created any additional shares of capital stock or other equity interests or phantom stock or other contractual rights the value of which is determined in whole or in part by the value of any equity security of STAR or any STAR Subsidiary or securities convertible into or exchangeable for such shares or equity interests, (ii) issue, grant, extend or enter into any such subscriptions, options, warrants, calls, rights, profits interests, stock appreciation rights, phantom stock, convertible securities or other similar rights, agreements, arrangements, undertakings or commitments or

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(iii) redeem, repurchase or otherwise acquire any such shares of capital stock, STAR Voting Debt or other equity interests.

(e) Neither STAR nor any STAR Subsidiary is a party to or bound by any Contracts concerning the voting (including voting trusts and proxies) of any capital stock of STAR or any of the STAR Subsidiaries. Neither STAR nor any STAR Subsidiary has granted any registration rights on any of its capital stock other than as set forth inSection 5.4(e) of the STAR Disclosure Letter. No STAR Common Stock is owned by any STAR Subsidiary.

(f) STAR does not have a “poison pill” or similar stockholder rights plan.

(g) All dividends or other distributions on the shares of STAR Common Stock or STAR OP Interests and any material dividends or other distributions on any securities of any STAR Subsidiary which have been authorized or declared prior to the date hereof have been paid in full (except to the extent such dividends have been publicly announced and are not yet due and payable).

Section 5.5SEC Documents; Financial Statements; Internal Controls; Off Balance Sheet Arrangements; Investment Company Act; Anti-Corruption Laws.

(a) STAR has timely filed with, or furnished (on a publicly available basis) to the SEC, all forms, documents, certifications, statements, schedules, registration statements, prospectuses, reports and exhibits required to be filed or furnished by STAR under the Exchange Act or the Securities Act (together with all certifications required pursuant to the Sarbanes-Oxley Act) since January 1, 2016 (the forms, documents, financial statements (including those referenced in Section 5.5(d)) and reports filed with the SEC since January 1, 2016, and those filed with the SEC since the date of this Agreement, if any, including any amendments thereto, the “STAR SEC Documents”). STAR has timely paid all fees due in connection with any STAR SEC Document. As of their respective filing dates (or the date of their most recent amendment, supplement or modification, in each case, to the extent filed and publicly available prior to the date of this Agreement), the STAR SEC Documents (i) complied, or with respect to STAR SEC Documents filed after the date hereof, will comply, in all material respects with the requirements of the Securities Act or the Exchange Act, as the case may be, the Sarbanes-Oxley Act and the applicable rules and regulations of the SEC thereunder, and (ii) did not, or with respect to STAR SEC Documents filed after the date hereof, will not, contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements made therein, in light of the circumstances under which they were made, not misleading. None of the STAR SEC Documents is, to the Knowledge of STAR, the subject of ongoing SEC review or threatened review, and STAR does not have any outstanding and unresolved comments from the SEC with respect to any STAR SEC Documents. There are no internal investigations, any SEC inquiries or investigations or other governmental inquiries or investigations pending or, to the Knowledge of STAR, threatened. None of the STAR SEC Documents is the subject of any confidential treatment request by STAR.

(b) STAR has made available to STAR III complete and correct copies of all written correspondence between the SEC, on the one hand, and STAR, on the other hand, since December 31, 2016. No STAR Subsidiary is separately subject to the periodic reporting requirements of Section 13(a) or Section 15(d) of the Exchange Act.

(c) At all applicable times, STAR has complied in all material respects with the applicable provisions of the Sarbanes-Oxley Act and the applicable rules and regulations thereunder, as amended from time to time.

(d) The consolidated audited and unaudited financial statements of STAR and the STAR Subsidiaries included, or incorporated by reference, in the STAR SEC Documents, including the related notes and schedules (as amended, supplemented or modified by later STAR SEC Documents, in each case, to the extent filed and publicly available prior to the date of this Agreement), (i) have been or will be, as the case may be, prepared

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from, are in accordance with, and accurately reflect the books and records of STAR and STAR Subsidiaries in all material respects, (ii) complied or will comply, as the case may be, as of their respective dates in all material respects with the then-applicable accounting requirements of the Securities Act and the Exchange Act and the published rules and regulations of the SEC with respect thereto, (iii) have been or will be, as the case may be, prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto, or, in the case of the unaudited financial statements, for normal and recurringyear-end adjustments and as may be permitted by the SEC onForm 10-Q,Form 8-K,Regulation S-X or any successor or like form under the Exchange Act, which such adjustments are not, in the aggregate, material to STAR) and (iv) fairly present, or will fairly present, as the case may be, in all material respects (subject, in the case of unaudited financial statements, for normal and recurringyear-end adjustments, none of which is material), the consolidated financial position of STAR and the STAR Subsidiaries, taken as a whole, as of their respective dates and the consolidated statements of operations, stockholders’ equity and cash flows of STAR and the STAR Subsidiaries for the periods presented therein. There are no internal investigations, any SEC inquiries or investigations or other governmental inquiries or investigations pending or, to the Knowledge of STAR, threatened, in each case regarding any accounting practices of STAR.

(e) Since December 31, 2016, (A) STAR has designed and maintained disclosure controls and procedures (as defined in Rules13a-15(e) and15d-15(e) under the Exchange Act) that are effective to ensure that material information required to be disclosed by STAR in the reports that it files or furnishes under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and is accumulated and communicated to STAR’s management as appropriate to allow timely decisions regarding required disclosure and to make the certifications of the Chief Executive Officer and Chief Financial Officer of STAR required under the Exchange Act with respect to such reports, and (B) such disclosure controls and procedures are effective in timely alerting STAR’s management to material information required to be included in STAR’s periodic reports required under the Exchange Act. STAR and STAR Subsidiaries have designed and maintained a system of internal control over financial reporting (as defined inRule 13a-15(f) and15d-15(f) under the Exchange Act) sufficient to provide reasonable assurances (i) regarding the reliability of financial reporting and the preparation of financial statements in accordance with GAAP, (ii) that transactions are executed in accordance with management’s general or specific authorizations, (iii) that transactions are recorded as necessary to permit preparation of financial statements and to maintain asset accountability, (iv) that access to assets is permitted only in accordance with management’s general or specific authorization, (v) that the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences and (vi) accounts, notes and other receivables and inventory are recorded accurately, and proper and adequate procedures are implemented to effect the collection thereof on a current and timely basis. STAR has disclosed to STAR’s auditors and audit committee (and made summaries of such disclosures available to STAR III) (1) any significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect in any material respect STAR’s ability to record, process, summarize and report financial information and (2) any fraud whether or not material, that involves management or other employees who have a significant role in internal control over financial reporting.

(f) STAR is not, and none of the STAR Subsidiaries are, a party to, and neither STAR nor any STAR Subsidiary has any commitment to become a party to, any joint venture,off-balance sheet partnership or any similar Contract or arrangement, including any Contract relating to any transaction or relationship between or among STAR and any STAR Subsidiary, on the one hand, and any unconsolidated Affiliate of STAR or any STAR Subsidiary, including any structured finance, special purpose or limited purpose entity or Person, on the other hand, or any“off-balance sheet arrangements” (as defined in Item 303(a) ofRegulation S-K of the SEC), where the result, purpose or effect of such Contract is to avoid disclosure of any material transaction involving, or material liabilities of, STAR, any STAR Subsidiary or STAR’s or such STAR Subsidiary’s audited financial statements or other STAR SEC Documents.

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(g) Neither STAR nor any STAR Subsidiary is required to be registered as an investment company under the Investment Company Act.

(h) STAR, STAR Subsidiaries and their controlled Affiliates (including in each case any of their officers, directors or employees) have complied with the Anti-Corruption Law. Neither STAR nor any STAR Subsidiary nor, to the Knowledge of STAR, any director, officer or Representative of STAR or any STAR Subsidiary has (i) used any corporate funds for any unlawful contributions, gifts, entertainment or other unlawful expenses related to political activity, (ii) made, taken or will take any action in furtherance of any direct or indirect unlawful payment, promise to pay or authorization or approval of the payment or giving of money, property or gifts of anything of value, directly or indirectly to any foreign or domestic government official or employee, (iii) made, offered or taken an act in furtherance of any direct or indirect unlawful bribe, rebate, payoff, kickback or other unlawful payment to any foreign or domestic government official or employee, (iv) made any payment to any customer, supplier or tenant, or to any officer, director, partner, employee or agent of any such customer, supplier or tenant, for the unlawful sharing of fees to any such customer, supplier or tenant or any such officer, director, partner, employee or agent for the unlawful rebating of charges, (v) engaged in any other unlawful reciprocal practice, or made any other unlawful payment or given any other unlawful consideration to any such customer, supplier or tenant or any such officer, director, partner, employee or agent of such customer, officer or tenant, or (vi) taken any action or made any omission in violation of any applicable Law governing imports into or exports from the United States or any foreign country, or relating to economic sanctions or embargoes, corrupt practices, money laundering, or compliance with unsanctioned foreign boycotts, in each case, in violation of any applicable Anti-Corruption Law. Neither STAR nor any STAR Subsidiary has received any written communication that alleges that STAR or any STAR Subsidiary, or any of their respective Representatives, is, or may be, in violation of, or has, or may have, any liability under, any Anti-Corruption Law.

Section 5.6Absence of Certain Changes or Events. Except as set forth inSection 5.6 of the STAR Disclosure Letter, since December 31, 2018 through the date of this Agreement, (a) STAR and each STAR Subsidiary has conducted its business in all material respects in the ordinary course of business consistent with past practice, (b) neither STAR nor any STAR Subsidiary has taken any action that would have been prohibited bySection 6.2(b)(Conduct of the Business of STAR) if taken from and after the date of this Agreement and (c) there has not been any STAR Material Adverse Effect or any event, circumstance, change, effect, development, condition or occurrence that, individually or in the aggregate with all other events, circumstances, changes, effects, developments, conditions or occurrences, would reasonably be expected to have a STAR Material Adverse Effect.

Section 5.7No Undisclosed Liabilities. Except (a) as disclosed, reflected or reserved against on the balance sheet of STAR dated as of December 31, 2018 (including the notes thereto), (b) for liabilities or obligations incurred in connection with the transactions contemplated by this Agreement and (c) for liabilities or obligations incurred in the ordinary course of business consistent with past practice since December 31, 2018, neither STAR nor any STAR Subsidiary has any liabilities or obligations (whether accrued, absolute, contingent or otherwise) that either alone or when combined with all other liabilities of a type not described in clauses (a), (b) or (c) above, has had, or would reasonably be expected to have, a STAR Material Adverse Effect.

Section 5.8Permits; Compliance with Law.

(a) Except for the authorizations, licenses, permits, certificates, approvals, variances, exemptions, orders, franchises, certifications and clearances that are the subject ofSection 5.10 andSection 5.11, which are addressed solely in those Sections, STAR and each STAR Subsidiary is in possession of Permits necessary for STAR and each STAR Subsidiary to own, lease and, to the extent applicable, operate its properties or to carry on its respective business substantially as they are being conducted as of the date hereof (the “STAR Permits”), and all such STAR Permits are valid and in full force and effect, except where the failure to be in possession of, or the failure to be valid or in full force and effect of, any of the STAR Permits, individually or in the aggregate, would not reasonably be expected to have a STAR Material Adverse Effect. STAR has paid all fees and

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assessments due and payable, in each case, in connection with all such Permits except where failure to pay would not have a STAR Material Adverse Effect. No event has occurred with respect to any of the STAR Permits which permits, or after notice or lapse of time or both would permit, revocation or termination thereof or would result in any other material impairment of the rights of the holder of any such STAR Permits. Neither STAR nor any of the STAR Subsidiaries has received any notice indicating, nor to the Knowledge of STAR, is there any pending applicable petition, objection or other pleading with any Governmental Authority having jurisdiction or authority over the operations of STAR or the STAR Subsidiaries that impairs the validity of any STAR Permit or which would reasonably be expected, if accepted or granted, to result in the revocation of any STAR Permit, except where the impairment or revocation of any such STAR Permit, individually, or in the aggregate, would not reasonably be expected to have a STAR Material Adverse Effect.

(b) Neither STAR nor any STAR Subsidiary is, and for the past three (3) years has been, in conflict with, or in default or violation of, (i) any Law applicable to STAR or any STAR Subsidiary or by which any property or asset of STAR or any STAR Subsidiary is bound (except for compliance with Laws addressed inSection 5.10,Section 5.11,Section 5.13 andSection 5.14 which are solely addressed in those Sections), or (ii) any STAR Permits (except for the STAR Permits addressed inSection 5.10 orSection 5.11, which are solely addressed in those Sections), except, in each case, for any such conflicts, defaults or violations that, individually or in the aggregate, would not reasonably be expected to have a STAR Material Adverse Effect.

Section 5.9Litigation. Except as set forth inSection 5.9 of the STAR Disclosure Letter, there is no material action, suit, proceeding or investigation to which STAR or any STAR Subsidiary is a party (either as plaintiff or defendant) pending or, to the Knowledge of STAR, threatened before any Governmental Authority, and, to the Knowledge of STAR, there is no basis for any such action, suit, proceeding or investigation. Neither STAR nor any STAR Subsidiary has been permanently or temporarily enjoined by any Order, judgment or decree of any Governmental Authority from engaging in or continuing to conduct the business of STAR or the STAR Subsidiaries. No Order of any Governmental Authority has been issued in any proceeding to which STAR or any of the STAR Subsidiaries is or was a party, or, to the Knowledge of STAR, in any other proceeding, that enjoins or requires STAR or any of the STAR Subsidiaries to take action of any kind with respect to its businesses, assets or properties. Since January 1, 2019, none of STAR, any STAR Subsidiary or any Representative of the foregoing has received or made any settlement offer for any material Action to which STAR or any STAR Subsidiary is a party or potentially could be a party (in each case, either as plaintiff or defendant), other than settlement offers that do not exceed $1,000,000 individually.

Section 5.10Properties.

(a) STAR has made available to STAR III a list of each parcel of real property currently owned or ground leased by STAR or any STAR Subsidiary, together with the applicable STAR Subsidiary owning or leasing such property. Except as disclosed in title insurance policies and reports (and the documents or surveys referenced in such policies and reports): (A) STAR or a STAR Subsidiary owns fee simple title to each of the STAR Properties, free and clear of Liens, except Permitted Liens; (B) except as has not had and would not, individually or in the aggregate, have a STAR Material Adverse Effect, neither STAR nor any STAR Subsidiary has received written notice of any violation of any Law affecting any portion of any of the STAR Properties issued by any Governmental Authority; and (C) except as would not, individually or in the aggregate, have a STAR Material Adverse Effect, neither STAR nor any STAR Subsidiary has received notice to the effect that there are (1) condemnation or rezoning proceedings that are pending or threatened with respect to any of the STAR Properties or (2) zoning, building or similar Laws, codes, ordinances, orders or regulations that are or will be violated by the continued maintenance, operation or use of any buildings or other improvements on any of the STAR Properties or by the continued maintenance, operation or use of the parking areas.

(b) STAR has not received written notice of, nor does STAR have any Knowledge of, any material latent defects or adverse physical conditions affecting any of the STAR Properties or the improvements thereon, except as would not, individually or in the aggregate, have a STAR Material Adverse Effect.

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(c) STAR and the STAR Subsidiaries have good title to, or a valid and enforceable leasehold interest in, all personal assets owned, used or held for use by them. Neither STAR’s nor the STAR Subsidiaries’ ownership of any such personal property is subject to any Liens, other than Permitted Liens.

(d) A policy of title insurance has been issued for each STAR Property insuring, as of the effective date of such insurance policy, (i)(A) fee simple title interest held by STAR or the applicable STAR Subsidiary with respect to STAR Properties that are not subject to ground leases and (B) a valid leasehold estate held by STAR or the applicable STAR Subsidiary that are subject to ground leases and (ii) to the Knowledge of STAR, such insurance policies are in full force and effect, and no material claim has been made against any such policy that remains outstanding as of the date of hereof.

Section 5.11Environmental Matters. Except as, individually or in the aggregate, would not reasonably be expected to have a STAR Material Adverse Effect: (i) no notification, demand, request for information, citation, summons, notice of violation or order has been received, no complaint has been filed, no penalty has been assessed and no investigation, action, suit or proceeding is pending or, to the Knowledge of STAR, is threatened relating to STAR or any of the STAR Subsidiaries or any of their respective properties, and relating to or arising out of any Environmental Law or Hazardous Substance; (ii) STAR and the STAR Subsidiaries are, and for the past year, have been, in compliance with all Environmental Laws and all applicable Environmental Permits; (iii) STAR and each of the STAR Subsidiaries is in possession of all Environmental Permits necessary for STAR and each STAR Subsidiary to own, lease and, to the extent applicable, operate its properties or to carry on its respective business substantially as they are being conducted as of the date hereof, and all such Environmental Permits are valid and in full force and effect; (iv) any and all Hazardous Substances disposed of by STAR and each STAR Subsidiary was done so in accordance with all applicable Environmental Laws and Environmental Permits; (v) STAR and the STAR Subsidiaries are not subject to any order, writ, judgment, injunction, decree, stipulation, determination or award by any Governmental Authority pursuant to any Environmental Laws, any Environmental Permit or with respect to any Hazardous Substance; and (vi) there are no liabilities or obligations of STAR or any of the STAR Subsidiaries of any kind whatsoever, whether accrued, contingent, absolute, determined, determinable or otherwise arising under or relating to any Environmental Law or any Hazardous Substance and there is no condition, situation or set of circumstances that would reasonably be expected to result in any such liability or obligation.

Section 5.12Material Contracts.

(a) STAR has made available to STAR III a true, correct and complete copy of each Contract in effect as of the date hereof to which STAR or any STAR Subsidiary is a party or by which any of its properties or assets are bound that:

(i) is required to be filed with the SEC as an exhibit to STAR’s Annual Report onForm 10-K for the year ending December 31, 2018 or any subsequent current or periodic report pursuant to Item 601(b)(1), (2), (4), (9) or (10) ofRegulation S-K promulgated under the Securities Act;

(ii) is required to be described pursuant to Item 404 of RegulationS-K, promulgated under the Securities Act;

(iii) obligates the STAR Parties or any other STAR Subsidiary to makenon-contingent aggregate annual expenditures (other than principal and/or interest payments or the deposit of other reserves with respect to debt obligations) in excess of $1,000,000 and is not cancelable within ninety (90) days without material penalty to the STAR Parties or any other STAR Subsidiary;

(iv) contains anynon-compete or exclusivity provisions with respect to any line of business or geographic area that restricts the business of the STAR Parties or any other STAR Subsidiary, including upon consummation of the transactions contemplated by this Agreement, or that otherwise restricts the lines of business conducted by the STAR Parties or any other STAR Subsidiary or the geographic area in which the STAR Parties or any other STAR Subsidiary may conduct business;

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(v) is a Contract that obligates the STAR Parties or any other STAR Subsidiary to indemnify any past or present directors, officers, or employees of the STAR Parties or any other STAR Subsidiary pursuant to which the STAR Parties or any other STAR Subsidiary is the indemnitor;

(vi) constitutes (A) an Indebtedness obligation of the STAR Parties or any other STAR Subsidiary with a principal amount as of the date hereof greater than $1,000,000 or (B) a Contract (including any so calledtake-or-pay or keepwell agreements) under which (1) any Person including STAR or a STAR Subsidiary, has directly or indirectly guaranteed Indebtedness, liabilities or obligations of STAR or STAR Subsidiary or (2) STAR or a STAR Subsidiary has directly or indirectly guaranteed Indebtedness, liabilities or obligations of any Person, including STAR or another STAR Subsidiary (in each case other than endorsements for the purpose of collection in the ordinary course of business);

(vii) requires the STAR Parties or any other STAR Subsidiary to dispose of or acquire assets or properties that (together with all of the assets and properties subject to such requirement in such Contract) have a fair market value in excess of $1,000,000, or involves any pending or contemplated merger, consolidation or similar business combination transaction;

(viii) constitutes an interest rate cap, interest rate collar, interest rate swap or other Contract relating to a swap or other hedging transaction of any type;

(ix) constitutes a loan to any Person (other than a Wholly Owned STAR Subsidiary or the STAR Operating Partnership) by STAR or any STAR Subsidiary in an amount in excess of $1,000,000;

(x) sets forth the operational terms of a joint venture, partnership, limited liability company or strategic alliance of the STAR Parties or any other STAR Subsidiary with a third party;

(xi) prohibits the pledging of the capital stock of STAR or any STAR Subsidiary or prohibits the issuance of guarantees by any STAR Subsidiary;

(xii) contains covenants expressly limiting, in any material respect, the ability of STAR or any STAR Subsidiary to sell, transfer, pledge or otherwise, dispose of any material assets or business of STAR or any STAR Subsidiary;

(xiii) contains restrictions on the ability of STAR or any STAR Subsidiary to pay dividends or other distributions (other than pursuant to the organizational documents of STAR and STAR Subsidiaries);

(xiv) is with a Governmental Authority;

(xv) has continuing“earn-out” or other similar contingent purchase price payment obligations, in each case that could result in payments, individually or in the aggregate, in excess of $1,000,000;

(xvi) is an employment Contract or consulting Contract;

(xvii) provides severance, retention or transaction bonus payments, change of control payments or similar compensation;

(xviii) is a settlement agreement or release of claims with any current employee or with any former employee within the past five (5) years;

(xix) is a lease, sublease, license or other rental agreement or occupancy agreement (written or verbal) which grants any possessory interest in and to any space situated on or in the STAR Properties or that otherwise gives rights with regard to the use of the STAR Properties;

(xx) is a ground lease under which STAR or a STAR Subsidiary holds a leasehold interest in the STAR Properties or any portion thereof; or

(xxi) is both (A) not made in the ordinary course of business consistent with past practice and (B) material to STAR and the STAR Subsidiaries, taken as a whole.

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(b) Each Contract in any of the categories set forth inSection 5.12(a) to which the STAR Parties or any other STAR Subsidiary is a party or by which it is bound as of the date hereof is referred to herein as a “STAR Material Contract.”

(c) Each STAR Material Contract is legal, valid, binding and enforceable on the STAR Parties and each other STAR Subsidiary that is a party thereto and, to the Knowledge of STAR, each other party thereto, and is in full force and effect, except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar Laws affecting creditors’ rights generally and by general principles of equity (regardless of whether enforceability is considered in a proceeding in equity or at Law). The STAR Parties and each other STAR Subsidiary has performed all obligations required to be performed by it prior to the date hereof under each STAR Material Contract and, to the Knowledge of STAR, each other party thereto has performed all obligations required to be performed by it under such STAR Material Contract prior to the date hereof. None of the STAR Parties or any other STAR Subsidiary, nor, to the Knowledge of STAR, any other party thereto, is in breach or violation of, or default under, any STAR Material Contract, and no event has occurred that, with notice or lapse of time or both, would constitute a violation, breach or default under any STAR Material Contract, except where in each case such breach, violation or default, individually or in the aggregate, would not reasonably be expected to have a STAR Material Adverse Effect. None of the STAR Parties or any other STAR Subsidiary has received notice of any violation or default under, or currently owes any termination, cancellation or other similar fees or any liquidated damages with respect to, any STAR Material Contract, except for violations, defaults, fees or damages that, individually or in the aggregate, would not reasonably be expected to have a STAR Material Adverse Effect. Since December 31, 2016 and as of the date hereof, neither STAR nor any STAR Subsidiary has received any written notice of the intention of any party to cancel, terminate, materially change the scope of rights under or fail to renew any STAR Material Contract.

(d) Each management agreement pursuant to which any third party manages or operates any of the STAR Properties on behalf of STAR or any STAR Subsidiary is valid, binding and in full force and effect as against STAR or the applicable STAR Subsidiary and, to the Knowledge of STAR, as against the other party thereto. Neither STAR nor any STAR Subsidiary owes any termination, cancellation or other similar fees or any liquidated damages to any third party manager or operator.

Section 5.13Taxes.

(a) Each STAR Party and each other STAR Subsidiary has timely filed with the appropriate Governmental Authority all United States federal income Tax Returns and all other material Tax Returns required to be filed, taking into account any extensions of time within which to file such Tax Returns, and all such Tax Returns were complete and correct in all material respects. Each STAR Party and each other STAR Subsidiary has duly paid (or there has been paid on their behalf), or made adequate provisions in accordance with GAAP for, all material Taxes required to be paid by them, whether or not shown on any Tax Return. True and materially complete copies of all United States federal income Tax Returns that have been filed with the IRS by STAR and each STAR Subsidiary with respect to the taxable years ending on or after STAR’s formation have been made available to STAR III. No written claim has been proposed by any Governmental Authority in any jurisdiction where STAR or any STAR Subsidiary do not file Tax Returns that STAR or any STAR Subsidiary is or may be subject to Tax by such jurisdiction.

(b) Beginning with its initial taxable year ending on December 31, 2014, and through and including the Closing Date (determined as if STAR’s current taxable year ended immediately prior to Closing), STAR (i) has been organized and operated in conformity with the requirements to qualify as a REIT under the Code and the current and proposed method of operation for STAR is expected to enable STAR to continue to meet the requirements for qualification as a REIT through and including the Closing Date, and (ii) has not taken or omitted to take any action which would reasonably be expected to result in STAR’s failure to qualify as a REIT, and no challenge to STAR’s status as a REIT is pending or threatened in writing. No STAR Subsidiary is a corporation for United States federal income tax purposes, other than a corporation that qualifies as a Qualified

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REIT Subsidiary or as a Taxable REIT Subsidiary. STAR’s dividends paid deduction, within the meaning of Section 561 of the Code, for each taxable year, taking into account any dividends subject to Sections 857(b)(8) or 858 of the Code, has not been less than the sum of (i) STAR’s REIT taxable income, as defined in Section 857(b)(2) of the Code, determined without regard to any dividends paid deduction for such year and (ii) STAR’s net capital gain for such year.

(c) (i) There are no audits, investigations by any Governmental Authority or other proceedings pending or, to the Knowledge of STAR, threatened with regard to any material Taxes or Tax Returns of STAR or any STAR Subsidiary; (ii) no material deficiency for Taxes of STAR or any STAR Subsidiary has been claimed, proposed or assessed in writing or, to the Knowledge of STAR, threatened, by any Governmental Authority, which deficiency has not yet been settled except for such deficiencies which are being contested in good faith or with respect to which the failure to pay, individually or in the aggregate, would not reasonably be expected to have a STAR Material Adverse Effect; (iii) neither STAR nor any STAR Subsidiary has waived any statute of limitations with respect to the assessment of material Taxes or agreed to any extension of time with respect to any material Tax assessment or deficiency for any open tax year; (iv) neither STAR nor any STAR Subsidiary is currently the beneficiary of any extension of time within which to file any material Tax Return; and (v) neither STAR nor any STAR Subsidiary has entered into any “closing agreement” as described in Section 7121 of the Code (or any corresponding or similar provision of state, local or foreign income Tax Law).

(d) Each STAR Subsidiary that is a partnership, joint venture or limited liability company and that has not elected to be a Taxable REIT Subsidiary has been since its formation treated for United States federal income tax purposes as a partnership, disregarded entity, or Qualified REIT Subsidiary, as the case may be, and not as a corporation, an association taxable as a corporation whose separate existence is respected for United States federal income tax purposes, or a “publicly traded partnership” within the meaning of Section 7704(b) of the Code that is treated as a corporation for U.S. federal income tax purposes under Section 7704(a) of the Code.

(e) Neither STAR nor any STAR Subsidiary holds any asset the disposition of which would be subject to Treasury RegulationSection 1.337(d)-7, nor have they disposed of any such asset during its current taxable year.

(f) Since its inception, STAR and the STAR Subsidiaries have not incurred (i) any material liability for Taxes under Sections 857(b)(1), 857(b)(4), 857(b)(5), 857(b)(6)(A), 857(b)(7), 857(f), 860(c) or 4981 of the Code, (ii) any liability for Taxes under Sections 857(b)(5) (for income test violations), 856(c)(7)(C) (for asset test violations), or 856(g)(5)(C) (for violations of other qualification requirements applicable to REITs) and (iii) STAR has not, and none of the STAR Subsidiaries have, incurred any material liability for Tax other than (A) in the ordinary course of business consistent with past practice, or (B) transfer or similar Taxes arising in connection with sales of property. No event has occurred, and to the Knowledge of STAR no condition or circumstances exists, which presents a material risk that any material liability for Taxes described clause (iii) of the preceding sentence or any liability for Taxes described in either clause (i) or (ii) of the preceding sentence will be imposed upon STAR or any STAR Subsidiary.

(g) STAR and the STAR Subsidiaries have complied, in all material respects, with all applicable Laws relating to the payment and withholding of Taxes (including withholding of Taxes pursuant to Sections 1441, 1442, 1445, 1446, 1471 and 3402 of the Code or similar provisions under any state, local and foreign Laws) and have duly and timely withheld and, in each case, have paid over to the appropriate taxing authorities all material amounts required to be so withheld and paid over on or prior to the due date thereof under all applicable Laws.

(h) There are no STAR Tax Protection Agreements (as hereinafter defined) in force at the date of this Agreement, and, as of the date of this Agreement, no person has raised in writing, or to the Knowledge of STAR threatened to raise, a material claim against STAR or any STAR Subsidiary for any breach of any STAR Tax Protection Agreements. As used herein, “STAR Tax Protection Agreements” means any written agreement to which STAR or any STAR Subsidiary is a party pursuant to which: (i) any liability to holders of limited

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partnership interests in a STAR Subsidiary Partnership (as hereinafter defined) relating to Taxes may arise, whether or not as a result of the consummation of the transactions contemplated by this Agreement; and/or (ii) in connection with the deferral of income Taxes of a holder of limited partnership interests or limited liability company interests in a STAR Subsidiary Partnership, STAR or any STAR Subsidiary has agreed to (A) maintain a minimum level of debt, continue a particular debt or provide rights to guarantee debt, (B) retain or not dispose of assets, (C) make or refrain from making Tax elections, and/or (D) only dispose of assets in a particular manner. As used herein, “STAR Subsidiary Partnership” means a STAR Subsidiary that is a partnership for United States federal income tax purposes.

(i) There are no Tax Liens upon any property or assets of STAR or any STAR Subsidiary except Liens for Taxes not yet due and payable or that are being contested in good faith by appropriate proceedings and for which adequate reserves have been established in accordance with GAAP.

(j) There are no Tax allocation or sharing agreements or similar arrangements with respect to or involving STAR or any STAR Subsidiary, and after the Closing Date neither STAR nor any STAR Subsidiary shall be bound by any such Tax allocation agreements or similar arrangements or have any liability thereunder for amounts due in respect of periods prior to the Closing Date.

(k) Neither STAR nor any STAR Subsidiary has requested or received any written ruling of a Governmental Authority or entered into any written agreement with a Governmental Authority with respect to any Taxes, and neither STAR nor any STAR Subsidiary is subject to written ruling of a Governmental Authority.

(l) Neither STAR nor any STAR Subsidiary (i) has been a member of an affiliated group filing a consolidated federal income Tax Return or any other unitary, combined, consolidated or similar Tax group or (ii) has any liability for the Taxes of any Person (other than any STAR Subsidiary) under Treasury RegulationSection 1.1502-6 (or any similar provision of state, local or foreign law), as a transferee or successor, by Contract, or otherwise.

(m) Neither STAR nor any STAR Subsidiary has participated in any “reportable transaction” within the meaning of Treasury RegulationSection 1.6011-4(b).

(n) Neither STAR nor any STAR Subsidiary has constituted either a “distributing corporation” or a “controlled corporation” (within the meaning of Section 355(a)(1)(A) of the Code) in a distribution of stock qualifying fortax-free treatment under Section 355 of the Code (i) in the two (2) years prior to the date of this Agreement or (ii) in a distribution which could otherwise constitute part of a “plan” or “series of related transactions” (within the meaning of Section 355(e) of the Code) in conjunction with transactions contemplated by this Agreement.

(o) No written power of attorney that has been granted by STAR or any STAR Subsidiary (other than to STAR or a STAR Subsidiary) currently is in force with respect to any matter relating to Taxes.

(p) Neither STAR nor any STAR Subsidiary has taken any action or failed to take any action which action or failure would reasonably be expected to jeopardize the status of the Merger as a reorganization within the meaning of Section 368(a) of the Code, nor to the Knowledge of STAR, is there any other fact or circumstance that could reasonably be expected to prevent, the Merger from qualifying as such a reorganization.

(q) STAR is a “domestically controlled qualified investment entity” within the meaning of Section 897(h)(4)(B) of the Code.

Section 5.14Intellectual Property. Neither STAR nor any STAR Subsidiary: (a) owns any registered trademarks, patents or copyrights, (b) has any pending applications, registrations or recordings for any trademarks, patents or copyrights or (c) is a party to any Contracts with respect to use by STAR or any STAR

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Subsidiary of any trademarks or patents. Except as, individually or in the aggregate, would not reasonably be expected to have a STAR Material Adverse Effect, (i) no Intellectual Property used by STAR or any STAR Subsidiary infringes or is alleged to infringe any Intellectual Property rights of any third party, (ii) no Person is misappropriating, infringing or otherwise violating any Intellectual Property of STAR or any STAR Subsidiary, and (iii) STAR and the STAR Subsidiaries own or are licensed to use, or otherwise possess valid rights to use, all Intellectual Property necessary to conduct the business of STAR and the STAR Subsidiaries as it is currently conducted. Since January 1, 2019, neither STAR nor any STAR Subsidiary has received any written or, to the Knowledge of STAR, verbal complaint, claim or notice alleging misappropriation, infringement or violation of any Intellectual Property rights of any third party.

Section 5.15Insurance. STAR and each STAR Subsidiary maintain material insurance policies and all material fidelity bonds as set forth inSection 5.15 of the STAR Disclosure Letter (which specifies the general type of insurance, insurer, policy number and aggregate limit) (the “STAR Insurance Policies”). All such insurance policies are in full force and effect, and, as of the date hereof, no written notice of cancellation or termination has been received by STAR or any STAR Subsidiary with respect to any such policy which has not been replaced on substantially similar terms prior to the date of such cancellation, and there is no existing default or event which, with the giving of notice or lapse of time or both, would constitute a breach or default, by any insured thereunder, or permit termination or modification, of any of the policies, except as would not, individually or in the aggregate, reasonably be expected to have a STAR Material Adverse Effect. Except as, individually or in the aggregate, would not reasonably be expected to have a STAR Material Adverse Effect, all premiums currently due and payable under all STAR Insurance Policies have been paid, and STAR and the STAR Subsidiaries have otherwise complied in all material respects with the terms and conditions of all STAR Insurance Policies.

Section 5.16Benefit Plans.

(a) Other than the STAR Equity Incentive Plan, STAR and the STAR Subsidiaries do not and are not required to, and have not and have never been required to, maintain, sponsor or contribute to any Benefit Plans. Neither STAR nor any STAR Subsidiary has any contract, plan or commitment, whether or not legally binding, to create any Benefit Plan.

(b) Except as individually or in the aggregate, have not had and would not reasonably be expected to have STAR Material Adverse Effect, none of STAR, any STAR Subsidiary or any of their respective ERISA Affiliates has incurred any obligation or liability with respect to or under any employee benefit plan, program or arrangement (including any agreement, program, policy or other arrangement under which any current or former employee, director or consultant has any present or future right to benefits) which has created or will create any obligation with respect to, or has resulted in or will result in any liability to STAR or any STAR Subsidiary.

(c) Except as individually or in the aggregate, have not had and would not reasonably be expected to have a STAR Material Adverse Effect, the STAR Equity Incentive Plan was established and has been administered in accordance with its terms and in compliance with all applicable Laws, including the Code.

(d) None of STAR, any STAR Subsidiaries or any of their respective ERISA Affiliates has ever maintained, contributed to, or participated in, or otherwise has any obligation or liability in connection with: (i) a “pension plan” under Section 3(2) of ERISA that is subject to Title IV or Section 302 of ERISA or Section 412 or 4971 of the Code, (ii) a “multiemployer plan” (as defined in Section 3(37) of ERISA), (iii) a “multiple employer welfare arrangement” (as defined in Section 3(40) of ERISA), or (iv) a “multiple employer plan” (as defined in Section 413(c) of the Code).

(e) No amount that could be received (whether in cash or property or the vesting of property) as a result of the Merger or any of the other transactions contemplated hereby (alone or in combination with any other event) by any Person who is a “disqualified individual” (as such term is defined in Treasury Regulation

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Section 1.280G-1) under any compensation arrangement could be characterized as an “excess parachute payment” (as such term is defined in Section 280G(b)(1) of the Code).

(f) The STAR Equity Incentive Plan has been maintained and operated in compliance with Section 409A of the Code or an available exemption therefrom.

(g) Neither STAR nor any STAR Subsidiary is a party to or has any obligation under any Contract, the STAR Equity Incentive Plan or otherwise to compensate any Person for excise Taxes payable pursuant to Section 4999 of the Code or for additional Taxes payable pursuant to Section 409A of the Code.

(h) Neither STAR nor any STAR Subsidiary has, or has ever had, any employees.

Section 5.17Related Party Transactions. Except as described in the publicly available STAR SEC Documents filed with or furnished to the SEC on or after January 1, 2016 and prior to the date hereof, no agreements, arrangements or understandings between any of the STAR Parties or any other STAR Subsidiary (or binding on any of their respective properties or assets), on the one hand, and any other Person, on the other hand (other than those exclusively among STAR and STAR Subsidiaries) (the “STAR Related Party Agreements”), are in existence that are not, but are required to be, disclosed under Item 404 ofRegulation  S-K promulgated by the SEC.

Section 5.18Brokers. No broker, investment banker or other Person (other than the Persons listed inSection 5.18 of the STAR Disclosure Letter, each in a fee amount not to exceed the amount set forth inSection 5.18 of the STAR Disclosure Letter, pursuant to the terms of the engagement letter between STAR and such Person, true, correct and complete copies of which have been provided to STAR III prior to the date hereof) is entitled to any broker’s, finder’s or other similar fee or commission in connection with the Merger and the other transactions contemplated by this Agreement based upon arrangements made by or on behalf of the STAR Parties or any other STAR Subsidiary.

Section 5.19Opinion of Financial Advisor. The STAR Special Committee has received the oral opinion of Robert A. Stanger & Co., Inc. (the “STAR Financial Advisor”) (which was confirmed in writing as of the date of this Agreement), to the effect that, as of the date of such opinion and based on and subject to the assumptions, limitations, qualifications and conditions set forth in its written opinion, the Merger Consideration is fair, from a financial point of view, to STAR. STAR will deliver to STAR III a complete and correct copy of such opinion promptly after receipt thereof by the STAR Special Committee solely for informational purposes. STAR and Merger Sub acknowledge that the opinion of the STAR III Financial Advisor contemplated by Section 4.19 is for the benefit of the STAR III Special Committee and that neither STAR nor Merger Sub shall be entitled to rely on that opinion for any purpose.

Section 5.20Takeover Statutes. None of STAR, Merger Sub or any STAR Subsidiary is, nor at any time during the last two (2) years has been, an “interested stockholder” of STAR III as defined inSection 3-601 of the MGCL. The STAR Board has taken all action necessary to render inapplicable to the Merger the restrictions on business combinations contained in Subtitle 6 of Title 3 of the MGCL. The restrictions on control share acquisitions contained in Subtitle 7 of Title 3 of the MGCL are not applicable to the Merger. No other Takeover Statutes are applicable to this Agreement, the Merger or the other transactions contemplated by this Agreement. No dissenters’, appraisal or similar rights are available to the holders of STAR Common Stock with respect to the Merger and the other transactions contemplated by this Agreement.

Section 5.21Information Supplied. None of the information relating to STAR or any STAR Subsidiary contained or incorporated by reference in the Proxy Statement or theForm S-4 or that is provided by STAR or any STAR Subsidiary in writing for inclusion or incorporation by reference in any document filed with any other Governmental Authority in connection with the transactions contemplated by this Agreement will (a) in the case of the Proxy Statement, at the time of the mailing thereof, at the time of the Stockholders Meeting, at the time the

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Form S-4 is declared effective or at the Merger Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading, or (b) in the case of theForm S-4 or with respect to any other document to be filed by STAR with the SEC in connection with the Merger or the other transactions contemplated by this Agreement, at the time of its filing with the SEC, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. All documents that STAR is responsible for filing with the SEC in connection with the transactions contemplated by this Agreement, to the extent relating to STAR, its officers, directors and partners and the STAR Subsidiaries (or other information supplied by or on behalf of STAR or any STAR Subsidiaries for inclusion therein) will comply in all material respects with the applicable requirements of the Securities Act and the Exchange Act;provided, that no representation is made as to statements made or incorporated by reference by or on behalf of the STAR III Parties.

Section 5.22Ownership of Merger Sub; No Prior Activities.

(a) Merger Sub was formed solely for the purpose of engaging in the transactions contemplated by this Agreement. All of the limited liability company membership interests of Merger Sub are owned, directly or indirectly, by STAR.

(b) Except for the obligations or liabilities incurred in connection with its organization and the transactions contemplated by this Agreement, Merger Sub has not, and will not have prior to the Merger Effective Time, incurred, directly or indirectly through any subsidiary or Affiliate, any obligations or liabilities or engaged in any business activities of any type or kind whatsoever or entered into any agreements or arrangements with any Person.

Section 5.23Financing. As of the Closing, STAR will have available to it all funds necessary to satisfy all of its obligations hereunder and transactions contemplated hereby.

Section 5.24No Other Representations and Warranties. Except for the representations or warranties expressly set forth in thisArticle 5, or any document, agreement, certificate or other instrument contemplated hereby, none of the STAR Parties or any other Person on behalf of a STAR Party has made any representation or warranty, expressed or implied, with respect to the STAR Parties or any other STAR Subsidiary, their respective businesses, operations, assets, liabilities, condition (financial or otherwise), results of operations, future operating or financial results, estimates, projections, forecasts, plans or prospects (including the reasonableness of the assumptions underlying such estimates, projections, forecasts, plans or prospects) or the accuracy or completeness of any information regarding the STAR Parties or any other STAR Subsidiary. In particular, without limiting the foregoing disclaimer, none of the STAR Parties or any other Person on behalf of a STAR Party makes or has made any representation or warranty to any STAR III Party or any of their respective Affiliates or Representatives with respect to, except for the representations and warranties made by the STAR Parties in thisArticle 5, or any document, agreement, certificate or other instrument contemplated hereby, any oral or written information presented to the STAR III Parties or any of their respective Affiliates or Representatives in the course of their due diligence of the STAR Parties, the negotiation of this Agreement or in the course of the transactions contemplated by this Agreement. Notwithstanding anything contained in this Agreement to the contrary, the STAR Parties acknowledge and agree that none of the STAR III Parties or any other Person has made or is making any representations or warranties relating to the STAR III Parties whatsoever, express or implied, beyond those expressly given by any STAR III Party inArticle 4, or any document, agreement, certificate or other instrument contemplated hereby, including any implied representation or warranty as to the accuracy or completeness of any information regarding any STAR III Party furnished or made available to the STAR Parties or any of their respective Representatives.

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ARTICLE 6

COVENANTS RELATING TO CONDUCT OF BUSINESS PENDING THE MERGER

Section 6.1Conduct of Business bySTAR III.

(a) STAR III covenants and agrees that, between the date of this Agreement and the earlier to occur of the Merger Effective Time and the date, if any, on which this Agreement is terminated pursuant toSection 9.1 (the “Interim Period”), except (1) to the extent required by Law, (2) as may be consented to in advance in writing by STAR (which consent shall not be unreasonably withheld, conditioned or delayed), (3) as may be expressly contemplated, expressly required or expressly permitted by this Agreement, or (4) as set forth inSection 6.1(a) orSection 6.1(b) of the STAR III Disclosure Letter, each of the STAR III Parties shall, and shall cause each of the other STAR III Subsidiaries to, (i) conduct its business in all material respects in the ordinary course and in a manner consistent with past practice, and (ii) use all reasonable efforts to (A) preserve intact its current business organization, goodwill, ongoing businesses and significant relationships with third parties and (B) maintain the status of STAR III as a REIT.

(b) Without limiting the foregoing, STAR III covenants and agrees that, during the Interim Period, except (1) to the extent required by Law, (2) as may be consented to in advance in writing by STAR (which consent shall not be unreasonably withheld, conditioned or delayed), (3) as may be expressly contemplated, expressly required or expressly permitted by this Agreement, or (4) as set forth inSection 6.1(a) orSection 6.1(b) of the STAR III Disclosure Letter, the STAR III Parties shall not, and shall not cause or permit any other STAR III Subsidiary to, do any of the following:

(i) amend or propose to amend (A) the STAR III Governing Documents or (B) such equivalent organizational or governing documents of any STAR III Subsidiary, or (C) waive the stock ownership limit or create an Excepted Holder Limit (as defined in the STAR III Charter) under the STAR III Charter;

(ii) adjust, split, combine, reclassify or subdivide any shares of stock or other equity securities or ownership interests of STAR III or any STAR III Subsidiary;

(iii) declare, set aside or pay any dividend on or make any other actual, constructive or deemed distributions (whether in cash, stock, property or otherwise) with respect to shares of capital stock of STAR III or any STAR III Subsidiary or other equity securities or ownership interests in STAR III or any STAR III Subsidiary or otherwise make any payment to its or their stockholders or other equity holders in their capacity as such, except for (A) the declaration and payment by STAR III of regular dividends in accordance with past practice at a daily rate not to exceed $0.004098 per share of STAR III Class A Common Stock, $0.004098 per share of STAR III Class R Common Stock, or $0.004098 per share of STAR III Class T Common Stock, each such daily rate as may be adjusted to account for a365-day year, (B) the declaration and payment by the STAR III Operating Partnership of regular distributions in accordance with past practice and for any interim period through the Closing Date, on the STAR III OP Units, (C) the declaration and payment of dividends or other distributions to STAR III by any directly or indirectly Wholly Owned STAR III Subsidiary, and (D) distributions by any STAR III Subsidiary that is not wholly owned, directly or indirectly, by STAR III, in accordance with the requirements of the organizational documents of such STAR III Subsidiary;provided, that, notwithstanding the restriction on dividends and other distributions in thisSection 6.1(b)(iii), STAR III and any STAR III Subsidiary shall be permitted to make distributions, including under Sections 858 or 860 of the Code, reasonably necessary for STAR III to maintain its status as a REIT under the Code and avoid or reduce the imposition of any entity level income or excise Tax under the Code;

(iv) other than in accordance with the STAR III SRP set forth onSection 6.1(b)(iv) of the STAR III Disclosure Letter, redeem, repurchase or otherwise acquire, directly or indirectly, any shares of its capital stock or other equity interests of STAR III or a STAR III Subsidiary;

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(v) except for transactions among STAR III and one or more Wholly Owned STAR III Subsidiaries or among one or more Wholly Owned STAR III Subsidiaries, issue, sell, pledge, dispose, encumber or grant any shares of STAR III or any of the STAR III Subsidiaries’ capital stock (including the STAR III OP Units), or authorize the issuance, sale, pledge, disposition, grant, transfer or any Lien against, or otherwise enter into any Contract or understanding with respect to the voting of, any shares of STAR III or any of the STAR III Subsidiaries’ capital stock (including the STAR III OP Units, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of STAR III Capital Stock or any of the STAR III Subsidiaries’ capital stock or other equity interests;

(vi) acquire or agree to acquire (including by merger, consolidation or acquisition of stock or assets) any material assets, except (A) acquisitions by STAR III or any Wholly Owned STAR III Subsidiary of or from an existing Wholly Owned STAR III Subsidiary and (B) other acquisitions in the ordinary course of business;

(vii) sell, mortgage, pledge, lease, assign, transfer, dispose of or encumber, or effect a deed in lieu of foreclosure with respect to, any property or assets, except in the ordinary course of business consistent with past practice, provided that any sale, mortgage, pledge, lease, assignment, transfer, disposition or deed in connection with (x) the satisfaction of any margin call, or (y) the posting of collateral in connection with any Contract to which STAR III or any STAR III Subsidiary is a party, shall be considered to be done in the ordinary course of business consistent with past practice;

(viii) incur, create, assume, refinance, replace or prepay any Indebtedness for borrowed money or guarantee such Indebtedness of another Person, or issue, sell or amend the terms of any debt securities or rights to acquire any debt securities of STAR III or any of the STAR III Subsidiaries, except (A) Indebtedness incurred under STAR III’s then-existing credit facilities in the ordinary course of business consistent with past practice (including to the extent necessary to pay dividends permitted bySection 6.1(b)(iii)), (B) Indebtedness incurred in the ordinary course of business that does not, in the aggregate, exceed $1,000,000, and (C) refinancing of existing Indebtedness (provided, that the terms of such new Indebtedness shall not be materially more onerous on STAR III compared to the existing Indebtedness and the principal amount of such replacement Indebtedness shall not be materially greater than the Indebtedness it is replacing);

(ix) make any loans, advances or capital contributions to, or investments in, any other Person (including to any of its officers, directors, Affiliates, agents or consultants), make any change in its existing borrowing or lending arrangements for or on behalf of such Persons, or enter into any “keep well” or similar agreement to maintain the financial condition of another entity, other than in the ordinary course of business and other than loans, advances or capital contributions to, or investments in, any Wholly Owned STAR III Subsidiary;

(x) other than in the ordinary course of business, enter into, renew, modify, amend or terminate, or waive, release, compromise or assign any rights or claims under, any STAR III Material Contract (or any Contract that, if existing as of the date hereof, would be a STAR III Material Contract), other than (A) any termination or renewal in accordance with the terms of any existing STAR III Material Contract that occurs automatically without any action (other than notice of renewal) by STAR III or any STAR III Subsidiary or (B) as may be reasonably necessary to comply with the terms of this Agreement;

(xi) except as set forth onSection 6.1(b)(xi) of the STAR III Disclosure Letter, authorize, make or commit to make any capital expenditures other than in the ordinary course of business or to address obligations under existing Contracts, or in conjunction with emergency repairs;

(xii) make any payment, direct or indirect, of any liability of STAR III or any STAR III Subsidiary before the same comes due in accordance with its terms, other than (A) in the ordinary course of business consistent with past practice or (B) in connection with dispositions or refinancings of any Indebtedness otherwise permitted hereunder;

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(xiii) waive, release, assign, settle or compromise any Action, other than waivers, releases, assignments, settlements or compromises that (A) with respect to the payment of monetary damages, involve only the payment of monetary damages (excluding any portion of such payment payable under an existing property-level insurance policy) (x) equal to or less than the amounts specifically reserved with respect thereto on the most recent balance sheet of STAR III made available to STAR prior to the date of this Agreement or (y) that do not exceed $500,000 individually or $1,000,000 in the aggregate, (B) do not involve the imposition of injunctive relief against STAR III or any STAR III Subsidiary or the Surviving Entity, (C) do not provide for any admission of material liability by STAR III or any of the STAR III Subsidiaries, excluding in each case any such matter relating to Taxes (which, for the avoidance of doubt, shall be covered bySection 6.1(b)(xix)), and (D) with respect to any Action involving any present, former or purported holder or group of holders of STAR III Common Stock in accordance withSection 7.6(c);

(xiv) (A) increase in any manner the amount, rate or terms of compensation or benefits of any of STAR III’s current or former employees, officers or directors, except for increases in annual salary or wage rate in the ordinary course of business consistent with past practice and except for reasonable compensation that may be payable to the members of the STAR III Special Committee, or (B) enter into, adopt, amend or terminate any employment, bonus, severance or retirement Contract or Benefit Plan or other compensation or employee benefits arrangement, except as may be required to comply with applicable Law;

(xv) fail to maintain all financial books and records in all material respects in accordance with GAAP or make any material change to its methods of accounting in effect on August 1, 2019, except as required by a change in GAAP or in applicable Law, or make any change with respect to accounting policies, principles or practices unless required by GAAP or the SEC;

(xvi) enter into any new line of business;

(xvii) form any new, or consent to any amendment or modification of the terms of existing, funds, joint ventures ornon-traded real estate investment trusts or other pooled investment vehicles;

(xviii) fail to duly and timely file all material reports and other material documents required to be filed with any Governmental Authority, subject to extensions permitted by Law;

(xix) enter into or modify in a manner adverse to STAR III any STAR III Tax Protection Agreement, make, change or rescind any material election relating to Taxes (other than making its initial REIT election), change a material method of Tax accounting, file or amend any material Tax Return, settle or compromise any material federal, state, local or foreign Tax liability, audit, claim or assessment, enter into any material closing agreement related to Taxes, or knowingly surrender any right to claim any material Tax refund, give or request any waiver of a statute of limitation with respect to any material Tax Return except, in each case, (A) to the extent required by Law or (B) to the extent necessary (x) to preserve STAR III’s qualification as a REIT under the Code or (y) to qualify or preserve the status of any STAR III Subsidiary as a disregarded entity or partnership for United States federal income tax purposes or as a Qualified REIT Subsidiary or a Taxable REIT Subsidiary under the applicable provisions of Section 856 of the Code, as the case may be;

(xx) take any action that would, or fail to take any action, the failure of which to be taken would, reasonably be expected to cause STAR III to fail to qualify as a REIT or any STAR III Subsidiary to cease to be treated as any of (A) a partnership or disregarded entity for United States federal income tax purposes or (B) a Qualified REIT Subsidiary or a Taxable REIT Subsidiary under the applicable provisions of Section 856 of the Code, as the case may be;

(xxi) adopt a plan of merger, complete or partial liquidation or resolutions providing for or authorizing such merger, liquidation or a dissolution, consolidation, recapitalization or bankruptcy reorganization except in connection with any transaction permitted bySection 6.1(b)(vi) orSection 6.1(b)(vii) in a manner that would not reasonably be expected to be materially adverse to STAR or to prevent or impair the ability of the STAR Parties to consummate the Merger;

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(xxii) amend or modify the engagement letters entered into with the Persons listed onSection 4.18 of the STAR III Disclosure Letter, in a manner adverse to STAR III or any STAR III Subsidiary, or engage other financial advisers in connection with the transactions contemplated by this Agreement;

(xxiii) make any payment, loan, distribution or transfer of assets to STAR III Advisor or its Affiliates (other than STAR III and any STAR III Subsidiary) except in such amount and as expressly contemplated by this Agreement or the STAR III Advisory Agreement;

(xxiv) take any action (or fail to take any action) that would make dissenters’, appraisal or similar rights available to the holders of the STAR III Common Stock with respect to the Merger;

(xxv) permit any Liens, other than Permitted Liens; or

(xxvi) authorize, or enter into any Contract or arrangement to do any of the foregoing.

(c) Notwithstanding anything to the contrary set forth in this Agreement, nothing in this Agreement shall prohibit STAR III from taking any action, at any time or from time to time, that in the reasonable judgment of the STAR III Board, upon advice of counsel to STAR III, is reasonably necessary (i) for STAR III to avoid or to continue to avoid incurring entity level income or excise Taxes under the Code or to maintain its qualification as a REIT under the Code for any period or portion thereof ending on or prior to the Merger Effective Time or (ii) to establish or maintain any exemption from or otherwise avoid the imposition of any requirement that STAR III or any STAR III Subsidiary be registered as an investment company under the Investment Company Act, including in each case, making dividend or any other actual, constructive or deemed distribution payments to stockholders of STAR III in accordance with this Agreement or otherwise as permitted pursuant toSection 6.1(b)(iii).

Section 6.2Conduct of Business bySTAR.

(a) STAR covenants and agrees that during the Interim Period, except (1) to the extent required by Law, (2) as may be consented to in advance in writing by STAR III (which consent shall not be unreasonably withheld, conditioned or delayed), (3) as may be expressly contemplated, expressly required or expressly permitted by this Agreement, (4) as may be required by the SIR Merger Agreement, or (5) as set forth inSection 6.2(a) orSection 6.2(b) of the STAR Disclosure Letter, each of the STAR Parties shall, and shall cause each of the other STAR Subsidiaries to, (i) conduct its business in all material respects in the ordinary course and in a manner consistent with past practice, and (ii) use all reasonable efforts to (A) preserve intact its current business organization, goodwill, ongoing businesses and significant relationships with third parties and (B) maintain the status of STAR as a REIT.

(b) Without limiting the foregoing, STAR covenants and agrees that, during the Interim Period, except (1) to the extent required by Law, (2) as may be consented to in advance in writing by STAR III (which consent shall not be unreasonably withheld, conditioned or delayed), (3) as may be expressly contemplated, expressly required or expressly permitted by this Agreement, or (4) as set forth inSection 6.2(a) orSection 6.2(b) of the STAR Disclosure Letter, the STAR Parties shall not, and shall not cause or permit any other STAR Subsidiary to, do any of the following:

(i) amend or propose to amend (A) the STAR Governing Documents or such equivalent organizational or governing documents of any STAR Subsidiary, or (B) waive the stock ownership limit or create an Excepted Holder Limit (as defined in the STAR Charter) under the STAR Charter;

(ii) adjust, split, combine, reclassify or subdivide any shares of stock or other equity securities or ownership interests of STAR or any STAR Subsidiary;

(iii) declare, set aside or pay any dividend on or make any other actual, constructive or deemed distributions (whether in cash, stock, property or otherwise) with respect to shares of capital stock of STAR or any STAR Subsidiary or other equity securities or ownership interests in STAR or any STAR

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Subsidiary or otherwise make any payment to its or their stockholders or other equity holders in their capacity as such, except for (A) the declaration and payment by STAR of regular dividends in accordance with past practice at a daily rate not to exceed $0.002459, as may be adjusted to account for a365-day year, per share, of STAR Common Stock, (B) the declaration and payment by the STAR Operating Partnership of regular distributions in accordance with past practice and for any interim period through the Closing Date, on the STAR OP Interests, (C) the declaration and payment of dividends or other distributions to STAR by any directly or indirectly Wholly Owned STAR Subsidiary, and (D) distributions by any STAR Subsidiary that is not wholly owned, directly or indirectly, by STAR, in accordance with the requirements of the organizational documents of such STAR Subsidiary;provided, that, notwithstanding the restriction on dividends and other distributions in thisSection 6.2(b)(iii), STAR and any STAR Subsidiary shall be permitted to make distributions, including under Sections 858 or 860 of the Code, reasonably necessary for STAR to maintain its status as a REIT under the Code and avoid or reduce the imposition of any entity level income or excise Tax under the Code;

(iv) other than in accordance with the STAR SRP set forth onSection 6.2(b)(iv) of the STAR Disclosure Letter, redeem, repurchase or otherwise acquire, directly or indirectly, any shares of its capital stock or other equity interests of STAR or a STAR Subsidiary;

(v) except (A) pursuant to the STAR DRP and (B) for transactions among STAR and one or more Wholly Owned STAR Subsidiaries or among one or more Wholly Owned STAR Subsidiaries, issue, sell, pledge, dispose, encumber or grant any shares of STAR or any of the STAR Subsidiaries’ capital stock (including the STAR OP Interests) or authorize the issuance, sale, pledge, disposition, grant, transfer or any Lien against, or otherwise enter into any Contract or understanding with respect to the voting of, any shares of STAR or any of the STAR Subsidiaries’ capital stock (including the STAR OP Interests), or any options, warrants, convertible securities or other rights of any kind to acquire any shares of STAR Capital Stock or any of the STAR Subsidiaries’ capital stock or other equity interests;

(vi) except as set forth onSection 6.2(b)(vi) of the STAR Disclosure Letter, acquire or agree to acquire (including by merger, consolidation or acquisition of stock or assets) any material assets, except (A) acquisitions by STAR or any Wholly Owned STAR Subsidiary of or from an existing Wholly Owned STAR Subsidiary and (B) other acquisitions in the ordinary course of business;

(vii) sell, mortgage, pledge, lease, assign, transfer, dispose of or encumber, or effect a deed in lieu of foreclosure with respect to, any property or assets, except in the ordinary course of business consistent with past practice, provided that any sale, mortgage, pledge, lease, assignment, transfer, disposition or deed in connection with (x) the satisfaction of any margin call, or (y) the posting of collateral in connection with any Contract to which STAR or any STAR Subsidiary is a party, shall be considered to be done in the ordinary course of business consistent with past practice;

(viii) except as set forth onSection 6.2(b)(viii) of the STAR Disclosure Letter, incur, create, assume, refinance, replace or prepay any Indebtedness for borrowed money or guarantee such Indebtedness of another Person, or issue, sell or amend the terms of any debt securities or rights to acquire any debt securities of STAR or any of the STAR Subsidiaries, except (A) Indebtedness incurred under STAR’s then-existing credit facilities in the ordinary course of business consistent with past practice (including to the extent necessary to pay dividends permitted bySection 6.2(b)(iii)), (B) Indebtedness incurred in the ordinary course of business that does not, in the aggregate, exceed $1,000,000, and (C) refinancing of existing Indebtedness (provided, that the terms of such new Indebtedness shall not be materially more onerous on STAR compared to the existing Indebtedness and the principal amount of such replacement Indebtedness shall not be materially greater than the Indebtedness it is replacing);

(ix) make any loans, advances or capital contributions to, or investments in, any other Person (including to any of its officers, directors, Affiliates, agents or consultants), make any change in its existing borrowing or lending arrangements for or on behalf of such Persons, or enter into any “keep

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well” or similar agreement to maintain the financial condition of another entity, other than in the ordinary course of business and other than loans, advances or capital contributions to, or investments in, any Wholly Owned STAR Subsidiary;

(x) other than in the ordinary course of business, enter into, renew, modify, amend or terminate, or waive, release, compromise or assign any rights or claims under, any STAR Material Contract (or any Contract that, if existing as of the date hereof, would be a STAR Material Contract), other than (A) any termination or renewal in accordance with the terms of any existing STAR Material Contract that occurs automatically without any action (other than notice of renewal) by STAR or any STAR Subsidiary or (B) as may be reasonably necessary to comply with the terms of this Agreement;

(xi) authorize, make or commit to make any capital expenditures other than in the ordinary course of business or to address obligations under existing Contracts, or in conjunction with emergency repairs;

(xii) make any payment, direct or indirect, of any liability of STAR or any STAR Subsidiary before the same comes due in accordance with its terms, other than (A) in the ordinary course of business consistent with past practice or (B) in connection with dispositions or refinancings of any Indebtedness otherwise permitted hereunder;

(xiii) waive, release, assign, settle or compromise any Action, other than waivers, releases, assignments, settlements or compromises that (A) with respect to the payment of monetary damages, involve only the payment of monetary damages (excluding any portion of such payment payable under an existing property-level insurance policy) (x) equal to or less than the amounts specifically reserved with respect thereto on the most recent balance sheet of STAR made available to STAR III prior to the date of this Agreement or (y) that do not exceed $1,000,000 individually or $1,500,000 in the aggregate, (B) do not involve the imposition of injunctive relief against STAR or any STAR Subsidiary or the Surviving Entity, (C) do not provide for any admission of material liability by STAR or any of the STAR Subsidiaries, excluding in each case any such matter relating to Taxes (which, for the avoidance of doubt, shall be covered bySection 6.2(b)(xix), and (D) with respect to any Action involving any present, former or purported holder or group of holders of STAR Common Stock in accordance withSection 7.6(c);

(xiv) (A) increase in any manner the amount, rate or terms of compensation or benefits of any of STAR’s current or former employees, officers or directors, except for increases in annual salary or wage rate in the ordinary course of business consistent with past practice and except for reasonable compensation that may be payable to the members of the STAR Special Committee, or (B) enter into, adopt, amend or terminate any employment, bonus, severance or retirement Contract or Benefit Plan or other compensation or employee benefits arrangement, except as may be required to comply with applicable Law;

(xv) fail to maintain all financial books and records in all material respects in accordance with GAAP or make any material change to its methods of accounting in effect on August 1, 2019, except as required by a change in GAAP or in applicable Law, or make any change with respect to accounting policies, principles or practices unless required by GAAP or the SEC;

(xvi) enter into any new line of business;

(xvii) form any new, or consent to any amendment or modification of the terms of existing, funds, joint ventures ornon-traded real estate investment trusts or other pooled investment vehicles;

(xviii) fail to duly and timely file all material reports and other material documents required to be filed with any Governmental Authority, subject to extensions permitted by Law;

(xix) enter into or modify in a manner adverse to STAR any STAR Tax Protection Agreement, make, change or rescind any material election relating to Taxes, change a material method of Tax accounting, file or amend any material Tax Return, settle or compromise any material federal, state,

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local or foreign Tax liability, audit, claim or assessment, enter into any material closing agreement related to Taxes, or knowingly surrender any right to claim any material Tax refund, give or request any waiver of a statute of limitation with respect to any material Tax Return, except, in each case, (A) to the extent required by Law or (B) to the extent necessary (x) to preserve STAR’s qualification as a REIT under the Code or (y) to qualify or preserve the status of any STAR Subsidiary as a disregarded entity or partnership for United States federal income tax purposes or as a Qualified REIT Subsidiary or a Taxable REIT Subsidiary under the applicable provisions of Section 856 of the Code, as the case may be;

(xx) take any action that would, or fail to take any action, the failure of which to be taken would, reasonably be expected to cause STAR to fail to qualify as a REIT or any STAR Subsidiary to cease to be treated as any of (A) a partnership or disregarded entity for United States federal income tax purposes or (B) a Qualified REIT Subsidiary or a Taxable REIT Subsidiary under the applicable provisions of Section 856 of the Code, as the case may be;

(xxi) adopt a plan of merger, complete or partial liquidation or resolutions providing for or authorizing such merger, liquidation or a dissolution, consolidation, recapitalization or bankruptcy reorganization, except in connection with any transaction permitted bySection 6.2(b)(vi) orSection 6.2(b)(vii) in a manner that would not reasonably be expected to be materially adverse to STAR or to prevent or impair the ability of the STAR Parties to consummate the Merger;

(xxii) amend or modify the engagement letters entered into with the Persons listed onSection 5.18 of the STAR Disclosure Letter, in a manner adverse to STAR or any STAR Subsidiary, or engage other financial advisers in connection with the transactions contemplated by this Agreement;

(xxiii) make any payment, loan, distribution or transfer of assets to STAR Advisor or its Affiliates (other than STAR and any STAR Subsidiary) except in such amount and as expressly contemplated by this Agreement or the STAR Advisory Agreement;

(xxiv) take any action (or fail to take any action) that would make dissenters’, appraisal or similar rights available to the holders of the STAR Common Stock with respect to the Merger;

(xxv) permit any Liens, other than Permitted Liens; or

(xxvi) authorize, or enter into any Contract or arrangement to do any of the foregoing.

(c) Notwithstanding anything to the contrary set forth in this Agreement, nothing in this Agreement shall prohibit STAR from taking any action, at any time or from time to time, that in the reasonable judgment of the STAR Board, upon advice of counsel to STAR, is reasonably necessary (i) for STAR to avoid or to continue to avoid incurring entity level income or excise Taxes under the Code or to maintain its qualification as a REIT under the Code for any period or portion thereof ending on or prior to the Merger Effective Time or (ii) to establish or maintain any exemption from or otherwise avoid the imposition of any requirement that STAR or any STAR Subsidiary be registered as an investment company under the Investment Company Act, including in each case, making dividend or any other actual, constructive or deemed distribution payments to stockholders of STAR in accordance with this Agreement or otherwise as permitted pursuant toSection 6.2(b)(iii).

(d) For the avoidance of doubt, any amendment of the SIR Merger Agreement shall require the prior approval of STAR III, which approval shall not be unreasonably withheld, delayed or conditioned.

Section 6.3No Control of Other Parties’ Business. Nothing contained in this Agreement shall give (i) STAR, directly or indirectly, the right to control or direct STAR III or any STAR III Subsidiary’s operations prior to the Merger Effective Time, or (ii) STAR III, directly or indirectly, the right to control or direct STAR or any STAR Subsidiary’s operations prior to the Merger Effective Time. Prior to the Merger Effective Time, (i) STAR III shall exercise, consistent with the terms and conditions of this Agreement, complete control and supervision over its and the STAR III Subsidiaries’ respective operations and (ii) STAR shall exercise, consistent

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with the terms and conditions of this Agreement, complete control and supervision over its and the STAR Subsidiaries’ respective operations.

ARTICLE 7

ADDITIONAL COVENANTS

Section 7.1Preparation of the Form S-4 and the Proxy Statement;Stockholder Approval.

(a) As promptly as reasonably practicable following the date of this Agreement, (i) STAR III shall prepare (with STAR’s reasonable cooperation) and cause to be filed with the SEC the Proxy Statement in preliminary form with respect to the Stockholders Meeting and (ii) STAR shall prepare (with STAR III’s reasonable cooperation) and cause to be filed with the SEC, a registration statement onForm S-4 under the Securities Act (the “Form S-4”), which will include the Proxy Statement, to register under the Securities Act the shares of STAR Common Stock to be issued in the Merger, (together, the “Registered Securities”). Each of STAR III and STAR shall use its reasonable best efforts to (A) have theForm S-4 declared effective under the Securities Act as promptly as practicable after such filing, (B) ensure that theForm S-4 complies in all material respects with the applicable provisions of the Exchange Act and the Securities Act and (C) keep theForm S-4 effective for so long as necessary to complete the Merger, unless this Agreement is terminated pursuant toArticle 9. Each of STAR III and STAR shall furnish all information concerning itself, its Affiliates and the holders of its capital stock to the other Party and provide such other assistance as may be reasonably requested in connection with the preparation, filing and distribution of theForm S-4 and the Proxy Statement and shall provide to their and each other’s counsel such representations as reasonably necessary to render the opinions required to be filed therewith. TheForm S-4 and the Proxy Statement shall include all information reasonably requested by such other Party to be included therein. Each of STAR III and STAR shall promptly notify the other Party upon the receipt of any comments from the SEC or any request from the SEC for amendments or supplements to theForm S-4 or the Proxy Statement, and shall, as promptly as practicable after receipt thereof, provide the other Party with copies of all correspondence between it and its Representatives, on the one hand, and the SEC, on the other hand, and all written comments with respect to theForm S-4 or the Proxy Statement received from the SEC and advise the other Party of any oral comments with respect to theForm S-4 or the Proxy Statement received from the SEC. Each of STAR III and STAR shall use its reasonable best efforts to respond as promptly as practicable to any comments from the SEC with respect to theForm S-4 or the Proxy Statement. Notwithstanding the foregoing, prior to filing theForm S-4 (or any amendment or supplement thereto) with the SEC, mailing the Proxy Statement (or any amendment or supplement thereto) or responding to any comments of the SEC with respect thereto, each of STAR III and STAR, as applicable, shall cooperate and provide the other Party a reasonable opportunity to review and comment on such document or response (including the proposed final version of such document or response) and shall give due consideration to all reasonable comments provided by the other Party. STAR shall notify STAR III, promptly after it receives notice thereof, of the time of effectiveness of theForm S-4, the issuance of any stop order relating thereto or the suspension of the qualification for offering or sale in any jurisdiction of the Registered Securities, and STAR shall use its reasonable best efforts to have any such stop order or suspension lifted, reversed or otherwise terminated. STAR shall also use its reasonable best efforts to take any other action required to be taken under the Securities Act, the Exchange Act, any applicable foreign or state securities or “blue sky” Laws and the rules and regulations thereunder in connection with the issuance of the Registered Securities, and STAR III shall furnish all information concerning STAR III and its stockholders as may be reasonably requested in connection with any such actions.

(b) If, at any time prior to the receipt of the Stockholder Approval, any information relating to STAR or STAR III, or any of their respective Affiliates, should be discovered by STAR or STAR III which, in the reasonable judgment of STAR or STAR III, should be set forth in an amendment of, or a supplement to, any of theForm S-4 or the Proxy Statement, so that any of such documents would not include any misstatement of a

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material fact or omit to state any material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, the Party that discovers such information shall promptly notify the other Parties, and STAR and STAR III shall cooperate in the prompt filing with the SEC of any necessary amendment of, or supplement to, theForm S-4 or the Proxy Statement and, to the extent required by Law, in disseminating the information contained in such amendment or supplement to stockholders of STAR and STAR III. Nothing in thisSection 7.1(b) shall limit the obligations of any Party underSection 7.1(a). For purposes ofSection 4.21,Section 5.21 and thisSection 7.1, any information concerning or related to STAR III, its Affiliates or the Stockholders Meeting will be deemed to have been provided by STAR III, and any information concerning or related to STAR or its Affiliates will be deemed to have been provided by STAR.

(c) As promptly as practicable following the date of this Agreement, STAR III shall, in accordance with applicable Law and the STAR III Governing Documents, establish a record date for, duly call, give notice of, convene and hold the Stockholders Meeting solely for the purpose of obtaining the Stockholder Approval (and other matters that shall be submitted to the holders of STAR III Common Stock at such meeting);provided, that such record date shall not be more than ninety (90) days prior to the date of the Stockholders Meeting. STAR III shall use its reasonable best efforts to cause the definitive Proxy Statement to be mailed to STAR III’s stockholders entitled to vote at the Stockholders Meeting and to hold the Stockholders Meeting as soon as practicable after theForm S-4 is declared effective under the Securities Act. STAR III shall, through the STAR III Special Committee and the STAR III Board, recommend to its stockholders that they provide the Stockholder Approval, include the STAR III Special Committee and STAR III Board Recommendation in the Proxy Statement and solicit and use its reasonable best efforts to obtain the Stockholder Approval, except to the extent that the STAR III Special Committee and STAR III Board shall have made an Adverse Recommendation Change as permitted by Section 7.3(c). Notwithstanding the foregoing provisions of thisSection 7.1(c), if, on a date for which the Stockholders Meeting is scheduled, STAR III has not received proxies representing a sufficient number of shares of STAR III Common Stock to obtain the Stockholder Approval, whether or not a quorum is present, STAR III shall have the right to make one or more successive postponements or adjournments of the Stockholders Meeting (provided,however, that the Stockholders Meeting shall not be postponed or adjourned to a date that is (i) more than thirty (30) days after the date for which the Stockholders Meeting was originally scheduled (excluding any adjournments or postponements required by applicable Law)) or (ii) more than one hundred twenty (120) days from the record date for the Stockholders Meeting; provided, further, the Stockholders Meeting may not be postponed or adjourned on the date the Stockholders Meeting is scheduled if STAR III shall have received proxies in respect of an aggregate number of shares of STAR III Common Stock, which have not been withdrawn, such that Stockholder Approval would be obtained at such meeting.

Section 7.2Access to Information; Confidentiality.

(a) During the period from the date of this Agreement to and including the Merger Effective Time, each of the Parties shall, and shall cause each of their respective subsidiaries to, afford to the other Parties and to their respective Representatives reasonable access during normal business hours and upon reasonable advance notice to all of their respective properties, offices, books, Contracts, personnel and records that the other Party may reasonably request and, during such period, each of the Parties shall, and shall cause each of their respective subsidiaries to and shall use their reasonable best efforts to cause its Representatives to, furnish reasonably promptly to the other Parties (i) any information concerning such Party or its respective subsidiaries (including with respect to any pending or threatened Action) as the other Party may reasonably request and (ii) a copy of each report, schedule, registration statement and other document filed by it during such period pursuant to the requirements of federal or state securities Laws. In connection with such reasonable access to information, each of the Parties shall use their reasonable best efforts to cause its respective Representatives to participate in meetings and telephone conferences with the other Parties and their Representatives prior to the mailing of the Proxy Statement, prior to the Stockholders Meeting, respectively, and at such other times as may be reasonably requested. No investigation under thisSection 7.2(a) or otherwise shall affect any of the representations and warranties of the Parties contained in this Agreement or any condition to the obligations of the Parties under this Agreement. Notwithstanding the foregoing, none of the Parties shall be required by thisSection 7.2(a) to provide

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the other Parties or their respective Representatives with access to or to disclose information (A) that is subject to the terms of a confidentiality agreement with a third party entered into prior to the date of this Agreement or entered into after the date of this Agreement in the ordinary course of business consistent with past practice in accordance with this Agreement (provided,however, that the withholding Party shall use its reasonable best efforts to obtain the required consent of such third party to such access or disclosure), (B) the disclosure of which would violate any Law applicable to such Party or any of its Representatives (provided,however, that the withholding Party shall use its reasonable best efforts to make appropriate substitute arrangements to permit reasonable disclosure not in violation of any Law or duty), (C) that is subject to any attorney-client, attorney work product or other legal privilege (provided,however, that the withholding Party shall use its reasonable best efforts to allow for such access or disclosure to the maximum extent that does not result in a loss of any such attorney-client, attorney work product or other legal privilege, including by means of entry into a customary joint defense agreement that would alleviate the loss of such privilege) or (D) for the purpose of allowing Parties or their respective Representatives to collect samples of soil, air, water, groundwater or building materials. The Parties will use their reasonable best efforts to minimize any disruption to the businesses of the other Parties and any of their respective subsidiaries that may result from the requests for access, data and information hereunder. Prior to the Merger Effective Time, the Parties shall not, and shall cause their respective Representatives and Affiliates not to, contact or otherwise communicate with parties with which any of the other Parties or any other of their respective subsidiaries has a business relationship regarding the business of the other Parties and their respective subsidiaries or this Agreement and the transactions contemplated by this Agreement without the prior written consent of such other Party (provided, that, for the avoidance of doubt, nothing in thisSection 7.2(a) shall be deemed to restrict the Parties from contacting such parties in pursuing the business of the Parties operating in the ordinary course).

(b) Each Party will hold, and will cause its respective Representatives and Affiliates to hold, any nonpublic information, including any information exchanged pursuant to thisSection 7.2, in confidence to the extent required by and in accordance with, and will otherwise comply with, the terms of the Confidentiality Agreements, which shall remain in full force and effect pursuant to the terms thereof notwithstanding the execution and delivery of this Agreement or the termination thereof.

Section 7.3No Solicitation of Transactions.

(a) Notwithstanding anything to the contrary contained in this Agreement but subject toSection 7.3(e) andSection 7.3(f), during the period beginning on the date of this Agreement and continuing until 11:59 p.m. (New York City time) on September 19, 2019 (the “Go Shop Period End Time”), STAR III, the STAR III Subsidiaries and their respective Representatives may and shall have the right to, directly or indirectly: (i) initiate, solicit, encourage or facilitate any inquiries or the making of any proposal, offer or other action that constitutes, or may reasonably be expected to lead to, any Acquisition Proposal, including by way of (A) contacting third parties, (B) broadly disseminating public disclosure, or (C) providing access to the properties, offices, assets, books, records and personnel of STAR III and the STAR III Subsidiaries and furnishingnon-public information pursuant to (but only pursuant to) one or more Acceptable Confidentiality Agreements;provided, however, that STAR III shall prior to, or concurrently with the time such access ornon-public information is provided, provide such access and make available suchnon-public information to STAR; (ii) enter into, continue or otherwise participate in any discussions or negotiations with any Person relating to, or in furtherance of such inquiries, proposals, offers or other actions or to obtain, an Acquisition Proposal; (iii) release any Person from, or refrain from enforcing, any standstill agreement or similar obligation to STAR III or any of the STAR III Subsidiaries; and (iv) disclose to the stockholders of STAR III any information required to be disclosed under applicable Law;provided, however, that in the case of this clause (iv), to the extent any such disclosure addresses the Merger or an Acquisition Proposal, such disclosure shall be deemed to be an Adverse Recommendation Change if such disclosure has the effect of withdrawing or adversely modifying, or is not accompanied by an express publicre-affirmation of the STAR III Board Recommendation. For purposes of this Agreement, the term “Go Shop Bidder” shall mean any Person (including its controlled Affiliates and Representatives) that submits a written proposal or offer regarding an Acquisition Proposal prior to

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the Go Shop Period End Time that has not been withdrawn and that the STAR III Special Committee determines, in good faith, after consultation with its financial advisors and outside legal counsel, prior to the Go Shop Period End Time (or in the case of any Acquisition Proposal received less than five (5) Business Days before the date of the Go Shop Period End Time, not later than five (5) Business Days after the receipt of such Acquisition Proposal), has resulted in, or would be reasonably expected to result in, a Superior Proposal (as defined below) (such Person, a “Go Shop Bidder”);provided, that a Go Shop Bidder shall cease to be a Go Shop Bidder if (1) the negotiations between STAR III and such Go Shop Bidder with respect to the Acquisition Proposal that resulted in such Go Shop Bidder becoming a Go Shop Bidder shall have been terminated, (2) the Acquisition Proposal submitted by such Go Shop Bidder prior to the Go Shop Period End Time is withdrawn, terminated or modified in a manner such that, in the STAR III Special Committee’s good faith determination, after consultation with its financial advisors and outside legal counsel, the Acquisition Proposal as modified no longer constitutes, or would no longer reasonably be expected to lead to, a Superior Proposal, or (3) such Go Shop Bidder otherwise ceases to be actively pursuing efforts to acquire STAR III or the STAR III Operating Partnership. No later than forty-eight (48) hours after the Go Shop Period End Time (or after a bidder is determined to be a Go Shop Bidder if such determination occurs after the Go Shop Period End Time), STAR III shall notify STAR in writing (I) if any Go Shop Bidders remain at such time, (II) of the identity of such Go Shop Bidder(s) and (III) the material terms and conditions of the most recent Acquisition Proposal received from such Go Shop Bidder(s) (and shall include with such notice (x) copies of any written Acquisition Proposal, including any proposed transaction agreement and any related transaction documents and financing commitments, if any and (y) a written summary of the material terms of any related Acquisition Proposal not made in writing (including any material terms proposed orally or supplementally)), and thereafter shall promptly (and in any event no later than forty-eight (48) hours after the occurrence of such developments, discussions or negotiations or receipt of materials) (1) keep STAR reasonably informed of all material developments, discussions and negotiations concerning any such Acquisition Proposal and (2) provide STAR with any written supplements or written additions to any written Acquisition Proposal, including any revisions to any proposed transaction agreement and any related transaction documents and financing commitments, if any. Without limiting the foregoing, from and after the Go Shop Period End Time, STAR III will promptly (and in any event no later than forty-eight (48) hours after receipt thereof) notify STAR in writing if (A) any Acquisition Proposal is received by STAR III or any STAR III Subsidiary, (B) any request for information relating to STAR III or any STAR III Subsidiary is received by STAR III or any STAR III Subsidiary from any Person who informs STAR III or any STAR III Subsidiary that it is considering making or has made an Acquisition Proposal or (C) any discussions or negotiations are sought to be initiated with STAR III or any STAR III Subsidiary regarding any Acquisition Proposal, in each case from a Person that is not a Go Shop Bidder, and shall, in any such notice to STAR, indicate the identity of the Person making, and the material terms and conditions of, such Acquisition Proposal, request or inquiry (and shall include with such notice (x) copies of any written Acquisition Proposal, including any proposed transaction agreement and any related transaction documents and financing commitments, if any, and (y) a written summary of the material terms of any related Acquisition Proposal not made in writing (including any material terms proposed orally or supplementally), and thereafter shall promptly (and in any event no later than forty-eight (48) hours after the occurrence of such developments, discussions or negotiations or receipt of materials) (1) keep STAR reasonably informed of all material developments, discussions and negotiations concerning any such Acquisition Proposal, request or inquiry and (2) provide STAR with any written supplements or written additions to any written Acquisition Proposal, including any revisions to any proposed transaction agreement and any related transaction documents and financing commitments, if any. Neither STAR III nor any STAR III Subsidiary will enter into any agreement with any Person subsequent to the date of this Agreement that prohibits STAR III from providing any information to STAR in accordance with thisSection 7.3.

(b) Except as permitted by thisSection 7.3, and except with respect to a Go Shop Bidder, from and after theGo-Shop Period End Time, STAR III shall not, and shall cause each of the STAR III Subsidiaries and its and their respective directors, officers and Affiliates, and shall direct each of its and the STAR III Subsidiaries’ other Representatives (to the extent acting on behalf of STAR III) not to, directly or indirectly, (i) initiate, solicit, knowingly encourage or facilitate any inquiries, proposals or offers for, or engage in any negotiations concerning, or provide any confidential or nonpublic information or data to, or have any discussions with, any

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Person relating to any inquiry, proposal, offer or other action that constitutes, or may reasonably be expected to lead to, any Acquisition Proposal, (ii) enter into or engage in, continue or otherwise participate in any discussions or negotiations with any Person regarding or otherwise in furtherance of, or furnish to any Person other than a STAR Party or its Representatives, any information in connection with or for the purpose of encouraging or facilitating any inquiry, proposal, offer or other action that constitutes, or could reasonably be expected to lead to, or to otherwise obtain an Acquisition Proposal, (iii) release any Person from or fail to enforce any confidentiality agreement, standstill agreement or similar obligation (provided that STAR III shall be permitted to waive or to not enforce any provision of any confidentiality agreement, standstill agreement or similar obligation to permit a Person to make a confidential Acquisition Proposal directly to the STAR III Special Committee if the STAR III Special Committee determines in good faith after consultation with outside legal counsel that any such failure to waive or to not enforce would be inconsistent with or otherwise result in a breach of the STAR III directors’ duties under applicable Law), (iv) enter into any agreement in principle, arrangement, understanding, contract or agreement (whether binding or not) contemplating or otherwise relating to an Acquisition Proposal, or (v) take any action to exempt any Person from any Takeover Statute or similar restrictive provision of the STAR III Organizational Documents. In furtherance of the foregoing and except with respect to a Go Shop Bidder and as otherwise permitted by thisSection 7.3, STAR III shall, and shall cause each STAR III Subsidiary and each Representative of STAR III and the STAR III Subsidiaries to, immediately cease any discussions, negotiations or communications with any Person with respect to any Acquisition Proposal or potential Acquisition Proposal and shall immediately terminate all physical and electronic data room access previously granted to any such Person and exercise and use reasonable best efforts to enforce any contractual rights available to STAR III to cause such Person to return and/or destroy allnon-public information concerning STAR III and the STAR III Subsidiaries to the extent permitted pursuant to any confidentiality agreement with such Person and immediately terminate all physical and electronic data room access granted to such Person. For the avoidance of doubt, after the Go Shop Period End Time and until the receipt of Stockholder Approval, STAR III, the STAR III Subsidiaries and their respective Representatives may continue to take any of the actions described inSection 7.3(a) with respect to any proposals or offers regarding any Acquisition Proposal submitted by a Go Shop Bidder on or before the Go Shop Period End Time or with respect to any amended or modified proposal or offer with respect to any such Acquisition Proposal submitted by a Go Shop Bidder after the Go Shop Period End Time that STAR III discloses to STAR (and provides copies to STAR of) if the STAR III Special Committee has determined in good faith after consultation with outside legal counsel and outside financial advisors that such Acquisition Proposal (as may be amended or modified) is or is reasonably likely to lead to a Superior Proposal.

(c) Notwithstanding anything in this Agreement to the contrary, at any time after the Go Shop Period End Time and prior to the time, but not after, Stockholder Approval is obtained, STAR III and its Representatives may (i) provide information in response to a request therefor by a person or persons who has made a written Acquisition Proposal that did not result from a breach of this Section 7.3 (provided that STAR III (A) receives from the person or persons so requesting such information an executed Acceptable Confidentiality Agreement, and (B) as contemplated below, STAR III discloses to STAR (and provides copies to STAR of) such written Acquisition Proposal and concurrently furnishes, makes available or provides access to any nonpublic information provided to such person or persons to the extent not previously so provided to STAR), and (ii) engage or participate in any discussions or negotiations with any person who has made such a written Acquisition Proposal, if and only to the extent that, in each such case referred to in clause (i) or (ii) above, the STAR III Special Committee has either determined that such Acquisition Proposal constitutes a Superior Proposal or determined in good faith after consultation with outside legal counsel and outside financial advisors that such Acquisition Proposal could reasonably be expected to lead to a Superior Proposal.

(d) Except as expressly provided inSection 7.3(e),Section 7.3(f), andSection 9.1(c)(ii), neither the STAR III Board, nor any committee thereof, nor any group of directors, formally or informally, shall: (i) change, withhold, withdraw, qualify or modify or publicly propose or announce or authorize or resolve to, or announce its intention to change, withhold, withdraw, qualify or modify, in each case in a manner adverse to STAR, the STAR III Board Recommendation, (ii) authorize, approve, endorse, declare advisable, adopt or recommend or propose

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to publicly authorize, approve, endorse, declare advisable, adopt or recommend, any Acquisition Proposal, (iii) authorize, cause or permit STAR III or any STAR III Subsidiary to enter into any Alternative Acquisition Agreement, or (iv) fail to make the STAR III Board Recommendation or fail to include the STAR III Board Recommendation in the Proxy Statement (any event described in clause (i), (ii) or this clause (iv), whether taken by the STAR III Board or a committee thereof, an “Adverse Recommendation Change”).

(e) Notwithstanding anything in this Agreement to the contrary, at any time after the date of this Agreement and before Stockholder Approval is obtained and subject to compliance with the provisions of thisSection 7.3(e) in all material respects, if STAR III receives an Acquisition Proposal (whether or not from a Go Shop Bidder) that did not result from a breach of thisSection 7.3 (and such proposal is not withdrawn) and the STAR III Special Committee determines that such Acquisition Proposal constitutes a Superior Proposal and, after consultation with outside legal counsel, that failure to effect an Adverse Recommendation Change in connection with such Superior Proposal or that failure to terminate this Agreement to enter into an Alternative Acquisition Agreement for such Superior Proposal would be inconsistent with the STAR III directors’ duties under applicable Law, then the STAR III Board (based on the recommendation of the STAR III Special Committee) may effect an Adverse Recommendation Change and/or terminate this Agreement in accordance withSection 9.1(c)(ii); provided that the STAR III Board may not take action contemplated by thisSection 7.3(e) unless:

(i) STAR III has notified STAR in writing that the STAR III Board intends to take such action at least five (5) Business Days in advance of effecting an Adverse Recommendation Change, which notice shall specify in reasonable detail the reasons for such action, a description of the material terms of the Superior Proposal and attach the most current version of such agreements (including any amendments, supplements or modifications) between STAR III and the party making such Superior Proposal to such notice (a “STAR III Change Notice”); and

(ii) during the five (5) Business Day period following STAR’s receipt of a STAR III Change Notice, STAR III shall have offered to negotiate with and, if accepted, negotiated with (and directed its outside financial and outside legal advisors to negotiate with) STAR in good faith to make such adjustments to the terms and conditions of this Agreement such that the Superior Proposal ceases to constitute (in the good faith determination of the STAR III Special Committee, after consultation with outside legal counsel and outside financial advisors) a Superior Proposal;provided, that any amendment, supplement or modification to any Acquisition Proposal shall be deemed a new Acquisition Proposal and STAR III may not enter into any agreement relating to such Superior Proposal pursuant thisSection 7.3(e) or make an Adverse Recommendation Change pursuant to thisSection 7.3(e) or terminate this Agreement pursuant toSection 9.1(c)(ii) unless STAR III has complied with the requirements of thisSection 7.3(e) with respect to such new Acquisition Proposal including sending an additional STAR III Change Notice (except that the new negotiation period under thisSection 7.3(e)(ii) shall be three (3) Business Days instead of five (5) Business Days). Notwithstanding anything in thisSection 7.3(e)(ii), neither STAR’s acceptance nor rejection of STAR III’s offer to negotiate pursuant to thisSection 7.3(e)(ii) shall have any bearing on STAR’s right to terminate this Agreement pursuant toSection 9.1(d)(ii) herein.

(f) Nothing in thisSection 7.3 or elsewhere in this Agreement shall prevent the STAR III Board or STAR III, directly or indirectly, from (i) taking and disclosing to the stockholders of STAR III a position contemplated by Rule14d-9 or Rule14e-2(a) promulgated under the Exchange Act with respect to an Acquisition Proposal, making any required disclosure to the stockholders of the STAR III under applicable Law, including Rule14d-9 promulgated under the Exchange Act or Item 1012(a) of RegulationM-A or (ii) making any disclosure to the stockholders of STAR III if the STAR III Board determines in good faith after consultation with its outside legal counsel (and based on the recommendation of the STAR III Special Committee) that the failure to do so would be inconsistent with the duties of the STAR III directors to STAR III under applicable Law;provided, however, that to the extent any such disclosure addresses the approval, recommendation or declaration of advisability by the STAR III Board with respect to this Agreement or an Acquisition Proposal,

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such disclosure shall be deemed to be an Adverse Recommendation Change if not accompanied by an express publicre-affirmation of the STAR III Board Recommendation.

(g) Notwithstanding anything to the contrary contained in this Agreement, STAR III shall not, and shall not permit any STAR III Subsidiaries or any of its or their respective Affiliates or Representatives to, reimburse or agree to reimburse the fees or expenses of any Person (including any Go Shop Bidder or its Representatives) in connection with (or related to) an Acquisition Proposal (including, for the avoidance of doubt, in connection with any Acceptable Confidentiality Agreement) but excluding, for the avoidance of doubt, in connection with any acquisition agreement with respect to a Superior Proposal entered into pursuant to thisSection 7.3 and resulting in termination of this Agreement pursuant toSection 9.1(c).

(h) STAR III agrees that in the event any Representative of STAR III or any STAR III Subsidiary takes any action that, if taken by STAR III would constitute a material violation of thisSection 7.3, then STAR III shall be deemed to be in violation of thisSection 7.3 for all purposes of this Agreement.

(i) For purposes of this Agreement:

(i) “Acquisition Proposal” means any bona fide proposal or offer from any Person (other than STAR or any STAR Subsidiaries), whether in one transaction or a series of related transactions, relating to any (a) merger, consolidation, share exchange, business combination or similar transaction involving STAR III or any STAR III Subsidiary that would constitute a “significant subsidiary” (as defined in Rule1-02 of RegulationS-X), (b) sale or other disposition, by merger, consolidation, share exchange, business combination or any similar transaction, of any assets of STAR III or any STAR III Subsidiaries representing 20% or more of the consolidated assets of STAR III and the STAR III Subsidiaries, taken as a whole, (c) issue, sale or other disposition by STAR III or any STAR III Subsidiaries of (including by way of merger, consolidation, share exchange, business combination or any similar transaction) securities (or options, rights or warrants to purchase, or securities convertible into, such securities) representing 20% or more of the votes associated with the outstanding shares of STAR III Common Stock, (d) tender offer or exchange offer in which any Person or “group” (as such term is defined under the Exchange Act) shall acquire beneficial ownership (as such term is defined in Rule13d-3 under the Exchange Act), or the right to acquire beneficial ownership, of 20% or more of the votes associated with the outstanding shares of STAR III Common Stock, (e) recapitalization, restructuring, liquidation, dissolution or other similar type of transaction with respect to STAR III in which a third party shall acquire beneficial ownership of 20% or more of the outstanding shares of STAR III Common Stock, or (f) transaction that is similar in form, substance or purpose to any of the foregoing transactions; provided, however, that the term “Acquisition Proposal” shall not include (i) the Merger or any of the other transactions contemplated by this Agreement, (ii) any merger, consolidation, business combination, reorganization, recapitalization or similar transaction solely among STAR III and one or more of the STAR III Subsidiaries or solely among the STAR III Subsidiaries or (iii) was solicited by any STAR III Party or their Representative in breach of this Agreement.

(ii) “Superior Proposal” means a written Acquisition Proposal (except for purposes of this definition, the references in the definition of “Acquisition Proposal” to “20%” shall be replaced with “50%”) which the STAR III Board (based on the recommendation of the STAR III Special Committee) determines in its good faith judgment (after consultation with its outside legal and financial advisors and after taking into account (a) all of the terms and conditions of the Acquisition Proposal and this Agreement (as it may be proposed to be amended by STAR) and (b) the feasibility and certainty of consummation of such Acquisition Proposal on the terms proposed (taking into account all legal, financial, regulatory and other aspects of such Acquisition Proposal and conditions to consummation thereof) to be more favorable from a financial point of view to the stockholders of STAR III (in their capacities as stockholders) than the Merger and the other transactions contemplated by this Agreement (as it may be proposed to be amended by STAR)).

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Section 7.4Public Announcements. Except with respect to any Adverse Recommendation Change or any action taken pursuant to, and in accordance with,Section 7.1 orSection 7.3, so long as this Agreement is in effect, the Parties shall consult with each other before issuing any press release or otherwise making any public statements or filings with respect to this Agreement or any of the transactions contemplated by this Agreement, and none of the Parties shall issue any such press release or make any such public statement or filing prior to obtaining the other Parties’ consent (which consent shall not be unreasonably withheld, delayed or conditioned);provided, that a Party may, without obtaining the other Parties’ consent, issue such press release or make such public statement or filing as may be required by Law or Order if it is not possible to consult with the other Party before making any public statement with respect to this Agreement or any of the transactions contemplated by this Agreement. The Parties have agreed upon the form of a joint press release announcing the Merger and the execution of this Agreement, and shall make such joint press release no later than one (1) Business Day following the date on which this Agreement is signed.

Section 7.5Appropriate Action; Consents; Filings.

(a) Upon the terms and subject to the conditions set forth in this Agreement, each of the STAR Parties and each of the STAR III Parties shall and shall cause the other STAR Subsidiaries and the other STAR III Subsidiaries, respectively, and their respective Affiliates to use its reasonable best efforts to take, or cause to be taken, all actions, and to do, or cause to be done, and to assist and cooperate with the other Party in doing, all things necessary, proper or advisable under applicable Law or pursuant to any Contract to consummate and make effective, as promptly as practicable, the Merger and the other transactions contemplated by this Agreement, including (i) taking all actions necessary to cause the conditions to Closing set forth inArticle 8 to be satisfied, (ii) preparing and filing any applications, notices, registrations and requests as may be required or advisable to be filed with or submitted to any Governmental Authority in order to consummate the transactions contemplated by this Agreement, (iii) obtaining all necessary or advisable actions or nonactions, waivers, consents and approvals from Governmental Authorities necessary in connection with the consummation of the Merger and the other transactions contemplated by this Agreement and the making of all necessary or advisable registrations and filings (including filings with Governmental Authorities, if any) and the taking of all reasonable steps as may be necessary or advisable to obtain an approval or waiver from, or to avoid an action or proceeding by, any Governmental Authority necessary in connection with the consummation of the Merger and the other transactions contemplated by this Agreement, (iv) subject toSection 7.6(c), defending any lawsuits or other legal proceedings, whether judicial or administrative, challenging this Agreement or the consummation of the Merger or the other transactions contemplated by this Agreement, including seeking to have any stay or temporary restraining order entered by any court or other Governmental Authority vacated or reversed, the avoidance of each and every impediment under any antitrust, merger control, competition or trade regulation Law that may be asserted by any Governmental Authority with respect to the Merger so as to enable the Closing to occur as soon as reasonably possible, and (v) executing and delivering any additional instruments necessary or advisable to consummate the Merger and the other transactions contemplated by this Agreement and to fully carry out the purposes of this Agreement;provided, that neither Party will have any obligation (A) to propose, negotiate, commit to or effect, by consent decree, hold separate order or otherwise, the sale, divestiture or disposition of any assets or businesses of such Party, any of its subsidiaries (including subsidiaries of STAR after the Closing) or their Affiliates or (B) otherwise to take or commit to take any actions that would limit the freedom of such Party, its subsidiaries (including subsidiaries of STAR after the Closing) or their Affiliates with respect to, or their ability to retain, one or more of their businesses, product lines or assets.

(b) In connection with and without limiting the foregoingSection 7.5(a), each of the Parties shall give (or shall cause their respective Affiliates to give) any notices to third parties, and each of the Parties shall use, and cause each of their respective Affiliates to use, its reasonable best efforts to obtain any third party consents that are necessary, proper or advisable to consummate the Merger and the other transactions contemplated by this Agreement. Each of the Parties will, and shall cause their respective Affiliates to, furnish to the other such necessary information and reasonable assistance as the other may request in connection with the preparation of any required applications, notices, registrations and requests as may be required or advisable to be filed with any

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Governmental Authority and will cooperate in responding to any inquiry from a Governmental Authority, including promptly informing the other Party of such inquiry, consulting in advance before making any presentations or submissions to a Governmental Authority, and supplying each other with copies of all material correspondence, filings or communications between either Party and any Governmental Authority with respect to this Agreement. To the extent reasonably practicable, the Parties or their Representatives shall have the right to review in advance and each of the Parties will consult the others on, all the information relating to the other and each of their Affiliates that appears in any filing made with, or written materials submitted to, any Governmental Authority in connection with the Merger and the other transactions contemplated by this Agreement, except that confidential competitively sensitive business information may be redacted from such exchanges. To the extent reasonably practicable, neither Party shall, nor shall they permit their respective Representatives to, participate independently in any meeting or engage in any substantive conversation with any Governmental Authority in respect of any filing, investigation or other inquiry without giving the other Party prior notice of such meeting or conversation and, to the extent permitted by applicable Law, without giving the other Party the opportunity to attend or participate (whether by telephone or in person) in any such meeting with such Governmental Authority.

(c) Notwithstanding anything to the contrary in this Agreement, in connection with obtaining any approval or consent from any Person (other than any Governmental Authority) with respect to the Merger and the other transactions contemplated by this Agreement, none of the Parties or any of their respective Representatives shall be obligated to pay or commit to pay to such Person whose approval or consent is being solicited any cash or other consideration, make any accommodation or commitment or incur any liability or other obligation to such Person. Subject to the immediately foregoing sentence, the Parties shall cooperate with respect to reasonable accommodations that may be requested or appropriate to obtain such consents.

Section 7.6Notification of Certain Matters; Transaction Litigation.

(a) The STAR Parties and their Representatives shall give prompt notice to the STAR III Parties, and the STAR III Parties and their Representatives shall give prompt notice to the STAR Parties, of any notice or other communication received by such Party from any Governmental Authority in connection with this Agreement, the Merger or the other transactions contemplated by this Agreement, or from any Person alleging that the consent of such Person is or may be required in connection with the Merger or the other transactions contemplated by this Agreement.

(b) The STAR Parties and their Representatives shall give prompt notice to the STAR III Parties, and the STAR III Parties and their Representatives shall give prompt notice to the STAR Parties, if (i) any representation or warranty made by it contained in this Agreement becomes untrue or inaccurate such that it would be reasonable to expect that the applicable closing conditions would be incapable of being satisfied by the Outside Date or (ii) it fails to comply with or satisfy in any material respect any covenant, condition or agreement to be complied with or satisfied by it under this Agreement;provided, that no such notification shall affect the representations, warranties, covenants or agreements of the Parties or the conditions to the obligations of the Parties under this Agreement. Notwithstanding anything to the contrary in this Agreement, the failure by the STAR Parties, the STAR III Parties or their respective Representatives to provide such prompt notice under thisSection 7.6(b) shall not constitute a breach of covenant for purposes ofSection 8.2(b),Section 8.3(b),Section 9.1(c)(i), orSection 9.1(d)(i).

(c) The STAR Parties and their Representatives shall give prompt notice to the STAR III Parties, and the STAR III Parties and their Representatives shall give prompt notice to the STAR Parties, of any Action commenced or, to such Party’s Knowledge, threatened against, relating to or involving such Party or any STAR Subsidiary or STAR III Subsidiary, respectively, or any of their respective directors, officers or partners that relates to this Agreement, the Merger or the other transactions contemplated by this Agreement. The STAR Parties and their respective Representatives shall give STAR III the opportunity to reasonably participate in the defense and settlement of any stockholder litigation against the STAR Parties and/or their directors, officers or partners relating to this Agreement and the transactions contemplated by this Agreement, and no such settlement

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shall be agreed to without STAR III’s prior written consent (which consent shall not be unreasonably withheld, delayed or conditioned). The STAR III Parties and their respective Representatives shall give the STAR Parties the opportunity to reasonably participate in the defense and settlement of any litigation against the STAR III Parties and/or their directors, officers or partners relating to this Agreement and the transactions contemplated by this Agreement, and no such settlement shall be agreed to without STAR’s prior written consent (which consent shall not be unreasonably withheld, delayed or conditioned).

Section 7.7Indemnification; Directors’ and Officers’ Insurance.

(a) Without limiting or being limited by the provisions ofSection 7.7(b) and to the extent permitted by applicable Law, during the period commencing as of the Merger Effective Time and ending on the sixth (6^th) anniversary of the Merger Effective Time, STAR shall (and shall cause the Surviving Entity to): (i) indemnify, defend and hold harmless each Indemnified Party against and from any costs or expenses (including reasonable attorneys’ fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any Action to the extent such Action arises out of or pertains to (x) any action or omission or alleged action or omission in such Indemnified Party’s capacity as a manager, director, officer, partner, member, trustee, employee or agent of STAR III or any of the STAR III Subsidiaries, or (y) this Agreement or any of the transactions contemplated by this Agreement, including the Merger; and (ii) pay in advance of the final disposition of any such Action the expenses (including reasonable attorneys’ fees and any expenses incurred by any Indemnified Party in connection with enforcing any rights with respect to indemnification) of any Indemnified Party without the requirement of any bond or other security, in each case to the fullest extent permitted by Law, but subject to STAR’s or the Surviving Entity’s receipt of an undertaking by or on behalf of such Indemnified Party to repay such amount if it shall ultimately be determined that such Indemnified Party is not entitled to be indemnified. Notwithstanding anything to the contrary set forth in this Agreement, STAR or the Surviving Entity, as applicable, (i) shall not settle or compromise or consent to the entry of any judgment or otherwise seek termination with respect to any claim, action, suit or proceeding against or investigation of any Indemnified Party for which indemnification may be sought under thisSection 7.7(a) without the Indemnified Party’s prior written consent (which consent may not be unreasonably withheld, delayed or conditioned) unless such settlement, compromise, consent or termination includes an unconditional release of such Indemnified Party from all liability arising out of such claim, action, suit, proceeding or investigation, (ii) shall not be liable for any settlement effected without its prior written consent (which consent shall not be unreasonably withheld, delayed or conditioned) and (iii) shall not have any obligation hereunder to any Indemnified Party to the extent that a court of competent jurisdiction shall determine in a final andnon-appealable order that such indemnification is prohibited by applicable Law, in which case the Indemnified Party shall promptly refund to STAR or the Surviving Entity the amount of all such expenses theretofore advanced pursuant hereto.

(b) Without limiting the foregoing, and to the extent permitted by applicable Law, each of STAR and the Surviving Entity agree that, during the period commencing as of the Merger Effective Time and ending on the sixth (6^th) anniversary of the Merger Effective Time, all rights to indemnification and exculpation from liabilities for acts or omissions occurring at or prior to the Merger Effective Time, and advancement of expenses, now existing in favor of the current or former managers, directors, officers, partners, members, trustees, employees, agents, fiduciaries or other individuals of STAR III or any of the STAR III Subsidiaries (each an “Indemnified Party” and collectively, the “Indemnified Parties”) as provided in (i) the STAR III Charter, the STAR III Bylaws or, if applicable, similar organizational documents or agreements of any STAR III Subsidiary (the “STAR III Organizational Documents”) and (ii) indemnification agreements of STAR III shall survive the Merger and shall continue in full force and effect in accordance with their terms. For a period of six (6) years following the Merger Effective Time, the organizational documents of STAR and the Surviving Entity and the organizational documents of any applicable STAR Subsidiary or STAR III Subsidiary shall contain provisions no less favorable with respect to indemnification and limitations on liability of directors and officers than are set forth in the STAR III Governing Documents or, if applicable, similar organizational documents or agreements of any STAR III Subsidiary. The STAR Governing Documents provisions shall not be amended, repealed or

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otherwise modified for a period of six (6) years following the Merger Effective Time in any manner that would affect adversely the rights thereunder of individuals who, at or prior to the Merger Effective Time, were Indemnified Parties, unless such modification shall be required by applicable Law and then only to the minimum extent required by applicable Law.

(c) To the extent that any Indemnified Party shall reasonably believe that representation by counsel designated by STAR or the Surviving Entity in connection with any action, suit, proceeding, investigation or inquiry results in a conflict of interest, such Indemnified Party shall have the right to employ such person’s own separate counsel, at STAR’s or the Surviving Entity’s expense;provided, however, that such separate counsel shall, to the extent consistent with its professional responsibilities, cooperate with STAR or the Surviving Entity and any counsel designated by STAR or the Surviving Entity.

(d) STAR III shall obtain an extended reporting period coverage under STAR III’s directors’ and officers’ liability insurance policies or the substantial equivalent of such coverage (to be effective as of the Merger Effective Time) with a policy period of six (6) years after the Merger Effective Time, on prepaid andnon-cancellable terms, for a cost not in excess of three times the current annual premiums for such insurance. STAR and the Surviving Entity shall not take any action to terminate or modify the terms of the extended reporting period coverage.

(e) If STAR or the Surviving Entity or any of their respective successors or assigns (i) consolidates with or merges with or into any other Person and shall not be the continuing or surviving corporation, partnership or other entity of such consolidation or merger or (ii) liquidates, dissolves orwinds-up, or transfers or conveys all or substantially all of its properties and assets to any Person, then, and in each such case, proper provision shall be made so that the successors and assigns of STAR or the Surviving Entity, as applicable, assume the obligations set forth in thisSection 7.7.

(f) STAR shall cause the Surviving Entity to pay all reasonable expenses, including reasonable attorneys’ fees, that may be incurred by any Indemnified Party in enforcing the obligations provided in thisSection 7.7.

(g) The provisions of thisSection 7.7 are intended to be for the express benefit of, and shall be enforceable by, each Indemnified Party (who are intended third party beneficiaries of thisSection 7.7), his or her heirs and his or her personal representatives, shall be binding on all successors and assigns of STAR, STAR III and the Surviving Entity and shall not be amended in a manner that is adverse to the Indemnified Party (including his or her successors, assigns and heirs) without the prior written consent of the Indemnified Party (including such successors, assigns and heirs) affected thereby. The exculpation and indemnification provided for by thisSection 7.7 shall not be deemed to be exclusive of any other rights to which an Indemnified Party is entitled, whether pursuant to applicable Law, Contract or otherwise.

Section 7.8Dividends.

(a) In the event that a distribution with respect to the shares of STAR III Common Stock permitted under the terms of this Agreement has a record date prior to the Merger Effective Time and has not been paid prior to the Closing Date, such distribution shall be paid to the holders of such shares of STAR III Common Stock on the Closing Date immediately prior to the Merger Effective Time. In the event that a distribution with respect to the shares of STAR Common Stock permitted under the terms of this Agreement has a record date prior to the Merger Effective Time and has not been paid prior to the Closing Date, such distribution shall be paid to the holders of such shares of STAR Common Stock on the Closing Date immediately prior to the Merger Effective Time. STAR III shall coordinate with STAR on the declaration, setting of record dates and payment dates of dividends on STAR III Common Stock so that holders of STAR III Common Stock (i) do not receive dividends on both STAR III Common Stock and STAR Common Stock received in the Merger in respect of a single distribution period or fail to receive a dividend on either STAR III Common Stock or STAR Common

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Stock received in the Merger in respect of a single distribution period or (ii) do not receive both a dividend permitted by the proviso toSection 6.2(b)(iii) on STAR Common Stock and a dividend permitted by the proviso toSection 6.1(b)(iii) on STAR III Common Stock received in the Merger or fail to receive either a dividend permitted by the proviso toSection 6.2(b)(iii) on STAR Common Stock or a dividend permitted by the proviso toSection 6.1(b)(iii) on STAR III Common Stock received in the Merger.

(b) In the event that either STAR III or STAR shall declare or pay any dividend or other distribution that is expressly permitted pursuant to the proviso at the end ofSection 6.1(b)(iii) orSection 6.2(b)(iii), respectively, it shall notify the other Party at least twenty (20) days prior to the Closing Date, and such other Party shall be entitled to declare a dividend per share payable (i) in the case of STAR III, to holders of STAR III Common Stock, in an amount per share of STAR III Common Stock equal to the product of (A) the dividend declared by STAR with respect to each share of STAR Common Stock by (B) the Exchange Ratio, and (ii) in the case of STAR, to holders of STAR Common Stock, in an amount per share of STAR Common Stock equal to the quotient obtained by dividing (x) the dividend declared by STAR III with respect to each share of STAR III Common Stock by (y) the Exchange Ratio. The record date and time and payment date and time for any dividend payable pursuant to thisSection 7.8(b) shall be prior to the Closing Date.

Section 7.9Takeover Statutes. The Parties shall use their respective reasonable best efforts (a) to take all action necessary so that no Takeover Statute is or becomes applicable to the Merger or any of the other transactions contemplated by this Agreement and (b) if any such Takeover Statute is or becomes applicable to any of the foregoing, to take all action necessary so that the Merger and the other transactions contemplated by this Agreement may be consummated as promptly as practicable on the terms contemplated by this Agreement and otherwise to eliminate or minimize the effect of such Takeover Statute or the restrictions in the STAR Charter or the STAR III Charter on the Merger and the other transactions contemplated by this Agreement.

Section 7.10Obligations ofthe Parties. STAR III shall take all actions necessary to cause the other STAR III Parties to perform their obligations under this Agreement and to consummate the Merger on the terms and conditions set forth in this Agreement. STAR shall take all actions necessary to (a) cause the STAR Parties to perform its obligations under this Agreement and to consummate the Merger on the terms and conditions set forth in this Agreement, and (b) ensure that, prior to the Merger Effective Time, Merger Sub shall not conduct any business or make any investments or incur or guarantee any indebtedness other than as specifically contemplated by this Agreement.

Section 7.11New Convertible Stock. If prior to the Closing, STAR Advisor requests that, in lieu of the incentive and performance fees provided for in the Amended and Restated STAR Advisory Agreement, STAR issue, at the Closing, convertible stock (the “New Convertible Stock”) in exchange for the convertible stock currently owned by STAR Advisor (such exchange, the “Exchange”), then subject to the consent of each of STAR and STAR III, upon the approval of each of their respective Special Committees, which consent shall not be unreasonably withheld, delayed or conditioned, the Parties shall amend this Agreement, and take all other necessary actions, to provide for the Exchange, including amending the Amended and Restated STAR Advisory Agreement to delete the incentive and performance fees and issuing the New Convertible Stock in the Exchange. The New Convertible Stock shall have terms and conditions regarding conversion that are substantially similar to the terms set forth in the Amended and Restated STAR Advisory Agreement regarding incentive and performance fees.

Section 7.12Tax Matters.

(a) Each of STAR and STAR III shall use its reasonable best efforts to cause the Merger to qualify as a reorganization within the meaning of Section 368(a) of the Code, including by executing and delivering the officers’ certificates referred to herein and, unless otherwise required by a final determination within the meaning of Section 1313(a) of the Code (or a similar determination under applicable state or local Law), reporting consistently for all federal, state, and local income Tax or other purposes. None of STAR or STAR III shall take

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any action, or fail to take any action, that would reasonably be expected to cause the Merger to fail to qualify as a reorganization within the meaning of Section 368(a) of the Code.

(b) STAR shall (i) use its reasonable best efforts to obtain or cause to be provided the opinions of Morrison & Foerster LLP (“Morrison”) referred to inSection 8.2(g) andSection 8.3(e), (ii) use its reasonable best efforts to obtain opinions of counsel consistent with the opinions of counsel referred to inSection 8.2(g) andSection 8.3(e), but dated as of the effective date of the FormS-4 (or shortly before such date), to the extent required for the FormS-4 to be declared effective by the SEC, (iii) deliver to Morrison a tax representation letter, dated as of the effective date of the FormS-4 and the Closing Date, as applicable, and signed by an officer of STAR and STAR Operating Partnership, containing representations of STAR and STAR Operating Partnership reasonably necessary or appropriate to enable Morrison to render the tax opinions described inSection 8.2(g) andSection 8.3(e), and (iv) deliver to DLA Piper a tax representation letter, dated as of the Closing Date and signed by an officer of STAR containing representations of STAR reasonably necessary or appropriate to enable DLA Piper to render the applicable tax opinions described in clause (ii) of thisSection 7.12(b) and the tax opinion described inSection 8.3(f).

(c) STAR III shall (i) use its reasonable best efforts to obtain or cause to be provided the opinions of DLA Piper LLP (US) (“DLA Piper”) referenced inSection 8.2(f) andSection 8.3(f), (ii) use its reasonable best efforts to obtain opinions of counsel consistent with the opinions of counsel referred to inSection 8.2(f) andSection 8.3(f), but dated as of the effective date of the FormS-4 (or shortly before such date), to the extent required for the FormS-4 to be declared effective by the SEC, (iii) deliver to DLA Piper a tax representation letter, dated as of the effective date of the FormS-4 and the Closing Date, as applicable, and signed by an officer of STAR III and STAR III Operating Partnership, containing representations of STAR III and STAR III Operating Partnership reasonably necessary or appropriate to enable DLA Piper to render the applicable tax opinions described in clause (ii) of thisSection 7.12(c), and the tax opinions described inSection 8.2(f) andSection 8.3(f), and (iv) deliver to Morrison a tax representation letter, dated as of the Closing Date and signed by an officer of STAR III containing representations of STAR III reasonably necessary or appropriate to enable Morrison to render the tax opinion described inSection 8.2(g).

(d) STAR and STAR III shall reasonably cooperate in the preparation, execution and filing of all returns, questionnaires, applications or other documents regarding any real property transfer or gains, sales, use, transfer, value added, stock transfer or stamp taxes, any transfer, recording, registration and other fees and any similar taxes that become payable in connection with the transactions contemplated by this Agreement (together with any related interest, penalties or additions to such taxes, “Transfer Taxes”), and shall reasonably cooperate in attempting to minimize the amount of Transfer Taxes.

(e) With respect to the taxable year of STAR III ending on the Closing Date, STAR III shall take all necessary actions, including without limitation, declaring and paying dividends sufficient to satisfy its requirement under Section 857(a)(1), to cause STAR III to qualify as a REIT for its shortened tax year ending on the Closing Date.

Section 7.13STAR III Designee. The STAR Board shall take or cause to be taken such action as may be necessary, in each case, to be effective as of the Merger Effective Time, to cause the individual set forth onSection 7.13 of the STAR III Disclosure Letter to be elected to the STAR Board effective as of the Merger Effective Time.

Section 7.14STAR Convertible Stock. STAR shall cause the STAR Convertible Stock to be redeemed for no consideration on or prior to the Merger Effective Time.

Section 7.15Section 16 Matters. Prior to the Merger Effective Time, each of the Parties hereto shall take all such steps as may be required to cause (a) any dispositions of STAR III Common Stock (including derivative securities with respect to STAR III Common Stock) resulting from the Merger and the other transactions

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contemplated by this Agreement, by each individual who will be subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to STAR III immediately prior to the Merger Effective Time to be exempt under Rule16b-3 promulgated under the Exchange Act and (b) any acquisitions of the STAR Common Stock (including derivative securities with respect to the STAR Common Stock) resulting from the Merger and the other transactions contemplated by this Agreement, by each individual who may become subject to the reporting requirements of Section 16(a) of the Exchange Act with respect to STAR to be exempt under Rule16b-3 promulgated under the Exchange Act.

ARTICLE 8

CONDITIONS

Section 8.1Conditions to Each Party’s Obligation to Effect theMerger. The respective obligations of the Parties to effect the Merger and to consummate the other transactions contemplated by this Agreement on the Closing Date are subject to the satisfaction or, to the extent permitted by Law, waiver by each of the Parties at or prior to the Merger Effective Time of the following conditions:

(a)Authorizations; Consents. All consents, authorizations, orders or approvals of each Governmental Authority, lender and other third parties necessary for the consummation of the Merger and the other transactions contemplated by this Agreement set forth inSection 8.1(a) of the STAR III Disclosure Letter andSection 8.1(a) of the STAR Disclosure Letter shall have been obtained and any applicable waiting periods in respect thereof shall have expired or been terminated.

(b)Stockholder Approval; Charter Amendment. The Stockholder Approval shall have been obtained in accordance with applicable Law and the STAR III Charter and STAR III Bylaws. The STAR III Charter Amendment shall have become effective pursuant to the MGCL.

(c)No Injunctions or Restraints. No Order issued by any Governmental Authority of competent jurisdiction prohibiting consummation of the Merger shall be in effect, and no Law shall have been enacted, entered, promulgated or enforced by any Governmental Authority after the date of this Agreement that, in any case, prohibits, restrains, enjoins or makes illegal the consummation of the Merger or the other transactions contemplated by this Agreement.

(d)Form S-4. TheForm S-4 shall have been declared effective by the SEC under the Securities Act and no stop order suspending the effectiveness of theForm S-4 shall have been issued by the SEC and no proceedings for that purpose shall have been initiated by the SEC that have not been withdrawn.

Section 8.2Conditions to Obligations ofthe STAR Parties. The obligations of the STAR Parties to effect the Merger and to consummate the other transactions contemplated by this Agreement are subject to the satisfaction or, to the extent permitted by Law, waiver by STAR, at or prior to the Merger Effective Time, of the following additional conditions:

(a)Representations and Warranties. (i) The representations and warranties of the STAR III Parties set forth in the Fundamental Representations (exceptSection 4.4(a) (Capital Structure)) shall be true and correct in all material respects as of the date of this Agreement and as of the Merger Effective Time, as though made as of the Merger Effective Time, (ii) the representations and warranties set forth inSection 4.4(a) (Capital Structure) shall be true and correct in all butde minimis respects as of the date of this Agreement and as of the Merger Effective Time, as though made as of the Merger Effective Time, and (iii) each of the other representations and warranties of the STAR III Parties contained in this Agreement shall be true and correct as of the date of this Agreement and as of the Merger Effective Time, as though made as of the Merger Effective Time, except (A) in each case, representations and warranties that are made as of a specific date shall be true and correct only on and as of such date, and (B) in the case of clause (iii) where the failure of such representations or warranties to be

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true and correct (without giving effect to any materiality or STAR III Material Adverse Effect qualifications set forth therein), individually or in the aggregate, does not have and would not reasonably be expected to have a STAR III Material Adverse Effect.

(b)Performance of Covenants and Obligations of the STAR III Parties. The STAR III Parties shall have performed in all material respects all obligations, and complied in all material respects with all agreements and covenants, required to be performed by them under this Agreement on or prior to the Merger Effective Time.

(c)Absence of Material Adverse Change. On the Closing Date, no circumstance shall exist that constitutes a STAR III Material Adverse Effect.

(d)Delivery of Certificate. STAR III shall have delivered to STAR a certificate, dated the date of the Closing and signed by its chief executive officer and chief financial officer on behalf of STAR III, certifying to the effect that the conditions set forth inSection 8.2(a),Section 8.2(b) andSection 8.2(c) have been satisfied.

(e)Consents. STAR III shall have delivered to STAR all approvals, consents and waivers that are listed onSection 8.1(a) of the STAR III Disclosure Letter, each in a form reasonably satisfactory to STAR.

(f)REIT Opinion. STAR shall have received a written opinion of DLA Piper, or other counsel to STAR III reasonably satisfactory to STAR, dated as of the Closing Date and in form and substance reasonably satisfactory to STAR, to the effect that, commencing with STAR III’s taxable year that ended on December 31, 2016, STAR III has been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code and its actual method of operation has enabled STAR III to meet, through the Merger Effective Time, the requirements for qualification and taxation as a REIT under the Code, which opinion will be subject to customary exceptions, assumptions and qualifications and based on customary representations contained in an officer’s certificate executed by STAR III and STAR III Operating Partnership.

(g)Section 368 Opinion. STAR shall have received a written opinion of Morrison, or other tax counsel to STAR reasonably satisfactory to STAR, dated as of the Closing Date and in form and substance reasonably satisfactory to STAR, to the effect that, on the basis of facts, representations and assumptions set forth or referred to in such opinion, the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code, which opinion will be subject to customary exceptions, assumptions and qualifications. In rendering such opinion, Morrison may rely upon the tax representation letters described inSection 7.12

Section 8.3Conditions to Obligations ofthe STAR III Parties. The obligations of the STAR III Parties to effect the Merger and to consummate the other transactions contemplated by this Agreement are subject to the satisfaction or, to the extent permitted by Law, waiver by STAR III at or prior to the Merger Effective Time, of the following additional conditions:

(a)Representations and Warranties. (i) The representations and warranties of the STAR Parties set forth in the Fundamental Representations (exceptSection 5.4(a) (Capital Structure)), shall be true and correct in all material respects as of the date of this Agreement and as of the Merger Effective Time, as though made as of the Merger Effective Time, (ii) the representations and warranties set forth inSection 5.4(a) (Capital Structure) shall be true and correct in all butde minimis respects as of the date of this Agreement and as of the Merger Effective Time, as though made as of the Merger Effective Time, and (iii) each of the other representations and warranties of the STAR Parties contained in this Agreement shall be true and correct as of the date of this Agreement and as of the Merger Effective Time, as though made as of the Merger Effective Time, except (A) in each case, representations and warranties that are made as of a specific date shall be true and correct only on and as of such date, and (B) in the case of clause (iii) where the failure of such representations or warranties to be true and correct (without giving effect to any materiality or STAR Material Adverse Effect qualifications set forth therein), individually or in the aggregate, does not have and would not reasonably be expected to have a STAR Material Adverse Effect.

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(b)Performance of Covenants and Obligations of the STAR Parties. The STAR Parties shall have performed in all material respects all obligations, and complied in all material respects with all agreements and covenants, required to be performed by them under this Agreement on or prior to the Merger Effective Time.

(c)Absence of Material Adverse Change. On the Closing Date, no circumstance shall exist that constitutes a STAR Material Adverse Effect.

(d)Delivery of Certificate. STAR shall have delivered to STAR III a certificate, dated the date of the Closing and signed by its chief executive officer and chief financial officer on behalf of STAR certifying to the effect that the conditions set forth inSection 8.3(a),Section 8.3(b) andSection 8.3(c) have been satisfied.

(e)REIT Opinion. STAR III shall have received a written opinion of Morrison or other counsel to STAR reasonably satisfactory to STAR III, dated as of the Closing Date and in form and substance reasonably satisfactory to STAR III, to the effect that, commencing with STAR’s taxable year that ended on December 31, 2014, STAR has been organized and operated in conformity with the requirements for qualification and taxation as a REIT under the Code and its proposed method of operation will enable STAR to meet, through the Closing, the requirements for qualification and taxation as a REIT under the Code, which opinion will be subject to customary exceptions, assumptions and qualifications and based on customary representations contained in an officer’s certificate executed by STAR and STAR Operating Partnership.

(f)Section 368 Opinion. STAR III shall have received a written opinion of DLA Piper, tax counsel to STAR III, or other tax counsel to STAR III reasonably satisfactory to STAR III, dated as of the Closing Date and in form and substance reasonably satisfactory to STAR III, to the effect that, on the basis of facts, representations and assumptions set forth or referred to in such opinion, the Merger will qualify as a reorganization within the meaning of Section 368(a) of the Code, which opinion will be subject to customary exceptions, assumptions and qualifications. In rendering such opinion, DLA Piper may rely upon the tax representation letters described inSection 7.12.

(g)Validity Opinion. STAR or STAR III shall have received a written opinion of Venable LLP, or other counsel to STAR reasonably satisfactory to STAR III and in form and substance reasonably satisfactory to STAR III and filed with the FormS-4, to the effect that the issuance of the Merger Consideration has been duly authorized and, when and if issued in connection with the Merger in accordance with the resolutions of the STAR Board, this Agreement and the Articles of Merger, the Merger Consideration will be validly issued, fully paid and nonassessable.

ARTICLE 9

TERMINATION, FEES AND EXPENSES, AMENDMENT AND WAIVER

Section 9.1Termination. This Agreement may be terminated and the Merger and the other transactions contemplated by this Agreement may be abandoned at any time prior to the Merger Effective Time, notwithstanding receipt of the Stockholder Approval (except as otherwise specified in thisSection 9.1):

(a) by mutual written consent of each of STAR and STAR III;

(b) by either STAR (with prior approval of the STAR Special Committee ) or by STAR III (with prior approval of the STAR III Special Committee):

(i) if the Merger shall not have occurred on or before 11:59 p.m. New York time on April 30, 2020 (the “Outside Date”);provided, that the right to terminate this Agreement pursuant to thisSection 9.1(b)(i) shall not be available to any Party if the failure of such Party (and (A) in the case of STAR, including the failure of the other STAR Parties, and (B) in the case of STAR III, including the

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failure of the other STAR III Parties) to perform or comply in all material respects with the obligations, covenants or agreements of such Party set forth in this Agreement shall have been the cause of, or resulted in, the failure of the Merger to be consummated by the Outside Date;

(ii) if any Governmental Authority of competent jurisdiction shall have issued an Order permanently restraining or otherwise prohibiting the transactions contemplated by this Agreement, and such Order shall have become final and nonappealable;provided, that the right to terminate this Agreement under thisSection 9.1(b)(ii) shall not be available to a Party if the issuance of such final,non-appealable Order was primarily due to the failure of such Party (and (A) in the case of STAR, including the failure of the other STAR Parties, and (B) in the case of STAR III, including the failure of the other STAR III Parties) to perform or comply in all material respects with any of its obligations, covenants or agreements under this Agreement; or

(iii) if the Stockholder Approval shall not have been obtained at the Stockholders Meeting duly convened therefor or at any adjournment or postponement thereof at which a vote on the approval of the Merger and the STAR III Charter Amendment is taken;provided, that the right to terminate this Agreement under thisSection 9.1(b)(iii) shall not be available to a Party if the failure to receive the Stockholder Approval was primarily due to the failure of a Party to perform or comply in all material respects with any of its obligations, covenants or agreements under this Agreement;

(c) by STAR III (with prior approval of the STAR III Special Committee):

(i) if a breach of any representation or warranty or failure to perform any obligation, covenant or agreement on the part of any of the STAR Parties set forth in this Agreement has occurred that would cause any of the conditions set forth inSection 8.1 orSection 8.3 not to be satisfied (a “STAR Terminating Breach”), which breach or failure to perform cannot be cured ,or, if capable of cure, has not been cured by the earlier of twenty (20) days following written notice thereof from STAR III to STAR and two (2) Business Days before the Outside Date;provided, that STAR III shall not have the right to terminate this Agreement pursuant to thisSection 9.1(c)(i) if a STAR III Terminating Breach shall have occurred and be continuing at the time STAR III delivers notice of its election to terminate this Agreement pursuant to thisSection 9.1(c)(i); or

(ii) at any time before Stockholder Approval is obtained, in order to enter into an Alternative Acquisition Agreement with respect to a Superior Proposal in accordance with the provisions ofSection 7.3;provided,however, that this Agreement may not be so terminated unless STAR III shall have complied withSection 7.3 and shall have paid or shall concurrently pay the Termination Payment in accordance withSection 9.3(b) in full to STAR.

(d) by STAR:

(i) if a breach of any representation or warranty or failure to perform any obligation, covenant or agreement on the part of any of the STAR III Parties set forth in this Agreement has occurred that would cause any of the conditions set forth inSection 8.1 orSection 8.2 not to be satisfied (a “STAR III Terminating Breach”), which breach or failure to perform cannot be cured, or if capable of cure, has not been cured by the earlier of twenty (20) days following written notice thereof from STAR to STAR III and two (2) Business Days before the Outside Date;provided, that STAR shall not have the right to terminate this Agreement pursuant to thisSection 9.1(d)(i) if a STAR Terminating Breach shall have occurred and be continuing at the time STAR delivers notice of its election to terminate this Agreement pursuant to thisSection 9.1(d)(i); or

(ii) if, at any time prior to the receipt of the Stockholder Approval, (A) the STAR III Board has made an Adverse Recommendation Change, (B) a tender offer or exchange offer for any shares of STAR III Common Stock that constitutes an Acquisition Proposal (other than by STAR or any of its Affiliates) is commenced and the STAR III Board fails to recommend against acceptance of such tender offer or exchange offer by the stockholders of STAR III and to publicly reaffirm the STAR III

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Board Recommendation within ten (10) Business Days of being requested to do so by STAR, or (C) STAR III shall have violated any of its obligations underSection 7.3 (other than any immaterial or inadvertent violations thereof that did not result in an Alternative Acquisition Proposal).

Section 9.2Effect of Termination. In the event of termination of this Agreement as provided inSection 9.1, written notice thereof shall forthwith be given to the other Parties, in accordance with the provisions ofSection 10.2, specifying the provision hereof pursuant to which such termination is made, and this Agreement shall forthwith become void and have no effect, without any liability or obligation on the part of the STAR Parties or the STAR III Parties, except that the Confidentiality Agreements and the provisions ofSection 7.4 (Public Announcements), thisSection 9.2,Section 9.3 (Fees and Expenses),Section 9.4(Amendment), andArticle 10 (General Provisions) of this Agreement shall survive the termination hereof;provided, that no such termination shall relieve any Party from any liability or damages resulting from any fraud or willful and material breach of any of its covenants, obligations or agreements set forth in this Agreement.

Section 9.3Fees and Expenses.

(a) Except as otherwise provided in thisSection 9.3, all Expenses shall be paid by the party incurring such fees or expenses, whether or not the Merger is consummated;provided that the Parties will share equally anyForm S-4 filing fees as may be required to consummate the transactions contemplated by this Agreement.

(b) In the event that this Agreement is terminated:

(i) (A) by STAR pursuant toSection 9.1(d)(i), on account of a failure to perform any obligation, covenant or agreement on the part of any of the STAR III Parties set forth in this Agreement, and after the date hereof and prior to the failure to perform giving rise to such right of termination, an Acquisition Proposal (with, for all purposes of thisSection 9.3(b)(i), all percentages included in the definition of “Acquisition Proposal” increased to 50%) has been publicly announced, disclosed or otherwise communicated to the STAR III Board or any Person shall have publicly announced an intention (whether or not conditional) to make such an Acquisition Proposal or (B) by STAR III or STAR pursuant toSection 9.1(b)(i) orSection 9.1(b)(iii), and after the date of this Agreement but prior to the Stockholders Meeting, an Acquisition Proposal with respect to STAR III has been publicly announced, disclosed or otherwise communicated to STAR III’s stockholders (and not withdrawn) or any Person shall have publicly announced an intention (whether or not conditional) to make such an Acquisition Proposal, and, in either case, within twelve (12) months after the date of such termination, a transaction in respect of an Acquisition Proposal with respect to STAR III is consummated or STAR III enters into a definitive agreement in respect of an Acquisition Proposal with respect to STAR III that is later consummated, STAR III shall pay to STAR the Full Termination Payment;

(ii) by STAR III pursuant toSection 9.1(c)(ii), then STAR III shall pay to STAR (A) an amount equal to the Go Shop Termination Payment if such termination occurs no later than (x) five (5) Business Days after theGo-Shop Period End Time or (y) in the event of timely delivery of a STAR III Change Notice with respect to a Go Shop Bidder, the negotiation period contemplated bySection 7.3(e) and (B) an amount equal to the Full Termination Payment if the event giving rise to STAR III’s termination right occurred thereafter; or

(iii) by STAR pursuant toSection 9.1(d)(ii), then STAR III shall pay to STAR (A) an amount equal to the Go Shop Termination Payment if the event giving rise to STAR’s termination right occurred no later than (x) five (5) Business Days after theGo-Shop Period End Time or (y) in the event of timely delivery of a STAR III Change Notice with respect to a Go Shop Bidder, the negotiation period contemplated bySection 7.3(e) and (B) an amount equal to the Full Termination Payment if the event giving rise to STAR’s termination right occurred thereafter.

(c)Termination Payment. The Parties agree and acknowledge that in no event shall STAR III be required to pay the applicable Termination Payment on more than one occasion. Payment of the Termination

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Payment shall be made by wire transfer of same day funds to the account or accounts designated by STAR III: (i) within two (2) Business Days after the consummation of any transaction contemplated by an Acquisition Proposal, in the case of a Termination Payment payable pursuant toSection 9.3(b)(i); and (ii) as promptly as reasonably practicable after termination (and, in any event, within two (2) Business Days thereof), in the case of a Termination Payment payable pursuant toSection 9.3(b)(ii) orSection 9.3(b)(iii).

(d) Notwithstanding anything in this Agreement to the contrary, in the event that the Termination Payment becomes payable, then such payment shall be STAR’s and its Affiliates’ sole and exclusive remedy as liquidated damages for any and all losses or damages of any nature against STAR III and its Subsidiaries and their respective Representatives in respect of this Agreement, any agreement executed in connection herewith, and the transactions contemplated hereby and thereby, including for any loss or damage suffered as a result of the termination of this Agreement, the failure of the Merger to be consummated or for a breach or failure to perform hereunder (whether intentionally, unintentionally, or otherwise) or otherwise.

(e) Each of the Parties acknowledges that the agreements contained in thisSection 9.3 are an integral part of the transactions contemplated by this Agreement, and that without these agreements, the other Parties would not enter into this Agreement. In the event that STAR III shall fail to pay the applicable Termination Payment when due, STAR III shall reimburse the STAR for all reasonable costs and expenses actually incurred or accrued by STAR (including reasonable fees and expenses of counsel) in connection with the collection under and enforcement of thisSection 9.3. Further, if STAR III fails to timely pay any amount due pursuant toSection 9.3(b), and, in order to obtain the payment, STAR commences a suit which results in a judgment against STAR III for the payment set forth in thisSection 9.3, STAR III shall pay to STAR its reasonable and documented costs and expenses (including reasonable and documented attorneys’ fees) in connection with such suit, together with interest on such amount at a rate per annum equal to the prime rate published in the Wall Street Journal in effect on the date such payment was required to be made through the date of payment.

(f) If STAR III becomes obligated to pay a fee under thisSection 9.3, then STAR III shall deposit into escrow an amount in cash equal to the applicable Termination Payment with an escrow agent reasonably selected by STAR, after reasonable consultation with STAR III, and pursuant to a written escrow agreement (the “Escrow Agreement”) reflecting the terms set forth in thisSection 9.3 and otherwise reasonably acceptable to each of the Parties and the escrow agent. The payment or deposit into escrow of the applicable Termination Payment pursuant to thisSection 9.3(b) shall be made by STAR III promptly after receipt of notice from STAR that the Escrow Agreement has been executed by the parties thereto and once deposited in escrow shall relieve STAR III from any further obligation to pay any fee required under thisSection 9.3. The Escrow Agreement shall provide that the Termination Payment in escrow or the applicable portion thereof shall be released to STAR on an annual basis based upon the delivery by STAR to the escrow agent of any one (or a combination) of the following:

(i) a letter from STAR’s independent certified public accountants indicating the maximum amount that can be paid by the escrow agent to STAR without causing STAR to fail to meet the requirements of Sections 856(c)(2) and (3) of the Code for the applicable taxable year of STAR determined as if the payment of such amount did not constitute income described in Sections 856(c)(2)(A) (H) or 856(c)(3)(A) (I) of the Code (such income, “Qualifying REIT Income”), in which case the escrow agent shall release to STAR such maximum amount stated in the accountant’s letter;

(ii) a letter from STAR’s counsel indicating that STAR received a private letter ruling from the IRS holding that the receipt by STAR of the applicable Termination Payment would either constitute Qualifying REIT Income or would be excluded from gross income within the meaning of Sections 856(c)(2) and (3) of the Code, in which case the escrow agent shall release to STAR the remainder of the applicable Termination Payment; or

(iii) a letter from STAR’s counsel indicating that STAR has received a tax opinion from STAR’s outside counsel or accountant, respectively, to the effect that the receipt by STAR of the applicable Termination Payment should either constitute Qualifying REIT Income or should be excluded from

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gross income within the meaning of Section 856(c)(2) and (3) of the Code, in which case the escrow agent shall release to STAR the remainder of the applicable Termination Payment.

The Parties agree to cooperate in good faith to amend thisSection 9.3(f) at the reasonable request of STAR in order to (A) maximize the portion of the applicable Termination Payment that may be distributed to STAR hereunder without causing STAR to fail to meet the requirements of Sections 856(c)(2) and (3) of the Code, (B) improve STAR’s chances of securing the favorable private letter ruling from the IRS described in thisSection 9.3(f) or (C) assist STAR in obtaining the favorable tax opinion from its outside counsel or accountant described in thisSection 9.3(f). The Escrow Agreement shall provide that STAR shall bear all costs and expenses under the Escrow Agreement and that any portion of the applicable Termination Payment held in escrow for ten (10) years shall be released by the escrow agent to STAR III. STAR III shall not be a party to the Escrow Agreement and shall not bear any liability, cost or expense resulting directly or indirectly from the Escrow Agreement (other than any Taxes imposed on STAR III in connection therewith). STAR shall fully indemnify STAR III and hold STAR III harmless from and against any such liability, cost or expense.

Section 9.4Amendment. Subject to compliance with applicable Law, this Agreement may be amended by mutual agreement of the Parties by action taken or authorized by the STAR Special Committee and the STAR III Special Committee, respectively, at any time before or after receipt of the Stockholder Approval and prior to the Merger Effective Time; provided, that after the Stockholder Approval has been obtained, there shall not be (i) any amendment of this Agreement that changes the amount or the form of the consideration to be delivered under this Agreement to the holders of STAR III Common Stock, or which by applicable Law requires the further approval of the stockholders of STAR III without such further approval of such stockholders, or (ii) any amendment or change not permitted under applicable Law. This Agreement may not be amended except by an instrument in writing signed by each of the Parties.

ARTICLE 10

GENERAL PROVISIONS

Section 10.1Nonsurvival of Representations and Warranties and Certain Covenants. None of the representations and warranties in this Agreement or in any instrument delivered pursuant to this Agreement shall survive the Merger Effective Time. The covenants to be performed prior to or at the Closing shall terminate at the Closing. ThisSection 10.1 shall not limit any covenant or agreement of the Parties that by its terms contemplates performance after the Merger Effective Time.

Section 10.2Notices. All notices, requests, claims, consents, demands and other communications under this Agreement shall be in writing and shall be deemed given if delivered personally, sent by overnight courier (providing proof of delivery) to the Parties or sent by facsimile ore-mail of a pdf attachment (providing confirmation of transmission) at the following addresses or facsimile numbers (or at such other address or facsimile number for a Party as shall be specified by like notice):

(a) if to a STAR III Party to:

Special Committee of the Board of Directors

c/o Steadfast Apartment REIT III, Inc.

18100 Von Karman Avenue, Suite 500

Irvine, CA 92612

Attn: Stephen Bowie

email: srbowie.ssc@gmail.com

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with copies (which shall not constitute notice) to:

DLA Piper LLP (US)

4141 Parklake Avenue, Suite 300

Raleigh, North Carolina 27612

Attn: Robert H. Bergdolt

email: robert.bergdolt@dlapiper.com

(b) if to a STAR Party to:

Special Committee of the Board of Directors

c/o Steadfast Apartment REIT, Inc.

18100 Von Karman Avenue, Suite 500

Irvine, CA 92612

Attn: Thomas Purcell

email: tom@curcicompanies.com

with copies (which shall not constitute notice) to:

Venable, LLP

750 E. Pratt Street, Suite 900

Baltimore, MD 21202

Attn: Sharon Kroupa

email: sakroupa@venable.com

Morrison & Foerster LLP

3500 Lenox Road, N.E., Suite 1500

Atlanta, GA 30326

Attention: Heath D. Linsky

email: hlinsky@mofo.com

Section 10.3Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced under any present or future Law, or public policy, (a) such term or other provision shall be fully separable, (b) this Agreement shall be construed and enforced as if such invalid, illegal or unenforceable provision had never comprised a part hereof, and (c) all other conditions and provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable term or other provision or by its severance herefrom so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in a mutually acceptable manner in order that transactions contemplated by this Agreement be consummated as originally contemplated to the fullest extent possible.

Section 10.4Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed an original and all of which together shall be deemed one and the same agreement, and shall become effective when one or more counterparts have been signed by each of the Parties and delivered (by telecopy, electronic delivery or otherwise) to the other Parties. Signatures to this Agreement transmitted by facsimile transmission, by electronic mail in “portable document form” or by any other electronic means intended to preserve the original graphic and pictorial appearance of a document, will have the same effect as physical delivery of the paper document bearing the original signature.

Section 10.5Entire Agreement; No Third-Party Beneficiaries. This Agreement (including the Exhibits, Schedules, the STAR Disclosure Letter and the STAR III Disclosure Letter), the Confidentiality Agreements (a) constitute the entire agreement and supersede all prior agreements and understandings, both written and oral, between the Parties with respect to the subject matter of this Agreement and, (b) except for the provisions of

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Article 3 (which, from and after the Merger Effective Time, shall be for the benefit of holders of shares of STAR III Common Stock immediately prior to the Merger Effective Time) andSection 7.7 (which, from and after the Merger Effective Time shall be for the benefit of the Indemnified Parties) are not intended to confer upon any Person other than the Parties hereto any rights or remedies.

Section 10.6Extension; Waiver. At any time prior to the Merger Effective Time, the Parties may, to the extent legally allowed and except as otherwise set forth herein, (a) extend the time for the performance of any of the obligations or other acts of the other Parties, (b) waive any inaccuracies in the representations and warranties of the other Party contained in this Agreement or in any document delivered pursuant to this Agreement or (c) subject to the requirements of applicable Law, waive compliance with any of the agreements or conditions contained in this Agreement. Any agreement on the part of a Party to any such extension or waiver shall be valid only if set forth in an instrument in writing signed on behalf of such Party. The failure of any Party to this Agreement to assert any of its rights under this Agreement or otherwise shall not constitute a waiver of those rights.

Section 10.7Governing Law; Venue.

(a) This Agreement, and all claims or causes of actions (whether at Law, in contract or in tort) that may be based upon, arise out of or related to this Agreement or the negotiation, execution or performance of this Agreement, shall be governed by, and construed in accordance with, the laws of the State of Maryland without giving effect to its conflicts of laws principles (whether the State of Maryland or any other jurisdiction that would cause the application of the Laws of any jurisdiction other than the State of Maryland).

(b) All disputes arising out of or relating to this Agreement shall be heard and determined exclusively in any Maryland state or federal court. Each of the Parties hereby irrevocably and unconditionally (i) submits to the exclusive jurisdiction of any such Maryland state or federal court, for the purpose of any dispute arising out of or relating to this Agreement brought by any Party, (ii) agrees not to commence any such dispute except in such courts, (iii) agrees that any claim in respect of any such dispute may be heard and determined in any such Maryland state or federal court, (iv) waives, to the fullest extent it may legally and effectively do so, any objection which it may now or hereafter have to the laying of venue of any such dispute, (v) waives, to the fullest extent permitted by Law, the defense of an inconvenient forum to the maintenance of such dispute, and (vi) agrees, with respect to any Action filed in a Maryland state court, to jointly request an assignment to the Maryland Business and Technology Case Management Program. Each of the Parties agrees that a final judgment in any such dispute shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by Law. Each Party irrevocably consents to service of process in the manner provided for notices inSection 10.2. Nothing in this Agreement will affect the right of any Party to serve process in any other manner permitted by Law.

Section 10.8Assignment. Neither this Agreement nor any of the rights, interests or obligations under this Agreement shall be assigned or delegated, in whole or in part, by operation of Law or otherwise by any of the Parties without the prior written consent of the other Parties. This Agreement will be binding upon, inure to the benefit of, and be enforceable by, the Parties and their respective successors and assigns.

Section 10.9Specific Performance. The Parties agree that irreparable damage would occur if any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached, and that monetary damages, even if available, would not be an adequate remedy therefor. It is accordingly agreed that, prior to the termination of this Agreement pursuant toArticle 9, each Party shall be entitled to an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, and each Party hereby waives any requirement for the securing or posting of any bond in connection with such remedy, this being in addition to any other remedy to which such Party is entitled at Law or in equity.

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Section 10.10Waiver of Jury Trial. EACH PARTY HEREBY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. EACH PARTY (A) CERTIFIES THAT NO REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH PARTY WOULD NOT, IN THE EVENT OF ANY ACTION, SUIT OR PROCEEDING, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT, BY, AMONG OTHER THINGS, THE MUTUAL WAIVER AND CERTIFICATIONS IN THISSECTION 10.10.

Section 10.11Authorship. The Parties agree that the terms and language of this Agreement are the result of negotiations between the Parties and their respective advisors and, as a result, there shall be no presumption that any ambiguities in this Agreement shall be resolved against any Party. Any controversy over construction of this Agreement shall be decided without regard to events of authorship or negotiation.

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be signed by their respective duly authorized officers, all as of the date first written above.

STEADFAST APARTMENT REIT, INC.
By:	/s/ Rodney F. Emery
	Name: Rodney F. Emery
	Title: Chief Executive Officer and Chairman of the Board of Directors
STEADFAST APARTMENT REIT OPERATING PARTNERSHIP, L.P.
	By: Steadfast Apartment REIT, Inc., not in its individual capacity but solely as general partner
By:	/s/ Rodney F. Emery
	Name: Rodney F. Emery
	Title: Chief Executive Officer and Chairman of the Board of Directors
SIII SUBSIDIARY, LLC
	By: Steadfast Apartment REIT, Inc., its Member
By:	/s/ Rodney F. Emery
	Name: Rodney F. Emery
	Title: Chief Executive Officer and Chairman of the Board of Directors

[Signature Page to the Agreement and Plan of Merger]

STEADFAST APARTMENT REIT III, INC.
By:	/s/ Kevin Keating
	Name: Kevin Keating
	Title: Chief Financial Officer
STEADFAST APARTMENT REIT III OPERATING PARTNERSHIP, L.P.
	By:Steadfast Apartment REIT III, Inc., not in its individual capacity but solely as general partner
By:	/s/ Kevin Keating
	Name: Kevin Keating
	Title: Chief Financial Officer

[Signature Page to the Agreement and Plan of Merger]

Annex B

STEADFAST APARTMENT REIT III, INC.

ARTICLES OF AMENDMENT

Steadfast Apartment REIT III, Inc., a Maryland corporation (the “Corporation”), hereby certifies to the State Department of Assessments and Taxation of Maryland that:

FIRST: The charter of the Corporation (the “Charter”) is hereby amended by deleting the definitions of“Roll-Up Entity” and“Roll-Up Transaction” in Article IV of the Charter in their entirety.

SECOND: The Charter is hereby further amended by deleting the existing Article XIV(“Roll-Up Transactions”) of the Charter in its entirety.

THIRD: The foregoing amendments have been duly advised by the Board of Directors of the Corporation and approved by the stockholders of the Corporation as required by law.

FOURTH: The undersigned acknowledges these Articles of Amendment to be the corporate act of the Corporation and as to all matters or facts required to be verified under oath, the undersigned acknowledges that to the best of his knowledge, information and belief, these matters and facts are true in all material respects and that this statement is made under the penalties for perjury.

- signature page follows-

B-1

IN WITNESS WHEREOF, the Corporation has caused these Articles of Amendment to be executed in its name and on its behalf by its                  and attested to by its                  on this      day of                 , 20    .

ATTEST:	STEADFAST APARTMENT REIT III, INC.
By:	By:
Name: Title:	Name: Title:

B-2

Annex C

August 5, 2019

The Special Committee of the Board of Directors

Steadfast Apartment REIT III, Inc.

18100 Von Karman Avenue, Suite 500

Irvine, California 92612

Dear Special Committee:

We understand that Steadfast Apartment REIT III, Inc. (the “Company”), Steadfast Apartment REIT III Operating Partnership, L.P., which is the operating partnership of the Company (the “Company Operating Partnership”), Steadfast Apartment REIT, Inc. (“STAR”), SIII Subsidiary, LLC (“Merger Sub”), which is a wholly owned subsidiary of STAR, and Steadfast Apartment REIT Operating Partnership, L.P. (the “STAR Operating Partnership”), which is the operating partnership of STAR, propose to enter into the Agreement (defined below), pursuant to which, among other things, (a) the Company will be merged with and into Merger Sub (the “Transaction”), and (b) in connection with the Transaction, each outstanding share of Class A common stock, par value $0.01 per share, of the Company, each outstanding share of Class R common stock, par value $0.01 per share, of the Company and each outstanding share of Class T common stock, par value $0.01 per share, of the Company (such Class A, Class R and Class T common stock, collectively, “Company Common Stock”) will be converted into the right to receive 1.43 (the “Exchange Ratio”) shares of common stock, par value $0.01 per share, of STAR (“STAR Common Stock”). We also understand that the Agreement will permit STAR to take the actions required by a separate merger agreement (the “SIR Acquisition Agreement”) to be entered into concurrently with the execution of the Agreement, providing for the acquisition of Steadfast Income REIT, Inc. (“SIR”) by STAR (the “SIR Acquisition”).

The Special Committee (the “Committee”) of the Board of Directors (the “Board”) of the Company has requested that Houlihan Lokey Capital, Inc. (“Houlihan Lokey”) provide an opinion (the “Opinion”) to the Committee as to whether, as of the date hereof, the Exchange Ratio provided for in the Transaction pursuant to the Agreement is fair to the holders of Company Common Stock from a financial point of view.

In connection with this Opinion, we have made such reviews, analyses and inquiries as we have deemed necessary and appropriate under the circumstances. Among other things, we have:

1. reviewed an execution version of the Agreement and Plan of Merger, dated as of August 5, 2019, to be entered into by the Company, the Company Operating Partnership, STAR, Merger Sub and the STAR Operating Partnership (the “Agreement”);

2. reviewed certain publicly available business and financial information relating to the Company, STAR and SIR that we deemed to be relevant, including the reported estimate of the value of SIR’s joint venture investment as of December 31, 2018 contained in certain public filings of SIR;

3. reviewed certain information relating to the historical, current and future operations, financial condition and prospects of the Company and its portfolio properties (the “Company Portfolio Properties”) made available to us by the Company, including (a) certain financial projections prepared by the management of Steadfast Apartment Advisor III, LLC, which is the external investment advisor of the Company and the Company Operating Partnership (the “Company Advisor”), relating to the Company Portfolio Properties

245 Park Avenue, 20th Floor • New York, New York 10167 • tel. 212.497.4100 • fax. 212.661.3070 •www.HL.com

Broker/dealer services through Houlihan Lokey Capital, Inc.

Special Committee

The Special Committee of the Board of Directors

August 5, 2019

for the years 2019 through 2024 that we have been directed by the Company and the Company Advisor to rely upon and utilize for purposes of our analyses and this Opinion and (b) certain cash projections prepared by the Company Advisor relating to the Company for 2019;

4. reviewed certain information relating to the historical, current and future operations, financial condition and prospects of STAR (both on a standalone basis and giving effect to the SIR Acquisition), the portfolio properties of STAR (the “STAR Portfolio Properties”) and the portfolio properties of SIR that will be acquired by STAR in the SIR Acquisition, if consummated (the “SIR Portfolio Properties”), made available to us by STAR and SIR, including (a) certain financial projections prepared by the management of Steadfast Apartment Advisor , LLC, which is the external investment advisor of STAR and the STAR Operating Partnership (the “STAR Advisor”), relating to the STAR Portfolio Properties and the SIR Portfolio Properties for the years 2019 through 2024 that we have been directed by STAR and the STAR Advisor to rely upon and utilize for purposes of our analyses and this Opinion and (b) certain cash projections prepared by the STAR Advisor relating to STAR and SIR for 2019;

5. spoken with certain members of the managements of the Company Advisor and the STAR Advisor regarding the respective businesses, operations, financial condition and prospects of the Company and STAR (both on a standalone basis and giving effect to the SIR Acquisition), the Company Portfolio Properties, the STAR Portfolio Properties, the SIR Portfolio Properties, the Transaction, the SIR Acquisition and related matters; and

6. conducted such other financial studies, analyses and inquiries and considered such other information and factors as we deemed appropriate.

We have relied upon and assumed, without independent verification, the accuracy and completeness of all data, material and other information furnished, or otherwise made available, to us, discussed with or reviewed by us, or publicly available, and do not assume any responsibility with respect to such data, material and other information. In addition, managements of the Company Advisor and the STAR Advisor have advised us, and we have assumed, that the financial projections and other estimates reviewed by us have been reasonably prepared in good faith on bases reflecting the best currently available estimates and judgments of such managements, as the case may be (or, in the case of the publicly reported estimate of value of SIR’s joint venture investment referred to above, represent reasonable estimates and judgments), as to the future financial results and condition of the Company Portfolio Properties, the STAR Portfolio Properties and the SIR Portfolio Properties and as to the other matters covered thereby, and we express no opinion with respect to such projections or the assumptions on which they are based. At the direction of the Company, we have neither utilized nor relied upon the financial projections relating to the Company Portfolio Properties, the STAR Portfolio Properties and the SIR Portfolio Properties for periods beyond the year 2024 which were utilized in certain third party valuation reports obtained by the Company, STAR and SIR and reviewed by us. We have relied upon and assumed, without independent verification, that there has been no change in the businesses, assets, liabilities, financial condition, results of operations, cash flows or prospects of the Company, STAR (both on a standalone basis and giving effect to the SIR Acquisition), SIR or any of the Company Portfolio Properties, the STAR Portfolio Properties or the SIR Portfolio Properties since the respective dates of the most recent financial statements and other information, financial or otherwise, provided to us that would be material to our analyses or this Opinion, that the financial statements and other information (including the financial projections) reviewed by us reflect all of the assets and liabilities of the Company and STAR (both on a standalone basis and giving effect to the SIR Acquisition) and that there is no information or any facts that would make any of the information reviewed by us incomplete or misleading. In reaching our conclusions hereunder, we have performed and relied upon solely discounted cash flow analyses of the Company Portfolio Properties, the STAR Portfolio Properties and the SIR Portfolio Properties.

C-2

Special Committee

The Special Committee of the Board of Directors

August 5, 2019

We have relied upon and assumed, without independent verification, that (a) the representations and warranties of all parties to the Agreement and all other related documents and instruments that are referred to therein (including, without limitation, the SIR Acquisition Agreement) are true and correct, (b) each party to the Agreement and such other related documents and instruments will fully and timely perform all of the covenants and agreements required to be performed by such party, (c) all conditions to the consummation of the Transaction will be satisfied without waiver thereof, and (d) the Transaction and, if consummated, the SIR Acquisition will be consummated in a timely manner in accordance with the terms described in the Agreement and such other related documents and instruments and as otherwise described to us by representatives of the Company and STAR, without any amendments or modifications thereto. We have also assumed, with the consent of the Committee, that the Transaction will qualify for the intended tax treatment described in the Agreement for U.S. federal income tax purposes. We have relied upon and assumed, without independent verification, that (i) the Transaction and, if consummated, the SIR Acquisition will be consummated in a manner that complies in all respects with all applicable federal and state statutes, rules and regulations, and (ii) all governmental, regulatory, and other consents and approvals necessary for the consummation of the Transaction and, if consummated, the SIR Acquisition will be obtained and that no delay, limitations, restrictions or conditions will be imposed or amendments, modifications or waivers made that would result in the disposition of any assets of the Company, STAR or SIR, or otherwise have an effect on the Transaction, the Company, STAR, SIR, the Company Portfolio Properties, the STAR Portfolio Properties, the SIR Portfolio Properties or any expected benefits of the Transaction, that would be material to our analyses or this Opinion. In addition, we have relied upon and assumed, without independent verification, that the final form of the Agreement will not differ in any respect from the execution version of the Agreement identified above.

Furthermore, in connection with this Opinion, we have not been requested to make, and have not made, any physical inspection or independent appraisal of any of the assets, properties or liabilities (fixed, contingent, derivative, off-balance-sheet or otherwise) of the Company (including, without limitation, any of the Company Portfolio Properties), STAR (including, without limitation, any of the STAR Portfolio Properties), SIR (including, without limitation, any of the SIR Portfolio Properties) or any other party. We express no opinion as to the value of any of the Company Portfolio Properties, the STAR Portfolio Properties or the SIR Portfolio Properties, or the price at which any such property may be transferable, at any time. We did not estimate, and express no opinion regarding, the liquidation value of any entity or business. We have undertaken no independent analysis of any potential or actual litigation, regulatory action, possible unasserted claims or other contingent liabilities, to which the Company, STAR, SIR or any of the Company Portfolio Properties, the STAR Portfolio Properties or the SIR Portfolio Properties is or may be a party or is or may be subject, or of any governmental investigation of any possible unasserted claims or other contingent liabilities to which the Company, STAR, SIR or any of the Company Portfolio Properties, the STAR Portfolio Properties or the SIR Portfolio Properties is or may be a party or is or may be subject. We have relied upon and assumed, without independent verification, that each of the Company, STAR and SIR has operated in conformity with the requirements for qualification as a REIT for federal income tax purposes since its formation as a REIT, and also have relied upon and assumed, without independent verification, that the Transaction and, if consummated, the SIR Acquisition will not adversely affect the REIT status of STAR.

We have not been requested to, and did not, initiate any discussions with, or solicit any indications of interest from, third parties with respect to the Transaction, the securities, assets, businesses or operations of the Company or any other party, or any alternatives to the Transaction. We express no view or opinion as to any such matters, including the terms that could have been obtained if any of the foregoing had been undertaken. This Opinion is necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to us as of, the date hereof. We have not undertaken, and are under no obligation, to update, revise, reaffirm or withdraw this Opinion, or otherwise comment on or consider events occurring or

C-3

Special Committee

The Special Committee of the Board of Directors

August 5, 2019

coming to our attention after the date hereof. We are not expressing any opinion as to what the value of STAR Common Stock actually will be when issued pursuant to the Transaction or the price or range of prices at which STAR Common Stock, Company Common Stock or any other securities of STAR, the Company or SIR may be purchased or sold, or otherwise be transferable, at any time.

This Opinion is furnished for the use of the Committee (in its capacity as such) in connection with its evaluation of the Transaction and may not be used for any other purpose without our prior written consent. This Opinion should not be construed as creating any fiduciary duty on Houlihan Lokey’s part to any party. This Opinion is not intended to be, and does not constitute, a recommendation to the Committee, the Board, the Company, any security holder or any other party as to how to act or vote with respect to any matter relating to the Transaction, the SIR Acquisition or otherwise.

In the ordinary course of business, certain of our employees and affiliates, as well as investment funds in which they may have financial interests or with which they may co-invest, may acquire, hold or sell, long or short positions, or trade, in debt, equity, and other securities and financial instruments (including loans and other obligations) of, or investments in, the Company, STAR, SIR or any other party that may be involved in the Transaction or the SIR Acquisition and their respective affiliates or security holders or any currency or commodity that may be involved in the Transaction or the SIR Acquisition.

Houlihan Lokey and certain of its affiliates may provide investment banking, financial advisory and/or other financial or consulting services to the Company, STAR, SIR, Steadfast REIT Investments, LLC (“Steadfast”) or one or more security holders and/or affiliates of Steadfast (collectively, with Steadfast, the “Steadfast Group”), other participants in the Transaction or the SIR Acquisition or certain of their respective affiliates or security holders in the future, for which Houlihan Lokey and its affiliates may receive compensation. Furthermore, in connection with bankruptcies, restructurings, distressed situations and similar matters, Houlihan Lokey and certain of its affiliates may have in the past acted, may currently be acting and may in the future act as financial advisor to debtors, creditors, equity holders, trustees, agents and other interested parties (including, without limitation, formal and informal committees or groups of creditors) that may have included or represented and may include or represent, directly or indirectly, or may be or have been adverse to, the Company, STAR, SIR, other members of the Steadfast Group, other participants in the Transaction or the SIR Acquisition or certain of their respective affiliates or security holders, for which advice and services Houlihan Lokey and its affiliates have received and may receive compensation.

Houlihan Lokey has also acted as financial advisor to the Committee in connection with, and has participated in certain of the negotiations leading to, the Transaction and will receive a fee for such services, a portion of which is contingent upon the consummation of the Transaction or other merger or sale transaction. In addition, we will receive a fee for rendering this Opinion, which is not contingent upon the successful completion of the Transaction or the conclusion contained in this Opinion. The Company has agreed to reimburse certain of our expenses and to indemnify us and certain related parties for certain potential liabilities arising out of our engagement.

We have not been asked to, and we do not, express any opinion with respect to any matter other than the fairness, from a financial point of view, of the Exchange Ratio provided for in the Transaction pursuant to the Agreement to the holders of Company Common Stock, without regard to differences among the classes of Company Common Stock. The Company has advised us, and we have relied upon and assumed, without independent verification, that such classes of Company Common Stock are economically equivalent. We have not been requested to opine as to, and this Opinion does not express an opinion as to or otherwise address, among other things: (i) the underlying business decision of the Committee, the Board, the Company, its security holders

C-4

Special Committee

The Special Committee of the Board of Directors

August 5, 2019

or any other party to proceed with or effect the Transaction, (ii) the terms of any arrangements, understandings, agreements or documents related to, or the form, structure or any other portion or aspect of, the Transaction (other than the Exchange Ratio to the extent expressly specified herein) or otherwise, including, without limitation, the fees and expenses to be paid to the Company Advisor and the STAR Advisor in connection with the Transaction, any term or other aspect of the termination agreement to be entered into by the Company, the Company Operating Partnership and the Company Advisor, the amended and restated advisory agreement to be entered into by STAR, the STAR Operating Partnership and the STAR Advisor, the amended and restated agreement of limited partnership to be entered into by the Company Operating Partnership and the amendment to the charter of the Company to be effected in connection with the Transaction and any term or other aspect of the SIR Acquisition or the SIR Acquisition Agreement, (iii) the fairness of any portion or aspect of the Transaction or the SIR Acquisition to the holders of any class of securities, creditors or other constituencies of the Company, STAR or SIR, or to any other party, except if and only to the extent expressly set forth in the last sentence of this Opinion, (iv) the relative merits of the Transaction as compared to any alternative business strategies or transactions that might be available for the Company or any other party, (v) the fairness of any portion or aspect of the Transaction or the SIR Acquisition to any one class or group of the Company’s, STAR’s, SIR’s or any other party’s security holders or other constituents vis-à-vis any other class or group of the Company’s, STAR’s, SIR’s or such other party’s security holders or other constituents (including, without limitation, the allocation of any consideration amongst or within such classes or groups of security holders or other constituents and the relative fairness of the Exchange Ratio and the consideration to be paid by STAR to the holders of the common stock of SIR in the SIR Acquisition), (vi) whether or not the Company, STAR, SIR, their respective security holders or any other party is receiving or paying reasonably equivalent value in the Transaction or the SIR Acquisition, (vii) the solvency, creditworthiness or fair value of the Company, STAR, SIR or any other participant in the Transaction or the SIR Acquisition, or any of their respective assets (including, without limitation, any of the Company Portfolio Properties, the STAR Portfolio Properties or the SIR Portfolio Properties), under any applicable laws relating to bankruptcy, insolvency, fraudulent conveyance or similar matters, (viii) the fairness, financial or otherwise, of the amount, nature or any other aspect of any compensation to or consideration payable to or received by any officers, directors or employees of any party to the Transaction, any class of such persons or any other party, relative to the Exchange Ratio or otherwise, or (ix) the financial or other implications and effects of the Transaction or the SIR Acquisition on STAR or any other party (including, without limitation, any aspects relating to ongoing operations of STAR following consummation of the Transaction or the SIR Acquisition). Furthermore, no opinion, counsel or interpretation is intended in matters that require legal, regulatory, accounting, insurance, tax or other similar professional advice. It is assumed that such opinions, counsel or interpretations have been or will be obtained from appropriate professional sources. Furthermore, we have relied, with the consent of the Committee, on the assessments by the Committee, the Company, STAR and their respective advisors as to all legal, regulatory, accounting, insurance, tax and other similar matters with respect to the Company, STAR, SIR, the Company Portfolio Properties, the STAR Portfolio Properties, the SIR Portfolio Companies and the Transaction or otherwise. The issuance of this Opinion was approved by a committee authorized to approve opinions of this nature.

Based upon and subject to the foregoing, and in reliance thereon, it is our opinion that, as of the date hereof, the Exchange Ratio provided for in the Transaction pursuant to the Agreement is fair to the holders of Company Common Stock from a financial point of view.

Very truly yours,

/s/ Houlihan Lokey Capital, Inc.

HOULIHAN LOKEY CAPITAL, INC.

C-5

Annex D

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2018

OR

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

For the transition period from                    to                    

Commission file number000-55772

STEADFAST APARTMENT REIT III, INC.

(Exact Name of Registrant as Specified in Its Charter)

Maryland	47-4871012
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

18100 Von Karman Avenue, Suite 500 Irvine, California	92612
(Address of Principal Executive Offices)	(Zip Code)

(949) 852-0700

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.01 par value per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes  ☐    No  ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to thisForm 10-K.  ☒

Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filer, anon-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” inRule 12b-2 of the Exchange Act.

Large Accelerated filer	☐	Accelerated filer	☐
Non-Accelerated filer	☐	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.  ☒

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

There is no established market for the registrant’s shares of common stock.

As of June 29, 2018, the last business day of the registrant’s most recently completed second fiscal quarter, there were approximately 3,152,067 shares of Class A common stock, 409,536 shares of Class R common stock and 4,174,826 shares of Class T common stock held bynon-affiliates, for an aggregate market value of $187,418,829, assuming a market value of $25.00 per share of Class A common stock, $22.50 per share of Class R common stock and $23.81 per share of Class T common stock.

As of March 7, 2019, there were 3,506,298 shares of the Registrant’s Class A common stock issued and outstanding, 475,921 shares of the Registrant’s Class R common stock issued and outstanding and 4,651,563 shares of the Registrant’s Class T common stock issued and outstanding.

STEADFAST APARTMENT REIT III, INC.

INDEX

		Page
Cautionary Note Regarding Forward-Looking Statements			D-2
PART I
Item 1.	Business		D-4
Item 1A.	Risk Factors		D-12
Item 1B.	Unresolved Staff Comments		D-38
Item 2.	Properties		D-38
Item 3.	Legal Proceedings		D-39
Item 4.	Mine Safety Disclosures		D-39
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		D-40
Item 6.	Selected Financial Data		D-52
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		D-55
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		D-79
Item 8.	Financial Statements and Supplementary Data		D-80
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		D-80
Item 9A.	Controls and Procedures		D-80
Item 9B.	Other Information		D-81
PART III
Item 10.	Directors, Executive Officers and Corporate Governance		D-82
Item 11.	Executive Compensation		D-86
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		D-88
Item 13.	Certain Relationships and Related Transactions, and Director Independence		D-88
Item 14.	Principal Accountant Fees and Services		D-96
PART IV
Item 15.	Exhibits and Financial Statement Schedules		D-98
Item 16.	Form10-K Summary		D-108
	Index to Consolidated Financial Statements		D-109

D-1

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements of Steadfast Apartment REIT III, Inc. (“we,” “our,” “us” or the “Company”) included in this Annual Report on Form10-K (the “Annual Report”) that are not historical facts (including any statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto) are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual events or our investments and results of operations could differ materially from those expressed or implied in any forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms and other comparable terminology.

The forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to:

• the fact that we have a limited operating history and commenced operations on May 19, 2016;

• the fact that we have had a net loss for each quarterly and annual period since inception;

• changes in economic conditions generally and the real estate and debt markets specifically;

• our ability to successfully identify and acquire multifamily properties and independent senior-living properties on terms that are favorable to us;

• our ability to secure resident leases for our multifamily properties and independent senior-living properties at favorable rental rates;

• risks inherent in the real estate business, including resident defaults, potential liability relating to environmental matters and the lack of liquidity of real estate investments;

• the fact that we pay fees and expenses to our advisor and its affiliates that were not negotiated on anarm’s-length basis and the fact that the payment of these fees and expenses increases the risk that our stockholders will not earn a profit on their investment in us;

• our ability to retain our executive officers and other key personnel of our advisor, our property manager and other affiliates of our advisor;

• our ability to generate sufficient cash flows to pay distributions for our stockholders;

• legislative or regulatory changes (including changes to the laws governing the taxation of real estate investment trusts (“REITs”));

• the availability of capital;

• changes in interest rates; and

• changes to U.S. generally accepted accounting principles (“GAAP”).

Any of the assumptions underlying forward-looking statements could be inaccurate. You are cautioned not to place undue reliance on any forward-looking statements included in this Annual Report. All forward-looking

D-2

statements are made as of the date of this Annual Report and the risk that actual results will differ materially from the expectations expressed in this Annual Report will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this Annual Report, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this Annual Report, including, without limitation, the risks described under “Risk Factors,” the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this Annual Report will be achieved.

D-3

PART I

ITEM 1. BUSINESS

Overview

Steadfast Apartment REIT III, Inc. (which is referred to in this Annual Report, as context requires, as the “Company,” “we,” “us,” or “our”) was formed on July 29, 2015, as a Maryland corporation and elected to be taxed as, and currently qualifies as, a REIT, commencing with its taxable year ended December 31, 2016. We own and manage a portfolio of multifamily properties located in targeted markets throughout the United States. As of December 31, 2018, we owned ten multifamily properties comprised of a total of 2,775 apartment homes. For more information on our real estate portfolio, see “—Our Real Estate Portfolio.”

On February 5, 2016, we commenced our initial public offering to offer a maximum of $1,000,000,000 in shares of common stock for sale to the public in the primary offering (the “Primary Offering”). We initially offered Class A shares and Class T shares in the Public Offering at an initial price of $25.00 for each Class A share ($500,000,000 in Class A shares) and $23.81 for each Class T share ($500,000,000 in Class T shares), with discounts available for certain categories of purchasers. We also registered up to $300,000,000 in shares pursuant to our distribution reinvestment plan (the “DRP,” and together with the Primary Offering, the “Public Offering”) at an initial price of $23.75 for each Class A share and $22.62 for each Class T share.

Commencing on July 25, 2016, we revised the terms of our Public Offering to include Class R shares. From July 25, 2016 through August 31, 2018, the date we terminated our Primary Offering, we offered a maximum of $1,000,000,000 in shares of common stock for sale to the public at a price of $25.00 for each Class A share ($400,000,000 in Class A shares), $22.50 for each Class R share ($200,000,000 in Class R shares) and $23.81 for each Class T share ($400,000,000 in Class T shares), with discounts available for certain categories of purchasers. We also offered up to $300,000,000 in shares pursuant to our DRP at an initial price of $23.75 for each Class A share, $22.50 for each Class R share and $22.62 for each Class T share until our board determined an estimated value per share on October 9, 2018 (discussed below). We terminated the DRP on February 5, 2019.

As of August 31, 2018, the date we terminated our Primary Offering, we had sold 3,483,706 shares of Class A common stock, 474,357 shares of Class R common stock and 4,572,889 shares of Class T common stock in our Public Offering for gross proceeds of $85,801,001, $10,672,273 and $108,706,960, respectively, and $205,180,234 in the aggregate, including 111,922 shares of Class A common stock, 8,450 shares of Class R common stock and 145,838 shares of Class T common stock issued pursuant to our DRP for gross offering proceeds of $2,658,156, $190,125 and $3,298,847, respectively. As of December 31, 2018, we had sold 3,513,310 shares of Class A common stock, 477,684 shares of Class R common stock and 4,623,732 shares of Class T common stock in our Public Offering for gross proceeds of $86,485,589, $10,747,201 and $109,854,820, respectively, and $207,087,610 in the aggregate, including 141,524 shares of Class A common stock, 11,777 shares of Class R common stock and 196,681 shares of Class T common stock issued pursuant to our DRP for gross offering proceeds of $3,342,744, $265,053 and $4,446,707, respectively.

On October 9, 2018, our board of directors determined an estimated value per share for each of our Class A common stock, Class R common stock and Class T common stock of $22.54 as of June 30, 2018. In connection with the determination of an estimated value per share, our board of directors determined a price per share for the DRP for each of the Company’s Class A common stock, Class R common stock and Class T common stock of $22.54 effective November 1, 2018. Our board of directors elected to suspend the DRP with respect to distributions that accrue after February 1, 2019 and may, from time to time in its sole discretion, reinstate the DRP, although there is no assurance as to if or when this will happen.

As of March 7, 2019, we had sold 3,528,796 shares of Class A common stock, 479,529 shares of Class R common stock and 4,654,977 shares of Class T common stock in our Public Offering for gross proceeds of $86,834,672, $10,788,788 and $110,559,104, respectively, and $208,182,564 in the aggregate, including 157,012

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shares of Class A common stock, 13,622 shares of Class R common stock and 227,925 shares of Class T common stock issued pursuant to our DRP for gross offering proceeds of $9,149,457.

We are externally managed by Steadfast Apartment Advisor III, LLC (the “Advisor”) pursuant to the Amended and Restated Advisory Agreement dated July 25, 2016, by and among us, Steadfast Apartment REIT III Operating Partnership, L.P. (the “Operating Partnership”) and the Advisor (as amended, the “Advisory Agreement”). Subject to certain restrictions and limitations, the Advisor manages ourday-to-day operations and our portfolio of properties and real estate-related assets, sources and presents investment opportunities to our board of directors and provides investment management services on our behalf. The Advisor has also entered into an Advisory Services Agreement with Crossroads Capital Advisors, LLC (“Crossroads Capital Advisors”), whereby Crossroads Capital Advisors provides advisory services to us on behalf of the Advisor. Stira Capital Markets Group, LLC (formerly known as Steadfast Capital Markets Group, LLC) (the “Dealer Manager”), an affiliate of the Advisor, served as the dealer manager for our Public Offering. The Advisor, along with the Dealer Manager, provides marketing, investor relations and other administrative services on our behalf.

Substantially all of our business is conducted through the Operating Partnership. We are the sole general partner of the Operating Partnership and own a 99.99% partnership interest in the Operating Partnership. The Advisor is the sole limited partner of and owns the remaining 0.01% partnership interest in the Operating Partnership. We entered into an Amended and Restated Agreement of Limited Partnership on July 25, 2016, with the Advisor (as amended, the “Partnership Agreement”). As we accepted subscriptions for shares of our common stock in our Public Offering, we transferred substantially all of the net offering proceeds to the Operating Partnership as a contribution in exchange for partnership interests and our percentage ownership in the Operating Partnership increased proportionately.

Our Structure

Our sponsor, Steadfast REIT Investments, LLC, a Delaware limited liability company (the “Sponsor”), is indirectly controlled by Rodney F. Emery, the chairman of our board of directors and our chief executive officer. We refer to each of our Sponsor, Advisor, Dealer Manager and their affiliates as “a Steadfast Companies affiliate” and collectively as “Steadfast Companies affiliates.”

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The chart below shows the relationships among our Company and various Steadfast Companies affiliates.

(1) Crossroads Capital Multifamily, LLC’s percentage interest in our Sponsor is contingent upon a net increase in book capitalization (as defined in our Sponsor’s limited liability company agreement). Crossroads Capital Multifamily, LLC (“Crossroads Capital Multifamily”) and Crossroads Capital Advisors are affiliated entities, each being wholly-owned subsidiaries of Crossroads Capital Group, LLC.

Objectives and Strategies

Our investment objectives are to:

• realize capital appreciation in the value of our investments over the long term; and

• pay attractive and stable cash distributions to stockholders.

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We own and manage a portfolio of multifamily properties located in targeted markets throughout the United States, with the objective of generating stable rental income and maximizing the opportunity for future capital appreciation. A majority of our portfolio consists of established, well-positioned, institutional-quality apartment communities. Established apartments are typically older, more affordable apartments that cater to the middle-class segment of the workforce, with monthly rental rates that accommodate the generally accepted guidelines for housing costs as a percentage of gross income. As a result, we believe the demand for apartment housing at these properties is higher compared to other types of multifamily properties and is generally more consistent in all economic cycles. We intend to execute a value-enhancement strategy, invest additional capital and reposition under-managed assets in high-demand neighborhoods to increase both average rental rates and resale value with respect to approximately50-70% of our portfolio. The properties targeted for value-enhancement typically are established, well-positioned, institutional-quality apartment communities with existing high occupancies and consistent rental revenue. However, these properties present an opportunity to increase rental revenue by expending incremental capital (typically approximately4-7% of the original unit price) in aesthetic improvements such as new doors and lighting hardware, flooring, window coverings and appliances. Often such enhancements are cosmetic in nature and do not require building permits. This work does not constitute “reconstruction” or “remodeling” as those terms are commonly used, and we believe the properties targeted for value-enhancement would otherwise be accretive to and consistent with our greater portfolio regardless of whether any value-enhancement expenditures are made. These properties are deemed “under-managed” insofar as prior owners either failed to recognize the potential for, or did not have the capital to execute, a value-enhancement strategy.

2018 Highlights

During 2018, we:

• acquired one multifamily property for an aggregate purchase price of $31,118,698, including closing costs;

• reported net cash provided by financing activities of $54,279,898;

• had a net loss of $15,365,609;

• paid cash distributions of $2,918,723 to Class A common stockholders and distributed $1,901,022 in shares of our Class A common stock pursuant to our DRP, which constituted a 6.00% annualized distribution rate to our stockholders based on a purchase price of $25.00 per share;

• paid cash distributions of $384,993 to Class R common stockholders and distributed $186,153 in shares of our Class R common stock pursuant to our DRP, subject to an annual distribution and shareholder fee of up to 0.67%, which constituted an up to 6.40% annualized distribution rate to our stockholders based on a purchase price of $22.50 per share;

• paid cash distributions of $2,195,243 to Class T common stockholders and distributed $2,955,129 in shares of our Class T common stock pursuant to our DRP, subject to an annual distribution and shareholder servicing fee of up to 1.125%, which constituted an up to 5.30% annualized distribution rate to our stockholders based on a purchase price of $23.81 per share;

• issued 645,919 of Class A common stock, 168,166 of Class R common stock and 1,252,854 shares of Class T common stock in our Public Offering, including shares issued pursuant to our DRP, resulting in gross offering proceeds of $15,967,850, $3,784,153 and $29,672,672, respectively, and $49,424,675 in the aggregate;

• generated net operating income (“NOI”) of $20,477,716 (for further information on how we calculate NOI and a reconciliation of NOI to net loss, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Net Operating Income”);

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• generated funds from operations (“FFO”), as defined by the National Association of Real Estate Investment Trusts (“NAREIT”), of $1,293,508 (for further information on how we calculate FFO and a reconciliation of FFO to net loss, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds From Operations and Modified Funds From Operations”); and

• generated modified funds from operations (“MFFO”), as defined by the Institute for Portfolio Alternatives (formerly known as the Investment Program Association) (“IPA”), of $1,178,251 (for further information on how we calculate MFFO and a reconciliation of MFFO to net loss, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds From Operations and Modified Funds From Operations”).

Our Real Estate Portfolio

As of December 31, 2018, we owned the ten multifamily properties described below.

Property Name		Location	Number of Units		Average Monthly Occupancy(1)			Average Monthly Rent(2)		Purchase Date	Total Purchase Price		Mortgage Debt Outstanding(3)		Capitalization Rate(4)
1	Carriage House Apartment Homes	Gurnee, IL		136		86.8	%	$	818	5/19/2016	$	7,525,000	$	5,660,454		6.5	%
2	Bristol Village Apartments	Aurora, CO		240		91.9	%		1,374	11/17/2016		47,400,000		34,883,417		5.6	%
3	Canyon Resort at Great Hills Apartments	Austin, TX		256		94.3	%		1,313	12/29/2016		44,500,000		31,568,495		5.5	%
4	Reflections on Sweetwater Apartments	Lawrenceville, GA		280		93.4	%		1,071	1/12/2017		33,288,337		22,822,158		5.8	%
5	The Pointe at Vista Ridge Apartments	Lewisville, TX		300		92.6	%		1,228	5/25/2017		45,188,223		28,964,451		5.7	%
6	Belmar Villas	Lakewood, CO		318		90.0	%		1,329	7/21/2017		64,503,255		46,892,398		5.8	%
7	Ansley at Princeton Lakes	Atlanta, GA		306		91.4	%		1,146	8/31/2017		44,594,087		32,204,192		5.7	%
8	Sugar Mill Apartments	Lawrenceville, GA		244		94.6	%		1,139	12/7/2017		36,305,492		24,636,684		5.6	%
9	Avery Point Apartments	Indianapolis, IN		512		94.2	%		809	12/15/2017		45,829,836		31,060,671		5.9	%
10	Cottage Trails at Culpepper Landing	Chesapeake, VA		183		90.6	%		1,338	5/31/2018		31,118,698		21,394,001		5.6	%
				2,775		92.4	%	$	1,136		$	400,252,928	$	280,086,921

(1) As of December 31, 2018, our portfolio was approximately 94.3% leased, calculated using the number of occupied and contractually leased units divided by total units. As of December 31, 2018, no single tenant accounted for greater than 10% of our 2018 gross annualized rental revenue.

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(2) Average monthly rent is based upon the effective rental income after considering the effect of vacancies, concessions and write-offs.

(3) Mortgage debt outstanding is net of deferred financing costs associated with the loans for each individual property listed in the table.

(4) The capitalization rate reflected in the table is as of the closing of the acquisition of the property. We calculate the capitalization rate for a real property by dividing the “net operating income” of the property by the purchase price of the property, excluding acquisition costs. Net operating income is calculated by deducting all operating expenses of a property, including property taxes and management fees but excluding debt service payments and capital expenditures, from gross operating revenues received from a property. For purposes of this calculation, net operating income is determined using the projected first year net operating income of the property based onin-place leases, potential rent increases or decreases for each unit and other revenues from late fees or services, adjusted for projected vacancies, tenant concessions, if any, and charges not collected.

We plan to invest approximately $4.4 million during the year ending December 31, 2019, for interior renovations at certain properties in our portfolio. These renovations are primarily to enhance the interior amenities of the apartment homes and will be performed initially on vacant units and thereafter on units vacated from time to time in the ordinary course.

The following information generally applies to all of our properties:

• we believe all of our properties are adequately covered by insurance and are suitable for their intended purposes;

• except as noted above, we have no plans for any material renovations, improvements or developments with respect to any of our properties; and

• our properties face competition in attracting new residents and retaining current residents from other multifamily properties in and around their respective submarkets.

Leverage

We use secured debt, and intend to use in the future secured and unsecured debt. At December 31, 2018, our debt was approximately 64% of the value of our properties as determined by the most recent valuations performed by an independent third-party appraiser as of June 30, 2018. We believe that the careful use of borrowings will help us achieve our diversification goals and potentially enhance the returns on our investments. After we have invested all of the net offering proceeds from our Public Offering, we expect our borrowings will be approximately 55% to 60% of the value of our properties (after debt amortization) and other real estate-related assets. For valuation purposes, the value of a property is determined by an independent third-party appraiser or qualified independent valuation expert. Under our Second Articles of Amendment and Restatement (as amended, the “Charter”), we are prohibited from borrowing in excess of 300% of our net assets, which generally approximates to 75% of the aggregate cost of our assets unless such excess is approved by a majority of the independent directors and disclosed to stockholders in our next quarterly report, along with a justification for such excess. In such event, we will monitor our debt levels and take action to reduce any such excess as soon as practicable. Our aggregate borrowings are reviewed by our board of directors at least quarterly. At December 31, 2018, our aggregate borrowings were not in excess of 300% of the value of our net assets.

Employees

We have no paid employees. The employees of the Advisor and its affiliates provide management, acquisition, advisory and certain administrative services for us.

Competition

We are subject to significant competition in seeking real estate investments and residents. We compete with many third parties engaged in real estate investment activities, including other REITs, specialty finance

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companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, lenders, hedge funds, governmental bodies and other entities. Many of our competitors have substantially greater financial and other resources than we have and may have substantially more operating experience than us. They may also enjoy significant competitive advantages that result from, among other things, a lower cost of capital.

The multifamily property market in particular is highly competitive. This competition could reduce occupancy levels and revenues at our multifamily properties, which would adversely affect our operations. We face competition from many sources, including from other multifamily properties in our target markets. In addition, overbuilding of multifamily properties may occur, which would increase the number of multifamily homes available and may decrease occupancy and unit rental rates. Furthermore, multifamily properties we acquire most likely compete, or will compete, with numerous housing alternatives in attracting residents, including owner occupied single- and multifamily homes available to rent or purchase. Competitive housing in a particular area and the increasing affordability of owner occupied single- and multifamily homes available to rent or buy could adversely affect our ability to retain our residents, lease apartment homes and increase or maintain rental rates.

We may also compete with Steadfast Income REIT, Inc. (“Steadfast Income REIT”) and Steadfast Apartment REIT, Inc. (“Steadfast Apartment REIT”), public,non-listed REITs sponsored by our Sponsor that also focus their investment strategy on multifamily properties located in the United States. Steadfast Apartment REIT terminated its primary offering on March 24, 2016, but continues to offer shares pursuant to its distribution reinvestment plan and may engage in future public offerings for its shares. Steadfast Income REIT terminated its initial public offering on December 20, 2013, but may engage in future public offerings for its shares, including, but not limited to, a public offering of shares pursuant to its distribution reinvestment plan. Even if Steadfast Income REIT and Steadfast Apartment REIT are no longer raising capital, they may have funds, including proceeds from the sale of assets or the refinancing of debt, available for investment. Although Steadfast Income REIT and Steadfast Apartment REIT are the only investment programs currently sponsored by or affiliated with our Sponsor that may directly compete with us for investment opportunities, our Sponsor may launch additional investment programs in the future that compete with us for investment opportunities. To the extent that we compete with Steadfast Income REIT, Steadfast Apartment REIT or any other program affiliated with our Sponsor for investments, our Sponsor will face potential conflicts of interest and there is a risk that our Sponsor will select investment opportunities for us that provide lower returns than the investments selected for other such programs, or that certain otherwise attractive investment opportunities will not be available to us. In addition, certain of our affiliates currently own or manage multifamily properties in geographical areas in which we own and expect to own multifamily properties. As a result of our potential competition with Steadfast Income REIT, Steadfast Apartment REIT and other affiliates of our Sponsor, certain investment opportunities that would otherwise be available to us may not in fact be available. Such competition may also result in conflicts of interest that are not resolved in our favor.

Regulations

Our investments are subject to various federal, state, and local laws, ordinances, and regulations, including, among other things, zoning regulations, land use controls, environmental controls relating to air and water quality, noise pollution, and indirect environmental impacts such as increased motor vehicle activity. We believe that we have all permits and approvals necessary under current law to operate our investments.

Income Taxes

We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), and have operated as such commencing with the taxable year ending December 31, 2016. To continue to qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to our stockholders (which is computed

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without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, we generally will not be subject to federal income tax to the extent we distribute qualifying dividends to our stockholders. If we fail to qualify as a REIT in any taxable year following the year we initially elected to be taxed as a REIT, we would be subject to federal income tax on our taxable income at regular corporate income tax rates and generally would not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to our stockholders.

Financial Information About Industry Segments

Our current business consists of owning, managing, operating, leasing, acquiring, developing, investing in, and disposing of real estate assets. We internally evaluate all of our real estate assets as one industry segment, and, accordingly, we do not report segment information.

Available Information

We are subject to the reporting requirements of the Exchange Act and, accordingly, we file Annual Reports, Quarterly Reports and other information with the Securities and Exchange Commission (“SEC”). Access to copies of our Annual Reports onForm 10-K, Quarterly Reports onForm 10-Q, Current Reports onForm 8-K and other filings with the SEC, including amendments to such filings, may be obtained free of charge from our website,http://www.steadfastreits.com. These filings are available promptly after we file them with, or furnish them to, the SEC. We are not incorporating our website or any information from the website into this Annual Report. The SEC also maintains a website,http://www.sec.gov, that contains our Annual Reports onForm 10-K, Quarterly Reports onForm 10-Q, Current Report onForm 8-K and other filings with the SEC. Access to these filings is free of charge.

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ITEM 1A. RISK FACTORS

The following are some of the risks and uncertainties that could cause our actual results to differ materially from those presented in our forward-looking statements. The risks and uncertainties described below are not the only ones we face but do represent those risks and uncertainties that we believe are material to us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also harm our business. References to “shares” and “our common stock” refer to the shares of common stock of Steadfast Apartment REIT III, Inc.

General Investment Risks

We have limited prior operating history, and there is no assurance that we will be able to successfully achieve our investment objectives.

We commenced operations on May 19, 2016, with our acquisition of the Carriage House Apartment Homes. We and the Advisor have a limited operating history and may not be able to successfully operate our business or achieve our investment objectives. We cannot assure you that we will be profitable in the future or that we will recognize growth in our assets.

From inception through December 31, 2018, we have experienced quarterly and annual net losses and may experience similar losses in the future.

From inception through December 31, 2018, we incurred a cumulative net loss of $32,039,408. We cannot assure you that we will be profitable in the future or that we will recognize growth in the value of our assets.

There is no public trading market for shares of our common stock and we are not required to effectuate a liquidity event by a certain date or at all. As a result, it will be difficult for you to sell your shares of common stock and, if you are able to sell your shares, you are likely to sell them at a substantial discount.

There is no public market for the shares of our common stock and we have no obligation to list our shares on any public securities market or provide any other type of liquidity to our stockholders by a particular date or at all. It will therefore be difficult for you to sell your shares of common stock. Even if you are able to sell your shares of common stock, the absence of a public market may cause the price received for any shares of our common stock sold to be less than what you paid or less than your proportionate value of the assets we own. We have adopted a share repurchase program but it is limited in terms of the amount of shares that stockholders may sell to us each quarter. Our board of directors can amend, suspend, or terminate our share repurchase program upon 30 days’ notice. Additionally, our Charter does not require that we consummate a transaction to provide liquidity to stockholders on any certain date. As a result, you should be prepared to hold your shares for an indefinite period of time.

You are limited in your ability to have your shares of common stock repurchased pursuant to our share repurchase program. You may not be able to sell any of your shares of our common stock back to us, and if you do sell your shares, you may not receive the price you paid.

Our share repurchase program may provide you with an opportunity to have your shares of common stock repurchased by us. No shares may be repurchased under our share repurchase program until after the first anniversary of the date of purchase of such shares. Prior to the first determination of our estimated value per share, we repurchased shares of our common stock pursuant to our share repurchase plan at a discount from the offering price per share of our common stock based upon how long such shares had been held. Following the first determination of our estimated value per share of our common stock, shares are repurchased at a price based upon such estimated value per share. Due to the fact that the per share amount paid by us to repurchase shares will typically exceed the net proceeds we received in connection with the sale of such shares, the repurchase of shares pursuant to our share repurchase program will have a dilutive effect on our existing stockholders.

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Our share repurchase program contains certain limitations, including those relating to the number of shares of our common stock that we can repurchase at any given time and limiting the repurchase price. Specifically, the share repurchase program limits the number of shares to be repurchased during any calendar year to no more than (1) 5.0% of the weighted average number of shares of our common stock outstanding in the prior calendar year and (2) those that could be funded from the net proceeds from the sale of shares under our DRP in the prior calendar year plus such additional funds as may be borrowed or reserved for that purpose by our board of directors. Further, we have no obligation to repurchase shares if the repurchase would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency. Our board of directors reserves the right to reject any repurchase request for any reason or no reason or to amend, suspend or terminate the share repurchase program at any time upon 30 days’ notice to our stockholders. Therefore, you may not have the opportunity to make a repurchase request prior to a potential termination or suspension of the share repurchase program and you may not be able to sell any of your shares of common stock back to us. If you do sell your shares of common stock back to us pursuant to the share repurchase program, you may be forced to do so at a discount to the purchase price you paid for your shares.

The actual value of shares that we repurchase under our share repurchase program may be substantially less than what we pay.

Under our share repurchase program, shares may be repurchased at varying prices depending on (1) the number of years the shares have been held, (2) the purchase price paid for the shares and (3) whether the repurchases are sought upon a stockholder’s death or disability. On October 12, 2018, we announced an estimated per share value of $22.54 as of June 30, 2018. This reported value is likely to differ from the price at which a stockholder could resell his or her shares. Thus, if we repurchase shares of our common stock based on this estimated share value, the actual value of the shares that we repurchase may be less, and the repurchase could be dilutive to our remaining stockholders. Even at lower repurchase prices, the actual value of the shares may be substantially less than what we pay and the repurchase may be dilutive to our remaining stockholders.

We have paid and it is likely we will continue to pay distributions from sources other than our cash flow from operations. To the extent that we pay distributions from sources other than our cash flow from operations, we will have reduced funds available for investment and the overall return to our stockholders may be reduced.

Our organizational documents permit us to pay, without limitation, distributions from any source, including net proceeds from our Public Offering, borrowings, advances from our Sponsor or Advisor and the deferral of fees and expense reimbursements by our Advisor, in its sole discretion. Since our inception, our cash flow from operations has not been sufficient to fund all of our distributions. To the extent that our cash flow from operations has been or is insufficient to fully cover our distributions, we have paid and it is likely we will continue to pay, distributions from the net proceeds from this offering or sources other than cash flow from operations.

If we are unable to consistently fund distributions to our stockholders entirely from our cash flow from operations, the value of your shares upon a listing of our common stock, the sale of our assets or any other liquidity event may be reduced. To the extent that we fund distributions from sources other than our cash flow from operations, our funds available for investment will be reduced relative to the funds available for investment if our distributions were funded solely from cash flow from operations, our ability to achieve our investment objectives will be negatively impacted and the overall return to our stockholders may be reduced. In addition, if we make a distribution in excess of our current and accumulated earnings and profits, the distribution will be treated first as atax-free return of capital, which will reduce the stockholder’s tax basis in its shares of common stock. The amount, if any, of each distribution in excess of a stockholder’s tax basis in its shares of common stock will be taxable as gain realized from the sale or exchange of property.

For the year ended December 31, 2018, we paid aggregate distributions of $10,541,263, including $5,498,959 of distributions paid in cash and 219,833 shares of our common stock issued pursuant to our DRP for

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$5,042,304. For the year ended December 31, 2018, our net loss was $15,365,609, we had FFO of $1,293,508 and net cash provided by operations of $1,914,725. For the year ended December 31, 2018, we funded $1,914,725, or 18%, and $8,626,538, or 82%, of total distributions paid, including shares issued pursuant to our DRP, from net cash provided by operating activities and with proceeds from our Public Offering, respectively. Since inception, of the $16,804,856 in total distributions paid through December 31, 2018, including shares issued pursuant to our DRP, 15% of such amounts were funded from cash flow from operations and 85% were funded from public offering proceeds. For information on how we calculate FFO and the reconciliation of FFO to net loss, see “—Funds from Operations and Modified Funds from Operations.”

The amount of distributions we make is uncertain. It is likely that we will pay initial distributions from sources other than our cash flow from operations, and that such distributions will represent a return of capital. Any such actions could result in fewer funds available for investments and your overall return may be reduced.

Although our distribution policy is to use our cash flow from operations to make distributions, our organizational documents permit us to pay distributions from any source. We expect to have little, if any, cash flow from operations available for distribution until we make substantial investments. If we fund distributions from financings or the net proceeds of our Public Offering, we will have fewer funds available for investment in properties than if our distributions came solely from cash flow from operations and your overall return may be reduced. Further, because we may receive income at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund expenses, we expect that at least during the early stages of our development and from time to time during our operational stage, we will declare distributions in anticipation of cash flow that we expect to receive during a later period and we will pay these distributions in advance of our actual receipt of these funds. In these instances, we may use third-party borrowings to fund our distributions. We may also fund such distributions with the deferral by the Advisor, in its sole discretion, of fees payable under the Advisory Agreement.

In addition, if the aggregate amount of cash we distribute to stockholders in any given year exceeds the amount of our “REIT taxable income” generated during the year, the excess amount will either be (1) a return of capital or (2) a gain from the sale or exchange of property to the extent that a stockholder’s basis in our common stock equals or is reduced to zero as the result of our current or prior year distributions, which could cause subsequent investors to experience dilution.

Our success is dependent on the performance of the Advisor and its affiliates and any adverse change in their financial health could cause our operations to suffer.

Our ability to achieve our investment objectives and to pay distributions is dependent upon the performance of the Advisor and its affiliates and any adverse change in their financial health could cause our operations to suffer. The Advisor and its affiliates are sensitive to trends in the general economy, as well as the commercial real estate and credit markets. The most recent economic recession and accompanying credit crisis negatively impacted the value of commercial real estate assets, contributing to a general slowdown in the real estate industry. The failure to achieve a sustained economic recovery or a renewed economic downturn could result in continued reductions in overall transaction volume and size of sales and leasing activities that the Advisor and its affiliates have recently experienced, and would put downward pressure on the Advisor’s and its affiliates’ revenues and operating results. To the extent that any decline in revenues and operating results impacts the performance of the Advisor and its affiliates, our financial condition and ability to pay distributions to our stockholders could also suffer.

We pay substantial fees and expenses to the Advisor and its affiliates, including the Dealer Manager, for our Public Offering. These fees were not negotiated at arm’s length, may be higher than fees payable to unaffiliated third parties and may reduce cash available for investment.

A portion of the offering proceeds from the sale of our shares in our Public Offering was used to pay fees and expenses to the Advisor and its affiliates, including the Dealer Manager. These fees were not negotiated at

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arm’s-length and may be higher than fees payable to unaffiliated third parties, though the board of directors must approve the payment of certain fees. In addition, the full offering price paid by stockholders will not be invested in properties. As a result, stockholders will only receive a full return of their invested capital if we either (1) sell our assets or the Company for a sufficient amount in excess of the original purchase price of our assets or (2) the market value of the Company after we list our shares of common stock on a national securities exchange is substantially in excess of the original purchase price of our assets.

Financial regulatory reforms could have a significant impact on our business, financial condition and results of operations.

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, was signed into law. The Dodd-Frank Act represents a significant change in the U.S. financial regulatory environment and impacts nearly every aspect of the U.S. financial services industry. The Dodd-Frank Act requires various federal agencies to adopt hundreds of new rules to implement the Dodd-Frank Act and to deliver to Congress numerous studies and reports that may influence future legislation. The Dodd-Frank Act leaves significant discretion to federal agencies as to exactly how to implement the broad provisions of the Dodd-Frank Act. Some provisions of the Dodd-Frank Act are subject to rule making and will take effect over several years, making it difficult to anticipate the overall impact on us. The changes resulting from the Dodd-Frank Act may impact the profitability of business activities, require changes to certain business practices, impose more stringent capital, liquidity and leverage requirements or otherwise adversely affect our business.

Disruptions in the financial markets and resulting economic conditions could adversely impact our ability to implement our investment strategy and achieve our investment objectives.

United States and global financial markets experienced extreme volatility and disruption from 2008 to 2010. There was a widespread tightening in overall credit markets, devaluation of the assets underlying certain financial contracts, and increased borrowing by governmental entities. The turmoil in the capital markets during the most recent recession resulted in constrained equity and debt capital available for investment in the real estate market, resulting in fewer buyers seeking to acquire properties, increases in capitalization rates and lower property values. During the subsequent economic recovery, capital has been more available and the overall economy has improved. However, the failure of a sustained economic recovery or future disruptions in the financial markets and deteriorating economic conditions could impact the value of our investments in properties. In addition, if potential purchasers of properties have difficulty obtaining capital to finance property acquisitions, capitalization rates could increase and property values could decrease. Current economic conditions greatly increase the risks of our investments. See “—Risks Related to Investments in Real Estate.”

A cybersecurity incident and other technology disruptions could negatively impact our business.

We use technology in substantially all aspects of our business operations. We also use mobile devices, social networking, outside vendors and other online activities to connect with our residents, suppliers and employees of our affiliates. Such uses give rise to potential cybersecurity risks, including security breach, espionage, system disruption, theft and inadvertent release of information. Our business involves the storage and transmission of numerous classes of sensitive and confidential information and intellectual property, including residents’ and suppliers’ personal information, private information about employees, and financial and strategic information about us. If we fail to assess and identify cybersecurity risks associated with our operations, we may become increasingly vulnerable to such risks. Additionally, the measures we have implemented to prevent security breaches and cyber incidents may not be effective. The theft, destruction, loss, misappropriation, or release of sensitive and/or confidential information or intellectual property, or interference with our information technology systems or the technology systems of third parties on which we rely, could result in business disruption, negative publicity, brand damage, violation of privacy laws, loss of residents, potential liability and competitive disadvantage, any of which could result in a material adverse effect on our financial condition or results of operations.

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Our board of directors determined an estimated value per share of $22.54 for each class of our shares of common stock as of June 30, 2018. You should not rely on the estimated value per share as being an accurate measure of the current value of our shares of common stock.

On October 12, 2018, our board of directors determined an estimated value per share of our common stock of $22.54 of each our Class A, Class T and Class R common stock as of June 30, 2018. Our board of directors’ objective in determining the estimated value per share was to arrive at a value, based on the most recent data available, that it believed was reasonable based on methodologies that it deemed appropriate after consultation with the Advisor. However, the market for commercial real estate can fluctuate quickly and substantially and the value of our assets is expected to change in the future and may decrease. Also, our board of directors did not consider certain other factors, such as a liquidity discount to reflect the fact that our shares are not currently traded on a national securities exchange and the limitations on the ability to redeem shares pursuant to our share repurchase plan.

As with any valuation methodology, the methodologies used to determine the estimated value per share were based upon a number of assumptions, estimates and judgments that may not be accurate or complete. Our assets have been valued based upon appraisal standards and the value of our assets using these methodologies are not required to be a reflection of market value under those standards and will not result in a reflection of fair value under GAAP. Further, different parties using different property-specific and general real estate and capital market assumptions, estimates, judgments and standards could derive a different estimated value per share, which could be significantly different from the estimated value per share determined by our board of directors. The estimated value per share does not represent the fair value of our assets less liabilities in accordance with United States GAAP as of June 30, 2018. The estimated value per share is not a representation or indication that: a stockholder would be able to realize the estimated value per share if he or she attempts to sell shares; a stockholder would ultimately realize distributions per share equal to the estimated value per share upon liquidation of assets and settlement of our liabilities or upon a sale of us; shares of our common stock would trade at the estimated value per share on a national securities exchange; a third party would offer the estimated value per share in an arms-length transaction to purchase all or substantially all of our shares of common stock; or the methodologies used to estimate the value per share would be acceptable to FINRA or compliant with the Employee Retirement Income Security Act of 1974 (“ERISA”), the Internal Revenue Code or other applicable law, or the applicable provisions of a retirement plan or individual retirement plan, or IRA, with respect to their respective requirements. Further, the estimated value per share was calculated as of a moment in time and the value of our shares will fluctuate over time as a result of, among other things, future acquisitions or dispositions of assets (including acquisitions and dispositions of real estate investments since June 30, 2018), developments related to individual assets and changes in the real estate and capital markets. For additional information on the calculation of our estimated value per share as of June 30, 2018, see Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Purchases of Equity Securities—Estimated Value Per Share.”

Because our Charter does not require our listing or liquidation by a specified date or at all, stockholders should be prepared to hold their shares for an indefinite period of time.

In the future, our board of directors will consider alternatives for providing liquidity to our stockholders, which we refer to as a liquidity event. A liquidity event may include the sale of our assets, a sale or merger of our company or a listing of our shares on a national securities exchange. It is anticipated that our board of directors will consider a liquidity event within five years after the completion of our offering stage; however, the timing of any such event will be significantly dependent upon economic and market conditions after completion of our offering stage. Because our Charter does not require us to pursue a liquidity event by a specified date or at all, you should be prepared to hold your shares for an indefinite period of time.

If we elect to be self-managed, we could incur other significant costs.

Our board of directors may elect in the future to be self-managed. If we do so, we may elect to negotiate to acquire the Advisor’s assets and hire the Advisor’s personnel, acquire a management company or develop a

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management function. Pursuant to the Advisory Agreement, we are not allowed to solicit or hire any of the Advisor’s personnel without the Advisor’s prior written consent. While we would no longer bear the costs of the various fees and expenses we expect to pay to the Advisor under the Advisory Agreement, our direct expenses would include general and administrative costs, including legal, accounting and other expenses related to corporate governance, SEC reporting and compliance. We would also be required to employ personnel and would be subject to potential liabilities commonly faced by employers, such as workers disability and compensation claims, potential labor disputes and other employee-related liabilities and grievances as well as incur the compensation and benefits costs of our officers and other employees and consultants that will be paid by the Advisor or its affiliates. We may issue equity awards to officers, employees and consultants, which awards would decrease net income and funds from operations and may further dilute your investment. We cannot reasonably estimate the amount of fees to the Advisor we would save or the costs we would incur if we became self-managed. If the expenses we assume as a result of self-management are higher than the expenses we avoid paying to the Advisor, our funds from operations would be lower than they otherwise would have been, potentially decreasing the amount of funds available to distribute to our stockholders.

If we are delayed or unable to find suitable investments, we may not be able to achieve our investment objectives.

Delays in selecting, acquiring and developing multifamily properties could adversely affect investor returns. Our ability to commit to purchase specific assets will depend, in part, on the amount of capital we have available at a given time. If we are unable to access sufficient capital, we may suffer from delays in deploying the capital into suitable investments.

We are uncertain of our sources for funding our future capital needs. If we do not have sufficient funds from operations to cover our expenses or to fund improvements to our real estate and cannot obtain debt or equity financing on acceptable terms, our ability to cover our expenses or to fund improvements to our real estate will be adversely affected.

We terminated our Public Offering on August 31, 2018. In the event that we develop a need for additional capital in the future for the repayment of maturing debt obligations, the improvement of our real properties or for any other reason, sources of funding may not be available to us. If we do not have sufficient funds from cash flow generated by our investments or out of net sale proceeds, or cannot obtain debt or equity financing on acceptable terms, our financial condition and ability to make distributions may be adversely affected.

We report MFFO, anon-GAAP financial measure.

We report MFFO, anon-GAAP financial measure, which we believe to be an appropriate supplemental measure to reflect our operating performance.

Not all public,non-listed REITs calculate MFFO the same way, so comparisons of our MFFO with that of other public,non-listed REITs may not be meaningful. MFFO is not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs, including our ability to make distributions to our stockholders. MFFO should be reviewed in conjunction with GAAP measurements as an indication of our performance. MFFO is useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete and net asset value is disclosed. MFFO is not a useful measure in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining MFFO.

Neither the SEC nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate MFFO. In the future, the SEC or another regulatory body may decide to standardize the

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allowable adjustments across thenon-listed REIT industry and in response to such standardization we may have to adjust our calculation and characterization of MFFO accordingly. For further information on how we calculate MFFO and a reconciliation of MFFO to net loss, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds From Operations and Modified Funds From Operations.”

Risks Relating to Our Organizational Structure

Maryland law and our organizational documents limit your right to bring claims against our officers and directors.

Maryland law provides that a director will not have any liability as a director so long as he or she performs his or her duties in accordance with the applicable standard of conduct. In addition, our Charter provides that, subject to the applicable limitations set forth therein or under Maryland law, no director or officer will be liable to us or our stockholders for monetary damages. Our Charter also provides that we will generally indemnify our directors, our officers, the Advisor and its affiliates for losses they may incur by reason of their service in those capacities unless their act or omission was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty, they actually received an improper personal benefit in money, property or services or, in the case of any criminal proceeding, they had reasonable cause to believe the act or omission was unlawful. We have also entered into separate indemnification agreements with each of our directors and executive officers. As a result, we and our stockholders may have more limited rights against these persons than might otherwise exist under common law. In addition, we may be obligated to fund the defense costs incurred by these persons. However, our Charter provides that we may not indemnify our directors, the Advisor and its affiliates for loss or liability suffered by them or hold our directors or the Advisor and its affiliates harmless for loss or liability suffered by us unless they have determined that the course of conduct that caused the loss or liability was in our best interests, they were acting on our behalf or performing services for us, the liability was not the result of negligence or misconduct by ournon-independent directors, the Advisor and its affiliates or gross negligence or willful misconduct by our independent directors, and the indemnification or agreement to hold harmless is recoverable only out of our net assets, including the proceeds of insurance, and not from the stockholders. As a result of these limitations on liability and indemnification provisions and agreements, we and our stockholders may be entitled to a more limited right of action than we would otherwise have if indemnification rights were not granted.

The limit on the percentage of shares of our common stock that any person may own may discourage a takeover or business combination that may benefit our stockholders.

Our Charter restricts the direct or indirect ownership by one person or entity to no more than 9.8% in value of the aggregate of our then outstanding shares of capital stock (which includes common stock and any preferred stock we may issue) and no more than 9.8% in value or number of shares, whichever is more restrictive, of the aggregate of our then outstanding common stock unless exempted (prospectively or retroactively) by our board of directors. These restrictions may discourage a change of control of us and may deter individuals or entities from making tender offers for shares of our common stock on terms that might be financially attractive to stockholders or which may cause a change in our management. In addition to deterring potential transactions that may be favorable to our stockholders, these provisions may also decrease your ability to sell your shares of our common stock.

We may issue preferred stock or other classes of common stock, which issuance could adversely affect the holders of our common stock.

Our stockholders do not have preemptive rights to any shares issued by us in the future. We may issue, without stockholder approval, preferred stock or other classes of common stock with rights that could dilute the value of your shares of common stock. However, the issuance of preferred stock must also be approved by a majority of our independent directors not otherwise interested in the transaction, who will have access, at our

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expense, to our legal counsel or to independent legal counsel. Under our Charter, we have authority to issue a total of 1,300,000,000 shares of capital stock, of which 1,200,000,000 shares are classified as common stock with a par value of $0.01 per share and 100,000,000 shares are classified as preferred stock with a par value of $0.01 per share. Of the total shares of common stock authorized, 480,000,000 are classified as Class A shares, 240,000,000 are classified as Class R shares and 480,000,000 are classified as Class T shares. Our board of directors, with the approval of a majority of the entire board of directors and without any action by our stockholders, may amend our Charter from time to time to increase or decrease the aggregate number of shares of capital stock or the number of shares of capital stock of any class or series that we have authority to issue. If we ever create and issue preferred stock with a distribution preference over common stock, payment of any distribution preferences of outstanding preferred stock would reduce the amount of funds available for the payment of distributions on our common stock. Further, holders of preferred stock are normally entitled to receive a preference payment in the event we liquidate, dissolve or wind up before any payment is made to our common stockholders, likely reducing the amount common stockholders would otherwise receive upon such an occurrence. In addition, under certain circumstances, the issuance of preferred stock or a separate class or series of common stock may render more difficult or tend to discourage a merger, tender offer or proxy contest, the assumption of control by a holder of a large block of our securities, or the removal of incumbent management.

We may grant stock-based awards to our directors, employees and consultants pursuant to our long-term incentive plan, which will have a dilutive effect on your investment in us.

Our board of directors has adopted a long-term incentive plan, pursuant to which we are authorized to grant restricted stock, stock options, restricted or deferred stock units, performance awards or other stock-based awards to directors, employees and consultants selected by our board of directors for participation in the plan. We currently intend only to issue awards of restricted stock to our independent directors under our long-term incentive plan. Our executive officers, as key personnel of the Advisor, also may be entitled to receive rewards in the future under our long-term incentive plan. If we issue additional stock-based awards to eligible participants under our long-term incentive plan, the issuance of these stock-based awards will dilute your investment in our shares of common stock.

Certain features of our long-term incentive plan could have a dilutive effect on your investment in us, including (1) a lack of annual award limits, individually or in the aggregate (subject to the limit on the maximum number of shares which may be issued pursuant to awards granted under the plan), (2) the fact that the limit on the maximum number of shares which may be issued pursuant to awards granted under the plan is not tied to the amount of proceeds raised in our Public Offering and (3) share counting procedures which provide that shares subject to certain awards, including, without limitation, substitute awards granted by us to employees of another entity in connection with our merger or consolidation with such company or shares subject to outstanding awards of another company assumed by us in connection with our merger or consolidation with such company, are not subject to the limit on the maximum number of shares which may be issued pursuant to awards granted under the plan.

Our UPREIT structure may result in potential conflicts of interest with limited partners in our Operating Partnership whose interests may not be aligned with those of our stockholders.

Limited partners in our Operating Partnership have the right to vote on certain amendments to the Operating Partnership agreement, as well as on certain other matters. Persons holding such voting rights may exercise them in a manner that conflicts with the interests of our stockholders. As general partner of our Operating Partnership, we are obligated to act in a manner that is in the best interest of all partners of our Operating Partnership. Circumstances may arise in the future when the interests of limited partners in our Operating Partnership may conflict with the interests of our stockholders. These conflicts may be resolved in a manner stockholders do not believe are in their best interest.

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We may change our targeted investments and investment guidelines without our stockholders’ consent.

Our board of directors may change our targeted investments and investment guidelines at any time without the consent of our stockholders, which could result in our making investments that are different from, and possibly riskier than, the investments described in this Annual Report on Form10-K. A change in our targeted investments or investment guidelines may increase our exposure to interest rate risk, default risk and real estate market fluctuations, all of which could adversely affect the value of our common stock and our ability to make distributions to our stockholders.

Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain actions and proceedings that may be initiated by our stockholders.

Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or, if that Court does not have jurisdiction, the U.S. District Court for the District of Maryland, Baltimore Division, will be the sole and exclusive forum for: (1) any derivative action or proceeding brought on behalf of our Company, (2) any action asserting a claim of breach of any duty owed by any of our directors or officers or employees to us or to our stockholders, (3) any action asserting a claim against us or any of our directors or officers or employees arising pursuant to any provision of the Maryland General Corporation Law (the “MGCL”), or our Charter or bylaws or (4) any action asserting a claim against us or any of our directors or officers or employees that is governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring or holding any interest in our shares shall be deemed to have notice of and to have consented to these provisions of our bylaws, as they may be amended from time to time. Our board of directors, without stockholder approval, adopted this provision of the bylaws so that we can respond to such litigation more efficiently and reduce the costs associated with our responses to such litigation, particularly litigation that might otherwise be brought in multiple forums. This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder believes is favorable for disputes with us or our directors, officers, agents or employees, if any, and may discourage lawsuits against us and our directors, officers, agents or employees, if any. Alternatively, if a court were to find this provision of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings notwithstanding that the MGCL expressly provides that the charter or bylaws of a Maryland corporation may require that any internal corporate claim be brought only in courts sitting in one or more specified jurisdictions, we may incur additional costs that we do not currently anticipate associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition and results of operations.

Your investment return may be reduced if we are required to register as an investment company under the Investment Company Act; if we are subject to registration under the Investment Company Act, we will not be able to continue our business.

Neither we, our Operating Partnership nor any of our subsidiaries intend to register as an investment company under the Investment Company Act. Our Operating Partnership’s and subsidiaries’ investments in real estate will represent the substantial majority of our total asset mix. In order for us not to be subject to regulation under the Investment Company Act, we engage, through our Operating Partnership and our wholly and majority-owned subsidiaries, primarily in the business of buying real estate. These investments must be made within a year after the termination of our Public Offering.

If we were obligated to register as an investment company, we would have to comply with a variety of substantive requirements under the Investment Company Act that impose, among other things:

• limitations on capital structure;

• restrictions on specified investments;

• prohibitions on transactions with affiliates; and

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• compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase our operating expenses.

Section 3(a)(1)(A) of the Investment Company Act defines an investment company as any issuer that is or holds itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. Section 3(a)(1)(C) of the Investment Company Act defines an investment company as any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of the issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis, which we refer to as the 40% test. Excluded from the term “investment securities,” among other things, are U.S. government securities and securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act.

We expect that most of our assets will be held through wholly- or majority-owned subsidiaries of our Operating Partnership. We expect that most of these subsidiaries will be outside the definition of an “investment company” under Section 3(a)(1) of the Investment Company Act as they are generally expected to hold at least 60% of their assets in real property. We believe that we, our Operating Partnership and most of the subsidiaries of our Operating Partnership will not fall within either definition of investment company under Section 3(a)(1) of the Investment Company Act as we intend to invest primarily in real property, through our wholly- or majority-owned subsidiaries, the majority of which we expect to have at least 60% of their assets in real property. As these subsidiaries would be investing either solely or primarily in real property, they would be outside of the definition of “investment company” under Section 3(a)(1) of the Investment Company Act. We are organized as a holding company that conducts its businesses primarily through our Operating Partnership, which in turn is a holding company conducting its business through its subsidiaries. Both we and our Operating Partnership intend to conduct our operations so that they comply with the 40% test. We will monitor our holdings to ensure continuing and ongoing compliance with this test. In addition, we believe that neither we nor our Operating Partnership will be considered an investment company under Section 3(a)(1)(A) of the Investment Company Act because neither we nor our Operating Partnership will engage primarily or hold itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. Rather, through our Operating Partnership’s wholly- or majority-owned subsidiaries, we and our Operating Partnership will be primarily engaged in thenon-investment company businesses of these subsidiaries, namely the business of purchasing or otherwise acquiring real property.

In the event that the value of investment securities held by a subsidiary of our Operating Partnership were to exceed 40% of the value of its total assets, we expect that subsidiary to be able to rely on the exception from the definition of “investment company” under Section 3(c)(5)(C) of the Investment Company Act, which is available for entities “primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.” This exception generally requires that at least 55% of a subsidiary’s portfolio must be comprised of qualifying real estate assets and at least 80% of its portfolio must be comprised of qualifying real estate assets and real estate-related assets (and no more than 20% comprised of miscellaneous assets). What we buy and sell is therefore limited by these criteria. How we determine to classify our assets for purposes of the Investment Company Act will be based in large measure uponno-action letters issued by the SEC staff and other SEC interpretive guidance and, in the absence of SEC guidance, on our view of what constitutes a qualifying real estate asset and a real estate-related asset. Theseno-action positions were issued in accordance with factual situations that may be substantially different from the factual situations we may face, and a number of theseno-action positions were issued more than twenty years ago. Pursuant to this guidance, and depending on the characteristics of the specific investments, certain mortgage loans, participations in mortgage loans, mortgage-backed securities, mezzanine loans, joint venture investments and the equity securities of other entities may not constitute qualifying real estate assets and therefore investments in these types of assets may be limited. The SEC or its staff may not concur with our classification of our assets. Future revisions to the Investment Company Act or further guidance from the SEC or its staff may cause us to lose our exclusion from the definition of investment

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company or force us tore-evaluate our portfolio and our investment strategy. Such changes may prevent us from operating our business successfully.

In August 2011, the SEC solicited public comment on a wide range of issues relating to Section 3(c)(5)(C) of the Investment Company Act, including the nature of the assets that qualify for purposes of the exclusion. There can be no assurance that the laws and regulations governing the Investment Company Act status of REITs, including more specific or different guidance regarding these exclusions that may be published by the SEC or its staff, will not change in a manner that adversely affects our operations. In addition, the SEC or its staff could take action that results in our or our subsidiary’s failure to maintain an exception or exemption from the Investment Company Act.

In the event that we, or our Operating Partnership, were to acquire assets that could make either entity fall within the definition of investment company under Section 3(a)(1) of the Investment Company Act, we believe that we would still qualify for the exception from the definition of investment company provided by Section 3(c)(6). Although the SEC or its staff has issued little interpretive guidance with respect to Section 3(c)(6), we believe that we and our Operating Partnership may rely on Section 3(c)(6) if 55% of the assets of our Operating Partnership consist of, and at least 55% of the income of our Operating Partnership is derived from, qualifying real estate assets owned by wholly- or majority-owned subsidiaries of our Operating Partnership.

To ensure that neither we nor any of our subsidiaries, including our Operating Partnership, are required to register as an investment company, each entity may be unable to sell assets that it would otherwise want to sell and may need to sell assets that it would otherwise wish to retain. In addition, we, our Operating Partnership or our subsidiaries may be required to acquire additional income- or loss-generating assets that we might not otherwise acquire or forego opportunities to acquire interests in companies that we would otherwise want to acquire. Although we, our Operating Partnership and our subsidiaries intend to monitor our portfolio periodically and prior to each acquisition and disposition, any of these entities may not be able to remain outside the definition of investment company or maintain an exclusion from the definition of investment company. If we, our Operating Partnership or our subsidiaries are required to register as an investment company but fail to do so, the unregistered entity would be prohibited from engaging in our business, and criminal and civil actions could be brought against such entity. In addition, the contracts of such entity would be unenforceable unless a court required enforcement, and a court could appoint a receiver to take control of the entity and liquidate its business.

Risks Related To Conflicts of Interest

We depend on the Advisor and its key personnel and if any such key personnel were to cease to be affiliated with the Advisor, our business could suffer.

Our ability to achieve our investment objectives is dependent upon the performance of the Advisor and, to a significant degree, upon the continued contributions of certain of the key personnel of the Advisor, each of whom would be difficult to replace. If the Advisor were to lose the benefit of the experience, efforts and abilities of any these individuals, our operating results could suffer.

The Advisor and its affiliates, including our officers and our affiliated directors, will face conflicts of interest caused by compensation arrangements with us, which could result in actions that are not in the best interests of our stockholders.

The Advisor and its affiliates receive substantial fees from us in return for their services and these fees could influence the advice provided to us. Among other matters, these compensation arrangements could affect their judgment with respect to:

• future public offerings of equity by us, which allow the Dealer Manager to earn additional dealer manager fees and allow the Advisor to earn increased acquisition fees, investment management fees and property management fees; and

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• real property sales, since the investment management fees and property management fees payable to the Advisor and its affiliates will decrease.

Further, the Advisor may recommend that we invest in a particular asset or pay a higher purchase price for the asset than it would otherwise recommend if it did not receive an acquisition fee in connection with such transactions. Certain potential acquisition fees, investment management fees and property management fees will be paid irrespective of the quality of the underlying real estate or property management services. These fees may influence the Advisor to recommend transactions with respect to the sale of a property or properties that may not be in our best interest. The Advisor will have considerable discretion with respect to the terms and timing of our acquisition, disposition and leasing transactions. In evaluating investments and other management strategies, the opportunity to earn these fees may lead the Advisor to place undue emphasis on criteria relating to its compensation at the expense of other criteria, such as the preservation of capital, to achieve higher short-term compensation. This could result in decisions that are not in the best interests of our stockholders. In addition, we may be obligated to pay the Advisor a subordinated distribution upon termination ornon-renewal of the Advisory Agreement, with or without cause, which may be substantial and therefore may discourage us from terminating the Advisor.

We may compete with Steadfast Income REIT, Steadfast Apartment REIT and other affiliates of our Sponsor for opportunities to acquire or sell investments, which may have an adverse impact on our operations.

We may compete for investment opportunities with Steadfast Income REIT and Steadfast Apartment REIT, public,non-listed REITs sponsored by our Sponsor that also focus their investment strategy on multifamily properties located in the United States. Steadfast Apartment REIT commenced its initial public offering on December 30, 2013 and terminated its primary offering on March 24, 2016, but continues to offer its shares pursuant to its distribution reinvestment plan and may engage in future public offerings for its shares. Steadfast Income REIT terminated its initial public offering on December 20, 2013, but may engage in future public offerings for its shares, including, but not limited to, a public offering of shares pursuant to its distribution reinvestment plan. Even if Steadfast Income REIT and Steadfast Apartment REIT are no longer raising capital, they may have funds, including proceeds from the sale of assets or the refinancing of debt, available for investment. Although Steadfast Income REIT and Steadfast Apartment REIT are the only investment programs currently sponsored by or affiliated with our Sponsor that may directly compete with us for investment opportunities, our Sponsor may launch additional investment programs in the future that compete with us for investment opportunities. To the extent that we compete with Steadfast Income REIT, Steadfast Apartment REIT or any other program affiliated with our Sponsor for investments, our Sponsor will face potential conflicts of interest and there is a risk that our Sponsor will select investment opportunities for us that provide lower returns than the investments selected for other such programs, or that certain otherwise attractive investment opportunities will not be available to us. In addition, certain of our affiliates currently own or manage multifamily properties in geographical areas in which we own and expect to own multifamily properties. As a result of our potential competition with Steadfast Income REIT, Steadfast Apartment REIT and other affiliates of our Sponsor, certain investment opportunities that would otherwise be available to us may not in fact be available. Such competition may also result in conflicts of interest that are not resolved in our favor.

The time and resources that our Sponsor and its affiliates could devote to us may be diverted to other investment activities, and we may face additional competition due to the fact that our Sponsor and its affiliates are not prohibited from raising money for, or managing, another entity that makes the same or other types of investments that we do.

Our Sponsor and its affiliates are not prohibited from raising money for, or managing, another investment entity that makes the same or other types of investments as we do. As a result, the time and resources they could devote to us may be diverted to other investment activities. Additionally, some of our directors and officers serve as directors and officers of investment entities sponsored by our Sponsor and its affiliates, including Steadfast Income REIT, Steadfast Apartment REIT and Stira Alcentra Global Credit Fund, aclosed-end fund recently

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formed by affiliates of our Sponsor. We cannot currently estimate the time our officers and directors will be required to devote to us because the time commitment required of our officers and directors will vary depending upon a variety of factors, including, but not limited to, general economic and market conditions affecting us, and the Advisor’s ability to locate and acquire investments that meet our investment objectives. Since these professionals engage in and will continue to engage in other business activities on behalf of themselves and others, these professionals will face conflicts of interest in allocating their time among us, the Advisor, and its affiliates and other business activities in which they are involved. This could result in actions that are more favorable to affiliates of the Advisor than to us.

In addition, we may compete with affiliates of the Advisor for the same investors and investment opportunities. We may alsoco-invest with any such investment entity. Even though all suchco-investments will be subject to approval by our independent directors, they could be on terms not as favorable to us as those we could achieveco-investing with a third party.

The Advisor may have conflicting fiduciary obligations if we acquire assets from affiliates of our Sponsor or enter into joint ventures with affiliates of our Sponsor. As a result, in any such transaction we may not have the benefit ofarm’s-length negotiations of the type normally conducted between unrelated parties.

The Advisor may cause us to invest in a property owned by, or make an investment in equity securities in or real estate-related loans to, our Sponsor or its affiliates or through a joint venture with affiliates of our Sponsor. In these circumstances, the Advisor will have a conflict of interest when fulfilling its fiduciary obligation to us. In any such transaction, we would not have the benefit ofarm’s-length negotiations of the type normally conducted between unrelated parties.

The fees we paid to affiliates in connection with our Public Offering and will continue to pay in connection with the acquisition and management of our investments were determined without the benefit ofarm’s-length negotiations of the type normally conducted between unrelated parties.

The fees to be paid to the Advisor, our property managers, the Dealer Manager and other affiliates for services they provide for us were determined without the benefit ofarm’s-length negotiations of the type normally conducted between unrelated parties, may be in excess of amounts that we would otherwise pay to third parties for such services and may reduce the amount of cash that would otherwise be available for investments in real properties and distributions to our stockholders.

Risks Related To Investments in Real Estate

Our operating results will be affected by economic and regulatory changes that impact the real estate market in general.

Our investments in multifamily properties will be subject to risks generally attributable to the ownership of real property, including:

• changes in global, national, regional or local economic, demographic or real estate market conditions;

• changes in supply of or demand for similar properties in an area;

• increased competition for real property investments targeted by our investment strategy;

• bankruptcies, financial difficulties or lease defaults by our residents;

• changes in interest rates and availability of financing;

• changes in the terms of available financing, including more conservativeloan-to-value requirements and shorter debt maturities;

• competition from other residential properties;

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• the inability or unwillingness of residents to pay rent increases;

• changes in government rules, regulations and fiscal policies, including changes in tax, real estate, environmental and zoning laws;

• the severe curtailment of liquidity for certain real estate related assets; and

• rent restrictions due to government program requirements.

All of these factors are beyond our control. Any negative changes in these factors could affect our ability to meet our obligations and make distributions to stockholders.

We are unable to predict future changes in global, national, regional or local economic, demographic or real estate market conditions. For example, a recession or rise in interest rates could make it more difficult for us to lease or dispose of multifamily properties and could make alternative interest-bearing and other investments more attractive and therefore potentially lower the relative value of the real estate assets we acquire. These conditions, or others we cannot predict, may adversely affect our results of operations and returns to our stockholders. In addition, the value of the multifamily properties we acquire may decrease following the date we acquire such properties due to the risks described above or any other unforeseen changes in market conditions. If the value of our multifamily properties decreases, we may be forced to dispose of our properties at a price lower than the price we paid to acquire our properties, which could adversely impact the results of our operations and our ability to make distributions and return capital to our investors.

A concentration of our investments in the apartment sector may leave our profitability vulnerable to a downturn or slowdown in the sector or state or region.

We expect that our property portfolio will be comprised solely of multifamily properties. As a result, we will be subject to risks inherent in investments in a single type of property. If substantially all of our investments are in the apartment sector, the potential effects on our revenues, and as a result, on cash available for distribution to our stockholders, resulting from a downturn or slowdown in the apartment sector could be more pronounced than if we had more fully diversified our investments. If our investments are concentrated in a particular state or geographic region, and such state or geographic region experiences economic difficulty disproportionate to the nation as a whole, then the potential effects on our revenues, and as a result, on cash available for distribution to our stockholders, could be more pronounced than if we had more fully diversified our investments geographically.

The geographic concentration of our portfolio may make us particularly susceptible to adverse economic developments in the real estate markets of those areas.

In addition to general, regional and national economic conditions, our operating results are impacted by the economic conditions of the specific markets in which we have concentrations of properties. As of December 31, 2018, of the $400,252,928 purchase price of our real estate assets, 29% was located in the Atlanta, Georgia metropolitan statistical area, 28% was located in the Denver, Colorado metropolitan statistical area, 11% was located in the Austin, Texas metropolitan statistical area, 11% was located in the Dallas, Texas metropolitan statistical area and 11% was located in the Indianapolis, Indiana metropolitan statistical area. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for multifamily property space resulting from the local business climate, could adversely affect our property revenue resulting in a lower net operating income.

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We depend on residents for our revenue, and therefore, our revenue and our ability to make distributions to our stockholders is dependent upon the ability of the residents of our properties to generate enough income to pay their rents in a timely manner. A substantial number ofnon-renewals, terminations or lease defaults could reduce our net income and limit our ability to make distributions to our stockholders.

The underlying value of our properties and the ability to make distributions to our stockholders depend upon the ability of the residents of our properties to generate enough income to pay their rents in a timely manner, and the success of our investments depends upon the occupancy levels, rental income and operating expenses of our properties and the Company. Residents’ inability to timely pay their rents may be impacted by employment and other constraints on their personal finances, including debts, purchases and other factors. These and other changes beyond our control may adversely affect our residents’ ability to make rental payments. In the event of a resident default or bankruptcy, we may experience delays in enforcing our rights as landlord and may incur costs in protecting our investment andre-leasing our property. We may be unable tore-lease the property for the rent previously received. We may be unable to sell a property with low occupancy without incurring a loss. These events and others could cause us to reduce the amount of distributions we make to stockholders and the value of our stockholders’ investment to decline.

We may be unable to secure funds for future capital improvements, which could adversely impact our ability to make cash distributions to our stockholders.

In order to attract residents, we may be required to expend funds for capital improvements and apartment renovations when residents do not renew their leases or otherwise vacate their apartment homes. In addition, we may require substantial funds to renovate an apartment community in order to sell it, upgrade it or reposition it in the market. If we have insufficient capital reserves, we will have to obtain financing from other sources. We intend to establish capital reserves in an amount we, in our discretion, believe is necessary. A lender also may require escrow of capital reserves in excess of any established reserves. If these reserves or any reserves otherwise established are designated for other uses or are insufficient to meet our cash needs, we may have to obtain financing from either affiliated or unaffiliated sources to fund our cash requirements. We cannot assure our stockholders that sufficient financing will be available or, if available, will be available on economically feasible terms or on terms acceptable to us. Moreover, certain reserves required by lenders may be designated for specific uses and may not be available for capital purposes such as future capital improvements. Additional borrowing for capital needs and capital improvements will increase our interest expense, and therefore our financial condition and our ability to make cash distributions to our stockholders may be adversely affected.

A property that experiences significant vacancy could be difficult to sell orre-lease.

A property may experience significant vacancy through the eviction of residents and/or the expiration of leases. Certain of the multifamily properties we acquire may have some level of vacancy at the time of our acquisition of the property and we may have difficulty obtaining new residents. If vacancies continue for a long period of time, we may suffer reduced revenues resulting in lower cash distributions to stockholders. In addition, the resale value of the property could be diminished because the market value may depend principally upon the value of the leases of such property.

We will compete with numerous other persons and entities for real estate investments.

We are subject to significant competition in seeking real estate investments and residents. We compete with many third parties engaged in real estate investment activities, including other REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, lenders, hedge funds, governmental bodies and other entities. Many of our competitors may have substantially greater financial and other resources than we have and may have substantially more operating experience than us. They may also enjoy significant competitive advantages that result from, among other things, a lower cost of capital. There is no assurance that we will be able to acquire multifamily properties on favorable terms, if at all. These factors could adversely affect our results of operations, financial condition, value of our investments and ability to pay distributions to you.

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Competition from other multifamily communities and housing alternatives for residents could reduce our profitability and the return on your investment.

The multifamily property market in particular is highly competitive. This competition could reduce occupancy levels and revenues at our multifamily properties, which would adversely affect our operations. We face competition from many sources, including from other multifamily properties in our target markets. In addition, overbuilding of multifamily properties may occur, which would increase the number of multifamily homes available and may decrease occupancy and unit rental rates. Furthermore, multifamily properties we acquire most likely compete, or will compete, with numerous housing alternatives in attracting residents, including owner occupied single- and multifamily homes available to rent or purchase. Competitive housing in a particular area and the increasing affordability of owner occupied single- and multifamily homes available to rent or buy (caused by declining mortgage interest rates and government programs to promote home ownership) could adversely affect our ability to retain our residents, lease apartment homes and increase or maintain rental rates.

Our strategy for acquiring value-enhancement multifamily properties involves greater risks than more conservative investment strategies.

We expect to implement a “value-enhancement” strategy for approximately 50 - 70% of the conventional multifamily homes we acquired. Our value-enhancement strategy involves the acquisition of under-managed, stabilized apartment communities in high job and population growth neighborhoods and the investment of additional capital to make strategic upgrades of the interiors of the apartment homes. These opportunities will vary in degree based on the specific business plan for each asset, but could include new appliances, upgraded cabinets, countertops and flooring. Our strategy for value-enhancement projects involves greater risks than more conservative investment strategies. The risks related to these value-enhancement investments include risks related to delays in the repositioning or improvement process, higher than expected capital improvement costs, possible borrowings necessary to fund such costs, and ultimately that the repositioning process may not result in the higher rents and occupancy rates anticipated. Our value-enhancement properties may not produce revenue while undergoing capital improvements. Furthermore, we may also be unable to complete the improvements of these properties and may be forced to hold or sell these properties at a loss. For these and other reasons, we cannot assure you that we will realize growth in the value of our value-enhancement multifamily properties, and as a result, our ability to make distributions to our stockholders could be adversely affected.

Multifamily properties are illiquid investments, and we may be unable to adjust our portfolio in response to changes in economic or other conditions or sell a property if or when we decide to do so.

Multifamily properties are illiquid investments. We may be unable to adjust our portfolio in response to changes in economic or other conditions. In addition, the real estate market is affected by many factors, such as general economic conditions, availability of financing, interest rates, supply and demand, and other factors that are beyond our control. We cannot predict whether we will be able to sell any real property for the price or on the terms set by us, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We cannot predict the length of time needed to find a willing purchaser and to close the sale of a real property. Additionally, we may be required to expend funds to correct defects or to make improvements before a property can be sold. We cannot assure you that we will have funds available to correct such defects or to make such improvements.

In acquiring a real property, we may agree to restrictions that prohibit the sale of that real property for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that real property. All these provisions would restrict our ability to sell a property, which could hinder our ability to adjust our portfolio in response to changes in economic and other conditions.

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Short-term apartment leases expose us to the effects of declining market rent, which could adversely impact our ability to make cash distributions to our stockholders.

Substantially all of our apartment leases are for a term of one year or less. Because these leases generally permit the residents to leave at the end of the lease term without penalty, our rental revenues may be impacted by declines in market rents more quickly than if our leases were for longer terms.

Increased construction of similar properties that compete with our apartment communities in any particular location could adversely affect the operating results of our properties and our cash available for distribution to our stockholders.

We may acquire apartment communities in locations that experience increases in construction of properties that compete with our apartment communities. This increased competition and construction could:

• make it more difficult for us to find residents to lease apartment homes in our apartment communities;

• force us to lower our rental prices in order to lease apartment homes in our apartment communities; or

• substantially reduce our revenues and cash available for distribution to our stockholders.

Actions of joint venture partners could negatively impact our performance.

We may enter into joint ventures with third parties, including with entities that are affiliated with the Advisor. We may also purchase and develop properties in joint ventures or in partnerships,co-tenancies or otherco-ownership arrangements with the sellers of the properties, affiliates of the sellers, developers or other persons. Such investments may involve risks not otherwise present with a direct investment in real estate, including, for example:

• the possibility that our venture partner orco-tenant in an investment might become bankrupt;

• that the venture partner orco-tenant may at any time have economic or business interests or goals which are, or which become, inconsistent with our business interests or goals;

• that such venture partner orco-tenant may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives;

• the possibility that we may incur liabilities as a result of an action taken by such venture partner;

• that disputes between us and a venture partner may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our business;

• the possibility that if we have a right of first refusal or buy/sell right to buy out aco-venturer,co-owner or partner, we may be unable to finance such abuy-out if it becomes exercisable or we may be required to purchase such interest at a time when it would not otherwise be in our best interest to do so; or

• the possibility that we may not be able to sell our interest in the joint venture if we desire to exit the joint venture.

Such investments may also have the potential risk of impasses on decisions because neither we nor theco-venturer would have full control over the joint venture, which might have a negative influence on the joint venture and decrease potential returns to you. In addition, to the extent our participation represents a minority interest, a majority of the participants may be able to take actions which are not in our best interests because of our lack of full control. Disputes between us andco-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort on our business. Consequently, actions by or disputes withco-venturers might result in subjecting properties owned by the joint venture to additional risk. In addition, to the extent that our venture partner orco-tenant is an affiliate of the Advisor, certain conflicts of interest will exist.

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Our multifamily properties are subject to property taxes that may increase in the future, which could adversely affect our cash flow.

Our multifamily properties are subject to real and personal property taxes, as well as excise taxes, that may increase as tax rates change and as the properties are assessed or reassessed by taxing authorities. As the owner of the properties, we are ultimately responsible for payment of the taxes to the applicable government authorities. If we fail to pay any such taxes, the applicable taxing authority may place a lien on the real property and the real property may be subject to a tax sale. In addition, we will generally be responsible for real property taxes related to any vacant space.

Uninsured losses or costly premiums for insurance coverage relating to real property may adversely affect your returns.

We attempt to adequately insure all of our multifamily properties against casualty losses. The nature of the activities at certain properties we may acquire, may expose us and our operators to potential liability for personal injuries and property damage claims. In addition, there are types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, tornadoes, hurricanes, pollution or environmental matters that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles orco-payments. Risks associated with potential acts of terrorism could sharply increase the premiums we pay for coverage against property and casualty claims. Mortgage lenders sometimes require commercial property owners to purchase specific coverage against acts of terrorism as a condition for providing mortgage loans. These policies may not be available at a reasonable cost, if at all, which could inhibit our ability to finance or refinance our properties. In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. Changes in the cost or availability of insurance could expose us to uninsured casualty losses. In the event that any of our properties incurs a casualty loss that is not fully covered by insurance, the value of our assets will be reduced by any such uninsured loss. In addition, we cannot assure you that funding will be available to us for repair or reconstruction of damaged real property in the future.

Costs of complying with governmental laws and regulations related to environmental protection and human health and safety may be high.

All real property investments and the operations conducted in connection with such investments are subject to federal, state and local laws and regulations relating to environmental protection and human health and safety. Some of these laws and regulations may impose joint and several liability on customers, owners or operators for the costs to investigate or remediate contaminated properties, regardless of fault or whether the acts causing the contamination were legal.

Under various federal, state and local environmental laws, a current or previous owner or operator of real property may be liable for the cost of removing or remediating hazardous or toxic substances on such real property. These environmental laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. In addition, the presence of hazardous substances, or the failure to properly remediate these substances, may adversely affect our ability to sell, rent or pledge such real property as collateral for future borrowings. Environmental laws also may impose restrictions on the manner in which real property may be used or businesses may be operated. Some of these laws and regulations have been amended so as to require compliance with new or more stringent standards as of future dates. Compliance with new or more stringent laws or regulations or stricter interpretation of existing laws may require us to incur material expenditures. Future laws, ordinances or regulations may impose material environmental liability. Additionally, the existing condition of land when we buy it, operations in the vicinity of our properties, such as the presence of underground storage tanks, or activities of unrelated third parties, may affect our properties. There are also various local, state and federal fire, health, life-safety and similar regulations with which we may be required to comply and which may subject us to liability in the form of fines or damages

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for noncompliance. In connection with the acquisition and ownership of our properties, we may be exposed to these costs in connection with such regulations. The cost of defending against environmental claims, any damages or fines we must pay, compliance with environmental regulatory requirements or remediating any contaminated real property could materially and adversely affect our business and results of operations, lower the value of our assets and lower the amounts available for distribution to our stockholders.

The costs associated with complying with the Americans with Disabilities Act may reduce the amount of cash available for distribution to our stockholders.

Investment in properties may also be subject to the Americans with Disabilities Act of 1990, as amended (the “ADA”). Under the ADA, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. We are committed to complying with the ADA to the extent to which it applies. The ADA has separate compliance requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services be made accessible and available to people with disabilities. With respect to the properties we acquire, the ADA’s requirements could require us to remove access barriers and could result in the imposition of injunctive relief, monetary penalties or, in some cases, an award of damages. We will attempt to acquire properties that comply with the ADA or place the burden on the seller or other third party, such as residents, to ensure compliance with the ADA. We cannot assure you that we will be able to acquire properties or allocate responsibilities in this manner. Any monies we use to comply with the ADA will reduce the amount of cash available for distribution to our stockholders.

To the extent we invest inage-restricted communities, we may incur liability by failing to comply with the the Fair Housing Act (“FHA”), Housing for Older Persons Act (“HOPA”), or certain state regulations, which may affect cash available for distribution to our stockholders.

To the extent we invest inage-restricted communities, any such properties must comply with FHA and HOPA. The FHA generally prohibitsage-based housing discrimination; however certain exceptions exist for housing developments that qualify as housing for older persons. HOPA provides the legal requirements for such housing developments. In order for housing to qualify as housing for older persons, HOPA requires (1) all residents of such developments to be at least 62 years of age or (2) that at least 80% of the occupied apartment homes are occupied by at least one person who is at least 55 years of age and that the housing community publish and adhere to policies and procedures that demonstrate this required intent and comply with rules issued by the U.S. Department of Housing and Urban Development (“HUD”), for verification of occupancy. In addition, certain states require thatage-restricted communities register with the state. Noncompliance with the FHA, HOPA or state registration requirements could result in the imposition of fines, awards of damages to private litigants, payment of attorneys’ fees and other costs to plaintiffs, substantial litigation costs and substantial costs of remediation, all of which would reduce the amount of cash available for distribution to our stockholders.

Government housing regulations may limit the opportunities at some of the government-assisted housing properties we invest in, and failure to comply with resident qualification requirements may result in financial penalties or loss of benefits, such as rental revenues paid by government agencies.

To the extent that we invest in government-assisted housing, we may acquire properties that benefit from governmental programs intended to provide affordable housing to individuals with low or moderate incomes. These programs, which are typically administered by HUD or state housing finance agencies, typically provide mortgage insurance, favorable financing terms, tax credits or rental assistance payments to property owners. As a condition of the receipt of assistance under these programs, the properties must comply with various requirements, which typically limit rents topre-approved amounts and impose restrictions on resident incomes. Failure to comply with these requirements and restrictions may result in financial penalties or loss of benefits. In addition, we will typically need to obtain the approval of HUD in order to acquire or dispose of a significant interest in or manage aHUD-assisted property.

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Risks Associated With Debt Financing

We incur mortgage indebtedness and other borrowings that may increase our business risks and could hinder our ability to make distributions and decrease the value of your investment.

We have financed a portion of the purchase price of our multifamily properties by borrowing funds. Under our Charter, we are prohibited from borrowing in excess of 300% of the value of our net assets. Net assets for purposes of this calculation is defined to be our total assets (other than intangibles), valued at cost prior to deducting depreciation, reserves for bad debt or othernon-cash reserves, less total liabilities. Generally speaking, the preceding calculation is expected to approximate 75% of the aggregate cost of our investments before depreciation and amortization. We may borrow in excess of these amounts if such excess is approved by a majority of the independent directors and is disclosed to stockholders in our next quarterly report, along with the justification for such excess. In addition, we may incur mortgage debt and pledge some or all of our investments as security for that debt to obtain funds to acquire additional investments or for working capital. We may also borrow funds as necessary or advisable to ensure we maintain our REIT tax qualification, including the requirement that we distribute at least 90% of our annual REIT taxable income to our stockholders (computed without regard to the distribution paid deduction and excluding net capital gains).

Certain debt levels will cause us to incur higher interest charges, which would result in increased debt service payments and could be accompanied by restrictive covenants. If there is a shortfall between the cash flow from a property and the cash flow needed to service mortgage debt on that property, the amount available for distributions to our stockholders may be reduced. In addition, incurring mortgage debt increases the risk of loss since defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. In that case, we could lose the property securing the loan that is in default, thus reducing the value of your investment. For tax purposes, a foreclosure on any of our properties will generally be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we will recognize taxable income on foreclosure, but we would not receive any cash proceeds. If any mortgage contains cross collateralization or cross default provisions, a default on a single property could affect multiple properties. If any of our properties are foreclosed upon due to a default, our ability to pay cash distributions to our stockholders could be adversely affected.

Instability in the debt markets and our inability to find financing on attractive terms may make it more difficult for us to finance or refinance properties, which could reduce the number of properties we can acquire and the amount of cash distributions we can make to our stockholders.

If mortgage debt is unavailable on reasonable terms as a result of increased interest rates, underwriting standards, capital market instability or other factors, we may not be able to finance the initial purchase of properties. In addition, if we place mortgage debt on properties, we run the risk of being unable to refinance such debt when the loans come due, or of being unable to refinance on favorable terms. If interest rates are higher when we refinance debt, our income could be reduced. We may be unable to refinance debt at appropriate times, which may require us to sell properties on terms that are not advantageous to us, or could result in the foreclosure of such properties. If any of these events occur, our cash flow would be reduced. This, in turn, would reduce cash available for distribution to our stockholders and may hinder our ability to raise more capital by issuing securities or by borrowing more money.

Changes in banks’ inter-bank lending rate reporting practices or the method pursuant to which LIBOR is determined may impact our variable rate debt and adversely affect our ability to manage and hedge our debt.

Our variable rate debt is tied to the benchmark LIBOR. LIBOR and other indices are the subject of recent national, international, and other regulatory guidance and proposals for reform. Some of these reforms are already effective while others are still to be implemented. These reforms may cause such benchmarks to perform differently than in the past, or have other consequences which cannot be predicted. LIBOR is calculated by

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reference to a market for interbank lending that continues to shrink, as its based on increasingly fewer actual transactions. This increases the subjectivity of the LIBOR calculation process and increases the risk of manipulation. Actions by the regulators or law enforcement agencies, as well as ICE Benchmark Administration (the current administrator of LIBOR), may result in changes to the manner in which LIBOR is determined or the establishment of alternative reference rates. For example, on July 27, 2017, the U.K. Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021.

It is likely that, over time, U.S. Dollar LIBOR will be replaced by the Secured Overnight Financing Rate (“SOFR”) published by the Federal Reserve Bank of New York. However, the manner and timing of this shift is currently unknown. SOFR is an overnight rate instead of a term rate, making SOFR an inexact replacement for LIBOR. There is currently no perfect way to create robust, forward-looking, SOFR term rates. Market participants are still considering how various types of financial instruments and securitization vehicles should react to a discontinuation of LIBOR. It is possible that not all of our variable rate debt will transition away from LIBOR at the same time, and it is possible that not all of our variable rate debt will transition to the same alternative reference rate, in each case increasing the difficulty of hedging. Switching existing financial instruments and hedging transactions from LIBOR to SOFR requires calculations of a spread. Industry organizations are attempting to structure the spread calculation in a manner that minimizes the possibility of value transfer between counterparties, borrowers, and lenders by virtue of the transition, but there is no assurance that the calculated spread will be fair and accurate or that all asset types and all types of securitization vehicles will use the same spread. We and other market participants have less experience understanding and modeling SOFR-based assets and liabilities than LIBOR-based assets and liabilities, increasing the difficulty of investing, hedging, and risk management. The process of transition involves operational risks. It is also possible that no transition will occur for many financial instruments, meaning that those instruments would continue to be subject to the weaknesses of the LIBOR calculation process. At this time, it is not possible to predict the effect of any such changes, any establishment of alternative reference rates or any other reforms to LIBOR that may be implemented. If LIBOR ceases to exist, we may need to renegotiate with borrowers and financing institutions that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with the new standard that is established. As such, the potential effect of any such event on our cost of capital and interest income cannot yet be determined.

Increases in interest rates could increase the amount of our debt payments and negatively impact our operating results.

The interest we pay on our debt obligations reduces our cash available for distributions. Utilization of variable rate debt, combined with increases in interest rates would increase our interest costs, which would reduce our cash flows and our ability to make distributions to our stockholders. If we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments at times which may not permit realization of the maximum return on such investments.

Lenders may require us to enter into restrictive covenants relating to our operations, which could limit our ability to make distributions to our stockholders.

When providing financing, a lender may impose restrictions on us that affect our distributions and operating policies, and our ability to incur additional debt. Loan documents we enter into may contain covenants that limit our ability to further mortgage a property, discontinue insurance coverage, or replace the Advisor. In addition, loan documents may limit our ability to replace a property’s property manager or terminate certain operating or lease agreements related to a property. These or other limitations may adversely affect our flexibility and our ability to achieve our investment objectives.

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The derivative financial instruments that we may use to hedge against interest rate fluctuations may not be successful in mitigating our risks associated with interest rates and could reduce the overall returns on your investment.

We use derivative financial instruments, such as interest rate cap or collar agreements and interest rate swap agreements, to hedge exposures to changes in interest rates on loans secured by our assets. However, no hedging strategy can protect us completely. These agreements involve risks, such as the risk that counterparties may fail to honor their obligations under these arrangements and that these arrangements may not be effective in reducing our exposure to interest rate changes. We cannot assure you that our hedging strategy and the derivatives that we use will adequately offset the risk of interest rate volatility or that our hedging transactions will not result in losses. In addition, the use of such instruments may reduce the overall return on our investments. These instruments may also generate income that may not be treated as qualifying REIT income for purposes of the 75% or 95% REIT income tests.

Federal Income Tax Risks

Failure to qualify as a REIT would reduce our net earnings available for investment or distribution.

If we fail to qualify as a REIT for any taxable year and we do not qualify for certain statutory relief provisions, we will be subject to federal income tax and applicable state and local income taxes on our taxable income at corporate rates. In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year of losing our REIT status. Losing our REIT status would reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability. In addition, distributions to stockholders would no longer qualify for the dividends paid deduction and we would no longer be required to make distributions. If this occurs, we might be required to borrow funds or liquidate some investments in order to pay the applicable tax.

You may have current tax liability on distributions you elect to reinvest in our common stock.

If you participated in our DRP, which is currently suspended, you will be deemed to have received, and for U.S. federal income tax purposes will be taxed on, the amount reinvested in shares of our common stock to the extent the amount reinvested was not atax-free return of capital. In addition, you will be treated for tax purposes as having received an additional distribution to the extent the shares are purchased at a discount to fair market value. As a result, unless you are atax-exempt entity, you may have to use funds from other sources to pay your tax liability on the value of the shares of common stock received.

Distributions payable by REITs generally are subject to a higher tax rate than regular corporate dividends under current law.

The maximum U.S. federal income tax rate for certain qualified dividends payable to U.S. stockholders that are individuals, trusts and estates generally is 20% (but under the Tax Act (as defined below), U.S. shareholders that are individuals, trusts and estates generally may deduct 20% of ordinary dividends from a REIT for taxable years beginning after December, 31 2017, and before January 1, 2026). Dividends payable by REITs, however, are generally subject to a higher tax rate when paid to such stockholders. The more favorable rates applicable to regular corporate dividends under current law could cause investors who are individuals, trusts and estates or are otherwise sensitive to these lower rates to perceive investments in REITs to be relatively less attractive than investments in the stocks ofnon-REIT corporations that pay distributions, which could adversely affect the value of the stock of REITs, including our shares of our common stock.

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Even if we qualify as a REIT for federal income tax purposes, we may be subject to other tax liabilities that reduce our cash flow and our ability to make distributions to you.

Even if we qualify as a REIT for federal income tax purposes, we may be subject to some federal, state and local taxes on our income or property. For example:

In order to qualify as a REIT, we must distribute annually at least 90% of our REIT taxable income (which is determined without regard to the dividends paid deduction or net capital gain for this purpose) to our stockholders. To the extent that we satisfy the distribution requirement but distribute less than 100% of our REIT taxable income and net capital gain, we will be subject to federal corporate income tax on the undistributed income or gain at regular ordinary or capital gains tax rates.

We will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions we pay in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years.

If we have net income from the sale of foreclosure property that we hold primarily for sale to customers in the ordinary course of business or othernon-qualifying income from foreclosure property, we must pay a tax on that income at the highest corporate income tax rate.

If we sell an asset, other than foreclosure property, that we hold primarily for sale to customers in the ordinary course of business and we do not qualify for a statutory safe harbor, our gain would be subject to the 100% “prohibited transaction” tax unless such sale were made by one of our taxable REIT subsidiaries.

REIT distribution requirements could adversely affect our ability to execute our business plan.

We generally must distribute annually at least 90% of our REIT taxable income (which is determined without regard to the dividends paid deduction or net capital gain for this purpose) in order to qualify as a REIT. To the extent that we satisfy this distribution requirement, but distribute less than 100% of our taxable income (including net capital gain), we will be subject to federal corporate income tax on our undistributed taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under federal tax laws. We intend to make distributions to our stockholders to comply with the REIT requirements of the Internal Revenue Code.

From time to time, we may generate taxable income greater than our net income for financial reporting purposes, or our taxable income may be greater than our cash flow available for distribution to stockholders. If we do not have other funds available in the latter situation we could be required to borrow funds, sell investments at disadvantageous prices or find another alternative source of funds to make distributions sufficient to satisfy the REIT distribution requirement and to avoid corporate income tax and the 4% excise tax in a particular year. There is no assurance that outside financing will be available to us. Even if available, the use of outside financing or other alternative sources of funds to pay distributions could increase our costs or dilute our stockholders’ equity interests. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.

To maintain our REIT status, we may be forced to forgo otherwise attractive opportunities, which may delay or hinder our ability to meet our investment objectives and reduce your overall return.

To maintain our REIT status, we must satisfy certain tests on an ongoing basis concerning, among other things, the sources of our income, nature of our assets and the amounts we distribute to our stockholders. We may be required to make distributions to stockholders at times when it would be more advantageous to reinvest cash in our business or when we do not have funds readily available for distribution. Compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits and the value of your investment.

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Our gains from sales of our assets are potentially subject to the prohibited transaction tax, which could reduce the return on your investment.

Our ability to dispose of property during the first few years following acquisition is restricted to a substantial extent as a result of our REIT status. We will be subject to a 100% tax on any gain realized on the sale or other disposition of any property (other than foreclosure property) we own, directly or through any subsidiary entity, including our Operating Partnership, but excluding our taxable REIT subsidiaries, that is deemed to be inventory or property held primarily for sale to customers in the ordinary course of trade or business unless we qualify for a statutory safe harbor. Whether property is inventory or otherwise held primarily for sale to customers in the ordinary course of a trade or business depends on the particular facts and circumstances surrounding each property. We intend to avoid the 100% prohibited transaction tax by (1) conducting activities that may otherwise be considered prohibited transactions through a taxable REIT subsidiary, (2) conducting our operations in such a manner so that no sale or other disposition of an asset we own, directly or through any subsidiary other than a taxable REIT subsidiary, will be treated as a prohibited transaction or (3) structuring certain dispositions of our properties to comply with a safe harbor available under the Internal Revenue Code for properties held at least two years. However, no assurance can be given that any particular property we own, directly or through any subsidiary entity, including our Operating Partnership, but excluding our taxable REIT subsidiaries, will not be treated as inventory or property held primarily for sale to customers in the ordinary course of a trade or business.

Complying with REIT requirements may force us to liquidate otherwise attractive investments.

To maintain our REIT status, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualifying real estate assets, including certain mortgage loans and mortgage-backed securities. Our investment in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer. No more than 20% of the value of our total assets can be represented by securities of one or more taxable REIT subsidiaries, and not more that 25% of the value of our assets may consist of “nonqualified publicly offered REIT debt instruments.”

If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate from our portfolio otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.

If our Operating Partnership fails to maintain its status as a partnership, its income may be subject to taxation, which would reduce the cash available for distribution to our stockholders and likely result in a loss of our REIT status.

We intend to maintain the status of the Operating Partnership as a partnership for U.S. federalincome tax purposes. However, if the Internal Revenue Service were to successfully challenge the status of the OperatingPartnership as a partnership for such purposes, it would be taxable as a corporation. In such event, thiswould reduce the amount of distributions that the Operating Partnership could make to us. This would also likely result in ourlosing REIT status, and, if so, becoming subject to a corporate level tax on our own income. This would substantially reduceany cash available to pay distributions. In addition, if any of the partnerships or limited liability companies through which theOperating Partnership owns its properties, in whole or in part, loses its characterization as a partnership and is otherwise notdisregarded for U.S. federal income tax purposes, it would be subject to taxation as a corporation, thereby reducingdistributions to the Operating Partnership. Such a recharacterization of an underlying property owner could also threaten ourability to maintain our status as a REIT.

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Liquidation of assets may jeopardize our REIT status.

To maintain our REIT status, we must comply with requirements regarding our assets and our sources of income. If we are compelled to liquidate our investments to repay obligations to our lenders, we may be unable to comply with these requirements, ultimately jeopardizing our qualification as a REIT, or we may be subject to a 100% tax on any resultant gain if we sell assets that are treated as dealer property or inventory.

Legislative or regulatory action could adversely affect investors.

In recent years, numerous legislative, judicial and administrative changes have been made in the provisions of U.S. federal income tax laws applicable to investments similar to an investment in shares of our common stock. Additional changes to the tax laws are likely to continue to occur, and we cannot assure you that any such changes will not adversely affect our taxation and our ability to continue to qualify as a REIT or the taxation of a stockholder. Any such changes could have an adverse effect on an investment in our shares or on the market value or the resale potential of our assets. Our stockholders are urged to consult with their tax advisor with respect to the impact of recent legislation on their investment in our shares and the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our shares.

Although REITs generally receive better tax treatment than entities taxed as regular corporations, it is possible that future legislation would result in a REIT having fewer tax advantages, and it could become more advantageous for a company that invests in real estate to elect to be treated for U.S. federal income tax purposes as a regular corporation. As a result, our charter provides our board of directors with the power, under certain circumstances, to revoke or otherwise terminate our REIT election and cause us to be taxed as a regular corporation, without the vote of our stockholders. Our board of directors has fiduciary duties to us and our stockholders and could only cause such changes in our tax treatment if it determines in good faith that such changes are in the best interests of our stockholders.

In addition, on December 22, 2017, the Tax Cuts and Jobs Act (the “Tax Act”) was signed into law. The Tax Act made significant changes to the U.S. federal income tax rules for taxation of individuals and businesses, generally effective for taxable years beginning after December 31, 2017. In addition to reducing corporate and individual tax rates, the Tax Act eliminates or restricts various deductions. Most of the changes applicable to individuals are temporary and apply only to taxable years beginning after December 31, 2017, and before January 1, 2026. The Tax Act made numerous large and small changes to the tax rules that do not affect the REIT qualification rules directly, but may otherwise affect us or our stockholders.

While the changes in the Tax Act generally appear to be favorable with respect to REITs, the extensive changes tonon-REIT provisions in the Internal Revenue Code may have unanticipated effects on us or our stockholders. Moreover, Congressional leaders have recognized that the process of adopting extensive tax legislation in a short amount of time without hearings and substantial time for review is likely to have led to drafting errors, issues needing clarification and unintended consequences that will have to be revisited in subsequent tax legislation. At this point, it is not clear if or when Congress will address these issues or when the IRS will issue administrative guidance on the changes made in the Tax Act.

We urge our stockholders to consult with their own tax advisor with respect to the status of the Tax Act and other legislative, regulatory or administrative developments and proposals and their potential effect on an investment in shares of our common stock.

Non-U.S. investors may be subject to FIRPTA on the sale of shares of our common stock if we are unable to qualify as a “domestically controlled qualified investment entity.”

Anon-U.S. person disposing of a U.S. real property interest, including shares of a U.S. corporation whose assets consist principally of U.S. real property interests, is generally subject to a tax under certain Internal Revenue Code provisions, known as “FIRPTA”, on the gain recognized on the disposition of such interest.

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However, certain qualified foreign pension plans and certain foreign publicly traded entities are exempt from FIRPTA withholding. Further, FIRPTA does not apply to the disposition of stock in a REIT if the REIT is a “domestically controlled qualified investment entity.” A REIT is a domestically controlled qualified investment entity if, at all times during a specified testing period (the continuous five-year period ending on the date of disposition or, if shorter, the entire period of the REIT’s existence), less than 50% in value of its shares is held directly or indirectly bynon-U.S. holders. We cannot assure you that we will qualify as a domestically controlled qualified investment entity. If we were to fail to so qualify, gain realized by anon-U.S. investor on a sale of our common stock would be subject to FIRPTA unless our common stock was traded on an established securities market and thenon-U.S. investor did not at any time during a specified testing period directly or indirectly own more than 10% of the value of our outstanding common stock.

Retirement Plan Risks

If a stockholder that is a Benefit Plan or IRA fails to meet the fiduciary and other standards under ERISA or the Internal Revenue Code as a result of an investment in our stock, such stockholder could be subject to civil (and criminal, if the failure is willful) penalties.

There are special considerations that apply to employee benefit plans subject to ERISA (such as pension, stock bonus, profit-sharing or 401(k) plans), and other retirement plans or accounts subject to Section 4975 of the Internal Revenue Code (such as an IRAs or annuities described in Sections 408 or 408A of the Internal Revenue Code, annuities described in Sections 403(a) or (b) of the Internal Revenue Code, Archer MSAs described in Section 220(d) of the Internal Revenue Code, health savings accounts described in Section 223(d) of the Internal Revenue Code and Coverdell education savings accounts described in Section 530 of the Internal Revenue Code), including assets of an insurance company general account or entity whose assets are considered “plan assets” under ERISA (collectively, “Benefit Plans and IRAs”) whose assets are invested in our common stock. Stockholders that are Benefit Plans and IRAs should satisfy themselves that:

• the investment is consistent with the fiduciary obligations under ERISA and the Internal Revenue Code applicable to the Benefit Plan or IRA, or any other applicable governing authority in the case of a plan not subject to ERISA or the Internal Revenue Code;

• the investment is made in accordance with the documents and instruments governing the Benefit Plan or IRA, including any investment policy;

• the investment satisfies the prudence, diversification and other requirements of Section 404(a)(1)(B) and 404(a)(1)(C) of ERISA and other applicable provisions of ERISA, the Internal Revenue Code and any other applicable law;

• the investment will not produce unrelated business taxable income (referred to as “UBTI”) for the Benefit Plan or IRA;

• the Benefit Plan or IRA will be able to value its assets annually (or more frequently) in accordance with ERISA, the Internal Revenue Code, and the applicable provisions of the Benefit Plan or IRA;

• the investment will not constitute a prohibited transaction under Section 406 of ERISA, Section 4975 of the Internal Revenue Code or any similar rule under other applicable law; and

• our assets will not be treated as “plan assets” of the Benefit Plan or IRA.

Failure to satisfy the fiduciary standards of conduct and other applicable requirements of ERISA, the Internal Revenue Code or other applicable statutory or common law may result in the imposition of civil and criminal (if the violation was willful) penalties and can subject responsible fiduciaries to claims for damages or for equitable remedies. In addition, if an investment in our common stock constitutes a prohibited transaction under ERISA or the Internal Revenue Code, the“party-in-interest” (within the meaning of ERISA) or “disqualified person” (within the meaning of the Internal Revenue Code) who authorized or directed the investment may have to compensate the plan for any losses the plan suffered as a result of the transaction or

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restore to the plan any profits made by such person as a result of the transaction, or may be subject to excise taxes with respect to the amount involved. In the case of a prohibited transaction involving an IRA, the IRA may be disqualified and all of the assets of the IRA may be deemed distributed and subject to tax.

In addition to considering their fiduciary responsibilities under ERISA and the prohibited transaction rules of ERISA and the Internal Revenue Code, stockholders that are Benefit Plans and IRAs should consider the effect of the plan assets regulation, U.S. Department of Labor RegulationSection 2510.3-101, as modified by ERISA Section 3(42). We cannot guarantee our stockholders that we will qualify for an exemption from the plan assets regulation. If we do not qualify for an exemption from the plan assets regulation, our underlying assets would be treated as “plan assets” of the investing Benefit Plan or IRA under the plan assets regulation and (i) we would be an ERISA fiduciary and subject to certain fiduciary requirements of ERISA with which it would be difficult for us to comply and (ii) we could be restricted from entering into favorable transactions if the transaction, absent an exemption, would constitute a prohibited transaction under ERISA or the Internal Revenue Code. Even if our assets are not considered to be “plan assets,” a prohibited transaction could occur if we or any of our affiliates is a fiduciary (within the meaning of ERISA) of a Benefit Plan or IRA stockholder.

Due to the complexity of these rules and the potential penalties that may be imposed, it is important that stockholders that are Benefit Plans and IRAs consult with their own advisors regarding the potential applicability of ERISA, the Internal Revenue Code and any similar applicable law.

Stockholders that are Benefit Plans and IRAs may be limited in their ability to withdraw required minimum distributions as a result of an investment in shares of our common stock.

If Benefit Plans or IRAs invest in our common stock, the Internal Revenue Code may require such plan or IRA to withdraw required minimum distributions from such plan or IRA in the future. Our stock will be highly illiquid, and our share repurchase program only offers limited liquidity. If a Benefit Plan or IRA requires liquidity, it may generally sell its shares, but such sale may be at a price less than the price at which such plan or IRA initially purchased its shares of our common stock. If a Benefit Plan or IRA fails to make required minimum distributions, it may be subject to certain taxes and tax penalties.

Specific rules apply to foreign, governmental and church plans.

As a general rule, certain employee benefit plans, including foreign pension plans, governmental plans established or maintained in the United States (as defined in Section 3(32) of ERISA), and certain church plans (as defined in Section 3(33) of ERISA), are not subject to ERISA’s requirements and are not “benefit plan investors” within the meaning of the plan asset regulations of the U.S. Department of Labor. Any such plan that is qualified and exempt from taxation under Sections 401(a) and 501(a) of the Internal Revenue Code may nonetheless be subject to the prohibited transaction rules set forth in Section 503 of the Internal Revenue Code and, under certain circumstances in the case of church plans, Section 4975 of the Internal Revenue Code. Also, some foreign plans and governmental plans may be subject to foreign, state, or local laws which are, to a material extent, similar to the provisions of ERISA or Section 4975 of the Internal Revenue Code. Each fiduciary of a plan subject to any such similar law should make its own determination as to the need for and the availability of any exemption relief.

ITEM 1B. UNRESOLVED STAFF COMMENTS

We have no unresolved staff comments.

ITEM 2. PROPERTIES

As of December 31, 2018, we owned ten multifamily properties, consisting of an aggregate of 2,775 apartment homes. The total purchase price of our real estate portfolio as of December 31, 2018 was $400,252,928. For additional information on our real estate portfolio, see Part I, Item I. “Business—Our Real Estate Portfolio” of this Annual Report.

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Our principal executive offices are located at 18100 Von Karman Avenue, Suite 500, Irvine, CA 92612. Our telephone number, general facsimile number and website address are(949) 852-0700,(949) 852-0143 andhttp://www.steadfastreits.com, respectively.

ITEM 3. LEGAL PROCEEDINGS

From time to time we are party to legal proceedings that arise in the ordinary course of our business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by government agencies.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Stockholder Information

As of March 7, 2019, we had approximately 8,633,782 shares of common stock outstanding held by a total of approximately 5,000 stockholders. The number of stockholders is based on the records of DST Systems, Inc., who serves as our transfer agent.

Market Information

No public trading market currently exists for our shares of common stock and we currently have no plans to list our shares on a national securities exchange. Until our shares are listed, if ever, our stockholders may not sell their shares unless the buyer meets the applicable suitability and minimum purchase requirements. In addition, our Charter prohibits the ownership of more than 9.8% in value of the aggregate of our outstanding shares of capital stock (which includes common stock and preferred stock we may issue) and more than 9.8% in value or number of shares, whichever is more restrictive, of the aggregate of our outstanding shares of common stock, unless exempted (prospectively or retroactively) by our board of directors. Consequently, there is the risk that our stockholders may not be able to sell their shares at a time or price acceptable to them.

Estimated Value Per Share

In August 2018, our board of directors initiated a process to determine an estimated value per share of our Class A common stock, Class R common stock and Class T common stock. We are providing an estimated value per share to assist broker-dealers that participated in the Public Offering in meeting their customer account statement reporting obligations under National Association of Securities Dealers Conduct Rule 2340, as required by FINRA. This valuation was performed in accordance with Practice Guideline2013-01,Valuations of Publicly RegisteredNon-Listed REITs, issued by the Institute for Portfolio Alternatives (formerly known as the Investment Program Association), (the “IPA”), in April 2013, (the “IPA Valuation Guidelines”). Our board of directors formed a valuation committee, comprised solely of independent directors, to oversee the process of determining the estimated value per share. Upon approval of our board of directors, we engaged CBRE Capital Advisors, Inc., or CBRE Cap, a FINRA registered broker dealer firm that specializes in providing real estate financial services, to provide property-level and aggregate valuation analyses and a range for the estimated value per share of each class of our common stock as of June 30, 2018.

From the date of CBRE Cap’s engagement, through the issuance of its valuation report on October 9, 2018, CBRE Cap held discussions with the Advisor and our senior management and conducted or commissioned such investigations, research, review and analyses as it deemed necessary. CBRE Cap based its calculation of the range for the estimated value per share of our common stock upon appraisals of all of our real properties performed by CBRE, Inc., or CBRE, an affiliate of CBRE Cap and an independent third party appraisal firm, and valuations performed by the Advisor with respect to our other assets and liabilities. The valuation committee, upon its receipt and review of the valuation report, concluded that the range between $21.04 and $24.14 for our estimated value per share proposed in the valuation report was reasonable and recommended that the board of directors adopt $22.54 as the estimated value per share of each class of our common stock as of June 30, 2018. The estimated value per share represents the weighted average of the range reflecting the effect of using differing discount rates and terminal capitalization rates in the sensitivity analysis. On October 9, 2018, our board of directors accepted the valuation committee’s recommendation and approved $22.54 as the estimated value per share of each class of our common stock as of June 30, 2018. CBRE Cap is not responsible for the determination of the estimated value per share of our common stock as of June 30, 2018.

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Valuation Methodology

In preparing the valuation report, CBRE Cap, among other things:

• reviewed financial and operating information requested from or provided by our advisor and us;

• reviewed and discussed with us and the Advisor the historical and anticipated future financial performance of our multifamily properties, including forecasts prepared by us and the Advisor;

• reviewed appraisals commissioned by us that contained analysis on each of our multifamily properties and performed analyses and studies for each property;

• conducted or reviewed CBRE Cap proprietary research, including market and sector capitalization rate surveys;

• reviewed third-party research, including equity reports and online data;

• compared our financial information to similar information of companies that CBRE Cap deemed to be comparable;

• reviewed our reports filed with the SEC, including our Quarterly Report on Form10-Q for the period ended June 30, 2018, and the unaudited financial statements therein; and

• reviewed our audited financial statements as of December 31, 2017.

The appraisals were performed in accordance with Uniform Standards of Professional Appraisal Practice and were all Member of Appraisal Institute, or MAI, appraisals. The appraisals were prepared by CBRE and personnel who are members and hold the MAI designation. CBRE Cap reviewed and took into consideration the appraisals, and described the results of the appraisals in its valuation report. Discreet values were assigned to each property in our portfolio.

The valuation committee and board of directors considered the following valuation methodology with respect to each multifamily property, which was applied by CBRE Cap in its valuation report. Unlevered,ten-year discounted cash flow analyses from appraisals were created for our fully operational properties. Fornon-stabilized properties,lease-up discounts were applied to discounted cash flow to arrive at an “As Is” value. The “terminal capitalization rate” method was used to calculate terminal value of the assets, with such rates varying based on the specific geographic location and other relevant factors.

Valuation Summary: Material Assumptions

The valuation process we used to determine an estimated value per share of each class of our common stock was designed to follow the recommendations of the IPA Valuation Guidelines.

The following table summarizes the key assumptions that were employed by CBRE Cap in the discounted cash flow models to estimate the value of our real estate assets:

	Range	Weighted-Average
Terminal capitalization rate	5.62% - 5.91%		5.77	%
Discount rate	6.85% - 7.20%		7.02	%

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While we believe that CBRE’s assumptions and inputs are reasonable, a change in these assumptions and inputs may significantly impact the appraised value of the real estate properties and our estimated value per share. The table below illustrates the impact on the estimated value per share if the terminal capitalization rates or discount rates were adjusted by 2.5% in either direction, which represents a 5% sensitivity analysis, in accordance with the IPA Valuation Guidelines, assuming all other factors remain unchanged:

	Increase (Decrease) on the Estimated Value per Share due to
	Decrease of 2.5%		Increase of 2.5%
Terminal capitalization rate	$	0.86	$	(0.79	)
Discount rate	$	0.75	$	(0.71	)

In its valuation report, CBRE Cap included an estimate of the June 30, 2018, value of our assets, including cash and selected other assets net of payables, and accruals and other liabilities including notes payable. The estimated values of our notes payable are equal to GAAP fair values for the period ended June 30, 2018, but do not equal the book value of the loans in accordance with GAAP. The GAAP fair values of our notes payable were determined using a discounted cash flow analysis. The discounted cash flow analysis was based on projected cash flow over the remaining loan terms and on management’s estimates of current market interest rates for instruments with similar characteristics. The carrying values of a majority of our other assets and liabilities are considered to equal their fair value due to their short term maturities or liquid nature. Certain balances, such as lease intangible assets and liabilities related to real estate investments and deferred financing costs, have been eliminated for the purpose of the valuation since the value of those balances was already considered in the appraisals.

Our estimated value per share takes into consideration any potential liability related to an incentive fee the Advisor is entitled to upon meeting certain stockholder return thresholds in accordance with the Charter. For purposes of determining the estimated value per share, our advisor calculated the potential liability related to this incentive fee based on a hypothetical liquidation of our assets and liabilities at their estimated fair values, without considering the impact of any potential closing costs and fees related to the disposition of real estate properties, and determined that there would no liability related to the incentive fee.

Taking into consideration the reasonableness of the valuation methodology, assumptions and conclusions contained in the valuation report, the board of directors determined the estimated value of our equity interest in our real estate portfolio to be in the range of $425,282,296 to $449,778,605 and our estimated net asset value to range between $165,473,712 and $189,912,032, or between $21.04 and $24.14 per share, based on a share count of 7,860,558 shares issued and outstanding as of June 30, 2018.

As with any valuation methodology, the methodologies considered by the valuation committee and the board of directors in reaching an estimate of the value of our shares are based upon all of the foregoing estimates, assumptions, judgments and opinions that may, or may not, prove to be correct. The use of different estimates, assumptions, judgments or opinions may have resulted in significantly different estimates of the value of our shares.

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The following table summarizes the material components of our estimated value and estimated value per share as of June 30, 2018.

	Components of Share Value
	Estimated Value			Estimated Value per Share
Real estate properties	$	437,110,000		$	55.60
Cash		26,240,456			3.33
Other assets		5,046,159			0.64
Mortgage debt		(280,858,805	)		(35.73	)
Other liabilities		(10,236,394	)		(1.30	)
Total estimated value	$	177,301,416		$	22.54

The estimated value of the real estate properties as of June 30, 2018, was $437,110,000, while the total cost of the real estate properties was $407,192,836 (comprised of the aggregate purchase price of $400,252,928, and capital expenditures subsequent to acquisition of $6,939,908).

The following table summarizes the total cost and estimated value of our real estate properties based on the length of our ownership of the real estate properties as of June 30, 2018.

	Total Cost		Estimated Value		% Increase
Properties owned > 1 year	$	182,872,077	$	200,110,000		9.4	%
Properties owned < 1 year		224,320,759		237,000,000		5.7	%
	$	407,192,836	$	437,110,000		7.3	%

Additional Information Regarding the Valuation, Limitations of Estimated Value per Share and the Engagement of CBRE Cap

In accordance with the IPA Valuation Guidelines, the valuation committee reviewed, confirmed and approved the processes and methodologies employed by CBRE Cap, their consistency with real estate industry standards and best practices and the reasonableness of the assumptions utilized in the valuation.

The valuation report issued on October 9, 2018, was based upon market, economic, financial and other information, circumstances and conditions existing prior to June 30, 2018, and any material change in such information, circumstances and/or conditions may have a material effect on the estimated value per share. CBRE Cap’s valuation materials were addressed solely to the board of directors to assist it in establishing an estimated value of our common stock. CBRE Cap’s valuation materials were restricted, were not addressed to the public and should not be relied upon by any other person to establish an estimated value of our common stock. The valuation report does not constitute a recommendation by CBRE Cap to purchase or sell any shares of our common stock and should not be represented as such.

Each of CBRE Cap and CBRE reviewed the information supplied or otherwise made available to it by us or the Advisor for reasonableness, and assumed and relied upon the accuracy and completeness of all such information and of all information supplied or otherwise made available to it by any other party, and did not undertake any duty or responsibility to verify independently any of such information. With respect to operating or financial forecasts and other information and data provided to or otherwise reviewed by or discussed with CBRE Cap and CBRE, CBRE Cap and CBRE assumed that such forecasts and other information and data were reasonably prepared in good faith reflecting our and the Advisor’s best currently available estimates and judgments and other subjective judgments, and relied upon us and the Advisor to advise CBRE Cap and CBRE promptly if any information previously provided became inaccurate or was required to be updated during the period of its review. CBRE Cap assumes no obligation to update or otherwise revise these materials. In preparing

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its valuation materials, CBRE Cap did not, and was not requested to, solicit third-party indications of interest for us in connection with possible purchases of our securities or the acquisition of all or any part of us.

In performing its analyses, CBRE Cap made numerous assumptions as of various points in time with respect to industry performance, general business, economic and regulatory conditions, current and future rental market for our operating properties and other matters, many of which are necessarily subject to change and beyond the control of CBRE Cap and us. The analyses performed by CBRE Cap are not necessarily indicative of actual values, trading values or actual future results of our common stock that might be achieved, all of which may be significantly more or less favorable than suggested by the valuation report. The analyses do not purport to be appraisals or to reflect the prices at which the properties may actually be sold, and such estimates are inherently subject to uncertainty. The actual value of our common stock may vary significantly depending on numerous factors that generally impact the price of securities, our financial condition and the state of the real estate industry more generally. Accordingly, with respect to the estimated value per share of our common stock, neither us nor CBRE Cap can give any assurance that:

• a stockholder would be able to resell shares at this estimated value;

• a stockholder would ultimately realize distributions per share equal to our estimated value per share upon liquidation of our assets and settlement of our liabilities or a sale of us;

• another independent third-party appraiser or third-party valuation firm would agree with our estimated value per share;

• a third party would offer the estimated value per share in anarm’s-length transaction to purchase all or substantially all of our shares of common stock;

• our shares would trade at a price equal to or greater than the estimated value per share if we listed them on a national securities exchange; or

• the methodology used to estimate our value per share would be acceptable to FINRA or the reporting requirements under the ERISA, the Internal Revenue Code or other applicable law, or the applicable provisions of a Benefit Plan or IRA.

Similarly, the amount a stockholder may receive upon repurchase of his or her shares pursuant to our share repurchase program, may be greater or less than the amount a stockholder paid for the shares, regardless of any increase in the underlying value of assets owned by us.

The June 30, 2018 estimated value per share was reviewed and recommended by the valuation committee and approved by the board of directors at meetings held on October 9, 2018. The value of our common stock will fluctuate over time as a result of, among other things, developments related to individual assets and responses to the real estate and capital markets. We expect to utilize an independent valuation firm to update the estimated value per share as of December 31, 2019, in accordance with the IPA Valuation Guidelines.

The estimated value per share does not reflect a discount for the fact that we are externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. The estimated value per share does not take into account estimated disposition costs and fees for real estate properties that are not under contract to sell or debt prepayment penalties that could apply upon the prepayment of certain of our debt obligations or the impact of restrictions on the assumption of debt.

CBRE Cap is a FINRA registered broker-dealer and is an investment banking firm that specializes in providing real estate financial services. CBRE is actively engaged in the business of appraising commercial real estate properties similar to those owned by us in connection with public securities offerings, private placements, business combinations and similar transactions. We commissioned CBRE to deliver an appraisal report relating to our real estate properties and CBRE received fees upon delivery of such report. In addition, we agreed to indemnify CBRE Cap against certain liabilities arising out of this engagement. Each of CBRE Cap and CBRE is

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an affiliate of CBRE Group, Inc., or the CBRE Group, a Fortune 500 and S&P 500 company headquartered in Los Angeles, California, one of the world’s largest commercial real estate services and investment firms (in terms of 2018 revenue) and a parent holding company of affiliated companies that are engaged in the ordinary course of business in many areas related to commercial real estate and related services. CBRE Cap and its affiliates possess substantial experience in the valuation of assets similar to those owned by us and regularly undertake the valuation of securities in connection with public offerings, private placements, business combinations and similar transactions. For the preparation of the valuation report, we paid CBRE Cap a customary fee for services of this nature, no part of which was contingent relating to the provision of services or specific findings. We did not engage CBRE Cap for any other services. During the past three years, certain of our affiliates engaged affiliates of CBRE primarily for various real estate-related services and these affiliates of CBRE received fees in connection with such services. We anticipate that affiliates of CBRE will continue to provide similar or other real estate-related services in the future for us and our affiliates. In addition, we may in our discretion engage CBRE Cap to assist the board of directors in future determinations of our estimated value per share. We are not affiliated with CBRE, CBRE Cap or any of their affiliates. CBRE Cap and CBRE and their affiliates may from time to time in the future perform other commercial real estate appraisal, valuation and financial advisory services for us and our affiliates in transactions related to the properties that are the subjects of the appraisals, so long as such other services do not adversely affect the independence of the applicable CBRE appraiser. While we and affiliates of the Advisor have engaged and may engage CBRE Cap or its affiliates in the future for commercial real estate services of various kinds, we believe that there are no material conflicts of interest with respect to our engagement of CBRE Cap.

In the ordinary course of their business, each of CBRE Cap and CBRE, and their respective affiliates, directors and officers may structure and effect transactions for their own accounts or for the accounts of their customers in commercial real estate assets of the same kind and in the same markets as our assets.

Distribution Information

We elected to qualify as a REIT for federal income tax purposes, commencing with our taxable year ended December 31, 2016. To qualify as a REIT, we are required to distribute 90% of our annual taxable income, determined without regard to the dividends-paid deduction and by excluding net capital gains, to our stockholders. If the aggregate amount of cash distributions in any given year exceeds the amount of our “REIT taxable income” generated during the year, the excess amount will either be (1) a return on capital or (2) gain from the sale or exchange of property to the extent that a stockholder’s basis in our common stock equals or is reduced to zero as the result of our current or prior year distributions.

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Distributions declared during the years ended December 31, 2018 and 2017, aggregated by quarter, are as follows:

	2018(1)
	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter			Total
Total Distributions Declared	$	2,325,053		$	2,567,449		$	2,823,452		$	3,248,764		$	10,964,718
Total Per Class A Share Distribution	$	0.370		$	0.374		$	0.378		$	0.378		$	1.500
Total Per Class R Share Distribution	$	0.352		$	0.357		$	0.361		$	0.378		$	1.448
Total Per Class T Share Distribution	$	0.306		$	0.309		$	0.313		$	0.378		$	1.307
Daily Distribution per Class A share(2)(3)	$	0.004110		$	0.004110		$	0.004110		$	0.004110		$	0.016440
Daily Distribution per Class R share(2)(3)(4)(6)	$	0.00394521		$	0.00394521		$	0.00394521		$	0.004110		$	0.01594563
Daily Distribution per Class T share(2)(3)(5)(6)	$	0.003376		$	0.003376		$	0.003376		$	0.004110		$	0.014238
Annualized Rate Based on Purchase Price:
Per Class A share		6.00	%		6.00	%		6.00	%		6.00	%
Per Class R share		6.40	%		6.40	%		6.40	%		6.67	%
Per Class T share		5.17	%		5.17	%		5.17	%		6.30	%

	2017(1)
	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter			Total
Total Distributions Declared	$	952,632		$	1,362,134		$	1,772,470		$	2,102,017		$	6,189,253
Total Per Class A Share Distribution	$	0.370		$	0.374		$	0.378		$	0.378		$	1.500
Total Per Class R Share Distribution	$	0.353		$	0.357		$	0.363		$	0.352		$	1.425
Total Per Class T Share Distribution	$	0.304		$	0.307		$	0.320		$	0.310		$	1.241
Daily Distribution per Class A share(2)(3)	$	0.004110		$	0.004110		$	0.004110		$	0.004110		$	0.016440
Daily Distribution per Class R share(2)(3)(4)(6)	$	0.00394521		$	0.00394521		$	0.00394521		$	0.00394521		$	0.01578084
Daily Distribution per Class T share(2)(3)(5)(6)	$	0.003376		$	0.003376		$	0.003457		$	0.003376		$	0.013585
Annualized Rate Based on Purchase Price:
Per Class A share		6.00	%		6.00	%		6.00	%		6.00	%
Per Class R share		6.40	%		6.40	%		6.40	%		6.40	%
Per Class T share		5.17	%		5.17	%		5.30	%		5.17	%

(1) Our board of directors approved a cash distribution that accrued at the above rates per day for each share of our Class A common stock, Class R common stock and Class T common stock, which if paid each day over a365-day period during fiscal years 2018 and 2017, respectively, is equivalent to the per share annualized rates reflected above based on a purchase price of $25.00 per share of Class A common stock, $22.50 per share of Class R common stock and $23.81 per share of Class T common stock.

(2) Our board of directors approved a cash distribution that began to accrue on May 19, 2016, at the above rates per day for each share of our Class A common stock and Class T common stock. Our board of directors also

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approved a cash distribution that began to accrue on August 2, 2016, at the above rates per day for each share of our Class R common stock.

(3) The distributions declared accrued daily to stockholders of record as of the close of business on each day and are payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month. There is no guarantee that we will continue to pay distributions at these rates or at all.

(4) Distributions during the fiscal year 2018, were based on daily record dates and calculated at a rate of $0.00394521 per share of Class R common stock per day for Class R common stock subject to an annual distribution and shareholder servicing fee of 0.27%. In some instances during the three months ended March 31, 2017, and the three months ended December 31, 2017, we paid distributions at a rate of $0.00369863 per share of Class R common stock per day for Class R common stock subject to an annual distribution and shareholder servicing fee of 0.67%.

(5) Distributions during the three months ended September 30, 2017, were based on daily record dates and calculated at a rate of $0.003457 per share of Class T common stock per day for Class T common stock subject to an annual distribution and shareholder servicing fee of 1.0%. In some instances during the three months ended September 30, 2017, and the three months ended December 31, 2017, we paid distributions at a rate of $0.003376 subject to an annual distribution and shareholder fee of 1.125%.

(6) In connection with the determination of an estimated value per share, our board of directors determined a price per share for the DRP for each of our Class A common stock, Class R common stock and Class T common stock of $22.54 effective November 1, 2018.

The tax composition of our distributions declared for the years ended December 31, 2018 and 2017, was as follows:

	December 31,
	2018			2017
Ordinary income		0.18	%		—	%
Return of capital		99.82	%		100.00	%
Total		100.00	%		100.00	%

Generally, our policy is to pay distributions from cash flow from operations. Because we may receive income from interest or rents at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund capital expenditures and other expenses, we expect that from time to time during our operational stage, we will declare distributions in anticipation of cash flow that we expect to receive during a later period, and we expect to pay these distributions in advance of our actual receipt of these funds. In these instances, our board of directors has the authority under our organizational documents, to the extent permitted by Maryland law, to fund distributions from sources such as borrowings, offering proceeds or the deferral of fees and expense reimbursements by the Advisor in its sole discretion. If we pay distributions from sources other than cash flow from operations, we will have fewer funds available for investments and our stockholders’ overall return on their investment in us may be reduced. Since inception, through December 31, 2018, 85% of all distributions, including shares issued pursuant to our DRP, have been funded from offering proceeds.

Until the termination of the DRP on February 5, 2019, stockholders could elect to have the cash distributions reinvested in the same class of shares of our common stock at an initial price of $23.75 per Class A share, $22.50 per Class R share and $22.62 per Class T share pursuant to the DRP. On October 9, 2018, our board of directors determined a price per Class A, Class R and Class T share of common stock for DRP of $22.54. No selling commissions or dealer manager fees are payable on shares sold through our DRP. Following the termination of the DRP, all subsequent distributions to stockholders will be made in cash.

For additional information on our distributions, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Distributions.”

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Unregistered Sales of Equity Securities

On August 9, 2018 and 2017, we granted 1,000 shares of restricted common stock to each of our three independent directors pursuant to our independent directors compensation plan as compensation for services in connection with theirre-election to the board of directors at our annual meeting of stockholders.

On March 31, 2017, June 30, 2017, September 29, 2017, December 29, 2017, March 29, 2018 and June 30, 2018, we issued 275 shares of Class A common stock to our independent directors pursuant to our independent directors compensation plan at a value of $25.00 per share as base annual compensation. During the years ended December 31, 2018 and 2017, we issued 550 and 1,100 shares of Class A common stock, respectively, to our independent directors pursuant to our independent directors compensation plan at a value of $25.00 per share as base annual compensation and compensation for attending meetings of our board of directors. The shares issued pursuant to our independent directors compensation plan were issued in transactions exempt from registration pursuant to Section 4a(2) of the Securities Act.

Use of Proceeds from Sales of Registered Securities

Our Registration Statement onForm S-11 (FileNo. 333-207952), registering a Public Offering of up to $1,300,000,000 in shares of our common stock, was declared effective under the Securities Act and we commenced our Public Offering on February 5, 2016. We initially offered a maximum of $1,000,000,000 in shares of our common stock to the public in our Primary Offering at $25.00 for each Class A share ($500,000,000 in Class A shares) and $23.81 for each Class T share ($500,000,000 in Class T shares), and $300,000,000 in shares of our common stock pursuant to our DRP at $23.75 for each Class A share and $22.62 for each Class T share. Commencing on July 25, 2016, we revised the terms of our Public Offering to include Class R shares. From July 25, 2016 through August 31, 2018, the date we terminated the Public Offering, we offered a maximum of $1,000,000,000 in shares of common stock for sale to the public at an initial price of $25.00 for each Class A share ($400,000,000 in Class A shares), $22.50 for each Class R share ($200,000,000 in Class R shares) and $23.81 for each Class T share ($400,000,000 in Class T shares). Up to $300,000,000 in shares pursuant to our DRP was offered at an initial price of $23.75 for each Class A share, $22.50 for each Class R share and $22.62 for each Class T share. In connection with the determination of an estimated value per share, our board of directors determined a price per share for the DRP of $22.54 for each of our Class A common stock, Class R common stock and Class T common stock effective November 1, 2018.

As of December 31, 2018, we had sold 3,513,310, 477,684 and 4,623,732 shares of our Class A, Class R and Class T common stock in our Public Offering, respectively, for gross offering proceeds of $86,485,589, $10,747,201 and $109,854,820, respectively, or $207,087,610 in the aggregate, including 141,524 shares of Class A common stock, 11,777 shares of Class R common stock and 196,681 shares of Class T common stock issued pursuant to our DRP for gross offering proceeds of $3,342,744, $265,053 and $4,446,707, respectively, or $8,054,504 in the aggregate.

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From inception through December 31, 2018, we recognized selling commissions, dealer manager fees, distribution and shareholder servicing fees and organization and other offering costs in our Public Offering in the amounts set forth below. The dealer manager for our Public Offering reallowed all of the selling commissions, a portion of the dealer manager fees and distribution and shareholder servicing fees to participating broker-dealers.

Type of Expense Amount	Amount			Estimated/ Actual	Percentage of Offering Proceeds
Selling commissions and dealer manager fees	$	13,041,427		Actual		6.55	%
Other organization and offering costs		14,609,826		Actual		7.34	%
Total expenses	$	27,651,253		Actual		13.89	%
Total public offering proceeds (excluding DRP proceeds)	$	199,033,106		Actual		100.00	%
Percentage of public offering proceeds used to pay for organization and offering costs		13.89	%	Actual		13.89	%
Distribution and shareholder servicing fees(1)		1,334,800		Actual
Total expenses including the distribution and shareholder servicing fees	$	28,986,053		Actual
Organization and offering costs incurred since inception as a percentage of public offering proceeds		14.56	%	Actual

(1) Includes the distribution and shareholder servicing fee incurred from inception through December 31, 2018, for Class R shares and Class T shares of up to 0.67% and up to 1.125%, respectively, of the purchase price per share sold in our Public Offering. From inception through December 31, 2018, the distribution and shareholder servicing fees incurred with respect to Class R shares and Class T shares were $32,963 and $1,301,837, respectively. The distribution and shareholder servicing fees are paid from sources other than Public Offering proceeds.

From the commencement of our Public Offering through December 31, 2018, the net offering proceeds to us, after deducting the total expenses incurred as described above, were $179,436,357, including net offering proceeds from our DRP of $8,054,504. For the period from inception through December 31, 2018, the ratio of the cost of raising equity capital to the gross amount of equity capital raised was approximately 13.89%.

The net proceeds from our Public Offering have been used to invest in and manage a portfolio of multifamily properties properties located in our targeted markets throughout the United States. In addition to our focus on multifamily properties properties, we may also make selective strategic acquisitions of other types of commercial properties. We may also selectively acquire debt collateralized by multifamily and independent senior-living properties and securities of other companies owning multifamily and independent senior-living properties. As of December 31, 2018, we had invested in ten multifamily properties for a total purchase price of $400,252,928. These property acquisitions were funded from proceeds of our Public Offering and $281,566,000 in secured financings.

Share Repurchase Program

Our share repurchase program may provide an opportunity for our stockholders to have their shares of common stock repurchased by us, subject to certain restrictions and limitations. No shares can be repurchased under our share repurchase program until after the first anniversary of the date of purchase of such shares; provided, however, that this holding period shall not apply to repurchases requested within 270 days after the death or disability of a stockholder.

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Prior to the date we published an estimated value per share of our common stock, the purchase price for shares repurchased under our share repurchase program was as follows:

Share Purchase Anniversary	Repurchase Price on Repurchase Date(1)
Less than 1 year	No Repurchase Allowed
1 year	92.5% of Purchase Price
2 years	95.0% of Purchase Price
3 years	97.5% of Purchase Price
4 years	100.0% of Purchase Price
In the event of a stockholder’s death or disability	Average Issue Price for Shares(2)

Following the date we published an estimated value per share of our common stock, the purchase price for shares repurchased under our share repurchase program is as follows:

Share Purchase Anniversary	Repurchase Price on Repurchase Date(1)(3)(4)
Less than 1 year	No Repurchase Allowed
1 year	92.5% of the Lesser of Purchase Price or Estimated Value per Share
2 years	95.0% of the Lesser of Purchase Price or Estimated Value per Share
3 years	97.5% of the Lesser of Purchase Price or Estimated Value per Share
4 years	100.0% of the Lesser of Purchase Price or Estimated Value per Share
In the event of a stockholder’s death or disability	Average Issue Price for Shares(2)

(1) As adjusted for any stock dividends, combinations, splits, recapitalizations or any similar transaction with respect to the shares of common stock. Repurchase price includes the full amount paid for each share, including all sales commissions and dealer manager fees.

(2) The purchase price per share for shares repurchased upon the death or disability of a stockholder will be equal to the average issue price per share for all of the stockholder’s shares. The requiredone-year holding period does not apply to repurchases requested within 270 days after the death or disability of a stockholder.

(3) For purposes of the share repurchase program, until the day we publicly disclosed a new estimated value per share, the purchase price for shares purchased under the share repurchase program equaled, exclusively, the purchase price paid for the shares. Thereafter, the repurchase price will be a graduated percentage of the lesser of the purchase price or the estimated value per share in effect at the time of repurchase. The estimated value per share is determined by our board of directors, based on periodic valuations by independent third-party appraisers or qualified independent valuation experts selected by the Advisor.

(4) For purposes of the share repurchase program, the “Estimated Value per Share” will equal the most recent publicly disclosed estimated value per share determined by our board of directors. On October 12, 2018, we publicly disclosed an estimated value per share of $22.54 for each class of shares of our common stock based on valuations by independent third-party appraisers or qualified valuation experts.

The purchase price per share for shares repurchased pursuant to our share repurchase program will be further reduced by the aggregate amount of net proceeds per share, if any, distributed to our stockholders prior to the repurchase date as a result of the sale of one or more of our assets that constitutes a return of capital distribution as a result of such sales.

Repurchases of shares of our common stock will be made quarterly upon written request to us at least 15 days prior to the end of the applicable quarter. Repurchase requests will be honored approximately 30 days following the end of the applicable quarter (the “Repurchase Date”). Stockholders may withdraw their repurchase request at any time up to three business days prior to the Repurchase Date.

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We cannot guarantee that the funds set aside for the share repurchase program will be sufficient to accommodate all repurchase requests made in any quarter. In the event that we do not have sufficient funds available to repurchase all of our shares of common stock for which repurchase requests have been submitted in any quarter, such outstanding repurchase requests will automatically roll over to the subsequent quarter and priority will be given to redemption requests in the case of the death or disability of a stockholder. If we repurchase less than all of the shares subject to a repurchase request in any quarter, with respect to any shares which have not been repurchased, a stockholder can (1) withdraw the stockholder’s request for repurchase or (2) ask that we honor the stockholder’s request in a future quarter, if any, when such repurchases can be made pursuant to the limitations of the share repurchase program and when sufficient funds are available. Such pending requests will be honored among all requests for repurchases in any given repurchase period as follows: first, pro rata as to repurchases sought upon a stockholder’s death or disability; and, next, pro rata as to other repurchase requests. Shares repurchased under the share repurchase program to satisfy the required minimum distribution requirements under the Internal Revenue Code applicable to Benefit Plans and IRAs will be repurchased on or after the first anniversary of the date of purchase of such shares at 100% of the purchase price or at 100% of the estimated value per share, as applicable.

We are not obligated to repurchase shares of our common stock under the share repurchase program. The share repurchase program limits the number of shares to be repurchased in any calendar year to (1) 5% of the weighted average number of shares of common stock outstanding during the prior calendar year and (2) those that could be funded from the net proceeds from the sale of shares under the DRP in the prior calendar year, plus such additional funds as may be reserved for that purpose by our board of directors. Such sources of funds could include cash on hand, cash available from borrowings and cash from liquidations of securities investments as of the end of the applicable month, to the extent that such funds are not otherwise dedicated to a particular use, such as working capital, cash distributions to stockholders or purchases of real estate assets. There is no fee in connection with a repurchase of shares of our common stock pursuant to our share repurchase program.

Our board of directors may, in its sole discretion, amend, suspend or terminate the share repurchase program at any time upon 30 days’ notice to its stockholders if it determines that the funds available to fund the share repurchase program are needed for other business or operational purposes or that amendment, suspension or termination of the share repurchase program is in the best interest of our stockholders. Therefore, a stockholder may not have the opportunity to make a repurchase request prior to any potential termination or suspension of our share repurchase program. The share repurchase program will terminate in the event that a secondary market develops for our shares of common stock.

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During the year ended December 31, 2018, we fulfilled repurchase requests and repurchased shares of our common stock pursuant to our share repurchase program as follow:

	Total Number of Shares Requested to be Repurchased(1)		Total Number of Shares Repurchased		Average Price Paid per Share(2)(3)		Approximate Dollar Value of Shares Available That May Yet Be Repurchased Under the Program
January 2018		3,608		3,044	$	23.35		(4)
February 2018		4,748		—		—		(4)
March 2018		8,124		—		—		(4)
April 2018		1,271		—		—		(4)
May 2018		769		16,481		22.80		(4)
June 2018		—		—		—		(4)
July 2018		911		2,964		22.68		(4)
August 2018		2,399		—		—		(4)
September 2018		1,458		—		—		(4)
October 2018		20,777		3,857		21.19		(4)
November 2018		4,800		—		—		(4)
December 2018		600		—		—		(4)
		49,465		26,346

(1) We generally repurchase shares approximately 30 days following the end of the applicable quarter in which requests were received. At December 31, 2018, we had $595,821, representing outstanding and unfulfilled repurchase requests of 26,177 Class A shares, all of which were fulfilled on January 31, 2019.

(2) We currently repurchase shares at prices determined as follows:

• 92.5% of the lesser of Purchase Price or Estimated Value per Share for stockholders who have held their shares for at least one year;

• 95.0% of the lesser of Purchase Price or Estimated Value per Share for stockholders who have held their shares for at least two years;

• 97.5% of the lesser of Purchase Price or Estimated Value per Share for stockholders who have held their shares for at least three years; and

• 100% of the lesser of Purchase Price or Estimated Value per Share for stockholders who have held their shares for at least four years.

Notwithstanding the above, the repurchase price for repurchases sought upon a stockholder’s death or disability will be equal to the average issue price per share for all of the stockholder’s shares. The requiredone-year holding period does not apply to repurchases requested within 270 days after the death or disability of a stockholder.

(3) We have funded repurchases exclusively from the net proceeds we received from the sale of shares under the DRP.

(4) The number of shares that may be repurchased pursuant to the share repurchase program during any calendar year is limited to: (1) 5% of the weighted-average number of shares of our common stock outstanding during the prior calendar year and (2) those that can be funded from the net proceeds we received from the sale of shares under the distribution reinvestment plan during the prior calendar year, plus such additional funds as may be reserved for that purpose by our board of directors.

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data as of December 31, 2018, 2017, 2016 and 2015, for the years ended December 31, 2018, 2017 and 2016 and for the period from July 29, 2015 (Inception) to December 31, 2015,

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should be read in conjunction with the accompanying consolidated financial statements and related notes thereto and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Our results of operations for the periods presented below are not indicative of those expected in future periods. During the period from July 29, 2015 (Inception) to May 18, 2016, we were in existence and commenced our Public Offering, but had not yet commenced real estate operations, as we had not yet acquired any real estate investments. As a result, we had no material results of operations for that period. We terminated our Public Offering on August 31, 2018.

	As of December 31,
	2018		2017		2016		2015
Balance sheet data
Total real estate, net	$	380,301,823	$	360,485,475	$	98,947,503	$	—
Total assets		421,082,401		381,554,845		117,448,401		200,000
Mortgage notes payable, net		280,086,921		258,470,441		72,016,933		—
Total liabilities		293,676,343		270,430,279		77,241,609		—
Redeemable common stock		6,570,093		2,920,059		292,818		—
Total stockholders’ equity		120,835,965		108,204,507		39,913,974		200,000

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	For the Year Ended December 31,									For the Period from July 29, 2015 (Inception) to December 31, 2015
	2018			2017			2016
Operating data
Total revenues	$	37,909,630		$	19,591,577		$	1,264,906		$	—
Net loss		(15,365,609	)		(11,753,187	)		(4,920,712	)		—
Net loss attributable tonon-controlling interest		—			—			(100	)		—
Net loss attributable to common stockholders		(15,365,609	)		(11,753,187	)		(4,920,612	)		—
Net loss attributable to Class A common stockholders—basic and diluted		(6,401,649	)		(5,726,887	)		(3,160,451	)		—
Net loss attributable to Class R common stockholders—basic and diluted		(806,620	)		(534,790	)		(165,258	)		—
Net loss attributable to Class T common stockholders—basic and diluted		(8,157,340	)		(5,491,510	)		(1,594,903	)		—
Net loss per Class A common share—basic and diluted		(1.86	)		(2.49	)		(8.36	)		—
Net loss per Class R common share—basic and diluted		(1.91	)		(2.55	)		(8.42	)		—
Net loss per Class T common share—basic and diluted		(2.05	)		(2.75	)		(8.62	)		—
Other data
Cash flows provided by (used in) operating activities		1,914,725			5,941,399			(1,784,706	)		—
Cash flows used in investing activities		(36,715,267	)		(273,486,909	)		(100,824,607	)		—
Cash flows provided by financing activities		54,279,898			270,282,264			119,551,512			200,000
Total distributions declared to Class A common stockholders		4,903,884			3,286,288			560,327			—
Total distributions declared to Class R common stockholders		597,062			295,072			27,997			—
Total distributions declared to Class T common stockholders		5,463,772			2,607,893			232,376			—
Distributions declared per Class A common share(1)		1.500			1.500			0.930			—
Distributions declared per Class R common share(1)		1.448			1.425			0.598			—
Distributions declared per Class T common share(1)		1.307			1.241			0.764			—
Weighted average number of Class A common shares outstanding—basic and diluted		3,266,046			2,190,070			374,595			—
Weighted average number of Class R common shares outstanding—basic and diluted		411,528			204,514			19,587			—
Weighted average number of Class T common shares outstanding—basic and diluted		4,161,778			2,100,058			189,037			—
FFO(2)		1,293,508			735,644			(4,094,977	)		—
MFFO(2)		1,178,251			1,340,468			(1,076,205	)		—

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(1) For information on our distributions, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Distributions.”

(2) GAAP basis accounting for real estate assets utilizes historical cost accounting and assumes real estate values diminish over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets the Board of Governors of NAREIT established the measurement tool of FFO. Since its introduction, FFO has become a widely usednon-GAAP financial measure among REITs. Additionally, we use MFFO, as defined by the IPA, as a supplemental measure to evaluate our operating performance. MFFO is based on FFO but includes certain adjustments we believe are necessary due to changes in accounting and reporting under GAAP since the establishment of FFO. Neither FFO nor MFFO should be considered as an alternative to net loss or other measurements under GAAP as indicators of our operating performance, nor should they be considered as an alternative to cash flow from operating activities or other measurements under GAAP as indicators of liquidity. For additional information on how we calculate FFO and MFFO and a reconciliation of FFO and MFFO to net loss, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds From Operations and Modified Funds From Operations.”

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the “Selected Financial Data” above and our accompanying consolidated financial statements and the notes thereto included in this Annual Report. As used herein, the terms “we,” “our” and “us” refer to Steadfast Apartment REIT III, Inc., a Maryland corporation, and, as required by context, Steadfast Apartment REIT III Operating Partnership, L.P., a Delaware limited partnership, which we refer to as our “Operating Partnership,” and to their subsidiaries. Also see “Cautionary Note Regarding Forward Looking Statements” preceding Part I of this Annual Report.

Overview

We were formed on July 29, 2015, as a Maryland corporation that has elected to be taxed as, and currently qualifies as, a REIT. We own and manage a portfolio of multifamily properties located in targeted markets throughout the United States. As of December 31, 2018, we owned ten multifamily properties comprised of a total of 2,775 apartment homes.

On February 5, 2016, we commenced our Public Offering to offer a maximum of $1,000,000,000 in shares of common stock for sale to the public at an initial price of $25.00 for each Class A share (up to $500,000,000 in Class A shares) and $23.81 for each Class T share (up to $500,000,000 in Class T shares), with discounts available for certain categories of purchasers. We also offered up to $300,000,000 in shares of common stock pursuant to our DRP at an initial price of $23.75 for each Class A share and $22.62 for each Class T share.

Commencing on July 25, 2016, we revised the terms of the Public Offering to include Class R Shares. We subsequently offered a maximum of $1,000,000,000 in shares of common stock for sale to the public at an initial price of $25.00 for each Class A share ($400,000,000 in Class A shares), $22.50 for each Class R share ($200,000,000 in Class R shares) and $23.81 for each Class T share ($400,000,000 in Class T shares), with discounts available for certain categories of purchasers. We also offered up to $300,000,000 in shares pursuant to our DRP at an initial price of $23.75 for each Class A share, $22.50 for each Class R share and $22.62 for each Class T share. On August 31, 2018, we terminated our Primary Offering but continued to offer shares of common stock pursuant to the DRP through February 5, 2019. We terminated the DRP on February 5, 2019.

As of August 31, 2018, we had sold 3,483,706 shares of Class A common stock, 474,357 shares of Class R common stock and 4,572,889 shares of Class T common stock in our Public Offering for gross proceeds of $85,801,001, $10,672,273 and $108,706,960, respectively, and $205,180,234 in the aggregate, including 111,922

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shares of Class A common stock, 8,450 shares of Class R common stock and 145,838 shares of Class T common stock issued pursuant to our DRP for gross offering proceeds of $2,658,156, $190,125 and $3,298,847, respectively. As of December 31, 2018, we had sold 3,513,310 shares of Class A common stock, 477,684 shares of Class R common stock and 4,623,732 shares of Class T common stock in our Public Offering for gross proceeds of $86,485,589, $10,747,201 and $109,854,820, respectively, and $207,087,610 in the aggregate, including 141,524 shares of Class A common stock, 11,777 shares of Class R common stock and 196,681 shares of Class T common stock issued pursuant to our DRP for gross offering proceeds of $3,342,744, $265,053 and $4,446,707, respectively.

On October 9, 2018, our board of directors determined an estimated value per share for each of our Class A common stock, Class R common stock and Class T common stock of $22.54 as of June 30, 2018. In connection with the determination of an estimated value per share, our board of directors determined a price per share for the DRP for each of our Class A common stock, Class R common stock and Class T common stock of $22.54 effective November 1, 2018. The DRP was suspended with respect to distributions that accrue after February 1, 2019. Our board of directors may, from time to time in its sole discretion, reinstate the DRP, although there is no assurance as to if or when this will happen.

On May 16, 2016, we raised the minimum offering amount and the offering proceeds held in escrow were released to us. As of March 7, 2019, we had sold 3,528,796 shares of Class A common stock, 479,529 shares of Class R common stock and 4,654,977 shares of Class T common stock in our Public Offering for gross proceeds of $86,834,672, $10,788,788 and $110,559,104, respectively, and $208,182,564 in the aggregate, including 157,012 shares of Class A common stock, 13,622 shares of Class R common stock and 227,925 shares of Class T common stock issued pursuant to our DRP for gross offering proceeds of $9,149,457.

Steadfast Apartment Advisor III, LLC is our advisor. Subject to certain restrictions and limitations, the Advisor manages ourday-to-day operations and our portfolio of properties and real estate-related assets. The Advisor sources and presents investment opportunities to our board of directors and provides investment management, marketing, investor relations and other administrative services on our behalf.

Substantially all of our business is conducted through our Operating Partnership. We are the sole general partner of our Operating Partnership and the Advisor is the only limited partner of our Operating Partnership. As we accepted subscriptions for shares of common stock, we transferred substantially all of the net proceeds of the Public Offering to our Operating Partnership as a capital contribution. The Partnership Agreement of our Operating Partnership provides that our Operating Partnership will be operated in a manner that will enable us to (1) satisfy the requirements for being classified as a REIT for federal income tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that our Operating Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code, which classification could result in our Operating Partnership being taxed as a corporation, rather than as a disregarded entity. In addition to the administrative and operating costs and expenses incurred by our Operating Partnership in acquiring and operating our investments, our Operating Partnership will pay all of our administrative costs and expenses, and such expenses will be treated as expenses of our Operating Partnership. We will experience a relative increase in liquidity as additional subscriptions for shares of our common stock are received and a relative decrease in liquidity as offering proceeds are used to acquire and operate our assets.

We elected to be taxed as a REIT under the Internal Revenue Code commencing with our taxable year ended December 31, 2016. As a REIT, we generally will not be subject to federal income tax to the extent that we distribute qualifying dividends to our stockholders. If we fail to qualify as a REIT, we would be subject to federal income tax on our taxable income at regular corporate rates and would not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year in which qualification is lost, unless the Internal Revenue Service grants us relief under certain statutory provisions. Failing to qualify as a REIT could materially and adversely affect our net income and results of operations.

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Market Outlook

The economy in the United States has improved since the last recession; however, there is no assurance that economic conditions will continue to improve or will not worsen in the future. We believe economic and demographic trends will benefit our existing portfolio and that we have unique investment opportunities, particularly in the multifamily sector. Home ownership rates are nearall-time lows. Demographic and economic factors favor the flexibility of rental housing and discourage the potential financial burden associated with home ownership. Additionally, Millennials and Baby Boomers, the two largest demographic groups comprising roughly half of the total population in the United States, are increasingly choosing rental housing over home ownership. Demographic studies suggest that Baby Boomers are downsizing their suburban homes and relocating to multifamily apartments, Millennials are renting multifamily apartments due to high levels of student debt and increased credit standards in order to qualify for a home mortgage. According to the Federal Reserve Bank of New York, aggregate student debt has surpassed automotive, home equity lines of credit and credit card debt. Millennials are also getting married and having children later and are choosing to live in apartment communities until theirmid-30s. Today, 30% of Millennials are still living with their parents or are still in school. When they get a job, Millennials will likely rent moderate income apartments based upon an average income of $45,000 to $65,000. Our plan is to provide rental housing for these generational groups as they age. We believe these factors will continue to contribute to the demand for multifamily housing.

Our Real Estate Portfolio

As of December 31, 2018, we owned the ten multifamily apartment communities listed below:

	Property Name	Location	Purchase Date	Number of Units		Total Purchase Price		Mortgage Debt Outstanding(1)		Average Monthly Occupancy(2)						Average Monthly Rent(3)
										December 31,						December 31,
										2018			2017			2018		2017
1	Carriage House Apartment Homes	Gurnee, IL	5/19/2016		136	$	7,525,000	$	5,660,454		86.8	%		89.7	%	$	818	$	699
2	Bristol Village Apartments	Aurora, CO	11/17/2016		240		47,400,000		34,883,417		91.9	%		95.0	%		1,374		1,319
3	Canyon Resort at Great Hills Apartments	Austin, TX	12/29/2016		256		44,500,000		31,568,495		94.3	%		91.0	%		1,313		1,254
4	Reflections on Sweetwater Apartments	Lawrenceville, GA	1/12/2017		280		33,288,337		22,822,158		93.4	%		92.9	%		1,071		1,024
5	The Pointe at Vista Ridge Apartments	Lewisville, TX	5/25/2017		300		45,188,223		28,964,451		92.6	%		91.7	%		1,228		1,223
6	Belmar Villas	Lakewood, CO	7/21/2017		318		64,503,255		46,892,398		90.0	%		91.2	%		1,329		1,310
7	Ansley at Princeton Lakes	Atlanta, GA	8/31/2017		306		44,594,087		32,204,192		91.4	%		91.2	%		1,146		1,168
8	Sugar Mill Apartments	Lawrenceville, GA	12/7/2017		244		36,305,492		24,636,684		94.6	%		97.1	%		1,139		1,094
9	Avery Point Apartments	Indianapolis, IN	12/15/2017		512		45,829,836		31,060,671		94.2	%		93.2	%		809		776
10	Cottage Trails at Culpepper Landing	Chesapeake, VA	5/31/2018		183		31,118,698		21,394,001		90.6	%		—	%		1,338		—
					2,775	$	400,252,928	$	280,086,921		92.4	%		92.6	%	$	1,136	$	1,089

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(1) Mortgage debt outstanding is net of deferred financing costs associated with the loans for the properties listed above.

(2) At December 31, 2018, our portfolio was approximately 94.3% leased, calculated using the number of occupied and contractually leased units divided by total units.

(3) Average monthly rent is based upon the effective rental income after considering the effect of vacancies, concessions and write-offs.

Review of our Policies

Our board of directors, including our independent directors, has reviewed our policies described in this Annual Report, including policies regarding our investments, leverage and conflicts of interests, and determined that they are in the best interests of our stockholders.

Liquidity and Capital Resources

We use secured borrowings, and intend to use in the future secured and unsecured borrowings. At December 31, 2018, our debt was approximately 64% of the value of our properties as determined by the most recent valuation performed by an independent third-party appraiser as of June 30, 2018. We expect that our overall borrowings will be approximately 55% to 60% of the value of our properties (after debt amortization) plus the value of our other investments. For valuation purposes, the value of a property is determined by an independent third-party appraiser or qualified independent valuation expert. Under our Charter, we are prohibited from borrowing in excess of 300% of the value of our net assets, which generally approximates to 75% of the aggregate cost of our assets, though we may exceed this limit under certain circumstances.

In addition to making investments in accordance with our investment objectives, we use our capital resources to make certain payments to the Advisor and Dealer Manager. During our organization and offering stage, these payments included payments to the Dealer Manager for sales commissions, the dealer manager fee and the distribution and shareholder servicing fees, and payments to the Advisor for reimbursement of certain organization and offering expenses. Through the termination of the Public Offering, total organization and offering expenses incurred by us did not exceed 15% of the gross offering proceeds raised in the Primary Offering. During our operating stage, we make payments to the Advisor in connection with the acquisition of investments, the management of our assets and costs incurred by the Advisor in providing services to us.

Our principal demand for funds will be to acquire investments in accordance with our investment strategy, to pay operating expenses and interest on our outstanding indebtedness and to make distributions to our stockholders. Over time, we intend to generally fund our cash needs for items, other than asset acquisitions, from operations. We expect that our principal sources of working capital will include:

• current unrestricted cash balance, which was $35,628,660 as of December 31, 2018;

• various forms of secured and unsecured financing;

• borrowings under master repurchase agreements;

• equity capital from joint venture partners; and

• cash from operations.

Over the short term, we believe that our sources of capital, specifically our cash balances, cash flow from operations, our ability to raise equity capital from joint venture partners and our ability to obtain various forms of secured and unsecured financing will be adequate to meet our liquidity requirements and capital commitments.

Over the longer term, in addition to the same sources of capital we will rely on to meet our short-term liquidity requirements, we may conduct additional public or private offerings of securities. We expect these

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resources will be adequate to fund our operating activities, debt service and distributions, and will be sufficient to fund our ongoing acquisition activities as well as providing capital for investment in future development and other joint ventures along with potential forward purchase commitments.

We may, but are not required to, establish working capital reserves from offering proceeds out of cash flow generated by our investments or out of proceeds from the sale of our investments. We do not anticipate establishing a general working capital reserve; however, we may establish capital reserves with respect to particular investments. We also may, but are not required to, establish reserves out of cash flow generated by investments or out of net sale proceeds innon-liquidating sale transactions. Our lenders also may require working capital reserves.

To the extent that the working capital reserve is insufficient to satisfy our cash requirements, additional funds may be provided from cash generated from operations or through short-term borrowing. In addition, subject to certain limitations described in our Charter, we may incur indebtedness in connection with the acquisition of any real estate asset, refinance the debt thereon, arrange for the leveraging of any previously unfinanced property or reinvest the proceeds of financing or refinancing in additional properties.

Cash Flows Provided by Operating Activities

We commenced real estate operations with the acquisition of our first multifamily property on May 19, 2016. As of December 31, 2018, we owned ten multifamily properties. During the year ended December 31, 2018, net cash provided by operating activities was $1,914,725, compared to net cash provided by operating activities of $5,941,399 for the year ended December 31, 2017. The change in net cash provided by operating activities is primarily due to an increase in net loss, increase in depreciation and amortization, partially offset by a decrease accounts payable and accrued liabilities and a decrease in amounts due to affiliates. We expect to generate cash flows from operations as we expand our property portfolio and stabilize its operations.

Cash Flows Used in Investing Activities

Our cash used in investing activities varied based on how quickly we raised funds in our Public Offering and how quickly we invested those funds towards acquisitions of real estate and real-estate related investments. During the year ended December 31, 2018, net cash used in investing activities was $36,715,267, compared to $273,486,909 during the year ended December 31, 2017. The decrease in net cash used in investing activities was primarily the result of our acquisition of one multifamily property during the year ended December 31, 2018, compared to our acquisition of six multifamily properties during the year ended December 31, 2017. Net cash used in investing activities during the year ended December 31, 2018, consisted of the following:

• $30,118,698 of cash used related to the acquisition of one multifamily property;

• $5,596,569 of cash used for improvements to real estate investments; and

• $1,000,000 of cash used for deposits for potential real estate investments.

Cash Flows Provided by Financing Activities

During the year ended December 31, 2018, net cash provided by financing activities was $54,279,898, compared to $270,282,264 during the year ended December 31, 2017. The decrease in net cash provided by financing activities is due primarily to decreased net proceeds from our Public Offering and the issuance of notes payable. Net cash provided by financing activities during the year ended December 31, 2018, consisted of the following:

• $38,992,707 of cash provided by offering proceeds related to our Public Offering, net of (1) payments of commissions on sales of common stock, related dealer manager fees and distribution and shareholder servicing fees in the amount of $3,640,878 and (2) the reimbursement of other offering costs to affiliates in the amount of $1,810,661;

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• $21,381,918 of proceeds from the issuance of mortgage notes payable, net of deferred financing costs in the amount of $163,082;

• $595,768 of cash paid for the repurchase of common stock; and

• $5,498,959 of net cash distributions, after giving effect to distributions reinvested by stockholders of $5,042,304.

Contractual Commitments and Contingencies

We use secured debt, and intend to use in the future secured and unsecured debt. At December 31, 2018, our debt was approximately 64% of the value of our properties as determined by the most recent valuation performed by an independent third-party appraiser as of June 30, 2018. We believe that the careful use of borrowings will help us achieve our diversification goals and potentially enhance the returns on our investments. We expect that our borrowings will be approximately 55% to 60% of the value of our properties (after debt amortization) and other real estate-related assets. For valuation purposes, the value of a property is determined by an independent third party appraiser or qualified independent valuation expert. Under our Charter, we are prohibited from borrowing in excess of 300% of our net assets, which generally approximates to 75% of the aggregate cost of our assets unless such excess is approved by a majority of the independent directors and disclosed to stockholders in our next quarterly report, along with a justification for such excess. In such event, we will monitor our debt levels and take action to reduce any such excess as practicable. Our aggregate borrowings are reviewed by our board of directors at least quarterly. As of December 31, 2018, our aggregate borrowings were not in excess of 300% of the value of our net assets.

In addition to using our capital resources for investing purposes and meeting our debt obligations, we use our capital resources to make certain payments to the Advisor and the Dealer Manager. During our organization and offering stage, these payments included payments to the Dealer Manager for selling commissions, dealer manager fees and distribution and shareholder servicing fees and payments to the Dealer Manager and the Advisor for reimbursement of certain organization and other offering expenses. Through the termination of the Public Offering, total organization and offering expenses incurred by us did not exceed 15% of the gross offering proceeds raised in the Primary Offering. During our acquisition and development stage, we make payments to the Advisor in connection with the selection and origination or purchase of real estate and real estate-related investments, the management of our asset portfolio and costs incurred by the Advisor in providing services to us.

As of December 31, 2018, we had indebtedness totaling an aggregate principal amount of $280,086,921, including net deferred financing costs of $1,479,079. The following is a summary of our contractual obligations as of December 31, 2018:

			Payments due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Interest payments on outstanding debt obligations(1)	$	95,252,178	$	12,786,436	$	25,598,265	$	25,124,069	$	31,743,408
Principal payments on outstanding debt obligations(2)		281,566,000		53,989		2,210,845		7,865,616		271,435,550
Total	$	376,818,178	$	12,840,425	$	27,809,110	$	32,989,685	$	303,178,958

(1) Projected interest payments on outstanding debt obligations are based on the outstanding principal amounts and interest rates in effect at December 31, 2018. We incurred interest expense of $11,657,873 during the year ended December 31, 2018, including amortization of deferred financing costs totaling $234,562 and net unrealized gains from the change in fair value of interest rate cap agreements of $119,837.

(2) Projected principal payments on outstanding debt obligations are based on the terms of the mortgage note agreements. Amounts exclude the net deferred financing costs associated with the mortgage notes payable.

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Our debt obligations contain customary financial ornon-financial debt covenants. As of December 31, 2018 and 2017, we were in compliance with all financial andnon-financial debt covenants.

Results of Operations

Overview

The discussion that follows is based on our consolidated results of operations for the years ended December 31, 2018, 2017 and 2016. We commenced real estate operations on May 19, 2016, in connection with the acquisition of our first investment, Carriage House Apartment Homes. We owned nine multifamily properties as of December 31, 2017, and subsequently acquired one additional multifamily property during the year ended December 31, 2018. Our results of operations for the year ended December 31, 2018, are not indicative of those expected in future periods. The increase in the number of properties in our portfolio is the primary cause of the increase in our operating income and expenses, as further discussed below. In general, we expect that our income and expenses related to our portfolio will increase in future periods as a result of organic rent increases and anticipated value-enhancement projects.

To provide additional insight into our operating results, we are also providing a detailed analysis of same-store versusnon-same-store NOI. For more information on NOI and a reconciliation of NOI (anon-GAAP financial measure) to net loss, see “—Net Operating Income.”

Consolidated Results of Operations for the Year Ended December 31, 2018, Compared to the Year Ended December 31, 2017

The following table summarizes the consolidated results of operations for the years ended December 31, 2018 and 2017:

	For the Years Ended December 31,						Change $			Change %
	2018			2017
Total revenues	$	37,909,630		$	19,591,577		$	18,318,053			93	%
Operating, maintenance and management		(10,429,818	)		(5,163,724	)		(5,266,094	)		(102	)%
Real estate taxes and insurance		(5,237,606	)		(2,763,816	)		(2,473,790	)		(90	)%
Fees to affiliates		(5,799,201	)		(2,402,297	)		(3,396,904	)		(141	)%
Depreciation and amortization		(16,659,117	)		(12,488,831	)		(4,170,286	)		(33	)%
Interest expense		(11,657,873	)		(5,898,156	)		(5,759,717	)		(98	)%
General and administrative expenses		(3,491,624	)		(2,627,940	)		(863,684	)		(33	)%
Net loss	$	(15,365,609	)	$	(11,753,187	)	$	(3,612,422	)		(31	)%
NOI(1)	$	20,477,716		$	10,915,679		$	9,562,037			88	%
FFO(2)	$	1,293,508		$	735,644		$	557,864			76	%
MFFO(2)	$	1,178,251		$	1,340,468		$	(162,217	)		(12	)%

(1) NOI is anon-GAAP financial measure used by investors and our management to evaluate and compare the performance of our properties and to determine trends in earnings. However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, interest income and other expense, acquisition costs, certain fees to affiliates, depreciation and amortization expense and gains or losses from the sale of our properties and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs, all of which are significant economic costs. For additional information on how we calculate NOI and a reconciliation of NOI to net loss, see “—Net Operating Income.”

(2) GAAP basis accounting for real estate assets utilizes historical cost accounting and assumes real estate values diminish over time. In an effort to overcome the difference between real estate values and historical

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cost accounting for real estate assets the Board of Governors of NAREIT established the measurement tool of FFO. Since its introduction, FFO has become a widely usednon-GAAP financial measure among REITs. Additionally, we use MFFO as defined by the IPA as a supplemental measure to evaluate our operating performance. MFFO is based on FFO but includes certain adjustments we believe are necessary due to changes in accounting and reporting under GAAP since the establishment of FFO. Neither FFO nor MFFO should be considered as alternatives to net loss or other measurements under GAAP as indicators of our operating performance, nor should they be considered as alternatives to cash flow from operating activities or other measurements under GAAP as indicators of liquidity. For additional information on how we calculate FFO and MFFO and a reconciliation of FFO and MFFO to net loss, see “—Funds From Operations and Modified Funds From Operations.”

Net loss

For the year ended December 31, 2018, we had a net loss of $15,365,609, compared to a net loss of $11,753,187 for the year ended December 31, 2017. The increase in net loss of $3,612,422 over the comparable prior year period was primarily due to the increase in depreciation and amortization expense of $4,170,286, the increase in interest expense of $5,759,717, the increase in operating, maintenance and management expenses of $5,266,094, the increase in real estate taxes and insurance of $2,473,790, the increase in fees to affiliates of $3,396,904 and the increase in general and administrative expenses of $863,684, partially offset by the increase in total revenues of $18,318,053. The increase in these expenses was primarily due to the acquisition of nine multifamily properties during the year ended December 31, 2017, which experienced a full year of operations during the year ended December 31, 2018, and the increase in our property portfolio from nine multifamily properties at December 31, 2017, to 10 multifamily properties at December 31, 2018.

Total revenues

Total revenues were $37,909,630 for the year ended December 31, 2018, compared to $19,591,577 for the year ended December 31, 2017. The increase of $18,318,053 was primarily due to owning ten multifamily properties at December 31, 2018, compared to nine multifamily properties at December 31, 2017. Our total units increased by 183 from 2,592 at December 31, 2017 to 2,775 at December 31, 2018. We expect rental income and tenant reimbursements to increase in future periods as a result of ordinary monthly rent increases, improved occupancy and the implementation of our value-enhancement strategy.

Operating, maintenance and management expenses

Operating, maintenance and management expenses were $10,429,818 for the year ended December 31, 2018, compared to $5,163,724 for the year ended December 31, 2017. The increase of $5,266,094 was primarily due to operating ten multifamily properties at December 31, 2018, compared to nine multifamily properties at December 31, 2017. We expect these amounts to increase in future periods as a result of the realization of operating expenses for an entire period for all properties, but to decrease as a percentage of total revenues as we implement operational efficiencies at our multifamily properties.

Real estate taxes and insurance

Real estate taxes and insurance expenses were $5,237,606 for the year ended December 31, 2018, compared to $2,763,816 for the year ended December 31, 2017. The increase of $2,473,790 was primarily due to the acquisition of one multifamily property since December 31, 2017, and real estate taxes and insurance expenses for a full reporting period on the properties acquired during the year ended December 31, 2017. We expect these amounts may increase in future periods as a result of municipal property tax rate increases as well as increases in the assessed value of our property portfolio.

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Fees to affiliates

Fees to affiliates were $5,799,201 for the year ended December 31, 2018, compared to $2,402,297 for the year ended December 31, 2017. The increase of $3,396,904 was primarily due to the increase in investment management fees and property management fees as a result of the growth in our portfolio. We expect fees to affiliates to increase in future periods as a result of increases in the cost of investments and increased property management fees from anticipated increases in future rental income.

Depreciation and amortization

Depreciation and amortization expenses were $16,659,117 for the year ended December 31, 2018, compared to $12,488,831 for the year ended December 31, 2017. The increase of $4,170,286 was primarily due to the net increase in depreciable and amortizable assets of $27,930,076 since December 31, 2017. We expect these amounts to increase in future periods as a result of anticipated future enhancements to our real estate portfolio.

Interest expense

Interest expense for the year ended December 31, 2018, was $11,657,873 compared to $5,898,156 for the year ended December 31, 2017. The increase of $5,759,717 was primarily due to the increase in mortgage notes payable, net of $21,616,480 since December 31, 2017, due to financing incurred in connection with the acquisition of one multifamily property since December 31, 2017. Included in interest expense is the amortization of deferred financing costs of $234,562 and $119,514 and the unrealized (gain) loss on derivative instruments of $(119,837) and $444,252 for the years ended December 31, 2018 and 2017, respectively. Our interest expense in future periods will vary based on the changes to LIBOR and its impact on our variable rate debt and our level of future borrowings, which will depend on the availability and cost of debt financing and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives.

General and administrative expense

General and administrative expenses for the year ended December 31, 2018, were $3,491,624 compared to $2,627,940 for the year ended December 31, 2017. These general and administrative costs consisted primarily of legal fees, insurance premiums, audit fees, other professional fees and independent directors’ compensation. The increase of $863,684 was primarily due to the acquisition of one multifamily property since December 31, 2017, expenses related to the determination of our estimated value per share and the increase in director meeting fees as a result of an increase in the number of meetings compared to the prior year. We expect general and administrative expenses to decrease as a percentage of total revenue.

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Consolidated Results of Operations for the Year Ended December 31, 2017, Compared to the Year Ended December 31, 2016

The following table summarizes the consolidated results of operations for the years ended December 31, 2017 and 2016:

	For the Years Ended December 31,						Change $			Change %
	2017			2016
Total revenues	$	19,591,577		$	1,264,906		$	18,326,671			1,449	%
Operating, maintenance and management		(5,163,724	)		(376,536	)		(4,787,188	)		(1,271	)%
Real estate taxes and insurance		(2,763,816	)		(160,707	)		(2,603,109	)		(1,620	)%
Fees to affiliates		(2,402,297	)		(2,221,052	)		(181,245	)		(8	)%
Depreciation and amortization		(12,488,831	)		(825,735	)		(11,663,096	)		(1,412	)%
Interest expense		(5,898,156	)		(281,031	)		(5,617,125	)		(1,999	)%
General and administrative expenses		(2,627,940	)		(1,426,575	)		(1,201,365	)		(84	)%
Acquisition costs		—			(893,982	)		893,982			100	%
Net loss	$	(11,753,187	)	$	(4,920,712	)	$	(6,832,475	)		(139	)%
NOI(1)	$	10,915,679		$	666,864		$	10,248,815			1,537	%
FFO(2)	$	735,644		$	(4,094,977	)	$	4,830,621			118	%
MFFO(2)	$	1,340,468		$	(1,076,205	)	$	2,416,673			225	%

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

(2) See “—Funds From Operations and Modified Funds From Operations” below for a reconciliation of FFO and MFFO to net loss.

Net loss

For the year ended December 31, 2017 we had a net loss of $11,753,187, compared to a net loss of $4,920,712 for the year ended December 31, 2016. The increase in net loss of $6,832,475 over the comparable prior year period was primarily due to the increase in depreciation and amortization expense of $11,663,096, the increase in interest expense of $5,617,125, the increase in operating, maintenance and management expenses of $4,787,188, the increase in real estate taxes and insurance of $2,603,109, the increase in fees to affiliates of $181,245 and the increase in general and administrative expenses of $1,201,365, partially offset by the increase in total revenues of $18,326,671 and a decrease in acquisition costs of $893,982. The increase in these expenses was primarily due to the increase in our property portfolio from three multifamily properties at December 31, 2016 to nine multifamily properties at December 31, 2017.

Total revenues

Total revenues were $19,591,577 for the year ended December 31, 2017, compared to $1,264,906 for the year ended December 31, 2016. The increase of $18,326,671 was primarily due to owning nine multifamily properties at December 31, 2017, compared to three multifamily properties at December 31, 2016. Our total units increased by 1,960 from 632 at December 31, 2016 to 2,592 at December 31, 2017.

Operating, maintenance and management expenses

Operating, maintenance and management expenses were $5,163,724 for the year ended December 31, 2017, compared to $376,536 for the year ended December 31, 2016. The increase of $4,787,188 was primarily due to operating nine multifamily properties at December 31, 2017, compared to three multifamily properties at December 31, 2016.

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Real estate taxes and insurance

Real estate taxes and insurance expenses were $2,763,816 for the year ended December 31, 2017, compared to $160,707 for the year ended December 31, 2016. The increase of $2,603,109 was primarily due to the acquisition of six multifamily properties since December 31, 2016, and real estate taxes and insurance expenses for a full reporting period on the properties acquired during the year ended December 31, 2016.

Fees to affiliates

Fees to affiliates were $2,402,297 for the year ended December 31, 2017, compared to $2,221,052 for the year ended December 31, 2016. The increase of $181,245 was primarily due to the increase in investment management fees and property management fees as a result of the growth in our portfolio, partially offset by the decrease in acquisition fees and as a result of the adoption of ASU2017-01,Business Combinations (Topic 805): clarifying the definition of a business (“ASU2017-01”) on January 1, 2017, resulting in the capitalization of previously expensed fees to affiliates in the accompanying consolidated balance sheet in this Annual Report.

Depreciation and amortization

Depreciation and amortization expenses were $12,488,831 for the year ended December 31, 2017, compared to $825,735 for the year ended December 31, 2016. The increase of $11,663,096 was primarily due to the net increase in depreciable and amortizable assets of $240,297,356 since December 31, 2016.

Interest expense

Interest expense for the year ended December 31, 2017, was $5,898,156 compared to $281,031 for the year ended December 31, 2016. The increase of $5,617,125 was primarily due to the increase in mortgage notes payable, net of $186,453,508 since December 31, 2016, due to financing incurred in connection with the acquisition of six multifamily properties since December 31, 2016. Included in interest expense is the amortization of deferred financing costs of $119,514 and $6,931 and the unrealized loss on derivative instruments of $444,252 and $24,989 for the years ended December 31, 2017 and 2016, respectively.

General and administrative expense

General and administrative expenses for the year ended December 31, 2017, were $2,627,940 compared to $1,426,575 for the year ended December 31, 2016. These general and administrative costs consisted primarily of legal fees, insurance premiums, audit fees, other professional fees and independent directors’ compensation. The increase of $1,201,365 was primarily due to the acquisition of six multifamily properties since December 31, 2016, and the continuing operation of the properties owned as of December 31, 2016.

Acquisition costs

Acquisition costs for the year ended December 31, 2017, were $0, compared to $893,982 for the year ended December 31, 2016. The decrease of $893,982 was due to the adoption of ASU2017-01 as of January 1, 2017, resulting in the capitalization of acquisition costs in the accompanying consolidated balance sheets in this Annual Report.

Property Operations for the Year Ended December 31, 2018, Compared to the Year Ended December 31, 2017

For purposes of evaluating comparative operating performance, we categorize our properties as “same-store” or“non-same-store.” A “same-store” property is a property that was owned at January 1, 2017. A“non-same-store” property is a property that was acquired, placed into service or disposed of after January 1, 2017. As of December 31, 2018, three properties were categorized as same-store properties.

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The following table presents the same-store andnon-same-store results from operations for the years ended December 31, 2018 and 2017:

	For the Year Ended December 31,				Change $			Change %
	2018		2017
Same-store property:
Revenues	$	9,457,447	$	9,289,735	$	167,712			2	%
Operating expenses		4,567,371		4,389,263		178,108			4	%
NOI		4,890,076		4,900,472		(10,396	)		—	%
Non-same-store properties:
NOI		15,587,640		6,015,207		9,572,433
Total NOI(1)	$	20,477,716	$	10,915,679	$	9,562,037

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

Net Operating Income

Same-store net operating income was $4,890,076 for the year ended December 31, 2018, compared to $4,900,472 for the year ended December 31, 2017. The decrease in same-store net operating income was a result of a 2% increase in same-store rental revenues and a 4% increase in same-store operating expenses.

Revenues

Same-store revenues were $9,457,447 for the year ended December 31, 2018, compared to $9,289,735 for the year ended December 31, 2017. The 2% increase in same-store revenues was primarily due to average rent increases at the same-store property from $1,166 as of December 31, 2017, to $1,248 as of December 31, 2018 and the completion of value-enhancement projects, offset by a decrease in the occupancy rate from 92.2% as of December 31, 2017, to 91.8% as of December 31, 2018.

Operating Expenses

Same-store operating expenses were $4,567,371 for the year ended December 31, 2018, compared to $4,389,263 for the year ended December 31, 2017. The increase in same-store operating expenses was primarily attributable to increases in salaries and utilities at the properties.

Net Operating Income

NOI is anon-GAAP financial measure of performance. NOI is used by investors and our management to evaluate and compare the performance of our properties, to determine trends in earnings and to compute the fair value of our properties as it is not affected by (1) the cost of funds, (2) acquisition costs,(3) non-operating fees to affiliates, (4) the impact of depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP or (5) general and administrative expenses and other gains and losses that are specific to us. The cost of funds is eliminated from net income (loss) because it is specific to our particular financing capabilities and constraints. The cost of funds is also eliminated because it is dependent on historical interest rates and other costs of capital as well as past decisions made by us regarding the appropriate mix of capital which may have changed or may change in the future. Acquisition costs andnon-operating fees to affiliates are eliminated because they do not reflect continuing operating costs of the property owner.

Depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets are eliminated because they may not accurately represent the actual change in value in our multifamily

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properties that result from use of the properties or changes in market conditions. While certain aspects of real property do decline in value over time in a manner that is reasonably captured by depreciation and amortization, the value of the properties as a whole have historically increased or decreased as a result of changes in overall economic conditions instead of from actual use of the property or the passage of time. Gains and losses from the sale of real property vary from property to property and are affected by market conditions at the time of sale which will usually change from period to period. These gains and losses can create distortions when comparing one period to another or when comparing our operating results to the operating results of other real estate companies that have not made similarly timed purchases or sales. We believe that eliminating these costs from net income is useful because the resulting measure captures the actual revenue generated and actual expenses incurred in operating our properties as well as trends in occupancy rates, rental rates and operating costs.

However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, interest income and other expense, acquisition costs, certain fees to affiliates, depreciation and amortization expense and gains or losses from the sale of properties, and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, all of which are significant economic costs. NOI may fail to capture significant trends in these components of net income which further limits its usefulness.

NOI is a measure of the operating performance of our properties but does not measure our performance as a whole. NOI is therefore not a substitute for net income (loss) as computed in accordance with GAAP. This measure should be analyzed in conjunction with net income (loss) computed in accordance with GAAP and discussions elsewhere in “—Results of Operations” regarding the components of net income (loss) that are eliminated in the calculation of NOI. Other companies may use different methods for calculating NOI or similarly entitled measures and, accordingly, our NOI may not be comparable to similarly entitled measures reported by other companies that do not define the measure exactly as we do.

The following is a reconciliation of our NOI to net loss for the three months ended December 31, 2018 and 2017 and for the years ended December 31, 2018, 2017 and 2016, computed in accordance with GAAP:

	For the Three Months Ended December 31,						For the Year Ended December 31,
	2018			2017			2018			2017			2016
Net loss	$	(4,358,151	)	$	(3,698,150	)	$	(15,365,609	)	$	(11,753,187	)	$	(4,920,712	)
Fees to affiliates(1)		1,075,282			818,540			4,167,442			1,655,649			2,160,253
Depreciation and amortization		3,854,972			4,317,671			16,659,117			12,488,831			825,735
Interest expense		3,748,802			2,032,189			11,657,873			5,898,156			281,031
General and administrative expenses		1,054,310			590,212			3,491,624			2,627,940			1,426,575
Acquisition costs(2)		—			—			—			—			893,982
Other gains(3)		(132,731	)		(755	)		(132,731	)		(1,710	)		—
NOI	$	5,242,484		$	4,059,707		$	20,477,716		$	10,915,679		$	666,864

(1) Fees to affiliates for the three months and year ended December 31, 2018, exclude property management fees of $309,294 and $1,179,534 and other fees of $139,842 and $452,225, respectively, that are included in NOI. Fees to affiliates for the three months and year ended December 31, 2017, exclude property management fees of $184,397 and $572,575 and other fees of $64,000 and $174,073, respectively, that are included in NOI. Fees to affiliates for the year ended December 31, 2016, exclude property management fees of $47,884 and other fees of $12,915 that are included in NOI.

(2) There were no acquisition costs for the three months and years ended December 31, 2018 and 2017. Acquisition costs for the year ended December 31, 2016 of $893,982 did not meet the criteria for capitalization under ASU2017-01 and is recorded in acquisition costs in the accompanying consolidated statements of operations. Acquisition expenses for the three months and years ended December 31, 2018

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and 2017, of $2,293, $(1,603), $4,580 and $160,572, respectively, did not meet the criteria for capitalization under ASU2017-01 and are recorded in general and administrative expenses in the accompanying consolidated statements of operations.

(3) Other gains for the three months and years ended December 31, 2018 and 2017, includenon-recurring insurance claim recoveries and interest income that are not included in NOI. There were no other gains for the year ended December 31, 2016.

Funds from Operations and Modified Funds from Operations

Due to certain unique operating characteristics of real estate companies, as discussed below, NAREIT, an industry trade group, has promulgated the measure FFO, which we believe to be an appropriate supplemental measure to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO is not equivalent to our net income (loss) as determined under GAAP.

We define FFO, anon-GAAP financial measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004 (“White Paper”). The White Paper defines FFO as net income (loss) computed in accordance with GAAP, excluding gains or losses from sales of property andnon-cash impairment charges of real estate related investments, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. In particular, we believe it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations and assessments regarding general market conditions which can change over time. An asset will only be evaluated for impairment if certain impairment indications exist and if the carrying, or book value, exceeds the total estimated undiscounted future cash flows (including net rental and lease revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) from such asset. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and the relatively limited term of our operations, it could be difficult to recover any impairment charges. Our FFO calculation complies with NAREIT’s policy described above.

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or as requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. However, FFO, and MFFO, as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than thenon-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.

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Changes in the accounting and reporting promulgations under GAAP (for acquisition fees and expenses from a capitalization/depreciation model to anexpensed-as-incurred model) that were put into effect in 2009 and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT’s definition of FFO have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses for all industries as items that are expensed under GAAP, that are typically accounted for as operating expenses. Management believes these fees and expenses do not affect our overall long-term operating performance. Publicly registered,non-listed REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation. While otherstart-up entities may also experience significant acquisition activity during their initial years, we believe that public,non-listed REITs, like us, are unique in that they have a limited life with targeted exit strategies within a relatively limited time frame after acquisition activity ceases. Our board of directors will determine to pursue a liquidity event when it believes that the then-current market conditions are favorable. However, our board of directors does not anticipate evaluating a liquidity event (i.e., listing of our common stock on a national exchange, a merger or sale of our company or another similar transaction) until five years after the completion of our offering stage. Thus, as a limited life REIT, we will not continuously purchase assets and will have a limited life.

Due to the above factors and other unique features of publicly registered,non-listed REITs, the IPA, an industry trade group, has standardized a measure known as MFFO, which the IPA has recommended as a supplemental measure for publicly registerednon-listed REITs and which we believe to be another appropriate supplemental measure to reflect the operating performance of a public,non-listed REIT having the characteristics described above. MFFO is not equivalent to our net income or loss as determined under GAAP, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate with a limited life and targeted exit strategy, as currently intended. We believe that, because MFFO excludes costs that we consider more reflective of investing activities and othernon-operating items included in FFO and also excludes acquisition fees and expenses that are not capitalized, as discussed below, and affect our operations only in periods in which properties are acquired, MFFO can provide, on a going forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance after the period in which we are acquiring our properties and once our portfolio is in place. By providing MFFO, we believe we are presenting useful information that assists investors and analysts to better assess the sustainability of our operating performance after our offering has been completed and our properties have been acquired. We also believe that MFFO is a recognized measure of sustainable operating performance by thenon-listed REIT industry. Further, we believe MFFO is useful in comparing the sustainability of our operating performance after our offering and acquisitions are completed with the sustainability of the operating performance of other real estate companies that are not as involved in acquisition activities. Investors are cautioned that MFFO should only be used to assess the sustainability of our operating performance after our offering has been completed and properties have been acquired, as it excludes acquisition costs that have a negative effect on our operating performance during the periods in which properties are acquired.

We define MFFO, anon-GAAP financial measure, consistent with the IPA’s Guideline2010-01, Supplemental Performance Measure for Publicly Registered,Non-Listed REITs: Modified Funds from Operations (the “Practice Guideline”), issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income: acquisition fees and expenses; amounts relating to deferred rent receivables and amortization of above and below market leases and liabilities (which are adjusted in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments); accretion of discounts and amortization of premiums on debt investments;mark-to-market adjustments included in net income; nonrecurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums on debt investments, nonrecurring unrealized gains and losses on hedges, foreign exchange, derivatives or securities holdings,

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unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operating activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized. While we rely on the Advisor for managing interest rate, hedge and foreign exchange risk, we do not retain an outside consultant to review all our hedging agreements. Inasmuch as interest rate hedges are not a fundamental part of our operations, we believe it is appropriate to exclude suchnon-recurring gains and losses in calculating MFFO, as such gains and losses are not reflective ofon-going operations.

Our MFFO calculation complies with the IPA’s Practice Guideline described above, except with respect to certain acquisition fees and expenses as discussed below. In calculating MFFO, we exclude acquisition related expenses that are not capitalized, amortization of above and below market leases, fair value adjustments of derivative financial instruments, deferred rent receivables and the adjustments of such items related to noncontrolling interests. Historically under GAAP, acquisition fees and expenses are characterized as operating expenses in determining operating net income. However, following the recent publication of ASU2017-01, acquisition fees and expenses are capitalized and depreciated under certain conditions. On January 1, 2017, we elected to early adopt ASU2017-01 resulting in a substantial part of our acquisition fees and expenses being capitalized and therefore not excluded from the calculation of MFFO but captured as depreciation in calculating FFO. However, these expenses are paid in cash by us. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property. The acquisition of properties, and the corresponding acquisition fees and expenses, is the key operational feature of our business plan to generate operational income and cash flow to fund distributions to our stockholders. Further, under GAAP, certain contemplatednon-cash fair value and othernon-cash adjustments are considered operatingnon-cash adjustments to net income in determining cash flow from operating activities. In addition, we view fair value adjustments of derivatives and gains and losses from dispositions of assets asnon-recurring items or items which are unrealized and may not ultimately be realized, and which are not reflective ofon-going operations and are therefore typically adjusted for when assessing operating performance.

Our management uses MFFO and the adjustments used to calculate MFFO in order to evaluate our performance against other public,non-listed REITs which have limited lives with short and defined acquisition periods and targeted exit strategies shortly thereafter. As noted above, MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate in this manner. We believe that our use of MFFO and the adjustments used to calculate MFFO allow us to present our performance in a manner that reflects certain characteristics that are unique to public,non-listed REITs, such as their limited life, limited and defined acquisition period and targeted exit strategy, and hence that the use of such measures is useful to investors. By excluding expensed acquisition costs that are not capitalized, the use of MFFO provides information consistent with management’s analysis of the operating performance of the properties. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such changes that may reflect anticipated and unrealized gains or losses, we believe MFFO provides useful supplemental information.

Presentation of this information is intended to provide useful information to investors as they compare the operating performance to that of other public,non-listed REITs, although it should be noted that not all public,non-listed REITs calculate FFO and MFFO the same way, so comparisons with other public,non-listed REITs may not be meaningful. Furthermore, FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs, including our ability to make distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with GAAP measurements as an indication of our performance. MFFO is useful in assisting management and investors in assessing the

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sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete and net asset value is disclosed. MFFO is not a useful measure in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining MFFO.

Neither the SEC, NAREIT nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, the SEC, NAREIT or another regulatory body may decide to standardize the allowable adjustments across thenon-listed REIT industry and in response to such standardization we may have to adjust our calculation and characterization of FFO or MFFO accordingly.

Our calculation of FFO and MFFO is presented in the following table for the years ended December 31, 2018, 2017 and 2016:

	For the Year Ended December 31,
	2018			2017			2016
Reconciliation of net loss to MFFO:
Net loss	$	(15,365,609	)	$	(11,753,187	)	$	(4,920,712	)
Depreciation of real estate assets		14,010,010			7,045,959			357,649
Amortization of lease-related costs		2,649,107			5,442,872			468,086
FFO		1,293,508			735,644			(4,094,977	)
Acquisition fees and expenses(1)(2)		4,580			160,572			2,993,783
Unrealized (gain) loss on derivative instruments		(119,837	)		444,252			24,989
MFFO	$	1,178,251		$	1,340,468		$	(1,076,205	)
FFO per share—basic and diluted	$	0.17		$	0.16		$	(7.02	)
MFFO per share—basic and diluted		0.15			0.30			(1.85	)
Loss per common share—basic and diluted		(1.96	)		(2.61	)		(8.44	)
Weighted average number of common shares outstanding—basic and diluted		7,839,352			4,494,642			583,220

(1) By excluding expensed acquisition costs that are not capitalized, management believes MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition fees and expenses include payments to the Advisor or third parties. Acquisition fees and expenses under GAAP were historically considered operating expenses and as expenses included in the determination of net income (loss) and income (loss) from continuing operations, both of which are performance measures under GAAP. Following the publication of ASU2017-01, acquisition fees and expenses are capitalized and depreciated under certain conditions. We have elected to early adopt ASU2017-01 resulting in a substantial part of our acquisition fees and expenses being capitalized and therefore not excluded from the calculation of MFFO but are captured as depreciation in calculating FFO. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to the property. The acquisition of properties, and the corresponding acquisition fees and expenses, is the key operational feature of our business plan to generate operational income and cash flow to fund distributions to its stockholders.

(2) Acquisition expenses for the years ended December 31, 2018 and 2017, of $4,580 and $160,572, respectively, did not meet the criteria for capitalization under ASU2017-01 and are recorded in general and administrative expenses in the accompanying consolidated statements of operations. All acquisition fees for the years ended December 31, 2018 and 2017, were capitalized pursuant to ASU2017-01 and therefore were not recorded in the statements of operations impacting net loss and MFFO. Acquisition fees and expenses for the year ended December 31, 2016, include acquisition fees of $2,099,801 and acquisition

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expenses of $893,982 and are recorded in fees to affiliates and acquisition costs, respectively, in the accompanying consolidated statements of operations.

FFO and MFFO may be used to fund all or a portion of certain capitalizable items that are excluded from FFO and MFFO, such as tenant improvements, building improvements and deferred leasing costs.

Inflation

Substantially all of our multifamily property leases with residents are for a term of one year or less. In an inflationary environment, this may allow us to realize increased rents upon renewal of existing leases or the beginning of new leases. Short-term leases generally will minimize our risk from the adverse effects of inflation, although these leases generally permit residents to leave at the end of the lease term and therefore will expose us to the effect of a decline in market rents. In a deflationary rent environment, we may be exposed to declining rents more quickly under these shorter term leases.

As of December 31, 2018, we had not entered into any material leases as a lessee.

REIT Compliance

To maintain our qualification as a REIT for tax purposes, we are required to distribute at least 90% of our REIT taxable income (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP) to our stockholders. We must also meet certain asset and income tests, as well as other requirements. We will monitor the operations and transactions that may potentially impact our REIT status. If we fail to qualify as a REIT in any taxable year following the year we initially elected to be taxed as a REIT, we would be subject to federal income tax on our taxable income at regular corporate rates.

Distributions

Our board of directors has declared daily distributions that are paid on a monthly basis. We expect to continue paying monthly distributions unless our results of operations, our general financial condition, general economic conditions or other factors prohibit us from doing so. We may declare distributions in excess of our FFO. As a result, our distribution rate and payment frequency may vary from time to time. However, to qualify as a REIT for tax purposes, we must make distributions equal to at least 90% of our “REIT taxable income” each year. For information on distribution rates paid during the year ended December 31, 2018 and 2017, see Note 6 (Stockholders’ Equity) to the consolidated financial statements included in the Annual Report.

The distributions declared and paid during each of the four quarters of fiscal year 2018, along with the amount of distributions reinvested pursuant to the DRP were as follows:

	Distributions Declared(1)		Distributions Declared Per Class A Share(1)		Distributions Declared Per Class R Share(1)		Distributions Declared Per Class T Share(1)		Distributions Paid(2)						Sources of Distributions Paid				Net Cash (Used In) Provided by Operating Activities
Period									Cash		Reinvested		Total		Cash Flow From Operations		Offering Proceeds
First Quarter 2018	$	2,325,053	$	0.370	$	0.352	$	0.306	$	1,165,331	$	1,075,644	$	2,240,975	$	—	$	2,240,975	$	(1,383,549	)
Second Quarter 2018		2,567,449		0.374		0.357		0.309		1,323,278		1,206,223		2,529,501		1,125,229		1,404,272		1,125,229
Third Quarter 2018		2,823,452		0.378		0.361		0.313		1,430,468		1,308,687		2,739,155		556,721		2,182,434		556,721
Fourth Quarter 2018		3,248,764		0.378		0.378		0.378		1,579,882		1,451,750		3,031,632		1,616,324		1,415,308		1,616,324
	$	10,964,718	$	1.500	$	1.448	$	1.306	$	5,498,959	$	5,042,304	$	10,541,263	$	3,298,274	$	7,242,989	$	1,914,725

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(1) Assumes each share was issued and outstanding each day during the periods presented.

(2) Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid approximately three days following month end.

For the year ended December 31, 2018, we paid aggregate distributions of $10,541,263, including $5,498,959 of distributions paid in cash and 219,833 shares of our common stock issued pursuant to our DRP for $5,042,304. For the year ended December 31, 2018, our net loss was $15,365,609, we had FFO of $1,293,508 and net cash provided by operations of $1,914,725. For the year ended December 31, 2018, we funded $1,914,725, or 18%, and $8,626,538, or 82%, of total distributions paid, including shares issued pursuant to our DRP, from net cash provided by operating activities and with proceeds from our Public Offering, respectively. Since inception, of the $16,804,856 in total distributions paid through December 31, 2018, including shares issued pursuant to our DRP, 15% of such amounts were funded from cash flow from operations and 85% were funded from public offering proceeds. For information on how we calculate FFO and the reconciliation of FFO to net loss, see “—Funds from Operations and Modified Funds from Operations.”

Our long-term policy is to pay distributions solely from cash flow from operations. However, we expect to have insufficient cash flow from operations available for distribution until we make substantial investments. Further, because we may receive income from interest or rents at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund capital expenditures and other expenses, we expect that at least during the early stages of our development and from time to time during our operational stage, we will declare distributions in anticipation of cash flow that we expect to receive during a later period, and we expect to pay these distributions in advance of our actual receipt of these funds. In these instances, our board of directors has the authority under our organizational documents, to the extent permitted by Maryland law, to fund distributions from sources such as borrowings, offering proceeds or advances and the deferral of fees and expense reimbursements by the Advisor, in its sole discretion. We have not established a limit on the amount of proceeds we may use from this offering to fund distributions. If we pay distributions from sources other than cash flow from operations, we will have fewer funds available for investments and your overall return on your investment in us may be reduced.

We elected to be taxed as a REIT for federal income tax purposes commencing with the taxable year ending December 31, 2016. To continue to qualify as a REIT, we must make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). If we meet the REIT qualification requirements, we generally will not be subject to federal income tax on the income that we distribute to our stockholders each year. We have not established a minimum distribution level and our Charter does not require that we make distributions to our stockholders.

Off-Balance Sheet Arrangements

As of December 31, 2018 and 2017, we had nooff-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Related-Party Transactions and Agreements

We have entered into agreements with the Advisor and its affiliates, including the Dealer Manager, whereby we pay or have paid certain fees to, or reimbursed certain expenses of, the Advisor or its affiliates for acquisition and advisory fees and expenses, financing coordination fees, organization and offering costs, selling commissions, dealer manager fees, distribution and shareholder servicing fees, asset and property management fees and expenses, leasing fees and reimbursement of certain operating costs as well as make certain distributions in connection with our liquidation or listing on a national stock exchange. See Item 13. “Certain Relationships and Related

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Transactions, and Director Independence” and Note 7 (Related Party Arrangements) to the consolidated financial statements included in this Annual Report for a discussion of the various related-party transactions, agreements and fees.

Critical Accounting Policies

Below is a discussion of the accounting policies that we believe are critical because they involve significant judgments and assumptions, require estimates about matters that are inherently uncertain and because they are important for understanding and evaluating our reported financial results. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.

Real Estate Assets

Depreciation and Amortization

Real estate costs related to the development, construction and improvement of properties will be capitalized. Acquisition costs related to business combinations are expensed as incurred. Acquisition costs related to asset acquisitions are capitalized. On January 1, 2017, we early adopted ASU2017-01, that 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. All of our real estate investments acquired in fiscal years 2018 and 2017, qualified as asset acquisitions, and as such, acquisition costs are capitalized. Repair and maintenance and tenant turnover costs are charged to expense as incurred and significant replacements and betterments are capitalized. Repair and maintenance and tenant turnover costs include all costs that do not extend the useful life of the real estate asset.

The Company considers the period of future benefit of an asset to determine its appropriate useful life and anticipates the estimated useful lives of assets by class to be generally as follows:

Buildings	30 years
Building improvements	5-25 years
Resident improvements	Shorter of lease term or expected useful life
Resident origination and absorption costs	Remaining term of related lease
Furniture, fixtures, and equipment	5-10 years

Real Estate Purchase Price Allocation

Prior to the adoption of ASU2017-01, we recorded the acquisition of income-producing real estate or real estate that are used for the production of income as a business combination. All assets acquired and liabilities assumed in a business combination are measured at their acquisition-date fair values. Acquisition costs are expensed as incurred. Upon adoption of ASU2017-01, we record the acquisition of income-producing real estate or real estate that are used for the production of income as an asset acquisition. All assets acquired and liabilities assumed in an asset acquisition are measured at their acquisition-date fair values. Acquisition costs are capitalized and allocated between land, buildings and improvements and tenant origination and associated costs on the consolidated balance sheet.

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We assess the acquisition-date fair values of all tangible assets, identifiable intangible assets and assumed liabilities using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis) and that utilize appropriate discount and/or capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. The fair value of tangible assets of an acquired property considers the value of the property as if it was vacant.

Intangible assets include the value ofin-place leases, which represents the estimated value of the net cash flows of thein-place leases to be realized, as compared to the net cash flows that would have occurred had the property been vacant at the time of acquisition and subject tolease-up.

We estimate the value of resident origination and absorption costs by considering the estimated carrying costs during hypothetical expectedlease-up periods, considering current market conditions. In estimating carrying costs, we estimate the amount of lost rentals using market rates during the expectedlease-up periods.

We amortize the value ofin-place leases to expense over the remainingnon-cancelable term of the respective leases. Should a resident terminate its lease, the unamortized portion of thein-place lease value and customer relationship intangibles would be charged to expense in that period.

We record above-market and below-marketin-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 (1) the contractual amounts to be paid pursuant to thein-place leases and (2) our estimate of fair market lease rates for the correspondingin-place leases, measured over a period equal to the remainingnon-cancelable term of the lease. We amortize any capitalized above-market or below-market lease values as a reduction or increase to rental income over the remainingnon-cancelable terms of the respective leases.

The total amount of other intangible assets acquired are further allocated toin-place lease values and customer relationship intangible values based on our evaluation of the specific characteristics of each tenant’s lease and its overall relationship with that respective tenant. Characteristics that we consider in allocating these values include the nature and extent of existing business relationships with the tenant, growth prospects for developing new business with the tenant, and the tenant’s credit quality and expectations of lease renewals (including those existing under the terms of the lease agreement), among other factors.

Estimates of the fair values of the tangible assets, identifiable intangible assets and assumed liabilities require us to make significant assumptions to estimate market lease rates, property-operating expenses, carrying costs duringlease-up periods, discount rates, market absorption periods, and the number of years the property will be held for investment. The use of inappropriate assumptions could result in an incorrect valuation of acquired tangible assets, identifiable intangible assets and assumed liabilities, which could impact the amount of our net income (loss).

Impairment of Real Estate Assets

We account for our real estate assets in accordance withASC 360, Property, Plant and Equipment (“ASC 360”). ASC 360 requires us to continually monitor events and changes in circumstances that could indicate that the carrying amounts of our real estate and related intangible assets may not be recoverable. When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets and liabilities may not be recoverable, we assess the recoverability of the assets by estimating whether we will recover the carrying value of the asset through its undiscounted future cash flows and its eventual disposition. Based on this analysis, if we do not believe that we will be able to recover the carrying value of the real estate and related intangible assets and liabilities, we will record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangible assets and liabilities. If any assumptions, projections or estimates regarding an asset changes in the future, we may have to record an impairment to reduce the net book value of such individual asset.

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Rents and Other Receivables

We periodically evaluate the collectability of amounts due from residents and maintain an allowance for doubtful accounts for estimated losses resulting from the inability of residents to make required payments under lease agreements. We exercise judgment in establishing these allowances and consider payment history and current credit status of residents in developing these estimates. Due to the short-term nature of the operating leases, we do not maintain a deferred rent receivable related to the straight-lining of rents. Other receivables include amounts due from the transfer agent for stock subscription net proceeds.

Revenue Recognition

On January 1, 2018, we adoptedASC 606, Revenue from Contracts with Customers, (“ASC 606”), which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard requires us to recognize, for certain of our revenue sources, transfer of promised goods or services to customers in an amount that reflects the consideration we are entitled to in exchange for those goods or services. We selected the modified retrospective transition method but had no cumulative effect adjustment to recognize as of the date of adoption on January 1, 2018. Our revenue consists of rental revenues and tenant reimbursements and other. There was no impact to our recognition of rental revenue from leasing arrangements as this was specifically excluded from ASC 606. We identified limited sources of revenues fromnon-lease components but did not experience a material impact on our revenue recognition in the consolidated financial statements upon adoption. We lease apartment and condominium units under operating leases with terms generally of one year or less. Generally, credit investigations are performed for prospective residents and security deposits are obtained. We will recognize minimum rent, including rental abatements, concessions and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of thenon-cancellable term of the related lease and amounts expected to be received in later years will be recorded as deferred rents. We record 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 in accordance with ASC 840, Leases.

Fair Value Measurements

Under GAAP, we are required to measure certain financial instruments at fair value on a recurring basis. In addition, we are required to measure other assets and liabilities at fair value on anon-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:

Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.

When available, we utilize quoted market prices from an independent third-party source to determine fair value and will classify such items in Level 1 or Level 2. In instances where the market is not active, regardless of the availability of anon-binding quoted market price, observable inputs might not be relevant and could require us to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When we determine the market for a financial instrument we own

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to be illiquid or when market transactions for similar instruments do not appear orderly, we will use several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and we will establish a fair value by assigning weights to the various valuation sources.

Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument.

Accounting for Stock-Based Compensation

We amortize the fair value of stock-based compensation awards to expense over the vesting period and record any dividend equivalents earned as dividends for financial reporting purposes. Stock-based compensation awards are valued at the fair value on the date of grant and amortized as an expense over the vesting period.

Organization and Offering Costs

Organization and offering expenses include all expenses to be paid by us in connection with our Public Offering, including legal, accounting, tax, printing, mailing and filing fees, charges of our escrow holder and transfer agent, expenses of organizing our Company, data processing fees, advertising and sales literature costs, transfer agent costs, information technology costs, bona fideout-of-pocket due diligence costs and amounts to reimburse the Advisor or its affiliates for the salaries of its employees and other costs in connection with preparing sales materials and providing other administrative services in connection with our Public Offering. Any such reimbursement will not exceed actual expenses incurred by the Advisor. Following the termination of our Public Offering, the Advisor had an obligation to reimburse us to the extent total organization and offering expenses (including selling commissions, dealer manager fees and the distribution and shareholder servicing fees) borne by us exceeded 15% of the gross proceeds raised in our Primary Offering. Total organization and offering expenses borne by us did not exceed 15% of the gross offering proceeds in our Public Offering.

To the extent we did not pay the full selling commissions or dealer manager fee for shares sold in our Public Offering, we were able to reimburse costs of bona fide training and education meetings held by us (primarily the travel, meal and lodging costs of registered representatives of broker-dealers), attendance and sponsorship fees and cost reimbursement of employees of our affiliates to attend seminars conducted by broker-dealers and, in certain cases, reimbursement to participating broker-dealers for technology costs associated with our Public Offering, costs and expenses related to such technology costs, and costs and expenses associated with the facilitation of the marketing of our shares and the ownership of our shares by such broker-dealers’ customers; provided, however, that we did not pay any of the foregoing costs to the extent that such payment would cause total underwriting compensation to exceed 10% of the gross offering proceeds of our Primary Offering, as required by the rules of the FINRA.

When recognized, organization costs are expensed as incurred. Offering costs, including selling commissions, dealer manager fees and the distribution and shareholder servicing fee, are deferred and charged to stockholders’ equity. All such amounts are reimbursed to the Advisor, the Dealer Manager or their affiliates from gross offering proceeds, except for the distribution and shareholder servicing fees, which are paid from sources other than Public Offering proceeds.

Income Taxes

We elected to be taxed as a REIT under the Internal Revenue Code and have operated as such commencing with the taxable year ended December 31, 2016. To continue to qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to our stockholders (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a

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REIT, we generally would not be subject to federal income tax to the extent we distribute qualifying dividends to our stockholders. If we fail to qualify as a REIT in any taxable year following the year we initially elect to be taxed as a REIT, we would be subject to federal income tax on our taxable income at regular corporate income tax rates and generally would not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to our stockholders. However, we intend to organize and operate in such a manner as to qualify for treatment as a REIT.

We follow the income tax guidance under GAAP to recognize, measure, present and disclose in our consolidated financial statements uncertain tax positions that we have taken or expect to take on a tax return. As of December 31, 2018, 2017, and 2016, we did not have any liabilities for uncertain tax positions that we believe should be recognized in our consolidated financial statements. We have not been assessed interest or penalties by any major tax jurisdictions. Our evaluations were performed for all open tax years through December 31, 2018.

Subsequent Events

Distributions Paid

Class A

On January 2, 2019, we paid distributions of $448,040, which related to distributions declared for each day in the period from December 1, 2018 through December 31, 2018 and consisted of cash distributions paid in the amount of $272,851 and $175,189 in shares issued pursuant to the DRP.

On February 1, 2019, we paid distributions of $448,950, which related to distributions declared for each day in the period from January 1, 2019 through January 31, 2019 and consisted of cash distributions paid in the amount of $275,056 and $173,894 in shares issued pursuant to the DRP.

On March 1, 2019, we paid cash distributions of $403,504, which related to distributions declared for each day in the period from February 1, 2019 through February 28, 2019.

Class R

On January 2, 2019, we paid distributions of $62,323, which related to distributions declared for each day in the period from December 1, 2018 through December 31, 2018 and consisted of cash distributions paid in the amount of $41,232 and $21,091 in shares issued pursuant to the DRP.

On February 1, 2019, we paid distributions of $60,517, which related to distributions declared for each day in the period from January 1, 2019 through January 31, 2019 and consisted of cash distributions paid in the amount of $40,020 and $20,497 in shares issued pursuant to the DRP.

On March 1, 2019, we paid cash distributions of $54,767, which related to distributions declared for each day in the period from February 1, 2019 through February 28, 2019.

Class T

On January 2, 2019, we paid distributions of $659,453, which related to distributions declared for each day in the period from December 1, 2018 through December 31, 2018 and consisted of cash distributions paid in the amount of $287,729 and $371,723 in shares issued pursuant to the DRP.

On February 1, 2019, we paid distributions of $590,710, which related to distributions declared for each day in the period from January 1, 2019 through January 31, 2019 and consisted of cash distributions paid in the amount of $258,149 and $332,562 in shares issued pursuant to the DRP.

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On March 1, 2019, we paid cash distributions of $535,334, which related to distributions declared for each day in the period from February 1, 2019 through February 28, 2019.

Advisory Agreement Renewal

On February 1, 2019, we entered into Amendment No. 3 to the Advisory Agreement, which is effective on February 5, 2019, to renew the term of the Advisory Agreement for an additional one year term ending February 5, 2020.

Suspension of DRP

As previously disclosed, on August 31, 2018, we terminated the Primary Offering of up to $1,000,000,000 in shares of our common stock, but continued to offer shares of Class A, Class T and Class R common stock pursuant to the DRP. We decided to not renew state registrations of the DRP for an additional year, and, therefore, suspended the DRP with respect to distributions that accrued after February 1, 2019. Our board of directors may in the future reinstate the DRP, although there is no assurance as to if or when this will happen, and such reinstatement will not happen unless and until we register the DRP in every state in which it offers or sells its shares of common stock.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We may be exposed to the effects of interest rate changes as a result of borrowings used to maintain liquidity and to fund the acquisition, expansion and refinancing of our real estate investment portfolio and operations. We may be also exposed to the effects of changes in interest rates as a result of the acquisition and origination of mortgage, mezzanine, bridge and other loans. Our profitability and the value of our investment portfolio may be adversely affected during any period as a result of interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs. We intend to manage interest rate risk by maintaining a ratio of fixed rate, long-term debt such that floating rate exposure is kept to an acceptable level. In addition, we may utilize a variety of financial instruments, including interest rate caps, collars, floors and swap agreements, in order to limit the effects of changes in interest rates on our operations. When we use these types of derivatives to hedge the risk of interest-earning assets or interest-bearing liabilities, we may be subject to certain risks, including the risk that losses on a hedge position will reduce the funds available for payments to holders of our common stock and that the losses may exceed the amount we invested in the instruments.

We borrow funds and make investments at a combination of fixed and variable rates. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt unless such instruments mature or are otherwise terminated. However, interest rate changes will affect the fair value of our fixed rate instruments. At December 31, 2018, the fair value of our fixed rate debt was $119,979,594 and the carrying value of our fixed rate debt was $123,983,755. The fair value estimate of our fixed rate debt was estimated using a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining maturity if the loan was originated at December 31, 2018. As we expect to hold our fixed rate instruments to maturity and the amounts due under such instruments would be limited to the outstanding principal balance and any accrued and unpaid interest, we do not expect that fluctuations in interest rates, and the resulting change in fair value of our fixed rate instruments, would have a significant impact on our operations.

Conversely, movements in interest rates on our variable rate debt will change our future earnings and cash flows, but not significantly affect the fair value of those instruments. However, changes in required risk premiums will result in changes in the fair value of floating rate instruments. At December 31, 2018, the fair value of our variable rate debt was $159,966,065 and the carrying value of our variable rate debt was $156,103,166. At December 31, 2018, we were exposed to market risks related to fluctuations in interest rates on $156,103,166 of our outstanding variable rate debt. Based on interest rates as of December 31, 2018, if interest

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rates are 100 basis points higher during the 12 months ending December 31, 2019, interest expense on our variable rate debt would increase by $1,590,634 and if interest rates are 100 basis points lower during the 12 months ending December 31, 2019, interest expense on our variable rate debt would decrease by $1,590,634.

At December 31, 2018, the weighted-average interest rate of our fixed rate debt and variable rate debt was 4.02% and 4.86%, respectively. The weighted-average interest rate of our blended fixed and variable rates was 4.49% at December 31, 2018. The weighted-average interest rate represents the actual interest rate in effect at December 31, 2018 (consisting of the contractual interest rate), using interest rate indices as of December 31, 2018, where applicable.

We will also be exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. If the fair value of a derivative contract is positive, the counterparty will owe us, which creates credit risk for us. If the fair value of a derivative contract is negative, we will owe the counterparty and, therefore, do not have credit risk. We will seek to minimize the credit risk in derivative instruments by entering into transactions with high-quality counterparties. As of December 31, 2018, we did not have counterparty risk on our interest rate cap agreements as the underlying variable rates for our interest rate cap agreements as of December 31, 2018, were not in excess of the capped rates. See also Note 10 (Derivative Financial Instruments) of our consolidated financial statements included in this Annual Report.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements and supplementary data can be found beginning atpage F-1 of this Annual Report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

As of the end of the period covered by this Annual Report, management, including our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule13a-15(e) or15d-15(e) under the Exchange Act). In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and we necessarily were required to apply our judgment in evaluating whether the benefits of the controls and procedures that we adopt outweigh their costs. Based upon, and as of the date of, the evaluation, our principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by this Annual Report to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file and submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule13a-15(f) or15d-15(f) promulgated under the Exchange Act. In

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connection with the preparation of this Annual Report, our management, including our principal executive officer and principal financial officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2018. In making that assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013 framework). Based on its assessment, our management believes that, as of December 31, 2018, our internal control over financial reporting was effective based on those criteria. There have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Our directors and executive officers and their respective positions and offices are as follows:

Name	Age	Position
Rodney F. Emery	68	Chairman of the Board and Chief Executive Officer
Ella S. Neyland	64	Affiliated Director and President
Kevin J. Keating	56	Chief Financial Officer and Treasurer
Ana Marie del Rio	64	Secretary
Stephen R. Bowie	68	Independent Director
Ned W. Brines	57	Independent Director
Janice M. Munemitsu	61	Independent Director

Rodney F. Emery has served as a director since July 2015, as our Chief Executive Officer since August 2015 and as Chairman of the Board since January 2016. Mr. Emery also serves as Chairman of the Board and Chief Executive Officer of Steadfast Income REIT and Steadfast Apartment REIT, positions he has held since each entity’s inception. Mr. Emery is the founder of Steadfast Companies and is responsible for the corporate vision, strategy and overall guidance of the operations of Steadfast Companies. Mr. Emery chairs the Steadfast Executive Committee, which establishes policy and strategy and acts as the general oversight committee of Steadfast Companies. Mr. Emery also serves on the Steadfast Companies Investment Committee and is a member of the Board of Managers of Stira Capital Markets Group, LLC (formerly known as Steadfast Capital Markets Group, LLC). Prior to founding Steadfast Companies in 1994, Mr. Emery served for 17 years as the President of Cove Properties, a diversified commercial real estate firm specializing in property management, construction and development with a specialty in industrial properties. Mr. Emery received a Bachelor of Science in Accounting from the University of Southern California and serves on the board of directors of severalnon-profit organizations.

Our board of directors, excluding Mr. Emery, has determined that Mr. Emery is qualified to serve as one of our directors due to the leadership positions previously and currently held by Mr. Emery and Mr. Emery’s 40 years of experience acquiring, financing, developing and managing multifamily, hotel, office, industrial and retail real estate assets throughout the country.

Ella S. Neyland has served as our President since August 2015 and an affiliated director since January 2016. Ms. Neyland also serves as President and an affiliated director of Steadfast Income REIT, positions she has held since October 2012, and serves as President and an affiliated director of Steadfast Apartment REIT, positions she has held since September 2013 and August 2013, respectively. Ms. Neyland served as an independent director of Steadfast Income REIT from October 2011 to September 2012. Ms. Neyland was a founder of Thin Centers MD (“TCMD”), which provides medically supervised weight loss programs, and served as its Chief Financial Officer from February 2011 to October 2011. Prior to founding TCMD, Ms. Neyland was a founder of Santa Barbara Medical Innovations, LLC, a privately owned company that owns and leaseslow-level lasers to medical groups, and served as its Chief Financial Officer from December 2008 to February 2011. From October 2004 to December 2008, Ms. Neyland was a financial advisor of Montecito Medical Investment Company, a private real estate acquisition and development company headquartered in Santa Barbara, California. From April 2001 to September 2004, Ms. Neyland served as the Executive Vice President, Treasurer and Investor Relations Officer of United Dominion Realty Trust, Inc., where she was responsible for capital market transactions, banking relationships and presentations to investors and Wall Street analysts. Prior to working at United Dominion Realty Trust, Inc., Ms. Neyland served as the Chief Financial Officer at Sunrise Housing, Ltd., from November 1999 to March 2001, and served as Executive Director of CIBC World Markets, from November 1997 to October 1999. From July 1990 to October 1997, Ms. Neyland served as the Senior Vice President of Finance and the Vice President of Troubled Debt Restructures/Finance for the Lincoln Property Company, a

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commercial real estate development and management company. From November 1989 to July 1990, Ms. Neyland was the Vice President/Portfolio Manager at Bonnet Resources Corporation, a subsidiary of BancOne. Prior to her employment at Bonnet Resources Corporation, Ms. Neyland served on the board of directors and as the Senior Vice President/Director of Commercial Real Estate Lending at Commerce Savings Association, a subsidiary of the publicly held American Century Corporation, from May 1983 to March 1989. Ms. Neyland received a Bachelor of Science in Finance from Trinity University in San Antonio, Texas.

Our board of directors, excluding Ms. Neyland, has determined that Ms. Neyland is qualified to serve as one of our directors due to Ms. Neyland’s prior service as a director and as chief financial officer.

Stephen R. Bowie has served as one of our independent directors since January 2016. Mr. Bowie currently is a partner with Pacific Development Group, a position he has held since 1987, specializing in the development and management of neighborhood and community shopping centers throughout California, with a primary responsibility in the development of new projects. From 1979 to 1987, Mr. Bowie served as president of Bowie Development Company, Inc., a California corporation. In addition, since 2009 Mr. Bowie has served as an investor in, and an advisor to, Alta Equities, Inc., a company that invests in and rehabs single family residential properties in southern California. Mr. Bowie earned a Bachelor of Science degree in business administration from the University of Southern California. Mr. Bowie is a member of the International Council of Shopping Centers and a licensed real estate broker in California, and serves on multiple boards, including the Northrise University Initiative 501(c)(3) and the Northrise University Board of Trustees.

Our board of directors, excluding Mr. Bowie, has determined that Mr. Bowie is qualified to serve as one of our directors due to Mr. Bowie’s prior experience in the real estate industry.

Ned W. Brines has served as one of our independent directors since January 2016. Mr. Brines also serves as an independent director of Steadfast Income REIT, a position he has held since October 2012, and as an independent trustee of Stira Alcentra Global Credit Fund since March 2017. Mr. Brines is presently the Director of Investments for Arnel & Affiliates where he oversees the management of the assets of a private family with significant and diversified holdings. From 2012 to 2016, Mr. Brines served as the Chief Investment Officer for the Citizen Trust Wealth Management and Trust division of Citizens Business Bank, where he was responsible for the investment management discipline, process, products and related sources. In addition, in September 2008 Mr. Brines founded Montelena Asset Management, a California based registered investment adviser firm. From June 2010 to July 2012, Mr. Brines served as a portfolio manager for Andell Holdings, a private family office with significant and diversified holdings. From May 2001 to September 2008, Mr. Brines served as a Senior Vice President and senior portfolio manager with Provident Investment Counsel in Pasadena, managing its Small Cap Growth Fund with $1.6 billion in assets under management. Mr. Brines was with Roger Engemann & Associate in Pasadena from September 1994 to March 2001 where he served as both an analyst and portfolio manager for their mid cap mutual fund and large cap Private Client business as the firm grew from $3 billion to over $19 billion in assets under management. Mr. Brines earned a Master of Business Administration degree from the University of Southern California and a Bachelor of Science degree from San Diego State University. Mr. Brines also holds the Chartered Financial Analyst designation and is involved in various community activities including serving on the investment committee of City of Hope, as well as the Orange County Regional Counsel for San Diego State University.

Our board of directors, excluding Mr. Brines, has determined that Mr. Brines is qualified to serve as one of our directors due to Mr. Brines’ prior investment management experience.

Janice M. Munemitsu has served as one of our independent directors since January 2016. Since 2002, Ms. Munemitsu has operated an independent corporate consultancy in the areas of strategic planning, branding and project management. From 1995 to 1999, Ms. Munemitsu was Vice President of Marketing/Brands for ConAgra Foods, where she was responsible for a food-brand business portfolio of $250 million. Brands under her purview included Hunt’s Tomato Products, Manwich, La Choy, Wolf Brand Chili and Healthy Choice.

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During the prior eight years, Ms. Munemitsu was a Brand Manager at ConAgra, with responsibilities that spanned advertising, consumer promotions, marketing research, product development and sales planning for food businesses, which included: Hunt’s, Manwich and Fisher Nuts. From 1982 to 1985, Ms. Munemitsu held positions in brand marketing and management with Mars, Inc. and The Clorox Company. Ms. Munemitsu holds both Bachelor of Science and Master of Business Administration degrees from the University of Southern California.

Our board of directors, excluding Ms. Munemitsu, has determined that Ms. Munemitsu is qualified to serve as one of our directors due to Ms. Munemitsu’s prior experience as an executive and manager in Fortune 500 companies.

Kevin J. Keating has served as our Chief Financial Officer and Treasurer since November 2017 and August 2015, respectively and as our Advisor’s Chief Financial Officer and Chief Accounting Officer since November 2017 and September 2013, respectively where he focuses on the accounting function and compliance responsibilities for us and our Advisor. Mr. Keating also serves as Chief Financial Officer and Treasurer of Steadfast Income REIT, positions he has held since November 2017 and April 2011, respectively, and as Chief Financial Officer and Treasurer of Steadfast Apartment REIT, positions he has held since November 2017 and September 2013, respectively. Mr. Keating served as the controller of Steadfast Income REIT from January 2011 to March 2011. Mr. Keating served as Senior Audit Manager with BDO USA, LLP (formerly BDO Seidman, LLP), an accounting and audit firm, from June 2006 to January 2011. From June 2004 to June 2006, Mr. Keating served as Vice President and Corporate Controller of Endocare, Inc., a medical device manufacturer. Mr. Keating has over 18 years of experience working with public companies and served as Assistant Controller and Audit Manager for Ernst & Young LLP from 1988 to 1999. Mr. Keating holds a Bachelor of Science in Accounting from St. John’s University in New York, New York and is a certified public accountant.

Ana Marie del Rio has served as our Secretary since August 2015 and our Compliance Officer since January 2016. Ms. del Rio also serves as Secretary and Compliance Officer of Steadfast Apartment REIT, positions she has held since September 2013, and Secretary and Compliance Officer of Steadfast Income REIT, positions she has held since its inception in May 2009. Ms. del Rio also serves as the Chief Legal Officer for Steadfast Companies and manages the Risk Management and Legal Services Departments for Steadfast Companies. Ms. del Rio also works closely with Steadfast Management Company, Inc. in the management and operation of Steadfast Companies’ residential apartment homes. Prior to joining Steadfast Companies in April 2003, Ms. del Rio was a partner in the public finance group at Orrick, Herrington & Sutcliffe, LLP, where she practiced from September 1993 to April 2003, representing both issuers and underwriters in financing single-family and multifamily housing and other types of public-private and redevelopment projects. From 1979 to 1993, Ms. del Rioco-owned and operated a campaign consulting and research company specializing in local campaigns and ballot measures. Ms. del Rio received a Juris Doctor from the University of the Pacific, McGeorge School of Law, and received a Master of Public Administration and a Bachelor of Arts from the University of Southern California. Ms. del Rio serves on the Board of Directors of Project Access and is a lecturer for the University of California, Irvine, School of Law.

Audit Committee

Our board of directors has established an audit committee. The audit committee’s function is to assist our board of directors in fulfilling its responsibilities by overseeing: (1) the systems of our internal accounting and financial controls; (2) our financial reporting processes; (3) the independence, objectivity and qualification of our independent auditors; (4) the annual audit of our financial statements; and (5) our accounting policies and disclosures. The members of the audit committee are Stephen R. Bowie, Ned W. Brines and Janice M. Munemitsu. All of the members of the audit committee are “independent” as defined by our Charter. Our shares are not listed for trading on any national securities exchange and therefore our audit committee members are not subject to the independence requirements of the New York Stock Exchange (“NYSE”) or any other national securities exchange. However, each member of our audit committee is “independent” as defined by the

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NYSE. All members of the audit committee have significant financial and/or accounting experience. Our board of directors has determined that Ned W. Brines satisfies the SEC’s requirements for and serves as our “audit committee financial expert.”

Investment Committee

Our board of directors has established an investment committee. Our board of directors has delegated to the investment committee: (1) certain responsibilities with respect to investment in specific investments proposed by the Advisor and (2) the authority to review our investment policies and procedures on an ongoing basis. The investment committee must at all times be comprised of at least three members, a majority of whom must be independent directors. The current members of the investment committee are Rodney F. Emery, Stephen R. Bowie and Janice M. Munemitsu, with Rodney F. Emery serving as the chairman of the investment committee.

With respect to investments, the investment committee has the authority to approve all acquisitions, developments and dispositions of real estate and real estate-related assets consistent with our investment objectives, for a purchase price, total project cost or sales price of up to 10% of the cost of our total assets as of the date of investment.

Valuation Committee

Our board of directors has established a valuation committee. The valuation committee’s function, as recommended by the IPA, is to perform the following functions in connection with the determination of an estimated per share value of our common stock: (1) ratify and approve the engagement of valuation advisory services, its scope of work and any amendments thereto, (2) review and approve the proposed valuation process and methodology to be used to determine the estimation of the per share value of our common stock, or valuation, (3) review the reasonableness of the valuation or range of value resulting from the process and (4) recommend the final proposed valuation for approval by the board of directors. The members of the valuation committee are Ned Brines, Janice Munemitsu, and Stephen Bowie, with Mr. Brines serving as the chairman of the valuation committee.

Special Committee

Our board of directors has established a special committee. The special committee’s function is limited to the evaluation, negotiation and approval of (1) any agreement, arrangement or other transaction by and between our company, our advisor or any other affiliate of our sponsor related to compensation payable by our company to our advisor any other affiliate of our sponsor in connection with the pursuit of strategic alternatives; (2) any strategic alternatives in which a counter party has expressed an interest in the contemporaneous or subsequent purchase of any other transaction related to Steadfast Companies; and (3) any other transaction which our board of directors specifically identifies and delegates authority to the special committee. The members of the special committee are Ned Brines, Janice Munemitsu, and Stephen Bowie, with Mr. Bowie serving as the chairman of the special committee.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires each director, officer and individual beneficially owning more than 10% of our common stock to file with the SEC, within specified time frames, initial statements of beneficial ownership (Form 3) of our common stock and statements of changes in beneficial ownership (Forms 4 and 5) of our common stock. These specified time frames require the reporting of changes in ownership within two business days of the transaction giving rise to the reporting obligation. Reporting persons are required to furnish us with copies of all Section 16(a) forms filed with the SEC. Based solely on a review of the copies of such forms furnished to us during and with respect to the fiscal year ended December 31, 2018 or written representations that no additional forms were required, we believe that all required Section 16(a) filings were timely and correctly made by reporting persons during the year ended December 31, 2018.

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Code of Conduct and Ethics

We have adopted a Code of Ethics that applies to all of our executive officers and directors, including but not limited to, our principal executive officer, principal financial officer and principal accounting officer. Our Code of Ethics can be found at our website:http://www.steadfastreits.com.

ITEM 11. EXECUTIVE COMPENSATION

Compensation of Executive Officers

Our executive officers do not receive compensation directly from us for services rendered to us and we do not intend to pay any compensation to our executive officers. We do not reimburse the Advisor directly or indirectly for the salary or other compensation paid to any of our executive officers. As a result, we do not, nor has our board of directors considered, a compensation policy for our executive officers. Accordingly, we have not included a Compensation Discussion and Analysis in this Annual Report or other related disclosures pursuant to Item 402 of RegulationS-K and paragraphs (e)(4) and (e)(5) of Item 407 of RegulationS-K with respect to our executive officers. Our executive officers are officers and/or employees of, or hold an indirect ownership interest in, the Advisor and/or its affiliates, and our executive officers are compensated by these entities, in part, for their services to us. See Item 13. “Certain Relationships and Related Transactions, and Director Independence—Certain Transactions with Related Persons” for a discussion of the fees paid to the Advisor and its affiliates.

Compensation of Directors

If a director is also one of our executive officers or an affiliate of the Advisor, we do not pay any compensation to that person for services rendered as a director. The amount and form of compensation payable to our independent directors for their service to us is determined by our board of directors, based upon recommendations from the Advisor. Four of our executive officers, Messrs. Rodney F. Emery and Kevin Keating and Mses. Ana Marie del Rio and Ella Neyland, manage, control or are affiliated with the Advisor, and through the Advisor, they are involved in recommending the compensation to be paid to our independent directors.

We have provided below certain information regarding compensation earned by or paid to our directors during the fiscal year ended December 31, 2018.

Name	Fees Earned or Paid in Cash in 2018(1)		Stock Awards(2)		Option Awards		Non-Equity Incentive Plan Compensation		Change in Pension Value and Nonqualified Deferred Compensation		All Other Compensation		Total
Stephen R. Bowie(3)(4)	$	151,500	$	25,000	$	—	$	—	$	—	$	—	$	176,500
Ned W. Brines(3)(4)		131,500		25,000		—		—		—		—		156,500
Janice M. Munemitsu(3)(4)		146,500		25,000		—		—		—		—		171,500
Ella S. Neyland(5)		—		—		—		—		—		—		—
Rodney F. Emery(5)		—		—		—		—		—		—		—
	$	429,500	$	75,000	$	—	$	—	$	—	$	—	$	504,500

(1) The amounts shown in this column include payments made to members of the special committee, which was formed during the year ended December 31, 2018. The members of the special committee are our independent directors. It was agreed that each independent director will receive retainers between $30,000 and $60,000. In addition, each member receives $1,000 for each meeting attended.

(2) The amounts shown in this column reflect the aggregate fair value of shares of restricted stock granted under our independent directors compensation plan computed as of the grant date in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718.

(3) Independent Directors.

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(4) On August 9, 2018, each of our three independent directors was granted 1,000 shares of restricted Class A common stock in connection with theirre-election to the board of directors pursuant to our Independent Directors Compensation Plan described below. The grant date fair value of the stock was $25.00 per share for an aggregate amount of $25,000 for each independent director. Of these shares of restricted common stock granted in 2018, each independent director had 750 shares of restricted Class A common stock that remained unvested as of December 31, 2018.

(5) Directors who are also our executive officers or executive officers of our affiliates do not receive compensation for services rendered as a director.

Cash Compensation

We pay each of our independent directors:

• annual compensation of $55,000 (the audit committee chairperson receives an additional $10,000 in annual compensation);

• $2,500 for eachin-person board of directors meeting attended;

• $1,500 for eachin-person committee meeting attended; and

• $1,000 for each teleconference meeting of the board of directors or committee.

We will not pay in excess of $4,000 for any one set of meetings attended within a48-hour period.

Equity Plan Compensation

Our board of directors has adopted a long-term incentive plan, the Steadfast Apartment REIT III, Inc. Independent Directors Compensation Plan, or the Plan, which operates as asub-plan of our Steadfast Apartment REIT III, Inc. 2016 Incentive Plan, or the Incentive Plan. Under the Plan and subject to such Plan’s conditions and restrictions, each of our current independent directors was entitled to receive 2,000 shares of restricted Class A common stock once we raised $2,000,000 in gross offering proceeds in our Public Offering. Each subsequent independent director that joins our board of directors receives 2,000 shares of restricted Class A common stock upon election to our board of directors. In addition, on the date following an independent director’sre-election to our board of directors, he or she receives 1,000 shares of restricted Class A common stock. Grants of restricted stock are subject to share availability under the Incentive Plan. The shares of restricted Class A common stock generally vest in four equal annual installments beginning on the date of grant and ending on the third anniversary of the date of grant; provided, however, that the restricted stock will become fully vested and becomenon-forfeitable on the earlier to occur of: (1) the termination of the independent director’s service as a director due to his or her death or “disability,” or (2) a “change in control” of the Company (as such terms are defined in the Incentive Plan). These awards entitle the holders to participate in distributions immediately upon issuance.

Compensation Committee Interlocks and Insider Participation

We currently do not have a compensation committee of our board of directors because we do not pay, or plan to pay, any compensation to our officers. There are no interlocks or insider participation as to compensation decisions required to be disclosed pursuant to SEC regulations.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Equity Compensation Plan Information

The following table provides information about our common stock that may be issued upon the exercise of options, warrants and rights under our Incentive Plan as of December 31, 2018.

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants  and Rights		Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance Under Equity Compensation  Plans
Equity compensation plans approved by security holders:		—		—		388,000
Equity compensation plans not approved by security holders:		N/A		N/A		N/A
Total		—		—		388,000

Security Ownership of Certain Beneficial Owners

The following table shows, as of March 7, 2019, the amount of our common stock beneficially owned (unless otherwise indicated) by: (1) any person who is known by us to be the beneficial owner of more than 5% of the outstanding shares of our common stock, (2) our directors, (3) our executive officers, and (4) all of our directors and executive officers as a group.

Name and Address of Beneficial Owner(1)	Amount and Nature of Beneficial Ownership(2)		Percentage
Rodney F. Emery(3)		27,857		*
Ned W. Brines		5,800		*
Janice M. Munemitsu		7,572		*
Stephen R. Bowie		7,904		*
Ella S. Neyland		1,111		*
Kevin J. Keating		—		*
Ana Marie del Rio		2,808		*
All officers and directors as a group (seven persons)		53,052		*

* Less than 1% of the outstanding common stock.

(1) The address of each named beneficial owner is c/o Steadfast Apartment REIT III, Inc., 18100 Von Karman Avenue, Suite 500, Irvine, CA, 92612.

(2) None of the shares are pledged as security.

(3) Includes 8,000 shares owned by the Advisor, which is primarily indirectly owned and controlled by Rodney F. Emery.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Certain Transactions with Related Persons

The following describes all transactions during the period from January 1, 2017 to December 31, 2018 involving us, our directors, the Advisor, our Sponsor and any affiliate thereof and all such proposed transactions. See also Note 7 (Related Party Arrangements) to the consolidated financial statements included in this Annual Report. Our independent directors are specifically charged with and have examined the fairness of such transactions to our stockholders, and have determined that all such transactions are fair and reasonable to us.

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Ownership Interests

On August 24, 2015, the Advisor purchased 8,000 shares of our Class A common stock at a purchase price of $25.00 per share for an aggregate purchase price of $200,000 and was admitted as our initial stockholder. We are the sole general partner of our Operating Partnership, and own a 99.99% partnership interest in our Operating Partnership. The Advisor is the sole limited partner of and owns the remaining 0.01% partnership interest in our Operating Partnership. We entered into the Partnership Agreement with the Advisor on July 25, 2015. As we accepted subscriptions for shares of our common stock, we transferred substantially all of the net offering proceeds from our Public Offering to our Operating Partnership as a contribution in exchange for partnership interests and our percentage ownership in our Operating Partnership increased proportionately.

Our Relationships with the Advisor and our Sponsor

Steadfast Apartment Advisor III, LLC is our advisor and, as such, manages ourday-to-day operations, manages our portfolio of properties and real estate-related assets, sources and presents investment opportunities to our board of directors and provides investment management services on our behalf. The Advisor also provides offering services, marketing, investor relations and other administrative services on our behalf. The Advisor is 99% owned by our Sponsor. Mr. Emery, our chairman of the board and chief executive officer, indirectly controls our Sponsor, the Advisor and our Dealer Manager. Ms. Ana Marie del Rio, our Secretary, owns an indirect 7% interest in our Sponsor, Advisor and Dealer Manager. Crossroads Capital Multifamily currently owns a 25% membership interest in our Sponsor that will increase upon a net increase in our book capitalization. Pursuant to the Third Amended and Restated Operating Agreement of our Sponsor, effective as of January 1, 2014, as amended, distributions are allocated to each member of our Sponsor in an amount equal to such member’s accrued and unpaid 10% preferred return, as defined in the Third Amended and Restated Operating Agreement. Thereafter, all distributions to Crossroads Capital Multifamily are subordinated to distributions to the other member of our Sponsor, Steadfast REIT Holdings, LLC (“Steadfast Holdings”), until Steadfast Holdings has received an amount equal to certain expenses, including certain organization and offering costs, incurred by Steadfast Holdings and its affiliates on our behalf. Steadfast Holdings owns the remaining 1% partnership interest in the Advisor.

All of our other officers and directors, other than our independent directors, are officers of the Advisor and officers, limited partners and/or members of our sponsor and other affiliates of the Advisor.

We and our Operating Partnership have entered into the Advisory Agreement with the Advisor and our Operating Partnership, which has aone-year term expiring February 5, 2020, subject to an unlimited number of successiveone-year renewals upon mutual consent of the parties. We may terminate the Advisory Agreement without cause or penalty upon 60 days’ written notice and immediately upon fraud, criminal conduct, willful misconduct, gross negligence or material breach of the Advisory Agreement by the Advisor or the Advisor’s bankruptcy. If we terminate the Advisory Agreement, we will pay the Advisor all unpaid advances for operating expenses and all earned but unpaid fees.

Services provided by the Advisor under the terms of the Advisory Agreement include the following:

• finding, presenting and recommending investment opportunities to us consistent with our investment policies and objectives;

• making investment decisions for us, subject to the limitations in our Charter and the direction and oversight of our board of directors;

• structuring the terms and conditions of our investments, sales and joint ventures;

• acquiring investments on our behalf in compliance with our investment objectives and policies;

• sourcing and structuring our loan originations;

• arranging for financing and refinancing of investments;

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• �� entering into service agreements for our loans;

• supervising and evaluating each loan servicer’s and property manager’s performance;

• reviewing and analyzing the operating and capital budgets of the properties underlying our investments and the properties we may acquire;

• entering into leases and service contracts for our properties;

• assisting us in obtaining insurance;

• generating our annual budget;

• reviewing and analyzing financial information for each of our assets and our overall investment portfolio;

• formulating and overseeing the implementation of strategies for the administration, promotion, management, financing and refinancing, marketing, servicing and disposition of our investments;

• performing investor relations services;

• maintaining our accounting and other records and assisting us in filing all reports required to be filed with the SEC, the Internal Revenue Service and other regulatory agencies;

• engaging and supervising the performance of our agents, including our registrar and transfer agent;

• performing services for us in connection with a listing of our shares on a securities exchange or a sale or merger of our company; and

• performing any other services reasonably requested by us.

The above summary is provided to illustrate the material functions that the Advisor performs for us as an advisor and is not intended to include all of the services that may be provided to us by the Advisor, its affiliates or third parties. The Advisor has also entered into an Advisory Services Agreement with Crossroads Capital Advisors whereby Crossroads Capital Advisors provides advisory services to us on behalf of the Advisor.

Fees and Expense Reimbursements Paid to the Advisor

Pursuant to the terms of our Advisory Agreement, we pay the Advisor the fees described below.

• We pay the Advisor an acquisition fee of 2.0% of the cost of investment, which includes the amount actually paid or budgeted to fund the acquisition, origination, development, construction or improvement (i.e., value-enhancement) of any real property or real estate-related asset acquired. For the period from January 1, 2017 to December 31, 2018, we incurred acquisition fees of $6,200,271 in connection with the acquisition of seven multifamily properties. During the same period, we paid $7,149,402 in acquisition fees.

• We paid the Advisor a monthly investment management fee in an amount equal toone-twelfth of 0.5% of the value of our investments in properties and real estate-related assets until the aggregate value of our investments in properties and real estate-related assets equaled $300,000,000, which occurred in August 2017. Thereafter, we pay the Advisor a monthly investment management fee equal toone-twelfth of 1.0% of the value of our investments in properties and real estate-related assets. For the purposes of the investment management fee, the value of our investments in properties were equal to their costs, until our investments were valued by an independent third-party appraiser. “Costs” are calculated by including acquisition fees, acquisition expenses, renovations and upgrades, and any debt attributable to such investments, or our proportionate share thereof in the case of investments made through joint ventures. For the period from January 1, 2017 to December 31, 2018, we incurred $5,823,091 and paid $5,152,116 of investment management fees to the Advisor.

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• We will pay the Advisor a loan coordination fee if our independent directors determine that the Advisor provided a substantial amount of services in connection with the origination or refinancing of any debt financing obtained by us that is used to refinance properties or other permitted investments or financing in connection with the recapitalization of the Company. The loan coordination fee equals 0.75% of the amount available under such financing. For the period from January 1, 2017 to December 31, 2018, we did not incur any loan coordination fees.

• We will pay the Advisor or its affiliate a disposition fee if, as determined by a majority of the independent directors, the Advisor or its affiliate provide a substantial amount of services in connection with the sale of a property or real estate-related asset, including pursuant to a sale of the entire company, which we refer to as a “liquidity event,” equal to (1) 1.5% of the sales price of each property or real estate-related asset sold or (2) 1.0%, which may be increased to 1.5% in the sole discretion of our independent directors, of the total consideration paid in a liquidity event. In the event of a final liquidity event, this fee will be reduced by the amount of any previous disposition fee paid on properties previously exchanged under Section 1031 of the Internal Revenue Code. For the period from January 1, 2017 to December 31, 2018, we did not incur any disposition fees.

• We will pay the Advisor (in its capacity as special limited partner of the Operating Partnership) a subordinated participation in net sale proceeds (payable only if we are not listed on an exchange), equal to 15.0% of the remaining net sale proceeds after return of the total investment amount, which is the amount equal to the original issue price paid by the stockholders in the Public Offering multiplied by the number of shares issued in the Public Offering, reduced by the weighted average original issue price of the shares sold in the Primary Offering multiplied by the total number of shares repurchased by us, plus payment to investors of an amount equal to a 6.0% annual cumulative,non-compounded return of the total investment amount, less amounts previously distributed to stockholders, including distributions that may constitute a return of capital for federal income tax purposes. For the period from January 1, 2017 to December 31, 2018, we did not incur any such fees.

“Net sale proceeds” means the net cash proceeds realized from the sale of the Company or all of our assets after deduction of all expenses incurred in connection with a sale or disposition of the Company or of our assets, including disposition fees paid to the Advisor, or from the prepayment, maturity, workout or other settlement of any loan or other investment. For purposes of calculating the 6.0% annual cumulative,non-compounded return of the total investment amount, the aggregate of all investors’ capital shall be deemed to have been invested collectively on one date—the aggregate average investment date, being a day of a month determined by the average weighted month of all shares sold on a monthly basis. In addition, the Advisor (in its capacity as special limited partner of the Operating Partnership) will receive a distribution similar to the subordinated participation in net sale proceeds in the event we undertake an issuer tender offer that results in the tendering stockholders receiving a return of the total investment amount of the tendering stockholders plus payment to those investors of an amount equal to a 6.0% annual cumulative,non-compounded return of the total investment amount of the tendering stockholders, less amounts previously distributed to stockholders, including distributions that may constitute a return of capital for federal income tax purposes.

• We will pay the Advisor (in its capacity as special limited partner of the Operating Partnership), upon our listing on a national securities exchange, a subordinated incentive listing distribution equal to 15.0% of the amount by which the sum of our adjusted market value plus distributions paid by us to stockholders from inception until the date the adjusted market value is determined, including distributions that may constitute a return of capital for federal income tax purposes, exceeds the sum of the total investment amount plus an amount equal to a 6.0% annual cumulative,non-compounded return to investors of the total investment amount. For purposes of calculating the 6.0% annual cumulative,non-compounded return of the total investment amount, the aggregate of all investors’ capital shall be deemed to have been invested collectively on one date—the aggregate average investment date, being a day of a month determined by the average weighted month of all shares sold on a monthly basis.

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The adjusted market value of our common stock will be calculated based on the average market value of the shares of common stock issued and outstanding at listing over the 30 consecutive trading days beginning 180 days after the shares are first listed or included for quotation. We have the option to pay the subordinated incentive listing distribution in the form of stock, cash, a promissory note or any combination thereof. Any previous payments of the subordinated participation in net sales proceeds will offset the amounts due pursuant to the subordinated listing distribution. For the period from January 1, 2017 to December 31, 2018, we did not incur any such fees.

• We will pay the Advisor (in its capacity as special limited partner of the Operating Partnership), upon termination or nonrenewal of the Advisory Agreement with or without cause, a subordinated distribution, which will entitle the Advisor to receive distributions from our Operating Partnership equal to 15.0% of the amount by which the sum of our appraised market value plus distributions exceeds the sum of the total investment amount plus an amount equal to a 6.0% annual cumulative,non-compounded return of the total investment amount to investors. For purposes of calculating the 6.0% annual cumulative,non-compounded return of the total investment amount, the aggregate of all investors’ capital shall be deemed to have been invested collectively on one date—the aggregate average investment date, being a day of a month determined by the average weighted month of all shares sold on a monthly basis. If we do not provide this return, the Advisor will not receive this distribution. In addition, the Advisor may elect to defer its right to receive a subordinated distribution upon termination until either shares of our common stock are listed and traded on a national securities exchange or another liquidity event occurs. For the period from January 1, 2017 to December 31, 2018, we did not incur any such fees.

In addition to the fees we pay to the Advisor pursuant to the Advisory Agreement, we also reimburse the Advisor and its affiliates for the costs and expenses described below.

• We reimburse the Advisor and its affiliates for organization and offering expenses it may incur on our behalf, other than underwriting compensation such as sales commissions, the dealer manager fee and the distribution and shareholder servicing fee, in connection with our Public Offering, including legal, accounting, tax, printing, mailing and filing fees, charges of our escrow holder and transfer agent, expenses of organizing us, data processing fees, advertising and sales literature costs, transfer agent costs, information technology costs, bona fideout-of-pocket due diligence costs and amounts to reimburse the Advisor or its affiliates for the salaries of its employees and other costs in connection with preparing sales materials and providing other administrative services in connection with the Public Offering. Any such reimbursement will not exceed actual expenses incurred by the Advisor. After the termination of the Public Offering, the Advisor will reimburse us to the extent total organization and offering expenses (including selling commissions, dealer manager fees and the distribution and shareholder servicing fees) borne by us exceed 15% of the gross proceeds raised in the Primary Offering. Through the termination of the primary offering, total organizational expenses incurred by us did not exceed 15% of the gross offering proceeds raised in the primary offering. To the extent we did not pay the full selling commissions, dealer manager fee or distribution and shareholder servicing fee for shares sold in the Public Offering, we also reimbursed costs of bona fide training and education meetings held by us (primarily the travel, meal and lodging costs of registered representatives of broker-dealers), attendance and sponsorship fees and cost reimbursement of employees of our affiliates to attend seminars conducted by broker-dealers and, in certain cases, reimbursement to participating broker-dealers for technology costs associated with our Public Offering, costs and expenses related to such technology costs, and costs and expenses associated with the facilitation of the marketing of our shares and the ownership of our shares by such broker-dealers’ customers; provided, however, that we did not pay any of the foregoing costs to the extent that such payment would cause total underwriting compensation to exceed 10% of the gross offering proceeds of the Primary Offering, as required by the rules of FINRA. For the period from January 1, 2017 to December 31, 2018, we incurred $20,659,583 of organization and offering expenses reimbursements. During the same period, we paid the Advisor $18,595,254.

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• Subject to the 2%/25% Guidelines discussed below, we reimburse the Advisor for other operating expenses incurred in providing services to us, including our allocable share of the Advisor’s overhead such as rent, employee costs, benefit administration costs, utilities and information technology costs; provided, however, that no reimbursement shall be made for costs of such personnel to the extent that personnel are used in transactions for which the Advisor receives an acquisition fee, investment management fee, loan coordination fee or disposition fee or for the employee costs the Advisor pays to our executive officers. For the period from January 1, 2017 to December 31, 2018, we incurred $2,200,324 and paid the Advisor $2,404,207 for administrative services.

• We reimburse the Advisor for acquisition expenses incurred related to the selection, evaluation, acquisition and development of a property or acquisition of real estate-related assets (including expenses relating to potential investments that we do not close) as long as total acquisition fees and expenses (including any loan coordination fee) relating to the purchase of an investment do not exceed 6.0% of the contract price of the property unless such excess is approved by our board of directors, including a majority of the independent directors. For the period from January 1, 2017 to December 31, 2018, we incurred and paid the Advisor $1,120,515 for acquisition expenses.

2%/25% Guidelines

As described above, the Advisor and its affiliates are entitled to reimbursement of actual expenses incurred for administrative and other services provided to us for which they do not otherwise receive a fee. However, we will not reimburse the Advisor or its affiliates at the end of any fiscal quarter for “total operating expenses” that for the four consecutive fiscal quarters then ended, or the expense year, exceeded the greater of (1) 2% of our average invested assets or (2) 25% of our net income, which we refer to as the “2%/25% Guidelines,” and the Advisor must reimburse us at least annually for any amounts by which our total operating expenses exceed the 2%/25% Guidelines in the expense year, unless our independent directors have determined that such excess expenses were justified based on unusual andnon-recurring factors.

For purposes of the 2%/25% Guidelines, “Average invested assets” means the average monthly book value of our assets invested directly or indirectly in equity interests and loans secured by real estate during the12-month period before deducting depreciation, reserves for bad debts or other noncash reserves. “Total operating expenses” means all costs and expenses paid or incurred by us, as determined under GAAP, that are in any way related to our operation, including advisor fees, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration, and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, registration and the listing of our shares of common stock, (b) interest payments, (c) taxes, (d)non-cash expenditures such as depreciation, amortization and bad debt reserves, (e) reasonable incentive fees, (f) acquisition fees and acquisition expenses (including expenses relating to potential acquisitions that do not close), (g) real estate commissions on the sale of a real property, and (h) other expenses connected with the acquisition, disposition, management and ownership of investments (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of real property). Within 60 days after the end of any fiscal quarter for which there are excess expenses which the independent directors conclude were justified and reimbursable to the Advisor, we will send written notice of such fact to our stockholders, together with an explanation of the factors the independent directors considered in determining that such excess expenses were justified. Any such finding and the reasons in support thereof shall be reflected in the minutes of the meetings of the board of directors.

Selling Commissions and Fees Paid to our Dealer Manager

The Dealer Manager for our Public Offering of common stock was Stira Capital Markets Group, LLC (formerly known as Steadfast Capital Markets Group, LLC), an affiliate of our Sponsor. Our Dealer Manager is a licensed broker-dealer registered with FINRA. The Dealer Manager for our Public Offering was entitled to

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certain selling commissions, dealer manager fees and reimbursements relating to raising capital. Our Dealer Manager Agreement with the Dealer Manager provides for the following compensation:

• Selling commissions of up to 7% of gross offering proceeds from the sale of Class A shares in the Primary Offering and up to 3% of gross offering proceeds from the sale of Class T shares in the Primary Offering (all of which will be reallowed to participating broker-dealers), subject to reductions based on volume and for certain categories of purchasers. No sales commissions were paid for sales of Class R shares or for sales pursuant to our DRP. The total amount of all items of compensation from any source payable to the Dealer Manager and the participating broker-dealers may not exceed 10.0% of the gross proceeds from our Primary Offering on a per class basis. For the period from January 1, 2017 to December 31, 2018, we incurred and paid $3,182,545 and $2,529,842 in selling commissions to our Dealer Manager in connection with the sale of Class A shares and Class T shares in the Primary Offering, respectively.

• A dealer manager fee of up to 3% of the gross offering proceeds from the sale of Class A shares and 2.5% of gross offering proceeds from the sale of Class T shares (a portion of which will be reallowed to participating broker-dealers). No dealer manager fee was paid for sales of Class R shares or for sales pursuant to our DRP. For the period from January 1, 2017 to December 31, 2018, we incurred and paid $1,586,125 and $2,108,199 in dealer manager fees to our Dealer Manager in connection with the sale of Class A shares and Class T shares in the Primary Offering, respectively.

• A distribution and shareholder servicing fee of up to (1) 0.27%, annualized, of the purchase price per Class R share (or, once reported, the amount of our estimated value per share) for each Class R share purchased in the Primary Offering from a registered investment advisor that does not participate on an alternative investment platform; (2) 0.67%, annualized, of the purchase price per Class R share (or, once reported, the amount of our estimated value per share) for each Class R share purchased in the Primary Offering from a registered investment advisor that participates on an alternative investment platform; and (3) 1.125%, annualized, of the purchase price per Class T share (or, once reported, the amount of our estimated value per share) for each Class T share purchased in the Primary Offering. The distribution and shareholder servicing fee accrued daily and was paid monthly in arrears. We amended our Charter on August 8, 2017, to authorize and pay different distributions to different holders of Class T and/or Class R shares. Prior to amending the Charter to allow for distributions at different rates on the same class of shares, of the 0.67% distribution and shareholder servicing fee payable with respect to sales of Class R shares by registered investment advisors that participate on an alternative investment platform, 0.27% was paid from the current distribution and shareholder servicing fee on Class R shares, which was payable out of amounts that otherwise would have been distributed to holders of Class R shares, and 0.40% was an additional expense for us.

Effective October 1, 2018, we ceased paying the distribution and shareholder servicing fee because total underwriting compensation had reached 10% of the total gross investment amount in the Primary Offering.

Fees and Reimbursements Paid to Our Property Manager

• We have entered into property management agreements (each a “Property Management Agreement”) with Steadfast Management Company, Inc., an affiliate of our Sponsor (the “Property Manager”), in connection with the management of each of our properties. The property management fee payable with respect to each property under the Property Management Agreements, ranges from 2.75% to 3.0% of the gross revenue of the property (as defined in the Property Management Agreement). In addition, the Property Manager may also earn an incentive management fee equal to 1.0% of total collections based on performance metrics of the property. The Property Manager may subcontract with third-party property managers and will be responsible for supervising and compensating those third-party property managers and will be paid an oversight fee equal to 1.0% of the gross revenues of the property managed for providing such supervisory services. In no event will we pay our Property Manager or any

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affiliate both a property management fee and an oversight fee with respect to any particular property. Each Property Management Agreement has an initial one year term and will continue thereafter on amonth-to-month basis unless either party gives60-days’ prior notice of its desire to terminate the Property Management Agreement, provided that we may terminate the Property Management Agreement at any time upon a determination of gross negligence, willful misconduct or bad acts of the Property Manager or its employees or upon an uncured breach of the Property Management Agreement upon 30 days’ prior written notice to the Property Manager. In the event of a termination of the Property Management Agreement by us without cause, we will pay a termination fee to the Property Manager equal to three months of the monthly management fee based on the average gross collections for the three months preceding the date of termination. For the period from January 1, 2017 to December 31, 2018, we incurred and paid property management fees of $1,752,109 and $1,596,668 to our Property Manager, respectively.

• The Property Management Agreements specify that we are to reimburse the Property Manager for the salaries and related benefits of onsite personnel. For the period from January 1, 2017 to December 31, 2018, we incurred and reimbursedon-site property management personnel costs of $5,130,738 and $4,963,967 to our Property Manager, respectively.

• The Property Management Agreements also specify certain other fees payable to the Property Manager or its affiliates, including fees for benefit administration, information technology infrastructure, licenses and support, training services and capital expenditures. For the period from January 1, 2017 to December 31, 2018, we incurred and paid other fees of $722,542 and $712,815 to our Property Manager, respectively.

Payments to our Construction Manager

• We have entered into Construction Management Agreements (each a “Construction Management Agreement”) with Pacific Coast Land & Construction, Inc., an affiliate of the Sponsor (the “Construction Manager”), in connection with capital improvements and renovation or value-enhancement projects for certain properties we acquire. The construction management fee payable with respect to each property under the Construction Management Agreements is equal to 6.0% of the costs of the improvements from which the Construction Manager has planning and oversight authority. Generally, each Construction Management Agreement can be terminated by either party with 30 days’ prior written notice to the other party. Construction management fees are capitalized to the respective real estate properties in the period in which they are incurred, as such costs relate to capital improvements and renovations for apartment homes taken out of service while they undergo the planned renovation. For the period from January 1, 2017 to December 31, 2018, we incurred and paid construction management fees of $351,731 and $347,810 to our Construction Manager, respectively.

• We may also reimburse the Construction Manager for the salaries and related benefits of certain of its employees for time spent working on capital improvements and renovations. For the period from January 1, 2017 to December 31, 2018, we incurred and reimbursed $612,071 and $595,184 to our Construction Manager, respectively.

Other Transactions

• We deposit amounts with an affiliate of our Sponsor to fund a prepaid insurance deductible account to cover the cost of required insurance deductibles across all properties owned by us and other affiliated entities of our Sponsor. Upon filing a major claim, proceeds from the insurance deductible account may be used by us or another affiliate of our Sponsor. In addition, we deposit amounts with an affiliate of our Sponsor to cover the cost of property and property related insurance across certain of our properties. For the period from January 1, 2017 to December 31, 2018, we funded $489,630 and incurred $450,368 of the prepaid deductible account and property insurance accounts to an affiliate of our Sponsor.

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Currently Proposed Transactions

Other than as described above, there are no currently proposed material transactions with related persons other than those covered by the terms of the agreements described above.

Policies and Procedures for Transactions with Related Persons

In order to reduce or eliminate certain potential conflicts of interest, our Charter and our Advisory Agreement contain restrictions and conflict resolution procedures relating to transactions we enter into with the Advisor, our directors or their respective affiliates. Each of the restrictions and procedures that apply to transactions with the Advisor and its affiliates will also apply to any transaction with any entity or real estate program controlled by the Advisor and its affiliates. As a general rule, any related party transaction must be approved by a majority of the directors (including a majority of independent directors) not otherwise interested in the transaction. In determining whether to approve or authorize a particular related party transaction, these persons will consider whether the transaction between us and the related party is fair and reasonable to us and has terms and conditions no less favorable to us than those available from unaffiliated third parties.

We have also adopted a Code of Ethics that applies to each of our officers and directors, which we refer to as “covered persons.” The Code of Ethics sets forth certain conflicts of interest policies that limit and govern certain matters among us, the covered persons, the Advisor and their respective affiliates.

Director Independence

Although our shares are not listed for trading on any national securities exchange, a majority of the members of our board of directors and all of the members of the audit committee are “independent” as defined by the NYSE. The NYSE standards provide that to qualify as an independent director, in addition to satisfying certain bright-line criteria, the board of directors must affirmatively determine that a director has no material relationship with us (either directly or as a partner, stockholder or officer of an organization that has a relationship with us). In addition, we have determined that these directors are independent pursuant to the definition of independence in our Charter, which is based on the definition included in the North American Securities Administrators Association, Inc.’s Statement of Policy Regarding Real Estate Investment Trusts, as revised and adopted on May 7, 2007. Our board of directors has determined that Stephen R. Bowie, Ned W. Brines and Janice M. Munemitsu each satisfies the bright-line criteria and that none has a relationship with us that would interfere with such person’s ability to exercise independent judgment as a member of our board of directors. None of these directors has ever served as (or is related to) an employee of ours or any of our predecessors or acquired companies or received any compensation from us or any such other entities except for compensation directly related to service as a director. Therefore, we believe that all of these directors are independent directors.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Independent Registered Public Accounting Firm

During the years ended December 31, 2018 and 2017, Ernst & Young LLP, or Ernst & Young, served as our independent registered public accounting firm and provided us with certain tax and other services. Ernst & Young has served as our independent auditor since June 8, 2016.

Pre-Approval Policies

The audit committee charter imposes a duty on our audit committee topre-approve all auditing services performed for us by our independent auditors as well as all permittednon-audit services in order to ensure that the provision of such services does not impair the auditors’ independence. In determining whether or not topre-approve services, our audit committee will consider whether the service is a permissible service under the

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rules and regulations promulgated by the SEC. Our audit committee, may, in its discretion, delegate to one or more of its members the authority topre-approve any audit ornon-audit services to be performed by the independent auditors, provided any such approval is presented to and approved by the full audit committee at its next scheduled meeting.

All services rendered by Ernst & Young for the years ended December 31, 2018 and 2017, werepre-approved in accordance with the policies and procedures described above.

Principal Independent Registered Public Accounting Firm Fees

Our audit committee reviewed the audit andnon-audit services performed by Ernst & Young, as well as the fees charged by Ernst & Young for such services. In its review of thenon-audit service fees, our audit committee considered whether the provision of such services is compatible with maintaining the independence of Ernst & Young.

The aggregate fees billed to us for professional accounting services, including the audit of our annual financial statements by Ernst & Young for the years ended December 31, 2018 and 2017, are set forth in the table below.

	2018		2017
Audit fees	$	483,075	$	640,188
Audit-related fees		—		60,000
Tax fees		65,147		47,400
All other fees		1,720		—
Total	$	549,942	$	747,588

For purposes of the preceding table, Ernst & Young’s professional fees are classified as follows:

• Audit fees—These are fees for professional services performed for the audit of our annual financial statements and the required review of quarterly financial statements and other procedures performed by Ernst & Young in order for them to be able to form an opinion on our consolidated financial statements. These fees also cover services that are normally provided by independent auditors in connection with statutory and regulatory filings or engagements.

• Audit-related fees—These are fees for assurance and related services that traditionally are performed by independent auditors that are reasonably related to the performance of the audit or review of the financial statements, such as due diligence related to acquisitions and dispositions, attestation services that are not required by statute or regulation, internal control reviews and consultation concerning financial accounting and reporting standards.

• Tax fees—These are fees for all professional services performed by professional staff in our independent auditor’s tax division, except those services related to the audit of our financial statements. These include fees for tax compliance, tax planning and tax advice, including federal, state and local issues. Services may also include assistance with tax audits and appeals before the Internal Revenue Service and similar state and local agencies, as well as federal, state and local tax issues related to due diligence.

• All other fees—These are fees for any services not included in the above-described categories.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

a. Financial Statement Schedules

See the Index to Financial Statements atpage F-1 of this report.

The following financial statement schedule is included herein at pageF-43 of this report:

Schedule III—Real Estate Assets and Accumulated Depreciation and Amortization

b. Exhibits

The following exhibits are included, or incorporated by reference, in this Annual Report on Form10-K for the year ended December 31, 2018 (and are numbered in accordance with Item 601 of RegulationS-K).

EXHIBIT LIST

Exhibit	Description
3.1	Second Articles of Amendment and Restatement of Steadfast Apartment REIT III, Inc., filed May 16, 2016 (included as Exhibit 3.1 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed May 17, 2016 and incorporated herein by reference).
3.2	Articles of Amendment of Steadfast Apartment REIT III, Inc. filed August 8, 2017 (included as Exhibit 3.1 to the Company’s Post-Effective Amendment No. 9 to FormS-11 (FileNo. 333-207952), filed August 10, 2017 and incorporated herein by reference).
3.3	Bylaws of Steadfast Apartment REIT III, Inc. (included as Exhibit 3.3 to Company’s Registration Statement on FormS-11 (FileNo. 333-207952), filed November 12, 2015 and incorporated herein by reference).
4.1	Form of Subscription Agreement (included as Appendix B to the Company’s Post-Effective Amendment No. 4 to FormS-11 (FileNo. 333-207952), filed February 14, 2017 and incorporated herein by reference).
4.2	Form of Distribution Reinvestment Plan (included as Appendix C to the Company’s Post-Effective Amendment No. 2 to FormS-11 (FileNo. 333-207952), filed June 21, 2016 and incorporated herein by reference).
4.3	Form of Redemption Request Form (included as Appendix D to the Company’s Post-Effective Amendment No. 2 to FormS-11 (FileNo. 333-207952), filed June 21, 2016 and incorporated herein by reference).
4.4	Form of Application for Transfer (included as Appendix E to the Company’s Post-Effective Amendment No. 2 to FormS-11 (FileNo. 333-207952), filed June 21, 2016 and incorporated herein by reference).
10.1	Amended and Restated Dealer Manager Agreement, dated July 25, 2016, by and among Steadfast Apartment REIT III, Inc., Steadfast Apartment REIT III Operating Partnership, L.P. and Stira Capital Markets Group, LLC (formerly known as Steadfast Capital Markets Group, LLC) (included as Exhibit 1.1 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed July 27, 2016 and incorporated herein by reference).
10.2	Amendment No. 1 to the Dealer Manager Agreement, dated May 26, 2016, by and among Steadfast Apartment REIT III, Inc., Steadfast Apartment REIT III Operating Partnership, L.P. and Stira Capital Markets Group, LLC (formerly known as Steadfast Capital Markets Group, LLC) (included as Exhibit 10.1 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed May 26, 2016 and incorporated herein by reference).

D-98

Exhibit	Description
10.3	Form of Participating Dealer Agreement (included as Exhibit A to Exhibit 1.1 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed July 27, 2016 and incorporated herein by reference).
10.4	Amendment No. 1 to Participating Dealer Agreement (included as Exhibit 1.2 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed June 1, 2017 and incorporated herein by reference).
10.5	Amended and Restated Advisory Agreement, dated July 25, 2016, by and among Steadfast Apartment REIT III, Inc., Steadfast Apartment REIT III Operating Partnership, L.P. and Steadfast Apartment Advisor III, LLC (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 333-207952), filed July 27, 2016 and incorporated herein by reference).
10.6	Amendment No. 2 to the Amended and Restated Advisory Agreement, dated as of February 1, 2018, by and among Steadfast Apartment REIT III, Inc., Steadfast Apartment REIT III Operating Partnership, L.P. and Steadfast Apartment Advisor III, LLC and effective as of February 5, 2018 (included as Exhibit 10.1 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed February 5, 2018).
10.7	Amendment No. 3 to the Amended and Restated Advisory Agreement, dated as of February 1, 2019, by and among Steadfast Apartment REIT III, Inc., Steadfast Apartment REIT III Operating Partnership, L.P. and Steadfast Apartment Advisor III, LLC and effective as of February 5, 2019 (included as Exhibit 10.1 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed February 1, 2019).
10.8	Amended and Restated Agreement of Limited Partnership of Steadfast Apartment REIT III, Inc., dated July 25, 2016 by and between Steadfast Apartment REIT III, Inc. and Steadfast Apartment Advisor III, LLC (included as Exhibit 10.2 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed July 27, 2016 and incorporated herein by reference).
10.9	Escrow Agreement, dated January 28, 2016, by and among Steadfast Apartment REIT III, Inc., Stira Capital Markets Group, LLC (formerly Steadfast Capital Markets Group, LLC) and UMB Bank, N.A., as escrow agent (included as Exhibit 10.2 to the Company’sPre-Effective Amendment No. 2 to FormS-11 (FileNo. 333-207952), filed February 2, 2016 and incorporated herein by reference).
10.10	Steadfast Apartment REIT III, Inc. 2016 Incentive Plan (included as Exhibit 10.3 to the Company’sPre-Effective Amendment No. 2 to FormS-11 (FileNo. 333-207952), filed February 2, 2016 and incorporated herein by reference).
10.11	Steadfast Apartment REIT III, Inc. Independent Directors Compensation Plan (included as Exhibit 10.4 to the Company’sPre-Effective Amendment No. 2 to FormS-11 (FileNo. 333-207952), filed February 2, 2016 and incorporated herein by reference).
10.12	Purchase and Sale Agreement, made and entered into as of April 6, 2016, by and between Steadfast Asset Holdings, Inc. and Ashford Properties, LLC, SeriesD-Gurnee Partners at Carriage House, with Chicago Title Company, in its capacity as the title company (included as Exhibit 10.1 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed May 23, 2016 and incorporated herein by reference).
10.13	First Amendment to Purchase and Sale Agreement, made as of May 11, 2016, by and between Steadfast Asset Holdings, Inc. and Ashford Properties, LLC, SeriesD-Gurnee Partners at Carriage House (included as Exhibit 10.2 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed May 23, 2016 and incorporated herein by reference).

D-99

Exhibit	Description
10.14	Assignment and Assumption of Purchase Agreement, dated as of May 18, 2016, by and between Steadfast Asset Holdings, Inc. and STAR III Carriage House, LLC (included as Exhibit 10.3 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed May 23, 2016 and incorporated herein by reference).
10.15	Property Management Agreement, entered into as of May 19, 2016, by and between Steadfast Management Company, Inc. and STAR III Carriage House, LLC (included as Exhibit 10.4 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed May 23, 2016 and incorporated herein by reference).
10.16	Construction Management Services Agreement, entered into as of May 19, 2016, by and between STAR III Carriage House, LLC and Pacific Coast Land & Construction, Inc. (included as Exhibit 10.5 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed May 23, 2016 and incorporated herein by reference).
10.17	Multifamily Note, made as of May 19, 2016, by STAR III Carriage House, LLC, in favor of PNC Bank, National Association (included as Exhibit 10.6 to the Company’s Current Report onForm 8-K (FileNo. 333-207952), filed May 23, 2016 and incorporated herein by reference).
10.18	Multifamily Loan and Security Agreement, made as of May 19, 2016, by and between STAR III Carriage House, LLC and PNC Bank, National Association (included as Exhibit 10.7 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed May 23, 2016 and incorporated herein by reference).
10.19	Multifamily Mortgage, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of May 19, 2016, by STAR III Carriage House, LLC to and for the benefit of PNC Bank, National Association (included as Exhibit 10.8 to the Company’s Current Report on Form 8-K (FileNo. 333-207952), filed May 23, 2016 and incorporated herein by reference).
10.20	Environmental Indemnity Agreement, dated as of May 19, 2016, by STAR III Carriage House, LLC to and for the benefit of PNC Bank, National Association (included as Exhibit 10.9 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed May 23, 2016 and incorporated herein by reference).
10.21	Guaranty ofNon-Recourse Obligations, dated as of May 19, 2016, by Steadfast Apartment REIT III, Inc. to and for the benefit of PNC Bank, National Association (included as Exhibit 10.10 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed May 23, 2016 and incorporated herein by reference).
10.22	Assignment of Management Agreement, dated as of May 19, 2016, by and among STAR III Carriage House, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (included as Exhibit 10.11 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed May 23, 2016 and incorporated herein by reference).
10.23	Agreement for Purchase and Sale of Real Estate, made and entered into as of October 7, 2016, by and between Steadfast Asset Holdings, Inc. and Bristol Village Apartments, LLC, with Fidelity National Title Insurance Company as the title company (included as Exhibit 10.1 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed November 22, 2016 and incorporated herein by reference).
10.24	Assignment and Assumption of Purchase Agreement, dated as of November 17, 2016, by and between Steadfast Asset Holdings, Inc. and STAR III Bristol Village, LLC (included as Exhibit 10.2 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed November 22, 2016 and incorporated herein by reference).

D-100

Exhibit	Description
10.25	Property Management Agreement, entered into as of November 17, 2016, by and between Steadfast Management Company, Inc. and STAR III Bristol Village, LLC (included as Exhibit 10.3 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed November 22, 2016 and incorporated herein by reference).
10.26	Construction Management Services Agreement, entered into as of November 17, 2016, by and between STAR III Bristol Village, LLC and Pacific Coast Land & Construction, Inc. (included as Exhibit 10.4 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed November 22, 2016 and incorporated herein by reference).
10.27	Multifamily Note, made as of November 17, 2016, by STAR III Bristol Village, LLC, in favor of Berkeley Point Capital LLC (included as Exhibit 10.5 to the Company’s Current Report onForm 8-K (FileNo. 333-207952), filed November 22, 2016 and incorporated herein by reference).
10.28	Multifamily Loan and Security Agreement, made as of November 17, 2016, by and between STAR III Bristol Village, LLC and Berkeley Point Capital LLC (included as Exhibit 10.6 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed November 22, 2016 and incorporated herein by reference).
10.29	Multifamily Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of November 17, 2016, by STAR III Bristol Village, LLC to the Public Trustee of Arapahoe County for the benefit of Berkeley Point Capital LLC (included as Exhibit 10.7 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed November 22, 2016 and incorporated herein by reference).
10.30	Environmental Indemnity Agreement, dated as of November 17, 2016, by STAR III Bristol Village, LLC to and for the benefit of Berkeley Point Capital LLC (included as Exhibit 10.8 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed November 22, 2016 and incorporated herein by reference).
10.31	Guaranty ofNon-Recourse Obligations, dated as of November 17, 2016, by Steadfast Apartment REIT III, Inc. to and for the benefit of Berkeley Point Capital LLC (included as Exhibit 10.9 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed November 22, 2016 and incorporated herein by reference).
10.32	Assignment of Management Agreement, dated as of November 17, 2016, by and among STAR III Bristol Village, LLC, Berkeley Point Capital LLC and Steadfast Management Company, Inc. (included as Exhibit 10.10 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed November 22, 2016 and incorporated herein by reference).
10.33	Agreement of Sale and Purchase, made and entered into as of November 11, 2016, by and between Steadfast Asset Holdings, Inc., Canyon Resort at Great Hills Limited Partnership and Wakefield GP Canyon Resort at Great Hills, LLC, with Heritage Title Company of Austin, Inc. as the title company (included as Exhibit 10.2 to the Company’s Current Report on Form 8-K (FileNo. 333-207952), filed January 4, 2017 and incorporated herein by reference).
10.34	First Amendment to Agreement of Sale and Purchase, made and entered into as of December 9, 2016, by and between Steadfast Asset Holdings, Inc., Canyon Resort at Great Hills Limited Partnership and Wakefield GP Canyon Resort at Great Hills, LLC (included as Exhibit 10.3 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed January 4, 2017 and incorporated herein by reference).
10.35	Second Amendment to Agreement of Sale and Purchase, made and entered into as of December 12, 2016, by and between Steadfast Asset Holdings, Inc., Canyon Resort at Great Hills Limited Partnership and Wakefield GP Canyon Resort at Great Hills, LLC (included as Exhibit 10.4 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed January 4, 2017 and incorporated herein by reference).

D-101

Exhibit	Description
10.36	Assignment and Assumption of Purchase Agreement, dated as of December 29, 2016, by and between Steadfast Asset Holdings, Inc. and STAR III Canyon Resort, LLC (included as Exhibit 10.5 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed January 4, 2017 and incorporated herein by reference).
10.37	Property Management Agreement, entered into as of December 29, 2016, by and between Steadfast Management Company, Inc. and STAR III Canyon Resort, LLC (included as Exhibit 10.6 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed January 4, 2017 and incorporated herein by reference).
10.38	Construction Management Services Agreement, entered into as of December 29, 2016, by and between STAR III Canyon Resort, LLC and Pacific Coast Land & Construction, Inc. (included as Exhibit 10.7 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed January 4, 2017 and incorporated herein by reference).
10.39	Multifamily Note, made as of December 29, 2016, by STAR III Canyon Resort, LLC, in favor of PNC Bank, National Association (included as Exhibit 10.8 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed January 4, 2017 and incorporated herein by reference).
10.40	Multifamily Loan and Security Agreement, made as of December 29, 2016, by and between STAR III Canyon Resort, LLC and PNC Bank, National Association (included as Exhibit 10.9 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed January 4, 2017 and incorporated herein by reference).
10.41	Multifamily Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of December 29, 2016, by STAR III Canyon Resort, LLC to Gary S. Farmer for the benefit of PNC Bank, National Association (included as Exhibit 10.10 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed January 4, 2017 and incorporated herein by reference).
10.42	Environmental Indemnity Agreement, dated as of December 29, 2016, by STAR III Canyon Resort, LLC to and for the benefit of PNC Bank, National Association (included as Exhibit 10.11 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed January 4, 2017 and incorporated herein by reference).
10.43	Guaranty ofNon-Recourse Obligations, dated as of December 29, 2016, by Steadfast Apartment REIT III, Inc. to and for the benefit of PNC Bank, National Association (included as Exhibit 10.12 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed January 4, 2017 and incorporated herein by reference).
10.44	Assignment of Management Agreement, dated as of December 29, 2016, by and among STAR III Canyon Resort, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (included as Exhibit 10.13 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed January 4, 2017 and incorporated herein by reference).
10.45	Purchase and Sale Agreement and Joint Escrow Instructions, made and entered into as of December 2, 2016, by and between Steadfast Asset Holdings, Inc. and VR Sweetwater Limited Partnership, with First American Title Insurance Company, Inc. as the title company (included as Exhibit 10.1 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed January 18, 2017 and incorporated herein by reference).
10.46	First Amendment to Purchase and Sale Agreement and Joint Escrow Instructions, made and entered into as of January 5, 2017, by and between Steadfast Asset Holdings, Inc. and VR Sweetwater Limited Partnership (included as Exhibit 10.2 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed January 18, 2017 and incorporated herein by reference).

D-102

Exhibit	Description
10.47	Assignment and Assumption of Purchase Agreement, dated as of January 12, 2017, by and between Steadfast Asset Holdings, Inc. and STAR III Sweetwater, LLC (included as Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No. 333-207952), filed January 18, 2017 and incorporated herein by reference).
10.48	Property Management Agreement, entered into as of January 12, 2017, by and between Steadfast Management Company, Inc. and STAR III Sweetwater, LLC (included as Exhibit 10.4 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed January 18, 2017 and incorporated herein by reference).
10.49	Construction Management Services Agreement, entered into as of January 12, 2017, by and between STAR III Sweetwater, LLC and Pacific Coast Land & Construction, Inc. (included as Exhibit 10.5 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed January 18, 2017 and incorporated herein by reference).
10.50	Multifamily Note, made as of January 12, 2017, by STAR III Sweetwater, LLC, in favor of Berkeley Point Capital LLC (included as Exhibit 10.6 to the Company’s Current Report onForm 8-K (FileNo. 333-207952), filed January 18, 2017 and incorporated herein by reference).
10.51	Multifamily Loan and Security Agreement, made as of January 12, 2017, by and between STAR III Sweetwater, LLC and Berkeley Point Capital LLC (included as Exhibit 10.7 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed January 18, 2017 and incorporated herein by reference).
10.52	Multifamily Deed to Secure Debt, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of January 12, 2017, by STAR III Sweetwater, LLC for the benefit of Berkeley Point Capital LLC (included as Exhibit 10.8 to the Company’s Current Report onForm 8-K (FileNo. 333-207952), filed January 18, 2017 and incorporated herein by reference).
10.53	Environmental Indemnity Agreement, dated as of January 12, 2017, by STAR III Sweetwater, LLC to and for the benefit of Berkeley Point Capital LLC (included as Exhibit 10.9 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed January 18, 2017 and incorporated herein by reference).
10.54	Guaranty ofNon-Recourse Obligations, dated as of January 12, 2017, by Steadfast Apartment REIT III, Inc. to and for the benefit of Berkeley Point Capital LLC (included as Exhibit 10.10 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed January 18, 2017 and incorporated herein by reference).
10.55	Assignment of Management Agreement, dated as of January 12, 2017, by and among STAR III Sweetwater, LLC, Berkeley Point Capital LLC and Steadfast Management Company, Inc. (included as Exhibit 10.11 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed January 18, 2017 and incorporated herein by reference).
10.56	Purchase and Sale Agreement, made and entered into as of April 28, 2017, by and between Steadfast Asset Holdings, Inc. and PAC Enclave at Vista Ridge, LLC, with Heritage Title Company of Austin, Inc. as the title company (included as Exhibit 10.1 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed June 1, 2017 and incorporated herein by reference).
10.57	Assignment and Assumption of Purchase Agreement, dated as of May 25, 2017, by and between Steadfast Asset Holdings, Inc. and STAR III Vista Ridge, LLC (included as Exhibit 10.2 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed June 1, 2017 and incorporated herein by reference).

D-103

Exhibit	Description
10.58	Property Management Agreement, entered into as of May 25, 2017, by and between Steadfast Management Company, Inc. and STAR III Vista Ridge, LLC (included as Exhibit 10.3 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed June 1, 2017 and incorporated herein by reference).
10.59	Construction Management Services Agreement, entered into as of May 25, 2017, by and between STAR III Vista Ridge, LLC and Pacific Coast Land & Construction, Inc. (included as Exhibit 10.4 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed June 1, 2017 and incorporated herein by reference).
10.60	Multifamily Note, made as of May 25, 2017, by STAR III Vista Ridge, LLC, in favor of PNC Bank, National Association (included as Exhibit 10.5 to the Company’s Current Report onForm 8-K (FileNo. 000-55772), filed June 1, 2017 and incorporated herein by reference).
10.61	Multifamily Loan and Security Agreement, made as of May 25, 2017, by and between STAR III Vista Ridge, LLC and PNC Bank, National Association (included as Exhibit 10.6 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed June 1, 2017 and incorporated herein by reference).
10.62	Multifamily Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of May 25, 2017, by STAR III Vista Ridge, LLC to Gary S. Farmer for the benefit of PNC Bank, National Association (included as Exhibit 10.7 to the Company’s Current Report on Form 8-K (File No. 000-55772), filed June 1, 2017 and incorporated herein by reference).
10.63	Environmental Indemnity Agreement, dated as of May 25, 2017, by STAR III Vista Ridge, LLC to and for the benefit of PNC Bank, National Association (included as Exhibit 10.8 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed June 1, 2017 and incorporated herein by reference).
10.64	Guaranty ofNon-Recourse Obligations, dated as of May 25, 2017, by Steadfast Apartment REIT III, Inc. to and for the benefit of PNC Bank, National Association (included as Exhibit 10.9 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed June 1, 2017 and incorporated herein by reference).
10.65	Assignment of Management Agreement, dated as of May 25, 2017, by and among STAR III Vista Ridge, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (included as Exhibit 10.10 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed June 1, 2017 and incorporated herein by reference).
10.66	Purchase and Sale Agreement, made and entered into as of May 22, 2017, by and between Steadfast Asset Holdings, Inc. and Seagate Belmar Associates, LLC, with Fidelity National Title Insurance Company as the title company (included as Exhibit 10.1 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed July 26, 2017 and incorporated herein by reference).
10.67	First Amendment to Purchase and Sale Agreement, made and entered into as of June 2, 2017, by and between Steadfast Asset Holdings, Inc. and Seagate Belmar Associates, LLC (included as Exhibit 10.2 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed July 26, 2017 and incorporated herein by reference).
10.68	Second Amendment to Purchase and Sale Agreement, made and entered into as of June 9, 2017, by and between Steadfast Asset Holdings, Inc. and Seagate Belmar Associates, LLC (included as Exhibit 10.3 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed July 26, 2017 and incorporated herein by reference).

D-104

Exhibit	Description
10.69	Third Amendment to Purchase and Sale Agreement, made and entered into as of June 16, 2017, by and between Steadfast Asset Holdings, Inc. and Seagate Belmar Associates, LLC (included as Exhibit 10.4 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed July 26, 2017 and incorporated herein by reference).
10.70	Assignment and Assumption of Purchase Agreement, dated as of July 21, 2017, by and between Steadfast Asset Holdings, Inc. and STAR III Belmar, LLC (included as Exhibit 10.5 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed July 26, 2017 and incorporated herein by reference).
10.71	Property Management Agreement, entered into as of July 21, 2017, by and between Steadfast Management Company, Inc. and STAR III Belmar, LLC (included as Exhibit 10.6 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed July 26, 2017 and incorporated herein by reference).
10.72	Construction Management Services Agreement, entered into as of July 21, 2017, by and between STAR III Belmar, LLC and Pacific Coast Land & Construction, Inc. (included as Exhibit 10.7 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed July 26, 2017 and incorporated herein by reference).
10.73	Multifamily Loan and Security Agreement, made as of July 21, 2017, by and between STAR III Belmar, LLC and Berkeley Point Capital LLC (included as Exhibit 10.8 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed July 26, 2017 and incorporated herein by reference).
10.74	Multifamily Note, made as of July 21, 2017, by STAR III Belmar, LLC, in favor of Berkeley Point Capital LLC (included as Exhibit 10.9 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed July 26, 2017 and incorporated herein by reference).
10.75	Multifamily Deed of Trust, Assignment of Rents and Security Agreement, dated as of July 21, 2017, by STAR III Belmar, LLC to the Public Trustee of Jefferson County for the benefit of Berkeley Point Capital LLC (included as Exhibit 10.10 to the Company’s Current Report onForm 8-K (FileNo. 000-55772), filed July 26, 2017 and incorporated herein by reference).
10.76	Assignment of Management Agreement and Subordination of Management Fees, dated as of July 21, 2017, by and among STAR III Belmar, LLC, Berkeley Point Capital LLC and Steadfast Management Company, Inc. (included as Exhibit 10.11 to the Company’s Current Report onForm 8-K (FileNo. 000-55772), filed July 26, 2017 and incorporated herein by reference).
10.77	Guaranty, dated as of July 21, 2017, by Steadfast Apartment REIT III, Inc. to and for the benefit of Berkeley Point Capital LLC (included as Exhibit 10.12 to the Company’s Current Report onForm 8-K (FileNo. 000-55772), filed July 26, 2017 and incorporated herein by reference).
10.78	Purchase and Sale Agreement, made and entered into as of June 20, 2017, by and between Steadfast Asset Holdings, Inc. and Ansley NC, LLC and US Diversified Residential 2, LLC, with Fidelity National Title Insurance Company as the title company (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 000-55772), filed September 6, 2017 and incorporated herein by reference).
10.79	Assignment and Assumption of Purchase Agreement, dated as of August 31, 2017, by and between Steadfast Asset Holdings, Inc. and STAR III Princeton Lakes, LLC (included as Exhibit 10.2 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed September 6, 2017 and incorporated herein by reference).

D-105

Exhibit	Description
10.80	Property Management Agreement, entered into as of August 31, 2017, by and between Steadfast Management Company, Inc. and STAR III Princeton Lakes, LLC (included as Exhibit 10.3 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed September 6, 2017 and incorporated herein by reference).
10.81	Construction Management Services Agreement, entered into as of August 31, 2017, by and between STAR III Princeton Lakes, LLC and Pacific Coast Land & Construction, Inc. (included as Exhibit 10.4 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed September 6, 2017 and incorporated herein by reference).
10.82	Multifamily Loan and Security Agreement(Non-Recourse), made as of August 31, 2017, by and between STAR III Princeton Lakes, LLC and PNC Bank, National Association (included as Exhibit 10.5 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed September 6, 2017 and incorporated herein by reference).
10.83	Multifamily Note, made as of August 31, 2017, by STAR III Princeton Lakes, LLC in favor of PNC Bank, National Association (included as Exhibit 10.6 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed September 6, 2017 and incorporated herein by reference).
10.84	Multifamily Deed to Secure Debt, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of August 31, 2017, by STAR III Princeton Lakes, LLC to and for the benefit of PNC Bank, National Association (included as Exhibit 10.7 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed September 6, 2017 and incorporated herein by reference).
10.85	Assignment of Management Agreement, dated as of August 31, 2017, by and among STAR III Princeton Lakes, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (included as Exhibit 10.8 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed September 6, 2017 and incorporated herein by reference).
10.86	Environmental Indemnity Agreement, dated as of August 31, 2017, by STAR III Princeton Lakes, LLC to and for the benefit of PNC Bank, National Association (included as Exhibit 10.9 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed September 6, 2017 and incorporated herein by reference).
10.87	Guaranty ofNon-Recourse Obligations, dated as of August 31, 2017, by Steadfast Apartment REIT III, Inc. to and for the benefit of PNC Bank, National Association (included as Exhibit 10.10 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed September 6, 2017 and incorporated herein by reference).
10.88	Purchase and Sale Agreement, made and entered into as of October 23, 2017, by and between Steadfast Asset Holdings, Inc. and Wilkinson CGR Lawrenceville, LLC, with Calloway Title and Escrow, LLC as the title company (included as Exhibit 10.1 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed December 12, 2017 and incorporated herein by reference).
10.89	Reinstatement and First Amendment to Purchase and Sale Agreement, made and entered into as of October 27, 2017, by and between Steadfast Asset Holdings, Inc. and Wilkinson CGR Lawrenceville, LLC (included as Exhibit 10.2 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed December 12, 2017 and incorporated herein by reference).
10.90	Assignment and Assumption of Purchase Agreement, dated as of December 7, 2017, by and between Steadfast Asset Holdings, Inc. and STAR III Sugar Mill, LLC (included as Exhibit 10.3 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed December 12, 2017 and incorporated herein by reference).

D-106

Exhibit	Description
10.91	Property Management Agreement, entered into as of December 7, 2017, by and between Steadfast Management Company, Inc. and STAR III Sugar Mill, LLC (included as Exhibit 10.4 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed December 12, 2017 and incorporated herein by reference).
10.92	Construction Management Services Agreement, entered into as of December 7, 2017, by and between STAR III Sugar Mill, LLC and Pacific Coast Land & Construction, Inc. (included as Exhibit 10.5 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed December 12, 2017 and incorporated herein by reference).
10.93	Multifamily Loan and Security Agreement, made as of December 7, 2017, by and between STAR III Sugar Mill, LLC and Walker & Dunlop, LLC (included as Exhibit 10.6 to the Company’s Current Report on Form 8-K (File No. 000-55772), filed December 12, 2017 and incorporated herein by reference).
10.94	Multifamily Note, made as of December 7, 2017, by STAR III Sugar Mill, LLC, in favor of Walker & Dunlop, LLC (included as Exhibit 10.7 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed December 12, 2017 and incorporated herein by reference).
10.95	Multifamily Deed to Secure Debt, Assignment of Rents and Security Agreement, dated as of December 7, 2017, by STAR III Sugar Mill, LLC for the benefit of Walker & Dunlop, LLC (included as Exhibit 10.8 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed December 12, 2017 and incorporated herein by reference).
10.96	Assignment of Management Agreement and Subordination of Management Fees, dated as of December 7, 2017, by and among STAR III Sugar Mill, LLC, Walker & Dunlop, LLC and Steadfast Management Company, Inc. (included as Exhibit 10.9 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed December 12, 2017 and incorporated herein by reference).
10.97	Guaranty, dated as of December 7, 2017, by Steadfast Apartment REIT III, Inc. to and for the benefit of Walker & Dunlop, LLC (included as Exhibit 10.10 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed December 12, 2017 and incorporated herein by reference).
10.98	Sale-Purchase Agreement, made and entered into as of October 30, 2017, by and between Steadfast Asset Holdings, Inc. and TEG Avery Point, LLC, with Madison Title Agency LLC as the title company (included as Exhibit 10.1 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed December 20, 2017 and incorporated herein by reference).
10.99	Assignment and Assumption of Purchase Agreement, dated as of December 15, 2017, by and between Steadfast Asset Holdings, Inc. and STAR III Avery Point, LLC (included as Exhibit 10.2 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed December 20, 2017 and incorporated herein by reference).
10.100	Property Management Agreement, entered into as of December 15, 2017, by and between Steadfast Management Company, Inc. and STAR III Avery Point, LLC (included as Exhibit 10.3 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed December 20, 2017 and incorporated herein by reference).
10.101	Construction Management Services Agreement, entered into as of December 15, 2017, by and between STAR III Avery Point, LLC and Pacific Coast Land & Construction, Inc. (included as Exhibit 10.4 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed December 20, 2017 and incorporated herein by reference).

D-107

Exhibit	Description
10.102	Multifamily Loan and Security Agreement, made as of December 15, 2017, by and between STAR III Avery Point, LLC and Berkeley Point Capital LLC (included as Exhibit 10.5 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed December 20, 2017 and incorporated herein by reference).
10.103	Multifamily Note, made as of December 15, 2017, by STAR III Avery Point, LLC, in favor of Berkeley Point Capital LLC (included as Exhibit 10.6 to the Company’s Current Report onForm 8-K (FileNo. 000-55772), filed December 20, 2017 and incorporated herein by reference).
10.104	Multifamily Mortgage, Assignment of Rents, Security Agreement and Fixture Filing, dated as of December 15, 2017, between STAR III Avery Point, LLC and Berkeley Point Capital LLC (included as Exhibit 10.7 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed December 20, 2017 and incorporated herein by reference).
10.105	Assignment of Management Agreement and Subordination of Management Fees, dated as of December 15, 2017, by and among STAR III Avery Point, LLC, Berkeley Point Capital LLC, and Steadfast Management Company, Inc. (included as Exhibit 10.8 to the Company’s Current Report on Form8-K (FileNo. 000-55772), filed December 20, 2017 and incorporated herein by reference).
10.106	Guaranty, dated as of December 15, 2017, by Steadfast Apartment REIT III, Inc. for the benefit of Berkeley Point Capital LLC (included as Exhibit 10.9 to the Company’s Current Report onForm 8-K (FileNo. 000-55772), filed December 20, 2017 and incorporated herein by reference).
21.1*	Subsidiaries of the Company
31.1*	Certification of the Principal Executive Officer pursuant to Exchange Act Rule13a-14(a) or15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of the Principal Financial Officer pursuant to Exchange Act Rule13a-14(a) or15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS*	XBRL Instance Document.
101.SCH*	XBRL Taxonomy Extension Schema Document.
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB*	XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document.

* Filed herewith.

** In accordance with Item 601(b)(32) of RegulationS-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

ITEM 16. FORM10-K SUMMARY

The Company has elected not to provide summary information.

D-108

STEADFAST APARTMENT REIT III, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm	D-110
Consolidated Balance Sheets as of December 31, 2018 and 2017	D-111
Consolidated Statements of Operations for the Years Ended December 31, 2018, 2017 and 2016	D-112
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2018, 2017 and 2016	D-113
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 2017 and 2016	D-114
Notes to Consolidated Financial Statements	D-116
Financial Statement Schedule
Schedule III—Real Estate Assets and Accumulated Depreciation and Amortization	D-158

All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

D-109

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of

Steadfast Apartment REIT III, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Steadfast Apartment REIT III, Inc. (the “Company”) as of December 31, 2018 and 2017, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2018, and the related notes and financial statement schedule listed in the Index at Item 15(a), Schedule III—Real Estate Assets and Accumulated Depreciation and Amortization (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.

Adoption of ASUNo. 2017-01

As discussed in Note 2 to the consolidated financial statements, the Company changed its method of accounting for determining whether transactions should be accounted for as acquisitions (or disposals) of assets or businesses in 2017 due to the adoption of Accounting Standards UpdateNo. 2017-01,Business Combinations (Topic 805): Clarifying the Definition of a Business.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2016.

Irvine, California

March 15, 2019

D-110

STEADFAST APARTMENT REIT III, INC.

CONSOLIDATED BALANCE SHEETS

	December 31,
	2018			2017
ASSETS
Assets:
Real Estate:
Land	$	45,908,171		$	42,059,897
Building and improvements		355,780,664			323,636,510
Tenant origination and absorption costs		—			4,214,078
Total real estate, cost		401,688,835			369,910,485
Less accumulated depreciation and amortization		(21,387,012	)		(9,425,010	)
Total real estate, net		380,301,823			360,485,475
Cash and cash equivalents		35,628,660			15,533,961
Restricted cash		3,729,649			4,344,992
Rents and other receivables		515,569			488,287
Other assets		906,700			702,130
Total assets	$	421,082,401		$	381,554,845
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued liabilities	$	7,520,803		$	5,726,298
Mortgage notes payable, net		280,086,921			258,470,441
Distributions payable		1,169,815			746,360
Due to affiliates		4,898,804			5,487,180
Total liabilities		293,676,343			270,430,279
Commitments and contingencies (Note 9)
Redeemable common stock		6,570,093			2,920,059
Stockholders’ Equity:
Preferred stock, $0.01 par value per share; 100,000,000 shares authorized, no shares issued and outstanding		—			—
Class A common stock, $0.01 par value per share; 480,000,000 shares authorized, 3,516,990 and 2,887,731 shares issued and outstanding at December 31, 2018 and 2017, respectively		35,171			28,878
Class R common stock, $0.01 par value per share; 240,000,000 shares authorized, 474,076 and 309,518 shares issued and outstanding at December 31, 2018 and 2017, respectively		4,742			3,096
Class T common stock, $0.01 par value per share; 480,000,000 shares authorized, 4,620,317 and 3,369,991 shares issued and outstanding at December 31, 2018 and 2017, respectively		46,204			33,700
Additionalpaid-in capital		170,763,927			131,822,585
Cumulative distributions and net losses		(50,014,079	)		(23,683,752	)
Total stockholders’ equity		120,835,965			108,204,507
Total liabilities and stockholders’ equity	$	421,082,401		$	381,554,845

See accompanying notes to consolidated financial statements.

D-111

STEADFAST APARTMENT REIT III, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended December 31,
	2018			2017			2016
Revenues:
Rental income	$	33,451,624		$	17,550,160		$	1,152,304
Tenant reimbursements and other		4,458,006			2,041,417			112,602
Total revenues		37,909,630			19,591,577			1,264,906
Expenses:
Operating, maintenance and management		10,429,818			5,163,724			376,536
Real estate taxes and insurance		5,237,606			2,763,816			160,707
Fees to affiliates		5,799,201			2,402,297			2,221,052
Depreciation and amortization		16,659,117			12,488,831			825,735
Interest expense		11,657,873			5,898,156			281,031
General and administrative expenses		3,491,624			2,627,940			1,426,575
Acquisition costs		—			—			893,982
Total expenses		53,275,239			31,344,764			6,185,618
Net loss		(15,365,609	)		(11,753,187	)		(4,920,712	)
Net loss attributable tonon-controlling interest		—			—			(100	)
Net loss attributable to common stockholders	$	(15,365,609	)	$	(11,753,187	)	$	(4,920,612	)
Net loss attributable to Class A common stockholders—basic and diluted	$	(6,401,649	)	$	(5,726,887	)	$	(3,160,451	)
Net Loss per Class A common share—basic and diluted	$	(1.86	)	$	(2.49	)	$	(8.36	)
Weighted average number of Class A common shares outstanding—basic and diluted		3,266,046			2,190,070			374,595
Net loss attributable to Class R common stockholders—basic and diluted	$	(806,620	)	$	(534,790	)	$	(165,258	)
Net loss per Class R common share—basic and diluted	$	(1.91	)	$	(2.55	)	$	(8.42	)
Weighted average number of Class R common shares outstanding—basic and diluted		411,528			204,514			19,587
Net loss attributable to Class T common stockholders—basic and diluted	$	(8,157,340	)	$	(5,491,510	)	$	(1,594,903	)
Net loss per Class T common share—basic and diluted	$	(2.05	)	$	(2.75	)	$	(8.62	)
Weighted average number of Class T common shares outstanding—basic and diluted		4,161,778			2,100,058			189,037

See accompanying notes to consolidated financial statements.

D-112

STEADFAST APARTMENT REIT III, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2018, 2017 AND 2016

	Stockholders’ Equity																											Noncontrolling Interest			Total Equity
	Common Stock																		Additional Paid-In Capital			Cumulative Distributions & Net Losses			Total Stockholders’ Equity
	Class A						Class R						Class T
	Shares			Amount			Shares			Amount			Shares			Amount
BALANCE, December 31, 2015		8,000		$	80			—		$	—			—		$	—		$	199,920		$	—		$	200,000		$	—		$	200,000
Issuance of common stock		1,239,420			12,394			99,043			990			889,434			8,894			53,633,875			—			53,656,153			—			53,656,153
Commissions on sales of common stock and related dealer manager fees to affiliates		—			—			—			—			—			—			(4,639,146	)		—			(4,639,146	)		—			(4,639,146	)
Transfers to redeemable common stock		—			—			—			—			—			—			(292,818	)		—			(292,818	)		—			(292,818	)
Other offering costs to affiliates		—			—			—			—			—			—			(3,329,974	)		—			(3,329,974	)		—			(3,329,974	)
Distributions declared		—			—			—			—			—			—			—			(820,700	)		(820,700	)		—			(820,700	)
Amortization of stock-based compensation		—			—			—			—			—			—			61,071			—			61,071			—			61,071
Contribution from noncontrolling interest		—			—			—			—			—			—			—			—			—			100			100
Net loss		—			—			—			—			—			—			—			(4,920,612	)		(4,920,612	)		(100	)		(4,920,712	)
BALANCE, December 31, 2016		1,247,420			12,474			99,043			990			889,434			8,894			45,632,928			(5,741,312	)		39,913,974			—			39,913,974
Issuance of common stock		1,640,311			16,404			210,475			2,106			2,481,444			24,815			104,046,957			—			104,090,282			—			104,090,282
Commissions on sales of common stock and related dealer manager fees to affiliates		—			—			—			—			—			—			(9,034,341	)		—			(9,034,341	)		—			(9,034,341	)
Transfers to redeemable common stock		—			—			—			—			—			—			(2,698,321	)		—			(2,698,321	)		—			(2,698,321	)
Repurchase of common stock		—			—			—			—			(887	)		(9	)		(21,060	)		—			(21,069	)		—			(21,069	)
Other offering costs to affiliates		—			—			—			—			—			—			(6,167,169	)		—			(6,167,169	)		—			(6,167,169	)
Distributions declared		—			—			—			—			—			—			—			(6,189,253	)		(6,189,253	)		—			(6,189,253	)
Amortization of stock-based compensation		—			—			—			—			—			—			63,591			—			63,591			—			63,591
Net loss		—			—			—			—			—			—			—			(11,753,187	)		(11,753,187	)		—			(11,753,187	)
BALANCE, December 31, 2017		2,887,731			28,878			309,518			3,096			3,369,991			33,700			131,822,585			(23,683,752	)		108,204,507			—			108,204,507
Issuance of common stock		649,469			6,495			168,166			1,682			1,252,853			12,529			49,417,719			—			49,438,425			—			49,438,425
Commissions on sales of common stock and related dealer manager fees to affiliates		—			—			—			—			—			—			(702,740	)		—			(702,740	)		—			(702,740	)
Transfers to redeemable common stock		—			—			—			—			—			—			(4,174,775	)		—			(4,174,775	)		—			(4,174,775	)
Repurchase of common stock		(20,210	)		(202	)		(3,608	)		(36	)		(2,527	)		(25	)		(595,505	)		—			(595,768	)		—			(595,768	)
Other offering costs to affiliates		—			—			—			—			—			—			(5,085,703	)		—			(5,085,703	)		—			(5,085,703	)
Distributions declared		—			—			—			—			—			—			—			(10,964,718	)		(10,964,718	)		—			(10,964,718	)
Amortization of stock-based compensation		—			—			—			—			—			—			82,346			—			82,346			—			82,346
Net loss		—			—			—			—			—			—			—			(15,365,609	)		(15,365,609	)		—			(15,365,609	)
BALANCE, December 31, 2018		3,516,990		$	35,171			474,076		$	4,742			4,620,317		$	46,204		$	170,763,927		$	(50,014,079	)	$	120,835,965		$	—		$	120,835,965

See accompanying notes to consolidated financial statements.

D-113

STEADFAST APARTMENT REIT III, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year Ended December 31,
	2018			2017			2016
Cash Flows from Operating Activities:
Net loss	$	(15,365,609	)	$	(11,753,187	)	$	(4,920,712	)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		16,659,117			12,488,831			825,735
Loss on disposal of buildings and improvements		315,472						—
Amortization of deferred financing costs		234,562			119,514			6,931
Amortization of stock-based compensation		82,346			63,591			61,071
Amortization of stock-based annual compensation and meeting fees		13,750			27,500			56,000
Change in fair value of interest rate cap agreements		(119,837	)		444,252			24,989
Changes in operating assets and liabilities:
Rents and other receivables		(89,157	)		(396,922	)		(29,490	)
Other assets		(84,733	)		(276,976	)		(167,535	)
Accounts payable and accrued liabilities		1,197,194			4,503,526			956,181
Due to affiliates		(928,380	)		721,270			1,402,124
Net cash provided by (used in) operating activities		1,914,725			5,941,399			(1,784,706	)
Cash Flows from Investing Activities:
Acquisition of real estate investments		(30,118,698	)		(264,059,130	)		(96,775,000	)
Additions to real estate investments		(5,596,569	)		(4,139,039	)		(311,387	)
Escrow deposits for pending real estate acquisitions		(1,000,000	)		(5,000,000	)		(3,300,100	)
Purchase of interest rate cap agreements		—			(288,740	)		(438,120	)
Cash used in investing activities		(36,715,267	)		(273,486,909	)		(100,824,607	)
Cash Flows from Financing Activities:
Proceeds from issuance of mortgage notes payable		21,545,000			187,595,000			72,426,000
Contributions from noncontrolling interest		—			—			100
Proceeds from issuance of Class A common stock		14,057,829			39,154,393			29,930,624
Proceeds from issuance of Class R common stock		3,597,999			4,661,050			2,223,100
Proceeds from issuance of Class T common stock		26,788,418			57,564,527			21,055,168
Payments of commissions on sale of common stock and related dealer manager fees		(3,640,878	)		(7,067,978	)		(3,667,371	)
Reimbursement of other offering costs to affiliates		(1,810,661	)		(7,377,882	)		(1,713,487	)
Payment of deferred financing costs		(163,082	)		(1,261,006	)		(415,998	)
Distributions to common stockholders		(5,498,959	)		(2,964,771	)		(286,624	)
Repurchase of common stock		(595,768	)		(21,069	)		—
Net cash provided by financing activities		54,279,898			270,282,264			119,551,512
Net increase in cash, cash equivalents and restricted cash		19,479,356			2,736,754			16,942,199
Cash, cash equivalents and restricted cash, beginning of year		19,878,953			17,142,199			200,000
Cash, cash equivalents and restricted cash, end of year	$	39,358,309		$	19,878,953		$	17,142,199

D-114

STEADFAST APARTMENT REIT III, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

	Year Ended December 31,
	2018			2017			2016
Supplemental Disclosures of Cash Flow Information:
Interest paid	$	11,138,568		$	4,781,715		$	141,718
Supplemental Disclosures of Noncash Flow Transactions:
Increase in distributions payable	$	423,455		$	505,102		$	241,258
Application of escrow deposits to acquire real estate	$	1,000,000		$	5,650,100		$	2,650,000
Increase (decrease) in amounts receivable from transfer agent for Class A common stock	$	9,000		$	(82,400	)	$	73,400
(Decrease) increase in amounts receivable from transfer agent for Class T common stock	$	(70,875	)	$	45,832		$	25,043
Increase (decrease) in amounts payable to affiliates for other offering costs	$	3,275,042		$	(1,210,713	)	$	1,616,487
Distributions paid to common stockholders through common stock issuances pursuant to the distribution reinvestment plan	$	5,042,304		$	2,719,380		$	292,818
Increase in redeemable common stock	$	4,174,775		$	2,698,321		$	292,818
Increase in redemption payable	$	524,741		$	71,080		$	—
Increase in accounts payable and accrued liabilities from additions to real estate investments	$	72,570		$	160,007		$	35,504
Increase in due to affiliates from additions to real estate investments	$	3,100		$	18,527		$	1,347
(Decrease) increase in due to affiliates from distribution and shareholder servicing fee	$	(2,938,138	)	$	1,966,363		$	971,775

See accompanying notes to consolidated financial statements.

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1. Organization and Business

Steadfast Apartment REIT III, Inc. (the “Company”) was formed on July 29, 2015, as a Maryland corporation that elected to be taxed as, and qualifies, as a real estate investment trust (“REIT”) commencing with the taxable year ended December 31, 2016. On August 24, 2015, the Company was initially capitalized with the sale of 8,000 shares of Class A common stock to Steadfast Apartment Advisor III, LLC (the “Advisor”), a Delaware limited liability company, at a purchase price of $25.00 per share for an aggregate purchase price of $200,000.

The Company owns and operates a portfolio of multifamily properties located in targeted markets throughout the United States. As of December 31, 2018, the Company owned ten multifamily properties comprising a total of 2,775 apartment homes. For more information on the Company’s real estate portfolio, see Note 3 (Real Estate).

Public Offering

On February 5, 2016, the Company commenced its initial public offering to offer a maximum of $1,000,000,000 in shares of common stock for sale to the public in the primary offering (the “Primary Offering”). The Company initially offered Class A shares and Class T shares in the Public Offering at an initial price of $25.00 for each Class A share ($500,000,000 in Class A shares) and $23.81 for each Class T share ($500,000,000 in Class T shares), with discounts available for certain categories of purchasers. The Company also registered up to $300,000,000 in shares pursuant to the Company’s distribution reinvestment plan (the “DRP,” and together with the Primary Offering, the “Public Offering”) at an initial price of $23.75 for each Class A share and $22.62 for each Class T share.

Commencing on July 25, 2016, the Company revised the terms of its Public Offering to include Class R shares. The Company subsequently offered a maximum of $1,000,000,000 in shares of common stock for sale to the public at an initial price of $25.00 for each Class A share ($400,000,000 in Class A shares), $22.50 for each Class R share ($200,000,000 in Class R shares) and $23.81 for each Class T share ($400,000,000 in Class T shares), with discounts available for certain categories of purchasers. Up to $300,000,000 in shares were offered pursuant to the DRP at an initial price of $23.75 for each Class A share, $22.50 for each Class R share and $22.62 for each Class T share.

As of August 31, 2018, the date the Company terminated its Primary Offering, it had sold 3,483,706 shares of Class A common stock, 474,357 shares of Class R common stock and 4,572,889 shares of Class T common stock in the Public Offering for gross proceeds of $85,801,001, $10,672,273 and $108,706,960, respectively, and $205,180,234 in the aggregate, including 111,922 shares of Class A common stock, 8,450 shares of Class R common stock and 145,838 shares of Class T common stock issued pursuant to the DRP for gross offering proceeds of $2,658,156, $190,125 and $3,298,847, respectively. As of December 31, 2018, the Company had sold 3,513,310 shares of Class A common stock, 477,684 shares of Class R common stock and 4,623,732 shares of Class T common stock in the Public Offering for gross proceeds of $86,485,589, $10,747,201 and $109,854,820, respectively, and $207,087,610 in the aggregate, including 141,524 shares of Class A common stock, 11,777 shares of Class R common stock and 196,681 shares of Class T common stock issued pursuant to the DRP for gross offering proceeds of $3,342,744, $265,053 and $4,446,707, respectively.

On October 9, 2018, the Company’s board of directors determined an estimated value per share for each of the Company’s Class A common stock, Class R common stock and Class T common stock of $22.54 as of June 30, 2018. In connection with the determination of an estimated value per share, the Company’s board of

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directors determined a price per share for the DRP for each of the Company’s Class A common stock, Class R common stock and Class T common stock of $22.54 effective November 1, 2018. The Company’s board of directors elected to suspend the DRP with respect to distributions that accrue after February 1, 2019 and may, from time to time in its sole discretion, reinstate the DRP, although there is no assurance as to if or when this will happen.

The business of the Company is externally managed by the Advisor, pursuant to the Amended and Restated Advisory Agreement dated July 25, 2016, by and among the Company, Steadfast Apartment REIT III Operating Partnership, L.P., a Delaware limited partnership (the “Operating Partnership”), and the Advisor (as amended, the “Advisory Agreement”). The Advisory Agreement is subject to annual renewal by the Company’s board of directors. The current term of the Advisory Agreement expires on February 5, 2020. Subject to certain restrictions and limitations, the Advisor manages the Company’sday-to-day operations, manages the Company’s portfolio of properties and real estate-related assets, sources and presents investment opportunities to the Company’s board of directors and provides investment management services on the Company’s behalf. The Advisor has also entered into an Advisory Services Agreement with Crossroads Capital Advisors, LLC (“Crossroads Capital Advisors”), whereby Crossroads Capital Advisors provides advisory services to the Company on behalf of the Advisor. The Company has retained Stira Capital Markets Group, LLC (formerly known as Steadfast Capital Markets Group, LLC) (the “Dealer Manager”), an affiliate of the Advisor, which served as the dealer manager for the Public Offering. The Advisor, along with the Dealer Manager, also provides marketing, investor relations and other administrative services on the Company’s behalf.

Substantially all of the Company’s business is conducted through the Operating Partnership. The Company is the sole general partner of the Operating Partnership and owns a 99.99% partnership interest in the Operating Partnership. The Advisor is the sole limited partner of and owns the remaining 0.01% partnership interest in the Operating Partnership. The Company and the Advisor entered into an amended and Restated Agreement of Limited Partnership on July 25, 2016 (as amended, the “Partnership Agreement”). As the Company accepted subscriptions for shares of its common stock in the Public Offering, the Company transferred substantially all of the net offering proceeds from the Public Offering to the Operating Partnership as a contribution in exchange for partnership interests and the Company’s percentage ownership in the Operating Partnership increased proportionately.

The Partnership Agreement provides that the Operating Partnership is operated in a manner that will enable the Company to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that the Operating Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), which classification could result in the Operating Partnership being taxed as a corporation. In addition to the administrative and operating costs and expenses incurred by the Operating Partnership in acquiring and operating real properties, the Operating Partnership pays all of the Company’s administrative costs and expenses, and such expenses are treated as expenses of the Operating Partnership.

The Company commenced its real estate operations on May 19, 2016, upon acquiring a fee simple interest in Carriage House Apartment Homes, a multifamily property located in Gurnee, Illinois.

2. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company, the consolidated variable interest entity (“VIE”) that the Company controls and of which the Company is the primary beneficiary, and the

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Operating Partnership’s subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation. The financial statements of the Company’s subsidiaries are prepared using accounting policies consistent with those of the Company. The Operating Partnership is a VIE because the Advisor, as the limited partner, lacks substantivekick-out rights and substantive participating rights. The Company is the primary beneficiary of, and consolidates, the Operating Partnership.

The accompanying consolidated financial statements are prepared in accordance with U.S. GAAP as contained within the Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC.

Square footage, occupancy and certain other measures used to describe real estate included in the notes to the consolidated financial statements are presented on an unaudited basis.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.

Reclassifications

Certain amounts in the Company’s prior period consolidated financial statements were reclassified to conform to the current period presentation. These reclassifications did not change the results of operations of prior periods. On January 1, 2018, the Company adopted ASU2016-18. As a result, the Company no longer presents transfers between cash and restricted cash in the consolidated statements of cash flows. Instead, restricted cash is included with cash and cash equivalents when reconciling the beginning of the period and end of the period total amounts shown on the consolidated statements of cash flows.

Real Estate Assets

Depreciation and Amortization

Real estate costs related to the development, construction and improvement of properties are capitalized. Acquisition costs related to business combinations are expensed as incurred. Acquisition costs related to asset acquisitions are capitalized. On January 1, 2017, the Company early adopted ASU2017-01,Business Combinations (Topic 805): clarifying the definition of a business (“ASU2017-01”), that 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. All of the Company’s real estate investments acquired in fiscal years 2018 and 2017, qualify as asset acquisitions, and as such, acquisition costs are capitalized.

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Repair and maintenance and tenant turnover costs are charged to expense as incurred and significant replacements and betterments are capitalized. Repair and maintenance and tenant turnover costs include all costs that do not extend the useful life of the real estate asset. The Company considers the period of future benefit of an asset to determine its appropriate useful life and anticipates the estimated useful lives of assets by class to be generally as follows:

Buildings	30 years
Building improvements	5-25 years
Tenant improvements	Shorter of lease term or expected useful life
Tenant origination and absorption costs	Remaining term of related lease
Furniture, fixtures, and equipment	5-10 years

Real Estate Purchase Price Allocation

Prior to the adoption of ASU2017-01, the Company recorded the acquisition of income-producing real estate or real estate that will be used for the production of income as a business combination. All assets acquired and liabilities assumed in a business combination are measured at their acquisition-date fair values. Acquisition costs are expensed as incurred. Upon adoption of ASU2017-01, the Company records the acquisition of income-producing real estate or real estate that are used for the production of income as an asset acquisition. All assets acquired and liabilities assumed in the asset acquisition are measured at their acquisition date fair values. Acquisition costs are capitalized and allocated between land, buildings and improvements and tenant origination and associated costs on the consolidated balance sheet.

The Company assesses the acquisition-date fair values of all tangible assets, identifiable intangible assets and assumed liabilities using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis) and that utilize appropriate discount and/or capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. The fair value of tangible assets of an acquired property considers the value of the property as if it was vacant.

Intangible assets include the value ofin-place leases, which represents the estimated value of the net cash flows of thein-place leases to be realized, as compared to the net cash flows that would have occurred had the property been vacant at the time of acquisition and subject tolease-up.

The Company estimates the value of tenant origination and absorption costs by considering the estimated carrying costs during hypothetical expectedlease-up periods, considering current market conditions. In estimating carrying costs, the Company estimates the amount of lost rentals using market rates during the expectedlease-up periods.

The Company amortizes the value ofin-place leases to expense over the remainingnon-cancelable term of the respective leases. Should a tenant terminate its lease, the unamortized portion of thein-place lease value and customer relationship intangibles would be charged to expense in that period.

The Company records above-market and below-marketin-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 (1) the contractual amounts to be paid pursuant to thein-place leases and (2) the Company’s estimate of fair market lease rates for the correspondingin-place leases, measured over a period equal to the remainingnon-cancelable term of the lease. The Company amortizes any capitalized above-market or below-

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market lease values as a reduction or increase to rental income over the remainingnon-cancelable terms of the respective leases.

The total amount of other intangible assets acquired will be further allocated toin-place lease values and customer relationship intangible values based on the Company’s evaluation of the specific characteristics of each tenant’s lease and its overall relationship with that respective tenant. Characteristics that the Company considers in allocating these values include the nature and extent of existing business relationships with the tenant, growth prospects for developing new business with the tenant, and the tenant’s credit quality and expectations of lease renewals (including those existing under the terms of the lease agreement), among other factors.

Estimates of the fair values of the tangible assets, identifiable intangible assets and assumed liabilities require the Company to make significant assumptions to estimate market lease rates, property-operating expenses, carrying costs duringlease-up periods, discount rates, market absorption periods, and the number of years the property will be held for investment. The use of inappropriate assumptions could result in an incorrect valuation of acquired tangible assets, identifiable intangible assets and assumed liabilities, which could impact the amount of the Company’s net income (loss).

Impairment of Real Estate Assets

The Company accounts for its real estate assets in accordance with ASC 360,Property, Plant and Equipment (“ASC 360”). ASC 360 requires the Company to continually monitor events and changes in circumstances that could indicate that the carrying amounts of the Company’s real estate and related intangible assets may not be recoverable. When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets and liabilities may not be recoverable, the Company assesses the recoverability of the assets by estimating whether the Company will recover the carrying value of the asset through its undiscounted future cash flows and its eventual disposition. Based on this analysis, if the Company does not believe that it will be able to recover the carrying value of the real estate and related intangible assets and liabilities, the Company records an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangible assets and liabilities. If any assumptions, projections or estimates regarding an asset changes in the future, the Company may have to record an impairment to reduce the net book value of such individual asset. The Company did not record any impairment loss on its real estate assets during the years ended December 31, 2018 , 2017 and 2016.

Rents and Other Receivables

The Company will periodically evaluate the collectability of amounts due from tenants and maintain an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments under lease agreements. The Company exercises judgment in establishing these allowances and considers payment history and current credit status of tenants in developing these estimates. Due to the short-term nature of the operating leases, the Company does not maintain a deferred rent receivable related to the straight-lining of rents. Other receivables include amounts due from the transfer agent for stock subscription net proceeds.

Revenue Recognition

On January 1, 2018, the Company adopted ASC 606, Revenue from Contracts with Customers, (“ASC 606”), which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard requires the Company to recognize, for certain of its revenue sources, transfer of promised goods or services to

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customers in an amount that reflects the consideration the Company is entitled to in exchange for those goods or services. The Company selected the modified retrospective transition method but had no cumulative effect adjustment to recognize as of the date of adoption and adopted ASC 606 effective January 1, 2018. The Company’s revenue consists of rental revenues and tenant reimbursements and other. There was no impact to the Company’s recognition of rental revenue from leasing arrangements as this was specifically excluded from ASC 606. The Company identified limited sources of revenues fromnon-lease components but did not experience a material impact on its revenue recognition in the consolidated financial statements upon adoption. The Company leases apartment and condominium units under operating leases with terms generally of one year or less. Generally, credit investigations are performed for prospective residents and security deposits are obtained. The Company will recognize minimum rent, including rental abatements, concessions and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of thenon-cancellable term of the related lease and amounts expected to be received in later years will be recorded as 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 in accordance with ASC 840,Leases.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents may include cash and short-term investments. Short-term investments are stated at cost, which approximates fair value. As of December 31, 2018 and 2017, the Company had amounts in excess of federally insured limits in deposit accounts with a financial institution. The Company limits such deposits to financial institutions with high credit standing.

Restricted Cash

Restricted cash represents those cash accounts for which the use of funds is restricted by loan covenants. As of December 31, 2018 and 2017, the Company had a restricted cash balance of $3,729,649 and $4,344,992, respectively, which represents amounts set aside as impounds for future property tax payments, property insurance payments and tenant improvement payments as required by agreements with the Company’s lenders.

Deferred Financing Costs

The Company capitalizes deferred financing costs such as commitment fees, legal fees and other third party costs associated with obtaining commitments for financing that result in a closing of such financing, as a contra liability against the respective outstanding debt balance. The Company amortizes these costs over the terms of the respective financing agreements using the effective interest method. The Company expenses unamortized deferred financing costs when the associated debt is refinanced or repaid before maturity unless specific rules are met that would allow for the carryover of such costs to the refinanced debt. Costs incurred in seeking financing transactions that do not close are expensed in the period in which it is determined that the financing will not close.

Derivative Financial Instruments

The Company accounts for its derivative instruments in accordance with ASC 815, Derivatives and Hedges. The Company’s objective in using derivatives is to add stability to interest expense and to manage the Company’s exposure to interest rate movements or other identified risks. To accomplish these objectives, the Company may use various types of derivative instruments to manage fluctuations in cash flows resulting from

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interest rate risk attributable to changes in the benchmark interest rate of London Interbank Offered Rate (“LIBOR”) or other applicable benchmark rates.

The Company measures its derivative instruments and hedging activities at fair value and records them as an asset or liability, depending on its rights or obligations under the applicable derivative contract. For derivatives designated as fair value hedges, the changes in the fair value of both the derivative instrument and the hedged items are recorded in earnings. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. For derivatives designated as cash flow hedges, the effective portions of changes in fair value of the derivatives are reported in other comprehensive income (loss) and are subsequently reclassified into earnings when the hedged item affects earnings. Changes in fair value of derivative instruments not designated as hedges and ineffective portions of hedges are recognized in earnings in the affected period. The Company assesses the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designated hedged item or transaction.

As of December 31, 2018 and 2017, the Company did not have any derivatives designated as cash flow or fair value hedges, nor are derivatives being used for trading or speculative purposes.

Fair Value Measurements

Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other assets and liabilities at fair value on anon-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:

• Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

• Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

• Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.

When available, the Company utilizes quoted market prices from an independent third-party source to determine fair value and will classify such items in Level 1 or Level 2. In instances where the market is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require the Company to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When the Company determines the market for a financial instrument owned by the Company to be illiquid or when market transactions for similar instruments do not appear orderly, the Company uses several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and will establish a fair value by assigning weights to the various valuation sources.

The following describes the valuation methodologies used by the Company to measure fair value, including an indication of the level in the fair value hierarchy in which each asset or liability is generally classified.

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Interest rate cap agreements—The Company has entered into certain interest rate cap agreements. These derivatives are recorded at fair value. Fair value was based on a model-driven valuation using the associated variable rate curve and an implied market volatility, both of which were observable at commonly quoted intervals for the full term of the interest rate cap agreements. Therefore, the Company’s interest rate cap agreements were classified within Level 2 of the fair value hierarchy and are included in other assets in the accompanying consolidated balance sheets. Changes in the fair value of the interest rate cap agreements are recorded as interest expense in the accompanying consolidated statements of operations.

The following tables reflect the Company’s assets required to be measured at fair value on a recurring basis on the consolidated balance sheets:

	December 31, 2018
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements	$	—	$	377,456	$	—

	December 31, 2017
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements	$	—	$	257,619	$	—

Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument.

Fair Value of Financial Instruments

The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities, due to affiliates, distributions payable, and mortgage notes payable, net.

The Company considers the carrying value of cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities and distributions payable to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. The fair value of amounts due to affiliates is not determinable due to the related party nature of such amounts. The Company has determined that its mortgage notes payable, net are classified as Level 3 within the fair value hierarchy.

The fair value of the mortgage notes payable, net is estimated using a discounted cash flow analysis using borrowing rates available to the Company for debt instruments with similar terms and maturities. As of December 31, 2018 and 2017, the fair value of the mortgage notes payable, net was $279,945,659 and $262,048,883, respectively, compared to the carrying value of $280,086,921 and $258,470,441, respectively.

Accounting for Stock-Based Compensation

The Company amortizes the fair value of stock-based compensation awards to expense over the vesting period and records any dividend equivalents earned as dividends for financial reporting purposes. Stock-based

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compensation awards are valued at the fair value on the date of grant and amortized as an expense over the vesting period.

Distribution Policy

The Company elected to be taxed as, and qualifies as, a REIT commencing with the Company’s taxable year ended December 31, 2016. To maintain its qualification as a REIT, the Company intends to make distributions each taxable year equal to at least 90% of its REIT taxable income (which is determined without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). The Company’s board of directors declared a distribution to the holders of Class A shares and Class T shares which began to accrue on May 19, 2016. The Company’s board of directors also declared a distribution to the holders of Class R shares which began to accrue on August 2, 2016.

Distributions declared during the period from January 1, 2017 to March 31, 2017, were based on daily record dates and calculated at a rate of $0.004110 per Class A share per day, $0.00394521 per Class R share per day subject to an annual distribution and shareholder servicing fee of 0.27%, and in some instances, $0.00369863 per Class R share per day subject to an annual distribution and shareholder servicing fee of 0.67% and $0.003376 per Class T share per day. Distributions declared during the period from April 1, 2017 to June 30, 2017, were based on daily record dates and calculated at a rate of $0.004110 per Class A share per day, $0.00394521 per Class R share per day subject to an annual distribution and shareholder servicing fee of 0.27%, and in some instances, $0.00369863 per Class R share per day subject to an annual distribution and shareholder servicing fee of 0.67% and $0.003376 per Class T share per day. Distributions declared during the period from July 1, 2017 to September 30, 2017, were based on daily record dates and calculated at a rate of $0.004110 per Class A share per day, $0.00394521 per Class R share per day and $0.003457 per Class T share per day. Distributions declared during the period from October 1, 2017 to September 30, 2018, were based on daily record dates and calculated at a rate of $0.004110 per Class A share per day, $0.00394521 per Class R share per day subject to an annual distribution and shareholder servicing fee of 0.27%, and in some instances, $0.00369863 per Class R share per day subject to an annual distribution and shareholder servicing fee of 0.67%, $0.003376 per Class T share per day subject to an annual distribution and shareholder servicing fee of 1.125%, and in some instances, $0.003457 per Class T share per day subject to an annual distribution and shareholder servicing fee of 1.0%. Distributions declared during the period from October 1, 2018 to December 31, 2018, were based on daily record dates and calculated at a rate of $0.004110 per Class A share, Class R share and Class T share per day. Each day during the period from May 19, 2016 to December 31, 2018, was a distribution record date with respect to Class A shares and Class T shares. Each day during the period from August 2, 2016 to December 31, 2018, was a distribution record date with respect to Class R shares.

Distributions to stockholders are determined by the board of directors of the Company and are dependent upon a number of factors relating to the Company, including funds available for the payment of distributions, financial condition, the timing of property acquisitions, capital expenditure requirements and annual distribution requirements in order for the Company to qualify as a REIT under the Internal Revenue Code. During the years ended December 31, 2018 and 2017, the Company declared distributions totaling $1.500 and $1.500 per Class A share of common stock, $1.448 and $1.425 per Class R share of common stock and $1.307 and $1.241 per Class T share of common stock, respectively.

Organization and Offering Costs

Organization and offering expenses include all expenses to be paid by the Company in connection with the Public Offering, including legal, accounting, tax, printing, mailing and filing fees, charges of the Company’s

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escrow holder and transfer agent, expenses of organizing the Company, data processing fees, advertising and sales literature costs, transfer agent costs, information technology costs, bona fideout-of-pocket due diligence costs and amounts to reimburse the Advisor or its affiliates for the salaries of its employees and other costs in connection with preparing sales materials and providing other administrative services in connection with the Public Offering. Any such reimbursement will not exceed actual expenses incurred by the Advisor. Following the termination of the Public Offering, the Advisor had an obligation to reimburse the Company to the extent total organization and offering expenses (including sales commissions, dealer manager fees and the distribution and shareholder servicing fees) borne by the Company exceeded 15% of the gross proceeds raised in our Primary Offering. Total organization and offering expenses borne by the Company did not exceed 15% of the gross offering proceeds in the Public Offering.

To the extent the Company does not pay the full sales commissions, dealer manager fee or distribution and shareholder servicing fee for shares sold in the Public Offering, the Company may also reimburse costs of bona fide training and education meetings held by the Company (primarily the travel, meal and lodging costs of registered representatives of broker-dealers), attendance and sponsorship fees and cost reimbursement of employees of the Company’s affiliates to attend seminars conducted by broker-dealers and, in certain cases, reimbursement to participating broker-dealers for technology costs associated with the offering, costs and expenses related to such technology costs, and costs and expenses associated with the facilitation of the marketing of the Company’s shares and the ownership of the Company’s shares by such broker-dealers’ customers; provided, however, that the Company did not pay any of the foregoing costs to the extent that such payment would cause total underwriting compensation to exceed 10% of the gross offering proceeds of the Primary Offering, as required by the rules of Financial Industry Regulatory Authority, Inc. (“FINRA”).

When recognized, organization costs are expensed as incurred. Offering costs, including selling commissions, dealer manager fees and the distribution and shareholder servicing fees, are deferred and charged to stockholders’ equity. All such amounts are reimbursed to the Advisor, the Dealer Manager or their affiliates from gross offering proceeds, except for the distribution and shareholder servicing fees, which are paid from sources other than Public Offering proceeds.

Operating Expenses

Pursuant to the Company’s Second Articles of Amendment and Restatement (as amended, the “Charter”), the Company is limited in the amount of certain operating expenses it may record on a rolling four-quarter basis to the greater of 2% of average invested assets and 25% of net income. Operating expenses include all costs and expenses incurred by the Company, as determined under GAAP, that in any way are related to the operation of the Company, excluding expenses of raising capital, interest payments, taxes, property operating expenses,non-cash expenditures, incentive fees, acquisition fees and acquisition expenses, real estate commissions on the resale of investments and other expenses connected with the acquisition, disposition, management and ownership of investments. During the four quarters ended December 31, 2018, the Company recorded operating expenses of $2,942,145, which include $1,176,246 incurred by the Advisor on behalf of the Company, none of which were in excess of the 2%/25% limitation, and are included in general and administrative expenses in the accompanying consolidated statements of operations. Operating expenses of $105,491 remain payable and are included in due to affiliates in the accompanying consolidated balance sheet as of December 31, 2018.

Income Taxes

The Company elected to be taxed as, and qualifies as, a REIT under the Internal Revenue Code and has operated as such commencing with the taxable year ended December 31, 2016. To maintain its qualification as a

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REIT, the Company must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of its annual REIT taxable income to its stockholders (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Company generally will not be subject to federal income tax to the extent it distributes qualifying dividends to its stockholders. If the Company fails to qualify as a REIT in any taxable year following the year it initially elects to be taxed as a REIT, it would be subject to federal income tax on its taxable income at regular corporate income tax rates and generally would not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially adversely affect the Company’s net income and net cash available for distribution to its stockholders. The Company believes it is organized and operates in such a manner as to qualify for treatment as a REIT.

The Company follows ASC 740,Income Taxes, to recognize, measure, present and disclose in its consolidated financial statements uncertain tax positions that it has taken or expects to take on a tax return. As of December 31, 2018 and 2017, the Company had no liabilities for uncertain tax positions that it believes should be recognized in its accompanying consolidated financial statements. Due to uncertainty regarding the realization of certain deferred tax assets, the Company has established valuation allowances, primarily in connection with the net operating loss carryforwards related to the Company. The Company has not been assessed interest or penalties by any major tax jurisdictions. The Company’s evaluations were performed for all open tax years through December 31, 2018. As of December 31, 2018, the Company’s tax return for calendar year 2017, 2016 and 2015 remains subject to examination by major tax jurisdictions.

Per Share Data

Basic loss per share attributable to common stockholders for all periods presented are computed by dividing net loss by the weighted average number of shares of the Company’s common stock outstanding for each class of shares outstanding during the period. Diluted loss per share is computed based on the weighted average number of shares of the Company’s common stock and all potentially dilutive securities, if any. Distributions declared per common share assume each share was issued and outstanding each day during the period. Nonvested shares of the Company’s restricted common stock give rise to potentially dilutive shares of the Company’s common stock but such shares were excluded from the computation of diluted earnings per share because such shares were anti-dilutive during the period.

In accordance with FASB ASC Topic260-10-45, Earnings Per Share, the Company uses thetwo-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 the relative percentage of each class of shares to the total number of outstanding shares. The Company does not have any participating securities outstanding but does have multiple classes of common stock with different dividend rates and an unvested portion of restricted Class A common stock. Earnings attributable to the unvested restricted Class A common stock are deducted from earnings in the computation of per share amounts where applicable.

Segment Disclosure

The Company has determined that it has one reportable segment with activities related to investing in multifamily properties. The Company’s investments in real estate are in different geographic regions, and

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management evaluates operating performance on an individual asset level. However, as each of the Company’s assets has similar economic characteristics, tenants and products and services, its assets have been aggregated into one reportable segment.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU2014-09, Revenue from Contracts with Customers (Topic 606). (“ASU2014-09”). ASU2014-09 requires an entity to recognize the revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. ASU2014-09 supersedes the revenue requirements in Revenue Recognition (Topic 605) and most industry-specific guidance throughout the Industry Topics of the Codification. ASU2014-09 does not apply to lease contracts within the scope of Leases (Topic 840). In August 2015, the FASB issued ASU2015-14,Revenue from Contracts with Customers (Topic 606), which delayed the effective date of the new guidance by one year, which resulted in ASU2014-09 being effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and is to be applied retrospectively. Early adoption is permitted, but can be no earlier than the original public entity effective date of fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company selected the modified retrospective transition method but had no cumulative effect adjustment to recognize as of the date of adoption of ASU2014-09 on January 1, 2018. The Company identified limited sources of revenues fromnon-lease components, and the Company did not experience a material impact on its revenue recognition in the consolidated financial statements upon adoption. Additionally, there was no impact to the recognition of its rental revenue, as rental revenue from leasing arrangements is specifically excluded from ASU2014-09.

In February 2016, the FASB issued ASU2016-02,Leases (Topic 842) (“ASU2016-02”), amending the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU2016-02requires a modified retrospective transition approach. ASU2016-02 will be effective in the first quarter of 2019 and allows for early adoption. The Company has selected the modified retrospective transition method with a cumulative effect recognized as of the date of adoption and adopted the new standard effective January 1, 2019. The Company evaluated the impact of ASU2016-02 on its leases both as it relates to the Company acting as a lessor and as a lessee. Based on its evaluation, as it relates to the former, the Company did not experience any material impact on the recognition of leases in the consolidated financial statements because under ASU2016-02, lessors continue to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases, and operating leases. As it relates to the latter, the Company did not experience a material impact on the recognition of leases in the consolidated financial statements because the quantity of leased equipment by the Company is limited and immaterial to the consolidated financial statements.

In July 2018, the FASB issued ASU2018-11, Leases (Topic 842): Targeted Improvements (“ASU2018-11”). The FASB issued ASU2018-11 to clarify ASU2016-02. The amendments in ASU2018-11 provide entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies ASU2016-02 at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. ASU2018-11 also provides lessors with a practical expedient, by class of underlying asset, to not separate nonlease components from the associated lease component and, instead, to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue guidance (Topic 606) and both of the following are met: (1) the timing and pattern of transfer of the nonlease components and associated lease component are the same, and (2) the lease component, if accounted for separately, would be classified as an operating lease. If the nonlease components associated with the lease component are the predominant component

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of the combined component, an entity is required to account for the combined component in accordance with Topic 606. Otherwise, the entity must account for the combined component as an operating lease in accordance with Topic 842. For entities that have not adopted Topic 842 before the issuance of ASU2018-11, the effective date and transition requirements for ASU2018-11 related to separating components of a contract are the same as the effective date and transition requirements in ASU2016-02. In its capacity as a lessee, the Company elected to adopt the new transition method offered by ASU2018-11 and initially applied ASU2016-02 on January 1, 2019 and recognized a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In its capacity as a lessor and based on its evaluation of the components of its lease contracts, the Company also elected to use the practical expedient provided by ASU2018-11 and does not separate nonlease components from the associated lease components and instead accounts for those components as a single component.

In December 2018, the FASB issued ASU2018-20,Leases (Topic 842), Narrow-scope Improvements for Lessors (“ASU2018-20”). The FASB issued ASU2018-20 to allow lessors to make an accounting policy election not to evaluate whether sales taxes and other similar taxes imposed by a governmental authority on a specific lease revenue-producing transaction are the primary obligation of the lessor as the owner of the underlying leased asset. The amendments also clarify that when lessors allocate variable payments to lease andnon-lease components they are required to follow the recognition guidance in ASU2016-02 for the lease component and other applicable guidance, such as the new revenue standard, for thenon-lease component. The amendments have the same effective date and transition requirements as ASU2016-02 for entities that have not yet adopted ASU2016-02. The amendments may be applied either retrospectively or prospectively. The Company is currently evaluating the impact of ASU2018-20 will have on its consolidated financial statements and related disclosures and does not expect a material impact on its consolidated financial statements and related disclosures from its adoption.

In June 2016, the FASB issued ASU2016-13, Financial Instruments-Credit Losses (“ASU2016-13”). ASU2016-13 requires more timely recording of credit losses on loans and other financial instruments that are not accounted for at fair value through net income (loss), including loans held for investment,held-to-maturity debt securities, trade and other receivables, net investment in leases and other such commitments. ASU2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The amendments in ASU2016-13 require the Company to measure all expected credit losses based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets and eliminates the “incurred loss” methodology in current GAAP. In November 2018, the FASB issued ASU2018-19,Codification Improvements to Topic 326, Financial Instruments—Credit Losses (“ASU2018-19”), which clarifies that operating lease receivables accounted for under ASC 842 Leases, are not in the scope of the new credit losses guidance. The effective date and transition requirements for this guidance are the same as for ASU2016-13. ASU2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and related disclosures and does not expect a material impact on its consolidated financial statements and related disclosures from its adoption.

In November 2016, the FASB issued ASU2016-18, Statement of Cash Flows (Topic 230), Restricted Cash, thatrequires that a statement of cash flows explains the change during the period in the total of cash, cash equivalents, restricted cash and restricted cash equivalents. Therefore, amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows. ASU2016-18 is effective for annual periods

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beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted. The Company adopted ASU2016-18 on January 1, 2018, and applied it retrospectively. As a result of adopting ASU2016-18, the Company began presenting restricted cash along with cash and cash equivalents in its consolidated statements of cash flows.

In February 2017, the FASB issued ASU2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (“Subtopic610-20”):Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets(“ASU2017-05”), that clarifies that a financial asset is within the scope of Subtopic610-20 if it meets the definition of an in substance nonfinancial asset and defines the term in substance nonfinancial asset. ASU2017-05 also clarifies that nonfinancial assets within the scope of Subtopic610-20 may include nonfinancial assets transferred within a legal entity to a counterparty. Subtopic610-20, which was issued in May 2014 as part of ASU2014-09 (discussed above), provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. An entity is required to apply amendments in ASU2017-05 at the same time it applies the amendments in ASU2014-09 (discussed above). ASU2017-05 requires retrospective application and is effective for fiscal years beginning after December 15, 2017, including interim reporting periods within those fiscal years. Early adoption is permitted. Upon adoption of ASU2017-05 on January 1, 2018, the Company did not experience a material impact.

In May 2017, the FASB issued ASU2017-09,Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting(“ASU2017-09”). The FASB issued ASU2017-09 to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718,Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in ASU2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASUNo. 2017-09 requires prospective application and is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. Upon adoption of ASU2017-09 on January 1, 2018, the Company did not experience a material impact.

In August 2018, the FASB issued ASU2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement (“ASU2018-13”). The FASB issued ASU2018-13 to improve the effectiveness of fair value measurement disclosures by adding, eliminating, and modifying certain disclosure requirements. The amendments in ASU2018-13 modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in FASB Concepts Statement, Conceptual Framework for Financial Reporting-Chapter 8: Notes to Financial Statements, including the consideration of costs and benefits. ASU2018-13 requires prospective and retrospective application depending on the amendment and is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of ASU2018-13 will have on its consolidated financial statements and related disclosures and believes that certain disclosures of interest rate cap agreements in its consolidated financial statements may be impacted by the adoption of ASU2018-13.

3. Real Estate

As of December 31, 2018, the Company owned ten multifamily properties, comprised of a total of 2,775 apartment homes. The total acquisition price of the Company’s real estate portfolio was $400,252,928. As of December 31, 2018 and 2017, the Company’s portfolio was approximately 92.4% and 92.6% occupied and the average monthly rent was $1,136 and $1,089, respectively.

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Current Year Acquisitions

During the year ended December 31, 2018, the Company acquired the following property:

	Location	Purchase Date		Units		Purchase Price Allocation
Property Name						Land		Buildings and Improvements		Tenant Origination and Absorption Costs		Total Purchase Price
Cottage Trails at Culpepper Landing	Chesapeake, VA		5/31/2018		183	$	3,848,274	$	26,813,993	$	456,431	$	31,118,698

As of December 31, 2018 and 2017, accumulated depreciation and amortization related to the Company’s consolidated real estate properties and related intangibles were as follows:

	December 31, 2018
	Assets
	Land		Building and Improvements			Tenant Origination and Absorption Costs		Total Real Estate
Investments in real estate	$	45,908,171	$	355,780,664		$	—	$	401,688,835
Less: Accumulated depreciation and amortization		—		(21,387,012	)		—		(21,387,012	)
Total real estate, net	$	45,908,171	$	334,393,652		$	—	$	380,301,823

	December 31, 2017
	Assets
	Land		Building and Improvements			Tenant Origination and Absorption Costs			Total Real Estate
Investments in real estate	$	42,059,897	$	323,636,510		$	4,214,078		$	369,910,485
Less: Accumulated depreciation and amortization		—		(7,403,608	)		(2,021,402	)		(9,425,010	)
Total real estate, net	$	42,059,897	$	316,232,902		$	2,192,676		$	360,485,475

Depreciation and amortization expense was $16,659,117, $12,488,831, and $825,735 for the years ended December 31, 2018, 2017 and 2016, respectively.

Depreciation of the Company’s buildings and improvements was $14,010,010, $7,045,959, and $357,649 for the years ended December 31, 2018, 2017 and 2016, respectively.

Amortization of the Company’s tenant origination and absorption costs was $2,649,107, $5,442,872, and $468,086 for the years ended December 31, 2018, 2017 and 2016, respectively. Tenant origination and absorption costs had a weighted-average amortization period as of the date of acquisition of less than one year.

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Operating Leases

As of December 31, 2018, the Company’s real estate portfolio comprised 2,775 apartment homes and was 94.3% leased by a diverse group of residents. The residential lease terms consist of lease durations equal to twelve months or less.

Some residential leases contain provisions to extend the lease agreements, options for early termination after paying a specified penalty and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires security deposits from tenants in the form of a cash deposit. Amounts required as security deposits vary depending upon the terms of the respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in accounts payables and accrued liabilities in the accompanying consolidated balance sheets and totaled $1,015,187 and $709,440 as of December 31, 2018 and 2017, respectively.

As of December 31, 2018 and 2017, no tenant represented over 10% of the Company’s annualized base rent.

4. Other Assets

As of December 31, 2018 and 2017, other assets consisted of:

	December 31,
	2018		2017
Prepaid expenses	$	262,850	$	287,958
Interest rate cap agreements		377,456		257,619
Other deposits		266,394		156,553
Other assets	$	906,700	$	702,130

5. Debt

Mortgage Notes Payable

The following is a summary of mortgage notes payable, net secured by real property as of December 31, 2018 and 2017.

	December 31, 2018
	Number of Instruments		Maturity Date Range	Interest Rate Range		Weighted Average Interest Rate			Principal Outstanding
Type				Minimum	Maximum
Variable rate(1)		6	6/1/2026 - 9/1/2027	1-Mo LIBOR + 2.195%	1-Mo LIBOR + 2.52%		4.86	%	$	156,892,000
Fixed rate		4	8/1/2024 - 6/1/2028	3.82%	4.66%		4.02	%		124,674,000
Mortgage notes payable, gross		10					4.49	%		281,566,000
Deferred financing costs, net(2)										(1,479,079	)
Mortgage notes payable, net									$	280,086,921

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	December 31, 2017
	Number of Instruments		Maturity Date Range	Interest Rate Range		Weighted Average Interest Rate			Principal Outstanding
Type				Minimum	Maximum
Variable rate(1)		6	6/1/2026 - 9/1/2027	1-Mo LIBOR + 2.195%	1-Mo LIBOR + 2.52%		3.90	%	$	156,892,000
Fixed rate		3	8/1/2024 - 1/1/2025	3.82%	3.92%		3.89	%		103,129,000
Mortgage notes payable, gross		9					3.90	%		260,021,000
Deferred financing costs, net(2)										(1,550,559	)
Mortgage notes payable, net									$	258,470,441

(1) See Note 10 (Derivative Financial Instruments) for a discussion of the interest rate cap agreements used to manage the exposure to interest rate movement on the Company’s variable rate loans.

(2) Accumulated amortization related to deferred financing costs, net as of December 31, 2018 and 2017 was $361,008 and $126,446, respectively.

Maturity and Interest

The following is a summary of the Company’s aggregate maturities as of December 31, 2018:

	Total		Maturities During the Years Ending December 31,										Thereafter
Contractual Obligations			2019		2020		2021		2022		2023
Principal payments on outstanding debt obligations(1)	$	281,566,000	$	53,989	$	374,945	$	1,835,900	$	3,552,437	$	4,313,179	$	271,435,550

(1) Projected principal payments on outstanding debt obligations are based on the terms of the notes payable agreements. Amounts exclude the deferred financing costs, net associated with the notes payable.

The Company’s mortgage notes payable contain customary financial andnon-financial debt covenants. As of December 31, 2018 and 2017, the Company was in compliance with all debt covenants.

For the years ended December 31, 2018, 2017 and 2016, the Company incurred interest expense of $11,657,873, $5,898,156 and $281,031, respectively. Interest expense for the years ended December 31, 2018, 2017 and 2016, includes amortization of deferred financing costs of $234,562, $119,514 and $6,931 and net unrealized (gains) losses from the change in fair value of interest rate cap agreements of $(119,837), $444,252 and $24,989, respectively.

Interest expense of $1,064,648 and $660,068 was payable as of December 31, 2018 and 2017, respectively, and is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.

6. Stockholders’ Equity

General

Under the Company’s Second Articles of Amendment and Restatement (the “Charter”), the total number of shares of capital stock authorized for issuance is 1,300,000,000, consisting of 1,200,000,000 shares of common

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stock, $0.01 par value per share, of which 480,000,000 shares are classified as Class A common stock, 240,000,000 shares are classified as Class R common stock and 480,000,000 shares are classified as Class T common stock, and 100,000,000 shares of preferred stock, $0.01 par value per share. The Company’s board of directors may amend the Charter from time to time to increase or decrease the aggregate number of shares of capital stock or the number of shares of capital stock of any class or series that it has authority to issue.

Common Stock

The shares of the Company’s common stock entitle the holders to one vote per share on all matters upon which stockholders are entitled to vote, to receive dividends and other distributions as authorized by the Company’s board of directors in accordance with the Maryland General Corporation Law and to all rights of a stockholder pursuant to the Maryland General Corporation Law. The common stock has no preferences or preemptive, conversion or exchange rights.

On August 24, 2015, the Company issued 8,000 shares of Class A common stock for $200,000 to the Advisor.

The following table reflects information regarding shares of common stock sold in the Public Offering from inception through December 31, 2018:

	December 31, 2018
	Class A		Class R		Class T		Total
Shares of common stock issued—Primary Offering		3,371,786		465,907		4,427,051		8,264,744
Shares of common stock issued—DRP		141,524		11,777		196,681		349,982
Total shares of common stock issued—Public Offering		3,513,310		477,684		4,623,732		8,614,726
Gross offering proceeds—Primary Offering	$	83,142,845	$	10,482,148	$	105,408,113	$	199,033,106
Gross offering proceeds—DRP		3,342,744		265,053		4,446,707		8,054,504
Total offering proceeds—Public Offering	$	86,485,589	$	10,747,201	$	109,854,820	$	207,087,610
Offering costs before distribution and shareholder servicing fees								(27,624,273	)
Offering proceeds, net of offering costs							$	179,463,337

Offering proceeds include $0 and $61,875 of amounts due from the Company’s transfer agent as of December 31, 2018 and 2017, respectively, which are included in rents and other receivables in the accompanying consolidated balance sheets.

For the years ended December 31, 2018, 2017 and 2016, the Company issued 550, 1,100, and 2,240 shares of Class A common stock to its independent directors pursuant to the Company’s independent directors’ compensation plan at a value of $25.00 per share as base annual compensation and compensation for attending meetings of the Company’s board of directors. See Note 8 (Long-Term Incentive Award Plan and Independent Director Compensation) for additional information. The shares of common stock vest and becomenon-forfeitable immediately upon the date of grant. Included in general and administrative expenses is $13,750, $27,500 and $56,000 for the years ended December 31, 2018, 2017 and 2016, respectively, for compensation expense related to the issuance of common stock to the Company’s independent directors.

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On August 9, 2018 and 2017, the Company granted 1,000 shares of restricted Class A common stock to each of its three independent directors pursuant to the Company’s independent directors’ compensation plan at a fair value of $25.00 per share in connection with theirre-election to the board of directors at the Company’s annual meeting of stockholders. The shares of restricted common stock vest and becomenon-forfeitable in four equal annual installments, beginning on the date of grant and ending on the third anniversary of the date of grant; provided, however, that the shares of restricted common stock will become fully vested on the earlier to occur of (1) the termination of the independent director’s service as a director due to his or her death or disability, or (2) a change in control of the Company.

The issuance and vesting activity for the years ended December 31, 2018, 2017 and 2016 for the restricted stock issued to the Company’s independent directors as compensation for services in connection with the Company raising $2,000,000 in the Public Offering and the independent directors’re-election to the board of directors at the Company’s annual meeting is as follows:

	Year Ended December 31,
	2018			2017			2016
Nonvested shares at the beginning of the period		5,250			4,500			—
Granted shares		3,000			3,000			6,000
Vested shares		(3,000	)		(2,250	)		(1,500	)
Nonvested shares at the end of the period		5,250			5,250			4,500

Included in general and administrative expenses is $82,346, $63,591 and $61,071 for the years ended December 31, 2018, 2017 and 2016 respectively, for compensation expense related to the issuance of restricted common stock. As of December 31, 2018, the compensation expense related to the issuance of the restricted common stock not yet recognized was $93,002. The weighted average remaining term of the restricted common stock was 1.11 years as of December 31, 2018. As of December 31, 2018, no shares of restricted common stock issued to the independent directors have been forfeited.

Preferred Stock

The Charter also provides the Company’s board of directors with the authority to issue one or more classes or series of preferred stock, and prior to the issuance of such shares of preferred stock, the board of directors shall have the power from time to time to classify or reclassify, in one or more series, any unissued shares and designate the preferences, rights and privileges of such shares of preferred stock. The Company’s board of directors is authorized to amend the Charter without the approval of the stockholders to increase the aggregate number of authorized shares of capital stock or the number of shares of any class or series that the Company has authority to issue. As of December 31, 2018 and 2017, no shares of the Company’s preferred stock were issued and outstanding.

Distribution Reinvestment Plan

The Company’s board of directors has approved the DRP through which common stockholders may elect to reinvest an amount equal to the distributions declared on their shares of common stock in additional shares of the Company’s common stock in lieu of receiving cash distributions. The purchase price per Class A, Class R and Class T share of common stock under the DRP was initially $23.75, $22.50 and $22.62, respectively. On October 9, 2018, the Company’s board of directors determined a price per Class A, Class R and Class T share of common stock for the DRP of $22.54, effective November 1, 2018. The Company’s board of directors elected to

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suspend the DRP with respect to distributions that accrue after February 1, 2019. As a result, all distributions that accrued beginning in February 2019 were paid in cash and not reinvested in shares of the Company’s common stock. The Company’s board of directors may, from time to time in its sole discretion, reinstate the DRP, although there is no assurance as to if or when this will happen.

No sales commissions or dealer manager fees were payable on shares sold through the DRP. The Company’s board of directors may amend, suspend or terminate the DRP at its discretion at any time upon ten days’ notice to the Company’s stockholders. Following any termination of the DRP, subsequent distributions to stockholders will be made in cash.

Share Repurchase Program and Redeemable Common Stock

The Company’s share repurchase program may provide an opportunity for stockholders to have their shares of common stock repurchased by the Company, subject to certain restrictions and limitations. No shares can be repurchased under the Company’s share repurchase program until after the first anniversary of the date of purchase of such shares; provided, however, that this holding period shall not apply to repurchases requested within 270 days after the death or disability of a stockholder.

Prior to the date the Company announced an estimated value per share of its common stock, the purchase price for shares repurchased under the Company’s share repurchase program was as follows:

Share Purchase Anniversary	Repurchase Price on Repurchase Date(1)
Less than 1 year	No Repurchase Allowed
1 year	92.5% of Purchase Price
2 years	95.0% of Purchase Price
3 years	97.5% of Purchase Price
4 years	100.0% of Purchase Price
In the event of a stockholder’s death or disability	Average Issue Price for Shares(2)

Beginning October 12, 2018, the date the Company first published its estimated value per share of its common stock, the purchase price for shares repurchased under the Company’s share repurchase program is as follows:

Share Purchase Anniversary	Repurchase Price on Repurchase Date(1)(3)(4)
Less than 1 year	No Repurchase Allowed
1 year	92.5% of the Lesser of Purchase Price or Estimated Value per Share
2 years	95.0% of the Lesser of Purchase Price or Estimated Value per Share
3 years	97.5% of the Lesser of Purchase Price or Estimated Value per Share
4 years	100.0% of the Lesser of Purchase Price or Estimated Value per Share
In the event of a stockholder’s death or disability	Average Issue Price for Shares(2)

(1) As adjusted for any stock dividends, combinations, splits, recapitalizations or any similar transaction with respect to the shares of common stock. Repurchase price includes the full amount paid for each share, including all sales commissions and dealer manager fees.

(2) The purchase price per share for shares repurchased upon the death or disability of a stockholder will be equal to the average issue price per share for all of the stockholder’s shares. The requiredone-year holding period does not apply to repurchases requested within 270 days after the death or disability of a stockholder.

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(3) For purposes of the share repurchase program, until the day the Company publicly disclosed a new estimated value per share, the purchase price for shares purchased under the share repurchase program equaled, exclusively, the purchase price paid for the shares. Thereafter, the repurchase price will be a graduated percentage of the lesser of the purchase price or the estimated value per share in effect at the time of repurchase. The estimated value per share will be determined by the Company’s board of directors, based on periodic valuations by independent third-party appraisers or qualified independent valuation experts selected by the Advisor.

(4) For purposes of the share repurchase program, the “Estimated Value per Share” will equal the most recent publicly disclosed estimated value per share determined by the Company’s board of directors. On October 12, 2018, the Company publicly disclosed an estimated value per share of $22.54 for each class of shares of its common stock based on valuations by independent third-party appraisers or qualified valuation experts.

The purchase price per share for shares repurchased pursuant to the Company’s share repurchase program will be further reduced by the aggregate amount of net proceeds per share, if any, distributed to the Company’s stockholders prior to the repurchase date as a result of the sale of one or more of the Company’s assets that constitutes a return of capital distribution as a result of such sales.

Repurchases of shares of the Company’s common stock will be made quarterly upon written request to the Company at least 15 days prior to the end of the applicable quarter. Repurchase requests will be honored approximately 30 days following the end of the applicable quarter (the “Repurchase Date”). Stockholders may withdraw their repurchase request at any time up to three business days prior to the Repurchase Date.

The following table reflects repurchase activity for the years ended December 31, 2018 and 2017:

	Year Ended December 31, 2018
	Class A		Class R		Class T		Total
Repurchase requests (in shares)		43,329		3,608		2,528		49,465
Repurchase requests (value)	$	988,099	$	75,097	$	57,002	$	1,120,198
Repurchases fulfilled (in shares)		20,209		3,608		2,528		26,345
Repurchase requests fulfilled (value)	$	463,669	$	75,097	$	57,002	$	595,768

	Year Ended December 31, 2017
	Class A		Class R		Class T		Total
Repurchase requests (in shares)		3,044		—		887		3,931
Repurchase requests (value)	$	71,080	$	—	$	21,069	$	92,149
Repurchases fulfilled (in shares)		—		—		887		887
Repurchase requests fulfilled (value)	$	—	$	—	$	21,069	$	21,069

As of December 31, 2018 and 2017, the Company had outstanding and unfulfilled repurchase requests of 26,177 and 3,044 Class A shares and recorded $595,821 and $71,080 in accounts payable and accrued liabilities on the accompanying consolidated balance sheets related to these unfulfilled repurchase requests. The Company repurchased the outstanding repurchase requests as of December 31, 2018 and 2017 of $595,821 and $71,080 on the January 31, 2019 and 2018 Repurchase Dates.

The Company cannot guarantee that the funds set aside for the share repurchase program will be sufficient to accommodate all repurchase requests made in any quarter. In the event that the Company does not have sufficient funds available to repurchase all of the shares of the Company’s common stock for which repurchase requests have been submitted in any quarter, such outstanding repurchase requests will automatically roll over to

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the subsequent quarter and priority will be given to redemption requests in the case of the death or disability of a stockholder. If the Company repurchases less than all of the shares subject to a repurchase request in any quarter, with respect to any shares which have not been repurchased, a stockholder can (1) withdraw the stockholder’s request for repurchase or (2) ask that the Company honor the stockholder’s request in a future quarter, if any, when such repurchases can be made pursuant to the limitations of the share repurchase program and when sufficient funds are available. Such pending requests will be honored among all requests for redemptions in any given repurchase period as follows: first, pro rata as to repurchases sought upon a stockholder’s death or disability; and, next, pro rata as to other repurchase requests. Shares repurchased under the share repurchase program to satisfy the required minimum distribution requirements under the Internal Revenue Code applicable to retirement Benefit Plans and IRAs will be repurchased on or after the first anniversary of the date of purchase of such shares at 100% of the purchase price or at 100% of the estimated value per share, as applicable.

The Company is not obligated to repurchase shares of its common stock under the share repurchase program. The share repurchase program limits the number of shares to be repurchased in any calendar year to (1) 5% of the weighted average number of shares of common stock outstanding during the prior calendar year and (2) those that could be funded from the net proceeds from the sale of shares under the DRP in the prior calendar year, plus such additional funds as may be reserved for that purpose by the Company’s board of directors. Such sources of funds could include cash on hand, cash available from borrowings and cash from liquidations of securities investments as of the end of the applicable month, to the extent that such funds are not otherwise dedicated to a particular use, such as working capital, cash distributions to stockholders or purchases of real estate assets. There is no fee in connection with a repurchase of shares of the Company’s common stock pursuant to the Company’s share repurchase program.

The Company’s board of directors may, in its sole discretion, amend, suspend or terminate the share repurchase program at any time upon 30 days’ notice to its stockholders if it determines that the funds available to fund the share repurchase program are needed for other business or operational purposes or that amendment, suspension or termination of the share repurchase program is in the best interest of the Company’s stockholders. Therefore, a stockholder may not have the opportunity to make a repurchase request prior to any potential termination of the Company’s share repurchase program. The share repurchase program will terminate in the event that a secondary market develops for the Company’s shares of common stock.

Pursuant to the share repurchase plan, for the years ended December 31, 2018 and 2017, the Company reclassified $4,174,775 and $2,698,321, net of $595,768 and $21,069 of fulfilled repurchase requests, respectively, from permanent equity to temporary equity, which is included as redeemable common stock on the accompanying consolidated balance sheets.

Distributions

The Company’s long-term policy is to pay distributions solely from cash flow from operations. However, the Company expects to have insufficient cash flow from operations available for distribution until it makes substantial investments. Further, because the Company may receive income from interest or rents at various times during the Company’s fiscal year and because the Company may need cash flow from operations during a particular period to fund capital expenditures and other expenses, the Company expects that at least during the early stages of the Company’s development and from time to time during the Company’s operational stage, the Company will declare distributions in anticipation of cash flow that the Company expects to receive during a later period, and the Company expects to pay these distributions in advance of its actual receipt of these funds. In these instances, the Company’s board of directors has the authority under its organizational documents, to the extent permitted by Maryland law, to fund distributions from sources such as borrowings, offering proceeds or advances and the deferral of fees and expense reimbursements by the Advisor, in its sole discretion. If the

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Company pays distributions from sources other than cash flow from operations, the Company will have fewer funds available for investments and stockholders’ overall return on their investment in the Company may be reduced.

The Company elected to be taxed as, and qualifies, as a REIT for federal income tax purposes commencing with the taxable year ended December 31, 2016. To qualify as a REIT, the Company must make aggregate annual distributions to its stockholders of at least 90% of the Company’s REIT taxable income (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). If the Company meets the REIT qualification requirements, the Company generally will not be subject to federal income tax on the income that the Company distributes to its stockholders each year.

Distributions Declared and Paid

The following table reflects per share daily distribution rates and annualized distribution rates for the four fiscal quarters of 2018 and 2017:

	2018(1)
	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter
Daily Distribution per Class A share(2)	$	0.004110		$	0.004110		$	0.004110		$	0.004110
Daily Distribution per Class R share(2)(3)	$	0.00394521		$	0.00394521		$	0.00394521		$	0.004110
Daily Distribution per Class T share(2)(4)	$	0.003376		$	0.003376		$	0.003376		$	0.004110
Annualized Rate Based on Purchase Price:
Per Class A share		6.00	%		6.00	%		6.00	%		6.00	%
Per Class R share		6.40	%		6.40	%		6.40	%		6.67	%
Per Class T share		5.17	%		5.17	%		5.17	%		6.30	%

	2017(1)
	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter
Daily Distribution per Class A share(2)	$	0.004110		$	0.004110		$	0.004110		$	0.004110
Daily Distribution per Class R share(2)(3)	$	0.00394521		$	0.00394521		$	0.00394521		$	0.00394521
Daily Distribution per Class T share(2)(4)	$	0.003376		$	0.003376		$	0.003457		$	0.003376
Annualized Rate Based on Purchase Price:
Per Class A share		6.00	%		6.00	%		6.00	%		6.00	%
Per Class R share		6.40	%		6.40	%		6.40	%		6.40	%
Per Class T share		5.17	%		5.17	%		5.30	%		5.17	%

(1) The Company’s board of directors approved a cash distribution that accrued at the above rates per day for each share of the Company’s Class A common stock, Class R common stock and Class T common stock, which if paid each day over a365-day period during fiscal years 2018 and 2017, respectively, is equivalent to the per share annualized rates reflected above based on a purchase price of $25.00 per share of Class A common stock, $22.50 per share of Class R common stock and $23.81 per share of Class T common stock.

(2) The distributions declared accrue daily to stockholders of record as of the close of business on each day and are payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month. There is no guarantee that the Company will continue to pay distributions at these rates or at all.

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(3) Distributions during the fiscal years 2018 and 2017, were based on daily record dates and calculated at a rate of $0.00394521 per share of Class R common stock per day for Class R common stock subject to an annual distribution and shareholder servicing fee of 0.27%. In some instances during the year ended December 31, 2018, three months ended March 31, 2017 and the three months ended December 31, 2017, the Company paid distributions at a rate of $0.00369863 per share of Class R common stock per day for Class R common stock subject to an annual distribution and shareholder servicing fee of 0.67%.

(4) Distributions during the three months ended September 30, 2017, were based on daily record dates and calculated at a rate of $0.003457 per share of Class T common stock per day for Class T common stock subject to an annual distribution and shareholder servicing fee of 1.0%. In some instances during the year ended December 31, 2018, three months ended September 30, 2017, and the three months ended December 31, 2017, the Company paid distributions at a rate of $0.003376 subject to an annual distribution and shareholder fee of 1.125%.

The following tables reflect distributions declared and paid to Class A common stockholders, Class R common stockholders and Class T common stockholders for the years ended December 31, 2018 and 2017:

	Year Ended December 31, 2018
	Class A		Class R		Class T		Total
DRP distributions declared (in shares)		82,435		8,689		138,442		229,566
DRP distributions declared (value)	$	1,929,937	$	195,619	$	3,128,060	$	5,253,616
Cash distributions declared		2,973,947		401,443		2,335,712		5,711,102
Total distributions declared	$	4,903,884	$	597,062	$	5,463,772	$	10,964,718
DRP distributions paid (in shares)		80,821		8,270		130,738		219,829
DRP distributions paid (value)	$	1,901,022	$	186,153	$	2,955,129	$	5,042,304
Cash distributions paid		2,918,723		384,993		2,195,243		5,498,959
Total distributions paid	$	4,819,745	$	571,146	$	5,150,372	$	10,541,263

	Year Ended December 31, 2017
	Class A		Class R		Class T		Total
DRP distributions declared (in shares)		55,934		3,654		68,424		128,012
DRP distributions declared (value)	$	1,328,426	$	82,207	$	1,547,760	$	2,958,393
Cash distributions declared		1,957,862		212,865		1,060,133		3,230,860
Total distributions declared	$	3,286,288	$	295,072	$	2,607,893	$	6,189,253
DRP distributions paid (in shares)		52,490		3,267		61,857		117,614
DRP distributions paid (value)	$	1,246,638	$	73,524	$	1,399,218	$	2,719,380
Cash distributions paid		1,824,122		195,955		944,694		2,964,771
Total distributions paid	$	3,070,760	$	269,479	$	2,343,912	$	5,684,151

As of December 31, 2018, $1,169,815 of distributions declared were payable and are included in distributions payable in the accompanying consolidated balance sheets, which included $448,039, $62,322 and $659,454 of Class A common stock, Class R common stock and Class T common stock, respectively, of which, $175,189, $21,090 and $371,724 or 7,772, 936 and 16,492 shares of Class A common stock, Class R common stock and Class T common stock are attributable to the DRP, respectively.

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As of December 31, 2017, $746,360 of distributions declared were payable and included in distributions payable in the accompanying consolidated balance sheets, which included $363,900, $36,405 and $346,055 of Class A common stock, Class R common stock and Class T common stock, respectively, of which $146,273, $11,624 and $198,794, or 6,158, 517 and 8,788 shares of Class A common stock, Class R common stock and Class T common stock, are attributable to the DRP, respectively.

As reflected in the table above, for the year ended December 31, 2018, the Company paid total distributions of $10,541,263, which related to distributions declared for each day in the period from December 1, 2017 through November 30, 2018, respectively.

For the year ended December 31, 2017, the Company paid total distributions of $5,684,151, which related to distributions declared for each day in the period from December 1, 2016 through November 30, 2017, respectively.

7. Related Party Arrangements

The Company entered into the Advisory Agreement with the Advisor and a Dealer Manager Agreement with the Dealer Manager. Pursuant to the Advisory Agreement and Dealer Manager Agreement, the Company paid the Advisor and the Dealer Manager specified fees upon the provision of certain services related to the Public Offering, the investment of funds in real estate and real estate-related investments and the management of the Company’s investments and for other services (including, but not limited to, the disposition of investments) as well as make certain distributions in connection with the Company’s liquidation or listing on a national stock exchange. Subject to the limitations described below, the Company also reimbursed the Advisor and its affiliates for organization and offering costs incurred by the Advisor and its affiliates on behalf of the Company, as well as acquisition and certain operating expenses incurred on behalf of the Company or incurred in connection with providing services to the Company.

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Amounts attributable to the Advisor and its affiliates incurred (earned) for the years ended December 31, 2018, 2017 and 2016 are as follows:

	Incurred (Earned) For The Year Ended December 31,
	2018			2017		2016
Consolidated Statements of Operations:
Expensed
Organization costs(1)	$	—		$	—	$	26,980
Investment management fees(2)		4,167,442			1,655,649		60,452
Acquisition fees(3)		—			—		2,099,801
Acquisition expenses(3)		2,474			105,105		572,722
Property management:
Fees(2)		1,179,534			572,575		47,884
Reimbursement of onsite personnel(4)		3,481,479			1,649,259		157,121
Other fees(2)		452,225			174,073		12,915
Other fees—property operations(4)		27,336			20,040		—
Other fees—G&A(1)		36,828			12,040		1,463
Other operating expenses(1)		1,176,246			1,024,078		861,164
Rental revenue(5)		(10,026	)		—		—
Property insurance(6)		375,478			74,890		1,014
Insurance proceeds(7)		(75,000	)		—		—
Consolidated Balance Sheets:
Assets:
Property escrow deposits(8)		—			—		234,000
Capitalized
Acquisition fees(9)		624,854			5,575,417		—
Acquisition expenses(9)		161,242			851,694		—
Construction management:
Fees(10)		178,756			172,975		14,163
Reimbursements of labor costs(10)		385,876			226,195		494
Capital expenditures(10)		21,538			50,990		12,589
Additionalpaid-in capital
Other offering costs reimbursement		5,085,703			6,167,169		3,329,974
Selling commissions:
Class A		926,929			2,255,616		1,635,300
Class T		801,531			1,728,311		632,407
Dealer manager fees:
Class A		422,055			1,164,070		840,004
Class T		667,939			1,440,260		527,005
Distribution and shareholder servicing fee:
Class R(11)		(164,429	)		141,570		55,821
Class T(11)		(1,951,285	)		2,304,514		948,609
	$	17,974,725		$	27,366,490	$	12,071,882

(1) Included in general and administrative expenses in the accompanying consolidated statements of operations.

(2) Included in fees to affiliates in the accompanying consolidated statements of operations.

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(3) Prior to the adoption of ASU2017-01 as of January 1, 2017, acquisition fees and acquisition expenses were included in fees to affiliates and acquisition costs, respectively, in the accompanying consolidated statements of operations.

(4) Included in operating, maintenance and management in the accompanying consolidated statements of operations.

(5) Included in rental income in the accompanying consolidated statements of operations.

(6) Property related insurance expense and the amortization of the prepaid insurance deductible account are included in general and administrative expenses in the accompanying consolidated statements of operations. The amortization of the prepaid property insurance is included in operating, maintenance and management expenses in the accompanying consolidated statements of operations. The prepaid insurance is included in other assets in the accompanying consolidated balance sheets upon payment.

(7) Included in tenant reimbursements and other in the accompanying consolidated statements of operations.

(8) Escrow deposits paid on behalf of the Company by an affiliate of the Advisor in connection with the acquisition of Carriage House Apartment Homes.

(9) Included in total real estate, cost in the accompanying consolidated balance sheets following the adoption of ASU2017-01, as of January 1, 2017.

(10) Included in building and improvements in the accompanying consolidated balance sheets.

(11) Included in additionalpaid-in capital as commissions on sales of common stock and related dealer manager fees to affiliates in the accompanying consolidated statements of stockholders’ equity.

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Amounts attributable to the Advisor and its affiliates paid (received) for the years ended December 31, 2018, 2017 and 2016 are as follows:

	Paid (Received) During The Year Ended December 31,
	2018			2017		2016
Consolidated Statements of Operations:
Expensed
Organization costs	$	—		$	—	$	26,980
Investment management fees		3,509,826			1,642,290		20,402
Acquisition fees		—			—		1,150,670
Acquisition expenses		2,474			105,105		516,531
Property management:
Fees		1,093,795			502,873		23,117
Reimbursement of onsite personnel		3,436,176			1,527,791		135,956
Other fees		448,684			167,887		11,469
Other fees—property operations		27,336			20,040		—
Other fees—G&A		36,828			12,040		1,463
Other operating expenses		1,173,364			1,230,843		551,790
Rental revenue		(10,026	)		—		—
Property insurance		399,692			89,938		2,028
Consolidated Balance Sheets:
Assets:
Property escrow deposits		—			—		234,000
Capitalized
Acquisition fees		2,347,495			4,801,907		—
Acquisition expenses		161,242			907,885		—
Construction management:
Fees		180,267			167,543		12,828
Reimbursements of labor costs		382,085			213,099		482
Capital expenditures		21,538			50,990		12,589
Additionalpaid-in capital
Other offering costs reimbursement		1,810,661			7,377,882		1,713,487
Selling commissions:
Class A		926,929			2,255,616		1,635,300
Class T		801,531			1,728,311		632,407
Dealer manager fees:
Class A		422,055			1,164,070		840,004
Class T		667,939			1,440,260		527,005
Distribution and shareholder servicing fee:
Class R		19,866			13,095		—
Class T		802,558			466,625		32,655
	$	18,662,315		$	25,886,090	$	8,081,163

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Amounts attributable to the Advisor and its affiliates that are payable (receivable/prepaid) as of December 31, 2018 and 2017, are as follows:

	Payable (Receivable/ Prepaid) as of December 31,
	2018			2017
Consolidated Statements of Operations:
Expensed
Investment management fees	$	711,025		$	53,409
Property management:
Fees		180,208			94,469
Reimbursement of onsite personnel		187,936			142,633
Other fees		11,173			7,632
Other operating expenses		105,491			102,609
Property insurance		(40,276	)		(16,062	)
Insurance proceeds		(75,000	)		—
Consolidated Balance Sheets:
Capitalized
Acquisition fees		—			1,722,641
Construction management:
Fees		5,256			6,767
Reimbursements of labor costs		16,899			13,108
Additionalpaid-in capital
Other offering costs reimbursement		3,680,816			405,774
Distribution and shareholder servicing fee:
Class R		—			184,295
Class T		—			2,753,843
	$	4,783,528		$	5,471,118

Organization and Offering Costs

Organization and offering expenses include all expenses (other than sales commissions, the dealer manager fee and the distribution and shareholder servicing fee) to be paid by the Company in connection with the Public Offering, including legal, accounting, tax, printing, mailing and filing fees, charges of the Company’s escrow holder and transfer agent, expenses of organizing the Company, data processing fees, advertising and sales literature costs, transfer agent costs, information technology costs, bona fideout-of-pocket due diligence costs and amounts to reimburse the Advisor or its affiliates for the salaries of its employees and other costs in connection with preparing sales materials and providing other administrative services in connection with the Public Offering. Any such reimbursement will not exceed actual expenses incurred by the Advisor. After the termination of the Public Offering, the Advisor had an obligation to reimburse the Company to the extent total organization and offering expenses (including sales commissions, dealer manager fees and the distribution and shareholder servicing fees) incurred by the Company exceed 15% of the gross proceeds raised in the Primary Offering. Total organization and offering expenses incurred by the Company did not exceed 15% of the gross offering proceeds raised in the Primary Offering.

The Company may also reimburse costs of bona fide training and education meetings held by the Company (primarily the travel, meal and lodging costs of registered representatives of broker-dealers), attendance and

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sponsorship fees and cost reimbursement of employees of the Company’s affiliates to attend seminars conducted by broker-dealers and, in certain cases, reimbursement to participating broker-dealers for technology costs associated with the offering, costs and expenses related to such technology costs, and costs and expenses associated with the facilitation of the marketing of the Company’s shares and the ownership of the Company’s shares by such broker-dealers’ customers; provided, however, that the Company did not pay any of the foregoing costs to the extent that such payment would cause total underwriting compensation to exceed 10% of the gross offering proceeds of the Primary Offering, as required by the rules of the Financial Industry Regulatory Authority, Inc. (“FINRA”).

Organization and offering costs include payments made to Crossroads Capital Advisors, whose parent company indirectly owns 25% of the Steadfast REIT Investments, LLC (the “Sponsor”), for certain specified services provided to the Company on behalf of the Advisor, including, without limitation, establishing operational and administrative processes; engaging and negotiating with vendors; providing recommendations and advice for the development of marketing materials and ongoing communications with investors; and assisting in public relations activities and the administration of the DRP and share repurchase program. From the commencement of the Public Offering through December 31, 2018 and 2017, the Advisor had incurred on the Company’s behalf $1,127,576 and $1,828,156, respectively, of costs attributable to Crossroads Capital Advisors for the services described above, all of which was recorded by the Company as offering costs during the applicable periods.

The amount of reimbursable organization and offering (“O&O”) costs that have been paid or recognized from inception through December 31, 2018 is as follows:

	Amount			Percentage of Gross Offering Proceeds
Gross offering proceeds:	$	199,033,106			100.00	%
O&O limitation		15.00	%
Total O&O costs available to be paid/reimbursed	$	29,854,966			15.00	%
O&O expenses recorded:
Sales commissions	$	7,980,090			4.01	%
Broker dealer fees(1)		5,061,337			2.54	%
Distribution and shareholder servicing fees(2)		1,334,800			0.67	%
Offering cost reimbursements		14,582,846			7.33	%
Organizational costs reimbursements		26,980			0.01	%
Total O&O cost reimbursements recorded by the Company	$	28,986,053			14.56	%

(1) Includes $1,903,127 of marketing reallowance paid to participating broker dealers.

(2) Includes the distribution and shareholder servicing fees paid from inception through December 31, 2018, for Class R shares of 0.27% and 0.67%, and Class T shares up to 1.125% of the purchase price per share sold in the Public Offering. The distribution and shareholder servicing fees were paid from sources other then Public Offering proceeds.

When recognized, organization costs are expensed as incurred. From inception through December 31, 2018, the Advisor incurred $26,980 of organizational costs on the Company’s behalf, all of which was reimbursed to the Advisor.

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Offering costs, including selling commissions and dealer manager fees and the distribution and shareholder servicing fees, are deferred and charged to stockholders’ equity. All such amounts are reimbursed to the Advisor, the Dealer Manager or their affiliates from gross offering proceeds except for the distribution and shareholder servicing fees, which were paid from sources other than Public Offering proceeds. For the years ended December 31, 2018, 2017 and 2016, the Advisor incurred $4,394,430, $9,976,583 and $11,114,533 of offering costs related to the Public Offering, respectively. The Advisor has incurred total offering costs related to the Public Offering of $25,485,548 from inception through December 31, 2018, of which $7,610,035 is deferred and may be reimbursable, subject to the limitations described above and the approval of the independent directors.

The Company accrued $3,680,816 and $405,774 for the reimbursement of offering costs in the accompanying consolidated balance sheets as of December 31, 2018 and 2017, respectively. The deferred offering costs of $7,610,035 are not included in the consolidated financial statements of the Company because these costs were not a Company liability as they exceeded the 15% limitation described above.

Investment Management Fee

The Company paid the Advisor a monthly investment management fee equal toone-twelfth of 0.50% of the value of the Company’s investments in properties and real estate-related assets until the aggregate value of the Company’s investments in properties and real estate-related assets equaled $300,000,000, which occurred on August 31, 2017. Thereafter, the Company pays the Advisor a monthly investment management fee equal toone-twelfth of 1.0% of the value of the Company’s investments in properties and real estate-related assets. For the purposes of the investment management fee, the value of the Company’s investments in properties will equal their costs, until the investments are valued by an independent third-party appraiser or qualified independent valuation expert. “Costs” are calculated by including acquisition fees, acquisition expenses, renovations and upgrades, and any debt attributable to such investments, or the Company’s proportionate share thereof in the case of investments made through joint ventures.

Acquisition Fees and Expenses

The Company pays the Advisor an acquisition fee equal to 2.0% of the cost of the investment which includes the amount actually paid or budgeted to fund the acquisition, origination, development, construction or improvement (i.e. value-enhancement) of any real property or real estate-related asset acquired. In addition to acquisition fees, the Company reimburses the Advisor for amounts directly incurred by the Advisor and amounts the Advisor pays to third parties in connection with the selection, evaluation, acquisition and development of a property or acquisition of real estate-related assets, whether or not the Company ultimately acquires the property or the real estate-related assets.

The Charter limits the Company’s ability to pay acquisition fees if the total of all acquisition fees and expenses relating to the purchase would exceed 6.0% of the contract purchase price. Under the Charter, a majority of the Company’s board of directors, including a majority of the independent directors, is required to approve any acquisition fees (or portion thereof) that would cause the total of all acquisition fees and expenses relating to an acquisition to exceed 6.0% of the contract purchase price. In connection with the purchase of securities, the acquisition fee may be paid to an affiliate of the Advisor that is registered as a FINRA member broker-dealer if applicable FINRA rules would prohibit the payment of the acquisition fee to a firm that is not a registered broker-dealer.

Loan Coordination Fee

Subject to the determination by a majority of the independent directors that the Advisor provides a substantial amount of services in connection with the origination or refinancing of any debt financing obtained by

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the Company that is used to refinance properties or other permitted investments or financing in connection with a recapitalization of the Company, the Company pays the Advisor a loan coordination fee equal to 0.75% of the amount available under such financing.

Property Management Fees and Expenses

The Company has entered into Property Management Agreements (each, as amended from time to time, a “Property Management Agreement”) with Steadfast Management Company, Inc., an affiliate of the Sponsor (the “Property Manager”) in connection with the management of each of the Company’s properties. The property management fee payable with respect to each property under the Property Management Agreements at December 31, 2018, ranges from 2.75% to 3.0% of the gross revenue of the property (as defined in the Property Management Agreement). In addition, the Property Manager may also earn an incentive management fee equal to 1.0% of total collections based on performance metrics of the property. The Property Manager may subcontract with third-party property managers and will be responsible for supervising and compensating those third-party property managers and will be paid an oversight fee equal to 1.0% of the gross revenues of the property managed for providing such supervisory services. In no event will the Company pay its Property Manager or any affiliate both a property management fee and an oversight fee with respect to any particular property. Each Property Management Agreement has an initialone-year term and will continue thereafter on amonth-to-month basis unless either party givesa 60-day prior notice of its desire to terminate the Property Management Agreement, provided that the Company may terminate the Property Management Agreement at any time upon a determination of gross negligence, willful misconduct or bad acts of the Property Manager or its employees or upon an uncured breach of the Property Management Agreement upon 30 days’ prior written notice to the Property Manager. In the event of a termination of the Property Management Agreement by the Company without cause, the Company will pay a termination fee to the Property Manager equal to three months of the monthly management fee based on the average gross collections for the three months preceding the date of termination.

In addition to the property management fee, the Property Management Agreements also specify certain other fees payable to the Property Manager or its affiliates, including fees for benefit administration, information technology infrastructure, licenses, support and training services and capital expenditures. The Company also reimburses the Property Manager for the salaries and related benefits ofon-site property management employees.

Construction Management Fees

The Company has entered into Construction Management Agreements (each a “Construction Management Agreement”) with Pacific Coast Land & Construction, Inc., an affiliate of the Sponsor (the “Construction Manager”), in connection with capital improvements and renovation or value-enhancement projects for certain properties the Company acquires. The construction management fee payable with respect to each property under the Construction Management Agreements is equal to 6.0% of the costs of the improvements for which the Construction Manager has planning and oversight authority. Generally, each Construction Management Agreement can be terminated by either party with 30 days’ prior written notice to the other party. Construction management fees are capitalized to the respective real estate properties in the period in which they are incurred, as such costs relate to capital improvements and renovations for apartment homes taken out of service while they undergo the planned renovation.

The Company may also reimburse the Construction Manager for the salaries and related benefits of certain of its employees for time spent working on capital improvements and renovations.

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Property Insurance

The Company deposits amounts with an affiliate of the Sponsor to fund a prepaid insurance deductible account to cover the cost of required insurance deductibles across all properties of the Company and other affiliated entities. Upon filing a major claim, proceeds from the insurance deductible account may be used by the Company or another affiliate of the Sponsor. In addition, the Company deposits amounts with an affiliate of the Sponsor to cover the cost of property and property related insurance across certain properties of the Company.

Other Operating Expense Reimbursement

In addition to the various fees paid to the Advisor, the Company is obligated to pay directly or reimburse all expenses incurred by the Advisor in providing services to the Company, including the Company’s allocable share of the Advisor’s overhead, such as rent, employee costs, benefit administration costs, utilities and information technology costs. The Company will not reimburse the Advisor for employee costs in connection with services for which the Advisor or its affiliates receive acquisition fees, investment management fees, loan coordination fees and disposition fees or for the employee costs the Advisor pays to the Company’s executive officers.

The Charter limits the Company’s total operating expenses during any four fiscal quarters to the greater of 2% of the Company’s average invested assets or 25% of the Company’s net income for the same period (the “2%/25% Limitation”). The Company may reimburse the Advisor, at the end of each fiscal quarter, for operating expenses incurred by the Advisor; provided, however, that the Company shall not reimburse the Advisor at the end of any fiscal quarter for operating expenses that exceed the 2%/25% Limitation unless the independent directors have determined that such excess expenses were justified based on unusual andnon-recurring factors. The Advisor must reimburse the Company for the amount by which the Company’s operating expenses for the preceding four fiscal quarters then ended exceed the 2%/25% Limitation, unless approved by the independent directors. For purposes of determining the 2%/25% Limitation, “average invested assets” means the average monthly book value of the Company’s assets invested directly or indirectly in equity interests and loans secured by real estate during the12-month period before deducting depreciation, reserves for bad debts or othernon-cash reserves. “Total operating expenses” means all expenses paid or incurred by the Company, as determined by GAAP, that are in any way related to the Company’s operation including advisor fees, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, listing and registration of shares of the Company’s common stock; (b) interest payments; (c) taxes;(d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based on the gain in the sale of the Company’s assets; (f) acquisition fees and acquisition expenses (including expenses relating to potential acquisitions that the Company does not close); (g) real estate commissions on the resale of investments; and (h) other expenses connected with the acquisition, disposition, management and ownership of investments (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of real property).

For the year ended December 31, 2018, the Advisor and its affiliates incurred $1,176,246 of the Company’s operating expenses, including the allocable share of the Advisor’s overhead expenses of $944,340, none of which were in excess of the 2%/25% Limitation and are included in the $3,491,624 of general and administrative expenses recognized by the Company. As of December 31, 2018, the Company’s total operating expenses were 0.29% of its average invested assets and 7.66% of its net loss.

As of December 31, 2018 , the Company’s total operating expenses, as defined above, did not exceed the 2%/25% Limitation.

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For the year ended December 31, 2017, the Advisor and its affiliates incurred $1,024,078 of the Company’s operating expenses, including the allocable share of the Advisor’s overhead expenses of $834,966, none of which were in excess of the 2%/25% Limitation and are included in the $2,627,940 of general and administrative expenses recognized by the Company. As of December 31, 2017, total operating expenses were 0.28% of its average invested assets and 8.71% of its net loss.

For the year ended December 31, 2016, the Advisor and its affiliates incurred $861,164 of the Company’s operating expenses, including the allocable share of the Advisor’s overhead expenses of $560,930, none of which were in excess of the 2%/25% Limitation and are included in the $560,930 of general and administrative expenses recognized by the Company. As of December 31, 2016, total operating expenses were 0.86% of its average invested assets and 17.50% of its net loss.

Disposition Fee

If the Advisor or its affiliates provide a substantial amount of services in connection with the sale of a property or real estate-related asset, including pursuant to a sale of the entire Company, as determined by a majority of the Company’s independent directors, the Advisor or its affiliates will earn a disposition fee equal to (1) 1.5% of the sales price of each property or real estate-related asset sold or (2) 1.0%, which may be increased to 1.5% in the sole discretion of the Company’s independent directors, of the total consideration paid in connection with the sale of the Company. In the event of a final liquidity event, this fee will be reduced by the amount of any previous disposition fee paid on properties previously exchanged under Section 1031 of the Internal Revenue Code.

To the extent the disposition fee is paid upon the sale of any assets other than real property, it will be included as an operating expense for purposes of the 2%/25% Limitation. In connection with the sale of securities, the disposition fee may be paid to an affiliate of the Advisor that is registered as a FINRA member broker-dealer if applicable FINRA rules would prohibit the payment of the disposition fee to a firm that is not a registered broker-dealer. As of December 31, 2018 the Company had not sold or otherwise disposed of property or any real estate-related assets. Accordingly, the Company had not incurred any disposition fees as of December 31, 2018.

Sales Commissions

The Company paid the Dealer Manager up to 7.0% of gross offering proceeds from the sale of Class A shares in the Primary Offering and up to 3.0% of gross offering proceeds from the sale of Class T shares in the Primary Offering (all of which was reallowed to participating broker-dealers), subject to reductions based on volume and for certain categories of purchasers. No sales commissions were paid for sales of Class R shares or for sales pursuant to the DRP. The total amount of all items of compensation from any source payable to the Dealer Manager and the participating broker-dealers may not exceed 10.0% of the gross proceeds from the Primary Offering on a per class basis.

Dealer Manager Fees

The Company paid the Dealer Manager up to 3.0% of gross offering proceeds from the sale of Class A shares and up to 2.5% of gross offering proceeds from the sale of Class T shares (a portion of which was reallowed to participating broker-dealers). No dealer manager fee was paid for sales of Class R shares or for sales pursuant to the Company’s DRP.

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Distribution and Shareholder Servicing Fees

The Company paid the Dealer Manager up to (1) 0.27%, annualized, of the purchase price per Class R share (or, once reported, the amount of the Company’s estimated value per share) for each Class R share purchased in the Primary Offering from a registered investment advisor that does not participate on an alternative investment platform; (2) 0.67%, annualized, of the purchase price per Class R share (or, once reported, the amount of the Company’s estimated value per share) for each Class R share purchased in the Primary Offering from a registered investment advisor that participates on an alternative investment platform; and (3) 1.125%, annualized, of the purchase price per Class T share (or, once reported, the amount of the Company’s estimated value per share) for each Class T share purchased in the Primary Offering. The distribution and shareholder servicing fee accrues daily and is paid monthly in arrears. The Company amended its Charter on August 8, 2017, to authorize and pay different distributions to different holders of Class T and/or Class R shares. Prior to amending the Charter to allow for distributions at different rates on the same class of shares, of the 0.67% distribution and shareholder servicing fee payable with respect to sales of Class R shares by registered investment advisors that participate on an alternative investment platform, 0.27% was paid from the current distribution and shareholder servicing fee on Class R shares, which was payable out of amounts that otherwise would have been distributed to holders of Class R shares, and 0.40% was an additional expense of the Company.

Effective October 1, 2018, we ceased paying the distribution and shareholder servicing fee because total underwriting compensation had reached 10% of the total gross investment amount in the Primary Offering.

Subordinated Participation in Net Sale Proceeds (payable only if the Company’s shares are not listed on an exchange)

The Advisor (in its capacity as special limited partner of the Operating Partnership) would receive 15.0% of the remaining net sale proceeds after return of the total investment amount, which is the amount equal to the original issue price paid by the stockholders in the Public Offering multiplied by the number of shares issued in the Public Offering, reduced by the weighted average original issue price of the shares sold in the Primary Offering multiplied by the total number of shares repurchased by the Company, plus payment to investors of an amount equal to a 6.0% annual cumulative,non-compounded return of the total investment amount, less amounts previously distributed to stockholders, including distributions that may constitute a return of capital for federal income tax purposes.

“Net sale proceeds” means the net cash proceeds realized from the sale of the Company or all of the Company’s assets after deduction of all expenses incurred in connection with a sale or disposition of the Company or of the Company’s assets, including disposition fees paid to the Advisor, or from the prepayment, maturity, workout or other settlement of any loan or other investment. For purposes of calculating the 6.0% annual cumulative,non-compounded return of the total investment amount, the aggregate of all investors’ capital shall be deemed to have been invested collectively on one date—the aggregate average investment date, being a day of a month determined by the average weighted month of all shares sold on a monthly basis. In addition, the Advisor (in its capacity as special limited partner of the Operating Partnership) will receive a distribution similar to the subordinated participation in net sale proceeds in the event the Company undertakes an issuer tender offer that results in the tendering stockholders receiving a return of the total investment amount of the tendering stockholders plus payment to those investors of an amount equal to a 6.0% annual cumulative,non-compounded return of the total investment amount of the tendering stockholders, less amounts previously distributed to stockholders, including distributions that may constitute a return of capital for federal income tax purposes.

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Subordinated Incentive Listing Distribution (payable only if the Company’s shares are listed on an exchange)

Upon the listing of the Company’s shares on a national securities exchange, the Advisor (in its capacity as special limited partner of the Operating Partnership) will receive 15.0% of the amount by which the sum of the Company’s adjusted market value plus distributions paid by the Company to stockholders from inception until the date the adjusted market value is determined, including distributions that may constitute a return of capital for federal income tax purposes, exceeds the sum of the total investment amount plus an amount equal to a 6.0% annual cumulative,non-compounded return to investors of the total investment amount, less amounts previously distributed to stockholders, including distributions that may constitute a return of capital for federal income tax purposes. For purposes of calculating the 6.0% annual cumulative,non-compounded return of the total investment amount, the aggregate of all investors’ capital shall be deemed to have been invested collectively on one date, the aggregate average investment date, being a day of a month determined by the average weighted month of all shares sold on a monthly basis.

The adjusted market value of the Company’s common stock will be calculated based on the average market value of the shares of common stock issued and outstanding at listing over the 30 trading days beginning 180 days after the shares are first listed or included for quotation. The Company has the option to pay the subordinated incentive listing distribution in the form of stock, cash, a promissory note or any combination thereof. Any previous payments of the subordinated participation in net sales proceeds will offset the amounts due pursuant to the subordinated listing distribution.

Subordinated Distribution Upon Termination of the Advisory Agreement

Upon termination ornon-renewal of the Advisory Agreement with or without cause, the Advisor (in its capacity as special limited partner of the Operating Partnership), would be entitled to receive distributions from the Operating Partnership equal to 15.0% of the amount by which the sum of the Company’s appraised market value plus distributions exceeds the sum of the total investment amount plus an amount equal to a 6.0% annual cumulative,non-compounded return of the total investment amount to investors, less amounts previously distributed to stockholders, including distributions that may constitute a return of capital for federal income tax purposes. For purposes of calculating the 6.0% annual cumulative,non-compounded return of the total investment amount, the aggregate of all investors’ capital shall be deemed to have been invested collectively on one date, the aggregate average investment date, being a day of a month determined by the average weighted month of all shares sold on a monthly basis. If the Company does not provide this return, the Advisor will not receive this distribution. In addition, the Advisor may elect to defer its right to receive a subordinated distribution upon termination until either shares of the Company’s common stock are listed and traded on a national securities exchange or another liquidity event occurs.

8. Long-Term Incentive Award Plan and Independent Director Compensation

The Company adopted a long-term incentive plan, the Incentive Plan, which the Company uses to attract and retain qualified directors, officers, employees and consultants. The Incentive Award Plan authorizes the granting of restricted stock, stock options, restricted or deferred stock units, performance awards and other stock-based awards to the Company’s directors, officers, employees and consultants selected by its board of directors for participation in the Incentive Award Plan. Stock options granted under the Incentive Award Plan will not exceed an amount equal to 10% of the outstanding shares of the Company’s common stock allocated to the Incentive Award Plan on the date of grant of any such stock options. Any stock options granted under the Incentive Award Plan will have an exercise price or base price that is not less than fair market value of the Company’s common stock on the date of grant.

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Under the Company’s independent directors compensation plan, which is asub-plan of the Incentive Award Plan, each of the Company’s independent directors was entitled to receive 2,000 shares of restricted Class A common stock once the Company raised $2,000,000 in gross offering proceeds in the Public Offering. Each subsequent independent director that joins the Company’s board of directors will receive 2,000 shares of restricted Class A common stock upon election to the Company’s board of directors. In addition, on the date following an independent director’sre-election to the Company’s board of directors, he or she receives 1,000 shares of restricted Class A common stock. Grants of restricted stock are subject to share availability under the Incentive Plan. The shares of restricted Class A common stock generally vest in four equal annual installments beginning on the date of grant and ending on the third anniversary of the date of grant; provided, however, that the restricted stock will become fully vested and becomenon-forfeitable on the earlier to occur of (1) the termination of the independent director’s service as a director due to his or her death or “disability” or (2) a “change in control” of the Company (as such terms are defined in the Incentive Plan). These awards entitle the holders to participate in distributions.

The Company recorded stock-based compensation expense of $82,346, $63,591 and $61,071 for the years ended December 31, 2018, 2017 and 2016 related to the independent directors’ restricted common stock, respectively.

In addition to the stock awards, the Company pays each of its independent directors annual compensation of $55,000, prorated for any partial term (the audit committee chairperson receives an additional $10,000 annually, prorated for any partial term). In addition, the independent directors are paid for attending meetings as follows: (1) $2,500 for each board meeting attended in person, (2) $1,500 for each committee meeting attended in person in such director’s capacity as a committee member and (3) $1,000 for each board meeting attended via teleconference (not to exceed $4,000 for any one set of meetings attended within a48-hour period). All directors also receive reimbursement of reasonable out of pocket expenses incurred in connection with attendance at meetings of the board of directors. Director compensation is an operating expense of the Company that is subject to the operating expense reimbursement obligation of the Advisor discussed in Note 7 (Related Party Arrangements). The Company recorded operating expenses of $429,500, $230,000 and $241,000 for the years ended December 31, 2018, 2017 and 2016, respectively, related to the independent directors’ restricted common stock, the independent directors’ annual compensation and the value of shares issued for annual compensation and attending board meetings, which is included in general and administrative expenses in the accompanying consolidated statements of operations. As of December 31, 2018 and 2017, $251,750 and $51,875 is included in accounts payable and accrued liabilities, respectively, and $13,750 and $27,500 is included in additionalpaid-in capital on the consolidated balance sheets, respectively.

9. Commitments and Contingencies

Economic Dependency

The Company is dependent on the Advisor and its affiliates for certain services that are essential to the Company, including the identification, evaluation, negotiation, purchase, and disposition of real estate and real estate-related investments; management of the daily operations of the Company’s real estate and real estate-related investment portfolio; and other general and administrative responsibilities. In the event that these companies are unable to provide the respective services, the Company will be required to obtain such services from other sources.

Concentration of Credit Risk

The geographic concentration of the Company’s portfolio makes it particularly susceptible to adverse economic developments in the Atlanta, Georgia, Austin, Texas, Dallas, Texas, Denver, Colorado and

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Indianapolis, Indiana apartment markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, relocations of businesses, increased competition from other apartment communities, decrease in demand for apartments or any other changes, could adversely affect the Company’s operating results and its ability to make distributions to stockholders.

Environmental

As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. The Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s properties, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the properties could result in future environmental liabilities.

Legal Matters

From time to time, the Company is subject, or party, to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on the Company’s results of operations or financial condition nor is the Company aware of any such legal proceedings contemplated by government agencies.

10. Derivative Financial Instruments

The Company uses interest rate derivatives with the objective of managing exposure to interest rate movements thereby minimizing the effect of interest rate changes and the effect they could have on future cash flows. Interest rate cap agreements are used to accomplish this objective. The following tables provide the terms of the Company’s interest rate derivative instruments that were in effect at December 31, 2018 and 2017:

December 31, 2018
Type	Maturity Date Range		Based on		Number of Instruments		Notional Amount		Variable Rate			Weighted Average Rate Cap			Fair Value
Interest Rate Cap		6/1/2019 - 12/1/2020		One-Month LIBOR		6	$	156,892,000		2.52	%		2.59	%	$	377,456

December 31, 2017
Type	Maturity Date Range		Based on		Number of Instruments		Notional Amount		Variable Rate			Weighted Average Rate Cap			Fair Value
Interest Rate Cap		6/1/2019 - 12/1/2020		One-Month LIBOR		6	$	156,892,000		1.56	%		2.59	%	$	257,619

The interest rate cap agreements are not designated as effective cash flow hedges. Accordingly, the Company records any changes in the fair value of the interest rate cap agreements as interest expense. The change in the fair value of the interest rate cap agreements for the years ended December 31, 2018, 2017 and 2016, resulted in an unrealized (gain) loss of $(119,837), $444,252 and $24,989, respectively, which is included in interest expense in the accompanying consolidated statements of operations. During the years ended December 31, 2018 and 2017, the Company acquired interest rate cap agreements of $0 and $288,740, respectively. The fair value of the interest rate cap agreements of $377,456 and $257,619 as of December 31, 2018 and 2017, respectively, is included in other assets on the accompanying consolidated balance sheets.

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11. Pro Forma Information (unaudited)

Following the adoption of ASU2017-01 as of January 1, 2017, all of the Company’s acquisitions in fiscal years 2018 and 2017 have been accounted for as asset acquisitions, therefore, no pro forma information is required.

The following table summarizes, on an unaudited basis, the consolidated pro forma results of operations of the Company for the years ended December 31, 2016 and 2015. The Company acquired three properties during the year ended December 31, 2016. These properties contributed $1,264,906 of revenues and $969,543 of net loss, including $825,735 of depreciation and amortization, to the Company’s results of operations from the date of acquisition to December 31, 2016. The following unaudited pro forma information for the years ended December 31, 2016 and 2015, has been provided to give effect to the acquisitions of the properties as if they had occurred on January 1, 2015. This pro forma information does not purport to represent what the actual results of operations of the Company would have been had these acquisitions occurred on this date, nor does it purport to predict the results of operations for future periods.

	Year Ended December 31,
	2016			2015
Revenues	$	9,068,309		$	9,068,309
Net loss	$	(10,548,934	)	$	(12,094,696	)
Net loss attributable to noncontrolling interest	$	(100	)	$	(100	)
Net loss attributable to common stockholders	$	(10,548,834	)	$	(12,094,596	)
Net loss per Class A share:
Net loss attributable to Class A common stockholders—basic and diluted	$	(6,775,391	)	$	(7,768,215	)
Weighted average number of Class A common shares outstanding—basic and diluted		374,595			374,595
Net loss per Class A common share—basic and diluted		(22.14	)		(24.79	)
Net loss per Class R share:
Net loss attributable to Class R common stockholders—basic and diluted	$	(354,281	)	$	(406,195	)
Weighted average number of Class R common shares outstanding—basic and diluted		19,587			19,587
Net loss per Class R common share—basic and diluted		(21.38	)		(24.03	)
Net loss per Class T share:
Net loss attributable to Class T common stockholders—basic and diluted	$	(3,419,162	)	$	(3,920,186	)
Weighted average number of Class T common shares outstanding—basic and diluted		189,037			189,037
Net loss per Class T common share—basic and diluted		(21.18	)		(23.83	)

The pro forma information reflects adjustments for actual revenues and expenses of the property acquired during the year ended December 31, 2016, for the respective period prior to acquisition by the Company. Net loss has been adjusted as follows: (1) interest expense has been adjusted to reflect the additional interest expense that would have been charged had the Company acquired the properties on January 1, 2015 under the same financing

D-154

STEADFAST APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

DECEMBER 31, 2018

arrangements as existed as of the acquisition date; (2) depreciation and amortization has been adjusted based on the Company’s basis in the properties; and (3) transaction costs have been adjusted for the acquisition of the properties.

12. Selected Quarterly Results (unaudited)

Presented below is a summary of the Company’s unaudited quarterly financial information for the years ended December 31, 2018 and 2017:

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
2018
Revenues	$	8,832,176		$	9,229,616		$	9,905,011		$	9,942,827
Net loss		(3,924,834	)		(3,526,366	)		(3,556,258	)		(4,358,151	)
Net loss attributable to common stockholders		(3,924,834	)		(3,526,366	)		(3,556,258	)		(4,358,151	)
Net loss attributable to Class A common stockholders—basic and diluted		(1,690,784	)		(1,475,758	)		(1,464,767	)		(1,779,440	)
Loss per Class A common share—basic and diluted		(0.53	)		(0.43	)		(0.40	)		(0.51	)
Distributions declared per Class A common share		0.370			0.374			0.378			0.378
Net loss attributable to Class R common stockholders—basic and diluted		(188,592	)		(183,927	)		(190,984	)		(240,227	)
Net loss per Class R common share—basic and diluted		(0.55	)		(0.45	)		(0.41	)		(0.51	)
Distributions declared per Class R common share		0.352			0.357			0.361			0.378
Net loss attributable to Class T common stockholders—basic and diluted		(2,045,458	)		(1,866,681	)		(1,900,505	)		(2,338,484	)
Net loss per Class T common share—basic and diluted		(0.60	)		(0.50	)		(0.46	)		(0.51	)
Distributions declared per Class T common share		0.306			0.309			0.313			0.378

D-155

STEADFAST APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

DECEMBER 31, 2018

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter
2017
Revenues	$	3,115,715		$	3,601,807		$	5,744,118		$	7,129,937
Net loss		(2,322,391	)		(2,647,638	)		(3,085,008	)		(3,698,150	)
Net loss attributable to common stockholders		(2,322,391	)		(2,647,638	)		(3,085,008	)		(3,698,150	)
Net loss attributable to Class A common stockholders—basic and diluted		(1,236,453	)		(1,369,535	)		(1,478,634	)		(1,675,829	)
Loss per Class A common share—basic and diluted		(0.81	)		(0.64	)		(0.58	)		(0.57	)
Distributions declared per Class A common share		0.370			0.374			0.378			0.378
Net loss attributable to Class R common stockholders—basic and diluted		(118,117	)		(116,698	)		(139,604	)		(171,219	)
Net loss per Class R common share—basic and diluted		(0.81	)		(0.65	)		(0.59	)		(0.59	)
Distributions declared per Class R common share		0.353			0.357			0.363			0.352
Net loss attributable to Class T common stockholders—basic and diluted		(967,821	)		(1,161,405	)		(1,466,769	)		(1,851,102	)
Net loss per Class T common share—basic and diluted		(0.87	)		(0.71	)		(0.64	)		(0.64	)
Distributions declared per Class T common share		0.304			0.307			0.320			0.310

13. Subsequent Events

Distributions Paid

Class A

On January 2, 2019, the Company paid distributions of $448,040, which related to distributions declared for each day in the period from December 1, 2018 through December 31, 2018 and consisted of cash distributions paid in the amount of $272,851 and $175,189 in shares issued pursuant to the DRP.

On February 1, 2019, the Company paid distributions of $448,950, which related to distributions declared for each day in the period from January 1, 2019 through January 31, 2019 and consisted of cash distributions paid in the amount of $275,056 and $173,894 in shares issued pursuant to the DRP.

On March 1, 2019, the Company paid distributions of $403,504, which related to distributions declared for each day in the period from February 1, 2019 through February 28, 2019 and consisted of cash distributions paid in the amount of $403,504 and $0 in shares issued pursuant to the DRP.

D-156

STEADFAST APARTMENT REIT III, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED

DECEMBER 31, 2018

Class R

On January 2, 2019, the Company paid distributions of $62,323, which related to distributions declared for each day in the period from December 1, 2018 through December 31, 2018 and consisted of cash distributions paid in the amount of $41,232 and $21,091 in shares issued pursuant to the DRP.

On February 1, 2019, the Company paid distributions of $60,517, which related to distributions declared for each day in the period from January 1, 2019 through January 31, 2019 and consisted of cash distributions paid in the amount of $40,020 and $20,497 in shares issued pursuant to the DRP.

On March 1, 2019, the Company paid distributions of $54,767, which related to distributions declared for each day in the period from February 1, 2019 through February 28, 2019 and consisted of cash distributions paid in the amount of $54,767 and $0 in shares issued pursuant to the DRP.

Class T

On January 2, 2019, the Company paid distributions of $659,453, which related to distributions declared for each day in the period from December 1, 2018 through December 31, 2018 and consisted of cash distributions paid in the amount of $287,729 and $371,723 in shares issued pursuant to the DRP.

On February 1, 2019, the Company paid distributions of $590,710, which related to distributions declared for each day in the period from January 1, 2019 through January 31, 2019 and consisted of cash distributions paid in the amount of $258,149 and $332,562 in shares issued pursuant to the DRP.

On March 1, 2019, the Company paid distributions of $535,334, which related to distributions declared for each day in the period from February 1, 2019 through February 28, 2019 and consisted of cash distributions paid in the amount of $535,334 and $0 in shares issued pursuant to the DRP.

Advisory Agreement Renewal

On February 1, 2019, the Company entered into Amendment No. 3 to the Advisory Agreement, which became effective on February 5, 2019, to renew the term of the Advisory Agreement for an additional one year term ending February 5, 2020.

D-157

STEADFAST APARTMENT REIT III, INC.

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION AND AMORTIZATION

DECEMBER 31, 2018

	Location		Ownership Percent			Encumbrances(1)		Initial Cost of Company						Cost Capitalized Subsequent to Acquisition		Gross Amount at which Carried at Close of Period						Accumulated Depreciation			Original Date of Construction		Date Acquired
Description								Land		Building and Improvements(2)		Total				Land		Building and Improvements(2)		Total(3)
Carriage House Apartment Homes		Gurnee, IL		100	%	$	5,660,454	$	892,666	$	6,632,334	$	7,525,000	$	913,836	$	892,666	$	7,003,588	$	7,896,254	$	(856,007	)		1970		5/19/2016
Bristol Village Apartments		Aurora, CO		100	%		34,883,417		4,234,471		43,165,529		47,400,000		1,341,099		4,234,471		43,595,893		47,830,364		(3,508,924	)		2003		11/17/2016
Canyon Resort at Great Hills Apartments		Austin, TX		100	%		31,568,495		6,892,366		37,607,634		44,500,000		834,399		6,892,366		37,452,927		44,345,293		(2,901,640	)		1997		12/29/2016
Reflections on Sweetwater Apartments		Lawrenceville, GA		100	%		22,822,158		5,041,375		28,246,962		33,288,337		1,894,066		5,041,375		29,265,827		34,307,202		(2,343,277	)		1996		1/12/2017
The Pointe at Vista Ridge		Lewisville, TX		100	%		28,964,451		4,610,773		40,577,450		45,188,223		1,451,446		4,610,773		41,114,886		45,725,659		(2,702,958	)		2003		5/25/2017
Belmar Villas		Lakewood, CO		100	%		46,892,398		7,105,266		57,397,989		64,503,255		1,966,462		7,105,266		58,170,169		65,275,435		(3,451,754	)		1974		7/21/2017
Ansley at Princeton Lakes		Atlanta, GA		100	%		32,204,192		3,067,897		41,526,190		44,594,087		202,205		3,067,897		40,616,624		43,684,521		(2,051,058	)		2009		8/31/2017
Sugar Mill Apartments		Lawrenceville, GA		100	%		24,636,684		5,706,010		30,599,482		36,305,492		718,723		5,706,010		30,527,940		36,233,950		(1,247,293	)		1997		12/7/2017
Avery Point Apartments		Indianapolis, IN		100	%		31,060,671		4,509,073		41,320,763		45,829,836		892,112		4,509,073		41,095,115		45,604,188		(1,754,853	)		1986		12/15/2017
Cottage Trails at Culpepper Landing		Chesapeake, VA		100	%		21,394,001		3,848,274		27,270,425		31,118,698		123,703		3,848,274		26,937,695		30,785,969		(569,248	)		2012/2015		5/31/2018
						$	280,086,921	$	45,908,171	$	354,344,758	$	400,252,928	$	10,338,051	$	45,908,171	$	355,780,664	$	401,688,835	$	(21,387,012	)

(1) Encumbrances are net of deferred financing costs associated with the loans for each individual property listed above.

(2) Building and improvements include tenant origination and absorption costs.

(3) The aggregate cost of real estate for federal income tax purposes was $413.0 million (unaudited) as of December 31, 2018.

D-158

STEADFAST APARTMENT REIT III, INC.

SCHEDULE III

REAL ESTATE AND ACCUMULATED DEPRECIATION AND AMORTIZATION

DECEMBER 31, 2018

A summary of activity for real estate and accumulated depreciation for the years ended December 31, 2018, 2017 and 2016:

	2018			2017			2016
Real Estate:
Balance at the beginning of the year	$	369,910,485		$	99,572,735		$	—
Acquisitions		31,118,698			269,709,230			99,425,000
Improvements		5,672,239			4,317,573			348,238
Write-off of fully depreciated and amortized assets		(5,012,587	)		(3,689,053	)		(200,503	)
Balance at the end of the year	$	401,688,835		$	369,910,485		$	99,572,735
Accumulated depreciation:
Balance at the beginning of the year	$	9,425,010		$	625,232		$	—
Depreciation expense		16,659,117			12,488,831			825,735
Write-off of fully depreciated and amortized assets		(4,697,115	)		(3,689,053	)		(200,503	)
Balance at the end of the year	$	21,387,012		$	9,425,010		$	625,232

D-159

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Irvine, State of California, on March 15, 2019.

Steadfast Apartment REIT III, Inc.
By:	/s/ Rodney F. Emery
	Rodney F. Emery
	Chief Executive Officer and Chairman of the Board
	(Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Name	Title	Date
/s/ Rodney F. Emery Rodney F. Emery	Chief Executive Officer and Chairman of the Board (Principal Executive Officer)	March 15, 2019
/s/ Kevin J. Keating Kevin J. Keating	Chief Financial Officer and Treasurer (Principal Financial Officer and Accounting Officer)	March 15, 2019
/s/ Ella S. Neyland Ella S. Neyland	President and Director	March 15, 2019
/s/ Stephen R. Bowie Stephen R. Bowie	Director	March 15, 2019
/s/ Ned W. Brines Ned W. Brines	Director	March 15, 2019
/s/ Janice M. Munemitsu Janice M. Munemitsu	Director	March 15, 2019

D-160

Annex E

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR

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

For the transition period from                    to                    

Commission file number000-55772

STEADFAST APARTMENT REIT III, INC.

(Exact Name of Registrant as Specified in Its Charter)

Maryland	47-4871012
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)
18100 Von Karman Avenue, Suite 500 Irvine, California	92612
(Address of Principal Executive Offices)	(Zip Code)

(949) 852-0700

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” inRule 12b-2 of the Exchange Act:

Large Accelerated filer	☐	Accelerated filer	☐
Non-Accelerated filer	☒	Smaller reporting company	☒
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act.  ☒

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of November 1, 2019, there were 3,466,447 shares of the Registrant’s Class A common stock issued and outstanding, 475,208 shares of the Registrant’s Class R common stock issued and outstanding and 4,628,177 shares of the Registrant’s Class T common stock issued and outstanding.

STEADFAST APARTMENT REIT III, INC.

INDEX

	Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements		E-2
Consolidated Balance Sheets as of September  30, 2019 (unaudited) and December 31, 2018		E-2
Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018 (unaudited)		E-3
Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2019 and 2018 (unaudited)		E-4
Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 (unaudited)		E-6
Condensed Notes to Consolidated Financial Statements as of September  30, 2019 (unaudited)		E-8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		E-45
Item 3. Quantitative and Qualitative Disclosures About Market Risk		E-68
Item 4. Controls and Procedures		E-69
PART II — OTHER INFORMATION
Item 1. Legal Proceedings		E-70
Item 1A. Risk Factors		E-70
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		E-70
Item 3. Defaults Upon Senior Securities		E-71
Item 4. Mine Safety Disclosures		E-71
Item 5. Other Information		E-71
Item 6. Exhibits		E-71
Signatures		E-75

E-1

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

STEADFAST APARTMENT REIT III, INC.

CONSOLIDATED BALANCE SHEETS

	September 30, 2019			December 31, 2018
	(Unaudited)
ASSETS
Assets:
Real Estate:
Land	$	45,908,171		$	45,908,171
Building and improvements		362,143,004			355,780,664
Total real estate, cost		408,051,175			401,688,835
Less accumulated depreciation and amortization		(32,960,809	)		(21,387,012	)
Total real estate, net		375,090,366			380,301,823
Cash and cash equivalents		21,803,455			35,628,660
Restricted cash		3,863,665			3,729,649
Rents and other receivables		1,380,692			515,569
Other assets		647,514			906,700
Total assets	$	402,785,692		$	421,082,401
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued liabilities	$	7,850,899		$	7,520,803
Mortgage notes payable, net		287,517,455			280,086,921
Distributions payable		1,056,993			1,169,815
Due to affiliates		636,953			4,898,804
Total liabilities		297,062,300			293,676,343
Commitments and contingencies (Note 9)
Redeemable common stock		4,149,979			6,570,093
Stockholders’ Equity:
Preferred stock, $0.01 par value per share; 100,000,000 shares authorized, no shares issued and outstanding		—			—
Class A common stock, $0.01 par value per share; 480,000,000 shares authorized, 3,466,447 and 3,516,990 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		34,666			35,171
Class R common stock, $0.01 par value per share; 240,000,000 shares authorized, 475,208 and 474,076 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		4,753			4,742
Class T common stock, $0.01 par value per share; 480,000,000 shares authorized, 4,630,865 and 4,620,317 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		46,310			46,204
Additionalpaid-in capital		172,930,174			170,763,927
Cumulative distributions and net losses		(71,442,490	)		(50,014,079	)
Total stockholders’ equity		101,573,413			120,835,965
Total liabilities and stockholders’ equity	$	402,785,692		$	421,082,401

See accompanying notes to consolidated financial statements.

E-2

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Revenues:
Rental income	$	10,274,865		$	9,851,463		$	30,070,531		$	27,775,041
Other income		237,254			53,548			731,453			191,762
Total revenues		10,512,119			9,905,011			30,801,984			27,966,803
Expenses:
Operating, maintenance and management		3,032,045			2,829,019			7,996,145			7,707,048
Real estate taxes and insurance		1,244,074			1,198,477			4,422,914			3,841,903
Fees to affiliates		1,643,653			1,528,770			5,586,812			4,274,781
Depreciation and amortization		3,965,495			3,866,775			11,574,455			12,804,145
Interest expense		3,077,197			2,998,775			10,014,805			7,909,070
Loss on debt extinguishment		—			—			167,469			—
General and administrative expenses		1,582,320			1,039,453			3,682,249			2,437,314
Total expenses		14,544,784			13,461,269			43,444,849			38,974,261
Loss before other income		(4,032,665	)		(3,556,258	)		(12,642,865	)		(11,007,458	)
Other income:
Other income		875,000			—			875,000			—
Total other income		875,000			—			875,000			—
Net loss	$	(3,157,665	)	$	(3,556,258	)	$	(11,767,865	)	$	(11,007,458	)
Net loss attributable to Class A common stockholders—basic and diluted	$	(1,277,305	)	$	(1,464,767	)	$	(4,772,019	)	$	(4,620,899	)
Net loss per Class A common share—basic and diluted	$	(0.37	)	$	(0.40	)	$	(1.37	)	$	(1.34	)
Weighted average number of Class A common shares outstanding—basic and diluted		3,471,013			3,397,330			3,490,700			3,185,507
Net loss attributable to Class R common stockholders—basic and diluted	$	(174,873	)	$	(190,984	)	$	(649,931	)	$	(566,814	)
Net loss per Class R common share—basic and diluted	$	(0.37	)	$	(0.41	)	$	(1.37	)	$	(1.40	)
Weighted average number of Class R common shares outstanding—basic and diluted		475,208			442,962			475,420			390,744
Net loss attributable to Class T common stockholders—basic and diluted	$	(1,705,487	)	$	(1,900,505	)	$	(6,345,915	)	$	(5,819,746	)
Net loss per Class T common share—basic and diluted	$	(0.37	)	$	(0.46	)	$	(1.37	)	$	(1.54	)
Weighted average number of Class T common shares outstanding—basic and diluted		4,634,576			4,407,966			4,641,994			4,011,955

See accompanying notes to consolidated financial statements.

E-3

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 (Unaudited)

	Common Stock																Additional Paid-In Capital			Cumulative Distributions & Net Losses			Total Stockholders’ Equity
	Class A						Class R				Class T
	Shares			Amount			Shares		Amount		Shares			Amount
BALANCE, July 1, 2019		3,486,677		$	34,868			475,208	$	4,753		4,641,877		$	46,420		$	172,920,483		$	(65,039,663	)	$	107,966,861
Transfers from redeemable common stock		—			—			—		—		—			—			667,887			—			667,887
Repurchase of common stock		(20,230	)		(202	)		—		—		(11,012	)		(110	)		(667,575	)		—			(667,887	)
Distributions declared ($0.378 per share of common stock)		—			—			—		—		—			—			—			(3,245,162	)		(3,245,162	)
Amortization of stock-based compensation		—			—			—		—		—			—			9,379			—			9,379
Net loss		—			—			—		—		—			—			—			(3,157,665	)		(3,157,665	)
BALANCE, September 30, 2019		3,466,447		$	34,666			475,208	$	4,753		4,630,865		$	46,310		$	172,930,174		$	(71,442,490	)	$	101,573,413

	Common Stock																		Additional Paid-In Capital			Cumulative Distributions & Net Losses			Total Stockholders’ Equity
	Class A						Class R						Class T
	Shares			Amount			Shares			Amount			Shares			Amount
BALANCE, January 1, 2019		3,516,990		$	35,171			474,076		$	4,742			4,620,317		$	46,204		$	170,763,927		$	(50,014,079	)	$	120,835,965
Issuance of common stock		15,487			155			1,845			18			31,246			313			1,094,470			—			1,094,956
Transfers from redeemable common stock		—			—			—			—			—			—			2,951,937			—			2,951,937
Repurchase of common stock		(66,030	)		(660	)		(713	)		(7	)		(20,698	)		(207	)		(1,922,409	)		—			(1,923,283	)
Distributions declared ($1.122 per share of common stock)		—			—			—			—			—			—			—			(9,660,546	)		(9,660,546	)
Amortization of stock-based compensation		—			—			—			—			—			—			42,249			—			42,249
Net loss		—			—			—			—			—			—			—			(11,767,865	)		(11,767,865	)
BALANCE, September 30, 2019		3,466,447		$	34,666			475,208		$	4,753			4,630,865		$	46,310		$	172,930,174		$	(71,442,490	)	$	101,573,413

See accompanying notes to consolidated financial statements.

E-4

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 (Unaudited)

	Common Stock																Additional Paid-In Capital			Cumulative Distributions & Net Losses			Total Stockholders’ Equity
	Class A						Class R				Class T
	Shares			Amount			Shares		Amount		Shares			Amount
BALANCE, July 1, 2018		3,276,197		$	32,764			409,536	$	4,096		4,174,825		$	41,749		$	157,467,255		$	(36,027,454	)	$	121,518,410
Issuance of common stock		223,987			2,238			61,977		620		407,697			4,076			16,534,178			—			16,541,112
Commissions on sales of common stock and related dealer manager fees to affiliates		—			—			—		—		—			—			(1,273,060	)		—			(1,273,060	)
Transfers to redeemable common stock		—			—			—		—		—			—			(1,241,466	)		—			(1,241,466	)
Repurchase of common stock		(2,543	)		(25	)		—		—		(420	)		(4	)		(67,192	)		—			(67,221	)
Other offering costs to affiliates		—			—			—		—		—			—			(735,217	)		—			(735,217	)
Distributions declared ($0.378, $0.361, $0.313 per share of Class A, R, and T common stock, respectively)		—			—			—		—		—			—			—			(2,823,452	)		(2,823,452	)
Amortization of stock-based compensation		—			—			—		—		—			—			35,613			—			35,613
Net loss		—			—			—		—		—			—			—			(3,556,258	)		(3,556,258	)
BALANCE, September 30, 2018		3,497,641		$	34,977			471,513	$	4,716		4,582,102		$	45,821		$	170,720,111		$	(42,407,164	)	$	128,398,461

	Common Stock																		Additional Paid-In Capital			Cumulative Distributions & Net Losses			Total Stockholders’ Equity
	Class A						Class R						Class T
	Shares			Amount			Shares			Amount			Shares			Amount
BALANCE, January 1, 2018		2,887,731		$	28,878			309,518		$	3,096			3,369,991		$	33,700		$	131,822,585		$	(23,683,752	)	$	108,204,507
Issuance of common stock		627,053			6,271			165,603			1,656			1,213,848			12,138			47,966,611			—			47,986,676
Commissions on sales of common stock and related dealer manager fees to affiliates		—			—			—			—			—			—			(3,673,948	)		—			(3,673,948	)
Transfers to redeemable common stock		—			—			—			—			—			—		��	(2,804,736	)		—			(2,804,736	)
Repurchase of common stock		(17,143	)		(172	)		(3,608	)		(36	)		(1,737	)		(17	)		(513,836	)		—			(514,061	)
Other offering costs to affiliates		—			—			—			—			—			—			(2,140,104	)		—			(2,140,104	)
Distributions declared ($1.122, $1.070, $0.928 per share of Class A, R, and T common stock, respectively)		—			—			—			—			—			—			—			(7,715,954	)		(7,715,954	)
Amortization of stock-based compensation		—			—			—			—			—			—			63,539			—			63,539
Net loss		—			—			—			—			—			—			—			(11,007,458	)		(11,007,458	)
BALANCE, September 30, 2018		3,497,641		$	34,977			471,513		$	4,716			4,582,102		$	45,821		$	170,720,111		$	(42,407,164	)	$	128,398,461

See accompanying notes to consolidated financial statements.

E-5

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2019			2018
Cash Flows from Operating Activities:
Net loss	$	(11,767,865	)	$	(11,007,458	)
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
Depreciation and amortization		11,574,455			12,804,145
Amortization of deferred financing costs		192,333			174,120
Amortization of stock-based compensation		42,249			63,539
Amortization of stock-based annual compensation		—			13,750
Loss on debt extinguishment		167,469			—
Change in fair value of interest rate cap agreements		375,637			(665,445	)
Insurance claim recoveries		(217,188	)		—
Changes in operating assets and liabilities:
Rents and other receivables		(940,123	)		(145,202	)
Other assets		(75,869	)		(183,634	)
Accounts payable and accrued liabilities		553,799			764,990
Due to affiliates		(574,806	)		(1,520,404	)
Net cash (used in) provided by operating activities		(669,909	)		298,401
Cash Flows from Investing Activities:
Acquisition of real estate investments		—			(30,118,698	)
Additions to real estate investments		(6,101,689	)		(3,967,275	)
Escrow deposits for pending real estate acquisitions		—			(1,000,000	)
Proceeds from insurance claims		292,188			—
Cash used in investing activities		(5,809,501	)		(35,085,973	)
Cash Flows from Financing Activities:
Proceeds from issuance of mortgage notes payable		94,861,000			21,545,000
Principal payments on notes payable		(87,148,994	)		—
Proceeds from issuance of Class A common stock		—			14,012,729
Proceeds from issuance of Class R common stock		—			3,597,999
Proceeds from issuance of Class T common stock		—			26,788,418
Payments of commissions on sale of common stock and related dealer manager fees		—			(3,548,440	)
Reimbursement of other offering costs to affiliates		(3,680,816	)		(1,810,661	)
Payment of deferred financing costs		(641,104	)		(163,083	)
Payment of debt extinguishment costs		(170	)		—
Distributions to common stockholders		(8,678,412	)		(3,919,077	)
Repurchase of common stock		(1,923,283	)		(514,061	)
Net cash (used in) provided by financing activities		(7,211,779	)		55,988,824
Net (decrease) increase in cash, cash equivalents and restricted cash		(13,691,189	)		21,201,253
Cash, cash equivalents and restricted cash, beginning of period		39,358,309			19,878,953
Cash, cash equivalents and restricted cash, end of period	$	25,667,120		$	41,080,206
Supplemental Disclosures of Cash Flow Information:
Interest paid	$	9,543,472		$	8,060,622

E-6

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited)

	Nine Months Ended September 30,
	2019		2018
Supplemental Disclosures of Noncash Flow Transactions:
Distributions payable	$	1,056,993	$	952,683
Amounts receivable from transfer agent for Class A common stock	$	—	$	45,100
Amounts payable to affiliates for other offering costs	$	—	$	735,217
Distributions paid to common stockholders through common stock issuances pursuant to the distribution reinvestment plan	$	1,094,956	$	3,590,554
Redeemable common stock	$	4,149,979	$	5,714,167
Redemptions payable	$	64,000	$	81,708
Accounts payable and accrued liabilities from additions to real estate investments	$	534,961	$	104,915
Due to affiliates from additions to real estate investments	$	16,746	$	21,884
Due to affiliates from distribution and shareholder servicing fee	$	—	$	3,063,646
Operating leaseright-of-use assets, net	$	38,794	$	—
Operating lease liabilities, net	$	41,240	$	—

See accompanying notes to consolidated financial statements.

E-7

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

1. Organization and Business

Steadfast Apartment REIT III, Inc. (the “Company”) was formed on July 29, 2015, as a Maryland corporation that elected to be taxed as, and qualifies as, a real estate investment trust (“REIT”) commencing with the taxable year ended December 31, 2016. On August 24, 2015, the Company was initially capitalized with the sale of 8,000 shares of Class A common stock to Steadfast Apartment Advisor III, LLC (the “Advisor”), a Delaware limited liability company, at a purchase price of $25.00 per share for an aggregate purchase price of $200,000.

The Company owns and operates a portfolio of multifamily properties located in targeted markets throughout the United States. As of September 30, 2019, the Company owned ten multifamily properties comprising a total of 2,775 apartment homes. For more information on the Company’s real estate portfolio, see Note 3 (Real Estate).

Public Offering

On February 5, 2016, the Company commenced its initial public offering to offer a maximum of $1,000,000,000 in shares of common stock for sale to the public in the primary offering (the “Primary Offering”). The Company initially offered Class A shares and Class T shares in the Public Offering at an initial price of $25.00 for each Class A share ($500,000,000 in Class A shares) and $23.81 for each Class T share ($500,000,000 in Class T shares), with discounts available for certain categories of purchasers. The Company also registered up to $300,000,000 in shares pursuant to the Company’s distribution reinvestment plan (the “DRP,” and together with the Primary Offering, the “Public Offering”) at an initial price of $23.75 for each Class A share and $22.62 for each Class T share.

Commencing on July 25, 2016, the Company revised the terms of its Public Offering to include Class R shares. The Company subsequently offered a maximum of $1,000,000,000 in shares of common stock for sale to the public at an initial price of $25.00 for each Class A share ($400,000,000 in Class A shares), $22.50 for each Class R share ($200,000,000 in Class R shares) and $23.81 for each Class T share ($400,000,000 in Class T shares), with discounts available for certain categories of purchasers. Up to $300,000,000 in shares were offered pursuant to the DRP at an initial price of $23.75 for each Class A share, $22.50 for each Class R share and $22.62 for each Class T share.

As of August 31, 2018, the date the Company terminated its Primary Offering, it had issued 3,483,706 shares of Class A common stock, 474,357 shares of Class R common stock and 4,572,889 shares of Class T common stock in the Public Offering for gross proceeds of $85,801,001, $10,672,273 and $108,706,960, respectively, and $205,180,234 in the aggregate, including 111,922 shares of Class A common stock, 8,450 shares of Class R common stock and 145,838 shares of Class T common stock issued pursuant to the DRP for gross offering proceeds of $2,658,156, $190,125 and $3,298,847, respectively. The Company suspended the DRP on February 5, 2019, effective beginning with distributions that accrued on February 1, 2019. As of September 30, 2019, the Company had issued 3,528,797 shares of Class A common stock, 479,529 shares of Class R common stock and 4,654,978 shares of Class T common stock in the Public Offering for gross proceeds of $86,834,671, $10,788,788 and $110,559,107, respectively, and $208,182,566 in the aggregate, including 157,012 shares of Class A common stock, 13,622 shares of Class R common stock and 227,925 shares of Class T

E-8

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

common stock issued pursuant to the DRP for gross offering proceeds of $3,691,826, $306,640 and $5,150,991, respectively.

On October 9, 2018, the Company’s board of directors approved an estimated value per share for each of the Company’s Class A common stock, Class R common stock and Class T common stock of $22.54 as of June 30, 2018. In connection with the determination of an estimated value per share, the Company’s board of directors approved a price per share for the DRP for each of the Company’s Class A common stock, Class R common stock and Class T common stock of $22.54, effective November 1, 2018.

The business of the Company is externally managed by the Advisor pursuant to the Amended and Restated Advisory Agreement dated July 25, 2016, by and among the Company, Steadfast Apartment REIT III Operating Partnership, L.P. (the “Operating Partnership”) and the Advisor (as amended, the “Advisory Agreement”). The Advisory Agreement is subject to annual renewal by the Company’s board of directors. The current term of the Advisory Agreement expires on February 5, 2020. Subject to certain restrictions and limitations, the Advisor manages the Company’sday-to-day operations, manages the Company’s portfolio of properties and real estate-related assets, sources and presents investment opportunities to the Company’s board of directors and provides investment management services on the Company’s behalf. The Advisor has also entered into an Advisory Services Agreement with Crossroads Capital Advisors, LLC (“Crossroads Capital Advisors”), whereby Crossroads Capital Advisors provides advisory services to the Company on behalf of the Advisor. The Company has retained Stira Capital Markets Group, LLC (formerly known as Steadfast Capital Markets Group, LLC) (the “Dealer Manager”), an affiliate of the Advisor, which served as the dealer manager for the Public Offering. The Advisor, along with the Dealer Manager, also provides marketing, investor relations and other administrative services on the Company’s behalf.

Substantially all of the Company’s business is conducted through the Operating Partnership. The Company is the sole general partner of the Operating Partnership and owns a 99.99% partnership interest in the Operating Partnership. The Advisor is the sole limited partner of and owns the remaining 0.01% partnership interest in the Operating Partnership. The Company and the Advisor entered into the Amended and Restated Agreement of Limited Partnership of the Operating Partnership on July 25, 2016 (as amended, the “Partnership Agreement”). As the Company accepted subscriptions for shares of its common stock in the Public Offering, the Company transferred substantially all of the net offering proceeds from the Public Offering to the Operating Partnership as a contribution in exchange for partnership interests and the Company’s percentage ownership in the Operating Partnership increased proportionately.

The Partnership Agreement provides that the Operating Partnership is operated in a manner that will enable the Company to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that the Operating Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), which classification could result in the Operating Partnership being taxed as a corporation. In addition to the administrative and operating costs and expenses incurred by the Operating Partnership in acquiring and operating real properties, the Operating Partnership pays all of the Company’s administrative costs and expenses, and such expenses are treated as expenses of the Operating Partnership.

E-9

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

The Company commenced its real estate operations on May 19, 2016, upon acquiring a fee simple interest in Carriage House Apartment Homes, a multifamily property located in Gurnee, Illinois.

Pending Merger with Steadfast Apartment REIT, Inc.

On August 5, 2019, the Company, Steadfast Apartment REIT, Inc. (“STAR”), a publicnon-traded REIT sponsored by the Sponsor, the Operating Partnership, Steadfast Apartment REIT Operating Partnership, L.P., the operating partnership of STAR (“STAR Operating Partnership”), and SIII Subsidiary, LLC, a wholly-owned subsidiary STAR (“STAR III Merger Sub”), entered into an Agreement and Plan of Merger (the “STAR III Merger Agreement”). Subject to the terms and conditions of the STAR III Merger Agreement, STAR III will merge with and into STAR III Merger Sub (the “Merger”), with STAR III Merger Sub surviving the Merger, such that following the Merger, the surviving entity will continue as a wholly-owned subsidiary of STAR. In accordance with the applicable provisions of the Maryland General Corporation Law (the “MGCL”), the separate existence of STAR III shall cease.

At the effective time of the Merger and subject to the terms and conditions of the STAR III Merger Agreement, each issued and outstanding share of the Company’s common stock (or a fraction thereof), $0.01 par value per share, will be converted into the right to receive 1.430 shares of STAR common stock, $0.01 par value per share (“STAR Common Stock”).

The obligation of each party to consummate the Merger is subject to a number of conditions, including receipt of the approval of the Merger and of an amendment to the Company’s Second Articles of Amendment and Restatement (the “Charter”) to delete certain provisions regardingroll-up transactions by the holders of a majority of the outstanding shares of the Company’s Common Stock (the “STAR III Stockholder Approval”).

The Company (with the prior approval of the special committee of its board of directors) may terminate the STAR III Merger Agreement in order to enter into an “Alternative Acquisition Agreement” with respect to a “Superior Proposal” (each as defined in the STAR III Merger Agreement) at any time prior to receipt by the Company of the STAR III Stockholder Approval pursuant to the terms of the STAR III Merger Agreement. STAR may terminate the STAR III Merger Agreement at any time prior to the receipt of the STAR III Stockholder Approval, in certain limited circumstances, including upon an “Adverse Recommendation Change” (as defined in the STAR III Merger Agreement).

If the STAR III Merger Agreement is terminated in connection with the Company’s acceptance of a Superior Proposal or making an Adverse Recommendation Change, the Company must pay STAR a termination fee $5,320,000.

On August 5, 2019, STAR, Steadfast Income REIT, Inc. (“SIR”), a publicnon-traded REIT sponsored by the Sponsor, STAR Operating Partnership, Steadfast Income REIT Operating Partnership, L.P., the operating partnership of SIR (“SIR Operating Partnership”), and SI Subsidiary, LLC, a wholly-owned subsidiary of STAR (“SIR Merger Sub”), entered into an Agreement and Plan of Merger (the “SIR Merger Agreement”). Subject to the terms and conditions of the SIR Merger Agreement, SIR will merge with and into SIR Merger Sub (the “SIR Merger”), with SIR Merger Sub surviving the SIR Merger, such that following the SIR Merger, the surviving entity will continue as a wholly-owned subsidiary of STAR. In accordance with the applicable provisions of the MGCL, the separate existence of SIR shall cease.

E-10

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

The consummation of the Merger is not contingent upon the completion of the SIR Merger and the consummation of the SIR Merger is not contingent upon the consummation of the Merger.

The combined company after the mergers (the “Combined Company”) will retain the name “Steadfast Apartment REIT, Inc.” Each merger is intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code.

Concurrently with the entry into the STAR III Merger Agreement, the Company entered into an amendment (the “First Amendment”) to the Partnership Agreement. The First Amendment will become effective at the earlier of (i) the date that STAR III merges with and into STAR III Merger Sub and (ii) upon payment of certain consideration owed to the Advisor in connection with consummation of a Superior Proposal. The purpose of the First Amendment is to revise the economic interests of the Advisor by providing that the Advisor will not receive any special allocations with respect to a “Special Limited Partner Interest” (as defined in the Partnership Agreement) pursuant to the Partnership Agreement.

Concurrently with the entry into the STAR III Merger Agreement, the Company and the Advisor entered into a termination letter agreement (the “Termination Agreement”), effective as of August 5, 2019. Pursuant to the Termination Agreement, the Advisory Agreement will be terminated at the effective time of the Merger. Also pursuant to the Termination Agreement, the Advisor agreed to waive any disposition fee it otherwise would be entitled to pursuant to the Advisory Agreement related to the Merger and agreed to reimburse STAR III for its costs if the STAR III stockholders reject the Merger at a meeting of stockholders.

2. Summary of Significant Accounting Policies

There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form10-K for the year ended December 31, 2018, other than Accounting Standards Update (“ASU”)2016-02, and the Securities and Exchange Commission’s (the “SEC”) Disclosure Update and Simplification rule (Release33-10532), as further described and defined below. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2018, included in the Company’s Annual Report on Form10-K filed with the SEC on March 15, 2019.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company, the consolidated variable interest entity (“VIE”) that the Company controls and of which the Company is the primary beneficiary, and the Operating Partnership’s subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation. The financial statements of the Company’s subsidiaries are prepared using accounting policies consistent with those of the Company. The Operating Partnership is a VIE because the Advisor, as the limited partner, lacks substantivekick-out rights and substantive participating rights. The Company is the primary beneficiary of, and consolidates, the Operating Partnership.

The accompanying unaudited consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the

E-11

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form10-Q and Article 10 ofRegulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments that are of a normal and recurring nature and necessary for a fair and consistent presentation of the results of such periods. Operating results for the three and nine months ended September 30, 2019, are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. The unaudited consolidated financial statements in this Quarterly Report on Form10-Q (the “Quarterly Report”) should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form10-K for the year ended December 31, 2018.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.

Fair Value Measurements

Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other assets and liabilities at fair value on anon-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:

• Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

• Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

• Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.

When available, the Company utilizes quoted market prices from an independent third-party source to determine fair value and will classify such items in Level 1 or Level 2. In instances where the market is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require the Company to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When the Company determines the market for a financial instrument owned by the Company to be illiquid or when market transactions for similar instruments do not appear orderly, the Company uses several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and will establish a fair value by assigning weights to the various valuation sources.

E-12

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

The following describes the valuation methodologies used by the Company to measure fair value, including an indication of the level in the fair value hierarchy in which each asset or liability is generally classified.

Interest rate cap agreements—The Company has entered into certain interest rate cap agreements. These derivatives are recorded at fair value. Fair value was based on a model-driven valuation using the associated variable rate curve and an implied market volatility, both of which were observable at commonly quoted intervals for the full term of the interest rate cap agreements. Therefore, the Company’s interest rate cap agreements were classified within Level 2 of the fair value hierarchy and are included in other assets in the accompanying consolidated balance sheets. Changes in the fair value of the interest rate cap agreements are recorded as interest expense in the accompanying consolidated statements of operations.

The following tables reflect the Company’s assets required to be measured at fair value on a recurring basis on the consolidated balance sheets:

	September 30, 2019
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements	$	—	$	1,819	$	—

	December 31, 2018
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements	$	—	$	377,456	$	—

Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument.

Fair Value of Financial Instruments

The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities, due to affiliates, distributions payable and mortgage notes payable, net.

The Company considers the carrying value of cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities and distributions payable to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. The fair value of amounts due to affiliates is not determinable due to the related party nature of such amounts. The Company has determined that its mortgage notes payable, net are classified as Level 3 within the fair value hierarchy.

E-13

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

The fair value of the mortgage notes payable, net is estimated using a discounted cash flow analysis using borrowing rates available to the Company for debt instruments with similar terms and maturities. As of September 30, 2019 and December 31, 2018, the fair value of the mortgage notes payable, net was $289,032,608 and $279,945,659, respectively, compared to the carrying value of $287,517,455 and $280,086,921, respectively.

Distribution Policy

The Company elected to be taxed as, and qualifies as, a REIT commencing with the Company’s taxable year ended December 31, 2016. To maintain its qualification as a REIT, the Company intends to make distributions each taxable year equal to at least 90% of its REIT taxable income (which is determined without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). The Company’s board of directors authorized a distribution to the holders of Class A shares and Class T shares, which began to accrue on May 19, 2016. The Company’s board of directors also authorized a distribution to the holders of Class R shares, which began to accrue on August 2, 2016.

Distributions declared during the period from January 1, 2018 to September 30, 2018, were based on daily record dates and calculated at a rate of $0.004110 per Class A share per day, $0.00394521 per Class R share per day subject to an annual distribution and shareholder servicing fee of 0.27%, and in some instances, $0.00369863 per Class R share per day subject to an annual distribution and shareholder servicing fee of 0.67% and $0.003376 per Class T share per day subject to an annual distribution and shareholder servicing fee of 1.125%, and in some instances, $0.003457 per Class T share per day subject to an annual distribution and shareholder servicing fee of 1.0%.

Distributions declared during the period from January 1, 2019 to September 30, 2019, were based on daily record dates and calculated at a rate of $0.004110 per Class A share, Class R share and Class T share per day. Each day during the period from May 19, 2016 to September 30, 2019, was a distribution record date with respect to Class A shares and Class T shares. Each day during the period from August 2, 2016 to September 30, 2019, was a distribution record date with respect to Class R shares.

Distributions to stockholders are determined by the board of directors of the Company and are dependent upon a number of factors relating to the Company, including funds available for the payment of distributions, financial condition, the timing of property acquisitions, capital expenditure requirements and annual distribution requirements in order for the Company to qualify as a REIT under the Internal Revenue Code. During the three and nine months ended September 30, 2019, the Company declared distributions totaling $0.378 and $1.122 per Class A, R and T shares of common stock, respectively. During the three and nine months ended September 30, 2018, the Company declared distributions totaling $0.378 and $1.122 per Class A share of common stock, $0.361 and $1.070 per Class R share of common stock and $0.313 and $0.928 per Class T share of common stock, respectively.

Per Share Data

Basic loss per share attributable to common stockholders for all periods presented are computed by dividing net loss by the weighted average number of shares of the Company’s common stock outstanding for each class of

E-14

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

shares outstanding during the period. Diluted loss per share is computed based on the weighted average number of shares of the Company’s common stock and all potentially dilutive securities, if any. Distributions declared per common share assume each share was issued and outstanding each day during the period. Nonvested shares of the Company’s restricted common stock give rise to potentially dilutive shares of the Company’s common stock but such shares were excluded from the computation of diluted earnings per share because such shares were anti-dilutive during the period.

In accordance with FASB ASC Topic260-10-45, Earnings Per Share, the Company uses thetwo-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 the relative percentage of each class of shares to the total number of outstanding shares. The Company does not have any participating securities outstanding but does have multiple classes of common stock, which at times had different dividend rates and an unvested portion of restricted Class A common stock. Earnings attributable to the unvested restricted Class A common stock are deducted from earnings in the computation of per share amounts where applicable.

Segment Disclosure

The Company has determined that it has one reportable segment with activities related to investing in multifamily properties. The Company’s investments in real estate are in different geographic regions, and management evaluates operating performance on an individual asset level. However, as each of the Company’s assets has similar economic characteristics, tenants and products and services, its assets have been aggregated into one reportable segment.

Reclassification

Certain amounts in the Company’s prior period consolidated financial statements were reclassified to conform to the current presentation. These reclassifications did not change the results of operations of prior periods. On January 1, 2019, the Company adopted ASU2016-02, as further described below. As a result, all income earned pursuant to tenant leases is reflected as one line item, “Rental Income,” in the consolidated statements of operations. To facilitate comparability, the Company has reclassified prior period’s lease andnon-lease income consistently with the current periods presented.

The table below provides a reconciliation of the prior period presentation of the income statement line items that were reclassified in the Company’s consolidated statements of operations to conform to the current period presentation, pursuant to the adoption of the new lease accounting standard and election of the single component practical expedient:

	Three Months Ended September 30, 2018		Nine Months Ended September 30, 2018
Rental income (presentation prior to January 1, 2019)	$	8,766,978	$	24,742,738
Tenant reimbursements(1) (presentation prior to January 1, 2019)		1,084,485		3,032,303
Rental income (presentation effective January 1, 2019)	$	9,851,463	$	27,775,041

E-15

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

(1) Tenant reimbursements include reimbursements for recoverable costs.

Recent Accounting Pronouncements

In February 2016, the FASB established ASC Topic 842 , Leases (“ASC 842”), by issuing ASU2016-02, which requires lessees to recognizeright-of-use assets and lease liabilities for operating leases on the balance sheet and disclose key information about leasing arrangements. ASC 842 also makes targeted changes to lessor accounting. ASC 842 was subsequently amended by ASU2018-01, Land Easement Practical Expedient for Transition to Topic 842 (“ASU2018-01”), ASU2018-10, Codification Improvements to Topic 842 (“ASU2018-10”), ASU2018-11, Targeted Improvements (“ASU2018-11”) and ASU2018-20, Leases (Topic 842), Narrow-scope Improvements for Lessors (“ASU2018-20”). ASC 842 requires a modified retrospective transition approach that was effective in the first quarter of 2019, subject to early adoption. The Company elected an optional transition method that allows entities to initially apply ASC 842 at the adoption date (January 1, 2019) and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company evaluated the impact of ASC 842 on its leases both as it relates to the Company acting as a lessee and as a lessor. Based on its evaluation, as it relates to the former, the Company elected to apply each of the practical expedients described in ASC842-10-65-1(f) that allowed, among other things, to not reassess lease classification conclusions or initial direct cost accounting as of December 31, 2018, therefore these leases continue to be accounted for as operating leases. The Company also elected the practical expedient described in ASC842-20-25-2 not to apply the recognition requirements in ASC 842 to short-term leases and instead, to recognize lease payments in the consolidated statement of operations on a straight-line basis over the lease term. The Company did not experience a material impact on the recognition of leases in the consolidated financial statements because the quantity of leased equipment by the Company is limited and immaterial to the consolidated financial statements. Upon adoption, the Company recognized an initial operating leaseright-of-use asset, net, of $18,629 and an operating lease liability, net, of $18,629.

As it relates to the Company as lessor, the Company did not experience a material impact on the recognition of leases in the consolidated financial statements because under ASC 842, lessors continue to account for leases using an approach that is substantially equivalent to historical guidance for sales-type leases, direct financing leases, and operating leases. The Company elected a practical expedient which allows lessors to not separatenon-lease components from the lease component when the timing and pattern of transfer for the lease components andnon-lease components are the same and if the lease component is classified as an operating lease. As a result, on January 1, 2019, the Company began presenting all rentals and reimbursements from tenants as a single line item rental income within the consolidated statements of operations. As of January 1, 2019, the Company implemented changes to its business processes and controls related to accounting for and the presentation and disclosure of leases, including the reclassification of tenant reimbursements, previously disclosed as part of tenant reimbursements and other, to rental income, in the consolidated statements of operations.

Under ASC 842, beginning on January 1, 2019, changes in the probability of collecting tenant rental income could result in direct adjustments of rental income and tenant receivables. The Company did not experience a material impact on its rental income and tenant receivables as of the adoption date.

E-16

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

The Company’s rental income consists of fixed rental payments from tenants under operating leases and is recognized on a straight-line basis over the respective operating lease terms. The Company recognizes minimum rent, including rental abatements, concessions and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of thenon-cancelable term of the related lease. The Company’s rental income that relates to variable lease payments consists of tenant reimbursements and includes reimbursements for recoverable costs, which are recognized as revenue in the period during which the applicable expenses are incurred and the tenant’s obligation to reimburse the Company arises.

The Company recognized $9,142,782 and $26,886,766 of rental income related to operating lease payments of which $9,142,782 and $26,886,766 was for variable lease payments for the three and nine months ended September 30, 2019.

In June 2016, the FASB issued ASU2016-13, Financial Instruments-Credit Losses (“ASU2016-13”). ASU2016-13 requires more timely recording of credit losses on loans and other financial instruments that are not accounted for at fair value through net income (loss), including loans held for investment,held-to-maturity debt securities, trade and other receivables, net investment in leases and other such commitments. ASU2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The amendments in ASU2016-13 require the Company to measure all expected credit losses based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets and eliminates the “incurred loss” methodology in current GAAP. In November 2018, the FASB issued ASU2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses (“ASU2018-19”), which clarifies that operating lease receivables accounted for under ASC 842 Leases, are not in the scope of the new credit losses guidance. The effective date and transition requirements for this guidance are the same as for ASU2016-13. ASU2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and related disclosures and does not expect a material impact on its consolidated financial statements and related disclosures from its adoption.

In August 2018, the FASB issued ASU2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement (“ASU2018-13”). The FASB issued ASU2018-13 to improve the effectiveness of fair value measurement disclosures by adding, eliminating, and modifying certain disclosure requirements. The issuance of ASU2018-13 is part of a disclosure framework project. The disclosure framework project’s objective and primary focus are to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear communication of the information required by GAAP that is most important to users of each entity’s financial statements. Achieving the objective of improving the effectiveness of the notes to financial statements includes: (1) the development of a framework that promotes consistent decisions by the FASB board about disclosure requirements and (2) the appropriate exercise of discretion by reporting entities. The amendments in ASU2018-13 modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in FASB Concepts Statement, Conceptual Framework for Financial Reporting-Chapter 8: Notes to Financial Statements, including the consideration of costs and benefits. ASU2018-13 removed certain disclosure requirements under Topic 820 such as the disclosure requirements of the valuation process for level 3 fair value measurements and modified

E-17

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

and added certain of the disclosure requirements in Topic 820. ASU2018-13 requires prospective and retrospective application depending on the amendment and is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact ASU2018-13 will have on its consolidated financial statements and related disclosures and believes that certain disclosures of interest rate cap agreements in its consolidated financial statements may be impacted by the adoption of ASU2018-13.

The SEC’s Disclosure Update and Simplification rule (Release33-10532) amends the interim financial statement requirements to require a reconciliation of changes in stockholders’ equity in the notes or as a separate statement. This analysis should reconcile the beginning balance to the ending balance of each caption in stockholders’ equity for each period for which an income statement is required to be filed and comply with the remaining content requirements of Rule3-04 of RegulationS-X. As a result, registrants will have to provide the reconciliation for both theyear-to-date and quarterly periods and comparable periods in Form10-Q but only for theyear-to-date periods in registration statements. The rule does not prescribe the format of the presentation as long as the appropriate periods are provided. Per a Compliance and Disclosure Interpretation (Q 105.09, Exchange Act Forms,10-Q), “the amendments are effective for all filings made on or after November 5, 2018. In light of the timing of effectiveness of the amendments and proximity of effectiveness to the filing date for most filers’ quarterly reports, the staff would not object if the filer’s first presentation of the changes in the shareholders’ equity is included in its Form10-Q for the quarter that begins after the effective date of the amendments.” This allowed the Company to adopt the amendment for the Company’s Form10-Q for the period ended March 31, 2019. The Company adopted this guidance in the nine months ended September 30, 2019 by presenting a reconciliation of changes in stockholders’ equity for the current and prior period as a separate statement.

3. Real Estate

As of September 30, 2019, the Company owned 10 multifamily properties comprised of a total of 2,775 apartment homes. The total acquisition price of the Company’s real estate portfolio was $400,252,928. As of September 30, 2019 and December 31, 2018, the Company’s portfolio was approximately 93.7% and 92.4% occupied and the average monthly rent was $1,183 and $1,136, respectively.

As of September 30, 2019 and December 31, 2018, accumulated depreciation and amortization related to the Company’s consolidated real estate properties were as follows:

	September 30, 2019
	Assets
	Land		Building and Improvements			Total Real Estate
Investments in real estate	$	45,908,171	$	362,143,004		$	408,051,175
Less: Accumulated depreciation and amortization		—		(32,960,809	)		(32,960,809	)
Net investments in real estate	$	45,908,171	$	329,182,195		$	375,090,366

E-18

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

	December 31, 2018
	Assets
	Land		Building and Improvements			Total Real Estate
Investments in real estate	$	45,908,171	$	355,780,664		$	401,688,835
Less: Accumulated depreciation and amortization		—		(21,387,012	)		(21,387,012	)
Net investments in real estate	$	45,908,171	$	334,393,652		$	380,301,823

Depreciation and amortization expense was $3,965,495 and $11,574,455 for the three and nine months ended September 30, 2019, and $3,866,775 and $12,804,145 for the three and nine months ended September 30, 2018, respectively.

Depreciation of the Company’s buildings and improvements was $3,965,276 and $11,573,797 for the three and nine months ended September 30, 2019, and $3,638,560 and $10,304,728 for the three and nine months ended September 30, 2018, respectively.

Amortization of the Company’s tenant origination and absorption costs was $0 and $0 for the three and nine months ended September 30, 2019, and $228,215 and $2,499,417 for the three and nine months ended September 30, 2018, respectively. Tenant origination and absorption costs had a weighted-average amortization period as of the date of acquisition of less than one year. At December 31, 2018, all tenant origination and absorption costs were fully amortized and written off.

Operating Leases

As of September 30, 2019, the Company’s real estate portfolio comprised 2,775 apartment homes and was approximately 96.4% leased by a diverse group of residents. The residential lease terms consist of lease durations equal to twelve months or less.

Some residential leases contain provisions to extend the lease agreements, options for early termination after paying a specified penalty and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires security deposits from tenants in the form of a cash deposit. Amounts required as security deposits vary depending upon the terms of the respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in accounts payables and accrued liabilities in the accompanying consolidated balance sheets and totaled $1,175,698 and $1,015,187 as of September 30, 2019 and December 31, 2018, respectively.

As of September 30, 2019 and 2018, no tenant represented over 10% of the Company’s annualized base rent.

E-19

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

4. Other Assets

As of September 30, 2019 and December 31, 2018, other assets consisted of:

	September 30, 2019		December 31, 2018
Prepaid expenses	$	351,610	$	262,850
Operating leaseright-of-use assets, net		44,696		—
Interest rate cap agreements		1,819		377,456
Deposits		249,389		266,394
Other assets	$	647,514	$	906,700

Amortization of the Company’s operating lease initial direct costs was $219 and $658 for the three and nine months ended September 30, 2019, respectively. The Company had no operating lease initial direct costs for the three and nine months ended September 30, 2018.

5. Debt

Mortgage Notes Payable

The following is a summary of mortgage notes payable, net secured by real property as of September 30, 2019 and December 31, 2018.

	September 30, 2019
					Interest Rate Range		Weighted Average Interest Rate
Type	Number of Instruments		Maturity Date Range		Minimum	Maximum				Principal Outstanding
Variable rate(1)		3		6/1/2026 - 9/1/2027	1-Mo LIBOR + 2.195%	1-Mo LIBOR + 2.47%		4.29	%	$	69,743,006
Fixed rate		7		8/1/2024 - 6/1/2029	3.73%	4.66%		3.91	%		219,535,000
Mortgage notes payable, gross		10						4.00	%		289,278,006
Deferred financing costs, net(2)											(1,760,551	)
Mortgage notes payable, net										$	287,517,455

E-20

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

	December 31, 2018
					Interest Rate Range		Weighted Average Interest Rate
Type	Number of Instruments		Maturity Date Range		Minimum	Maximum				Principal Outstanding
Variable rate(1)		6		6/1/2026 - 9/1/2027	1-Mo LIBOR + 2.195%	1-Mo LIBOR + 2.52%		4.86	%	$	156,892,000
Fixed rate		4		8/1/2024 - 6/1/2028	3.82%	4.66%		4.02	%		124,674,000
Mortgage notes payable, gross		10						4.49	%		281,566,000
Deferred financing costs, net(2)											(1,479,079	)
Mortgage notes payable, net										$	280,086,921

(1) See Note 10 (Derivative Financial Instruments) for a discussion of the interest rate cap agreements used to manage the exposure to interest rate movement on the Company’s variable rate loans.

(2) Accumulated amortization related to deferred financing costs, net as of September 30, 2019 and December 31, 2018, was $490,533 and $361,008, respectively.

Refinancing Transactions

On May 31, 2019 (the “Closing Date”), three indirect wholly-owned subsidiaries of the Company (each, a “Borrower” and collectively the “Borrowers”) terminated the existing mortgage loans with their lenders for an aggregate principal amount of $87,122,000 and entered into new loan agreements (each, a “Loan Agreement”) with, as applicable, PNC Bank, National Association (“PNC Bank”) and Newmark Knight Frank (“Newmark” and, together with PNC Bank, the “Lenders”) for an aggregate principal amount of $94,861,000 (the “Refinancing Transactions”). Each Borrower entered into a Loan Agreement with the applicable Lender pursuant to the Fannie Mae’s Green Execution Program (the “GEP”), as evidenced by a multifamily note. Pursuant to the GEP, the applicable Lender originates the mortgage loan and then transfers the loan to Fannie Mae. Each Loan Agreement provides for a term loan with a maturity date of June 1, 2029 (the “Maturity Date”), unless the Maturity Date is accelerated in accordance with the Loan terms. Each Loan with Newmark (each a “Newmark Loan” and, collectively the “Newmark Loans”) accrues interest at a fixed rate of 3.73% per annum. The loan with PNC Bank accrues interest at a fixed rate of 3.82% per annum. The entire outstanding principal balance and any accrued and unpaid interest on each of the Loans are due on the Maturity Date. Interest and principal payments on the Newmark Loans are payable monthly in arrears on specified dates as set forth in each Loan Agreement. Monthly payments are due and payable on the first day of each month, commencing July 1, 2019. The Company paid $491,655 in the aggregate in loan origination fees to the Lenders in connection with the Refinancing Transactions, and paid the Advisor a loan coordination fee of $711,459. The Loans are included in the mortgage notes payable table above as of September 30, 2019.

E-21

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Maturity and Interest

The following is a summary of the Company’s aggregate maturities as of September 30, 2019:

					Maturities During the Years Ending December 31,
Contractual Obligations	Total		Remainder of 2019		2020		2021		2022		2023		Thereafter
Principal payments on outstanding debt obligations(1)	$	289,278,006	$	26,994	$	374,945	$	1,835,900	$	2,611,190	$	3,305,764	$	281,123,213

(1) Scheduled principal payments on outstanding debt obligations are based on the terms of the notes payable agreements. Amounts exclude the deferred financing costs, net, associated with the notes payable.

The Company’s mortgage notes payable contain customary financial andnon-financial debt covenants. At September 30, 2019, the Company was in compliance with all debt covenants.

For the three and nine months ended September 30, 2019, the Company incurred interest expense of $3,077,197 and $10,014,805, respectively. Interest expense for the three and nine months ended September 30, 2019, includes amortization of deferred financing costs of $70,830 and $192,333, net unrealized losses from the change in fair value of interest rate cap agreements of $11,021 and $375,637, loan fees of $0 and $171,162 and interest rate cap proceeds of $0 and $1,668, respectively.

For the three and nine months ended September 30, 2018, the Company incurred interest expense of $2,998,775 and $7,909,070, respectively. Interest expense for the three and nine months ended September 30, 2018, includes amortization of deferred financing costs of $61,018 and $174,120 and net unrealized gains from the change in fair value of interest rate cap agreements of $120,720 and $665,445, respectively.

Interest expense of $968,011 and $1,064,648 was payable as of September 30, 2019 and December 31, 2018, respectively, and is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.

6. Stockholders’ Equity

General

Under the Charter, the total number of shares of capital stock authorized for issuance is 1,300,000,000, consisting of 1,200,000,000 shares of common stock, $0.01 par value per share, of which 480,000,000 shares are classified as Class A common stock, 240,000,000 shares are classified as Class R common stock and 480,000,000 shares are classified as Class T common stock, and 100,000,000 shares of preferred stock, $0.01 par value per share. The Company’s board of directors may amend the Charter from time to time to increase or decrease the aggregate number of shares of capital stock or the number of shares of capital stock of any class or series that it has authority to issue.

Common Stock

The shares of the Company’s common stock entitle the holders to one vote per share on all matters upon which stockholders are entitled to vote, to receive dividends and other distributions as authorized by the

E-22

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Company’s board of directors in accordance with the MGCL and to all rights of a stockholder pursuant to the Maryland General Corporation Law. The common stock has no preferences or preemptive, conversion or exchange rights.

On August 24, 2015, the Company issued 8,000 shares of Class A common stock for $200,000 to the Advisor.

The following table reflects information regarding shares of common stock sold in the Public Offering from inception through September 30, 2019:

	September 30, 2019
	Class A		Class R		Class T		Total
Shares of common stock issued - Primary Offering		3,371,785		465,907		4,427,053		8,264,745
Shares of common stock issued - DRP		157,012		13,622		227,925		398,559
Total shares of common stock issued - Public Offering		3,528,797		479,529		4,654,978		8,663,304
Gross offering proceeds - Primary Offering	$	83,142,845	$	10,482,148	$	105,408,116	$	199,033,109
Gross offering proceeds - DRP		3,691,826		306,640		5,150,991		9,149,457
Total offering proceeds - Public Offering	$	86,834,671	$	10,788,788	$	110,559,107	$	208,182,566
Offering costs, before distribution and shareholder servicing fees								(27,624,273	)
Offering proceeds, net of offering costs							$	180,558,293

On August 9, 2018, the Company granted 1,000 shares of restricted Class A common stock to each of its three independent directors pursuant to the Company’s independent directors’ compensation plan at a fair value of $25.00 per share in connection with theirre-election to the board of directors at the Company’s 2018 annual meeting of stockholders. The shares of restricted common stock vest and becomenon-forfeitable in four equal annual installments, beginning on the date of grant and ending on the third anniversary of the date of grant; provided, however, that the shares of restricted common stock will become fully vested on the earlier to occur of (1) the termination of the independent director’s service as a director due to his or her death or disability or (2) a change in control of the Company.

E-23

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

The issuance and vesting activity for the nine months ended September 30, 2019, and year ended December 31, 2018, for the restricted common stock issued to the Company’s independent directors pursuant to the independent directors’ compensation plan is as follows:

	Nine Months Ended September 30, 2019			Year Ended December 31, 2018
Nonvested shares at the beginning of the period		5,250			5,250
Granted shares		—			3,000
Vested shares		(3,000	)		(3,000	)
Nonvested shares at the end of the period		2,250			5,250

Included in general and administrative expenses is $9,379 and $42,249 for the three and nine months ended September 30, 2019, and $35,613 and $63,539 for the three and nine months ended September 30, 2018, respectively, for compensation expense related to the issuance of restricted common stock. As of September 30, 2019, the compensation expense related to the issuance of the restricted common stock not yet recognized was $50,762. The weighted average remaining term of the restricted common stock was 1.19 years as of September 30, 2019. As of September 30, 2019, no shares of restricted common stock issued to the independent directors had been forfeited.

Preferred Stock

The Charter also provides the Company’s board of directors with the authority to issue one or more classes or series of preferred stock, and prior to the issuance of such shares of preferred stock, the board of directors shall have the power from time to time to classify or reclassify, in one or more series, any unissued shares and designate the preferences, rights and privileges of such shares of preferred stock. The Company’s board of directors is authorized to amend the Charter without the approval of the stockholders to increase the aggregate number of authorized shares of capital stock or the number of shares of any class or series that the Company has authority to issue. As of September 30, 2019 and December 31, 2018, no shares of the Company’s preferred stock were issued and outstanding.

Distribution Reinvestment Plan

The Company’s board of directors approved the DRP through which common stockholders could elect to reinvest an amount equal to the distributions declared on their shares of common stock in additional shares of the Company’s common stock in lieu of receiving cash distributions. The purchase price per Class A, Class R and Class T share of common stock under the DRP was initially $23.75, $22.50 and $22.62, respectively. On October 9, 2018, the Company’s board of directors approved a price per Class A, Class R and Class T share of common stock for the DRP of $22.54, effective November 1, 2018. The Company’s board of directors elected to suspend the DRP with respect to distributions that accrue after February 1, 2019. As a result, all distributions beginning with distributions that accrued in February 2019 are paid in cash. The Company’s board of directors may, from time to time in its sole discretion, reinstate the DRP, although there is no assurance as to if or when this will happen.

E-24

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

No sales commissions or dealer manager fees were payable on shares sold through the DRP. The Company’s board of directors may amend, suspend or terminate the DRP at its discretion at any time upon ten days’ notice to the Company’s stockholders.

Share Repurchase Program and Redeemable Common Stock

The Company’s share repurchase program may provide an opportunity for stockholders to have their shares of common stock repurchased by the Company, subject to certain restrictions and limitations. No shares can be repurchased under the Company’s share repurchase program until after the first anniversary of the date of purchase of such shares; provided, however, that this holding period shall not apply to repurchases requested within 270 days after the death or disability of a stockholder.

Prior to the date the Company announced an estimated value per share of its common stock, the purchase price for shares repurchased under the Company’s share repurchase program was as follows:

Share Purchase Anniversary	Repurchase Price on Repurchase Date(1)
Less than 1 year	No Repurchase Allowed
1 year	92.5% of Purchase Price
2 years	95.0% of Purchase Price
3 years	97.5% of Purchase Price
4 years	100.0% of Purchase Price
In the event of a stockholder’s death or disability	Average Issue Price for Shares(2)

(1) As adjusted for any stock dividends, combinations, splits, recapitalizations or any similar transaction with respect to the shares of common stock. Repurchase price includes the full amount paid for each share, including all sales commissions and dealer manager fees.

(2) The purchase price per share for shares repurchased upon the death or disability of a stockholder will be equal to the average issue price per share for all of the stockholder’s shares. The requiredone-year holding period does not apply to repurchases requested within 270 days after the death or disability of a stockholder.

Beginning October 12, 2018, the date the Company first published its estimated value per share of its common stock, the purchase price for shares repurchased under the Company’s share repurchase program is as follows:

Share Purchase Anniversary	Repurchase Price on Repurchase Date(1)(2)
Less than 1 year	No Repurchase Allowed
1 year	92.5% of the Lesser of Purchase Price or Estimated Value per Share
2 years	95.0% of the Lesser of Purchase Price or Estimated Value per Share
3 years	97.5% of the Lesser of Purchase Price or Estimated Value per Share
4 years	100.0% of the Lesser of Purchase Price or Estimated Value per Share
In the event of a stockholder’s death or disability	Average Issue Price for Shares(3)

E-25

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

(1) As adjusted for any stock dividends, combinations, splits, recapitalizations or any similar transaction with respect to the shares of common stock. Repurchase price includes the full amount paid for each share, including all sales commissions and dealer manager fees.

(2) For purposes of the share repurchase program, the “Estimated Value per Share” equals the most recent publicly disclosed estimated value per share determined by the Company’s board of directors. On October 12, 2018, the Company publicly disclosed an estimated value per share of $22.54 for each class of shares of its common stock based on valuations by independent third-party appraisers or qualified valuation experts.

(3) The purchase price per share for shares repurchased upon the death or disability of a stockholder will be equal to the average issue price per share for all of the stockholder’s shares. The requiredone-year holding period does not apply to repurchases requested within 270 days after the death or disability of a stockholder.

The purchase price per share for shares repurchased pursuant to the Company’s share repurchase program will be further reduced by the aggregate amount of net proceeds per share, if any, distributed to the Company’s stockholders prior to the repurchase date as a result of the sale of one or more of the Company’s assets that constitutes a return of capital distribution as a result of such sales.

Repurchases of shares of the Company’s common stock will be made quarterly upon written request to the Company at least 15 days prior to the end of the applicable quarter. Repurchase requests will be honored approximately 30 days following the end of the applicable quarter (the “Repurchase Date”). Stockholders may withdraw their repurchase request at any time up to three business days prior to the Repurchase Date.

The following table reflects repurchase activity for the three and nine months ended September 30, 2019 and 2018:

	Three Months Ended September 30, 2019								Nine Months Ended September 30, 2019
	Class A		Class R		Class T		Total		Class A		Class R		Class T		Total
Repurchase requests (in shares)		—		—		2,688		2,688		39,851		713		23,386		63,950
Repurchase requests (value)	$	—	$	—	$	64,000	$	64,000	$	857,505	$	14,841	$	519,115	$	1,391,461
Repurchases fulfilled (in shares)		20,230		—		11,012		31,242		66,030		713		20,698		87,441
Repurchase requests fulfilled (value)	$	427,529	$	—	$	240,358	$	667,887	$	1,453,327	$	14,841	$	455,115	$	1,923,283

	Three Months Ended September 30, 2018								Nine Months Ended September 30, 2018
	Class A		Class R		Class T		Total		Class A		Class R		Class T		Total
Repurchase requests (in shares)		3,557		—		1,211		4,768		17,152		3,608		2,528		23,288
Repurchase requests (value)	$	75,724	$	—	$	25,734	$	101,458	$	392,278	$	75,097	$	57,003	$	524,378
Repurchases fulfilled (in shares)		2,543		—		420		2,963		17,143		3,608		1,737		22,488
Repurchase requests fulfilled (value)	$	57,971	$	—	$	9,250	$	67,221	$	398,445	$	75,097	$	40,519	$	514,061

E-26

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

In connection with the proposed Merger, on August 5, 2019, the board of directors approved the Amended and Restated Share Repurchase Plan (the “Amended & Restated SRP”), which became effective September 5, 2019, and applied with repurchases made on repurchase dates (as defined in the Amended & Restated SRP) subsequent to the effective date of the Amended & Restated SRP. Under the Amended & Restated SRP, the Company will only repurchase shares of common stock in connection with the death or qualifying disability (as defined in the Amended & Restated SRP) of a stockholder, subject to certain terms and conditions specified in the Amended & Restated SRP.

The Company is not obligated to repurchase shares of its common stock under the share repurchase program. The share repurchase program limits the number of shares to be repurchased in any calendar year to the lesser of (1) 5% of the weighted average number of shares of common stock outstanding during the prior calendar year and (2) those that could be funded from the net proceeds from the sale of shares under the DRP in the prior calendar year, plus such additional funds as may be reserved for that purpose by the Company’s board of directors. Such sources of funds could include cash on hand, cash available from borrowings and cash from liquidations of securities investments as of the end of the applicable month, to the extent that such funds are not otherwise dedicated to a particular use, such as working capital, cash distributions to stockholders or purchases of real estate assets. There is no fee in connection with a repurchase of shares of the Company’s common stock pursuant to the Company’s share repurchase program.

As of September 30, 2019 and 2018, the Company had outstanding and unfulfilled repurchase requests of 2,688 (pursuant to the Amended & Restated SRP) and 3,857 shares of common stock and recorded $64,000 and $81,708 in accounts payable and accrued liabilities on the accompanying consolidated balance sheets related to these unfulfilled repurchase requests, all of which were repurchased on the October 31, 2019 and 2018 repurchase dates, respectively.

The Company cannot guarantee that the funds set aside for the share repurchase program will be sufficient to accommodate all repurchase requests made in any quarter. In the event that the Company does not have sufficient funds available to repurchase all of the shares of the Company’s common stock for which repurchase requests have been submitted in any quarter, such outstanding repurchase requests will automatically roll over to the subsequent quarter and priority will be given to redemption requests in the case of the death or disability of a stockholder. If the Company repurchases less than all of the shares subject to a repurchase request in any quarter, with respect to any shares which have not been repurchased, a stockholder can withdraw the stockholder’s request for repurchase. Pending requests will be honored among all requests for redemptions in any given repurchase period as follows: first, pro rata as to repurchases sought upon a stockholder’s death or disability; and, next, pro rata as to other repurchase requests. Shares repurchased under the share repurchase program to satisfy the required minimum distribution requirements under the Internal Revenue Code applicable to retirement benefit plans and IRAs will be repurchased on or after the first anniversary of the date of purchase of such shares at 100% of the purchase price or at 100% of the estimated value per share, as applicable.

The Company’s board of directors may, in its sole discretion, amend, suspend or terminate the share repurchase program at any time upon 30 days’ notice to its stockholders if it determines that the funds available to fund the share repurchase program are needed for other business or operational purposes or that amendment, suspension or termination of the share repurchase program is in the best interest of the Company’s stockholders.

E-27

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Therefore, a stockholder may not have the opportunity to make a repurchase request prior to any potential termination of the Company’s share repurchase program. The share repurchase program will terminate in the event that a secondary market develops for the Company’s shares of common stock.

For the three and nine months ended September 30, 2019, the Company reclassified $667,887 and $2,951,937, net of $667,887 and $1,923,283 of fulfilled repurchase requests pursuant to the share repurchase program from temporary equity to permanent equity, which are included as additionalpaid-in capital in the accompanying consolidated balance sheets. Pursuant to the share repurchase program for the three and nine months ended September 30, 2018, the Company reclassified $1,241,466 and $2,804,736, net of $67,221 and $514,061 of fulfilled repurchase requests, respectively, from permanent equity to temporary equity, which are included as redeemable common stock on the accompanying consolidated balance sheets.

Distributions

The Company’s long-term policy is to pay distributions solely from cash flow from operations. Further, because the Company may receive income from interest or rents at various times during the Company’s fiscal year and because the Company may need cash flow from operations during a particular period to fund capital expenditures and other expenses, the Company’s expectation during its operational stage is that it will continue to declare distributions in anticipation of cash flow that the Company expects to receive during a later period, and the Company expects to pay these distributions in advance of its actual receipt of these funds. In these instances, the Company’s board of directors has the authority under its organizational documents, to the extent permitted by Maryland law, to fund distributions from sources such as borrowings, offering proceeds or advances and the deferral of fees and expense reimbursements by the Advisor, in its sole discretion. If the Company pays distributions from sources other than cash flow from operations, the Company will have fewer funds available for investments and stockholders’ overall return on their investment in the Company may be reduced.

The Company elected to be taxed as, and qualifies as, a REIT for federal income tax purposes commencing with the taxable year ended December 31, 2016. To qualify as a REIT, the Company must make aggregate annual distributions to its stockholders of at least 90% of the Company’s REIT taxable income (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). If the Company meets the REIT qualification requirements, the Company generally will not be subject to federal income tax on the income that the Company distributes to its stockholders each year.

E-28

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Distributions Declared and Paid

The following table reflects per share daily distribution rates and annualized distribution rates for the first, second and third fiscal quarters of 2019 and 2018 :

	2019(1)									2018(1)
	1st Quarter			2nd Quarter			3rd Quarter			1st Quarter			2nd Quarter			3rd Quarter
Daily Distribution per Class A share(2)	$	0.004110		$	0.004110		$	0.004110		$	0.004110		$	0.004110		$	0.004110
Daily Distribution per Class R share(2)(3)	$	0.004110		$	0.004110		$	0.004110		$	0.00394521		$	0.00394521		$	0.00394521
Daily Distribution per Class T share(2)(4)	$	0.004110		$	0.004110		$	0.004110		$	0.003376		$	0.003376		$	0.003376
Annualized Rate Based on Purchase Price:
Per Class A share		6.00	%		6.00	%		6.00	%		6.00	%		6.00	%		6.00	%
Per Class R share		6.67	%		6.67	%		6.67	%		6.40	%		6.40	%		6.40	%
Per Class T share		6.30	%		6.30	%		6.30	%		5.17	%		5.17	%		5.17	%

(1) The Company’s board of directors approved a cash distribution that accrued at the above rates per day for each share of the Company’s Class A common stock, Class R common stock and Class T common stock, which if paid each day over a365-day period is equivalent to the per share annualized rates reflected above based on a purchase price of $25.00 per share of Class A common stock, $22.50 per share of Class R common stock and $23.81 per share of Class T common stock.

(2) The distributions declared accrue daily to stockholders of record as of the close of business on each day and are payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month. There is no guarantee that the Company will continue to pay distributions at these rates or at all.

(3) Distributions during the three and nine months ended September 30, 2018, were based on daily record dates and calculated at a rate of $0.00394521 per share of Class R common stock per day for Class R common stock subject to an annual distribution and shareholder servicing fee of 0.27%. In some instances during the three and nine months ended September 30, 2018, the Company paid distributions at a rate of $0.00369863 per share of Class R common stock per day for Class R common stock subject to an annual distribution and shareholder servicing fee of 0.67%.

(4) Distributions during the three and nine months ended September 30, 2018, were based on daily record dates and calculated at a rate of $0.003457 per share of Class T common stock per day for Class T common stock subject to an annual distribution and shareholder servicing fee of 1.0%. In some instances during the three and nine months ended September 30, 2018, the Company paid distributions at a rate of $0.003376 per share of Class T common stock per day for Class T common stock subject to an annual distribution and shareholder fee of 1.125%.

E-29

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

The following tables reflect distributions declared and paid to Class A common stockholders, Class R common stockholders and Class T common stockholders for the three and nine months ended September 30, 2019 and 2018:

	Three Months Ended September 30, 2019								Nine Months Ended September 30, 2019
	Class A		Class R		Class T		Total		Class A		Class R		Class T		Total
DRP distributions declared (in shares)		—		—		—		—		7,715		909		14,754		23,378
DRP distributions declared (value)	$	—	$	—	$	—	$	—	$	173,894	$	20,497	$	332,562	$	526,953
Cash distributions declared		1,313,225		179,679		1,752,258		3,245,162		3,744,962		512,916		4,875,715		9,133,593
Total distributions declared	$	1,313,225	$	179,679	$	1,752,258	$	3,245,162	$	3,918,856	$	533,413	$	5,208,277	$	9,660,546
DRP distributions paid (in shares)		—		—		—		—		15,487		1,845		31,246		48,578
DRP distributions paid (value)	$	—	$	—	$	—	$	—	$	349,083	$	41,587	$	704,286	$	1,094,956
Cash distributions paid		1,315,719		179,679		1,753,616		3,249,014		3,590,399		495,557		4,592,456		8,678,412
Total distributions paid	$	1,315,719	$	179,679	$	1,753,616	$	3,249,014	$	3,939,482	$	537,144	$	5,296,742	$	9,773,368

	Three Months Ended September 30, 2018								Nine Months Ended September 30, 2019
	Class A		Class R		Class T		Total		Class A		Class R		Class T		Total
DRP distributions declared (in shares)		21,257		2,304		35,041		58,602		59,385		6,014		94,730		160,129
DRP distributions declared (value)	$	504,844	$	51,845	$	792,617	$	1,349,306	$	1,410,378	$	135,315	$	2,142,798	$	3,688,491
Cash distributions declared		780,204		107,813		586,129		1,474,146		2,165,573		282,840		1,579,050		4,027,463
Total distributions declared	$	1,285,048	$	159,658	$	1,378,746	$	2,823,452	$	3,575,951	$	418,155	$	3,721,848	$	7,715,954
DRP distributions paid (in shares)		20,611		2,189		34,039		56,839		58,405		5,708		91,734		155,847
DRP distributions paid (value)	$	489,496	$	49,225	$	769,966	$	1,308,687	$	1,387,118	$	128,418	$	2,075,018	$	3,590,554
Cash distributions paid		763,808		102,915		563,745		1,430,468		2,122,328		270,739		1,526,010		3,919,077
Total distributions paid	$	1,253,304	$	152,140	$	1,333,711	$	2,739,155	$	3,509,446	$	399,157	$	3,601,028	$	7,509,631

As of September 30, 2019, $1,056,993 of distributions declared were payable and are included in distributions payable in the accompanying consolidated balance sheets, which included $427,412, $58,591 and $570,990 of Class A common stock, Class R common stock and Class T common stock, respectively, all of which were payable in cash.

As of December 31, 2018, $1,169,815 of distributions declared were payable and included in distributions payable in the accompanying consolidated balance sheets, which included $448,039, $62,322 and $659,454 of Class A common stock, Class R common stock and Class T common stock, respectively, of which $175,189, $21,090 and $371,724, or 7,772, 936 and 16,492 shares of Class A common stock, Class R common stock and Class T common stock, are attributable to the DRP, respectively.

As reflected in the table above, for the three and nine months ended September 30, 2019, the Company paid total distributions of $3,249,014 and $9,773,368, which related to distributions declared for each day in the period from June 1, 2019 through August 31, 2019 and December 1, 2018 through August 31, 2019, respectively.

For the three and nine months ended September 30, 2018, the Company paid total distributions of $2,739,155 and $7,509,631, which related to distributions declared for each day in the period from June 1, 2018 through August 31, 2018 and December 31, 2017 through August 31, 2018, respectively.

E-30

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

7. Related Party Arrangements

The Company entered into the Advisory Agreement with the Advisor and a Dealer Manager Agreement with the Dealer Manager. Pursuant to the Advisory Agreement and Dealer Manager Agreement, the Company pays the Advisor and the Dealer Manager specified fees upon the provision of certain services related to the Public Offering, the investment of funds in real estate and real estate-related investments and the management of the Company’s investments and for other services (including, but not limited to, the disposition of investments) as well as make certain distributions in connection with the Company’s liquidation or listing on a national stock exchange. Subject to the limitations described below, the Company also reimbursed the Advisor and its affiliates for organization and offering costs incurred by the Advisor and its affiliates on behalf of the Company, as well as acquisition and certain operating expenses incurred on behalf of the Company or incurred in connection with providing services to the Company.

E-31

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Amounts attributable to the Advisor and its affiliates incurred (earned) for the three and nine months ended September 30, 2019 and 2018, and amounts outstanding to the Advisor and its affiliates as of September 30, 2019 and December 31, 2018, are as follows:

	Incurred (Earned) For the						Incurred (Earned) For the
	Three Months Ended September 30,						Nine Months Ended September 30,						Payable (Prepaid) as of
	2019			2018			2019			2018			September 30, 2019			December 31, 2018
Consolidated Statements of Operations:
Expensed
Investment management fees(1)	$	1,113,302		$	1,078,332		$	3,321,625		$	3,092,157		$	1,010		$	711,025
Loan coordination fees(1)		—			—			711,458			—			—			—
Property management:
Fees(1)		314,926			312,333			948,497			870,242			168,641			180,208
Reimbursement of onsite personnel(2)		955,838			940,688			2,818,693			2,537,790			287,998			187,936
Reimbursement of other(1)		215,425			138,105			605,232			312,382			11,078			11,173
Reimbursement of property operations(2)		7,033			8,350			22,325			22,215			—			—
Reimbursement of property G&A(3)		8,300			3,940			26,289			22,214			—			—
Other operating expenses(3)		284,313			285,162			917,922			861,533			151,480			105,491
Rental revenue(4)		(5,946	)		(5,013	)		(17,032	)		(5,013	)		—			—
Property insurance(5)		175,905			139,926			442,923			251,232			(108,393	)		(40,276	)
Insurance proceeds(6)		—			—			—			—			—			(75,000	)
Consolidated Balance Sheets:
Assets
Capitalized
Acquisition fees(7)		—			—			—			624,854			—			—
Acquisition expenses(7)		—			—			—			161,423			—			—
Construction management:
Fees(8)		144,433			49,778			266,197			116,489			12,531			5,256
Reimbursements of labor costs(8)		34,553			91,823			113,137			299,152			4,215			16,899
Capital expenditures(8)		—			—			—			21,538			—			—
Additionalpaid-in capital
Other offering costs reimbursement		—			735,217			—			2,140,104			—			3,680,816
Selling commissions:
Class A		—			332,676			—			926,929			—			—
Class T		—			266,904			—			801,529			—			—
Dealer manager fees:
Class A		—			149,384			—			422,055			—			—
Class T		—			222,420			—			667,939			—			—
Distribution and shareholder servicing fee:
Class R(9)		—			22,667			—			42,572			—			—
Class T(9)		—			279,009			—			812,924			—			—
	$	3,248,082		$	5,051,701		$	10,177,266		$	15,002,260		$	528,560		$	4,783,528

(1) Included in fees to affiliates in the accompanying consolidated statements of operations.

E-32

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

(2) Included in operating, maintenance and management in the accompanying consolidated statements of operations.

(3) Included in general and administrative expenses in the accompanying consolidated statements of operations.

(4) Included in rental income in the accompanying consolidated statements of operations.

(5) Property related insurance expense and the amortization of the prepaid insurance deductible account are included in general and administrative expenses in the accompanying consolidated statements of operations. The amortization of the prepaid property insurance is included in operating, maintenance and management expenses in the accompanying consolidated statements of operations. The prepaid insurance is included in other assets in the accompanying consolidated balance sheets upon payment.

(6) Included in other income in the accompanying consolidated statements of operations.

(7) Included in total real estate, cost in the accompanying consolidated balance sheets following the adoption of ASU2017-01,Business Combinations (Topic 805): Clarifying the Definition of Business (“ASU2017-01”), as of January 1, 2017. ASU2017-01 now forms part of ASC 805Business Combinations (“ASC 805”).

(8) Included in building and improvements in the accompanying consolidated balance sheets.

(9) Included in additionalpaid-in capital as commissions on sales of common stock and related dealer manager fees to affiliates in the accompanying consolidated statements of stockholders’ equity.

Organization and Offering Costs

Organization and offering expenses include all expenses (other than sales commissions, the dealer manager fee and the distribution and shareholder servicing fee) paid by the Company in connection with the Public Offering, including legal, accounting, tax, printing, mailing and filing fees, charges of the Company’s escrow holder and transfer agent, expenses of organizing the Company, data processing fees, advertising and sales literature costs, transfer agent costs, information technology costs, bona fideout-of-pocket due diligence costs and amounts to reimburse the Advisor or its affiliates for the salaries of its employees and other costs in connection with preparing sales materials and providing other administrative services in connection with the Public Offering. Any such reimbursement will not exceed actual expenses incurred by the Advisor. After the termination of the Public Offering, the Advisor had an obligation to reimburse the Company to the extent total organization and offering expenses (including sales commissions, dealer manager fees and the distribution and shareholder servicing fees) incurred by the Company exceed 15% of the gross proceeds raised in the Primary Offering. Total organization and offering expenses incurred by the Company did not exceed 15% of the gross offering proceeds raised in the Primary Offering.

The Company also reimbursed costs of bona fide training and education meetings held by the Company (primarily the travel, meal and lodging costs of registered representatives of broker-dealers), attendance and sponsorship fees and cost reimbursement of employees of the Company’s affiliates to attend seminars conducted by broker-dealers and, in certain cases, reimbursement to participating broker-dealers for technology costs associated with the offering, costs and expenses related to such technology costs, and costs and expenses associated with the facilitation of the marketing of the Company’s shares and the ownership of the Company’s shares by such broker-dealers’ customers; provided, however, that the Company did not pay any of the foregoing costs to the extent that such payment would cause total underwriting compensation to exceed 10% of the gross offering proceeds of the Primary Offering, as required by the rules of the Financial Industry Regulatory Authority, Inc. (“FINRA”).

Organization and offering costs include payments made to Crossroads Capital Advisors, whose parent company indirectly owns 25% of the Steadfast REIT Investments, LLC (the “Sponsor”) for certain specified services provided to the Company on behalf of the Advisor, including, without limitation, establishing operational and administrative processes; engaging and negotiating with vendors; providing recommendations

E-33

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

and advice for the development of marketing materials and ongoing communications with investors; and assisting in public relations activities and the administration of the DRP and share repurchase program. From the commencement of the Public Offering through September 30, 2019 and December 31, 2018, the Advisor had incurred on the Company’s behalf $1,127,576 and $1,127,576, respectively, of costs attributable to Crossroads Capital Advisors for the services described above, all of which was recorded by the Company as offering costs during the applicable periods.

The amount of reimbursable organization and offering (“O&O”) costs that have been paid or recognized from inception through September 30, 2019, is as follows:

	Amount			Percentage of Gross Offering Proceeds
Gross offering proceeds:	$	199,033,109			100.00	%
O&O limitation		15.00	%
Total O&O costs available to be paid/reimbursed	$	29,854,966			15.00	%
O&O expenses recorded:
Sales commissions	$	7,980,090			4.01	%
Broker Dealer fees(1)		5,061,337			2.54	%
Distribution and shareholder servicing fees(2)		1,334,800			0.67	%
Offering cost reimbursements		14,582,846			7.33	%
Organizational costs reimbursements		26,980			0.01	%
Total O&O cost reimbursements recorded by the Company	$	28,986,053			14.56	%

(1) Includes $1,903,127 of marketing reallowance paid to participating broker dealers.

(2) Includes the distribution and shareholder servicing fees paid from inception through September 30, 2019, for Class R shares of 0.27% and 0.67% and Class T shares up to 1.125% of the purchase price per share sold in the Public Offering. The distribution and shareholder servicing fees were paid from sources other than Public Offering proceeds.

When recognized, organization costs are expensed as incurred. From inception through September 30, 2019, the Advisor incurred $26,980 of organizational costs on the Company’s behalf, all of which was reimbursed to the Advisor.

Offering costs, including selling commissions and dealer manager fees and the distribution and shareholder servicing fees, were deferred and charged to stockholders’ equity. All such amounts were reimbursed to the Advisor, the Dealer Manager or their affiliates from gross offering proceeds except for the distribution and shareholder servicing fees, which were paid from sources other than Public Offering proceeds. For the three and nine months ended September 30, 2019, the Advisor did not incur offering costs related to the Public Offering. For the three and nine months ended September 30, 2018, the Advisor incurred $395,373 and $4,420,040, respectively, of offering costs related to the Public Offering. The Advisor incurred total offering costs related to the Public Offering of $25,485,548 from inception through September 30, 2019, of which $17,875,513 was paid.

E-34

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

The Company accrued $0 and $3,680,816 for the reimbursement of offering costs in the accompanying consolidated balance sheets as of September 30, 2019 and December 31, 2018, respectively.

Investment Management Fee

The Company pays the Advisor a monthly investment management fee equal toone-twelfth of 1.0% of the value of the Company’s investments in properties and real estate-related assets. For the purposes of the investment management fee, the value of the Company’s investments in properties equaled their costs, until the investments were valued by an independent third-party appraiser or qualified independent valuation expert. “Costs” are calculated by including acquisition fees, acquisition expenses, renovations and upgrades, and any debt attributable to such investments, or the Company’s proportionate share thereof in the case of investments made through joint ventures.

Acquisition Fees and Expenses

The Company pays the Advisor an acquisition fee equal to 2.0% of the cost of the investment which includes the amount actually paid or budgeted to fund the acquisition, origination, development, construction or improvement of any real property or real estate-related asset acquired. In addition to acquisition fees, the Company reimburses the Advisor for amounts directly incurred by the Advisor and amounts the Advisor pays to third parties in connection with the selection, evaluation, acquisition and development of a property or acquisition of real estate-related assets, whether or not the Company ultimately acquires the property or the real estate-related assets.

The Charter limits the Company’s ability to pay acquisition fees if the total of all acquisition fees and expenses relating to the purchase would exceed 6.0% of the contract purchase price. Under the Charter, a majority of the Company’s board of directors, including a majority of the independent directors, is required to approve any acquisition fees (or portion thereof) that would cause the total of all acquisition fees and expenses relating to an acquisition to exceed 6.0% of the contract purchase price. In connection with the purchase of securities, the acquisition fee may be paid to an affiliate of the Advisor that is registered as a FINRA member broker-dealer if applicable FINRA rules would prohibit the payment of the acquisition fee to a firm that is not a registered broker-dealer.

Loan Coordination Fee

Subject to the determination by a majority of the independent directors that the Advisor provides a substantial amount of services in connection with the origination or refinancing of any debt financing obtained by the Company that is used to refinance properties or other permitted investments or financing in connection with a recapitalization of the Company, the Company pays the Advisor a loan coordination fee equal to 0.75% of the amount available under such financing.

Property Management Fees and Expenses

The Company entered into Property Management Agreements (each, as amended from time to time, a “Property Management Agreement”) with Steadfast Management Company, Inc., an affiliate of the Sponsor (the

E-35

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

“Property Manager”), in connection with the management of each of the Company’s properties. The property management fee payable with respect to each property under the Property Management Agreements at September 30, 2019, ranged from 2.75% to 3.0% of the gross revenue of the property (as defined in the Property Management Agreement). In addition, the Property Manager may also earn an incentive management fee equal to 1.0% of total collections based on performance metrics of the property. The Property Manager may subcontract with third-party property managers and will be responsible for supervising and compensating those third-party property managers and will be paid an oversight fee equal to 1.0% of the gross revenues of the property managed for providing such supervisory services. In no event will the Company pay its Property Manager or any affiliate both a property management fee and an oversight fee with respect to any particular property. Each Property Management Agreement has aninitial one-year term and will continue thereafter on amonth-to-month basis unless either party gives60-day prior notice of its desire to terminate the Property Management Agreement, provided that the Company may terminate the Property Management Agreement at any time upon a determination of gross negligence, willful misconduct or bad acts of the Property Manager or its employees or upon an uncured breach of the Property Management Agreement upon 30 days’ prior written notice to the Property Manager. In the event of a termination of the Property Management Agreement by the Company without cause, the Company will pay a termination fee to the Property Manager equal to three months of the monthly management fee based on the average gross collections for the three months preceding the date of termination.

In addition to the property management fee, the Property Management Agreements also specify certain other reimbursements payable to the Property Manager or its affiliates, including reimbursements for benefit administration, information technology infrastructure, licenses, support and training services and capital expenditures. The Company also reimburses the Property Manager for the salaries and related benefits ofon-site property management employees.

Construction Management Fees

The Company entered into Construction Management Agreements (each, a “Construction Management Agreement”) with Pacific Coast Land & Construction, Inc., an affiliate of the Sponsor (the “Construction Manager”), in connection with capital improvements and renovation or value-enhancement projects for certain properties the Company acquires. The construction management fee payable with respect to each property under the Construction Management Agreements is equal to 6.0% of the costs of the improvements for which the Construction Manager has planning and oversight authority. Generally, each Construction Management Agreement can be terminated by either party with 30 days’ prior written notice to the other party. Construction management fees are capitalized to the respective real estate properties in the period in which they are incurred, as such costs relate to capital improvements and renovations for apartment homes taken out of service while they undergo the planned renovation.

The Company may also reimburse the Construction Manager for the salaries and related benefits of certain of its employees for time spent working on capital improvements and renovations.

Property Insurance

The Company deposits amounts with an affiliate of the Sponsor to fund a prepaid insurance deductible account to cover the cost of required insurance deductibles across all properties of the Company and other

E-36

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

affiliated entities. Upon filing a major claim, proceeds from the insurance deductible account may be used by the Company or another affiliate of the Sponsor. In addition, the Company deposits amounts with an affiliate of the Sponsor to cover the cost of property and property related insurance across certain properties of the Company.

Other Operating Expense Reimbursement

In addition to the various fees paid to the Advisor, the Company is obligated to pay directly or reimburse all expenses incurred by the Advisor in providing services to the Company, including the Company’s allocable share of the Advisor’s overhead, such as rent, employee costs, benefit administration costs, utilities and information technology costs. The Company will not reimburse the Advisor for employee costs in connection with services for which the Advisor or its affiliates receive acquisition fees, investment management fees, loan coordination fees and disposition fees or for the employee costs the Advisor pays to the Company’s executive officers.

The Charter limits the Company’s total operating expenses during any four fiscal quarters to the greater of 2% of the Company’s average invested assets or 25% of the Company’s net income for the same period (the “2%/25% Limitation”). The Company may reimburse the Advisor, at the end of each fiscal quarter, for operating expenses incurred by the Advisor; provided, however, that the Company shall not reimburse the Advisor at the end of any fiscal quarter for operating expenses that exceed the 2%/25% Limitation unless the independent directors have determined that such excess expenses were justified based on unusual andnon-recurring factors. The Advisor must reimburse the Company for the amount by which the Company’s operating expenses for the preceding four fiscal quarters then ended exceed the 2%/25% Limitation, unless approved by the independent directors. For purposes of determining the 2%/25% Limitation, “average invested assets” means the average monthly book value of the Company’s assets invested directly or indirectly in equity interests and loans secured by real estate during the12-month period before deducting depreciation, reserves for bad debts or othernon-cash reserves. “Total operating expenses” means all expenses paid or incurred by the Company, as determined by GAAP, that are in any way related to the Company’s operation, including advisor fees, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, listing and registration of shares of the Company’s common stock; (b) interest payments; (c) taxes;(d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based on the gain in the sale of the Company’s assets; (f) acquisition fees and acquisition expenses (including expenses relating to potential acquisitions that the Company does not close); (g) real estate commissions on the resale of investments; and (h) other expenses connected with the acquisition, disposition, management and ownership of investments (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of real property).

As of September 30, 2019, the Company’s total operating expenses, as defined above, did not exceed the 2%/25% Limitation.

Disposition Fee

If the Advisor or its affiliates provide a substantial amount of services in connection with the sale of a property or real estate-related asset, including pursuant to a sale of the entire Company, as determined by a

E-37

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

majority of the Company’s independent directors, the Advisor or its affiliates will earn a disposition fee equal to (1) 1.5% of the sales price of each property or real estate-related asset sold or (2) 1.0%, which may be increased to 1.5% in the sole discretion of the Company’s independent directors, of the total consideration paid in connection with the sale of the Company. In the event of a final liquidity event, this fee will be reduced by the amount of any previous disposition fee paid on properties previously exchanged under Section 1031 of the Internal Revenue Code.

To the extent the disposition fee is paid upon the sale of any assets other than real property, it will be included as an operating expense for purposes of the 2%/25% Limitation. In connection with the sale of securities, the disposition fee may be paid to an affiliate of the Advisor that is registered as a FINRA member broker-dealer if applicable FINRA rules would prohibit the payment of the disposition fee to a firm that is not a registered broker-dealer. As of September 30, 2019, the Company had not sold or otherwise disposed of property or any real estate-related assets. Accordingly, the Company had not incurred any disposition fees as of September 30, 2019.

Sales Commissions

The Company paid the Dealer Manager up to 7.0% of gross offering proceeds from the sale of Class A shares in the Primary Offering and up to 3.0% of gross offering proceeds from the sale of Class T shares in the Primary Offering (all of which was reallowed to participating broker-dealers), subject to reductions based on volume and for certain categories of purchasers. No sales commissions were paid for sales of Class R shares or for sales pursuant to the DRP. The total amount of all items of compensation from any source payable to the Dealer Manager and the participating broker-dealers may not exceed 10.0% of the gross proceeds from the Primary Offering on a per class basis.

Dealer Manager Fees

The Company paid the Dealer Manager up to 3.0% of gross offering proceeds from the sale of Class A shares and up to 2.5% of gross offering proceeds from the sale of Class T shares (a portion of which was reallowed to participating broker-dealers). No dealer manager fee was paid for sales of Class R shares or for sales pursuant to the Company’s DRP.

Distribution and Shareholder Servicing Fees

The Company paid the Dealer Manager either (1) 0.27%, annualized, of the purchase price per Class R share (or, once reported, the amount of the Company’s estimated value per share) for each Class R share purchased in the Primary Offering from a registered investment advisor that does not participate on an alternative investment platform; (2) 0.67%, annualized, of the purchase price per Class R share (or, once reported, the amount of the Company’s estimated value per share) for each Class R share purchased in the Primary Offering from a registered investment advisor that participates on an alternative investment platform; and (3) 1.125%, annualized, of the purchase price per Class T share (or, once reported, the amount of the Company’s estimated value per share) for each Class T share purchased in the Primary Offering. The distribution and shareholder servicing fee accrued daily and paid monthly in arrears.

E-38

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Effective October 1, 2018, the Company ceased paying the distribution and shareholder servicing fee because total underwriting compensation had reached 10% of the total gross investment amount in the Primary Offering.

Subordinated Participation in Net Sale Proceeds (payable only if the Company’s shares are not listed on an exchange)

The Advisor (in its capacity as special limited partner of the Operating Partnership) would receive 15.0% of the remaining net sale proceeds after return of the total investment amount, which is the amount equal to the original issue price paid by the stockholders in the Public Offering multiplied by the number of shares issued in the Public Offering, reduced by the weighted average original issue price of the shares sold in the Primary Offering multiplied by the total number of shares repurchased by the Company, plus payment to investors of an amount equal to a 6.0% annual cumulative,non-compounded return of the total investment amount, less amounts previously distributed to stockholders, including distributions that may constitute a return of capital for federal income tax purposes.

“Net sale proceeds” means the net cash proceeds realized from the sale of the Company or all of the Company’s assets after deduction of all expenses incurred in connection with a sale or disposition of the Company or of the Company’s assets, including disposition fees paid to the Advisor, or from the prepayment, maturity, workout or other settlement of any loan or other investment. For purposes of calculating the 6.0% annual cumulative,non-compounded return of the total investment amount, the aggregate of all investors’ capital shall be deemed to have been invested collectively on one date—the aggregate average investment date, being a day of a month determined by the average weighted month of all shares sold on a monthly basis. In addition, the Advisor (in its capacity as special limited partner of the Operating Partnership) will receive a distribution similar to the subordinated participation in net sale proceeds in the event the Company undertakes an issuer tender offer that results in the tendering stockholders receiving a return of the total investment amount of the tendering stockholders plus payment to those investors of an amount equal to a 6.0% annual cumulative,non-compounded return of the total investment amount of the tendering stockholders, less amounts previously distributed to stockholders, including distributions that may constitute a return of capital for federal income tax purposes.

Subordinated Incentive Listing Distribution (payable only if the Company’s shares are listed on an exchange)

Upon the listing of the Company’s shares on a national securities exchange, the Advisor (in its capacity as special limited partner of the Operating Partnership) will receive 15.0% of the amount by which the sum of the Company’s adjusted market value plus distributions paid by the Company to stockholders from inception until the date the adjusted market value is determined, including distributions that may constitute a return of capital for federal income tax purposes, exceeds the sum of the total investment amount plus an amount equal to a 6.0% annual cumulative,non-compounded return to investors of the total investment amount, less amounts previously distributed to stockholders, including distributions that may constitute a return of capital for federal income tax purposes. For purposes of calculating the 6.0% annual cumulative,non-compounded return of the total investment amount, the aggregate of all investors’ capital shall be deemed to have been invested collectively on one date, the aggregate average investment date, being a day of a month determined by the average weighted month of all shares sold on a monthly basis.

E-39

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

The adjusted market value of the Company’s common stock will be calculated based on the average market value of the shares of common stock issued and outstanding at listing over the 30 trading days beginning 180 days after the shares are first listed or included for quotation. The Company has the option to pay the subordinated incentive listing distribution in the form of stock, cash, a promissory note or any combination thereof. Any previous payments of the subordinated participation in net sales proceeds will offset the amounts due pursuant to the subordinated listing distribution.

Subordinated Distribution Upon Termination of the Advisory Agreement

Upon termination ornon-renewal of the Advisory Agreement with or without cause, the Advisor (in its capacity as special limited partner of the Operating Partnership), would be entitled to receive distributions from the Operating Partnership equal to 15.0% of the amount by which the sum of the Company’s appraised market value plus distributions exceeds the sum of the total investment amount plus an amount equal to a 6.0% annual cumulative,non-compounded return of the total investment amount to investors, less amounts previously distributed to stockholders, including distributions that may constitute a return of capital for federal income tax purposes. For purposes of calculating the 6.0% annual cumulative,non-compounded return of the total investment amount, the aggregate of all investors’ capital shall be deemed to have been invested collectively on one date, the aggregate average investment date, being a day of a month determined by the average weighted month of all shares sold on a monthly basis. If the Company does not provide this return, the Advisor will not receive this distribution. In addition, the Advisor may elect to defer its right to receive a subordinated distribution upon termination until either shares of the Company’s common stock are listed and traded on a national securities exchange or another liquidity event occurs.

Pending Merger with STAR

Amendment to Operating Partnership Agreement

Concurrently with the entry into the STAR III Merger Agreement, the Company entered into an amendment (the “First Amendment”) to the Partnership Agreement with the Operating Partnership. The First Amendment will become effective at the earlier of (i) the date that the Company merges with and into STAR III Merger Sub and (ii) upon payment of certain consideration owed to the Advisor in connection with consummation of a Superior Proposal (as defined in the STAR III Merger Agreement). The purpose of the First Amendment is to revise the economic interests of the Advisor by providing that the Advisor will not receive any special allocations with respect to a “Special Limited Partner Interest” (as defined in the Partnership Agreement) pursuant to the Partnership Agreement.

Termination Agreement

Concurrently with the entry into the STAR III Merger Agreement, the Company and the Advisor entered into the Termination Agreement, effective as of August 5, 2019. Pursuant to the Termination Agreement, the current Advisory Agreement will be terminated at the effective time of the Merger. Also pursuant to the Termination Agreement, the Advisor waived any disposition fee it otherwise would be entitled to pursuant to the Advisory Agreement related to the Merger and agreed to reimburse STAR III for its costs if the STAR III stockholders reject the Merger at a meeting of stockholders.

E-40

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

8. Long-Term Incentive Award Plan and Independent Director Compensation

The Company adopted a long-term incentive plan (the “Incentive Award Plan”) which the Company uses to attract and retain qualified directors, officers, employees and consultants. The Incentive Award Plan authorizes the granting of restricted stock, stock options, restricted or deferred stock units, performance awards and other stock-based awards to the Company’s directors, officers, employees and consultants selected by its board of directors for participation in the Incentive Award Plan. Stock options granted under the Incentive Award Plan will not exceed an amount equal to 10% of the outstanding shares of the Company’s common stock allocated to the Incentive Award Plan on the date of grant of any such stock options. Any stock options granted under the Incentive Award Plan will have an exercise price or base price that is not less than fair market value of the Company’s common stock on the date of grant.

Under the Company’s independent directors’ compensation plan, which is asub-plan of the Incentive Award Plan, each of the Company’s independent directors received 2,000 shares of restricted Class A common stock once the Company raised $2,000,000 in gross offering proceeds in the Public Offering. Each subsequent independent director that joins the Company’s board of directors receives 2,000 shares of restricted Class A common stock upon election to the Company’s board of directors. In addition, on the date following an independent director’sre-election to the Company’s board of directors, he or she would receive 1,000 shares of restricted Class A common stock. The shares of restricted Class A common stock generally vest in four equal annual installments beginning on the date of grant and ending on the third anniversary of the date of grant; provided, however, that the restricted common stock will become fully vested and becomenon-forfeitable on the earlier to occur of (1) the termination of the independent director’s service as a director due to his or her death or disability or (2) a change in control of the Company. These awards entitle the holders to participate in distributions beginning on the date of grant.

The Company recorded stock-based compensation expense of $9,379 and $42,249 for the three and nine months ended September 30, 2019 and $35,613 and $63,539 for the three and nine months ended September 30, 2018, related to the independent directors’ restricted common stock, respectively.

In addition to the stock awards, the Company pays each of its independent directors annual compensation of $55,000, prorated for any partial term (the audit committee chairperson receives an additional $10,000 annually, prorated for any partial term). In addition, the independent directors are paid for attending meetings as follows: (1) $2,500 for each board meeting attended in person, (2) $1,500 for each committee meeting attended in person in such director’s capacity as a committee member and (3) $1,000 for each board meeting attended via teleconference (not to exceed $4,000 for any one set of meetings attended within a48-hour period). The Company’s independent directors may elect to receive the meeting fees and annual compensation to which they are entitled in shares of the Company’s common stock with an equivalent value. Such election shall be made by delivering a valid election form as prescribed in the independent directors’ compensation plan. Such election shall be irrevocable for the plan year. All directors also receive reimbursement of reasonable out of pocket expenses incurred in connection with attendance at meetings of the board of directors. Director compensation is an operating expense of the Company that is subject to the operating expense reimbursement obligation of the Advisor discussed in Note 7 (Related Party Arrangements). The Company recorded an operating expense of $81,250 and $222,750 for the three and nine months ended September 30, 2019, respectively, and $285,363 and $432,289 for the three and nine months ended September 30, 2018, respectively, related to the independent

E-41

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

directors’ annual compensation and attending board committee meetings, which is included in general and administrative expenses in the accompanying consolidated statements of operations. As of September 30, 2019 and December 31, 2018, $81,250 and $251,750 is included in accounts payable and accrued liabilities on the consolidated balance sheets, respectively.

9. Commitments and Contingencies

Economic Dependency

The Company is dependent on the Advisor and its affiliates for certain services that are essential to the Company, including the identification, evaluation, negotiation, purchase, and disposition of real estate and real estate-related investments; management of the daily operations of the Company’s real estate and real estate-related investment portfolio; and other general and administrative responsibilities. In the event that these companies are unable to provide the respective services, the Company will be required to obtain such services from other sources.

Concentration of Credit Risk

The geographic concentration of the Company’s portfolio makes it particularly susceptible to adverse economic developments in the Atlanta, Georgia, Austin, Texas, Dallas, Texas, Denver, Colorado and Indianapolis, Indiana apartment markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, relocations of businesses, increased competition from other apartment communities, decrease in demand for apartments or any other changes, could adversely affect the Company’s operating results and its ability to make distributions to stockholders.

Environmental

As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. The Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s properties, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the properties could result in future environmental liabilities.

Legal Matters

From time to time, the Company is subject, or party, to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on the Company’s results of operations or financial condition nor is the Company aware of any such legal proceedings contemplated by government agencies.

10. Derivative Financial Instruments

The Company uses interest rate derivatives with the objective of managing exposure to interest rate movements thereby minimizing the effect of interest rate changes and the effect they could have on future cash

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

flows. Interest rate cap agreements are used to accomplish this objective. The following tables provide the terms of the Company’s interest rate derivative instruments that were in effect at September 30, 2019 and December 31, 2018:

September 30, 2019
Type	Maturity Date Range		Based on	Number of Instruments		Notional Amount		Variable Rate			Weighted Average Rate Cap			Fair Value
Interest Rate Cap		1/1/2020 - 12/1/2020	One-Month LIBOR		5	$	151,192,000		2.02	%		2.50	%	$	1,819

December 31, 2018
Type	Maturity Date Range		Based on	Number of Instruments		Notional Amount		Variable Rate			Weighted Average Rate Cap			Fair Value
Interest Rate Cap		6/1/2019 - 12/1/2020	One-Month LIBOR		6	$	156,892,000		2.52	%		2.59	%	$	377,456

The interest rate cap agreements are not designated as effective cash flow hedges. Accordingly, the Company records any changes in the fair value of the interest rate cap agreements as interest expense. The change in the fair value of the interest rate cap agreements for the three and nine months ended September 30, 2019, resulted in an unrealized loss of $11,021 and $375,637, respectively, and for the three and nine months ended September 30, 2018, resulted in an unrealized gain of $120,720 and $665,445, respectively, which is included in interest expense in the accompanying consolidated statements of operations. The Company acquired no interest rate cap agreements during the nine months ended September 30, 2019 and 2018. The fair value of the interest rate cap agreements of $1,819 and $377,456 as of September 30, 2019 and December 31, 2018, respectively, is included in other assets on the accompanying consolidated balance sheets.

11. Subsequent Events

Distributions Paid

Class A

On October 1, 2019, the Company paid distributions of $427,412, which related to distributions declared for each day in the period from September 1, 2019 through September 30, 2019. All such distributions were paid in cash.

On November 1, 2019, the Company paid distributions of $441,659, which related to distributions declared for each day in the period from October 1, 2019 through October 31, 2019. All such distributions were paid in cash.

Class R

On October 1, 2019, the Company paid distributions of $58,591, which related to distributions declared for each day in the period from September 1, 2019 through September 30, 2019. All such distributions were paid in cash.

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT III, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

On November 1, 2019, the Company paid distributions of $60,544, which related to distributions declared for each day in the period from October 1, 2019 through October 31, 2019. All such distributions were paid in cash.

Class T

On October 1, 2019, the Company paid distributions of $570,989, which related to distributions declared for each day in the period from September 1, 2019 through September 30, 2019. All such distributions were paid in cash.

On November 1, 2019, the Company paid distributions of $590,013, which related to distributions declared for each day in the period from October 1, 2019 through October 31, 2019. All such distributions were paid in cash.

Shares Repurchased

On October 31, 2019, the Company repurchased 2,688 shares of Class T common stock for a repurchase value of $64,000, or $23.81 per Class T common stock, pursuant to the Company’s share repurchase program.

Restricted Stock Grant

On November 7, 2019, the Company granted 1,000 shares of restricted common stock to each of its three independent directors upon theirre-election to the Company’s board of directors at the 2019 annual meeting of stockholders.

Declaration of Distributions

On November 6, 2019, the board of directors of the Company approved and authorized cash distributions to the holders of Class A common stock, Class R common stock and Class T common stock, such distributions to (1) accrue daily to the stockholders of record as of the close of business on each day during the period commencing on January 1, 2020 and ending on March 31, 2020; (2) be payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month; and (3) be calculated at a rate of $0.004098 per Class A share, per Class R share and Class T share per day.

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the accompanying unaudited consolidated financial statements of Steadfast Apartment REIT III, Inc. and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to Steadfast Apartment REIT III, Inc., a Maryland corporation, and, as required by context, Steadfast Apartment REIT III Operating Partnership, L.P., a Delaware limited partnership, which we refer to as our “Operating Partnership,” and to their subsidiaries. Capitalized terms not defined shall have the meaning given to such terms in Item 1 of this Quarterly Report.

Certain statements regarding future estimates and expectations may not be applicable to the extent the Merger is completed.

Forward-Looking Statements

Certain statements of Steadfast Apartment REIT III, Inc. included in this Quarterly Report on Form10-Q (the “Quarterly Report”) that are not historical facts (including any statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto) are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual events or our investments and results of operations could differ materially from those expressed or implied in any forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms and other comparable terminology.

The forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to:

• the fact that we have a limited operating history and commenced operations on May 19, 2016;

• the fact that we have had a net loss for each quarterly and annual period since inception;

• changes in economic conditions generally and the real estate and debt markets specifically;

• our ability to successfully identify and acquire multifamily properties on terms that are favorable to us;

• our ability to secure resident leases for our multifamily properties at favorable rental rates;

• risks inherent in the real estate business, including resident defaults, potential liability relating to environmental matters and the lack of liquidity of real estate investments;

• the fact that we pay fees and expenses to our Advisor and its affiliates that were not negotiated on an arm’s length basis and the fact that the payment of these fees and expenses increases the risk that our stockholders will not earn a profit on their investment in us;

• our ability to retain our executive officers and other key personnel of our Advisor, our Property Manager and other affiliates of our Advisor;

• our ability to generate sufficient cash flows to pay distributions for our stockholders;

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PART I — FINANCIAL INFORMATION (continued)

• completion of the Merger is subject to many conditions and if these conditions are not satisfied or waived, the Merger will not be completed, which could result in the expenditure of significant unrecoverable transaction costs;

• failure to complete the Merger could negatively impact our future business and financial results;

• the pendency of the Merger, including as a result of the restrictions on the operation of our business during the period between signing the related merger agreement and the completion of the Merger, could adversely affect our business and operations;

• legislative or regulatory changes (including changes to the laws governing the taxation of REITs);

• the availability of capital;

• changes in interest rates; and

• changes to U.S. GAAP.

Any of the assumptions underlying forward-looking statements could be inaccurate. You are cautioned not to place undue reliance on any forward-looking statements included in this Quarterly Report. All forward-looking statements are made as of the date of this Quarterly Report and the risk that actual results will differ materially from the expectations expressed in this Quarterly Report will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this Quarterly Report, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this Quarterly Report, including, without limitation, the risks described under “Risk Factors,” the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this Quarterly Report will be achieved.

All forward looking statements included herein should be read in light of the factors identified in the “Risk Factors” section of our Annual Report on Form10-K for the year ended December 31, 2018, filed with the SEC on March 15, 2019.

Overview

We were formed on July 29, 2015, as a Maryland corporation that elected to be taxed as, and currently qualifies as, a REIT. We own and manage a diverse portfolio of multifamily properties located in targeted markets throughout the United States. As of September 30, 2019, we owned ten multifamily properties comprised of 2,775 apartment homes.

On February 5, 2016, we commenced our Public Offering to offer a maximum of $1,000,000,000 in shares of common stock for sale to the public at an initial price of $25.00 for each Class A share (up to $500,000,000 in Class A shares) and $23.81 for each Class T share (up to $500,000,000 in Class T shares), with discounts available for certain categories of purchasers. We also offered up to $300,000,000 in shares of common stock pursuant to our DRP at an initial price of $23.75 for each Class A share and $22.62 for each Class T share.

Commencing on July 25, 2016, we revised the terms of the Public Offering to include Class R shares. We subsequently offered a maximum of $1,000,000,000 in shares of common stock for sale to the public at an initial price of $25.00 for each Class A share ($400,000,000 in Class A shares), $22.50 for each Class R share ($200,000,000 in Class R shares) and $23.81 for each Class T share ($400,000,000 in Class T shares), with discounts available for certain categories of purchasers. We also offered up to $300,000,000 in shares pursuant to our DRP at an initial price of $23.75 for each Class A share, $22.50 for each Class R share and $22.62 for each Class T share.

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PART I — FINANCIAL INFORMATION (continued)

As of August 31, 2018, the date we terminated our Primary Offering, we had sold 3,483,706 shares of Class A common stock, 474,357 shares of Class R common stock and 4,572,889 shares of Class T common stock in our Public Offering for gross proceeds of $85,801,001, $10,672,273 and $108,706,960, respectively, and $205,180,234 in the aggregate, including 111,922 shares of Class A common stock, 8,450 shares of Class R common stock and 145,838 shares of Class T common stock issued pursuant to our DRP for gross offering proceeds of $2,658,156, $190,125 and $3,298,847, respectively. As of September 30, 2019, we had sold 3,528,797 shares of Class A common stock, 479,529 shares of Class R common stock and 4,654,978 shares of Class T common stock in our Public Offering for gross proceeds of $86,834,671, $10,788,788 and $110,559,107, respectively, and $208,182,566 in the aggregate, including 157,012 shares of Class A common stock, 13,622 shares of Class R common stock and 227,925 shares of Class T common stock issued pursuant to our DRP for gross offering proceeds of $3,691,826, $306,640 and $5,150,991, respectively. We suspended the DRP effective with distributions that began to accrue on February 1, 2019.

On October 9, 2018, our board of directors determined an estimated value per share for each of our Class A common stock, Class R common stock and Class T common stock of $22.54 as of June 30, 2018. In connection with the determination of an estimated value per share, our board of directors determined a price per share for the DRP for each of our Class A common stock, Class R common stock, and Class T common stock of $22.54 effective November 1, 2018. Our board of directors may, from time to time in its sole discretion, reinstate the DRP, although there is no assurance as to if or when this would happen.

Steadfast Apartment Advisor III, LLC is our advisor. Subject to certain restrictions and limitations, the Advisor manages ourday-to-day operations and our portfolio of properties and real estate-related assets. The Advisor sources and presents investment opportunities to our board of directors and provides investment management, marketing, investor relations and other administrative services on our behalf.

Substantially all of our business is conducted through our Operating Partnership. We are the sole general partner of our Operating Partnership and the Advisor is the only limited partner of our Operating Partnership. As we accepted subscriptions for shares of common stock, we transferred substantially all of the net proceeds of the Public Offering to our Operating Partnership as a capital contribution. The Partnership Agreement of our Operating Partnership provides that our Operating Partnership will be operated in a manner that will enable us to (1) satisfy the requirements for being classified as a REIT for federal income tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that our Operating Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code, which classification could result in our Operating Partnership being taxed as a corporation, rather than as a disregarded entity. In addition to the administrative and operating costs and expenses incurred by our Operating Partnership in acquiring and operating our investments, our Operating Partnership will pay all of our administrative costs and expenses, and such expenses will be treated as expenses of our Operating Partnership.

We elected to be taxed as, and currently qualify as, a REIT under the Internal Revenue Code commencing with our taxable year ended December 31, 2016. As a REIT, we generally will not be subject to federal income tax to the extent that we distribute qualifying dividends to our stockholders. If we fail to qualify as a REIT, we would be subject to federal income tax on our taxable income at regular corporate rates and would not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year in which qualification is lost, unless the Internal Revenue Service grants us relief under certain statutory provisions. Failing to qualify as a REIT could materially and adversely affect our net income and results of operations.

Pending Merger with Steadfast Apartment REIT, Inc.

On August 5, 2019, we, STAR, STAR Operating Partnership, our Operating Partnership and STAR III Merger Sub entered into the STAR III Merger Agreement.

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PART I — FINANCIAL INFORMATION (continued)

Subject to the terms and conditions of the STAR III Merger Agreement, we will merge with and into STAR III Merger Sub, with STAR III Merger Sub surviving the Merger, such that following the Merger, the surviving entity will continue as a wholly-owned subsidiary of STAR. In accordance with the applicable provisions of the MGCL, our separate existence shall cease.

At the effective time of the Merger and subject to the terms and conditions of the STAR III Merger Agreement, each issued and outstanding share of our common stock, will be converted into the right to receive 1.430 shares of STAR Common Stock.

The obligations of each party to consummate the Merger is subject to a number of conditions, including receipt of the STAR III Stockholder Approval of the Merger and of an amendment to the Charter to delete certain provisions regardingroll-up transactions.

On August 5, 2019, STAR also entered into the SIR Merger Agreement. STAR’s proposed merger with SIR is also astock-for-stock transaction whereby SIR will be merged into a wholly-owned subsidiary of STAR. The consummation of STAR’s merger with us is not contingent upon the completion of STAR’s merger with SIR, and the consummation of STAR’s merger with SIR is not contingent upon the completion of STAR’s merger with us.

The combined company after the merger(s) will retain the name “Steadfast Apartment REIT, Inc.” Each merger is intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code.

For additional information on the Merger, see our Current Report on Form8-K filed with the SEC on August 6, 2019.

Market Outlook

We believe economic and demographic trends will benefit our existing portfolio and we have unique future investment opportunities, particularly in the multifamily sector. Home ownership rates are nearall-time lows. Demographic and economic factors favor the flexibility of rental housing and discourage the potential financial burden associated with home ownership. Additionally, Millennials and Baby Boomers, the two largest demographic groups comprising roughly half of the total population in the United States, are increasingly choosing rental housing over home ownership. Demographic studies suggest that Baby Boomers are downsizing their suburban homes and relocating to multifamily apartments. Millennials are renting multifamily apartments due to high levels of student debt and increased credit standards in order to qualify for a home mortgage. According to the Federal Reserve Bank of New York, aggregate student debt has surpassed automotive, home equity lines of credit and credit card debt. Millennials are also getting married and having children later and are choosing to live in apartment communities until theirmid-30s. Today, approximately 30% of Millennials are still living with their parents or are still in school. When they are employed, Millennials will likely rent moderate income apartments based upon an average income of $45,000 to $65,000. Our plan is to provide rental housing for these generational groups as they age. We believe these factors will continue to contribute to the demand for multifamily housing.

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PART I — FINANCIAL INFORMATION (continued)

Our Real Estate Portfolio

As of September 30, 2019, we owned the ten multifamily apartment communities listed below:

											Average Monthly Occupancy(2)						Average Monthly Rent(3)
Property Name	Location		Purchase Date		Number of Units		Total Purchase Price		Mortgage Debt Outstanding(1)		Sep 30, 2019			Dec 31, 2018			Sep 30, 2019		Dec 31, 2018
1 Carriage House Apartment Homes		Gurnee, IL		5/19/2016		136	$	7,525,000	$	5,638,098		88.3	%		86.8	%	$	887	$	818
2 Bristol Village Apartments		Aurora, CO		11/17/2016		240		47,400,000		34,033,421		94.2	%		91.9	%		1,415		1,374
3 Canyon Resort at Great Hills Apartments		Austin, TX		12/29/2016		256		44,500,000		31,583,615		96.5	%		94.3	%		1,346		1,313
4 Reflections on Sweetwater Apartments		Lawrenceville, GA		1/12/2017		280		33,288,337		30,001,137		93.0	%		93.4	%		1,148		1,071
5 The Pointe at Vista Ridge Apartments		Lewisville, TX		5/25/2017		300		45,188,223		29,964,563		95.0	%		92.6	%		1,290		1,228
6 Belmar Villas		Lakewood, CO		7/21/2017		318		64,503,255		46,925,464		96.3	%		90.0	%		1,376		1,329
7 Ansley at Princeton Lakes		Atlanta, GA		8/31/2017		306		44,594,087		32,219,902		93.4	%		91.4	%		1,220		1,146
8 Sugar Mill Apartments		Lawrenceville, GA		12/7/2017		244		36,305,492		24,659,302		94.7	%		94.6	%		1,183		1,139
9 Avery Point Apartments		Indianapolis, IN		12/15/2017		512		45,829,836		31,083,091		91.0	%		94.2	%		833		809
10 Cottage Trails at Culpepper Landing		Chesapeake, VA		5/31/2018		183		31,118,698		21,408,862		94.9	%		90.6	%		1,275		1,338
						2,775	$	400,252,928	$	287,517,455		93.7	%		92.4	%	$	1,183	$	1,136

(1) Mortgage debt outstanding is net of deferred financing costs associated with the loans for the properties listed above.

(2) At September 30, 2019, our portfolio was approximately 96.4% leased, calculated using the number of occupied and contractually leased units divided by total units.

(3) Average monthly rent is based upon the effective rental income after considering the effect of vacancies, concessions and write-offs.

Critical Accounting Policies

The preparation of our financial statements requires significant management judgments, assumptions and estimates about matters that are inherently uncertain. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. A discussion of the accounting policies that management considers critical in that they involve significant management judgments, assumptions and estimates is included in our Annual Report on Form10-K for the year ended December 31, 2018, filed with the SEC on March 15, 2019. There have been no significant changes to our accounting policies during the period covered by this report other than described in Note 2 (Summary of Significant Accounting Policies), to our unaudited consolidated financial statements in this Quarterly Report in the discussion of our significant accounting policies.

Organization and Offering Costs

Organization and offering expenses include all expenses (other than sales commissions, the dealer manager fee and the distribution and shareholder servicing fee) paid by us in connection with our Public Offering, including legal, accounting, tax, printing, mailing and filing fees, charges of our escrow holder and transfer agent, expenses of organizing our Company, data processing fees, advertising and sales literature costs, transfer agent costs, information technology costs, bona fideout-of-pocket due diligence costs and amounts to reimburse the Advisor or its affiliates for the salaries of its employees and other costs in connection with preparing sales materials and providing other administrative services in connection with our Public Offering. Any such

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PART I — FINANCIAL INFORMATION (continued)

reimbursement will not exceed actual expenses incurred by the Advisor. After the termination of our Public Offering, the Advisor was required to reimburse us to the extent total organization and offering expenses (including sales commissions, dealer manager fees and the distribution and shareholder servicing fees) incurred by us exceeded 15% of the gross proceeds raised in our Primary Offering. Through the termination of the Primary Offering, total organization and offering expenses incurred by us did not exceed 15% of the gross offering proceeds raised in the Primary Offering.

To the extent we did not pay the full sales commissions or dealer manager fee for shares sold in our Public Offering, we also reimbursed costs of bona fide training and education meetings held by us (primarily the travel, meal and lodging costs of registered representatives of broker-dealers), attendance and sponsorship fees and cost reimbursement of employees of our affiliates to attend seminars conducted by broker-dealers and, in certain cases, reimbursement to participating broker-dealers for technology costs associated with our Public Offering, costs and expenses related to such technology costs, and costs and expenses associated with the facilitation of the marketing of our shares and the ownership of our shares by such broker-dealers’ customers; provided, however, that we did not pay any of the foregoing costs to the extent that such payment would cause total underwriting compensation to exceed 10% of the gross offering proceeds of our Primary Offering, as required by the rules of the FINRA.

When recognized, organization costs are expensed as incurred. Offering costs, including selling commissions, dealer manager fees and the distribution and shareholder servicing fee, are deferred and charged to stockholders’ equity. All such amounts are reimbursed to the Advisor, the Dealer Manager or their affiliates from gross offering proceeds, except for the distribution and shareholder servicing fees, which are paid from sources other than Public Offering proceeds.

Income Taxes

We elected to be taxed as, and currently qualify as, a REIT under the Internal Revenue Code and have operated as such commencing with the taxable year ended December 31, 2016. To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to our stockholders (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, we generally will not be subject to federal income tax to the extent we distribute qualifying dividends to our stockholders. If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax on our taxable income at regular corporate income tax rates and generally would not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to our stockholders. However, we are, and intend to continue to be, organized and operated in such a manner as to qualify for treatment as a REIT.

We follow the income tax guidance under GAAP to recognize, measure, present and disclose in our consolidated financial statements uncertain tax positions that we have taken or expect to take on a tax return. As of September 30, 2019 and December 31, 2018, we did not have any liabilities for uncertain tax positions that we believe should be recognized in our consolidated financial statements. We have not been assessed interest or penalties by any major tax jurisdictions. Our evaluation was performed for all open tax years through December 31, 2018.

Distributions

Our board of directors has historically declared daily distributions that are paid on a monthly basis. We expect to continue paying monthly distributions unless our results of operations, our general financial condition,

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PART I — FINANCIAL INFORMATION (continued)

general economic conditions or other factors prohibit us from doing so. We have and may continue to declare distributions in excess of our cash flow from operations. As a result, our distribution rate and payment frequency may vary from time to time. However, to qualify as a REIT for tax purposes, we must make distributions equal to at least 90% of our “REIT taxable income” each year. For information on distribution rates paid during the three and nine months ended September 30, 2019 and 2018, refer to Note 6 (Stockholders’ Equity) to our unaudited consolidated financial statements included in this Quarterly Report.

The distributions declared and paid during the first, second and third fiscal quarters of 2019, along with the amount of distributions reinvested pursuant to the DRP were as follows:

					Distributions Paid(2)						Sources of Distributions Paid
Period	Distributions Declared(1)		Distributions Declared Per Share		Cash		Reinvested		Total		Cash Flow From Operations		Offering Proceeds		Net Cash Provided by (Used in) Operating Activities
First Quarter 2019	$	3,193,787	$	0.370	$	2,168,613	$	1,094,956	$	3,263,569	$	—	$	3,263,569	$	(1,116,143	)
Second Quarter 2019		3,221,597		0.374		3,260,785		—		3,260,785		127,491		3,133,294		127,491
Third Quarter 2019		3,245,162		0.378		3,249,014		—		3,249,014		318,743		2,930,271		318,743
	$	9,660,546	$	1.122	$	8,678,412	$	1,094,956	$	9,773,368	$	446,234	$	9,327,134	$	(669,909	)

(1) Assumes each share was issued and outstanding each day during the periods presented.

(2) Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid approximately three days following month end.

For the three and nine months ended September 30, 2019, we paid aggregate distributions of $3,249,014 and $9,773,368, including $3,249,014 and $8,678,412 of distributions paid in cash and 0 and 48,578 shares of our common stock issued pursuant to our DRP for $0 and $1,094,956, respectively. For the three and nine months ended September 30, 2019, our net loss was $3,157,665 and $11,767,865, we had funds from operations, or FFO, of $807,611 and $(194,068) and net cash provided by (used in) operations of $318,743 and $(669,909), respectively. For the three and nine months ended September 30, 2019, we funded $318,743 and $446,234, or 10% and 5%, and $2,930,271 and $9,327,134 or 90% and 95% of total distributions paid, including shares issued pursuant to our DRP, from cash flow from operations and with proceeds from our Public Offering, respectively. Since inception, of the $26,578,224 in total distributions paid through September 30, 2019, including shares issued pursuant to our DRP, 7% of such amounts were funded from cash flow from operations and 93% were funded from offering proceeds. For information on how we calculate FFO and the reconciliation of FFO to net loss, see “—Funds from Operations and Modified Funds from Operations.”

Our long-term policy is to pay distributions solely from cash flow from operations. Further, because we may receive income from interest or rents at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund capital expenditures and other expenses, we expect that from time to time during our operational stage, we will declare distributions in anticipation of cash flow that we expect to receive during a later period, and we expect to pay these distributions in advance of our actual receipt of these funds. In these instances, our board of directors has the authority under our organizational documents, to the extent permitted by Maryland law, to fund distributions from sources such as borrowings, offering proceeds or advances and the deferral of fees and expense reimbursements by the Advisor, in its sole discretion. If we pay distributions from sources other than cash flow from operations, we will have fewer funds available for investments and stockholders’ overall returns on their investment in us may be reduced.

We elected to be taxed as, and currently qualify as, a REIT for federal income tax purposes commencing with the taxable year ended December 31, 2016. To qualify as a REIT, we must make aggregate annual distributions to our stockholders of at least 90% of our REIT taxable income (which is computed without regard

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PART I — FINANCIAL INFORMATION (continued)

to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). If we meet the REIT qualification requirements, we generally will not be subject to federal income tax on the income that we distribute to our stockholders each year. We have not established a minimum distribution level and our Charter does not require that we make distributions to our stockholders.

Inflation

Substantially all of our multifamily property leases with residents are for a term of one year or less. In an inflationary environment, this may allow us to realize increased rents upon renewal of existing leases or the beginning of new leases. Short-term leases generally will minimize our risk from the adverse effects of inflation, although these leases generally permit residents to leave at the end of the lease term and therefore will expose us to the effect of a decline in market rents. In a deflationary rent environment, we may be exposed to declining rents more quickly under these shorter term leases.

As of September 30, 2019, we had not entered into any material leases as a lessee.

REIT Compliance

To continue to qualify as a REIT for tax purposes, we are required to distribute at least 90% of our REIT taxable income (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP) to our stockholders. We must also meet certain asset and income tests, as well as other requirements. We monitor the operations and transactions that may potentially impact our REIT status. If we fail to qualify as a REIT, we would be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates.

Liquidity and Capital Resources

We use secured borrowings, and intend to use in the future secured and unsecured borrowings. At September 30, 2019, our debt was approximately 66% of the value of our properties as determined by the most recent valuation performed by an independent third-party appraiser as of June 30, 2018. We expect that our overall borrowings will be approximately 55% to 60% of the value of our properties (after debt amortization) plus the value of our other investments. For valuation purposes, the value of a property is determined by an independent third-party appraiser or qualified independent valuation expert. Under our Charter, we are prohibited from borrowing in excess of 300% of the value of our net assets, which generally approximates to 75% of the aggregate cost of our assets, though we may exceed this limit under certain circumstances.

In addition to making investments in accordance with our investment objectives, we use our capital resources to make certain payments to the Advisor and Dealer Manager. During our organization and offering stage, these payments included payments to the Dealer Manager for sales commissions, the dealer manager fee and the distribution and shareholder servicing fee, and payments to the Advisor for reimbursement of certain organization and offering expenses. During our operating stage, we make payments to the Advisor in connection with the acquisition of investments, the management of our assets and costs incurred by the Advisor in providing services to us.

Our principal demand for funds will be to acquire investments in accordance with our investment strategy, to pay operating expenses and interest on our outstanding indebtedness and to make distributions to our stockholders. Over time, we intend to generally fund our cash needs for items, other than asset acquisitions, from operations. Otherwise, we expect that our principal sources of working capital will include:

• current unrestricted cash balance, which was $21,803,455 as of September 30, 2019;

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PART I — FINANCIAL INFORMATION (continued)

• various forms of secured and unsecured financing;

• borrowings under master repurchase agreements;

• equity capital from joint venture partners; and

• cash from operations.

Over the short term, we believe that our sources of capital, specifically our cash balances, cash flow from operations, our ability to raise equity capital from joint venture partners and our ability to obtain various forms of secured and unsecured financing will be adequate to meet our liquidity requirements and capital commitments.

Over the longer term, in addition to the same sources of capital we will rely on to meet our short-term liquidity requirements, we may conduct additional public or private offerings of securities. We expect these resources will be adequate to fund our operating activities, debt service and distributions, and will be sufficient to fund our ongoing acquisition activities as well as providing capital for investment in future development and other joint ventures along with potential forward purchase commitments.

We may, but are not required to, establish working capital reserves from offering proceeds out of cash flow generated by our investments or out of proceeds from the sale of our investments. We do not anticipate establishing a general working capital reserve; however, we may establish capital reserves with respect to particular investments. We also may, but are not required to, establish reserves out of cash flow generated by investments or out of net sale proceeds innon-liquidating sale transactions. Our lenders also may require working capital reserves.

To the extent that the working capital reserve is insufficient to satisfy our cash requirements, additional funds may be provided from cash generated from operations or through short-term borrowing. In addition, subject to certain limitations described in our Charter, we may incur indebtedness in connection with the acquisition of any real estate asset, refinance the debt thereon, arrange for the leveraging of any previously unfinanced property or reinvest the proceeds of financing or refinancing in additional properties.

Refinancing Transactions

On May 31, 2019, three of our indirect wholly-owned subsidiaries, the Borrowers, terminated the existing mortgage loan with their lenders for an aggregate principal amount of $87,122,000 and entered into a new Loan Agreement with, as applicable, PNC Bank and Newmark for an aggregate principal amount of $94,861,000 (the “Refinancing Transactions”). Each Borrower entered into a Loan Agreement with the applicable lender pursuant to the Fannie Mae’s Green Execution Program, as evidenced by a multifamily note. Pursuant to the GEP, the applicable Lender originates the mortgage loan and then transfers the loan to Fannie Mae. Each Loan Agreement provides for a term loan with a Maturity Date of June 1, 2029, unless the Maturity Date is accelerated in accordance with the Loan terms. Each Loan with Newmark accrues interest at a fixed rate of 3.73% per annum. The Loan with PNC Bank accrues interest at a fixed rate of 3.82% per annum. The entire outstanding principal balance and any accrued and unpaid interest on each of the Loans are due on the Maturity Date. Interest and principal payments on the Loans are payable monthly in arrears on specified dates as set forth in each Loan Agreement. Monthly payments are due and payable on the first day of each month, commencing July 1, 2019. We paid $491,655 in the aggregate in loan origination fees to the Lenders in connection with the Refinancing Transactions, and paid the Advisor a loan coordination fee of $711,459.

Cash Flows (Used in) Provided by Operating Activities

As of September 30, 2019, we owned 10 multifamily properties. During the nine months ended September 30, 2019, net cash used in operating activities was $669,909 compared to net cash provided by

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PART I — FINANCIAL INFORMATION (continued)

operating activities of $298,401 for the nine months ended September 30, 2018. The increase in net cash used in operating activities is primarily due to an increase in net loss, a decrease in accounts payable and accrued liabilities and a decrease in due to affiliates compared to the nine months ended September 30, 2018. We expect to generate cash flows from operations as we stabilize the operations of our property portfolio and complete our value-enhancement program.

Cash Flows Used in Investing Activities

During the nine months ended September 30, 2019, net cash used in investing activities was $5,809,501 compared to $35,085,973 during the nine months ended September 30, 2018. The decrease in net cash used in investing activities was primarily the result of no acquisitions of multifamily properties during the nine months ended September 30, 2019, compared to our acquisition of one multifamily property during the nine months ended September 30, 2018. Net cash used in investing activities during the nine months ended September 30, 2019 consisted of the following:

• $6,101,689 of cash used for improvements to real estate investments; and

• $292,188 of cash provided by insurance claim recoveries.

Cash Flows (Used in) Provided by Financing Activities

During the nine months ended September 30, 2019, net cash used in financing activities was $7,211,779, compared to net cash provided by financing activities of $55,988,824 during the nine months ended September 30, 2018. The decrease in net cash provided by financing activities was primarily due to an increase in principal payments on mortgage notes payable, a decrease in net proceeds from our Public Offering, increases in distributions to holders of common stock and repurchases of common stock, partially offset by an increase in proceeds from the issuance of mortgage notes payable. Net cash provided by financing activities during the nine months ended September 30, 2019, consisted of the following:

• $7,070,902 of net proceeds from mortgage notes payable, consisting of $94,861,000 of proceeds from the issuance of mortgage notes payable, principal payments on mortgage notes payable of $87,148,994 and deferred financing costs in the amount of $641,104;

• $3,680,816 of cash used for the reimbursement of other offering costs to our Advisor and its affiliates;

• $170 of payments for debt extinguishment costs;

• $8,678,412 of net cash distributions, after giving effect to distributions reinvested by stockholders of $1,094,956; and

• $1,923,283 of cash paid for the repurchase of common stock.

Contractual Commitments and Contingencies

We use secured debt, and intend to use in the future secured and unsecured debt. At September 30, 2019, our debt was approximately 66% of the value of our properties as determined by the most recent valuation performed by an independent third-party appraiser as of June 30, 2018. We believe that the careful use of borrowings will help us achieve our diversification goals and potentially enhance the returns on our investments. We expect that our borrowings will be approximately 55% to 60% of the value of our properties (after debt amortization) and other real estate-related assets. For valuation purposes, the value of a property is determined by an independent third-party appraiser or qualified independent valuation expert. Under our Charter, we are prohibited from borrowing in excess of 300% of our net assets, which generally approximates to 75% of the aggregate cost of our assets unless such excess is approved by a majority of the independent directors and disclosed to stockholders in our next quarterly report, along with a justification for such excess. In such event, we

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PART I — FINANCIAL INFORMATION (continued)

would monitor our debt levels and take action to reduce any such excess as practicable. Our aggregate borrowings are reviewed by our board of directors at least quarterly. As of September 30, 2019, our aggregate borrowings were not in excess of 300% of the value of our net assets.

In addition to using our capital resources for investing purposes and meeting our debt obligations, we use our capital resources to make certain payments to the Advisor and the Dealer Manager. During our organization and offering stage, these payments included payments to the Dealer Manager for selling commissions, dealer manager fees and distribution and shareholder servicing fees and payments to the Dealer Manager and the Advisor for reimbursement of certain organization and other offering expenses. Through the termination of the Public Offering, total organization and offering expenses incurred by us did not exceed 15% of the gross offering proceeds raised in the Primary Offering. During our acquisition and development stage, we make payments to the Advisor in connection with the selection and origination or purchase of real estate and real estate-related investments, the management of our asset portfolio and costs incurred by the Advisor in providing services to us.

As of September 30, 2019, we had indebtedness totaling $287,517,455, comprised of an aggregate principal amount of $289,278,006, and net deferred financing costs of $1,760,551. The following is a summary of our contractual obligations as of September 30, 2019:

			Payments due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Interest payments on outstanding debt obligations(1)	$	85,815,488	$	2,927,528	$	23,429,800	$	23,059,638	$	36,398,522
Principal payments on outstanding debt obligations(2)		289,278,006		26,994		2,210,845		5,916,954		281,123,213
Total	$	375,093,494	$	2,954,522	$	25,640,645	$	28,976,592	$	317,521,735

(1) Scheduled interest payments on outstanding debt obligations are based on the outstanding principal amounts and interest rates in effect at September 30, 2019. We incurred interest expense of $3,077,197 and $10,014,805 during the three and nine months ended September 30, 2019, including amortization of deferred financing costs totaling $70,830 and $192,333, net unrealized losses from the change in fair value of interest rate cap agreements of $11,021 and $375,637, loan fees of $0 and $171,162 and interest rate cap proceeds of $0 and $1,668, respectively.

(2) Scheduled principal payments on outstanding debt obligations are based on the terms of the mortgage note agreements. Amounts exclude the net deferred financing costs associated with the mortgage notes payable.

Our debt obligations contain customary financial ornon-financial debt covenants. As of September 30, 2019, and December 31, 2018, we were in compliance with all financial andnon-financial debt covenants.

Results of Operations

Overview

The discussion that follows is based on our consolidated results of operations for the three and nine months ended September 30, 2019 and 2018. We commenced real estate operations on May 19, 2016, in connection with the acquisition of our first investment. We owned ten multifamily properties as of September 30, 2019 and 2018. Our results of operations for the three and nine months ended September 30, 2019 and 2018, are not indicative of those expected in future periods. The increase in rents are the primary cause of the increase in our operating income and expenses, as further discussed below. In general, we expect that our income and expenses related to our real estate investments will increase in future periods as a result of ordinary monthly rent increases, improved occupancy and the implementation of our value-enhancement strategy.

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PART I — FINANCIAL INFORMATION (continued)

To provide additional insight into our operating results, we are also providing a detailed analysis of same-store versusnon-same-store net operating income (“NOI”). For more information on NOI and a reconciliation of NOI (anon-GAAP financial measure) to net loss, see “—Net Operating Income.”

Consolidated Results of Operations for the Three Months Ended September 30, 2019, Compared to the Three Months Ended September 30, 2018

The following table summarizes the consolidated results of operations for the three months ended September 30, 2019 and 2018:

	For the Three Months Ended September 30,
	2019			2018			Change $			Change%
Total revenues	$	10,512,119		$	9,905,011		$	607,108			6	%
Operating, maintenance and management		(3,032,045	)		(2,829,019	)		(203,026	)		(7	)%
Real estate taxes and insurance		(1,244,074	)		(1,198,477	)		(45,597	)		(4	)%
Fees to affiliates		(1,643,653	)		(1,528,770	)		(114,883	)		(8	)%
Depreciation and amortization		(3,965,495	)		(3,866,775	)		(98,720	)		(3	)%
Interest expense		(3,077,197	)		(2,998,775	)		(78,422	)		(3	)%
General and administrative expenses		(1,582,320	)		(1,039,453	)		(542,867	)		(52	)%
Other income		875,000			—			875,000			100	%
Net loss	$	(3,157,665	)	$	(3,556,258	)	$	398,593			11	%
NOI(1)	$	5,529,116		$	5,427,077		$	102,039			2	%
FFO(2)	$	807,611		$	310,517		$	497,094			160	%
MFFO(2)	$	818,632		$	189,297		$	629,335			332	%

(1) NOI is anon-GAAP financial measure used by investors and our management to evaluate and compare the performance of our properties and to determine trends in earnings. However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, interest income and other expense, acquisition costs (those that did not meet the criteria for capitalization under ASU2017-01), certain fees to affiliates, depreciation and amortization expense and gains or losses from the sale of our properties and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs, all of which are significant economic costs. For additional information on how we calculate NOI and a reconciliation of NOI to net loss, see “—Net Operating Income.”

(2) GAAP basis accounting for real estate assets utilizes historical cost accounting and assumes real estate values diminish over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets the Board of Governors of the National Association of Real Estate Investment Trusts (“NAREIT”) established the measurement tool of FFO. Since its introduction, FFO has become a widely usednon-GAAP financial measure among REITs. Additionally, we use modified funds from operations (“MFFO”) as defined by the Institute for Portfolio Alternatives (formerly known as the Investment Program Association) or (“IPA”) as a supplemental measure to evaluate our operating performance. MFFO is based on FFO but includes certain adjustments we believe are necessary due to changes in accounting and reporting under GAAP since the establishment of FFO. Neither FFO nor MFFO should be considered as alternatives to net loss or other measurements under GAAP as indicators of our operating performance, nor should they be considered as alternatives to cash flow from operating activities or other measurements under GAAP as indicators of liquidity. For additional information on how we calculate FFO and MFFO and a reconciliation of FFO and MFFO to net loss, see “—Funds From Operations and Modified Funds From Operations.”

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PART I — FINANCIAL INFORMATION (continued)

Net loss

For the three months ended September 30, 2019, we had a net loss of $3,157,665 compared to a net loss of $3,556,258 for the three months ended September 30, 2018. The decrease in net loss of $398,593 over the comparable prior year period was primarily due to the increase in other income of $875,000 and the increase in total revenues of $607,108, partially offset by the increase in operating, maintenance and management expenses of $203,026, the increase in real estate taxes and insurance of $45,597, the increase in fees to affiliates of $114,883, the increase in depreciation and amortization expense of $98,720, the increase in interest expense of $78,422 and the increase in general and administrative expenses of $542,867.

Total revenues

Total revenues were $10,512,119 for the three months ended September 30, 2019, compared to $9,905,011 for the three months ended September 30, 2018. The increase of $607,108 was primarily due to an increase in average monthly rents per unit from $1,130 as of September 30, 2018, to $1,183 as of September 30, 2019, and the increase in occupancy from 93.5% as of September 30, 2018 to 93.7% as of September 30, 2019. We expect rental income and tenant reimbursements to increase in future periods as a result of ordinary monthly rent increases, improved occupancy and the implementation of our value-enhancement strategy.

Operating, maintenance and management expenses

Operating, maintenance and management expenses for the three months ended September 30, 2019, were $3,032,045 compared to $2,829,019 for the three months ended September 30, 2018. The increase of $203,026 was primarily due to an increase in legal fees and payroll costs at one of our multifamily properties during the three months ended September 30, 2019, compared to the three months ended September 30, 2018. We expect these amounts to decrease as a percentage of total revenues as we implement operational efficiencies at our multifamily properties.

Real estate taxes and insurance

Real estate taxes and insurance expenses were $1,244,074 for the three months ended September 30, 2019, compared to $1,198,477 for the three months ended September 30, 2018. The increase of $45,597 was due to increases in insurance expenses at our multifamily properties in addition to increases in real estate taxes as a result of increases in assessed values in Georgia and Texas during the three months ended September 30, 2019. We expect these amounts may increase in future periods as a result of increases in municipal property tax rates as well as increases in the assessed value of our property portfolio.

Fees to affiliates

Fees to affiliates were $1,643,653 for the three months ended September 30, 2019, compared to $1,528,770 for the three months ended September 30, 2018. The increase of $114,883 was primarily due to the increase in the reimbursement of property related software costs during the three months ended September 30, 2019, and to a lesser extent from an increase in investment management fees as a result of the increase in the cost of investment from additions to our real estate assets. We expect fees to affiliates related to the ongoing management of our real estate portfolio to increase in future periods as a result of increased investment management fees from anticipated increases in the cost of investments and increased property management fees from anticipated increases in future rental income.

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PART I — FINANCIAL INFORMATION (continued)

Depreciation and amortization

Depreciation and amortization expenses were $3,965,495 for the three months ended September 30, 2019, compared to $3,866,775 for the three months ended September 30, 2018. The increase of $98,720 was primarily due to the net increase in depreciable and amortizable assets of $7,357,381 since September 30, 2018. We expect these amounts to increase slightly in future periods as a result of anticipated future enhancements to our real estate portfolio.

Interest expense

Interest expense for the three months ended September 30, 2019, was $3,077,197 compared to $2,998,775 for the three months ended September 30, 2018. The increase of $78,422 was primarily due to unrealized loss on derivative instruments of $11,021 in the three months ended September 30, 2019, compared to an unrealized gain of $120,720 for the three months ended September 30, 2018. Our interest expense in future periods will vary based on the changes to theone-month London Interbank Offered Rate (LIBOR) and its impact on our variable rate debt and our level of future borrowings, which will depend on the availability and cost of debt financing and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives.

General and administrative expenses

General and administrative expenses for the three months ended September 30, 2019, were $1,582,320 compared to $1,039,453 for the three months ended September 30, 2018. These general and administrative costs consisted primarily of legal fees, insurance premiums, audit fees, other professional fees and independent directors’ compensation. The increase of $542,867 was due to the increase in legal fees and expenses related to the proposed Merger and director meeting fees as a result of an increase in the number of meetings compared to the prior year period. We expect general and administrative expenses to decrease as a percentage of total revenue.

Other income

Other income for the three months ended September 30, 2019, was $875,000 compared to $0 for the three months ended September 30, 2018. The increase of $875,000 was due to proceeds from a legal settlement at one of our multifamily properties during the three months ended September 30, 2019.

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PART I — FINANCIAL INFORMATION (continued)

Consolidated Results of Operations for the Nine Months Ended September 30, 2019, Compared to the Nine Months Ended September 30, 2018

The following table summarizes the consolidated results of operations for the nine months ended September 30, 2019 and 2018:

	For the Nine Months Ended September 30,
	2019			2018			Change $			Change%
Total revenues	$	30,801,984		$	27,966,803		$	2,835,181			10	%
Operating, maintenance and management		(7,996,145	)		(7,707,048	)		(289,097	)		(4	)%
Real estate taxes and insurance		(4,422,914	)		(3,841,903	)		(581,011	)		(15	)%
Fees to affiliates		(5,586,812	)		(4,274,781	)		(1,312,031	)		(31	)%
Depreciation and amortization		(11,574,455	)		(12,804,145	)		1,229,690			10	%
Interest expense		(10,014,805	)		(7,909,070	)		(2,105,735	)		(27	)%
Loss on debt extinguishment		(167,469	)		—			(167,469	)		(100	)%
General and administrative expenses		(3,682,249	)		(2,437,314	)		(1,244,935	)		(51	)%
Other income		875,000			—			875,000			100	%
Net loss	$	(11,767,865	)	$	(11,007,458	)	$	(760,407	)		(7	)%
NOI(1)	$	16,285,667		$	15,235,228		$	1,050,439			7	%
FFO(2)	$	(194,068	)	$	1,796,687		$	(1,990,755	)		(111	)%
MFFO(2)	$	349,038		$	1,133,529		$	(784,491	)		(69	)%

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

(2) See “—Funds From Operations and Modified Funds From Operations” below for a reconciliation of FFO and MFFO to net loss.

Net loss

For the nine months ended September 30, 2019, we had a net loss of $11,767,865 compared to $11,007,458 for the nine months ended September 30, 2018. The increase in net loss of $760,407 over the comparable prior year period was primarily due to the increase in operating, maintenance and management expenses of $289,097, the increase in real estate taxes and insurance of $581,011, the increase in fees to affiliates of $1,312,031, the increase in interest expense of $2,105,735, the increase in loss on debt extinguishment of $167,469 and the increase in general and administrative expenses of $1,244,935, partially offset by the increase in total revenues of $2,835,181, a decrease in depreciation and amortization expense of $1,229,690 and an increase in other income of $875,000.

Total revenues

Total revenues were $30,801,984 for the nine months ended September 30, 2019, compared to $27,966,803 for the nine months ended September 30, 2018. The increase of $2,835,181 was primarily due to experiencing a full period of operations with respect to the acquisition of the one multifamily property acquired during the nine months ended September 30, 2018, the increase in average monthly rents per unit from $1,130 as of September 30, 2018, to $1,183 as of September 30, 2019 and the increase in occupancy from 93.5% as of September 30, 2018 to 93.7% as of September 30, 2019. We expect rental income and tenant reimbursements to increase in future periods as a result of ordinary monthly rent increases, improved occupancy and the implementation of our value-enhancement strategy.

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PART I — FINANCIAL INFORMATION (continued)

Operating, maintenance and management expenses

Operating, maintenance and management expenses were $7,996,145 for the nine months ended September 30, 2019, compared to $7,707,048 for the nine months ended September 30, 2018. The increase of $289,097 was primarily due an increase in legal fees and turnover costs at one of our multifamily properties the nine months ended September 30, 2019, compared to the nine months ended September 30, 2018. We expect that these amounts will decrease as a percentage of total revenues as we implement operational efficiencies at our multifamily properties.

Real estate taxes and insurance

Real estate taxes and insurance expenses were $4,422,914 for the nine months ended September 30, 2019, compared to $3,841,903 for the nine months ended September 30, 2018. The increase of $581,011 was primarily due to increases in real estate taxes as a result of increases in assessed values in Georgia during the nine months ended September 30, 2019 and the acquisition of one multifamily property during the nine months ended September 30, 2018, experiencing a full period of operations during the nine months ended September 30, 2019. We expect these amounts may increase in future periods as a result of increases in municipal property tax rates as well as increases in the assessed value of our property portfolio.

Fees to affiliates

Fees to affiliates were $5,586,812 for the nine months ended September 30, 2019, compared to $4,274,781 for the nine months ended September 30, 2018. The increase of $1,312,031 was primarily due to loan coordination fees payable to our advisor of $711,458 from the refinancing of three multifamily properties during the nine months ended September 30, 2019, and to a lesser extent from an increase in investment management fees as a result of the increase in the cost of investment from additions to our real estate assets and the acquisition of one multifamily property during the nine months ended September 30, 2018, that experienced a full period of operations during the nine months ended September 30, 2019. We expect fees to affiliates related to theon-going management of our real estate portfolio to increase in future periods as a result of increased investment management fees from anticipated increases in the cost of investments and increased property management fees from anticipated increases in future rental income.

Depreciation and amortization

Depreciation and amortization expenses were $11,574,455 for the nine months ended September 30, 2019, compared to $12,804,145 for the nine months ended September 30, 2018. The decrease of $1,229,690 was primarily due to the decrease in amortization of tenant origination and absorption costs, partially offset by the net increase in depreciable and amortizable assets of $7,357,381 since September 30, 2018. We expect these amounts to increase slightly in future periods as a result of anticipated future enhancements to our real estate portfolio.

Interest expense

Interest expense for the nine months ended September 30, 2019 was $10,014,805 compared to $7,909,070 for the nine months ended September 30, 2018. The increase of $2,105,735 was primarily due to additional mortgage notes payable, net of $7,490,977 since September 30, 2018, in connection with the refinancing of three multifamily properties during the nine months ended September 30, 2019, and the increase in unrealized losses on derivative instruments of $1,041,082, from the nine months ended September 30, 2019 compared to the nine months ended September 30, 2018. Also included in interest expense is the amortization of deferred financing costs of $192,333 and $174,120 and loan costs of $171,162 and $0, respectively, for the nine months ended September 30, 2019 and 2018, respectively. Our interest expense in future periods will vary based on the changes to LIBOR and its impact on our variable rate debt and our level of future borrowings, which will depend on the availability and cost of debt financing and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives.

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PART I — FINANCIAL INFORMATION (continued)

Loss on debt extinguishment

Loss on debt extinguishment for the nine months ended September 30, 2019, was $167,469 compared to $0 for the nine months ended September 30, 2018. These expenses consisted of the expense of deferred financing costs, net related to the refinancing of one mortgage note payable during the nine months ended September 30, 2019. The loss on debt extinguishment will vary in future periods if we repay the remaining outstanding principal prior to the scheduled maturity dates of the notes payable.

General and administrative expenses

General and administrative expenses for the nine months ended September 30, 2019, were $3,682,249 compared to $2,437,314 for the nine months ended September 30, 2018. These general and administrative costs consisted primarily of legal fees, insurance premiums, audit fees, other professional fees and independent directors’ compensation. The increase of $1,244,935 was due to the increase in legal fees and expenses related to the proposed Merger and director meeting fees as a result of an increase in the number of meetings compared to the prior year period. We expect general and administrative expenses to decrease as a percentage of total revenues.

Other income

Other income for the nine months ended September 30, 2019, was $875,000 compared to $0 for the nine months ended September 30, 2018. The increase of $875,000 was due to proceeds from a legal settlement at one of our multifamily properties during the nine months ended September 30, 2019.

Property Operations for the Three Months Ended September 30, 2019, Compared to the Three Months Ended September 30, 2018

For purposes of evaluating comparative operating performance, we categorize our properties as “same-store” or“non-same-store.” A “same-store” property is a property that was owned at July 1, 2018. A“non-same-store” property is a property that was acquired, placed into service or disposed of after July 1, 2018. As of September 30, 2019, all of our 10 properties were categorized as a same-store property.

The following table presents the same-store andnon-same-store results from operations for the three months ended September 30, 2019 and 2018:

	For the Three Months Ended September 30,
	2019		2018		Change $		Change%
Same-store property:
Revenues	$	10,335,586	$	9,905,011	$	430,575		4	%
Operating expenses		4,806,470		4,477,934		328,536		7	%
NOI		5,529,116		5,427,077		102,039		2	%
Non-same-store properties:
NOI		—		—		—
Total NOI(1)	$	5,529,116	$	5,427,077	$	102,039

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

Net Operating Income

Same-store NOI for the three months ended September 30, 2019, was $5,529,116 compared to $5,427,077 for the three months ended September 30, 2018. The 2% increase in same-store NOI was primarily the result of a 4% increase in same-store revenues, partially offset by an 7% increase in same-store operating expenses.

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Revenues

Same-store revenues for the three months ended September 30, 2019, were $10,335,586 compared to $9,905,011 for the three months ended September 30, 2018. The increase of 4% in same-store revenues was primarily due to the increase in average rent at the same-store properties from $1,130 as of September 30, 2018, to $1,183 as of September 30, 2019, as a result of ordinary monthly rent increases and the implementation of our value-enhancement strategy and an increase in occupancy from 93.5% as of September 30, 2018 to 93.7% as of September 30, 2019.

Operating Expenses

Same-store operating expenses for the three months ended September 30, 2019, were $4,806,470 compared to $4,477,934 for the three months ended September 30, 2018. The increase of 7% in same-store operating expenses was primarily attributable to increases in insurance, general and administrative expenses across all our multifamily properties as well as an increase in legal fees at one of our multifamily properties during the three months ended September 30, 2019.

Net Operating Income

NOI is anon-GAAP financial measure of performance. NOI is used by investors and our management to evaluate and compare the performance of our properties, to determine trends in earnings and to compute the fair value of our properties as it is not affected by (1) the cost of funds, (2) acquisition costs,(3) non-operating fees to affiliates, (4) the impact of depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP or (5) general and administrative expenses and other gains and losses that are specific to us. The cost of funds is eliminated from net income (loss) because it is specific to our particular financing capabilities and constraints. The cost of funds is also eliminated because it is dependent on historical interest rates and other costs of capital as well as past decisions made by us regarding the appropriate mix of capital which may have changed or may change in the future. Acquisition costs (those that did not meet the criteria for capitalization under ASU2017-01) andnon-operating fees to affiliates are eliminated because they do not reflect continuing operating costs of the property owner. ASU2017-01 now forms part of ASC 805.

Depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets are eliminated because they may not accurately represent the actual change in value in our multifamily properties that result from use of the properties or changes in market conditions. While certain aspects of real property do decline in value over time in a manner that is reasonably captured by depreciation and amortization, the value of the properties as a whole have historically increased or decreased as a result of changes in overall economic conditions instead of from actual use of the property or the passage of time. Gains and losses from the sale of real property vary from property to property and are affected by market conditions at the time of sale which will usually change from period to period. These gains and losses can create distortions when comparing one period to another or when comparing our operating results to the operating results of other real estate companies that have not made similarly timed purchases or sales. We believe that eliminating these costs from net income is useful because the resulting measure captures the actual revenue generated and actual expenses incurred in operating our properties as well as trends in occupancy rates, rental rates and operating costs.

However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, interest income and other expense, acquisition costs (those that did not meet the criteria for capitalization under ASC 805), certain fees to affiliates, depreciation and amortization expense and gains or losses from the sale of properties, and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, all of which are significant economic costs. NOI may fail to capture significant trends in these components of net income which further limits its usefulness.

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NOI is a measure of the operating performance of our properties but does not measure our performance as a whole. NOI is therefore not a substitute for net income (loss) as computed in accordance with GAAP. This measure should be analyzed in conjunction with net income (loss) computed in accordance with GAAP and discussions elsewhere in “—Results of Operations” regarding the components of net income (loss) that are eliminated in the calculation of NOI. Other companies may use different methods for calculating NOI or similarly entitled measures and, accordingly, our NOI may not be comparable to similarly entitled measures reported by other companies that do not define the measure exactly as we do.

The following is a reconciliation of our NOI to net loss for the three and nine months ended September 30, 2019 and 2018, computed in accordance with GAAP:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
Net loss	$	(3,157,665	)	$	(3,556,258	)	$	(11,767,865	)	$	(11,007,458	)
Fees to affiliates(1)		1,113,302			1,078,332			4,033,083			3,092,157
Depreciation and amortization		3,965,495			3,866,775			11,574,455			12,804,145
Interest expense		3,077,197			2,998,775			10,014,805			7,909,070
Loss on debt extinguishment		—			—			167,469			—
General and administrative expenses		1,582,320			1,039,453			3,682,249			2,437,314
Other gains(2)		(1,051,533	)		—			(1,418,529	)		—
NOI	$	5,529,116		$	5,427,077		$	16,285,667		$	15,235,228

(1) Fees to affiliates for the three and nine months ended September 30, 2019, exclude property management fees of $314,926 and $948,497 and other reimbursements of $215,425 and $605,232, respectively, that are included in NOI. Fees to affiliates for the three and nine months ended September 30, 2018, exclude property management fees of $312,333 and $870,242 and other reimbursements of $138,105 and $312,382, respectively, that are included in NOI.

(2) Other gains for the three and nine months ended September 30, 2019 includenon-recurring insurance claim recoveries, legal settlement proceeds and interest income that are not included in NOI. There was no other gain activity for the three and nine months ended September 30, 2018.

Funds from Operations and Modified Funds from Operations

Due to certain unique operating characteristics of real estate companies, as discussed below, NAREIT, an industry trade group, has promulgated the measure FFO, which we believe to be an appropriate supplemental measure to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO is not equivalent to our net income (loss) as determined under GAAP.

We define FFO, anon-GAAP financial measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in December 2018 (“White Paper”). The White Paper defines FFO as net income (loss) computed in accordance with GAAP, excluding gains or losses from sales of property andnon-cash impairment charges of real estate related investments, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. In particular, we believe it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations and assessments regarding general market conditions which can change over time. An asset will only be evaluated for impairment if certain impairment indications exist and if the carrying, or book value, exceeds the total estimated undiscounted future cash flows (including net rental and lease revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under

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GAAP) from such asset. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and the relatively limited term of our operations, it could be difficult to recover any impairment charges. Our FFO calculation complies with NAREIT’s policy described above.

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or as requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. However, FFO, and MFFO, as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than thenon-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.

Changes in the accounting and reporting promulgations under GAAP (for acquisition fees and expenses from a capitalization/depreciation model to anexpensed-as-incurred model) that were put into effect in 2009 and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT’s definition of FFO have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses for all industries as items that are expensed under GAAP, that are typically accounted for as operating expenses. Management believes these fees and expenses do not affect our overall long-term operating performance. Publicly registered,non-listed REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation. While otherstart-up entities may also experience significant acquisition activity during their initial years, we believe that public,non-listed REITs, like us, are unique in that they have a limited life with targeted exit strategies within a relatively limited time frame after acquisition activity ceases.

Due to the above factors and other unique features of publicly registered,non-listed REITs, the IPA, an industry trade group, has standardized a measure known as MFFO, which the IPA has recommended as a supplemental measure for publicly registerednon-listed REITs and which we believe to be another appropriate supplemental measure to reflect the operating performance of a public,non-listed REIT having the characteristics described above. MFFO is not equivalent to our net income or loss as determined under GAAP, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate with a limited life and targeted exit strategy, as currently intended. We believe that, because MFFO excludes costs that we consider more reflective of investing activities and othernon-operating items included in FFO and also excludes acquisition fees and expenses that are not capitalized, as discussed below, and affect our

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operations only in periods in which properties are acquired, MFFO can provide, on a going forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance after the period in which we are acquiring our properties and once our portfolio is in place. By providing MFFO, we believe we are presenting useful information that assists investors and analysts to better assess the sustainability of our operating performance after our offering has been completed and our properties have been acquired. We also believe that MFFO is a recognized measure of sustainable operating performance by thenon-listed REIT industry. Further, we believe MFFO is useful in comparing the sustainability of our operating performance after our offering and acquisitions are completed with the sustainability of the operating performance of other real estate companies that are not as involved in acquisition activities. Investors are cautioned that MFFO should only be used to assess the sustainability of our operating performance after our offering has been completed and properties have been acquired, as it excludes acquisition costs that have a negative effect on our operating performance during the periods in which properties are acquired.

We define MFFO, anon-GAAP financial measure, consistent with the IPA’s Guideline2010-01, Supplemental Performance Measure for Publicly Registered,Non-Listed REITs: Modified Funds from Operations (the “Practice Guideline”), issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income: acquisition fees and expenses; amounts relating to deferred rent receivables and amortization of above and below market leases and liabilities (which are adjusted in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments); accretion of discounts and amortization of premiums on debt investments;mark-to-market adjustments included in net income; nonrecurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums on debt investments, nonrecurring unrealized gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operating activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized. While we rely on the Advisor for managing interest rate, hedge and foreign exchange risk, we do not retain an outside consultant to review all our hedging agreements. Inasmuch as interest rate hedges are not a fundamental part of our operations, we believe it is appropriate to exclude suchnon-recurring gains and losses in calculating MFFO, as such gains and losses are not reflective ofon-going operations.

Our MFFO calculation complies with the IPA’s Practice Guideline described above, except with respect to certain acquisition fees and expenses as discussed below. In calculating MFFO, we exclude acquisition related expenses that are not capitalized, amortization of above and below market leases, fair value adjustments of derivative financial instruments, deferred rent receivables and the adjustments of such items related to noncontrolling interests. Historically under GAAP, acquisition fees and expenses are characterized as operating expenses in determining operating net income. However, following the publication of ASU2017-01, which now forms part of ASC 805, acquisition fees and expenses are capitalized and depreciated under certain conditions. These expenses are paid in cash by us. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property. The acquisition of properties, and the corresponding acquisition fees and expenses, is the key operational feature of our business plan to generate operational income and cash flow to fund distributions to our stockholders. Further, under GAAP, certain contemplatednon-cash fair value and othernon-cash adjustments are considered operatingnon-cash adjustments to net income in determining cash flow from operating activities. In addition, we view fair

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value adjustments of derivatives and gains and losses from dispositions of assets asnon-recurring items or items which are unrealized and may not ultimately be realized, and which are not reflective ofon-going operations and are therefore typically adjusted for when assessing operating performance.

Our management uses MFFO and the adjustments used to calculate MFFO in order to evaluate our performance against other public,non-listed REITs which have limited lives with short and defined acquisition periods and targeted exit strategies shortly thereafter. As noted above, MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate in this manner. We believe that our use of MFFO and the adjustments used to calculate MFFO allow us to present our performance in a manner that reflects certain characteristics that are unique to public,non-listed REITs, such as their limited life, limited and defined acquisition period and targeted exit strategy, and hence that the use of such measures is useful to investors. By excluding expensed acquisition costs that are not capitalized, the use of MFFO provides information consistent with management’s analysis of the operating performance of the properties. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such changes that may reflect anticipated and unrealized gains or losses, we believe MFFO provides useful supplemental information.

Presentation of this information is intended to provide useful information to investors as they compare the operating performance to that of other public,non-listed REITs, although it should be noted that not all public,non-listed REITs calculate FFO and MFFO the same way, so comparisons with other public,non-listed REITs may not be meaningful. Furthermore, FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs, including our ability to make distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with GAAP measurements as an indication of our performance. MFFO is useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete and net asset value is disclosed. MFFO is not a useful measure in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining MFFO.

Neither the SEC, NAREIT nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, the SEC, NAREIT or another regulatory body may decide to standardize the allowable adjustments across thenon-listed REIT industry and in response to such standardization we may have to adjust our calculation and characterization of FFO or MFFO accordingly.

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PART I — FINANCIAL INFORMATION (continued)

Our calculation of FFO and MFFO is presented in the following table for the three and nine months ended September 30, 2019 and 2018:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
Reconciliation of net loss to MFFO:
Net loss	$	(3,157,665	)	$	(3,556,258	)	$	(11,767,865	)	$	(11,007,458	)
Depreciation of real estate assets		3,965,276			3,638,560			11,573,797			10,304,728
Amortization of lease-related costs		—			228,215			—			2,499,417
FFO		807,611			310,517			(194,068	)		1,796,687
Acquisition fees and expenses(1)(2)		—			(500	)		—			2,287
Unrealized loss (gain) on derivative instruments		11,021			(120,720	)		375,637			(665,445	)
Loss on debt extinguishment		—			—			167,469			—
MFFO	$	818,632		$	189,297		$	349,038		$	1,133,529

(1) By excluding expensed acquisition costs that are not capitalized, management believes MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition fees and expenses include payments to the Advisor or third parties. Acquisition fees and expenses under GAAP historically were considered operating expenses and as expenses included in the determination of net income (loss) and income (loss) from continuing operations, both of which are performance measures under GAAP. Following the publication of ASU2017-01, which now forms part of ASC 805, acquisition fees and expenses are capitalized and depreciated under certain conditions. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to the property. The acquisition of properties, and the corresponding acquisition fees and expenses, is the key operational feature of our business plan to generate operational income and cash flow to fund distributions to its stockholders.

(2) Acquisition expenses for the three and nine months ended September 30, 2019 and 2018, of $0 and $0 and ($500) and $2,287, respectively, did not meet the criteria for capitalization under ASC 805 and were recorded in general and administrative expenses in the accompanying consolidated statements of operations. No acquisition fees were incurred that did not meet the criteria for capitalization under ASC 805 for the three and nine months ended September 30, 2019 and 2018.

FFO and MFFO may be used to fund all or a portion of certain capitalizable items that are excluded from FFO and MFFO, such as tenant improvements, building improvements and deferred leasing costs.

Off-Balance Sheet Arrangements

As of September 30, 2019, we had nooff-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Related-Party Transactions and Agreements

We have entered into agreements with the Advisor and its affiliates, including the Dealer Manager, whereby we pay certain fees to, or reimburse certain expenses of, the Advisor or its affiliates for acquisition and advisory fees and expenses, financing coordination fees, organization and offering costs, sales commissions, dealer manager fees, distribution and shareholder servicing fees, asset and property management fees and expenses, leasing fees and reimbursement of certain operating costs as well as make certain distributions in connection with

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PART I — FINANCIAL INFORMATION (continued)

our liquidation or listing on a national stock exchange. Refer to Note 7 (Related Party Arrangements) to our unaudited consolidated financial statements included in this Quarterly Report for a discussion of the various related-party transactions, agreements and fees.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We may be exposed to the effects of interest rate changes as a result of borrowings used to maintain liquidity and to fund the acquisition, expansion and refinancing of our real estate investment portfolio and operations. We may be also exposed to the effects of changes in interest rates as a result of the acquisition and origination of mortgage, mezzanine, bridge and other loans. Our profitability and the value of our investment portfolio may be adversely affected during any period as a result of interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs. We intend to manage interest rate risk by maintaining a ratio of fixed rate, long-term debt such that floating rate exposure is kept to an acceptable level. In addition, we may utilize a variety of financial instruments, including interest rate caps, collars, floors and swap agreements, in order to limit the effects of changes in interest rates on our operations. When we use these types of derivatives to hedge the risk of interest-earning assets or interest-bearing liabilities, we may be subject to certain risks, including the risk that losses on a hedge position will reduce the funds available for payments to holders of our common stock and that the losses may exceed the amount we invested in the instruments.

We borrow funds and make investments at a combination of fixed and variable rates. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt unless such instruments mature or are otherwise terminated. However, interest rate changes will affect the fair value of our fixed rate instruments. At September 30, 2019, the fair value of our fixed rate debt was $219,483,258 and the carrying value of our fixed rate debt was $218,075,840. The fair value estimate of our fixed rate debt was estimated using a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining maturity if the loans were originated at September 30, 2019. As we expect to hold our fixed rate instruments to maturity and the amounts due under such instruments would be limited to the outstanding principal balance and any accrued and unpaid interest, we do not expect that fluctuations in interest rates, and the resulting change in fair value of our fixed rate instruments, would have a significant impact on our operations.

Conversely, movements in interest rates on our variable rate debt will change our future earnings and cash flows, but not significantly affect the fair value of those instruments. However, changes in required risk premiums will result in changes in the fair value of floating rate instruments. At September 30, 2019, the fair value of our variable rate debt was $69,549,350 and the carrying value of our variable rate debt was $69,441,615. At September 30, 2019, we were exposed to market risks related to fluctuations in interest rates on $69,441,615 of our outstanding variable rate debt. Based on interest rates as of September 30, 2019, if interest rates are 100 basis points higher during the 12 months ending September 30, 2020, interest expense on our variable rate debt would increase by $708,643 and if interest rates are 100 basis points lower during the 12 months ending September 30, 2020, interest expense on our variable rate debt would decrease by $708,642.

At September 30, 2019, the weighted-average interest rate of our fixed rate debt and variable rate debt was 3.91% and 4.29%, respectively. The weighted-average interest rate of our blended fixed and variable rates was 4.00% at September 30, 2019. The weighted-average interest rate represents the actual interest rate in effect at September 30, 2019 (consisting of the contractual interest rate), using interest rate indices as of September 30, 2019, where applicable.

We are also exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. If the fair value of a derivative contract is positive, the counterparty will owe us, which creates credit risk for us. If the fair value of a derivative contract is negative, we will owe the counterparty and,

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PART I — FINANCIAL INFORMATION (continued)

therefore, do not have credit risk. We will seek to minimize the credit risk in derivative instruments by entering into transactions with high-quality counterparties. As of September 30, 2019, we did not have counterparty risk on our interest rate cap agreements as the underlying variable rates for our interest rate cap agreements as of September 30, 2019, were not in excess of the capped rates. See also Note 10 (Derivative Financial Instruments) of our unaudited consolidated financial statements included in this quarterly report.

Item 4. Controls and Procedures

Disclosure Controls and Procedures

As of the end of the period covered by this quarterly report, management, including our principal executive officer and principal financial officer, evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule13a-15(e) or15d-15(e) under the Exchange Act) as of September 30, 2019. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and we necessarily were required to apply our judgment in evaluating whether the benefits of the controls and procedures that we adopt outweigh their costs. Based upon, and as of the date of, the evaluation, our principal executive officer and principal financial officer concluded that the disclosure controls and procedures were effective at the reasonable assurance level as of the end of the period covered by this report to ensure that information required to be disclosed in the reports we file and submit under the Exchange Act is recorded, processed, summarized and reported as and when required. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by us in the reports we file and submit under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

PART II

Item 1. Legal Proceedings

From time to time we are party to legal proceedings that arise in the ordinary course of our business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by government agencies.

Item 1A. Risk Factors

There have been no material changes to the risk factors contained in Part 1, Item 1A set forth in our Annual Report on Form10-K filed with the SEC on March 15, 2019 and in our Quarterly Report on Form10-Q filed with the SEC on August 13, 2019.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended September 30, 2019, we did not sell any equity securities that were not registered under the Securities Act.

During the three months ended September 30, 2019, we fulfilled repurchase requests and repurchased shares of our common stock pursuant to our share repurchase program as follows:

	Total Number of Shares Requested to be Repurchased(1)		Total Number of Shares Repurchased		Average Price Paid per Share(2)(3)		Approximate Dollar Value of Shares Available That May Yet Be Repurchased Under the Program
July 2019		—		31,243	$	21.38		(4	)
August 2019		2,688		—		—		(4	)
September 2019		—		—		—		(4	)
	2,688		31,243

(1) We generally repurchase shares approximately 30 days following the end of the applicable quarter in which requests were received. At September 30, 2019, we had $64,000, representing 2,688 Class T shares of outstanding and unfulfilled repurchase requests, all of which were fulfilled on October 31, 2019.

(2) For three months ended September 30, 2019, we repurchased shares at prices determined as follows:

• 92.5% of the lesser of Purchase Price or Estimated Value per Share for stockholders who have held their shares for at least one year;

• 95.0% of the lesser of Purchase Price or Estimated Value per Share for stockholders who have held their shares for at least two years;

• 97.5% of the lesser of Purchase Price or Estimated Value per Share for stockholders who have held their shares for at least three years; and

• 100% of the lesser of Purchase Price or Estimated Value per Share for stockholders who have held their shares for at least four years.

Notwithstanding the above, the repurchase price for repurchases sought upon a stockholder’s death or disability will be equal to the average issue price per share for all of the stockholder’s shares. The requiredone-year holding period does not apply to repurchases requested within 270 days after the death or disability of a stockholder.

E-70

PART II — OTHER INFORMATION (continued)

(3) For the three months ended September 30, 2019, the sources of the cash used to repurchase shares were 100% from existing cash and cash equivalents.

(4) The number of shares that may be repurchased pursuant to the share repurchase program during any calendar year is limited to the lesser of (1) 5% of the weighted-average number of shares of our common stock outstanding during the prior calendar year and (2) those that can be funded from the net proceeds we received from the sale of shares under the distribution reinvestment plan during the prior calendar year, plus such additional funds as may be reserved for that purpose by our board of directors. In connection with the proposed Merger, on August 5, 2019, our board of directors approved the Amended & Restated SRP, which became effective September 5, 2019, and applied beginning with repurchases made on repurchase dates (as defined in the Amended & Restated SRP) subsequent to the effective date of the Amended & Restated SRP. Under the Amended & Restated SRP, we will only repurchase shares of common stock in connection with the death or qualifying disability (as determined by the Company’s board in its sole discretion) of a stockholder, subject to certain terms and conditions specified in the Amended & Restated SRP.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

Item 6. Exhibits

The following exhibits are included, or incorporated by reference, in this Quarterly Report for the three months ended September 30, 2019 (and are numbered in accordance with Item 601 of RegulationS-K).

Exhibit	Description
2.1	Agreement and Plan of Merger, dated as of August 5, 2019, by and among Steadfast Apartment REIT, Inc., Steadfast Apartment REIT Operating Partnership, L.P., SIII Subsidiary, LLC, Steadfast Apartment REIT III, Inc. and Steadfast Apartment REIT III Operating Partnership, L.P. (included as Exhibit 2.1 to the Company’s Current Report on Form8-K (FileNo. 000-55772) filed with the SEC on August 6, 2019, and incorporated herein by reference).
3.1	Second Articles of Amendment and Restatement of Steadfast Apartment REIT III, Inc., filed May 16, 2016 (included as Exhibit 3.1 to the Company’s Current Report on Form8-K (FileNo. 333-207952), filed May 17, 2016 and incorporated herein by reference).
3.2	Articles of Amendment of Steadfast Apartment REIT III, Inc., filed August 8, 2017 (included as Exhibit 3.1 to the Company’s Post-Effective Amendment No. 9 to FormS-11 (RegistrationNo. 333-207952), filed August 10, 2017 and incorporated herein by reference).
3.3	Bylaws of Steadfast Apartment REIT III, Inc. (included as Exhibit 3.3 to Company’s Registration Statement on FormS-11 (FileNo. 333-207952), filed November 12, 2015 and incorporated herein by reference).
4.1	Form of Subscription Agreement (included as Exhibit 4.1 to the Company’s Post-Effective Amendment No. 13 to FormS-11 (FileNo. 333-207952), filed April 11, 2018 and incorporated herein by reference).

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PART II — OTHER INFORMATION (continued)

Exhibit	Description
4.2	Form of Distribution Reinvestment Plan (included as Exhibit 4.2 to the Company’s Post-Effective Amendment No. 13 to FormS-11 (FileNo. 333-207952), filed April 11, 2018 and incorporated herein by reference).
4.3	Form of Redemption Request Form (included as Exhibit 4.3 to the Company’s Post-Effective Amendment No. 13 to FormS-11 (FileNo. 333-207952), filed April 11, 2018 and incorporated herein by reference).
4.4	Form of Application for Transfer (included as Exhibit 4.4 to the Company’s Post-Effective Amendment No. 13 to FormS-11 (FileNo. 333-207952) filed on July 11, 2018 and incorporated herein by reference).
10.1	Amendment No. 3 to the Amended and Restated Advisory Agreement, dated as of February 1, 2019, by and among Steadfast Apartment REIT III, Inc., Steadfast Apartment REIT III Operating Partnership, L.P. and Steadfast Apartment Advisor III, LLC and effective as of February 5, 2019 (included as Exhibit 10.1 to the Company’s Current Report Form8-K (FileNo. 333-207952), filed February 1, 2019 and incorporated herein by reference).
10.2	Multifamily Loan and Security Agreement(Non-Recourse), made as of May 31, 2019, by and between STAR III Bristol Village, LLC and Berkeley Point Capital LLC, d/b/a Newmark Knight Frank (included as Exhibit 10.1 to the Company’s Current Report on Form8-K filed June 6, 2019 and incorporated herein by reference).
10.3	Multifamily Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of May 31, 2019, by and between STAR III Bristol Village, LLC and Berkeley Point Capital LLC, d/b/a Newmark Knight Frank (included as Exhibit 10.2 to the Company’s Current Report on Form8-K filed June 6, 2019 and incorporated herein by reference).
10.4	Assignment of Management Agreement, dated May 31, 2019, by and among STAR III Bristol Village, LLC, Berkeley Point Capital, LLC d/b/a Newmark Knight Frank and Steadfast Management Company, Inc. (included as Exhibit 10.3 to the Company’s Current Report on Form8-K filed June 6, 2019 and incorporated herein by reference).
10.5	Guaranty, dated May 31, 2019, by Steadfast Apartment REIT III, Inc. for the benefit of Berkeley Point Capital, LLC, d/b/a Newmark Knight Frank (included as Exhibit 10.4 to the Company’s Current Report on Form8-K filed June 6, 2019 and incorporated herein by reference).
10.6	Multifamily Note, made as of May 31, 2019, by STAR III Bristol Village, LLC, in favor of Berkeley Point Capital, LLC d/b/a Newmark Knight Frank (included as Exhibit 10.5 to the Company’s Current Report on Form8-K filed June 6, 2019 and incorporated herein by reference).
10.7	Multifamily Loan and Security Agreement(Non-Recourse), made as of May 31, 2019, by and between STAR III Sweetwater, LLC and Berkeley Point Capital, LLC d/b/a Newmark Knight Frank (included as Exhibit 10.6 to the Company’s Current Report on Form8-K filed June 6, 2019 and incorporated herein by reference).
10.8	Multifamily Deed to Secure Debt, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of May 31, 2019, by and between STAR III Sweetwater, LLC and Berkeley Point Capital LLC, d/b/a Newmark Knight Frank (included as Exhibit 10.7 to the Company’s Current Report on Form8-K filed June 6, 2019 and incorporated herein by reference).
10.9	Assignment of Management Agreement, dated May 31, 2019, by and among STAR III Sweetwater, LLC, Berkeley Point Capital, LLC d/b/a Newmark Knight Frank and Steadfast Management Company, Inc. (included as Exhibit 10.8 to the Company’s Current Report on Form8-K filed June 6, 2019 and incorporated herein by reference).

E-72

PART II — OTHER INFORMATION (continued)

Exhibit	Description
10.10	Guaranty, dated as of May 31, 2019, by Steadfast Apartment REIT III, Inc. for the benefit of Berkeley Point Capital LLC d/b/a Newmark Knight Frank (included as Exhibit 10.9 to the Company’s Current Report on Form8-K filed June 6, 2019 and incorporated herein by reference).
10.11	Multifamily Note, made as of May 31, 2019, by STAR III Sweetwater, LLC, in favor of Berkeley Point Capital LLC d/b/a Newmark Knight Frank (included as Exhibit 10.10 to the Company’s Current Report on Form8-K filed June 6, 2019 and incorporated herein by reference).
10.12	Multifamily Loan and Security Agreement(Non-Recourse), made as of May 31, 2019, by and between STAR III Vista Ridge, LLC and PNC Bank, National Association (included as Exhibit 10.11 to the Company’s Current Report on Form8-K filed June 6, 2019 and incorporated herein by reference).
10.13	Multifamily Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of May 31, 2019, by and between STAR III Vista Ridge, LLC and PNC Bank, National Association (included as Exhibit 10.12 to the Company’s Current Report on Form8-K filed June 6, 2019 and incorporated herein by reference).
10.14	Assignment of Management Agreement, dated May 31, 2019, by and among STAR III Vista Ridge, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (included as Exhibit 10.13 to the Company’s Current Report on Form8-K filed June 6, 2019 and incorporated herein by reference).
10.15	Guaranty, dated May 31, 2019, by Steadfast Apartment REIT III, Inc. for the benefit of PNC Bank, National Association (included as Exhibit 10.14 to the Company’s Current Report on Form8-K filed June 6, 2019 and incorporated herein by reference).
10.16	Multifamily Note, made as of May 31, 2019, by STAR III Vista Ridge, LLC, in favor of PNC Bank, National Association (included as Exhibit 10.15 to the Company’s Current Report on Form8-K filed June 6, 2019 and incorporated herein by reference).
10.17	First Amendment to the Agreement of Limited Partnership of STAR III Operating Partnership, dated August 5, 2019 (included as Exhibit 10.1 to the Company’s Current Report on Form8-K (FileNo. 000-55772) filed with the SEC on August 6, 2019, and incorporated herein by reference).
10.18	Termination Agreement, dated as of August 5, 2019, by and among Steadfast Apartment REIT III, Inc. and Steadfast Apartment Advisor III, LLC (included as Exhibit 10.2 to the Company’s Current Report on Form8-K (FileNo. 000-55772) filed with the SEC on August 6, 2019, and incorporated herein by reference).
31.1*	Certification of the Principal Executive Officer pursuant to Exchange Act Rule13a-14(a) or15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of the Principal Financial Officer pursuant to Exchange Act Rule13a-14(a) or15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1	Amended and Restated Share Repurchase Program (included as Exhibit 99.3 to the Company’s Current Report on Form8-K (FileNo. 000-55772) filed with the SEC on August 6, 2019, and incorporated herein by reference).

E-73

PART II — OTHER INFORMATION (continued)

* Filed herewith.

** In accordance with Item 601(b)(32) of RegulationS-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

E-74

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Steadfast Apartment REIT III, Inc.
Date: November 8, 2019	By:	/s/ Rodney F. Emery
		Rodney F. Emery
		Chief Executive Officer and Chairman of the Board
		(Principal Executive Officer)
Date: November 8, 2019	By:	/s/ Kevin J. Keating
		Kevin J. Keating
		Chief Financial Officer and Treasurer
		(Principal Financial Officer and Accounting Officer)

E-75

Annex F

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2018

OR

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

For the transition period from                    to                    

Commission file number000-55428

STEADFAST APARTMENT REIT, INC.

(Exact Name of Registrant as Specified in Its Charter)

Maryland	36-4769184
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

18100 Von Karman Avenue, Suite 500
Irvine, California	92612
(Address of Principal Executive Offices)	(Zip Code)

(949) 852-0700

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.01 par value per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes  ☐    No  ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to thisForm 10-K.  ☒

Indicate by check mark whether the registrant is a large accelerated filed, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” inRule 12b-2 of the Exchange Act.

Large Accelerated filer	☐	Accelerated filer	☐
Non-Accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period of complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☒

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

There is no established market for the registrant’s shares of common stock. There were approximately 50,989,062 shares of common stock held bynon-affiliates as of June 29, 2018, the last business day of the registrant’s most recently completed second fiscal quarter, for an aggregate market value of $774,013,967, assuming an estimated value per share of $15.18.

As of March 7, 2019, there were 51,932,358 shares of the Registrant’s common stock issued and outstanding.

STEADFAST APARTMENT REIT, INC.

INDEX

		Page
Cautionary Note Regarding Forward-Looking Statements			F-2
PART I
Item 1.	Business		F-4
Item 1A.	Risk Factors		F-11
Item 1B.	Unresolved Staff Comments		F-40
Item 2.	Properties		F-40
Item 3.	Legal Proceedings		F-40
Item 4.	Mine Safety Disclosures		F-40
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		F-41
Item 6.	Selected Financial Data		F-50
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		F-51
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		F-76
Item 8.	Financial Statements and Supplementary Data		F-77
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		F-77
Item 9A.	Controls and Procedures		F-77
Item 9B.	Other Information		F-78
PART III
Item 10.	Directors, Executive Officers and Corporate Governance		F-79
Item 11.	Executive Compensation		F-83
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		F-85
Item 13.	Certain Relationships and Related Transactions, and Director Independence		F-86
Item 14.	Principal Accountant Fees and Services		F-92
PART IV
Item 15.	Exhibits and Financial Statement Schedules		F-94
Item 16.	Form10-K Summary		F-101
	Index to Consolidated Financial Statements		F-102

F-1

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements included in this Annual Report onForm 10-K of Steadfast Apartment REIT, Inc. (which is referred to in this Annual Report on Form10-K, as context requires, as the “Company,” “we,” “us,” or “our”) that are not historical facts (including any statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto) are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual events or our investments and results of operations could differ materially from those expressed or implied in any forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms and other comparable terminology.

The forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. Factors that could have a material adverse effect on our operations and future prospects include, but are not limited to:

• the fact that we have a limited operating history and commenced operations on May 22, 2014;

• the fact that we have had a net loss for each quarterly and annual period since inception;

• changes in economic conditions generally and the real estate and debt markets specifically;

• our ability to secure resident leases for our multifamily properties at favorable rental rates;

• risks inherent in the real estate business, including resident defaults, potential liability relating to environmental matters and the lack of liquidity of real estate investments;

• the fact that we pay fees and expenses to our advisor and its affiliates that were not negotiated on anarm’s-length basis and the fact that the payment of these fees and expenses increases the risk that our stockholders will not earn a profit on their investment in us;

• our ability to retain our executive officers and other key personnel of our advisor, our property manager and other affiliates of our advisor;

• our ability to generate sufficient cash flows to pay distributions for our stockholders;

• legislative or regulatory changes (including changes to the laws governing the taxation of real estate investment trusts, or REITs;

• the availability of capital;

• changes in interest rates; and

• changes to generally accepted accounting principles, or GAAP.

Any of the assumptions underlying forward-looking statements could be inaccurate. You are cautioned not to place undue reliance on any forward-looking statements included in this annual report. All forward-looking statements are made as of the date of this annual report and the risk that actual results will differ materially from the expectations expressed in this annual report will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this annual report, whether as a result of new information, future events,

F-2

changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this annual report, the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this annual report will be achieved.

All forward looking statements included herein should be read in connection with the risks identified in the “Risk Factors” section of this Annual Report on Form10-K.

F-3

PART I

ITEM 1. BUSINESS

Overview

Steadfast Apartment REIT, Inc. (which is referred to in this annual report, as context requires, as the “Company,” “we,” “us,” or “our”) was formed on August 22, 2013, as a Maryland corporation and elected to qualify as a real estate investment trust, or REIT, commencing with its taxable year ended December 31, 2014. We own and operate a diverse portfolio of real estate investments, primarily in the multifamily sector located throughout the United States. In addition to our focus on multifamily properties, we may also make selective strategic acquisitions of other types of commercial properties. We may also acquire or originate mortgage, mezzanine, bridge and other real estate loans and equity securities of other real estate companies. As of December 31, 2018, we owned 34 multifamily properties comprised of a total of 11,601 apartment homes. For more information on our real estate portfolio, see “ —Our Real Estate Portfolio” below.

On December 30, 2013, we commenced our initial public offering of up to 66,666,667 shares of common stock at an initial price of $15.00 per share and up to 7,017,544 shares of common stock pursuant to our distribution reinvestment plan, at an initial price of $14.25 per share. On March 24, 2016, we terminated our initial public offering. As of March 24, 2016, we had sold 48,625,651 shares of common stock for gross offering proceeds of $724,849,631, including 1,011,561 shares of common stock issued pursuant to our distribution reinvestment plan for gross offering proceeds of $14,414,752. Following the termination of our initial public offering, we continue to offer shares of our common stock pursuant to our distribution reinvestment plan. As of December 31, 2018, we had sold 52,921,670 shares of common stock for gross offering proceeds of $788,339,974, including 5,307,643 shares of common stock issued pursuant to our distribution reinvestment plan for gross offering proceeds of $77,905,095.

On February 14, 2017, our board of directors determined an estimated value per share of our common stock of $14.85 as of December 31, 2016. On March 14, 2018, our board of directors determined an estimated value per share of our common stock of $15.18 as of December 31, 2017. On March 12, 2019, our board of directors determined an estimated value per share of our common stock of $15.84 as of December 31, 2018. For more information on the determinations of the estimated value per share of our common stock, see Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Purchases of Equity Securities—Estimated Value Per Share.” In connection with the determination of our estimated value per share, our board of directors determined a price per share for the distribution reinvestment plan of $14.85, $15.18 and $15.84, effective March 1, 2017, April 1, 2018 and April 1, 2019. In the future, our board of directors may, in its sole discretion and from time to time, change the price at which we offer shares pursuant to our distribution reinvestment plan to reflect changes in our estimated value per share and other factors that our board of directors deems relevant.

We are externally managed by Steadfast Apartment Advisor, LLC, which we refer to as our “advisor,” pursuant to the Advisory Agreement, as amended, or the advisory agreement, dated December 13, 2013, by and among us, our operating partnership and our advisor. The advisory agreement is subject to annual renewal by our board of directors. The current term of the advisory agreement expires on December 13, 2019. Subject to certain restrictions and limitations, our advisor manages ourday-to-day operations and our portfolio of properties and real estate-related assets, sources and presents investment opportunities to our board of directors and provides investment management services on our behalf. The advisor has also entered into an Advisory Services Agreement with Crossroads Capital Advisors, LLC, or Crossroads Capital Advisors, whereby Crossroads Capital Advisors provides advisory services to us on behalf of the advisor. Stira Capital Markets Group, LLC (formerly known as Steadfast Capital Markets Group, LLC), or the dealer manager, an affiliate of Steadfast REIT Investments, LLC, our sponsor, served as the dealer manager for our initial public offering. Our advisor, along with the dealer manager, provides offering services, marketing, investor relations and other administrative services on our behalf.

F-4

Substantially all of our business is conducted through Steadfast Apartment REIT Operating Partnership, L.P., a Delaware limited partnership formed on August 27, 2013, which we refer to as our “operating partnership.” We are the sole general partner of our operating partnership and our wholly-owned subsidiary, Steadfast Apartment REIT Limited Partner, LLC, is the sole limited partner of our operating partnership.

F-5

Our Structure

Our sponsor, Steadfast REIT Investments, LLC, a Delaware limited liability company, is indirectly controlled by Rodney F. Emery, the chairman of our board of directors and our chief executive officer. We refer to each of our sponsor, advisor, dealer manager and their affiliates as “a Steadfast Companies affiliate” and collectively as “Steadfast Companies affiliates.” The chart below shows the relationships among our company and various Steadfast Companies affiliates.

(1) Crossroads Capital Multifamily, LLC and Crossroads Capital Advisors, LLC are affiliated entities, each being wholly-owned subsidiaries of Crossroads Capital Group, LLC.

F-6

Objectives and Strategies

Our investment objectives are to:

• realize capital appreciation in the value of our investments over the long term; and

• pay attractive and stable cash distributions to stockholders.

We intend to use cash flows from operations to continue to invest in and manage our real estate investments located throughout the United States, with the objective of generating stable rental income and maximizing the opportunity for future capital appreciation. We believe that a majority of our portfolio consists of established, well-positioned, institutional-quality apartment communities with high occupancies and consistent rental revenue. Established apartment communities are typically older, more affordable apartments that cater to the middle-class segment of the workforce, with monthly rental rates that accommodate the generally accepted guidelines for housing costs as a percentage of gross income. As a result, we believe the demand for apartment housing at these properties is higher compared to other types of multifamily properties and is generally more consistent in all economic cycles. We continue to implement a value-enhancement strategy on the apartment homes we acquired. Our value-enhancement strategy involves the acquisition of under-managed, stabilized apartment communities in high job and population growth neighborhoods and the investment of additional capital to make strategic upgrades of the interiors of the apartment homes. These opportunities vary in degree based on the specific business plan for each asset, but could include new appliances, better cabinets, countertops and flooring.

2018 Highlights

During 2018, we:

• invested $18,049,643 in improvements to our real estate investment portfolio;

• paid cash distributions of $23,399,025 and distributed $22,713,975 in shares of our common stock pursuant to our distribution reinvestment plan, which constituted a 6.0% annualized distribution rate to our stockholders based on a purchase price of $15.00 per share;

• generated cash flows from operations of $33,557,275, although we incurred a net loss of $49,100,346;

• generated net operating income, or NOI, of $96,505,018 (for further information on how we calculate NOI and a reconciliation of NOI to net loss, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Net Operating Income”);

• generated funds from operations, or FFO, of $21,892,934 (for further information on how we calculate FFO and a reconciliation of FFO to net loss, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds From Operations and Modified Funds From Operations”);

• generated modified funds from operations, or MFFO, of $27,369,983 (for further information on how we calculate MFFO and a reconciliation of MFFO to net loss, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds from Operations and Modified Funds from Operations”);

• received proceeds of $50,510,765, net of principal payments of $667,459,963, deferred financing costs of $4,528,781 and debt extinguishment cost of $1,019,491, related to the refinancing of a portion of our outstanding debt (for further information on the 2018 Refinancing Transactions, please refer to Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources”).

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Our Real Estate Portfolio

As of December 31, 2018, we owned the 34 multifamily properties described below.

Property Name		Location	Number of Units		Average Monthly Occupancy			Average Monthly Rent(1)		Purchase Date		Contract Purchase Price		Mortgage Debt Outstanding(2)			Capitalization Rate(3)
1	Villages at Spring Hill Apartments	Spring Hill, TN		176		94.9	%	$	996		5/22/2014	$	14,200,000			(4)		6.2	%
2	Harrison Place Apartments	Indianapolis, IN		307		95.4	%		971		6/30/2014		27,864,250			(4)		6.1	%
3	Club at Summer Valley	Austin, TX		260		92.3	%		913		8/28/2014		21,500,000			(4)		6.2	%
4	Terrace Cove Apartment Homes	Austin, TX		304		95.7	%		918		8/28/2014		23,500,000			(4)		6.6	%
5	The Residences on McGinnis Ferry	Suwanee, GA		696		93.0	%		1,282		10/16/2014		98,500,000			(4)		5.8	%
6	The 1800 at Barrett Lakes	Kennesaw, GA		500		95.2	%		1,035		11/20/2014		49,000,000		40,581,410			6.4	%
7	The Oasis	Colorado Springs, CO		252		93.7	%		1,349		12/19/2014		40,000,000		39,446,852			6.2	%
8	Columns on Wetherington	Florence, KY		192		94.3	%		1,153		2/26/2015		25,000,000			(4)		6.0	%
9	Preston Hills at Mill Creek	Buford, GA		464		93.5	%		1,113		3/10/2015		51,000,000			(4)		5.8	%
10	Eagle Lake Landing Apartments	Speedway, IN		277		94.6	%		865		3/27/2015		19,200,000			(4)		7.9	%
11	Reveal on Cumberland	Fishers, IN		220		94.5	%		1,104		3/30/2015		29,500,000		21,610,489			5.8	%
12	Randall Highlands Apartments	North Aurora, IL		146		93.2	%		1,786		3/31/2015		32,115,000			(4)		5.7	%
13	Heritage Place Apartments	Franklin, TN		105		96.2	%		1,130		4/27/2015		9,650,000		8,573,416			5.7	%
14	Rosemont at East Cobb	Marietta, GA		180		92.8	%		991		5/21/2015		16,450,000		13,238,815			5.7	%
15	Ridge Crossings Apartments	Hoover, AL		720		94.7	%		979		5/28/2015		72,000,000		57,605,492			6.0	%
16	Bella Terra at City Center	Aurora, CO		304		91.8	%		1,150		6/11/2015		37,600,000			(4)		5.7	%
17	Hearthstone at City Center	Aurora, CO		360		92.2	%		1,224		6/25/2015		53,400,000			(4)		5.8	%
18	Arbors at Brookfield	Mauldin, SC		702		93.0	%		929		6/30/2015		66,800,000			(4)		5.5	%
19	Carrington Park	Kansas City, MO		298		94.0	%		1,013		8/19/2015		39,480,000			(4)		5.7	%
20	Delano at North Richland Hills	North Richland Hills, TX		263		94.3	%		1,439		8/26/2015		38,500,000		29,790,989			5.6	%
21	Meadows at North Richland Hills	North Richland Hills, TX		252		93.7	%		1,339		8/26/2015		32,600,000		25,436,887			5.6	%
22	Kensington by the Vineyard	Euless, TX		259		95.0	%		1,485		8/26/2015		46,200,000		34,087,674			5.7	%
23	Monticello by the Vineyard	Euless, TX		354		95.2	%		1,336		9/23/2015		52,200,000		41,159,556			5.4	%
24	The Shores	Oklahoma City, OK		300		94.0	%		1,000		9/29/2015		36,250,000		23,944,543			6.4	%
25	Lakeside at Coppell	Coppell, TX		315		94.6	%		1,687		10/7/2015		60,500,000		45,217,115			5.9	%
26	Meadows at River Run	Bolingbrook, IL		374		91.4	%		1,408		10/30/2015		58,500,000		43,065,800			6.0	%
27	PeakView atT-Bone Ranch	Greeley, CO		224		95.5	%		1,295		12/11/2015		40,300,000			(4)		5.7	%
28	Park Valley Apartments	Smyrna, GA		496		92.9	%		1,012		12/11/2015		51,400,000		44,691,749			5.8	%
29	PeakView by Horseshoe Lake	Loveland, CO		222		94.1	%		1,388		12/18/2015		44,200,000		33,692,519			5.8	%

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Property Name		Location	Number of Units		Average Monthly Occupancy			Average Monthly Rent(1)		Purchase Date		Contract Purchase Price		Mortgage Debt Outstanding(2)			Capitalization Rate(3)
30	Stoneridge Farms	Smyrna, TN		336		93.8	%	$	1,178		12/30/2015	$	47,750,000	$	—			5.7	%
31	Fielder’s Creek	Englewood, CO		217		95.9	%		1,193		3/23/2016		32,400,000		—			6.0	%
32	Landings of Brentwood	Brentwood, TN		724		95.9	%		1,191		5/18/2016		110,000,000			(5)		5.7	%
33	1250 West Apartments	Marietta, GA		468		90.4	%		1,008		8/12/2016		55,772,500			(4)		6.1	%
34	Sixteen50 @ Lake Ray Hubbard	Rockwall, TX		334		94.6	%		1,492		9/29/2016		66,050,000			(4)		5.7	%
				11,601		93.9	%(6)	$	1,163			$	1,499,381,750	$	502,143,306

(1) Average monthly rent is based upon the effective rental income after considering the effect of vacancies, concessions and write-offs.

(2) Mortgage debt outstanding is net of deferred financing costs and loan discount associated with the loans for each individual property listed above but excludes the principal balance of $551,669,000 and associated deferred financing costs of $3,656,563 related to our Master Credit Facility Agreement, or MCFA.

(3) The capitalization rate reflected in the table is as of the closing of the acquisition of the property. We calculate the capitalization rate for a real property by dividing the NOI of the property by the purchase price of the property, excluding acquisition costs. Net operating income is calculated by deducting all operating expenses of a property, including property taxes and management fees but excluding debt service payments and capital expenditures, from gross operating revenues received from a property. For purposes of this calculation, net operating income is determined using the projected first year net operating income of the property based onin-place leases, potential rent increases or decreases for each unit and other revenues from late fees or services, adjusted for projected vacancies, tenant concessions, if any, and charges not collected.

(4) Properties secured under the terms of the MCFA.

(5) At December 31, 2018, Landings of Brentwood was pledged as collateral pursuant to our line of credit. On January 9, 2019, we terminated the line of credit.

(6) At December 31, 2018, our portfolio was approximately 95.5% leased, calculated using the number of occupied and contractually leased units divided by total units. As of December 31, 2018, no single tenant accounted for greater than 10% of our 2018 gross annualized rental revenues.

We plan to invest approximately $10 to $15 million during the year ending December 31, 2019, for interior renovations at certain properties in our portfolio. These renovations are primarily to enhance the interior amenities of the apartment homes and will be performed initially on vacant units and thereafter on units vacated from time to time in the ordinary course.

The following information generally applies to all of our properties:

• we believe all of our properties are adequately covered by insurance and are suitable for their intended purposes;

• except as noted above, we have no plans for any material renovations, improvements or developments with respect to any of our properties; and

• our properties face competition in attracting new residents and retaining current residents from other multifamily properties in and around their respective submarkets.

Leverage

We use secured debt, and intend to use in the future secured and unsecured debt, as a means of providing additional funds for the acquisition, development or renovation of our properties. We believe that the careful use of borrowings will help us achieve our diversification goals and potentially enhance the returns on our investments. At December 31, 2018, our debt was approximately 58% of the value of our properties, as determined by the most recent valuations performed by an independent third-party appraiser as of December 31, 2018. Going forward, we expect that our borrowings will be approximately 55% to 60% of the value of our properties (after debt amortization) and other real estate-related assets. Under our Articles of Amendment and Restatement, which we refer to as our “charter,” we are prohibited from borrowing in excess of 300% of the value of our net assets which generally approximates to 75% of the aggregate cost of our assets unless such

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excess is approved by a majority of the independent directors and disclosed to stockholders, along with a justification for such excess, in our next quarterly report. In such event, we will monitor our debt levels and take action to reduce any such excess as soon as practicable. Our aggregate borrowings are reviewed by our board of directors at least quarterly. At December 31, 2018, our borrowings were not in excess of 300% of the value of our net assets.

Employees

We have no paid employees. The employees of our advisor and its affiliates provide management, acquisition, advisory and certain administrative services for us.

Competition

We are subject to significant competition in seeking real estate investments and residents. We compete with many third parties engaged in real estate investment activities, including other REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, lenders, hedge funds, governmental bodies and other entities. Many of our competitors have substantially greater financial and other resources than we have and may have substantially more operating experience than us. They may also enjoy significant competitive advantages that result from, among other things, a lower cost of capital.

The multifamily property market in particular is highly competitive. This competition could reduce occupancy levels and revenues at our multifamily properties, which would adversely affect our operations. We face competition from many sources, including from other multifamily properties in our target markets. In addition, overbuilding of multifamily properties may occur, which would increase the number of multifamily homes available and may decrease occupancy and unit rental rates. Furthermore, multifamily properties we acquire most likely compete, or will compete, with numerous housing alternatives in attracting residents, including owner occupied single- and multifamily homes available to rent or purchase. Competitive housing in a particular area and the increasing affordability of owner occupied single- and multifamily homes available to rent or buy could adversely affect our ability to retain our residents, lease apartment homes and increase or maintain rental rates.

We may also compete with Steadfast Income REIT, Inc., or Steadfast Income REIT, and Steadfast Apartment REIT III, Inc. or Steadfast Apartment REIT III, bothnon-traded real estate investment trusts with similar investment objectives as us that are sponsored by our sponsor. Steadfast Income REIT and Steadfast Apartment REIT III terminated their initial public offerings on December 20, 2013 and August 31, 2018, respectively. However, Steadfast Income REIT and Steadfast Apartment REIT III may reinvest any proceeds from a sale of assets or engage in future public offerings to raise capital to acquire additional multifamily properties. Although Steadfast Income REIT and Steadfast Apartment REIT III are the only investment programs currently sponsored by or affiliated with our sponsor that may directly compete with us for investment opportunities, our sponsor may launch additional investment programs in the future that compete with us for investment opportunities. To the extent that we compete with Steadfast Income REIT, Steadfast Apartment REIT III or any other program affiliated with our sponsor for investments, our sponsor will face potential conflicts of interest and there is a risk that our sponsor will select investment opportunities for us that provide lower returns than the investments selected for other such programs, or that certain otherwise attractive investment opportunities will not be available to us.

Regulations

Our investments are subject to various federal, state, and local laws, ordinances, and regulations, including, among other things, zoning regulations, land use controls, environmental controls relating to air and water quality, noise pollution, and indirect environmental impacts such as increased motor vehicle activity. We believe that we have all permits and approvals necessary under current law to operate our investments.

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Income Taxes

We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, and operated as such commencing with the taxable year ended December 31, 2014. To continue to qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to our stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, we generally will not be subject to federal income tax to the extent we distribute qualifying dividends to our stockholders. If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax on our taxable income at regular corporate income tax rates and generally would not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost unless the Internal Revenue Service grants us relief under certain statutory provisions.

Financial Information About Industry Segments

Our current business consists of owning, managing, operating, leasing, acquiring, developing, investing in, and disposing of real estate assets. We internally evaluate all of our real estate assets as one industry segment, and, accordingly, we do not report segment information.

Available Information

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and, accordingly, we file annual reports, quarterly reports and other information with the Securities and Exchange Commission, or SEC. Access to copies of our Annual Reports onForm 10-K, Quarterly Reports onForm 10-Q, Current Reports onForm 8-K and other filings with the SEC, including amendments to such filings, may be obtained free of charge from our website,http://www.steadfastreits.com. These filings are available promptly after we file them with, or furnish them to, the SEC. We are not incorporating our website or any information from the website into this annual report. The SEC also maintains a website, http://www.sec.gov, that contains our Annual Reports onForm 10-K, Quarterly Reports onForm 10-Q, Current Report onForm 8-K and other filings with the SEC. Access to these filings is free of charge.

ITEM 1A. RISK FACTORS

The following are some of the risks and uncertainties that could cause our actual results to differ materially from those presented in our forward-looking statements. The risks and uncertainties described below are not the only ones we face but do represent those risks and uncertainties that we believe are material to us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also harm our business. References to “shares” and “our common stock” refer to the shares of common stock of Steadfast Apartment REIT, Inc.

General Investment Risks

We have a limited operating history, and there is no assurance that we will be able to successfully achieve our investment objectives.

We commenced operations on May 22, 2014 with our acquisition of the Villages at Spring Hill Apartments. We and our advisor have a limited operating history and may not be able to successfully operate our business or achieve our investment objectives. We cannot assure you that we will be profitable in the future or that we will recognize growth in our assets.

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From inception through December 31, 2018, we have experienced annual net losses and may experience similar losses in the future.

From inception through December 31, 2018, we incurred a net loss of $183,027,884. We cannot assure you that we will be profitable in the future or that we will recognize growth in the value of our assets.

There is no public trading market for shares of our common stock and we are not required to effectuate a liquidity event by a certain date. As a result, it will be difficult for you to sell your shares of common stock and, if you are able to sell your shares, you are likely to sell them at a substantial discount.

There is no public market for the shares of our common stock and we have no obligation to list our shares on any public securities market or provide any other type of liquidity to our stockholders by a particular date. It will therefore be difficult for you to sell your shares of common stock. Even if you are able to sell your shares of common stock, the absence of a public market may cause the price received for any shares of our common stock sold to be less than what you paid or less than your proportionate value of the assets we own. We have adopted a share repurchase plan but it is limited in terms of the amount of shares that stockholders may sell to us each quarter. Our board of directors can amend, suspend, or terminate our share repurchase plan upon 30 days’ notice. Additionally, our charter does not require that we consummate a transaction to provide liquidity to stockholders on any date certain. As a result, you should be prepared to hold your shares for an indefinite period of time.

We have paid, and it is likely we will continue to pay, distributions from sources other than our cash flow from operations. To the extent that we pay distributions from sources other than our cash flow from operations, we will have reduced funds available for investment and the overall return to our stockholders may be reduced.

Our organizational documents permit us to pay distributions from any source, including net proceeds from our public offerings, borrowings, advances from our sponsor or advisor and the deferral of fees and expense reimbursements by our advisor, in its sole discretion. To the extent that our cash flow from operations has been or is insufficient to fully cover our distributions, we have paid, and may continue to pay, distributions from sources other than cash flow from operations. We have not established a limit on the amount of proceeds from our public offerings, or other sources other than cash flow from operations, which we may use to fund distributions.

If we are unable to consistently fund distributions to our stockholders entirely from our cash flow from operations, the value of your shares upon a listing of our common stock, the sale of our assets or any other liquidity event may be reduced. To the extent that we fund distributions from sources other than our cash flow from operations, our funds available for investment will be reduced relative to the funds available for investment if our distributions were funded solely from cash flow from operations, our ability to achieve our investment objectives will be negatively impacted and the overall return to our stockholders may be reduced. In addition, if we make a distribution in excess of our current and accumulated earnings and profits, the distribution will be treated first as atax-free return of capital, which will reduce the stockholder’s tax basis in its shares of common stock. The amount, if any, of each distribution in excess of a stockholder’s tax basis in its shares of common stock will be taxable as gain realized from the sale or exchange of property.

For the year ended December 31, 2018, we paid aggregate distributions of $46,113,000, including $23,399,025 of distributions paid in cash and 1,507,497 shares of our common stock issued pursuant to our distribution reinvestment plan for $22,713,975. For the year ended December 31, 2018, our net loss was $49,100,346, we had FFO of $21,892,934 and net cash provided by operations of $33,557,275. For the year ended December 31, 2018, we funded $33,460,780, or 73%, and $12,652,220 or 27% of total distributions paid, including shares issued pursuant to our distribution reinvestment plan, from cash flow from operations and notes payable, respectively. Since inception, of the $151,688,728 in total distributions paid through December 31, 2018, including shares issued pursuant to our distribution reinvestment plan, we funded $108,489,915 or 71% from cash flow from operations, $22,544,653 or 15% from notes payable and $20,654,160 or 14% offering

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proceeds. For information on how we calculate FFO and the reconciliation of FFO to net loss, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds from Operations and Modified Funds from Operations.”

You are limited in your ability to have your shares of common stock repurchased pursuant to our share repurchase plan. You may not be able to sell any of your shares of our common stock back to us, and if you do sell your shares, you may not receive the price you paid.

Our share repurchase plan may provide you with an opportunity to have your shares of common stock repurchased by us. No shares may be repurchased under our share repurchase plan until after the first anniversary of the date of purchase of such shares. Prior to the first determination of our estimated value per share, we repurchased shares of our common stock pursuant to our share repurchase plan at a discount from the current offering price per share of our common stock based upon how long such shares had been held. Following the first determination of our estimated value per share of our common stock, shares are repurchased at a price based upon such estimated value per share. Due to the fact that the per share amount paid by us to repurchase shares will typically exceed the net proceeds we received in connection with the sale of such shares, the repurchase of shares pursuant to our share repurchase plan will have a dilutive effect on our existing stockholders.

Our share repurchase plan contains certain limitations, including those relating to the number of shares of our common stock that we can repurchase at any given time and limiting the repurchase price. Specifically, the share repurchase plan limits the number of shares to be repurchased during any calendar year to no more than (1) 5.0% of the weighted average number of shares of our common stock outstanding in the prior calendar year and (2) those that could be funded from the net proceeds from the sale of shares under our distribution reinvestment plan in the prior calendar year plus such additional funds as may be borrowed or reserved for that purpose by our board of directors. Our board of directors has further amended our share repurchase program so that in no event would the value of the shares repurchased pursuant to the share repurchase program exceed $2,000,000 during any quarter.

We have no obligation to repurchase shares if the repurchase would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency. Our board of directors reserves the right to reject any repurchase request for any reason or no reason or to amend, suspend or terminate the share repurchase plan at any time upon 30 days’ notice to our stockholders. Therefore, you may not have the opportunity to make a repurchase request prior to a potential termination or suspension of the share repurchase plan and you may not be able to sell any of your shares of common stock back to us. Moreover, if you do sell your shares of common stock back to us pursuant to the share repurchase plan, you may be forced to do so at a discount to the purchase price you paid for your shares.

The amount of distributions we make is uncertain. If we pay distributions from sources other than our cash flow from operations, we will have fewer funds available for investments and your overall return may be reduced.

Although our distribution policy is to use our cash flow from operations to make distributions, our organizational documents permit us to pay distributions from any source. During our public offering, we funded a portion of our distributions from the net proceeds of our public offering and therefore had fewer funds available for investment in properties than if our distributions came solely from cash flow from operations. Further, because we may receive income at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund expenses, we expect that from time to time during our operational stage, we will declare distributions in anticipation of cash flow that we expect to receive during a later period and we will pay these distributions in advance of our actual receipt of these funds. In these instances, we may use third-party borrowings to fund our distributions. We may also fund such distributions with the deferral by our advisor, in its sole discretion, of fees payable under the advisory agreement. New investors will be diluted to the

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extent that we make distributions in excess of our current and accumulated earnings and profits prior to the time that such investors acquire shares of our common stock.

In addition, if the aggregate amount of cash we distribute to stockholders in any given year exceeds the amount of our “REIT taxable income” generated during the year, the excess amount will either be (1) a return of capital or (2) a gain from the sale or exchange of property to the extent that a stockholder’s basis in our common stock equals or is reduced to zero as the result of our current or prior year distributions.

Our success is dependent on the performance of our advisor and its affiliates and any adverse change in their financial health could cause our operations to suffer.

Our ability to achieve our investment objectives and to pay distributions is dependent upon the performance of our advisor and its affiliates and any adverse change in their financial health could cause our operations to suffer. Our advisor and its affiliates are sensitive to trends in the general economy, as well as the commercial real estate and credit markets. The most recent economic recession and accompanying credit crisis negatively impacted the value of commercial real estate assets, contributing to a general slowdown in the real estate industry. The failure of a sustained economic recovery or a renewed economic downturn could result in reductions in overall transaction volume and size of sales and leasing activities, which could put downward pressure on our advisor’s and its affiliates’ revenues and operating results. To the extent that any decline in revenues and operating results impacts the performance of our advisor and its affiliates, our financial condition could suffer.

We have paid substantial fees and expenses to our advisor and its affiliates, including the dealer manager, for our public offering. These fees were not negotiated at arm’s length, may be higher than fees payable to unaffiliated third parties and may reduce cash available for investment.

A portion of the offering proceeds from the sale of our shares in our public offering was used to pay fees and expenses to our advisor and its affiliates. These fees were not negotiated atarm’s-length and may be higher than fees payable to unaffiliated third parties. In addition, the full offering price paid by stockholders was not invested in properties. As a result, stockholders will only receive a full return of their invested capital if we either (1) sell our assets or the Company for a sufficient amount in excess of the original purchase price of our assets or (2) the market value of the Company after we list our shares of common stock on a national securities exchange is substantially in excess of the original purchase price of our assets.

The geographic concentration of our portfolio may make us particularly susceptible to adverse economic developments in the real estate markets of those areas.

In addition to general, regional and national economic conditions, our operating results are impacted by the economic conditions of the specific markets in which we have concentrations of properties. As of December 31, 2018, of the $1,499,381,750 contract price of our real estate assets, 21% was located in the Atlanta, Georgia metropolitan statistical area, 20% was located in the Dallas/Fort Worth, Texas metropolitan statistical area and 12% was located in the Nashville, Tennessee metropolitan statistical area. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for multifamily property space resulting from the local business climate, could adversely affect our property revenue resulting in a lower NOI.

Financial regulatory reforms could have a significant impact on our business, financial condition and results of operations.

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, was signed into law. The Dodd-Frank Act represents a significant change in the American financial

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regulatory environment and impacts nearly every aspect of the U.S. financial services industry. The Dodd-Frank Act requires various federal agencies to adopt hundreds of new rules to implement the Dodd-Frank Act and to deliver to Congress numerous studies and reports that may influence future legislation. The Dodd-Frank Act leaves significant discretion to federal agencies as to exactly how to implement the broad provisions of the Dodd-Frank Act. Some provisions of the Dodd-Frank Act are subject to rulemaking and will take effect over several years, making it difficult to anticipate the overall impact on us. The changes resulting from the Dodd-Frank Act may impact the profitability of business activities, require changes to certain business practices, impose more stringent capital, liquidity and leverage requirements or otherwise adversely affect our business.

A cybersecurity incident and other technology disruptions could negatively impact our business.

We use technology in substantially all aspects of our business operations. We also use mobile devices, social networking, outside vendors and other online activities to connect with our residents, suppliers and employees of our affiliates. Such uses give rise to potential cybersecurity risks, including security breach, espionage, system disruption, theft and inadvertent release of information. Our business involves the storage and transmission of numerous classes of sensitive and confidential information and intellectual property, including residents’ and suppliers’ personal information, private information about employees of our affiliates, and financial and strategic information about us. If we fail to assess and identify cybersecurity risks associated with our operations, we may become increasingly vulnerable to such risks. Additionally, the measures we have implemented to prevent security breaches and cyber incidents may not be effective. The theft, destruction, loss, misappropriation, or release of sensitive and/or confidential information or intellectual property, or interference with our information technology systems or the technology systems of third parties on which we rely, could result in business disruption, negative publicity, brand damage, violation of privacy laws, loss of residents, potential liability and competitive disadvantage, any of which could result in a material adverse effect on our financial condition or results of operations.

Our board of directors determined an estimated value per share of $15.84 for our shares of common stock as of December 31, 2018. You should not rely on the estimated value per share as being an accurate measure of the current value of our shares of common stock.

On March 12, 2019, our board of directors determined an estimated value per share of our common stock of $15.84 as of December 31, 2018. Our board of directors’ objective in determining the estimated value per share was to arrive at a value, based on the most recent data available, that it believed was reasonable based on methodologies that it deemed appropriate after consultation with our advisor. However, the market for commercial real estate can fluctuate quickly and substantially and the value of our assets is expected to change in the future and may decrease. Also, our board of directors did not consider certain other factors, such as a liquidity discount to reflect the fact that our shares are not currently traded on a national securities exchange and the limitations on the ability to redeem shares pursuant to our share repurchase plan.

As with any valuation methodology, the methodologies used to determine the estimated value per share were based upon a number of assumptions, estimates and judgments that may not be accurate or complete. Our assets have been valued based upon appraisal standards and the value of our assets using these methodologies are not required to be a reflection of market value under those standards and will not result in a reflection of fair value under GAAP. Further, different parties using different property-specific and general real estate and capital market assumptions, estimates, judgments and standards could derive a different estimated value per share, which could be significantly different from the estimated value per share determined by our board of directors. The estimated value per share does not represent the fair value of our assets less liabilities in accordance with United States GAAP as of December 31, 2018. The estimated value per share is not a representation or indication that: a stockholder would be able to realize the estimated value per share if he or she attempts to sell shares; a stockholder would ultimately realize distributions per share equal to the estimated value per share upon liquidation of assets and settlement of our liabilities or upon a sale of our company; shares of our common stock would trade at the estimated value per share on a national securities exchange; a third party would offer the

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estimated value per share in anarm’s-length transaction to purchase all or substantially all of our shares of common stock; or the methodologies used to estimate the value per share would be acceptable to FINRA or compliant with the Employee Retirement Income Security Act of 1974, or ERISA, the Internal Revenue Code or other applicable law, or the applicable provisions of a retirement plan or individual retirement plan, or IRA, with respect to their respective requirements. Further, the estimated value per share was calculated as of a moment in time and the value of our shares will fluctuate over time as a result of, among other things, future acquisitions or dispositions of assets (including acquisitions and dispositions of real estate investments since December 31, 2018), developments related to individual assets and changes in the real estate and capital markets. For additional information on the calculation of our estimated value per share as of December 31, 2018, see Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Purchases of Equity Securities—Estimated Value Per Share.”

Because our charter does not require our listing or liquidation by a specified date, you should be prepared to hold your shares for an indefinite period of time.

In the future, our board of directors will consider alternatives for providing liquidity to our stockholders, which we refer to as a “liquidity event.” A liquidity event may include the sale of our assets, a sale or merger of our company or a listing of our shares on a national securities exchange. It is anticipated that our board of directors will consider a liquidity event within five years after the completion of our offering stage; however, the timing of any such event will be significantly dependent upon economic and market conditions after completion of our offering stage. Because our charter does not require us to pursue a liquidity event by a specified date, you should be prepared to hold your shares for an indefinite period of time.

If we internalize our management functions, we could incur other significant costs associated with being self-managed.

Our board of directors may decide in the future to internalize our management functions. If we do so, we may elect to negotiate to acquire our advisor’s assets and hire our advisor’s personnel. Pursuant to our advisory agreement with our advisor, we are not allowed to solicit or hire any of our advisor’s personnel without our advisor’s prior written consent. While we would no longer bear the costs of the various fees and expenses we expect to pay to our advisor under the advisory agreement, our direct expenses would include general and administrative costs, including legal, accounting and other expenses related to corporate governance, SEC reporting and compliance. We would also be required to employ personnel and would be subject to potential liabilities commonly faced by employers, such as workers’ disability and compensation claims, potential labor disputes and other employee-related liabilities and grievances as well as incur the compensation and benefits costs of our officers and other employees and consultants that are paid by our advisor or its affiliates. We may issue equity awards to officers, employees and consultants, which awards would decrease net income and FFO and may further dilute your investment. We cannot reasonably estimate the amount of fees to our advisor we would save or the costs we would incur if we became self-managed. If the expenses we assume as a result of an internalization are higher than the expenses we avoid paying to our advisor, our FFO would be lower as a result of the internalization than they otherwise would have been, potentially decreasing the amount of funds available to distribute to our stockholders.

Disruptions in the financial markets and deteriorating economic conditions could adversely impact our ability to implement our investment strategy and achieve our investment objectives.

United States and global financial markets experienced extreme volatility and disruption from 2008 to 2010. There was a widespread tightening in overall credit markets, devaluation of the assets underlying certain financial contracts, and increased borrowing by governmental entities. The turmoil in the capital markets during the most recent recession resulted in constrained equity and debt capital available for investment in the real estate market, resulting in fewer buyers seeking to acquire properties, increases in capitalization rates and lower property values. During the subsequent economic recovery, capital has been more available and the overall

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economy has improved. However, the failure of a sustained economic recovery or future disruptions in the financial markets and deteriorating economic conditions could impact the value of our investments in properties. In addition, if potential purchasers of properties have difficulty obtaining capital to finance property acquisitions, capitalization rates could increase and property values could decrease. Current economic conditions greatly increase the risks of our investments. See “—Risks Related to Investments in Real Estate.”

Events in U.S. financial markets have had, and may continue to have, a negative impact on the terms and availability of credit, which could have an adverse effect on our business and our results of operations.

The failure of large U.S. financial institutions in 2009 and the resulting turmoil in the U.S. financial sector had a negative impact on the terms and availability of credit within the United States. The tightening of the U.S. credit markets resulted in a lack of adequate credit. Some lenders continue to impose more stringent restrictions on the terms of credit, including shorter terms and more conservativeloan-to-value underwriting than was previously customary. The negative impact of the tightening credit markets may limit our ability to finance the acquisition of properties on favorable terms, if at all, and may result in increased financing costs or financing with increasingly restrictive covenants.

We are uncertain of our sources for funding our future capital needs. If we do not have sufficient funds from operations to cover our expenses or to fund improvements to our real estate and cannot obtain debt or equity financing on acceptable terms, our ability to cover our expenses or to fund improvements to our real estate will be adversely affected.

We terminated our initial public offering on March 24, 2016. In the event that we develop a need for additional capital in the future for the repayment of maturing debt obligations, the improvement of our real properties or for any other reason, sources of funding may not be available to us. If we do not have sufficient funds from cash flow generated by our investments or out of net sale proceeds, or cannot obtain debt or equity financing on acceptable terms, our financial condition and ability to make distributions may be adversely affected.

We report MFFO, anon-GAAP financial measure.

We report MFFO, anon-GAAP financial measure, which we believe to be an appropriate supplemental measure to reflect our operating performance.

Not all public,non-listed REITs calculate MFFO the same way, so comparisons of our MFFO with that of other public,non-listed REITs may not be meaningful. MFFO is not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs, including our ability to make distributions to our stockholders. MFFO should be reviewed in conjunction with GAAP measurements as an indication of our performance. MFFO is not a useful measure in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining MFFO.

Neither the SEC nor any other regulatory body has passed judgment on the acceptability of the adjustments that we will use to calculate MFFO. In the future, the SEC or another regulatory body may decide to standardize the allowable adjustments across thenon-listed REIT industry and in response to such standardization we may have to adjust our calculation and characterization of MFFO accordingly. For further information on how we calculate MFFO and a reconciliation of MFFO to net loss, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds from Operations and Modified Funds from Operations”.

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Risks Relating to Our Organizational Structure

Maryland law and our organizational documents limit your right to bring claims against our officers and directors.

Maryland law provides that a director will not have any liability as a director so long as he or she performs his or her duties in accordance with the applicable standard of conduct. In addition, our charter provides that, subject to the applicable limitations set forth therein or under Maryland law, no director or officer will be liable to us or our stockholders for monetary damages. Our charter also provides that we will generally indemnify our directors, our officers, our advisor and its affiliates for losses they may incur by reason of their service in those capacities unless their act or omission was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty, they actually received an improper personal benefit in money, property or services or, in the case of any criminal proceeding, they had reasonable cause to believe the act or omission was unlawful. Moreover, we have entered into separate indemnification agreements with each of our directors and executive officers. As a result, we and our stockholders may have more limited rights against these persons than might otherwise exist under common law. In addition, we may be obligated to fund the defense costs incurred by these persons. However, our charter provides that we may not indemnify our directors, our advisor and its affiliates for loss or liability suffered by them or hold our directors or our advisor and its affiliates harmless for loss or liability suffered by us unless they have determined that the course of conduct that caused the loss or liability was in our best interests, they were acting on our behalf or performing services for us, the liability was not the result of negligence or misconduct by ournon-independent directors, our advisor and its affiliates or gross negligence or willful misconduct by our independent directors, and the indemnification or agreement to hold harmless is recoverable only out of our net assets, including the proceeds of insurance, and not from the stockholders. As a result of these limitations on liability and indemnification provisions and agreements, we and our stockholders may be entitled to a more limited right of action than we would otherwise have if indemnification rights were not granted.

The limit on the percentage of shares of our common stock that any person may own may discourage a takeover or business combination that may benefit our stockholders.

Our charter restricts the direct or indirect ownership by one person or entity to no more than 9.8% of the value of our then outstanding capital stock (which includes common stock and any preferred stock we may issue) and no more than 9.8% of the value or number of shares, whichever is more restrictive, of our then outstanding common stock unless exempted (prospectively or retroactively) by our board of directors. These restrictions may discourage a change of control of us and may deter individuals or entities from making tender offers for shares of our common stock on terms that might be financially attractive to stockholders or which may cause a change in our management. In addition to deterring potential transactions that may be favorable to our stockholders, these provisions may also decrease your ability to sell your shares of our common stock.

We may issue preferred stock or other classes of common stock, which issuance could adversely affect the existing holders of our common stock.

Our stockholders do not have preemptive rights to any shares issued by us in the future. We may issue, without stockholder approval, preferred stock or other classes of common stock with rights that could dilute the value of your shares of common stock. However, the issuance of preferred stock must also be approved by a majority of our independent directors not otherwise interested in the transaction, who will have access, at our expense, to our legal counsel or to independent legal counsel. The issuance of preferred stock or other classes of common stock could increase the number of stockholders entitled to distributions without simultaneously increasing the size of our asset base. Under our charter, we have authority to issue a total of 1,100,000,000 shares of capital stock, of which 999,999,000 shares are classified as common stock with a par value of $0.01 per share, 100,000,000 shares are classified as preferred stock with a par value of $0.01 per share, and 1,000 shares are classified as convertible stock with a par value of $0.01 per share. Our board of directors, with the approval of a majority of the entire board of directors and without any action by our stockholders, may amend our charter from

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time to time to increase or decrease the aggregate number of shares of capital stock or the number of shares of capital stock of any class or series that we have authority to issue. If we ever created and issued preferred stock with a distribution preference over common stock, payment of any distribution preferences of outstanding preferred stock would reduce the amount of funds available for the payment of distributions on our common stock. Further, holders of preferred stock are normally entitled to receive a preference payment in the event we liquidate, dissolve or wind up before any payment is made to our common stockholders, likely reducing the amount common stockholders would otherwise receive upon such an occurrence. In addition, under certain circumstances, the issuance of preferred stock or a separate class or series of common stock may render more difficult or tend to discourage a merger, tender offer or proxy contest, the assumption of control by a holder of a large block of our securities, or the removal of incumbent management.

Your investment will be diluted upon conversion of the convertible stock.

We have issued 1,000 shares of our convertible stock to our advisor for an aggregate purchase price of $1,000. Under limited circumstances, each outstanding share of our convertible stock may be converted into shares of our common stock, which will have a dilutive effect to our stockholders. Our convertible stock will be converted into shares of common stock if (1) we have made total distributions on the then-outstanding shares of our common stock equal to the original issue price of those shares plus an aggregate 6.0% cumulative,non-compounded, annual return on the original issue price of those shares, (2) we list our common stock for trading on a national securities exchange or enter into a merger whereby holders of our common stock receive listed securities of another issuer or (3) our advisory agreement is terminated or not renewed (other than for “cause” as defined in our advisory agreement). Upon any of these events, each share of convertible stock will be converted into a number of shares of common stock equal to 1/1000 of the quotient of (A) 15% of the amount, if any, by which (i) our “enterprise value” plus the aggregate value of the distributions paid to date on the then outstanding shares exceeds (ii) the aggregate purchase price paid by stockholders for those outstanding shares plus an aggregated 6.0% cumulative,non-compounded, annual return on the original issue price of the shares, divided by (B) our enterprise value divided by the number of outstanding shares of our common stock on anas-converted basis as of the date of conversion. In the event of a termination ornon-renewal of our advisory agreement for cause, all of the shares of the convertible stock will be repurchased by us for $1.00. Upon the issuance of our common stock in connection with the conversion of our convertible stock, your interests in us will be diluted.

The conversion of the convertible stock held by our advisor due upon termination of the advisory agreement and the voting rights granted to the holder of our convertible stock may discourage a takeover attempt or prevent us from effecting a merger that otherwise would have been in the best interests of our stockholders.

If we engage in a merger in which we are not the surviving entity or our advisory agreement is terminated without cause, an affiliate of our sponsor may be entitled to conversion of the shares of our convertible stock it holds and to require that we purchase all or a portion of the limited partnership interests in our operating partnership that it holds at any time thereafter for cash or our common stock. The existence of this convertible stock may deter a prospective acquirer from bidding on our company, which may limit the opportunity for stockholders to receive a premium for their stock that might otherwise exist if an investor attempted to acquire us through a merger.

The affirmative vote oftwo-thirds of the outstanding shares of convertible stock, voting as a single class, will be required (1) for any amendment, alteration or repeal of any provision of our charter that materially and adversely changes the rights of the convertible stock and (2) to effect a merger of our company into another entity, or a merger of another entity into our company, unless in each case each share of convertible stock (A) will remain outstanding without a material and adverse change to its terms and rights or (B) will be converted into or exchanged for shares of stock or other ownership interest of the surviving entity having rights identical to that of our convertible stock (except for changes that do not materially and adversely affect the holders of the convertible stock). In the event that we propose to merge with or into another entity, including

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another REIT, our advisor could, by exercising these voting rights, determine whether or not we are able to complete the proposed transaction. By voting against a proposed merger, our advisor could prevent us from effecting the merger, even if the merger otherwise would have been in the best interests of our stockholders.

We may grant stock-based awards to our directors, employees and consultants pursuant to our long-term incentive plan, which will have a dilutive effect on your investment in us.

Our board of directors has adopted a long-term incentive plan, pursuant to which we are authorized to grant restricted stock, stock options, restricted or deferred stock units, performance awards or other stock-based awards to directors, employees and consultants selected by our board of directors for participation in the plan. We currently intend only to issue awards of restricted stock to our independent directors under our long-term incentive plan. If we issue additional stock-based awards to eligible participants under our long-term incentive plan, the issuance of these stock-based awards will dilute your investment in our shares of common stock.

Certain features of our long-term incentive plan could have a dilutive effect on your investment in us, including (1) a lack of annual award limits, individually or in the aggregate (subject to the limit on the maximum number of shares which may be issued pursuant to awards granted under the plan), (2) the fact that the limit on the maximum number of shares which may be issued pursuant to awards granted under the plan is not tied to the amount of proceeds raised in our public offering and (3) share counting procedures which provide that shares subject to certain awards, including, without limitation, substitute awards granted by us to employees of another entity in connection with our merger or consolidation with such company or shares subject to outstanding awards of another company assumed by us in connection with our merger or consolidation with such company, are not subject to the limit on the maximum number of shares which may be issued pursuant to awards granted under the plan.

Our UPREIT structure may result in potential conflicts of interest with limited partners in our operating partnership whose interests may not be aligned with those of our stockholders.

Limited partners in our operating partnership have the right to vote on certain amendments to the operating partnership agreement, as well as on certain other matters. Persons holding such voting rights may exercise them in a manner that conflicts with the interests of our stockholders. As general partner of our operating partnership, we are obligated to act in a manner that is in the best interest of all partners of our operating partnership. Circumstances may arise in the future when the interests of limited partners in our operating partnership may conflict with the interests of our stockholders. These conflicts may be resolved in a manner stockholders do not believe are in their best interest.

We may change our targeted investments and investment guidelines without our stockholders’ consent.

Our board of directors may change our targeted investments and investment guidelines at any time without the consent of our stockholders, which could result in our making investments that are different from, and possibly riskier than, the investments described in this Annual Report on Form10-K. A change in our targeted investments or investment guidelines may increase our exposure to interest rate risk, default risk and real estate market fluctuations, all of which could adversely affect the value of our common stock and our ability to make distributions to our stockholders.

Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain actions and proceedings that may be initiated by our stockholders.

Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or, if that Court does not have jurisdiction, the U.S. District Court for the District of Maryland, Baltimore Division, will be the sole and exclusive forum for: (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of any duty owed by any of our

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directors or officers or employees to us or to our stockholders, (3) any action asserting a claim against us or any of our directors or officers or employees arising pursuant to any provision of the Maryland General Corporation Law, or the MGCL, or our charter or bylaws or (4) any action asserting a claim against us or any of our directors or officers or employees that is governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring or holding any interest in our shares shall be deemed to have notice of and to have consented to these provisions of our bylaws, as they may be amended from time to time. Our board of directors, without stockholder approval, adopted this provision of the bylaws so that we can respond to such litigation more efficiently and reduce the costs associated with our responses to such litigation, particularly litigation that might otherwise be brought in multiple forums. This exclusive forum provision may limit a stockholder���s ability to bring a claim in a judicial forum that the stockholder believes is favorable for disputes with us or our directors, officers, agents or employees, if any, and may discourage lawsuits against us and our directors, officers, agents or employees, if any. Alternatively, if a court were to find this provision of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings notwithstanding that the MGCL expressly provides that the charter or bylaws of a Maryland corporation may require that any internal corporate claim be brought only in courts sitting in one or more specified jurisdictions, we may incur additional costs that we do not currently anticipate associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition and results of operations.

Your investment return may be reduced if we are required to register as an investment company under the Investment Company Act; if we are subject to registration under the Investment Company Act, we will not be able to continue our business.

Neither we, our operating partnership nor any of our subsidiaries intend to register as an investment company under the Investment Company Act of 1940, as amended, or the Investment Company Act. Our operating partnership’s and subsidiaries’ investments in real estate will represent the substantial majority of our total asset mix. In order for us not to be subject to regulation under the Investment Company Act, we engage, through our Operating Partnership and our wholly and majority-owned subsidiaries, primarily in the business of buying real estate. These investments must be made within a year after our public offering ends.

If we were obligated to register as an investment company, we would have to comply with a variety of substantive requirements under the Investment Company Act that impose, among other things:

• limitations on capital structure;

• restrictions on specified investments;

• prohibitions on transactions with affiliates; and

• compliance with reporting, record keeping, voting, proxy disclosure and other rules and regulations that would significantly increase our operating expenses.

Section 3(a)(1)(A) of the Investment Company Act defines an investment company as any issuer that is or holds itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. Section 3(a)(1)(C) of the Investment Company Act defines an investment company as any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of the issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis, which we refer to as the 40% test. Excluded from the term “investment securities,” among other things, are U.S. government securities and securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act.

We expect that most of our assets will be held through wholly or majority-owned subsidiaries of our operating partnership. We expect that most of these subsidiaries will be outside the definition of an “investment

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company” under Section 3(a)(1) of the Investment Company Act as they are generally expected to hold at least 60% of their assets in real property. We believe that we, our operating partnership and most of the subsidiaries of our operating partnership will not fall within either definition of investment company under Section 3(a)(1) of the Investment Company Act as we intend to invest primarily in real property, through our wholly or majority-owned subsidiaries, the majority of which we expect to have at least 60% of their assets in real property. As these subsidiaries would be investing either solely or primarily in real property, they would be outside of the definition of “investment company” under Section 3(a)(1) of the Investment Company Act. We are organized as a holding company that conducts its businesses primarily through our operating partnership, which in turn is a holding company conducting its business through its subsidiaries. Both we and our operating partnership intend to conduct our operations so that they comply with the 40% test. We will monitor our holdings to ensure continuing and ongoing compliance with this test. In addition, we believe that neither we nor our operating partnership will be considered an investment company under Section 3(a)(1)(A) of the Investment Company Act because neither we nor our operating partnership will engage primarily or hold itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. Rather, through our operating partnership’s wholly owned or majority owned subsidiaries, we and our operating partnership will be primarily engaged in thenon-investment company businesses of these subsidiaries, namely the business of purchasing or otherwise acquiring real property.

In the event that the value of investment securities held by a subsidiary of our operating partnership were to exceed 40% of the value of its total assets, we expect that subsidiary to be able to rely on the exception from the definition of “investment company” under Section 3(c)(5)(C) of the Investment Company Act, which is available for entities “primarily engaged in the business of purchasing or otherwise acquiring mortgages and other liens on and interests in real estate.” This exception generally requires that at least 55% of a subsidiary’s portfolio must be comprised of qualifying real estate assets and at least 80% of its portfolio must be comprised of qualifying real estate assets and real estate-related assets (and no more than 20% comprised of miscellaneous assets). What we buy and sell is therefore limited by these criteria. How we determine to classify our assets for purposes of the Investment Company Act will be based in large measure uponno-action letters issued by the SEC staff and other SEC interpretive guidance and, in the absence of SEC guidance, on our view of what constitutes a qualifying real estate asset and a real estate-related asset. Theseno-action positions were issued in accordance with factual situations that may be substantially different from the factual situations we may face, and a number of theseno-action positions were issued more than twenty years ago. Pursuant to this guidance, and depending on the characteristics of the specific investments, certain mortgage loans, participations in mortgage loans, mortgage-backed securities, mezzanine loans, joint venture investments and the equity securities of other entities may not constitute qualifying real estate assets and therefore investments in these types of assets may be limited. The SEC or its staff may not concur with our classification of our assets. Future revisions to the Investment Company Act or further guidance from the SEC or its staff may cause us to lose our exclusion from the definition of investment company or force us tore-evaluate our portfolio and our investment strategy. Such changes may prevent us from operating our business successfully.

In August 2011, the SEC solicited public comment on a wide range of issues relating to Section 3(c)(5)(C) of the Investment Company Act, including the nature of the assets that qualify for purposes of the exclusion. There can be no assurance that the laws and regulations governing the Investment Company Act status of REITs, including more specific or different guidance regarding these exclusions that may be published by the SEC or its staff, will not change in a manner that adversely affects our operations. In addition, the SEC or its staff could take action that results in our or our subsidiary’s failure to maintain an exception or exemption from the Investment Company Act.

In the event that we, or our operating partnership, were to acquire assets that could make either entity fall within the definition of investment company under Section 3(a)(1) of the Investment Company Act, we believe that we would still qualify for the exception from the definition of investment company provided by Section 3(c)(6). Although the SEC or its staff has issued little interpretive guidance with respect to Section 3(c)(6), we believe that we and our operating partnership may rely on Section 3(c)(6) if 55% of the assets

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of our operating partnership consist of, and at least 55% of the income of our operating partnership is derived from, qualifying real estate assets owned by wholly owned or majority-owned subsidiaries of our operating partnership.

To ensure that neither we nor any of our subsidiaries, including our operating partnership, are required to register as an investment company, each entity may be unable to sell assets that it would otherwise want to sell and may need to sell assets that it would otherwise wish to retain. In addition, we, our operating partnership or our subsidiaries may be required to acquire additional income- or loss-generating assets that we might not otherwise acquire or forego opportunities to acquire interests in companies that we would otherwise want to acquire. Although we, our operating partnership and our subsidiaries intend to monitor our portfolio periodically and prior to each acquisition and disposition, any of these entities may not be able to remain outside the definition of investment company or maintain an exclusion from the definition of investment company. If we, our operating partnership or our subsidiaries are required to register as an investment company but fail to do so, the unregistered entity would be prohibited from engaging in our business, and criminal and civil actions could be brought against such entity. In addition, the contracts of such entity would be unenforceable unless a court required enforcement, and a court could appoint a receiver to take control of the entity and liquidate its business.

Risks Related To Conflicts of Interest

We depend on our advisor and its key personnel and if any such key personnel were to cease to be affiliated with our advisor, our business could suffer.

Our ability to achieve our investment objectives is dependent upon the performance of our advisor and, to a significant degree, upon the continued contributions of certain of the key personnel of our advisor, each of whom would be difficult to replace. If our advisor were to lose the benefit of the experience, efforts and abilities of any these individuals, our operating results could suffer.

Our advisor and its affiliates, including our officers and our affiliated directors, will face conflicts of interest caused by compensation arrangements with us, which could result in actions that are not in the best interests of our stockholders.

Our advisor and its affiliates receive substantial fees from us in return for their services and these fees could influence the advice provided to us. Among other matters, these compensation arrangements could affect their judgment with respect to:

• future public offerings of equity by us, which would allow the dealer manager to earn additional dealer manager fees and allow our advisor to earn increased acquisition fees, investment management fees and property management fees;

• real property sales, since the investment management fees and property management fees payable to our advisor and its affiliates will decrease; and

• the purchase of assets from our sponsor and its affiliates, which may allow our advisor or its affiliates to earn additional acquisition fees, investment management fees and property management fees.

Further, our advisor may recommend that we invest in a particular asset or pay a higher purchase price for the asset than it would otherwise recommend if it did not receive an acquisition fee in connection with such transactions. Certain potential acquisition fees, investment management fees and property management fees will be paid irrespective of the quality of the underlying real estate or property management services. These fees may influence our advisor to recommend transactions with respect to the sale of a property or properties that may not be in our best interest. Our advisor will have considerable discretion with respect to the terms and timing of our acquisition, disposition and leasing transactions. In evaluating investments and other management strategies, the opportunity to earn these fees may lead our advisor to place undue emphasis on criteria relating to its compensation at the expense of other criteria, such as the preservation of capital, to achieve higher short-term compensation. This could result in decisions that are not in the best interests of our stockholders.

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We may compete with Steadfast Income REIT, Steadfast Apartment REIT III and other affiliates of our sponsor for opportunities to acquire or sell investments, which may have an adverse impact on our operations.

We may compete for investment opportunities with Steadfast Income REIT or Steadfast Apartment REIT III, public,non-listed REITs sponsored by our sponsor that also focus their investment strategy on multifamily properties located in the United States. Steadfast Income REIT terminated its initial public offering on December 20, 2013. Steadfast Apartment REIT III commenced its initial public offering on February 5, 2016, and terminated its initial public offering on August 31, 2018. Steadfast Income REIT and Steadfast Apartment REIT III may engage in future public offerings for its shares, including, but not limited to, a public offering of shares pursuant to its distribution reinvestment plan. Even if Steadfast Income REIT and Steadfast Apartment REIT III are no longer publicly offering their shares of common stock, Steadfast Income REIT and Steadfast Apartment REIT III may reinvest any proceeds from a sale of assets or the refinancing of debt or raise additional funds available for investment. Although Steadfast Income REIT and Steadfast Apartment REIT III are the only investment programs currently sponsored by or affiliated with our sponsor that may directly compete with us for investment opportunities, our sponsor may launch additional investment programs in the future that compete with us for investment opportunities. To the extent that we compete with Steadfast Income REIT, Steadfast Apartment REIT III or any other program affiliated with our sponsor for investments, our sponsor will face potential conflicts of interest and there is a risk that our sponsor will select investment opportunities for us that provide lower returns than the investments selected for other such programs, or that certain otherwise attractive investment opportunities will not be available to us. In addition, certain of our affiliates currently own or manage multifamily properties in geographical areas in which we own multifamily properties. As a result of our potential competition with Steadfast Income REIT, Steadfast Apartment REIT III and other affiliates of our sponsor, certain investment opportunities that would otherwise be available to us may not in fact be available. Such competition may also result in conflicts of interest that are not resolved in our favor.

The time and resources that our sponsor and its affiliates could devote to us may be diverted to other investment activities, and we may face additional competition due to the fact that our sponsor and its affiliates are not prohibited from raising money for, or managing, another entity that makes the same or other types of investments that we do.

Our sponsor and its affiliates are not prohibited from raising money for, or managing, another investment entity that makes the same or other types of investments as we do. As a result, the time and resources they could devote to us may be diverted to other investment activities. Additionally, some of our directors and officers serve as directors and officers of investment entities sponsored by our sponsor and its affiliates, including Steadfast Income REIT, Steadfast Apartment REIT III and Stira Alcentra Global Credit Fund, aclosed-end fund recently formed by affiliates of our sponsor. We cannot currently estimate the time our officers and directors will be required to devote to us because the time commitment required of our officers and directors will vary depending upon a variety of factors, including, but not limited to, general economic and market conditions affecting us, our advisor’s ability to locate and acquire investments that meet our investment objectives and the size of our real estate portfolio. Since these professionals engage in and will continue to engage in other business activities on behalf of themselves and others, these professionals will face conflicts of interest in allocating their time among us, our advisor, and its affiliates and other business activities in which they are involved. This could result in actions that are more favorable to affiliates of our advisor than to us.

In addition, we may compete with affiliates of our advisor for the same investors and investment opportunities. We may alsoco-invest with any such investment entity. Even though all suchco-investments will be subject to approval by our independent directors, they could be on terms not as favorable to us as those we could achieveco-investing with a third party.

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Our advisor may have conflicting fiduciary obligations if we acquire assets from affiliates of our sponsor or enter into joint ventures with affiliates of our sponsor. As a result, in any such transaction we may not have the benefit ofarm’s-length negotiations of the type normally conducted between unrelated parties.

Our advisor may cause us to invest in a property owned by, or make an investment in equity securities in or real estate-related loans to, our sponsor or its affiliates or through a joint venture with affiliates of our sponsor. In these circumstances, our advisor will have a conflict of interest when fulfilling its fiduciary obligation to us. In any such transaction, we would not have the benefit ofarm’s-length negotiations of the type normally conducted between unrelated parties.

The fees we paid to affiliates in connection with our public offering and continue to pay in connection with the acquisition and management of our investments were determined without the benefit ofarm’s-length negotiations of the type normally conducted between unrelated parties.

The fees paid to the dealer manager for services they provided for us and the fees to be paid to our advisor, our property managers and other affiliates for services they provide for us were determined without the benefit ofarm’s-length negotiations of the type normally conducted between unrelated parties, may be in excess of amounts that we would otherwise pay to third parties for such services and may reduce the amount of cash that would otherwise be available for investments in real properties and distributions to our stockholders.

Risks Related To Investments in Real Estate

Our operating results will be affected by economic and regulatory changes that impact the real estate market in general.

Our investments in multifamily properties will be subject to risks generally attributable to the ownership of real property, including:

• changes in global, national, regional or local economic, demographic or real estate market conditions;

• changes in supply of or demand for similar properties in an area;

• increased competition for real property investments targeted by our investment strategy;

• bankruptcies, financial difficulties or lease defaults by our residents;

• changes in interest rates and availability of financing;

• changes in the terms of available financing, including more conservativeloan-to-value requirements and shorter debt maturities;

• competition from other residential properties;

• the inability or unwillingness of residents to pay rent increases;

• changes in government rules, regulations and fiscal policies, including changes in tax, real estate, environmental and zoning laws;

• the severe curtailment of liquidity for certain real estate related assets; and

• rent restrictions due to government program requirements.

All of these factors are beyond our control. Any negative changes in these factors could affect our ability to meet our obligations and make distributions to stockholders.

We are unable to predict future changes in global, national, regional or local economic, demographic or real estate market conditions. For example, a recession or rise in interest rates could make it more difficult for us to lease or dispose of multifamily properties and could make alternative interest-bearing and other investments

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more attractive and therefore potentially lower the relative value of the real estate assets we acquire. These conditions, or others we cannot predict, may adversely affect our results of operations and returns to our stockholders. In addition, the value of the multifamily properties we acquire may decrease following the date we acquire such properties due to the risks described above or any other unforeseen changes in market conditions. If the value of our multifamily properties decreases, we may be forced to dispose of our properties at a price lower than the price we paid to acquire our properties, which could adversely impact the results of our operations and our ability to make distributions and return capital to our investors.

A concentration of our investments in the apartment sector may leave our profitability vulnerable to a downturn or slowdown in the sector or state or region.

Our property portfolio is comprised solely of multifamily properties. As a result, we will be subject to risks inherent in investments in a single type of property. Because our investments are in the apartment sector, the potential effects on our revenues, and as a result, our cash available for distribution to our stockholders, resulting from a downturn or slowdown in the apartment sector could be more pronounced than if we had more fully diversified our investments. If our investments are concentrated in a particular state or geographic region, and such state or geographic region experiences economic difficulty disproportionate to the nation as a whole, then the potential effects on our revenues, and as a result, our cash available for distribution to our stockholders, could be more pronounced than if we had more fully diversified our investments geographically.

We depend on residents for our revenue, and therefore, our revenue and our ability to make distributions to our stockholders is dependent upon the ability of the residents at our properties to generate enough income to pay their rents in a timely manner. A substantial number ofnon-renewals, terminations or lease defaults could reduce our net income and limit our ability to make distributions to our stockholders.

The underlying value of our properties and the ability to make distributions to our stockholders depend upon the ability of the residents at our properties to generate enough income to pay their rents in a timely manner, and the success of our investments depends upon the occupancy levels, rental income and operating expenses of our properties and our company. Residents’ inability to timely pay their rents may be impacted by employment and other constraints on their personal finances, including debts, purchases and other factors. These and other changes beyond our control may adversely affect our residents’ ability to make rental payments. In the event of a resident default or bankruptcy, we may experience delays in enforcing our rights as landlord and may incur costs in protecting our investment andre-leasing our property. We may be unable tore-lease the property for the rent previously received. We may be unable to sell a property with low occupancy without incurring a loss. These events and others could cause us to reduce the amount of distributions we make to stockholders and the value of our stockholders’ investment to decline.

We may be unable to secure funds for future capital improvements, which could adversely impact our ability to make cash distributions to our stockholders.

In order to attract residents, we may be required to expend funds for capital improvements and apartment renovations when residents do not renew their leases or otherwise vacate their apartment homes. In addition, we may require substantial funds to renovate an apartment community in order to sell it, upgrade it or reposition it in the market. If we have insufficient capital reserves, we will have to obtain financing from other sources. We intend to establish capital reserves in an amount we, in our discretion, believe is necessary. A lender also may require escrow of capital reserves in excess of any established reserves. If these reserves or any reserves otherwise established are designated for other uses or are insufficient to meet our cash needs, we may have to obtain financing from either affiliated or unaffiliated sources to fund our cash requirements. We cannot assure our stockholders that sufficient financing will be available or, if available, will be available on economically feasible terms or on terms acceptable to us. Moreover, certain reserves required by lenders may be designated for specific uses and may not be available for capital purposes such as future capital improvements. Additional borrowing for capital needs and capital improvements will increase our interest expense, and therefore our financial condition and our ability to make cash distributions to our stockholders may be adversely affected.

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A property that experiences significant vacancy could be difficult to sell orre-lease.

A property may experience significant vacancy through the eviction of residents and/or the expiration of leases. Certain of the multifamily properties we acquire may have some level of vacancy at the time of our acquisition of the property and we may have difficulty obtaining new residents. If vacancies continue for a long period of time, we may suffer reduced revenues resulting in lower cash distributions to stockholders. In addition, the resale value of the property could be diminished because the market value may depend principally upon the value of the leases of such property.

We will compete with numerous other persons and entities for real estate investments.

We are subject to significant competition in seeking real estate investments and residents. We compete with many third parties engaged in real estate investment activities, including other REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, lenders, hedge funds, governmental bodies and other entities. Many of our competitors have substantially greater financial and other resources than we have and may have substantially more operating experience than us. They may also enjoy significant competitive advantages that result from, among other things, a lower cost of capital.

Competition from other multifamily communities and housing alternatives for residents could reduce our profitability and the return on your investment.

The multifamily property market in particular is highly competitive. This competition could reduce occupancy levels and revenues at our multifamily properties, which would adversely affect our operations. We face competition from many sources, including from other multifamily properties in markets where we own properties. In addition, overbuilding of multifamily properties may occur, which would increase the number of multifamily homes available and may decrease occupancy and unit rental rates. Furthermore, our multifamily properties compete, with numerous housing alternatives in attracting residents, including owner occupied single- and multifamily homes available to rent or purchase. Competitive housing in a particular area and the increasing affordability of owner occupied single and multifamily homes available to rent or buy caused by declining mortgage interest rates and government programs to promote home ownership could adversely affect our ability to retain our residents, lease apartment homes and increase or maintain rental rates.

Our strategy for acquiring value-enhancement multifamily properties involves greater risks than more conservative investment strategies.

We have implemented a value-enhancement strategy for a substantial portion of the total apartment homes we have acquired. Our value-enhancement strategy involves the acquisition of under-managed, stabilized apartment communities in high job and population growth neighborhoods and the investment of additional capital to make strategic upgrades of the interiors of the apartment homes. These opportunities will vary in degree based on the specific business plan for each asset, but could include new appliances, better cabinets, countertops and flooring. Our strategy for acquiring value-enhancement multifamily properties involves greater risks than more conservative investment strategies. The risks related to these value-enhancement investments include risks related to delays in the repositioning or improvement process, higher than expected capital improvement costs, possible borrowings necessary to fund such costs, and ultimately that the repositioning process may not result in the higher rents and occupancy rates anticipated. In addition, our value-enhancement properties may not produce revenue while undergoing capital improvements. Furthermore, we may also be unable to complete the improvements of these properties and may be forced to hold or sell these properties at a loss. For these and other reasons, we cannot assure you that we will realize growth in the value of our value-enhancement multifamily properties, and as a result, our ability to make distributions to our stockholders could be adversely affected.

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Multifamily properties are illiquid investments, and we may be unable to adjust our portfolio in response to changes in economic or other conditions or sell a property if or when we decide to do so.

Multifamily properties are illiquid investments. We may be unable to adjust our portfolio in response to changes in economic or other conditions. In addition, the real estate market is affected by many factors, such as general economic conditions, availability of financing, interest rates, supply and demand, and other factors that are beyond our control. We cannot predict whether we will be able to sell any real property for the price or on the terms set by us, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We cannot predict the length of time needed to find a willing purchaser and to close the sale of a real property.

Additionally, we may be required to expend funds to correct defects or to make improvements before a real property can be sold. We cannot assure you that we will have funds available to correct such defects or to make such improvements.

In acquiring a real property, we may agree to restrictions that prohibit the sale of that real property for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that real property. All these provisions would restrict our ability to sell a property, which could reduce the amount of cash available for distribution to our stockholders.

Short-term apartment leases expose us to the effects of declining market rent, which could adversely impact our ability to make cash distributions to our stockholders.

Substantially all of our apartment leases are for a term of one year or less. Because these leases generally permit the residents to leave at the end of the lease term without penalty, our rental revenues may be impacted by declines in market rents more quickly than if our leases were for longer terms.

Increased construction of similar properties that compete with our apartment communities in any particular location could adversely affect the operating results of our properties and our cash available for distribution to our stockholders.

We may have acquired apartment communities in locations that may be experiencing increases in construction of properties that compete with our apartment communities. This increased competition and construction could:

• make it more difficult for us to find residents to lease apartment homes in our apartment communities;

• force us to lower our rental prices in order to lease apartment homes in our apartment communities; or

• substantially reduce our revenues and cash available for distribution to our stockholders.

Actions of joint venture partners could negatively impact our performance.

We may enter into joint ventures with third parties, including with entities that are affiliated with our advisor. We may also purchase and develop properties in joint ventures or in partnerships,co-tenancies or otherco-ownership arrangements with the sellers of the properties, affiliates of the sellers, developers or other persons. Such investments may involve risks not otherwise present with a direct investment in real estate, including, for example:

• the possibility that our venture partner orco-tenant in an investment might become bankrupt;

• that the venture partner orco-tenant may at any time have economic or business interests or goals which are, or which become, inconsistent with our business interests or goals;

• that such venture partner orco-tenant may be in a position to take action contrary to our instructions or requests or contrary to our policies or objectives;

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• the possibility that we may incur liabilities as a result of an action taken by such venture partner;

• that disputes between us and a venture partner may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our business;

• the possibility that if we have a right of first refusal or buy/sell right to buy out aco-venturer,co-owner or partner, we may be unable to finance such abuy-out if it becomes exercisable or we may be required to purchase such interest at a time when it would not otherwise be in our best interest to do so; or

• the possibility that we may not be able to sell our interest in the joint venture if we desire to exit the joint venture.

Such investments may also have the potential risk of impasses on decisions because neither we nor theco-venturer would have full control over the joint venture, which might have a negative influence on the joint venture and decrease potential returns to you. In addition, to the extent our participation represents a minority interest, a majority of the participants may be able to take actions which are not in our best interests because of our lack of full control. Disputes between us andco-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and effort on our business. Consequently, actions by or disputes withco-venturers might result in subjecting properties owned by the joint venture to additional risk. In addition, to the extent that our venture partner orco-tenant is an affiliate of the Advisor, certain conflicts of interest will exist.

Our multifamily properties will be subject to property taxes that may increase in the future, which could adversely affect our cash flow.

Our multifamily properties are subject to real and personal property taxes, as well as excise taxes, that may increase as tax rates change and as the properties are assessed or reassessed by taxing authorities. As the owner of the properties, we are ultimately responsible for payment of the taxes to the applicable government authorities. If we fail to pay any such taxes, the applicable taxing authority may place a lien on the real property and the real property may be subject to a tax sale. In addition, we will generally be responsible for real property taxes related to any vacant space.

Uninsured losses or costly premiums for insurance coverage relating to real property may adversely affect your returns.

We attempt to adequately insure all of our multifamily properties against casualty losses. The nature of the activities at certain properties we may acquire may expose us and our operators to potential liability for personal injuries and property damage claims. In addition, there are types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, tornadoes, hurricanes, pollution or environmental matters that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles orco-payments. Risks associated with potential acts of terrorism could sharply increase the premiums we pay for coverage against property and casualty claims. Mortgage lenders sometimes require commercial property owners to purchase specific coverage against acts of terrorism as a condition for providing mortgage loans. These policies may not be available at a reasonable cost, if at all, which could inhibit our ability to finance or refinance our properties. In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. Changes in the cost or availability of insurance could expose us to uninsured casualty losses. In the event that any of our properties incurs a casualty loss that is not fully covered by insurance, the value of our assets will be reduced by any such uninsured loss. In addition, we cannot assure you that funding will be available to us for repair or reconstruction of damaged real property in the future.

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Costs of complying with governmental laws and regulations related to environmental protection and human health and safety may be high.

All real property investments and the operations conducted in connection with such investments are subject to federal, state and local laws and regulations relating to environmental protection and human health and safety. Some of these laws and regulations may impose joint and several liability on customers, owners or operators for the costs to investigate or remediate contaminated properties, regardless of fault or whether the acts causing the contamination were legal.

Under various federal, state and local environmental laws, a current or previous owner or operator of real property may be liable for the cost of removing or remediating hazardous or toxic substances on such real property. These environmental laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. In addition, the presence of hazardous substances, or the failure to properly remediate these substances, may adversely affect our ability to sell, rent or pledge such real property as collateral for future borrowings. Environmental laws also may impose restrictions on the manner in which real property may be used or businesses may be operated. Some of these laws and regulations have been amended so as to require compliance with new or more stringent standards as of future dates. Compliance with new or more stringent laws or regulations or stricter interpretation of existing laws may require us to incur material expenditures. Future laws, ordinances or regulations may impose material environmental liability. Additionally, the existing condition of land when we buy it, operations in the vicinity of our properties, such as the presence of underground storage tanks, or activities of unrelated third parties, may affect our properties. There are also various local, state and federal fire, health, life-safety and similar regulations with which we may be required to comply and which may subject us to liability in the form of fines or damages for noncompliance. In connection with the acquisition and ownership of our properties, we may be exposed to these costs in connection with such regulations. The cost of defending against environmental claims, any damages or fines we must pay, compliance with environmental regulatory requirements or remediating any contaminated real property could materially and adversely affect our business and results of operations, lower the value of our assets and, consequently, lower the amounts available for distribution to our stockholders.

The costs associated with complying with the Americans with Disabilities Act may reduce the amount of cash available for distribution to our stockholders.

Investment in properties may also be subject to the Americans with Disabilities Act of 1990, as amended, or the ADA. Under the ADA, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. We are committed to complying with the ADA to the extent to which it applies. The ADA has separate compliance requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services be made accessible and available to people with disabilities. With respect to the properties we acquire, the ADA’s requirements could require us to remove access barriers and could result in the imposition of injunctive relief, monetary penalties or, in some cases, an award of damages. We will attempt to acquire properties that comply with the ADA or place the burden on the seller or other third party, such as residents, to ensure compliance with the ADA. We cannot assure you that we will be able to acquire properties or allocate responsibilities in this manner. Any monies we use to comply with the ADA will reduce the amount of cash available for distribution to our stockholders.

To the extent we invest inage-restricted communities, we may incur liability by failing to comply with the Housing for Older Persons Act, or HOPA, the Fair Housing Act, or FHA, or certain state regulations, which may affect cash available for distribution to our stockholders.

To the extent we invest inage-restricted communities, any such properties must comply with the FHA and HOPA. The FHA generally prohibitsage-based housing discrimination; however certain exceptions exist for housing developments that qualify as housing for older persons. HOPA provides the legal requirements for such housing developments. In order for housing to qualify as housing for older persons, HOPA requires (1) all

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residents of such developments to be at least 62 years of age or (2) that at least 80% of the occupied apartment homes are occupied by at least one person who is at least 55 years of age and that the housing community publish and adhere to policies and procedures that demonstrate this required intent and comply with rules issued by the United States Department of Housing and Urban Development, or HUD, for verification of occupancy. In addition, certain states require thatage-restricted communities register with the state. Noncompliance with the FHA, HOPA or state registration requirements could result in the imposition of fines, awards of damages to private litigants, payment of attorneys’ fees and other costs to plaintiffs, substantial litigation costs and substantial costs of remediation, all of which would reduce the amount of cash available for distribution to our stockholders.

Government housing regulations may limit the opportunities at some of the government-assisted housing properties we invest in, and failure to comply with resident qualification requirements may result in financial penalties or loss of benefits, such as rental revenues paid by government agencies.

To the extent that we invest in government-assisted housing, we may acquire properties that benefit from governmental programs intended to provide affordable housing to individuals with low or moderate incomes. These programs, which are typically administered by HUD or state housing finance agencies, generally provide mortgage insurance, favorable financing terms, tax credits or rental assistance payments to property owners. As a condition of the receipt of assistance under these programs, the properties must comply with various requirements, which typically limit rents topre-approved amounts and impose restrictions on resident incomes. Failure to comply with these requirements and restrictions may result in financial penalties or loss of benefits. In addition, we will typically need to obtain the approval of HUD in order to acquire or dispose of a significant interest in or manage aHUD-assisted property.

Risks Associated with Real Estate-Related Assets

Disruptions in the financial markets and deteriorating economic conditions could adversely impact the market for real estate-related assets, which may negatively impact our investments in real-estate related assets.

We may invest in real estate-related assets backed by multifamily properties. The returns available to investors in these investments are determined by: (1) the supply and demand for such investments and (2) the existence of a market for such investments, which includes the ability to sell or finance such investments. During periods of volatility the number of investors participating in the market may change at an accelerated pace. As liquidity or “demand” increases, the returns available to investors will decrease. Conversely, a lack of liquidity will cause the returns available to investors to increase. In recent years, concerns pertaining to the deterioration of credit in the residential mortgage market have adversely impacted almost all areas of the debt capital markets including corporate bonds, asset-backed securities and commercial real estate bonds and loans. Future instability in the financial markets or weakened economic conditions may negatively impact investments in such real estate-related assets.

If we make or invest in mortgage loans, our mortgage loans may be affected by unfavorable real estate market conditions and other factors that impact the commercial real estate underlying the mortgage loans, which could decrease the value of those loans and the return on your investment.

If we make or invest in mortgage loans, we will be at risk of defaults by the borrowers on those mortgage loans. These defaults may be caused by many conditions beyond our control, including interest rate levels, economic conditions affecting real estate values and other factors that impact the value of the underlying real estate. We will not know whether the values of the properties securing our mortgage loans will remain at the levels existing on the dates of origination of those mortgage loans. If the values of the underlying properties decrease, our risk will increase because of the lower value of the security associated with such loans.

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Our investments in real estate-related assets may be illiquid, and we may not be able to reallocate our portfolio in response to changes in economic and other conditions.

Certain of the real estate-related assets that we may purchase in connection with privately negotiated transactions will not be registered under the relevant securities laws, resulting in a prohibition against their transfer, sale, pledge or other disposition except in a transaction that is exempt from the registration requirements of, or is otherwise in accordance with, those laws. The mezzanine and bridge loans we may purchase would be particularly illiquid investments due to their short life, their unsuitability for securitization and the greater difficulty of recoupment in the event of a borrower’s default. As a result, our ability to reallocate our portfolio in response to changes in economic and other conditions may be relatively limited.

Risks Associated With Debt Financing

We incur mortgage indebtedness and other borrowings that may increase our business risks and could hinder our ability to make distributions and decrease the value of your investment.

We have financed a portion of the purchase price of our multifamily properties by borrowing funds. Under our charter, we are prohibited from borrowing in excess of 300% of the value of our net assets. For valuation purposes, the value of a property will equal the value determined by an independent third-party appraiser or qualified independent valuation expert. Generally speaking, this is expected to approximate 75% of the aggregate cost of our assets. We may borrow in excess of these amounts if such excess is approved by a majority of the independent directors and is disclosed to stockholders in our next quarterly report, along with the justification for such excess. In addition, we may incur mortgage debt and pledge some or all of our investments as security for that debt to obtain funds to acquire additional investments or for working capital. We may also borrow funds as necessary or advisable to ensure we maintain our REIT tax qualification, including the requirement that we distribute at least 90% of our annual REIT taxable income to our stockholders (computed without regard to the distribution-paid deduction and excluding net capital gains). Furthermore, we may borrow in excess of the borrowing limitations in our charter if we otherwise deem it necessary or advisable to ensure that we maintain our qualification as a REIT for federal income tax purposes.

Certain debt levels will cause us to incur higher interest charges, which would result in increased debt service payments and could be accompanied by restrictive covenants. If there is a shortfall between the cash flow from a property and the cash flow needed to service mortgage debt on that property, the amount available for distributions to our stockholders may be reduced. In addition, incurring mortgage debt increases the risk of loss since defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. In that case, we could lose the property securing the loan that is in default, thus reducing the value of your investment. For tax purposes, a foreclosure on any of our properties will generally be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by the mortgage exceeds our tax basis in the property, we will recognize taxable income on foreclosure, but we would not receive any cash proceeds. If any mortgage contains cross collateralization or cross default provisions, a default on a single property could affect multiple properties. If any of our properties are foreclosed upon due to a default, our ability to pay cash distributions to our stockholders could be adversely affected.

Instability in the debt markets and our inability to find financing on attractive terms may make it more difficult for us to finance or refinance properties, which could reduce the amount of cash distributions we can make to our stockholders.

If mortgage debt is unavailable on reasonable terms as a result of increased interest rates, underwriting standards, capital market instability or other factors, we run the risk of being unable to refinance such debt when the loans come due, or of being unable to refinance on favorable terms to the extent that we place mortgage debt on properties. If interest rates are higher when we refinance debt, our income could be reduced. We may be unable to refinance debt at appropriate times, which may require us to sell properties on terms that are not

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advantageous to us, or could result in the foreclosure of such properties. If any of these events occur, our cash flow would be reduced. This, in turn, would reduce cash available for distribution to our stockholders and may hinder our ability to raise more capital by issuing securities or by borrowing more money.

Increases in interest rates could increase the amount of our debt payments and negatively impact our operating results.

The interest we pay on our debt obligations reduces our cash available for distributions. Utilization of variable rate debt, combined with increases in interest rates would increase our interest costs, which would reduce our cash flows and our ability to make distributions to our stockholders. If we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments at times which may not permit realization of the maximum return on such investments.

Changes in banks’ inter-bank lending rate reporting practices or the method pursuant to which LIBOR is determined may impact our variable rate debt and adversely affect our ability to manage and hedge our debt.

Our variable rate debt is tied to the benchmark LIBOR. LIBOR and other indices are the subject of recent national, international, and other regulatory guidance and proposals for reform. Some of these reforms are already effective while others are still to be implemented. These reforms may cause such benchmarks to perform differently than in the past, or have other consequences which cannot be predicted. LIBOR is calculated by reference to a market for interbank lending that continues to shrink, as its based on increasingly fewer actual transactions. This increases the subjectivity of the LIBOR calculation process and increases the risk of manipulation. Actions by the regulators or law enforcement agencies, as well as ICE Benchmark Administration (the current administrator of LIBOR), may result in changes to the manner in which LIBOR is determined or the establishment of alternative reference rates. For example, on July 27, 2017, the U.K. Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021.

It is likely that, over time, U.S. Dollar LIBOR will be replaced by the Secured Overnight Financing Rate (“SOFR”) published by the Federal Reserve Bank of New York. However, the manner and timing of this shift is currently unknown. SOFR is an overnight rate instead of a term rate, making SOFR an inexact replacement for LIBOR. There is currently no perfect way to create robust, forward-looking, SOFR term rates. Market participants are still considering how various types of financial instruments and securitization vehicles should react to a discontinuation of LIBOR. It is possible that not all of our variable rate debt will transition away from LIBOR at the same time, and it is possible that not all of our variable rate debt will transition to the same alternative reference rate, in each case increasing the difficulty of hedging. Switching existing financial instruments and hedging transactions from LIBOR to SOFR requires calculations of a spread. Industry organizations are attempting to structure the spread calculation in a manner that minimizes the possibility of value transfer between counterparties, borrowers, and lenders by virtue of the transition, but there is no assurance that the calculated spread will be fair and accurate or that all asset types and all types of securitization vehicles will use the same spread. We and other market participants have less experience understanding and modeling SOFR-based assets and liabilities than LIBOR-based assets and liabilities, increasing the difficulty of investing, hedging, and risk management. The process of transition involves operational risks. It is also possible that no transition will occur for many financial instruments, meaning that those instruments would continue to be subject to the weaknesses of the LIBOR calculation process. At this time, it is not possible to predict the effect of any such changes, any establishment of alternative reference rates or any other reforms to LIBOR that may be implemented. If LIBOR ceases to exist, we may need to renegotiate with borrowers and financing institutions that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with the new standard that is established. As such, the potential effect of any such event on our cost of capital and interest income cannot yet be determined.

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Lenders may require us to enter into restrictive covenants relating to our operations, which could limit our ability to make distributions to our stockholders.

When providing financing, a lender may impose restrictions on us that affect our distributions and operating policies, and our ability to incur additional debt. Loan documents we enter into may contain covenants that limit our ability to further mortgage a property, discontinue insurance coverage, or replace our advisor. In addition, loan documents may limit our ability to replace a property’s property manager or terminate certain operating or lease agreements related to a property. These or other limitations may adversely affect our flexibility and our ability to achieve our investment objectives.

The derivative financial instruments that we use to hedge against interest rate fluctuations may not be successful in mitigating our risks associated with interest rates and could reduce the overall returns on your investment.

We use derivative financial instruments, such as interest rate cap or collar agreements and interest rate swap agreements, to hedge exposures to changes in interest rates on loans secured by our assets, but no hedging strategy can protect us completely. These agreements involve risks, such as the risk that counterparties may fail to honor their obligations under these arrangements and that these arrangements may not be effective in reducing our exposure to interest rate changes. We cannot assure you that our hedging strategy and the derivatives that we use will adequately offset the risk of interest rate volatility or that our hedging transactions will not result in losses. In addition, the use of such instruments may reduce the overall return on our investments. These instruments may also generate income that may not be treated as qualifying REIT income for purposes of the 75% or 95% REIT income tests.

Federal Income Tax Risks

Failure to qualify as a REIT would reduce our net earnings available for investment or distribution.

If we fail to qualify as a REIT for any taxable year and we do not qualify for certain statutory relief provisions, we will be subject to federal income tax on our taxable income at corporate rates. In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year of losing our REIT status. Losing our REIT status would reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability. In addition, distributions to stockholders would no longer qualify for the dividends paid deduction, and we would no longer be required to make distributions. If this occurs, we might be required to borrow funds or liquidate some investments in order to pay the applicable tax.

You may have current tax liability on distributions you elect to reinvest in our common stock.

If you participate in our distribution reinvestment plan, you will be deemed to have received, and for income tax purposes will be taxed on, the amount reinvested in shares of our common stock to the extent the amount reinvested was not atax-free return of capital. In addition, you will be treated for tax purposes as having received an additional distribution to the extent the shares are purchased at a discount to fair market value. As a result, unless you are atax-exempt entity, you may have to use funds from other sources to pay your tax liability on the value of the shares of common stock received.

Distributions payable by REITs generally are subject to a higher tax rate than regular corporate dividends under current law.

The maximum U.S. federal income tax rate for certain qualified dividends payable to U.S. stockholders that are individuals, trusts and estates generally is 20% (but under the Tax Act (as defined below), U.S. stockholders that are individuals, trusts and estates generally may deduct 20% of ordinary dividends from a REIT for taxable years beginning after December 31, 2017 and before January 1, 2026). Dividends payable by REITs, however, are generally subject to a higher rate when paid to such stockholders. The more favorable rates applicable to

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regular corporate dividends under current law could cause investors who are individuals, trusts and estates or are otherwise sensitive to these lower rates to perceive investments in REITs to be relatively less attractive than investments in the stocks ofnon-REIT corporations that pay distributions, which could adversely affect the value of the stock of REITs, including our shares of our common stock.

Even if we qualify as a REIT for federal income tax purposes, we may be subject to other tax liabilities that reduce our cash flow and our ability to make distributions to you.

Even if we qualify as a REIT for federal income tax purposes, we may be subject to some federal, state and local taxes on our income or property. For example:

In order to qualify as a REIT, we must distribute annually at least 90% of our REIT taxable income (which is determined without regard to the dividends-paid deduction or net capital gain for this purpose) to our stockholders. To the extent that we satisfy the distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to federal corporate income tax on the undistributed income.

We will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions we pay in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years.

If we have net income from the sale of foreclosure property that we hold primarily for sale to customers in the ordinary course of business or othernon-qualifying income from foreclosure property, we must pay a tax on that income at the highest corporate income tax rate.

If we sell an asset, other than foreclosure property, that we hold primarily for sale to customers in the ordinary course of business and we do not qualify for a statutory safe harbor, our gain would be subject to the 100% “prohibited transaction” tax unless such sale were made by one of our taxable REIT subsidiaries.

REIT distribution requirements could adversely affect our ability to execute our business plan.

We generally must distribute annually at least 90% of our REIT taxable income (which is determined without regard to the dividends paid deduction or net capital gain for this purpose) in order to qualify as a REIT. To the extent that we satisfy this distribution requirement, but distribute less than 100% of our REIT taxable income (including net capital gain), we will be subject to federal corporate income tax on our undistributed REIT taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under federal tax laws. We intend to make distributions to our stockholders to comply with the REIT requirements of the Internal Revenue Code.

From time to time, we may generate taxable income greater than our taxable income for financial reporting purposes, or our taxable income may be greater than our cash flow available for distribution to stockholders. If we do not have other funds available in these situations we could be required to borrow funds, sell investments at disadvantageous prices or find another alternative source of funds to make distributions sufficient to satisfy the REIT distribution requirement and to avoid corporate income tax and the 4% excise tax in a particular year. There is no assurance that outside financing will be available to us. Even if available, the use of outside financing or other alternative sources of funds to pay distributions could increase our costs or dilute our stockholders’ equity interests. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.

To maintain our REIT status, we may be forced to forgo otherwise attractive opportunities, which may delay or hinder our ability to meet our investment objectives and reduce your overall return.

To maintain our REIT status, we must satisfy certain tests on an ongoing basis concerning, among other things, the sources of our income, nature of our assets and the amounts we distribute to our stockholders. We

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may be required to make distributions to stockholders at times when it would be more advantageous to reinvest cash in our business or when we do not have funds readily available for distribution. Compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits and the value of your investment.

Our gains from sales of our assets are potentially subject to the prohibited transaction tax, which could reduce the return on your investment.

Our ability to dispose of property during the first few years following acquisition is restricted to a substantial extent as a result of our REIT status. We will be subject to a 100% tax on any gain realized on the sale or other disposition of any property (other than foreclosure property) we own, directly or through any subsidiary entity, including our operating partnership, but excluding any taxable REIT subsidiaries, that is deemed to be inventory or property held primarily for sale to customers in the ordinary course of trade or business, unless we qualify for a statutory safe harbor. Whether property is inventory or otherwise held primarily for sale to customers in the ordinary course of a trade or business depends on the particular facts and circumstances surrounding each property. We intend to avoid the 100% prohibited transaction tax by (1) conducting activities that may otherwise be considered prohibited transactions through a taxable REIT subsidiary, (2) conducting our operations in such a manner so that no sale or other disposition of an asset we own, directly or through any subsidiary other than a taxable REIT subsidiary, will be treated as a prohibited transaction or (3) structuring certain dispositions of our properties to comply with certain safe harbors available under the Internal Revenue Code for properties held at least two years. However, no assurance can be given that any particular property we own, directly or through any subsidiary entity, including our operating partnership, but excluding any taxable REIT subsidiaries, will not be treated as inventory or property held primarily for sale to customers in the ordinary course of a trade or business.

Complying with REIT requirements may force us to liquidate otherwise attractive investments.

To maintain our REIT status, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualifying real estate assets, including certain mortgage loans and mortgage-backed securities. Our investment in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer. No more than 20% of the value of our total assets can be represented by securities of one or more taxable REIT subsidiaries, and not more than 25% of the value of our assets may consist of “nonqualified publicly offered REIT debt instruments.”

If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate from our portfolio otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.

Liquidation of assets may jeopardize our REIT status.

To maintain our REIT status, we must comply with requirements regarding our assets and our sources of income. If we are compelled to liquidate our investments to repay obligations to our lenders, we may be unable to comply with these requirements, ultimately jeopardizing our qualification as a REIT, or we may be subject to a 100% tax on any resultant gain if we sell assets that are treated as dealer property or inventory.

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The failure of a mezzanine loan to qualify as a real estate asset could adversely affect our ability to qualify as a REIT.

We may acquire or originate mezzanine loans. The Internal Revenue Service has provided a safe harbor in Revenue Procedure2003-65 for structuring mezzanine loans so that they will be treated by the Internal Revenue Service as a real estate asset for purposes of the REIT asset tests and interest derived from mezzanine loans will be treated as qualifying mortgage interest for purposes of the 75% gross income test. Although the Revenue Procedure provides a safe harbor on which taxpayers may rely, it does not prescribe rules of substantive tax law. We may acquire mezzanine loans that do not meet all of the requirements of the safe harbor. In the event we own a mezzanine loan that does not meet the safe harbor, the Internal Revenue Service could challenge such loan’s treatment as a real estate asset for purposes of the REIT asset and income tests and, if such a challenge were sustained, we could fail to continue to qualify as a REIT.

If our operating partnership fails to maintain its status as a disregarded entity or partnership, its income may be subject to taxation, which would reduce the cash available for distribution to you and likely result in a loss of our REIT status.

We intend to maintain the status of the operating partnership as a disregarded entity or partnership for U.S. federal income tax purposes. However, if the Internal Revenue Service were to successfully challenge the status of the operating partnership as a disregarded entity or partnership for such purposes, it would be taxable as a corporation. In such event, this would reduce the amount of distributions that the operating partnership could make to us. This would also likely result in our losing REIT status, and, if so, becoming subject to a corporate level tax on our own income. This would substantially reduce any cash available to pay distributions. In addition, if any of the partnerships or limited liability companies through which the operating partnership owns its properties, in whole or in part, loses its characterization as a partnership and is otherwise not disregarded for U.S. federal income tax purposes, it would be subject to taxation as a corporation, thereby reducing distributions to the operating partnership. Such a recharacterization of an underlying property owner could also threaten our ability to maintain our status as a REIT.

Legislative or regulatory action could adversely affect investors.

In recent years, numerous legislative, judicial and administrative changes have been made in the provisions of U.S. federal income tax laws applicable to investments similar to an investment in shares of our common stock. Additional changes to the tax laws are likely to continue to occur, and we cannot assure our stockholders that any such changes will not adversely affect our taxation and our ability to continue to qualify as a REIT or the taxation of a stockholder. Any such changes could have an adverse effect on an investment in our shares or on the market value or the resale potential of our assets. Our stockholders are urged to consult with their tax advisor with respect to the impact of recent legislation on their investment in our shares and the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our shares.

Although REITs generally receive better tax treatment than entities taxed as regular corporations, it is possible that future legislation would result in a REIT having fewer tax advantages, and it could become more advantageous for a company that invests in real estate to elect to be treated for U.S. federal income tax purposes as a regular corporation. As a result, our charter provides our board of directors with the power, under certain circumstances, to revoke or otherwise terminate our REIT election and cause us to be taxed as a regular corporation, without the vote of our stockholders. Our board of directors has fiduciary duties to us and our stockholders and could only cause such changes in our tax treatment if it determines in good faith that such changes are in the best interests of our stockholders.

In addition, on December 22, 2017, the Tax Cuts and Jobs Act, or the Tax Act, was signed into law. The Tax Act made significant changes to the U.S. federal income tax rules for taxation of individuals and businesses, generally effective for taxable years beginning after December 31, 2017. In addition to reducing corporate and

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individual tax rates, the Tax Act eliminates or restricts various deductions. Most of the changes applicable to individuals are temporary and apply only to taxable years beginning after December 31, 2017, and before January 1, 2026. The Tax Act made numerous large and small changes to the tax rules that do not affect the REIT qualification rules directly, but may otherwise affect us or our stockholders.

While the changes in the Tax Act generally appear to be favorable with respect to REITs, the extensive changes tonon-REIT provisions in the Internal Revenue Code may have unanticipated effects on us or our stockholders. Moreover, Congressional leaders have recognized that the process of adopting extensive tax legislation in a short amount of time without hearings and substantial time for review is likely to have led to drafting errors, issues needing clarification and unintended consequences that will have to be revisited in subsequent tax legislation. At this point, it is not clear if or when Congress will address these issues or when the IRS will issue administrative guidance on the changes made in the Tax Act.

We urge our stockholders to consult with their own tax advisor with respect to the status of the Tax Act and other legislative, regulatory or administrative developments and proposals and their potential effect on an investment in shares of our common stock.

Our property taxes could increase due to property tax rate changes or reassessment, which would impact our cash flows.

Even if we qualify as a REIT for federal income tax purposes, we will be required to pay some state and local taxes on our properties. The real property taxes on our properties may increase as property tax rates change or as our properties are assessed or reassessed by taxing authorities. Therefore, the amount of property taxes we pay in the future may increase substantially. If the property taxes we pay increase and if any such increase is not reimbursable under the terms of our lease, then our cash flows will be impacted, and our ability to pay expected distributions to our stockholders could be adversely affected.

Non-U.S. investors may be subject to FIRPTA on the sale of shares of our common stock if we are unable to qualify as a “domestically controlled qualified investment entity.”

Anon-U.S. person disposing of a U.S. real property interest, including shares of a U.S. corporation whose assets consist principally of U.S. real property interests, is generally subject to a tax, known as FIRPTA, on the gain recognized on the disposition of such interest. However, certain qualified foreign pension plans and certain foreign publicly traded entities are exempt from FIRPTA withholding. Further, FIRPTA does not apply to the disposition of stock in a REIT if the REIT is a “domestically controlled qualified investment entity.” A REIT is a domestically controlled qualified investment entity if, at all times during a specified testing period (the continuous five-year period ending on the date of disposition or, if shorter, the entire period of the REIT’s existence), less than 50% in value of its shares is held directly or indirectly bynon-U.S. holders. We cannot assure you that we will qualify as a domestically controlled qualified investment entity. If we were to fail to so qualify, gain realized by anon-U.S. investor on a sale of our common stock would be subject to FIRPTA unless our common stock was traded on an established securities market and thenon-U.S. investor did not at any time during a specified testing period directly or indirectly own more than 10% of the value of our outstanding common stock.

Retirement Plan Risks

If a stockholder that is a Benefit Plan or IRA fails to meet the fiduciary and other standards under ERISA or the Internal Revenue Code as a result of an investment in our stock, such stockholder could be subject to civil (and criminal, if the failure is willful) penalties.

There are special considerations that apply to employee benefit plans subject to ERISA (such as pension, profit-sharing or 401(k) plans) and other retirement plans or accounts subject to Section 4975 of the Internal

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Revenue Code (such as an IRA or Keogh plan) including assets of an insurance company general account or entity whose assets are considered “plan assets” under ERISA (which we collectively refer to as, “Benefit Plans and IRAs”) whose assets are invested in our common stock. Stockholders that are Benefit Plans and IRAs should satisfy themselves that:

• the investment is consistent with the fiduciary obligations under ERISA and the Internal Revenue Code, or any other applicable governing authority in the case of a plan not subject to ERISA or the Internal Revenue Code;

• the investment is made in accordance with the documents and instruments governing the Benefit Plan or IRA, including any investment policy;

• the investment satisfies the prudence, diversification and other requirements of Section 404(a)(1)(B) and 404(a)(1)(C) of ERISA and other applicable provisions of ERISA and the Internal Revenue Code and any other applicable law;

• the investment will not impair the liquidity needs, the minimum and other distribution requirements and the withholding requirements that may be applicable to the Benefit Plan or IRA;

• the investment will not produce unrelated business taxable income, referred to as UBTI, for the Benefit Plan or IRA;

• the Benefit Plans and IRAs will be able to value the assets of the Benefit Plan or IRA annually (or more frequently) in accordance with ERISA, the Internal Revenue Code and applicable provisions of the Benefit Plan or IRA;

• the investment will not constitute a prohibited transaction under Section 406 of ERISA, Section 4975 of the Internal Revenue Code, or any similar rule under other applicable law; and

• the investment will cause our assets to be treated as “plan assets” of the Benefit Plan or IRA.

Failure to satisfy the fiduciary standards of conduct and other applicable requirements of ERISA, the Internal Revenue Code or other applicable statutory or common law may result in the imposition of civil and criminal (if the violation is willful) penalties and could subject the fiduciary to equitable remedies. In addition, if an investment in our common stock constitutes a prohibited transaction under ERISA or the Internal Revenue Code, the“party-in-interest” (within the meaning of ERISA) or “disqualified person” (within the meaning of the Internal Revenue Code) who authorized or directed the investment may have to compensate the plan for any losses the plan suffered as a result of the transaction or restore to the plan any profits made by such person as a result of the transaction, or may be subject to excise taxes with respect to the amount involved. In the case of a prohibited transaction involving IRA, the IRA may be disqualified and all of the assets of the IRA may be deemed distributed and subject to tax.

In addition to considering their fiduciary responsibilities under ERISA and the prohibited transaction rules of ERISA and the Internal Revenue Code, stockholders that are Benefit Plans and IRAs should consider the effect of the plan assets regulation. U.S. Department of Labor RegulationSection 2510.3-101, as modified by ERISA Section 3(42). We cannot guarantee our stockholders that we will qualify for an exemption from the plan assets regulation. If we do qualify for an exemption from the plan assets regulation, our underlying assets would be treated as “plan assets” of the investing Benefit Plan or IRA under the plan assets regulation and () we would be an ERISA fiduciary and subject to certain fiduciary requirements of ERISA with which it would be difficult for us to comply and (ii) we could be restricted from entering into favorable transactions if the transaction, absent an exemption, would constitute a prohibited transaction under ERISA or the Internal Revenue Code. Even if our assets are not considered to be “plan assets” a prohibited transaction could occur if we or any of our affiliates is a fiduciary (within the meaning of ERISA) of a Benefit Plan or IRA stockholder.

Due to the complexity of these rules and the potential penalties that may be imposed, it is important that stockholders that are Benefit Plans and IRAs consult with their own advisors regarding potential applicability of ERISA, the Internal Revenue Code and any similar applicable law.

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Stockholders that are Benefit Plans and IRA may be limited in their ability to withdraw required minimum distributions as a result of an investment in shares of our common stock.

If Benefit Plans and IRAs invest in our common stock, the Internal Revenue Code may require such plan or IRA to withdraw required minimum distributions from such plan or IRA in the future. Our stock will be highly illiquid, and our share repurchase program only offers limited liquidity. If a Benefit Plan or IRA requires liquidity, it may generally sell its shares, but such sale may be at a price less than the price at which such plan or IRA initially purchased its shares of our common stock. If a Benefit Plan or IRA fails to make required minimum distributions, it may be subject to certain taxes and tax penalties.

Specific rules apply to foreign, governmental and church plans.

As a general rule, certain employee benefit plans, including foreign pension plans, governmental plans established or maintained in the United States (as defined in Section 3(32) of ERISA), and certain church plans (as defined in Section 3(33) of ERISA), are not subject to ERISA’s requirements and are not “benefit plan investors” within the meaning of the plan assets regulation of the U.S. Department of Labor. Any such plan that is qualified and exempt from taxation under Sections 401(a) and 501(a) of the Internal Revenue Code may nonetheless be subject to the prohibited transaction rules set forth in Section 503 of the Internal Revenue Code and, under certain circumstances in the case of church plans, Section 4975 of the Internal Revenue Code. Also, some foreign plans and governmental plans may be subject to foreign, state, or local laws which are, to a material extent, similar to the provisions of ERISA or Section 4975 of the Internal Revenue Code. Each fiduciary of a plan subject to any such similar law should make its own determination as to the need for and the availability of any exemption relief.

ITEM 1B. UNRESOLVED STAFF COMMENTS

We have no unresolved staff comments.

ITEM 2. PROPERTIES

As of December 31, 2018, we owned 34 multifamily properties consisting of an aggregate of 11,601 apartment homes. The total contract purchase price of our real estate portfolio as of December 31, 2018 was $1,499,381,750, exclusive of closing costs. For additional information on our real estate portfolio, see Part I, Item I. “Business—Our Real Estate Portfolio” of this Annual Report on Form10-K.

Our principal executive offices are located at 18100 Von Karman Avenue, Suite 500, Irvine, CA 92612. Our telephone number, general facsimile number and website address are(949) 852-0700,(949) 852-0143 andhttp://www.steadfastreits.com, respectively.

ITEM 3. LEGAL PROCEEDINGS

From time to time, we are party to legal proceedings that arise in the ordinary course of our business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by government agencies.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND PURCHASES OF EQUITY SECURITIES

Stockholder Information

As of March 7, 2019, we had approximately 51,932,358 shares of common stock outstanding held by a total of approximately 18,000 stockholders. The number of stockholders is based on the records of DST Systems, Inc., who serves as our transfer agent.

Market Information

No public market currently exists for our shares of common stock and we currently have no plans to list our shares on a national securities exchange. Until our shares are listed, if ever, our stockholders may not sell their shares unless the buyer meets the applicable suitability and minimum purchase requirements. In addition, our charter prohibits the ownership of more than 9.8% in value of our outstanding capital stock (which includes common stock and preferred stock we may issue) and more than 9.8% in value or number of shares, whichever is more restrictive, of our outstanding common stock, unless exempted (prospectively or retroactively) by our board of directors. Consequently, there is the risk that our stockholders may not be able to sell their shares at a time or price acceptable to them.

Estimated Value Per Share

Background

In November 2018, our board of directors initiated a process to determine an estimated value per share of the shares of our common stock. We are providing an estimated value per share to assist broker-dealers that participated in our public offering in meeting their customer account statement reporting obligations under National Association of Securities Dealers Conduct Rule 2340, as required by the Financial Industry Regulatory Authority, Inc., or FINRA. This valuation was performed in accordance with Practice Guideline2013-01,Valuations of Publicly RegisteredNon-Listed REITs, issued by the Institute for Portfolio Alternatives (formerly known as the Investment Program Association), or IPA, in April 2013, or the IPA valuation guidelines. Our board of directors formed a valuation committee, or the valuation committee, comprised solely of independent directors, to oversee the process of determining our estimated value per share. Upon approval of our board of directors, we engaged CBRE Capital Advisors, Inc., or CBRE Cap, a FINRA registered broker dealer firm that specializes in providing real estate financial services, to provide property-level and aggregate valuation analyses and a range for the estimated value per share of our common stock as of December 31, 2018.

From CBRE Cap’s engagement through the issuance of its valuation report on March 12, 2019, or the valuation report, CBRE Cap held discussions with our advisor and our senior management and conducted or commissioned such investigations, research, review and analyses as it deemed necessary. CBRE Cap based its calculation of the range for our estimated value per share of our common stock upon appraisals of all our real properties, or the appraisals, performed by CBRE, Inc., or CBRE, an affiliate of CBRE Cap and an independent third-party appraisal firm, and valuations performed by our advisor with respect to our other assets and liabilities. The valuation committee, upon its receipt and review of the valuation report, concluded that the range between $14.98 and $16.74 for our estimated value per share proposed in the valuation report was reasonable and recommended that the board adopt $15.84 as the estimated value per share of our common stock as of December 31, 2018. The estimated value per share represents the weighted average of the range reflecting the effect of using differing discount rates and terminal capitalization rates in the sensitivity analysis. On March 12, 2019, our board of directors accepted the valuation committee’s recommendation and approved $15.84 as the estimated value per share of our common stock as of December 31, 2018. CBRE Cap is not responsible for the determination of the estimated value per share of our common stock as of December 31, 2018.

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Valuation Methodology

In preparing the valuation report, CBRE Cap, among other things:

• reviewed financial and operating information requested from or provided by our advisor and us;

• reviewed and discussed with us and our advisor the historical and anticipated future financial performance of our multifamily properties, including forecasts prepared by us and our advisor;

• reviewed appraisals commissioned by us that contained analysis on each of our multifamily properties and performed analyses and studies for each property;

• conducted or reviewed CBRE Cap proprietary research, including market and sector capitalization rate surveys;

• reviewed third-party research, including equity reports and online data providers;

• compared our financial information to similar information of companies that CBRE Cap deemed to be comparable;

• reviewed our reports filed with the SEC, including our Quarterly Report on Form10-Q for the period ended September 30, 2018, and the unaudited financial statements therein; and

• reviewed the unaudited financial statements as of December 31, 2018, as prepared by us.

The appraisals were performed in accordance with Uniform Standards of Professional Appraisal Practice and were all MAI appraisals. The appraisals were prepared by CBRE and personnel who are members and hold the MAI designation. CBRE Cap reviewed and took into consideration the appraisals, and described the results of the appraisals in its valuation report. Discreet values were assigned to each property in our portfolio.

Our valuation committee and board of directors considered the following valuation methodology with respect to each multifamily property, which was applied by CBRE Cap in its valuation report. Unlevered,ten-year discounted cash flow analyses from appraisals were created for our fully operational properties. The “terminal capitalization rate” method was used to calculate the terminal value of the assets, with such rates varying based on the specific geographic location and other relevant factors.

Valuation Summary: Material Assumptions

The valuation process we used to determine an estimated value per share was designed to follow the recommendations of the IPA valuation guidelines.

The following table summarizes the key assumptions that were employed by CBRE Cap in the discounted cash flow models to estimate the value of our real estate assets:

	Range		Weighted-Average
Terminal capitalization rate		5.78% - 6.08%		5.93	%
Discount rate		7.14% - 7.51%		7.33	%

While we believe that CBRE’s assumptions and inputs are reasonable, a change in these assumptions and inputs may significantly impact the appraised value of the real estate properties and our estimated value per share. The table below illustrates the impact on the estimated value per share if the terminal capitalization rates or discount rates were adjusted by 2.5% in either direction, which represents a 5% sensitivity analysis, in accordance with the IPA valuation guidelines, assuming all other factors remain unchanged:

	Increase (Decrease) on the Estimated Value per Share due to
	Decrease of 2.5%		Increase of 2.5%
Terminal capitalization rate	$	0.43	$	(0.48	)
Discount rate		0.40		(0.43	)

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In its valuation report, CBRE Cap included an estimate of the December 31, 2018 value of our assets, including cash and selected other assets net of payables, and accruals and other liabilities including notes payable. The estimated values of our notes payable are equal to GAAP fair values in this annual report, but do not equal the book value of the loans in accordance with GAAP. The GAAP fair values of our notes payable were determined using a discounted cash flow analysis. The discounted cash flow analysis was based on projected cash flow over the remaining loan terms and on management’s estimates of current market interest rates for instruments with similar characteristics. The carrying values of a majority of our other assets and liabilities are considered to equal their fair value due to their short term maturities or liquid nature. Certain balances, such as lease intangible assets and liabilities related to real estate investments and deferred financing costs have been eliminated for the purpose of the valuation since the value of those balances was already considered in the appraisals.

Our estimated value per share takes into consideration any potential liability related to an incentive fee our advisor is entitled to upon meeting certain stockholder return thresholds in accordance with our charter. For purposes of determining the estimated value per share, our advisor calculated the potential liability related to this incentive fee based on a hypothetical liquidation of our assets and liabilities at their estimated fair values, without considering the impact of any potential closing costs and fees related to the disposition of real estate properties, and determined that there would be a liability related to the incentive fee of $5,218,160.

Taking into consideration the reasonableness of the valuation methodology, assumptions and conclusions contained in the valuation report, the board of directors determined the estimated value of our equity interest in our real estate portfolio to be in the range of $1,777,959,694 to $1,881,531,755 and our net asset value to range between $775,104,772 and $866,261,775, or between $14.98 and $16.74 per share, based on a share count of 51,723,801 shares issued and outstanding as of December 31, 2018.

As with any valuation methodology, the methodologies considered by the valuation committee and board of directors in reaching an estimate of the value of our shares are based upon all of the foregoing estimates, assumptions, judgments and opinions that may, or may not, prove to be correct. The use of different estimates, assumptions, judgments or opinions may have resulted in significantly different estimates of the value of our shares.

The following table summarizes the material components of our estimated value and estimated value per share as of December 31, 2018 and December 31, 2017:

	Estimated Value as of December 31,						Estimated Value Per Share as of December 31,
	2018			2017			2018			2017
Real estate properties	$	1,827,610,000		$	1,777,635,000		$	35.33		$	34.96
Cash		72,738,775			27,298,855			1.41			0.54
Other assets		4,760,131			15,903,101			0.09			0.31
Mortgage debt		(1,042,358,884	)		(1,011,004,179	)		(20.15	)		(19.88	)
Other liabilities		(37,994,945	)		(34,259,950	)		(0.74	)		(0.68	)
Incentive fee		(5,218,160	)		(3,604,360	)		(0.10	)		(0.07	)
Estimated value per share	$	819,536,917		$	771,968,467		$	15.84		$	15.18

The estimated value of our real estate properties as of December 31, 2018 and 2017 was $1,827,610,000 and $1,777,635,000, respectively, while the total cost of the real estate properties was $1,612,494,662 and $1,595,533,800, respectively, comprised of the aggregate purchase price and capital expenditures subsequent to acquisition.

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Additional Information Regarding the Valuation, Limitations of Estimated Value per Share and the Engagement of CBRE Cap

In accordance with the IPA valuation guidelines, the valuation committee reviewed, confirmed and approved the processes and methodologies employed by CBRE Cap and their consistency with real estate industry standards and best practices.

The valuation report issued March 12, 2019, was based upon market, economic, financial and other information, circumstances and conditions existing prior to December 31, 2018, and any material change in such information, circumstances and/or conditions may have a material effect on the estimated value per share. CBRE Cap’s valuation materials were addressed solely to our board of directors to assist it in establishing an estimated value of our common stock. CBRE Cap’s valuation materials were restricted, were not addressed to the public and should not be relied upon by any other person to establish an estimated value of our common stock. The valuation report does not constitute a recommendation by CBRE Cap to purchase or sell any shares of our common stock and should not be represented as such.

Each of CBRE Cap and CBRE reviewed the information supplied or otherwise made available to it by us or our advisor for reasonableness, and assumed and relied upon the accuracy and completeness of all such information and of all information supplied or otherwise made available to it by any other party, and did not undertake any duty or responsibility to verify independently any of such information. With respect to operating or financial forecasts and other information and data provided to or otherwise reviewed by or discussed with CBRE Cap and CBRE, CBRE Cap and CBRE assumed that such forecasts and other information and data were reasonably prepared in good faith reflecting our and our advisor’s best currently available estimates and judgments and other subjective judgments, and relied upon us and our advisor to advise CBRE Cap and CBRE promptly if any information previously provided became inaccurate or was required to be updated during the period of its review. CBRE Cap assumes no obligation to update or otherwise revise these materials. In preparing its valuation materials, CBRE Cap did not, and was not requested to, solicit third-party indications of interest for us in connection with possible purchases of our securities or the acquisition of all or any part of us.

In performing its analyses, CBRE Cap made numerous assumptions as of various points in time with respect to industry performance, general business, economic and regulatory conditions, current and future rental market for our operating properties and those in development and other matters, many of which are necessarily subject to change and beyond the control of CBRE Cap and us. The analyses performed by CBRE Cap are not necessarily indicative of actual values, trading values or actual future results of our common stock that might be achieved, all of which may be significantly more or less favorable than suggested by the valuation report. The analyses do not purport to be appraisals or to reflect the prices at which the properties may actually be sold, and such estimates are inherently subject to uncertainty. The actual value of our common stock may vary significantly depending on numerous factors that generally impact the price of securities, our financial condition and the state of the real estate industry more generally. Accordingly, with respect to the estimated value per share of our common stock, neither we nor CBRE Cap can give any assurance that:

• a stockholder would be able to resell shares at this estimated value;

• a stockholder would ultimately realize distributions per share equal to our estimated value per share upon liquidation of our assets and settlement of our liabilities or a sale of the Company;

• another independent third-party appraiser or third-party valuation firm would agree with our estimated value per share;

• a third party would offer the estimated value per share in an arm’s length transaction to purchase all or substantially all of our shares of common stock;

• our shares would trade at a price equal to or greater than the estimated value per share if we listed them on a national securities exchange; or

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• the methodology used to estimate our value per share would be acceptable to FINRA or the reporting requirements under ERISA, the Internal Revenue Code or other applicable law, or the applicable provisions of a Benefit Plan or IRA.

The December 31, 2018 estimated value per share was reviewed and recommended by our valuation committee and approved by our board of directors at meetings held on March 12, 2019. The value of our common stock will fluctuate over time as a result of, among other things, developments related to individual assets and responses to the real estate and capital markets. We expect to utilize an independent valuation firm to update the estimated value per share as of December 31, 2019, in accordance with the IPA valuation guidelines.

The estimated value per share does not reflect a discount for the fact that we are externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. The estimated value per share does not take into account estimated disposition costs and fees for real estate properties that are not under contract to sell or debt prepayment penalties that could apply upon the prepayment of certain of our debt obligations or the impact of restrictions on the assumption of debt.

CBRE Cap is a FINRA registered broker-dealer and is an investment banking firm that specializes in providing real estate financial services. CBRE is actively engaged in the business of appraising commercial real estate properties similar to those owned by us in connection with public securities offerings, private placements, business combinations and similar transactions. We commissioned CBRE to deliver an appraisal report relating to our real estate properties and CBRE received fees upon delivery of such report. In addition, we have agreed to indemnify CBRE Cap against certain liabilities arising out of this engagement. Each of CBRE Cap and CBRE is an affiliate of CBRE Group, Inc., or the CBRE Group, a Fortune 500 and S&P 500 company headquartered in Los Angeles, California, one of the world’s largest commercial real estate services and investment firms (in terms of 2018 revenue) and a parent holding company of affiliated companies that are engaged in the ordinary course of business in many areas related to commercial real estate and related services. CBRE Cap and its affiliates possess substantial experience in the valuation of assets similar to those owned by us and regularly undertake the valuation of securities in connection with public offerings, private placements, business combinations and similar transactions. For the preparation of the valuation report, we paid CBRE Cap a customary fee for services of this nature, no part of which was contingent relating to the provision of services or specific findings. We have not engaged CBRE Cap for any other services. During the past four years, CBRE Cap assisted our board of directors in the determination of the estimated value per share and certain of our affiliates engaged affiliates of CBRE primarily for various real estate-related services and these affiliates of CBRE received fees in connection with such services. We anticipate that affiliates of CBRE will continue to provide similar or other real estate-related services in the future for us and our affiliates. In addition, we may in our discretion engage CBRE Cap to assist our board of directors in future determinations of our estimated value per share. We are not affiliated with CBRE, CBRE Cap or any of their affiliates. CBRE Cap and CBRE and their affiliates may from time to time in the future perform other commercial real estate appraisal, valuation and financial advisory services for us and our affiliates in transactions related to the properties that are the subjects of the appraisals, so long as such other services do not adversely affect the independence of the applicable CBRE appraiser. While we and affiliates of our advisor have engaged and may engage CBRE Cap or its affiliates in the future for commercial real estate services of various kinds, we believe that there are no material conflicts of interest with respect to our engagement of CBRE Cap.

In the ordinary course of their business, each of CBRE Cap and CBRE, and their respective affiliates, directors and officers may structure and effect transactions for their own accounts or for the accounts of their customers in commercial real estate assets of the same kind and in the same markets as our assets.

Distribution Information

To qualify and maintain our qualification as a REIT, we are required to distribute 90% of our annual taxable income, determined without regard to the dividends paid deduction and by excluding net capital gains, to our

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stockholders. If the aggregate amount of cash distributions in any given year exceeds the amount of our “REIT taxable income” generated during the year, the excess amount will either be (1) a return on capital or (2) gain from the sale or exchange of property to the extent that a stockholder’s basis in our common stock equals or is reduced to zero as the result of our current or prior year distributions.

We declared distributions based on daily record dates for each day during the period commencing April 7, 2014 through December 31, 2018. During the years ended December 31, 2018 and 2017, distributions declared for all record dates of a given month were paid approximately three days aftermonth-end. Distributions were calculated at a rate of $0.002466 per share per day, which if paid each day over a365-day period is equivalent to a 6.0% annualized distribution rate based on a purchase price of $15.00 per share of common stock. There is no guarantee that we will pay distributions at this rate in the future or at all.

Distributions declared during the years ended December 31, 2018 and 2017 aggregated by quarter, are as follows:

	2018
	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter			Total
Total Distributions Declared(1)	$	11,312,463		$	11,485,650		$	11,664,156		$	11,717,500		$	46,179,769
Total Per Share Distribution	$	0.222		$	0.224		$	0.227		$	0.227		$	0.900
Annualized Rate Based on Purchase Price		6.0	%		6.0	%		6.0	%		6.0	%		6.0	%

	2017
	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter			Total
Total Distributions Declared(1)	$	11,078,212		$	11,267,096		$	11,458,896		$	11,516,859		$	45,321,063
Total Per Share Distribution	$	0.222		$	0.224		$	0.227		$	0.227		$	0.900
Annualized Rate Based on Purchase Price		6.0	%		6.0	%		6.0	%		6.0	%		6.0	%

(1) Distributions were based on daily record dates and calculated at a rate of $0.002466 per share per day for the years ended December 31, 2018 and 2017.

The tax composition of our distributions declared for the years ended December 31, 2018 and 2017 was as follows:

	December 31,
	2018			2017
Ordinary income		20.7	%		—	%
Return of capital		79.3	%		100.0	%
Total		100.0	%		100.0	%

Generally, our policy is to pay distributions from cash flow from operations. Because we may receive income from interest or rents at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund capital expenditures and other expenses, we expect that from time to time during our operational stage, we will declare distributions in anticipation of cash flow that we expect to receive during a later period, and we expect to pay these distributions in advance of our actual receipt of these funds. In these instances, our board of directors has the authority under our organizational documents, to the extent permitted by Maryland law, to fund distributions from sources such as borrowings, offering proceeds or the deferral of fees and expense reimbursements by our advisor in its sole discretion. We have not established a limit on the amount of proceeds we may use from our public offering to fund distributions. If we pay distributions from sources other than cash flow from operations, we will have fewer funds available for investments and our stockholders’ overall return on their investment in us may be reduced. As of December 31, 2018, 15%, 14% and 72% of distributions, including shares issued pursuant to our distribution reinvestment plan, have been funded from our revolving line of credit, the refinancing of our outstanding debt, offering proceeds and cash flows from operations, respectively.

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Pursuant to our distribution reinvestment plan, stockholders had the option to elect to have their cash distributions reinvested in shares of our common stock at an initial price of $14.25 per share. On February 14, 2017, our board of directors determined a new share price of $14.85 for purposes of our distribution reinvestment plan. On March 14, 2018, our board of directors determined a new share price of $15.18 for purposes of our distribution reinvestment plan. On March 12, 2019, our board of directors determined a new share price of $15.84 for purposes of our distribution reinvestment plan. No sales commissions or dealer manager fees are payable on shares sold through our distribution reinvestment plan. Our board of directors may terminate the distribution reinvestment plan at its discretion at any time upon ten days’ notice to our stockholders. Following any termination of the distribution reinvestment plan, all subsequent distributions to stockholders will be made in cash.

For additional information on our distributions, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Distributions.”

Unregistered Sales of Equity Securities

On each of August 11, 2016, August 10, 2017 and August 8, 2018, we granted 1,666 shares of restricted common stock to each of our three independent directors pursuant to our independent directors’ compensation plan as compensation for services in connection with theirre-election to the board of directors at our annual meeting of stockholders. The shares of restricted stock issued pursuant to our independent directors’ compensation plan were issued in transactions exempt from registration pursuant to Section 4(a)(2) of the Securities Act.

Share Repurchase Plan

Our share repurchase plan may provide an opportunity for our stockholders to have their shares of common stock repurchased by us, subject to certain restrictions and limitations. No shares can be repurchased under our share repurchase plan until after the first anniversary of the date of purchase of such shares; provided, however, that this holding period shall not apply to repurchases requested within two years after the death or disability of a stockholder.

From March 29, 2016, the date we first published an estimated value per share, until April 14, 2018, the purchase price for shares repurchased under our share repurchase plan was as follows:

Share Purchase Anniversary	Repurchase Price on Repurchase Date(1)
Less than 1 year	No Repurchase Allowed
1 year	92.5% of Estimated Value per Share(2)
2 years	95.0% of Estimated Value per Share(2)
3 years	97.5% of Estimated Value per Share(2)
4 years	100.0% of Estimated Value per Share(2)
In the event of a stockholder’s death or disability(3)	Average Issue Price for Shares(4)

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On March 14, 2018, our board of directors amended the terms of our share repurchase plan effective as of April 15, 2018 to (1) limit the amount of shares repurchased pursuant to our share repurchase plan each quarter to $2,000,000 and (2) revise the repurchase price to an amount equal to 93% of the most recent publicly disclosed estimated value per share. Pursuant to the amended share repurchase program, the current share repurchase price is $14.73 per share, which represents 93% of the estimated value per share of $15.84. The share repurchase price is further reduced based on how long the stockholder has held the shares as follows:

Share Purchase Anniversary	Repurchase Price on Repurchase Date(1)
Less than 1 year	No Repurchase Allowed
1 year	92.5% of the Share Repurchase Price(2)
2 years	95.0% of the Share Repurchase Price(2)
3 years	97.5% of the Share Repurchase Price(2)
4 years	100.0% of the Share Repurchase Price(2)
In the event of a stockholder’s death or disability(3)	Average Issue Price for Shares(4)

(1) As adjusted for any stock dividends, combinations, splits, recapitalizations or any similar transaction with respect to the shares of common stock. Repurchase price includes the full amount paid for each share, including all sales commissions and dealer manager fees.

(2) The “Share Repurchase Price” equals 93% of the Estimated Value Per Share. The “Estimated Value per Share” is the most recent publicly disclosed estimated value per share determined by our board of directors.

(3) The requiredone-year holding period does not apply to repurchases requested within two years after death or disability of a stockholder.

(4) The purchase price per share for shares repurchased upon the death or disability of a stockholder will be equal to the average issue price per share for all of the stockholder’s shares.

The repurchase price per share for shares repurchased pursuant to our share repurchase plan will be further reduced by the aggregate amount of net proceeds per share, if any, distributed to our stockholders prior to the repurchase date (defined below) as a result of the sale of one or more of our assets that constitutes a return of capital as a result of such sales.

Repurchases of shares of our common stock are made quarterly upon written request to us at least 15 days prior to the end of the applicable quarter. Repurchase requests will be honored approximately 30 days following the end of the applicable quarter, or the repurchase date. Stockholders may withdraw their repurchase request at any time up to three business days’ prior to the repurchase date.

We cannot guarantee that the funds set aside for the share repurchase plan will be sufficient to accommodate all repurchase requests made in any quarter. In the event that we do not have sufficient funds available to repurchase all of the shares of our common stock for which repurchase requests have been submitted in any quarter, priority will be given to repurchase requests in the case of the death or disability of a stockholder. If we repurchase less than all of the shares subject to a repurchase request in any quarter, with respect to any shares which have not been repurchased, we will treat the shares that have not been repurchased as a request for repurchase in the following quarter pursuant to the limitations of the share repurchase plan and when sufficient funds are available unless the stockholder withdraws the request for repurchase. Such pending requests will be honored among all requests for repurchases in any given repurchase period as follows: first, pro rata as to repurchases sought upon a stockholder’s death or disability; and, next, pro rata as to other repurchase requests.

We are not obligated to repurchase shares of our common stock under the share repurchase plan. The share repurchase plan limits the number of shares to be repurchased in any calendar year to (1) the lessor of 5% of the weighted average number of shares of common stock outstanding during the prior calendar year or the $2,000,000 limit for any quarter and (2) those that could be funded from the net proceeds from the sale of shares under our distribution reinvestment plan in the prior calendar year, plus such additional funds as may be reserved for that purpose by our board of directors. Such sources of funds could include cash on hand, cash available from

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borrowings and cash from liquidations of securities investments as of the end of the applicable month, to the extent that such funds are not otherwise dedicated to a particular use, such as working capital, cash distributions to stockholders or purchases of real estate assets. There is no fee in connection with a repurchase of shares of our common stock pursuant to our share repurchase plan.

Our board of directors may, in its sole discretion, amend, suspend or terminate the share repurchase plan at any time upon 30 days’ notice to our stockholders if it determines that the funds available to fund the share repurchase plan are needed for other business or operational purposes or that amendment, suspension or termination of the share repurchase plan is in the best interest of our stockholders. Therefore, a stockholder may not have the opportunity to make a repurchase request prior to any potential termination or suspension of our share repurchase plan. The share repurchase plan will terminate in the event that a secondary market develops for our shares of common stock.

During the year ended December 31, 2018, we fulfilled repurchase requests and repurchased shares of our common stock pursuant to our share repurchase plan as follows:

	Total Number of Shares Requested to be Repurchased(1)		Total Number of Shares Repurchased		Average Price Paid per Share(2)(3)		Approximate Dollar Value of Shares Available That May Yet Be Repurchased Under the Program
January 2018		79,896		185,218	$	14.24		(4)
February 2018		76,777		15,861		14.64		(4)
March 2018		153,279		1,092		14.48		(4)
April 2018		121,062		—		—		(4)
May 2018		18,284		144,440		13.85		(4)
June 2018		92,228		—		—		(4)
July 2018		517,987		142,393		14.05		(4)
August 2018		256,487		—		—		(4)
September 2018		62,877		—		—		(4)
October 2018		153,787		142,328		14.05		(4)
November 2018		176,840		—		—		(4)
December 2018		104,797		—		—		(4)
		1,814,301		631,332

(1) We generally repurchase shares approximately 30 days following the end of the applicable quarter in which requests were received. At December 31, 2018, we had $2,000,000, representing 138,961 shares of outstanding and unfulfilled repurchase requests, all of which were fulfilled on January 31, 2019.

(2) We currently repurchase shares at prices determined as follows:

• 92.5% of the Share Repurchase Price for stockholders who have held their shares for at least one year;

• 95.0% of the Share Repurchase Price for stockholders who have held their shares for at least two years;

• 97.5% of the Share Repurchase Price for stockholders who have held their shares for at least three years; and

• 100% of the Share Repurchase Price for stockholders who have held their shares for at least four years.

The share repurchase price is 93% of the most recently determined estimated value per share. Notwithstanding the above, the repurchase price for repurchases sought upon a stockholder’s death, “qualifying disability” or “determination of incompetence” will be the average issue price the respective stockholder paid to acquire the shares from us.

(3) From inception through December 31, 2018, our share repurchases have been funded exclusively from the net proceeds we received from the sale of shares under our distribution reinvestment plan.

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(4) The number of shares that may be repurchased pursuant to the share repurchase plan during any calendar year is limited to (1) the lessor of 5% of the weighted average number of shares outstanding during the prior calendar year or the $2,000,000 limit for any quarter and (2) those that can be funded from the net proceeds we received from the sale of shares under the distribution reinvestment plan during the prior calendar year, plus such additional funds as may be reserved for that purpose by our board of directors.

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data as of December 31, 2018, 2017, 2016, 2015 and 2014 and for the years then ended should be read in conjunction with the accompanying consolidated financial statements and related notes thereto and Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Our results of operations for the periods presented below are not indicative of those expected in future periods. During the period from August 22, 2013 (inception) to May 22, 2014, we were in existence and commenced our initial public offering, but had not yet commenced real estate operations, as we had not yet acquired any real estate investments. As a result, we had no material results of operations for that period. We terminated our initial public offering on March 24, 2016.

	As of December 31,
	2018			2017			2016			2015			2014
Balance sheet data
Total real estate, net	$	1,356,639,742		$	1,411,166,101		$	1,453,385,165		$	1,207,028,126		$	269,987,629
Total assets		1,434,138,648			1,454,368,057			1,497,101,228			1,258,692,194			306,470,497
Notes payable		1,050,155,743			993,405,862			971,761,151			850,766,025			196,930,600
Total liabilities		1,088,150,688			1,027,665,812			1,007,103,450			876,726,253			202,426,021
Redeemable common stock		—			36,397,062			27,949,492			9,401,360			660,089
Total stockholders’ equity		345,987,960			390,305,183			462,048,286			372,564,581			103,384,387
	For the Year Ended December 31,
	2018			2017			2016			2015			2014
Operating data
Total revenues	$	169,963,230		$	163,398,158		$	144,010,514		$	68,449,753		$	7,255,266
Net loss		(49,100,346	)		(33,623,841	)		(37,682,474	)		(50,694,124	)		(11,840,455	)
Net loss attributable to common stockholders		(49,100,346	)		(33,623,841	)		(37,682,474	)		(50,694,124	)		(11,840,455	)
Loss per common share—basic and diluted		(0.96	)		(0.67	)		(0.80	)		(2.33	)		(4.74	)
Other data
Cash flows provided by (used in) operating activities		33,557,275			34,670,391			38,221,740			6,674,297			(1,955,348	)
Cash flows used in investing activities		(17,481,756	)		(26,784,774	)		(269,914,470	)		(910,353,430	)		(276,964,629	)
Cash flows provided by (used in) financing activities		17,995,551			(8,033,178	)		225,786,450			917,012,264			310,104,892
Distributions declared		46,179,769			45,321,063			42,357,688			19,559,628			2,224,079
Distributions declared per common share(1)		0.900			0.900			0.900			0.900			0.663
Weighted-average number of common shares outstanding, basic and diluted		51,312,947			50,358,618			47,092,206			21,753,832			2,495,771
FFO(2)		21,892,934			34,793,715			30,309,069			(8,255,364	)		(6,523,945	)
MFFO(2)		27,369,983			35,243,568			36,566,768			17,530,067			1,013,255

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(1) On April 4, 2014, our board of directors approved a cash distribution that began to accrue on April 7, 2014. Distributions declared per common share for the years ended December 31, 2018, 2017, 2016, 2015 and 2014 assume each share was issued and outstanding each day from April 7, 2014 through December 31, 2018. During the years ended December 31, 2018 and 2017, distributions declared were calculated at a rate of $0.002466 per share of common stock per day, which if paid over a365-day period is equivalent to a 6.0% annualized distribution rate based on a purchase price of $15.00 per share of common stock. During the year ended December 31, 2016, distributions declared were calculated at a rate of $0.002459 per share of common stock per day, which if paid each day over a366-day period, is equivalent to a 6.0% annualized distribution rate based on a purchase price of $15.00 per share of common stock.

(2) GAAP basis accounting for real estate assets utilizes historical cost accounting and assumes real estate values diminish over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets, the Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT, established the measurement tool of FFO. Since its introduction, FFO has become a widely usednon-GAAP financial measure among REITs. Additionally, we use MFFO, as defined by the IPA, as a supplemental measure to evaluate our operating performance. MFFO is based on FFO but includes certain adjustments we believe are necessary due to changes in accounting and reporting under GAAP since the establishment of FFO. Neither FFO or MFFO should be considered as an alternative to net loss or other measurements under GAAP as indicators of our operating performance, nor should they be considered as alternatives to cash flow from operating activities or other measurements under GAAP as indicators of liquidity. For additional information on how we calculate FFO and MFFO and a reconciliation of FFO and MFFO to net loss, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds From Operations and Modified Funds From Operations.”

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the “Selected Financial Data” above and our accompanying consolidated financial statements and the notes thereto included in this Annual Report on Form10-K. Also see “Cautionary Note Regarding Forward Looking Statements” preceding Part I.

Overview

We were formed on August 22, 2013, as a Maryland corporation that elected to be taxed as, and qualifies as, a REIT. As described in more detail below, we own and manage a diverse portfolio of multifamily properties, located in the United States.

On December 30, 2013, we commenced our initial public offering of up to 66,666,667 shares of common stock at an initial price of $15.00 per share and up to 7,017,544 shares of common stock pursuant to our distribution reinvestment plan at an initial price of $14.25 per share. On March 24, 2016, we terminated our initial public offering. As of March 24, 2016, we had sold 48,625,651 shares of common stock for gross offering proceeds of $724,849,631, including 1,011,561 shares of common stock issued pursuant to our distribution reinvestment plan for gross offering proceeds of $14,414,752. Following the termination of our initial public offering, we continue to offer shares of our common stock pursuant to our distribution reinvestment plan. As of December 31, 2018, we had sold 52,921,670 shares of common stock for gross offering proceeds of $788,339,974, including 5,307,643 shares of common stock issued pursuant to our distribution reinvestment plan for gross offering proceeds of $77,905,095.

On February 14, 2017, our board of directors determined an estimated value per share of our common stock of $14.85 as of December 31, 2016. On March 14, 2018, our board of directors determined an estimated value per share of our common stock of $15.18 as December 31, 2017. On March 12, 2019, our board of directors determined an estimated value per share of our common stock of $15.84 as of December 31, 2018. In connection with the determination of an estimated value per share, our board of directors determined a purchase price per share for the distribution reinvestment plan of $14.85, $15.18 and $15.84, effective March 1, 2017, April 1, 2018

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and April 1, 2019, respectively. In the future, our board of directors may, in its sole discretion and from time to time, change the price at which we offer shares pursuant to our distribution reinvestment plan to reflect changes in our estimated value per share and other factors that our board of directors deems relevant.

Subject to certain restrictions and limitations, Steadfast Apartment Advisor, LLC, which we refer to as our “advisor,” manages ourday-to-day operations and our portfolio of properties and real estate-related assets. Our advisor sources and presents investment opportunities to our board of directors. Our advisor also provides investment management, marketing, investor relations and other administrative services on our behalf.

Substantially all of our business is conducted through Steadfast Apartment REIT Operating Partnership, L.P., our operating partnership. We are the sole general partner of our operating partnership and one of our wholly-owned subsidiaries is the only limited partner of our operating partnership. As we accepted subscriptions for shares of common stock, we transferred substantially all of the net proceeds of the initial public offering to our operating partnership as a capital contribution. The limited partnership agreement of our operating partnership provides that our operating partnership will be operated in a manner that will enable us to (1) satisfy the requirements for being classified as a REIT for federal income tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that our operating partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code which classification could result in our operating partnership being taxed as a corporation, rather than as a disregarded entity. In addition to the administrative and operating costs and expenses incurred by our operating partnership in acquiring and operating our investments, our operating partnership will pay all of our administrative costs and expenses, and such expenses will be treated as expenses of our operating partnership.

We elected to be taxed as a REIT under the Internal Revenue Code commencing with our taxable year ended December 31, 2014. As a REIT, we generally will not be subject to federal income tax to the extent that we distribute qualifying dividends to our stockholders. If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax on our taxable income at regular corporate rates and would not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year in which qualification is lost, unless the Internal Revenue Service grants us relief under certain statutory provisions. Failing to qualify as a REIT could materially and adversely affect our net income and results of operations.

Market Outlook

The economy in the United States has improved since the last recession; however, there is no assurance that economic conditions will continue to improve or will not worsen in the future. We believe economic and demographic trends will benefit our existing portfolio and that we have unique future investment opportunities in the multifamily sector. Home ownership rates are at nearall-time lows. Demographic and economic factors favor the flexibility of rental housing and discourage the potential financial burden associated with home ownership. Additionally, Millennials and Baby Boomers, the two largest demographic groups comprising roughly half of the total population in the United States, are increasingly choosing rental housing over home ownership. Demographic studies suggest that Baby Boomers are downsizing their suburban homes and relocating to multifamily apartments. Millennials are renting multifamily apartments due to high levels of student debt and increased credit standards in order to qualify for a home mortgage. According to the Federal Reserve Bank of New York, aggregate student debt has surpassed automotive, home equity lines of credit and credit card debt. Millennials are also getting married and having children later and are choosing to live in apartment communities until theirmid-30s. Today, 30% of Millennials are still living with their parents or are still in school. When they get a job, Millennials will likely rent moderate income apartments based upon an average income of $45,000 to $65,000. Our plan is to provide rental housing for these generational groups as they age. We believe these factors will continue to contribute to the demand for multifamily housing.

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Our Real Estate Portfolio

As of December 31, 2018, we owned the 34 multifamily apartment communities listed below:

												Average Monthly Occupancy(1)						Average Monthly Rent(2)
Property Name		Location	Purchase Date		Number of Units		Contract Purchase Price		Mortgage Debt Outstanding(3)			December 31, 2018			December 31, 2017			December 31, 2018		December 31, 2017
1	Villages at Spring Hill Apartments	Spring Hill, TN		5/22/2014		176	$	14,200,000			(4)		94.9	%		93.8	%	$	996	$	1,076
2	Harrison Place Apartments	Indianapolis, IN		6/30/2014		307		27,864,250			(4)		95.4	%		93.5	%		971		942
3	Club at Summer Valley	Austin, TX		8/28/2014		260		21,500,000			(4)		92.3	%		94.6	%		913		926
4	Terrace Cove Apartment Homes	Austin, TX		8/28/2014		304		23,500,000			(4)		95.7	%		91.4	%		918		880
5	The Residences on McGinnis Ferry	Suwanee, GA		10/16/2014		696		98,500,000			(4)		93.0	%		88.6	%		1,282		1,272
6	The 1800 at Barrett Lakes	Kennesaw, GA		11/20/2014		500		49,000,000		40,581,410			95.2	%		91.4	%		1,035		973
7	The Oasis	Colorado Springs, CO		12/19/2014		252		40,000,000		39,446,852			93.7	%		92.9	%		1,349		1,344
8	Columns on Wetherington	Florence, KY		2/26/2015		192		25,000,000			(4)		94.3	%		91.7	%		1,153		1,061
9	Preston Hills at Mill Creek	Buford, GA		3/10/2015		464		51,000,000			(4)		93.5	%		92.5	%		1,113		1,136
10	Eagle Lake Landing Apartments	Speedway, IN		3/27/2015		277		19,200,000			(4)		94.6	%		93.5	%		865		837
11	Reveal on Cumberland	Fishers, IN		3/30/2015		220		29,500,000		21,610,489			94.5	%		93.2	%		1,104		1,072
12	Randall Highlands Apartments	North Aurora, IL		3/31/2015		146		32,115,000			(4)		93.2	%		90.4	%		1,786		1,747
13	Heritage Place Apartments	Franklin, TN		4/27/2015		105		9,650,000		8,573,416			96.2	%		96.2	%		1,130		1,052
14	Rosemont at East Cobb	Marietta, GA		5/21/2015		180		16,450,000		13,238,815			92.8	%		90.6	%		991		966
15	Ridge Crossings Apartments	Hoover, AL		5/28/2015		720		72,000,000		57,605,492			94.7	%		93.5	%		979		946
16	Bella Terra at City Center	Aurora, CO		6/11/2015		304		37,600,000			(4)		91.8	%		94.4	%		1,150		1,120
17	Hearthstone at City Center	Aurora, CO		6/25/2015		360		53,400,000			(4)		92.2	%		94.2	%		1,224		1,178
18	Arbors at Brookfield	Mauldin, SC		6/30/2015		702		66,800,000			(4)		93.0	%		92.7	%		929		881
19	Carrington Park	Kansas City, MO		8/19/2015		298		39,480,000			(4)		94.0	%		94.6	%		1,013		1,049
20	Delano at North Richland Hills	North Richland Hills, TX		8/26/2015		263		38,500,000		29,790,989			94.3	%		94.7	%		1,439		1,391
21	Meadows at North Richland Hills	North Richland Hills, TX		8/26/2015		252		32,600,000		25,436,887			93.7	%		95.6	%		1,339		1,290
22	Kensington by the Vineyard	Euless, TX		8/26/2015		259		46,200,000		34,087,674			95.0	%		93.1	%		1,485		1,515
23	Monticello by the Vineyard	Euless, TX		9/23/2015		354		52,200,000		41,159,556			95.2	%		96.6	%		1,336		1,331
24	The Shores	Oklahoma City, OK		9/29/2015		300		36,250,000		23,944,543			94.0	%		90.7	%		1,000		972

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												Average Monthly Occupancy(1)						Average Monthly Rent(2)
Property Name		Location	Purchase Date		Number of Units		Contract Purchase Price		Mortgage Debt Outstanding(3)			December 31, 2018			December 31, 2017			December 31, 2018		December 31, 2017
25	Lakeside at Coppell	Coppell, TX		10/7/2015		315	$	60,500,000	$	45,217,115			94.6	%		92.1	%	$	1,687	$	1,652
26	Meadows at River Run	Bolingbrook, IL		10/30/2015		374		58,500,000		43,065,800			91.4	%		92.2	%		1,408		1,340
27	PeakView atT-Bone Ranch	Greeley, CO		12/11/2015		224		40,300,000			(4)		95.5	%		94.6	%		1,295		1,242
28	Park Valley Apartments	Smyrna, GA		12/11/2015		496		51,400,000		44,691,749			92.9	%		92.3	%		1,012		958
29	PeakView by Horseshoe Lake	Loveland, CO		12/18/2015		222		44,200,000		33,692,519			94.1	%		95.5	%		1,388		1,381
30	Stoneridge Farms	Smyrna, TN		12/30/2015		336		47,750,000		—			93.8	%		94.9	%		1,178		1,139
31	Fielder’s Creek	Englewood, CO		3/23/2016		217		32,400,000		—			95.9	%		94.5	%		1,193		1,171
32	Landings of Brentwood	Brentwood, TN		5/18/2016		724		110,000,000			(5)		95.9	%		96.0	%		1,191		1,175
33	1250 West Apartments	Marietta, GA		8/12/2016		468		55,772,500			(4)		90.4	%		91.2	%		1,008		958
34	Sixteen50 @ Lake Ray Hubbard	Rockwall, TX		9/29/2016		334		66,050,000			(4)		94.6	%		94.3	%		1,492		1,527
						11,601	$	1,499,381,750	$	502,143,306			93.9	%		93.1	%	$	1,163	$	1,137

(1) As of December 31, 2018, our portfolio was approximately 95.5% leased, calculated using the number of occupied and contractually leased units divided by total units.

(2) Average monthly rent is based upon the effective rental income after considering the effect of vacancies, concessions and write-offs.

(3) Mortgage debt outstanding is net of deferred financing costs associated with the loans for each individual property listed above but excludes the principal balance of $551,669,000 and associated deferred financing costs of $3,656,563 related to the refinancings pursuant to the MCFA at the company level.

(4) Properties secured under the terms of the MCFA.

(5) At December 31, 2018, Landings of Brentwood was pledged as collateral pursuant to our line of credit. On January 9, 2019, we terminated the line of credit.

Review of our Policies

Our board of directors, including our independent directors, has reviewed our policies described in this Annual Report on Form10-K, including policies regarding our investments, leverage and conflicts of interest, and determined that the policies are in the best interests of our stockholders.

Liquidity and Capital Resources

We use secured borrowings, and intend to use in the future secured and unsecured borrowings. At December 31, 2018, our debt was approximately 58% of the value of our properties, as determined by the most recent valuations performed by an independent third-party appraiser as of December 31, 2018. Going forward, we expect that our borrowings will be approximately 55% to 60% of the value of our properties (after debt amortization) and other real estate-related assets. Under our charter, we are prohibited from borrowing in excess of 300% of the value of our net assets, which generally approximates to 75% of the aggregate cost of our assets, though we may exceed this limit only under certain circumstances.

In addition to making investments in accordance with our investment objectives, we use our capital resources to make certain payments to our advisor and its affiliates. During our organization and offering stage, we made payments to the dealer manager for sales commissions and the dealer manager fees and payments to our advisor for reimbursement of certain organization and offering expenses. Currently, during our operating stage, we make payments to our advisor in connection with the acquisition of investments, the management of our assets and costs incurred by our advisor in providing services to us.

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Our principal demand for funds will be to fund value-enhancement and other capital improvement projects, to pay operating expenses and interest on our outstanding indebtedness and to make distributions to our stockholders. Over time, we intend to generally fund our cash needs, other than asset acquisitions, from operations. Otherwise, we expect that our principal sources of working capital will include:

• current unrestricted cash balance, which was $58,880,007 as of December 31, 2018;

• various forms of secured and unsecured financing;

• borrowings under master repurchase agreements;

• equity capital from joint venture partners; and

• proceeds from our distribution reinvestment plan.

Over the short term, we believe that our sources of capital, specifically our cash balances, cash flow from operations, our ability to raise equity capital from joint venture partners and our ability to obtain various forms of secured and unsecured financing will be adequate to meet our liquidity requirements and capital commitments.

Over the longer term, in addition to the same sources of capital we will rely on to meet our short-term liquidity requirements, we may also conduct additional public or private offerings of our securities. We expect these resources will be adequate to fund our operating activities, debt service and distributions, and will be sufficient to fund our ongoing operating activities as well as providing capital for investment in future development and other joint ventures along with potential forward purchase commitments.

On August 26, 2015, we entered into a revolving credit facility, or the credit facility, with PNC Bank, National Association or PNC Bank, in an amount not to exceed $200,000,000, which provided for advances to purchase properties or refinance existing properties from time to time (subject to certain debt service and loan to value requirements). The credit facility had a maturity date of September 1, 2020, subject to extension. The maximum amount available to be drawn under the credit facility could have been increased to $350,000,000 at any time during the period from January 1, 2016 to 12 months prior to the maturity date. Advances made under the credit facility were secured by the property for which such advances were used. As of December 31, 2018 and 2017, no advances were outstanding on our credit facility. Interest on the outstanding principal balances of advances accrued at theone-month London Interbank Offered Rate, or LIBOR, plus (1) the servicing spread of 0.05% and (2) the net spread, based on the debt service coverage ratio, of between 1.80% and 2.10%, as further described in the applicable notes. Monthly interest payments were due and payable on the first day of each month until the maturity dates. The entire outstanding principal balance and any accrued and unpaid interest on all advances were due and payable in full on the maturity date. We are in the process of terminating the credit facility. For additional information on the credit facility, see Note 5 (Debt) to the consolidated financial statements contained in this annual report.

On May 18, 2016, we entered into a secured revolving line of credit, or the line of credit, with PNC Bank in an amount not to exceed $65,000,000. The line of credit provided for advances solely for the purpose of financing the costs in connection with acquisitions and development of real estate projects and for general corporate purposes (subject to certain debt service and loan to value requirements). The line of credit had a maturity date of May 17, 2019, subject to extension, as further described in the loan agreement entered into by certain of our wholly-owned subsidiaries with PNC Bank in connection with the acquisition of the Landings of Brentwood property. As of December 31, 2018 and 2017, $0 and $45,000,000 was outstanding on our line of credit, respectively. We had the option to select the interest rate in respect of the outstanding unpaid principal amount of the line of credit loans from the following options (1) the sum of the Base Rate (as defined in the loan agreement) plus 0.60% or (2) a rate per annum fixed for the applicable LIBOR Interest Period (as defined in the loan agreement) equal to the sum of LIBOR plus 1.60%. Monthly interest payments were due and payable in arrears on the first day of each month until the line of credit maturity date. The entire outstanding principal balance and any accrued and unpaid interest on the line of credit loans were due and payable in full on the line of

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credit maturity date. For additional information on our line of credit, see Note 5 (Debt) to the consolidated financial statements contained in this annual report. We continue to evaluate possible other sources of capital, including, without limitation, entering into additional credit facilities. There can be no assurance that we will be able to obtain any such financing on favorable terms, if at all. We terminated our line of credit in January 2019.

On November 29, 2017, three of our wholly-owned subsidiaries refinanced their existing loans under a revolving credit facility for an aggregate principal amount of $93,825,000 and entered into new loan agreements, each a loan agreement, with PNC Bank for an aggregate principal amount of $100,752,000, or the November Refinancing Transactions. Additionally, on December 29, 2017, another three of our wholly-owned subsidiaries refinanced their existing loans under the revolving credit facility for an aggregate principal amount of $92,475,000 and entered into new loan agreements with PNC Bank for an aggregate principal amount of $97,080,000, or the December Refinancing Transactions, and together with the November Refinancing Transactions, the “2017 Refinancing Transactions.” In connection with the 2017 Refinancing Transactions, we are in the process of terminating the credit facility.

In the 2017 Refinancing Transactions, each loan agreement was made pursuant to the Freddie Mac Capital Markets Execution Program, or CME, as evidenced by a multifamily note. Pursuant to the CME, the lender originates the mortgage loan and then transfers the loan to the Federal Home Loan Mortgage Corporation. Each loan agreement refinanced provides for a term loan with a maturity of December 1, 2024 or January 1, 2025, respectively, unless the maturity date is accelerated in accordance with its terms. Each loan refinanced accrues interest atone-month LIBOR plus 1.94% or 1.88%, respectively. The entire outstanding principal balance and any accrued and unpaid interest on each of the loans are due on the maturity date. Interest and principal payments on the loans are payable monthly in arrears on specified dates as set forth in each loan agreement. Monthly payments are due and payable on the first day of each month commencing on January 1, or February 1, 2018, as applicable.

2018 Refinancing Transactions

On July 31, 2018, or the closing date, 16 of our indirect wholly-owned subsidiaries terminated the existing mortgage loans with their lenders for an aggregate principal amount of $479,318,649 and entered into the MCFA with Newmark Knight Frank (formerly Berkeley Point Capital LLC), or the facility lender, for an aggregate principal amount of $551,669,000. The MCFA provides for three tranches: (i) a fixed rate loan in the aggregate principal amount of $331,001,400 that accrues interest at 4.43% per annum; (ii) a fixed rate loan in the aggregate principal amount of $137,917,250 that accrues interest at 4.57%; and (iii) a variable rate loan in the aggregate principal amount of $82,750,350 that accrues interest at theone-month LIBOR plus 1.70%. The loans have a maturity date of August 1, 2028, unless the maturity date is accelerated in accordance with the terms of the loan documents. Interest only payments are payable monthly through August 1, 2025, with interest and principal payments due monthly thereafter. We paid $1,930,842 in the aggregate in loan origination fees to the facility lender in connection with the refinancings, and paid our advisor a loan coordination fee of $2,758,345.

Additionally, on the closing date, five of our indirect wholly-owned subsidiaries terminated the existing mortgage loans with their lenders for an aggregate principal amount of $131,318,742 and entered into new loan agreements with PNC Bank for an aggregate principal amount of $160,850,000. Each loan agreement provides for a term loan, or a CME Loan, and, collectively, the CME Loans, with a maturity date of August 1, 2028, unless the maturity date is accelerated with the loan terms. Each CME Loan accrues interest at a fixed rate of 4.43% per annum. The entire outstanding principal balance and any accrued and unpaid interest on each of the CME Loans are due on the maturity date. Interest only payments on the CME Loans are payable monthly in arrears on specified dates as set forth in each loan agreement and interest and principal payments are due beginning September 1, 2023. Monthly payments are due and payable on the first day of each month, commencing September 1, 2018. We paid $643,400 in the aggregate in loan origination fees to PNC Bank in connection with the refinancings, and paid our advisor a loan coordination fee of $804,250.

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Cash Flows Provided by Operating Activities

During the year ended December 31, 2018, net cash provided by operating activities was $33,557,275 compared to $34,670,391 for the year ended December 31, 2017. The decrease in net cash provided by operating activities is primarily due to the increase in net loss offset by increases in accounts payable and accrued liabilities, loss on debt extinguishment and depreciation and amortization. We expect to continue to generate cash flows from operations as we stabilize the operations of our property portfolio and complete our value-enhancement strategy.

Cash Flows Used in Investing Activities

During the year ended December 31, 2018, net cash used in investing activities was $17,481,756 compared to $26,784,774 during the year ended December 31, 2017. The decrease in net cash used in investing activities was primarily the result of a decrease in additions to real estate investments during the year ended December 31, 2018, compared to the year ended December 31, 2017. Net cash used in investing activities during the year ended December 31, 2018 consisted of the following:

• $18,049,643 of cash used for improvements to real estate investments;

• $100,000 of cash used for deposits for pending real estate investments;

• $43,200 of cash used to purchase interest rate cap agreements;

• $270,000 of cash provided by the settlement of interest rate cap agreements; and

• $441,087 of cash provided by insurance claim recoveries.

Cash Flows Provided by Financing Activities

During the year ended December 31, 2018, net cash provided by financing activities was $17,995,551 compared to net cash used in financing activities of $8,033,178 during the year ended December 31, 2017. The increase in net cash provided by financing activities was due to the increase in borrowings on credit facilities from $10,000,000 during the year ended December 31, 2017 to $562,669,000 during the year ended December 31, 2018, the decrease in payments on credit facilities from $186,300,000 during the year ended December 31, 2017 to $56,000,000 during the year ended December 31, 2018, offset by an increase in principal payments on mortgage notes payable and a decrease in proceeds from the issuance of mortgage notes payable from $289,590 and $197,832,000, respectively, during the year ended December 31, 2017 to $611,459,963 and $160,850,000, respectively, during the year ended December 31, 2018. Net cash provided by financing activities during the year ended December 31, 2018 consisted of the following:

• $455,138,744 of proceeds from issuance of mortgage notes payable, net of deferred financing costs in the amount of $4,528,781 and principal payments of $611,459,963;

• $229,973 of cash paid for the commissions on sales of common stock;

• $506,669,000 of proceeds from borrowings from our master credit facility, net of $56,000,000 of principal payments on the line of credit;

• $1,019,491 of payments for debt extinguishment costs;

• $23,399,025 of net cash distributions to our stockholders, after giving effect to distributions reinvested by stockholders of $22,713,975; and

• $8,886,216 of cash paid for the repurchase of common stock.

Contractual Commitments and Contingencies

We use secured debt, and intend to use in the future secured and unsecured debt. We believe that the careful use of borrowings will help us achieve our diversification goals and potentially enhance the returns on our

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investments. As of December 31, 2018, our debt was approximately 58% of the value of our properties, as determined by the most recent valuations performed by an independent third-party appraiser as of December 31, 2018. We expect that our borrowings will be approximately 55% to 60% of the value of our properties (after debt amortization) and other real estate-related assets. Under our charter, we are prohibited from borrowing in excess of 300% of our net assets, which generally approximates to 75% of the aggregate cost of our assets unless such excess is approved by a majority of the independent directors and disclosed to stockholders, along with a justification for such excess, in our next quarterly report. In such event, we will monitor our debt levels and take action to reduce any such excess as practicable. Our aggregate borrowings are reviewed by our board of directors at least quarterly. As of December 31, 2018, our aggregate borrowings were not in excess of 300% of the value of our net assets.

In addition to using our capital resources for investing purposes and meeting our debt obligations, we expect to use our capital resources to make certain payments to our advisor in connection with the management of our asset portfolio and costs incurred by our advisor in providing services to us.

As of December 31, 2018, we had indebtedness totaling an aggregate principal amount of $1,050,155,743, including the net deferred financing costs of $7,072,590. The following is a summary of our contractual obligations as of December 31, 2018:

			Payments due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Interest payments on outstanding debt obligations(1)	$	231,989,111	$	47,746,195	$	70,700,439	$	44,916,405	$	68,626,072
Principal payments on outstanding debt obligations(2)		1,057,228,333		966,946		6,286,191		11,222,903		1,038,752,293
Total	$	1,289,217,444	$	48,713,141	$	76,986,630	$	56,139,308	$	1,107,378,365

(1) Projected interest payments on outstanding debt obligations are based on the outstanding principal amounts and interest rates in effect at December 31, 2018. We incurred interest expense of $44,374,484 during the year ended December 31, 2018, including amortization of deferred financing costs totaling $1,056,545, net unrealized gain from the change in fair value of interest rate cap agreements of $87,160, amortization of loan discount of $207,074 and credit facility commitment fees of $57,007, respectively.

(2) Projected principal payments on outstanding debt obligations are based on the terms of the notes payable agreements. Amounts exclude net deferred financing costs associated with certain notes payable.

Our debt obligations contain customary financial andnon-financial debt covenants. As of December 31, 2018 and 2017, we were in compliance with all debt covenants.

Results of Operations

Overview

The discussion that follows is based on our consolidated results of operations for the years ended December 31, 2018, 2017 and 2016. The ability to compare one period to another is affected by the implementation of our value-enhancement strategy. As of December 31, 2018 and 2017, we owned 34 multifamily properties. The increase in rents and occupancy are the primary cause of the increase in operating income and expenses, as further discussed below.

Our results of operations for the years ended December 31, 2018, 2017 and 2016 are not indicative of those expected in future periods. For the year ended December 31, 2018, we continued to perform value-enhancement projects, which may have an impact on our future results of operations. In general, we expect that our revenues and expenses related to our portfolio will increase in future periods as a result of organic rent increases and anticipated value-enhancement projects.

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To provide additional insight into our operating results, we are also providing a detailed analysis of same-store versusnon-same-store net operating income, or NOI. For more information on NOI and a reconciliation of NOI (anon-GAAP financial measure) to net loss, see “—Net Operating Income.”

Consolidated Results of Operations for the Year Ended December 31, 2018 Compared to the Year Ended December 31, 2017

The following table summarizes the consolidated results of operations for the years ended December 31, 2018 and 2017:

	For the Year Ended December 31,
	2018			2017			Change $			Change%
Total revenues	$	169,963,230		$	163,398,158		$	6,565,072			4	%
Operating, maintenance and management		(42,446,994	)		(41,113,376	)		(1,333,618	)		3	%
Real estate taxes and insurance		(23,501,730	)		(22,745,539	)		(756,191	)		3	%
Fees to affiliates		(25,976,226	)		(24,342,996	)		(1,633,230	)		7	%
Depreciation and amortization		(70,993,280	)		(68,417,556	)		(2,575,724	)		4	%
Interest expense		(44,374,484	)		(34,944,074	)		(9,430,410	)		27	%
Loss on debt extinguishment		(4,975,497	)		—			(4,975,497	)		100	%
General and administrative expenses		(6,795,365	)		(5,456,273	)		(1,339,092	)		25	%
Acquisition costs		—			(2,185	)		2,185			(100	)%
Net loss	$	(49,100,346	)	$	(33,623,841	)	$	(15,476,505	)		46	%
NOI(1)	$	96,505,018		$	93,223,245		$	3,281,773			4	%
FFO(2)	$	21,892,934		$	34,793,715		$	(12,900,781	)		(37	)%
MFFO(2)	$	27,369,983		$	35,243,568		$	(7,873,585	)		(22	)%

(1) NOI is anon-GAAP financial measure used by investors and our management to evaluate and compare the performance of our properties and to determine trends in earnings. However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, interest income and other expense, acquisition costs, certain fees to affiliates, depreciation and amortization expense and gains or losses from the sale of our properties and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs, all of which are significant economic costs. For additional information on how we calculate NOI and a reconciliation of NOI to net loss, see “—Net Operating Income.”

(2) GAAP basis accounting for real estate assets utilizes historical cost accounting and assumes real estate values diminish over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets the Board of Governors of NAREIT established the measurement tool of FFO. Since its introduction, FFO has become a widely usednon-GAAP financial measure among REITs. Additionally, we use MFFO, as defined by the IPA, as a supplemental measure to evaluate our operating performance. MFFO is based on FFO but includes certain adjustments we believe are necessary due to changes in accounting and reporting under GAAP since the establishment of FFO. Neither FFO nor MFFO should be considered as alternatives to net loss or other measurements under GAAP as indicators of our operating performance, nor should they be considered as alternatives to cash flow from operating activities or other measurements under GAAP as indicators of liquidity. For additional information on how we calculate FFO and MFFO and a reconciliation of FFO and MFFO to net loss, see “—Funds From Operations and Modified Funds From Operations.”

Net loss

For the year ended December 31, 2018, we had a net loss of $49,100,346 compared to $33,623,841 for the year ended December 31, 2017. The increase in net loss of $15,476,505 over the comparable prior year period

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was due to increases in interest expense of $9,430,410, loss on debt extinguishment of $4,975,497, fees to affiliates of $1,633,230, depreciation and amortization expense of $2,575,724, operating, maintenance and management expenses of $1,333,618, real estate taxes and insurance of $756,191 and general and administrative expenses of $1,339,092, partially offset by an increase in total revenues of $6,565,072 and a decrease in acquisition costs of $2,185.

Total revenues

Total revenues were $169,963,230 for the year ended December 31, 2018, compared to $163,398,158 for the year ended December 31, 2017. The increase of $6,565,072 was primarily due to increases in average monthly occupancy and average monthly rents as a result of ordinary monthly rent increases and rent increases driven by our value-enhancement projects. Average monthly occupancy increased from 93.1% as of December 31, 2017, to 93.9% as of December 31, 2018, and average monthly rents per unit increased from $1,137 as of December 31, 2017, to $1,163 as of December 31, 2018. We expect rental income and tenant reimbursements to increase in future periods as a result of ordinary monthly rent increases, improved occupancy and the implementation of our value-enhancement strategy.

Operating, maintenance and management expenses

Operating, maintenance and management expenses were $42,446,994 for the year ended December 31, 2018, compared to $41,113,376 for the year ended December 31, 2017. The increase of $1,333,618 was primarily due to increases in utilities, payroll, repairs and maintenance and turnover costs during the year ended December 31, 2018, compared to the year ended December 31, 2017. We expect that these amounts will decrease as a percentage of total revenues as we implement operational efficiencies at our multifamily properties.

Real estate taxes and insurance

Real estate taxes and insurance expenses were $23,501,730 for the year ended December 31, 2018, compared to $22,745,539 for the year ended December 31, 2017. The increase of $756,191 was primarily due to increases in tax rates, assessed values and special assessments at some of our multifamily properties during the year ended December 31, 2018, compared to the year ended December 31, 2017. We expect these amounts may increase in future periods as a result of municipal property tax rate increases as well as increases in the assessed value of our property portfolio.

Fees to affiliates

Fees to affiliates were $25,976,226 for the year ended December 31, 2018, compared to $24,342,996 for the year ended December 31, 2017. The increase of $1,633,230 was primarily due to the increase in loan coordination fees related to the refinancing of 21 multifamily properties during the year ended December 31, 2018, compared to refinancing of six properties during the year ended December 31, 2017. We expect fees to affiliates related to the ongoing management of our real estate portfolio to increase in future periods as a result of increased property management fees from anticipated increases in future rental income.

Depreciation and amortization

Depreciation and amortization expenses were $70,993,280 for the year ended December 31, 2018, compared to $68,417,556 for the year ended December 31, 2017. The increase of $2,575,724 was primarily due to the net increase in depreciable and amortizable assets of $16,419,173 as a result of capital improvements. We expect these amounts to increase slightly in future periods as a result of anticipated future enhancements to our real estate portfolio.

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Interest expense

Interest expense for the year ended December 31, 2018, was $44,374,484 compared to $34,944,074 for the year ended December 31, 2017. The increase of $9,430,410 was primarily due to the increase in the notes payable, net balance of $56,749,881 since December 31, 2017. Included in interest expense is the amortization of deferred financing costs of $1,056,545 and $1,012,380, net, unrealized (gain) loss on derivative instruments of $(87,160) and $447,668, amortization of loan discount of $207,074 and $354,984, credit facility commitment fees of $57,007 and $45,680, closing costs associated with the refinancing of debt of $587,520 and $664,880, and seasoning fees of $0 and $85,426 for the years ended December 31, 2018 and 2017, respectively. Our interest expense in future periods will vary based on our level of future borrowings, which will depend on the availability and cost of debt financing, the opportunity to acquire real estate and real estate-related investments meeting our investment objectives and changes in theone-month LIBOR which impacts our variable rate debt.

Loss on debt extinguishment

Loss on debt extinguishment for the year ended December 31, 2018, was $4,975,497, compared to $0 for the year ended December 31, 2017. These expenses consisted of prepayment penalties and the expense of the deferred financing costs, net related to the repayment and extinguishment of debt in conjunction with the refinancing of 21 multifamily properties during the year ended December 31, 2018. The loss on debt extinguishment will vary in future periods if we repay the remaining outstanding principal prior to the scheduled maturity dates of the notes payable.

General and administrative expenses

General and administrative expenses for the year ended December 31, 2018, were $6,795,365 compared to $5,456,273 for the year ended December 31, 2017. These general and administrative costs consisted primarily of legal fees, insurance premiums, audit fees, other professional fees and independent director compensation. The increase of $1,339,092 was primarily due to increases in director meeting fees as a result of an increase in the number of meetings compared to the prior year and legal costs incurred during the year ended December 31, 2018. We expect general and administrative expenses to decrease as a percentage of total revenues.

Acquisition costs

There were no acquisition costs for the year ended December 31, 2018. Acquisition costs were $2,185 for the year ended December 31, 2017. We do not expect to incur significant acquisition costs in future periods as we have invested all of the proceeds from our initial public offering. Upon adoption of ASU2017-01, we record the acquisition of income-producing real estate or real estate that are used for the production of income as an asset acquisition in the accompanying consolidated balance sheets.

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Consolidated Results of Operations for the Year Ended December 31, 2017 Compared to the Year Ended December 31, 2016

The following table summarizes the consolidated results of operations for the years ended December 31, 2017 and 2016:

	For the Year Ended December 31,
	2017			2016			Change $			Change %
Total revenues	$	163,398,158		$	144,010,514		$	19,387,644			13	%
Operating, maintenance and management		(41,113,376	)		(35,644,845	)		(5,468,531	)		15	%
Real estate taxes and insurance		(22,745,539	)		(20,836,003	)		(1,909,536	)		9	%
Fees to affiliates		(24,342,996	)		(24,629,873	)		286,877			(1	)%
Depreciation and amortization		(68,417,556	)		(67,991,543	)		(426,013	)		1	%
Interest expense		(34,944,074	)		(26,060,155	)		(8,883,919	)		34	%
General and administrative expenses		(5,456,273	)		(4,848,801	)		(607,472	)		13	%
Acquisition costs		(2,185	)		(1,681,768	)		1,679,583			(100	)%
Net loss	$	(33,623,841	)	$	(37,682,474	)	$	4,058,633			(11	)%
NOI(1)	$	93,223,245		$	81,592,629		$	11,630,616			14	%
FFO(2)	$	34,793,715		$	30,309,069		$	4,484,646			15	%
MFFO(2)	$	35,243,568		$	36,566,768		$	(1,323,200	)		(4	)%

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

(2) See “—Funds From Operations and Modified Funds From Operations” below for a reconciliation of FFO and MFFO to net loss.

Net loss

For the year ended December 31, 2017, we had a net loss of $33,623,841 compared to $37,682,474 for the year ended December 31, 2016. The decrease in net loss of $4,058,633 over the comparable prior year period was primarily due to the increase in total revenues of $19,387,644, the decrease in acquisition costs of $1,679,583 and the decrease in fees to affiliates of $286,877, partially offset by the increase in operating, maintenance and management expenses of $5,468,531, the increase in real estate taxes and insurance of $1,909,536, the increase in depreciation and amortization expense of $426,013, the increase in interest expense of $8,883,919 and the increase in general and administrative expenses of $607,472. The increase in these expenses was primarily due to the acquisition of four multifamily properties during the year ended December 31, 2016, which experienced a full year of operations during the year ended December 31, 2017.

Total revenues

Total revenues were $163,398,158 for the year ended December 31, 2017, compared to $144,010,514 for the year ended December 31, 2016. The increase of $19,387,644 was primarily due to the acquisition of four multifamily properties during the year ended December 31, 2016, which experienced a full period of operations for the year ended December 31, 2017. Additionally, average monthly occupancy increased from 92.2% as of December 31, 2016, to 93.1% as of December 31, 2017, and average monthly rents per unit increased from $1,102 as of December 31, 2016, to $1,137 as of December 31, 2017.

Operating, maintenance and management expenses

Operating, maintenance and management expenses were $41,113,376 for the year ended December 31, 2017, compared to $35,644,845 for the year ended December 31, 2016. The increase of $5,468,531 was primarily

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due to the acquisition of four multifamily properties during the year ended December 31, 2016, which experienced a full period of operations for the year ended December 31, 2017.

Real estate taxes and insurance

Real estate taxes and insurance expenses were $22,745,539 for the year ended December 31, 2017, compared to $20,836,003 for the year ended December 31, 2016. The increase of $1,909,536 was primarily due to the acquisition of four multifamily properties during the year ended December 31, 2016, which experienced a full period of operations for the year ended December 31, 2017.

Fees to affiliates

Fees to affiliates were $24,342,996 for the year ended December 31, 2017, compared to $24,629,873 for the year ended December 31, 2016. The decrease of $286,877 was primarily due to the decrease in acquisition fees and loan coordination fees as a result of the acquisition of no multifamily properties during the year ended December 31, 2017, compared to the acquisition of four multifamily properties during the year ended December 31, 2016, partially offset by an increase in investment management and property management fees as a result of the growth of our portfolio.

Depreciation and amortization

Depreciation and amortization expenses were $68,417,556 for the year ended December 31, 2017, compared to $67,991,543 for the year ended December 31, 2016. The increase of $426,013 was primarily due to the net increase in depreciable and amortizable assets of $23,407,841 since December 31, 2016, as a result of capital improvements.

Interest expense

Interest expense for the year ended December 31, 2017, was $34,944,074 compared to $26,060,155 for the year ended December 31, 2016. The increase of $8,883,919 was primarily due to the increase in the notes payable, net balance of $21,644,711 since December 31, 2016. Included in interest expense is the amortization of deferred financing costs of $1,012,380 and $937,075, net, unrealized loss on derivative instruments of $447,668 and $270,222, amortization of loan discount of $354,984 and $90,718, credit facility commitment fees of $45,680 and $65,302 and closing costs associated with the refinancing of debt of $664,880 and $0 for the years ended December 31, 2017 and 2016, respectively.

General and administrative expenses

General and administrative expenses for the year ended December 31, 2017, were $5,456,273 compared to $4,848,801 for the year ended December 31, 2016. These general and administrative costs consisted primarily of legal fees, insurance premiums, audit fees, other professional fees and independent director compensation. The increase of $607,472 was primarily due to the continuing operation of the properties owned as of December 31, 2016.

Acquisition costs

Acquisition costs for the year ended December 31, 2017, were $2,185 compared to $1,681,768 for the year ended December 31, 2016. The decrease of $1,679,583 was primarily due to the acquisition of no multifamily properties during the year ended December 31, 2017, compared to the acquisition of four multifamily properties with an aggregate contract purchase price of $264,222,500 during the year ended December 31, 2016.

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Property Operations for the Year Ended December 31, 2018 Compared to the Year Ended December 31, 2017

For purposes of evaluating comparative operating performance for the year, we categorize our properties as “same-store” or“non-same-store.” A “same-store” property is a property that was owned at January 1, 2017. A“non-same-store” property is a property that was acquired, placed into service or disposed of after January 1, 2017. As of December 31, 2018, all of our 34 properties were categorized as same-store properties.

The following table presents the same-store andnon-same-store results from operations for the years ended December 31, 2018 and 2017:

	For the Year Ended December 31,
	2018		2017		Change $		Change %
Same-store properties:
Revenues	$	169,124,188	$	163,036,959	$	6,087,229		3.7	%
Operating expenses		72,619,170		69,813,714		2,805,456		4.0	%
Net operating income		96,505,018		93,223,245		3,281,773		3.5	%
Non-same-store properties:
Net operating income		—		—		—
Total net operating income(1)	$	96,505,018	$	93,223,245	$	3,281,773

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

Net Operating Income

Same-store net operating income for the year ended December 31, 2018, was $96,505,018 compared to $93,223,245 for the year ended December 31, 2017. The 3.5% increase in same-store net operating income was a result of a 3.7% increase in same-store rental revenues offset by a 4.0% increase in same-store operating expenses.

Revenues

Same-store revenues for the year ended December 31, 2018, were $169,124,188 compared to $163,036,959 for the year ended December 31, 2017. The 3.7% increase in same-store revenues was primarily due to average rent increases at the same-store properties from $1,137 as of December 31, 2017 to $1,163 as of December 31, 2018, as a result of ordinary monthly rent increases and the completion of value-enhancement projects. In addition, same-store occupancy increased from 93.1% for all 34 properties as of December 31, 2017 to 93.9% as of December 31, 2018.

Operating Expenses

Same-store operating expenses for the year ended December 31, 2018, were $72,619,170 compared to $69,813,714 for the year ended December 31, 2017. The increase in same-store operating expenses was primarily attributable to a net increase in property taxes, utility and payroll costs across the same-store properties.

Net Operating Income

NOI is anon-GAAP financial measure of performance. NOI is used by investors and our management to evaluate and compare the performance of our properties, to determine trends in earnings and to compute the fair value of our properties as it is not affected by (1) the cost of funds, (2) acquisition costs,(3) non-operating fees to affiliates, (4) the impact of depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP or (5) general

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and administrative expenses and other gains and losses that are specific to us. The cost of funds is eliminated from net income (loss) because it is specific to our particular financing capabilities and constraints. The cost of funds is also eliminated because it is dependent on historical interest rates and other costs of capital as well as past decisions made by us regarding the appropriate mix of capital which may have changed or may change in the future. Acquisition costs andnon-operating fees to affiliates are eliminated because they do not reflect continuing operating costs of the property owner.

Depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets are eliminated because they may not accurately represent the actual change in value in our multifamily properties that result from use of the properties or changes in market conditions. While certain aspects of real property do decline in value over time in a manner that is reasonably captured by depreciation and amortization, the value of the properties as a whole have historically increased or decreased as a result of changes in overall economic conditions instead of from actual use of the property or the passage of time. Gains and losses from the sale of real property vary from property to property and are affected by market conditions at the time of sale which will usually change from period to period. These gains and losses can create distortions when comparing one period to another or when comparing our operating results to the operating results of other real estate companies that have not made similarly timed purchases or sales. We believe that eliminating these costs from net income is useful because the resulting measure captures the actual revenue generated and actual expenses incurred in operating our properties as well as trends in occupancy rates, rental rates and operating costs.

However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, interest income and other expense, acquisition costs, certain fees to affiliates, depreciation and amortization expense and gains or losses from the sale of properties, and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, all of which are significant economic costs. NOI may fail to capture significant trends in these components of net income which further limits its usefulness.

NOI is a measure of the operating performance of our properties but does not measure our performance as a whole. NOI is therefore not a substitute for net income (loss) as computed in accordance with GAAP. This measure should be analyzed in conjunction with net income (loss) computed in accordance with GAAP and discussions elsewhere in “—Results of Operations” regarding the components of net income (loss) that are eliminated in the calculation of NOI. Other companies may use different methods for calculating NOI or similarly entitled measures and, accordingly, our NOI may not be comparable to similarly entitled measures reported by other companies that do not define the measure exactly as we do.

The following is a reconciliation of our NOI to net loss for the three months ended December 31, 2018 and 2017 and for the years ended December 31, 2018, 2017 and 2016 computed in accordance with GAAP:

	For the Three Months Ended December 31,						For the Year Ended December 31,
	2018			2017			2018			2017			2016
Net loss	$	(11,464,743	)	$	(10,119,644	)	$	(49,100,346	)	$	(33,623,841	)	$	(37,682,474	)
Fees to affiliates(1)		2,916,698			5,725,567			19,305,780			18,388,198			19,401,952
Depreciation and amortization		18,072,943			17,256,537			70,993,280			68,417,556			67,991,543
Interest expense		12,754,788			9,698,664			44,374,484			34,944,074			26,060,155
Loss on debt extinguishment		—			—			4,975,497			—			—
General and administrative expenses		1,985,224			1,423,654			6,795,365			5,456,273			4,848,801
Acquisition costs		—			—			—			2,185			1,681,768
Other gains(2)		(406,097	)		(13,347	)		(839,042	)		(361,200	)		(709,116	)
Net operating income	$	23,858,813		$	23,971,431		$	96,505,018		$	93,223,245		$	81,592,629

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(1) Fees to affiliates for the three months and year ended December 31, 2018 exclude property management fees of $1,233,125 and $4,886,436 and other fees of $576,764 and $1,784,010, respectively, that are included in NOI. Fees to affiliates for the three months and year ended December 31, 2017 exclude property management fees of $1,195,312 and $4,706,698 and other fees of $309,869 and $1,248,100, respectively, that are included in NOI. Fees to affiliates for the year ended December 31, 2016 exclude property management fees of $4,140,513 and other fees of $1,087,408, that are included in NOI.

(2) Other gains for the years ended December 31, 2018, 2017 and 2016 includenon-recurring insurance claim recoveries and interest income that are not included in NOI.

Funds from Operations and Modified Funds from Operations

Due to certain unique operating characteristics of real estate companies, as discussed below, NAREIT, an industry trade group, has promulgated a measure known as FFO, which we believe to be an appropriate supplemental measure to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO is not equivalent to our net income (loss) as determined under GAAP.

We define FFO, anon-GAAP financial measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004, or the White Paper. The White Paper defines FFO as net income (loss) computed in accordance with GAAP, excluding gains or losses from sales of property andnon-cash impairment charges of real estate related investments, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. In particular, we believe it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations and assessments regarding general market conditions which can change over time. An asset will only be evaluated for impairment if certain impairment indications exist and if the carrying, or book value, exceeds the total estimated undiscounted future cash flows (including net rental and lease revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) from such asset. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and the relatively limited term of our operations, it could be difficult to recover any impairment charges. Our FFO calculation complies with NAREIT’s policy described above.

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or as requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. However, FFO, and MFFO as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its

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applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than thenon-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.

Changes in the accounting and reporting promulgations under GAAP (for acquisition fees and expenses from a capitalization/depreciation model to anexpensed-as-incurred model) that were put into effect in 2009 and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT’s definition of FFO have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses for all industries as items that are expensed under GAAP, that are typically accounted for as operating expenses. Management believes these fees and expenses do not affect our overall long-term operating performance. Publicly registered,non-listed REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation. While otherstart-up entities may also experience significant acquisition activity during their initial years, we believe that public,non-listed REITs, like us, are unique in that they have a limited life with targeted exit strategies within a relatively limited time frame after acquisition activity ceases. Our board of directors will determine to pursue a liquidity event when it believes that the then-current market conditions are favorable. However, our board of directors does not anticipate evaluating a liquidity event (i.e., listing of our common stock on a national exchange, a merger or sale of our company or another similar transaction) until five years after the completion of our offering stage. Thus, as a limited life REIT, we will not continuously purchase assets and will have a limited life.

Due to the above factors and other unique features of publicly registered,non-listed REITs, the IPA, an industry trade group, has standardized a measure known as MFFO, which the IPA has recommended as a supplemental measure for publicly registerednon-listed REITs and which we believe to be another appropriate supplemental measure to reflect the operating performance of a public,non-listed REIT having the characteristics described above. MFFO is not equivalent to our net income or loss as determined under GAAP, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate with a limited life and targeted exit strategy, as currently intended. We believe that, because MFFO excludes costs that we consider more reflective of investing activities and othernon-operating items included in FFO and also excludes acquisition fees and expenses that are not capitalized, as discussed below, and affect our operations only in periods in which properties are acquired, MFFO can provide, on a going forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance after the period in which we are acquiring our properties and once our portfolio is in place. By providing MFFO, we believe we are presenting useful information that assists investors and analysts to better assess the sustainability of our operating performance after our offering has been completed and our properties have been acquired. We also believe that MFFO is a recognized measure of sustainable operating performance by thenon-listed REIT industry. Further, we believe MFFO is useful in comparing the sustainability of our operating performance after our offering and acquisitions are completed with the sustainability of the operating performance of other real estate companies that are not as involved in acquisition activities. Investors are cautioned that MFFO should only be used to assess the sustainability of our operating performance after our offering has been completed and properties have been acquired, as it excludes acquisition costs that have a negative effect on our operating performance during the periods in which properties are acquired.

We define MFFO, anon-GAAP financial measure, consistent with the IPA’s Guideline2010-01, Supplemental Performance Measure for Publicly Registered,Non-Listed REITs: Modified Funds from Operations, or the Practice Guideline, issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income: acquisition fees and expenses; amounts relating to deferred rent receivables and amortization of above and below market leases and liabilities (which are adjusted in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments); accretion of discounts and amortization of premiums on debt investments;mark-to-market adjustments included in net income; nonrecurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or

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securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums on debt investments, nonrecurring unrealized gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operating activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized. While we rely on our advisor for managing interest rate, hedge and foreign exchange risk, we do not retain an outside consultant to review all our hedging agreements. Inasmuch as interest rate hedges are not a fundamental part of our operations, we believe it is appropriate to exclude suchnon-recurring gains and losses in calculating MFFO, as such gains and losses are not reflective ofon-going operations.

Our MFFO calculation complies with the IPA’s Practice Guideline described above, except with respect to certain acquisition fees and expenses as discussed below. In calculating MFFO, we exclude acquisition related expenses, amortization of above and below market leases, fair value adjustments of derivative financial instruments, deferred rent receivables and the adjustments of such items related to noncontrolling interests. Historically under GAAP, acquisition fees and expenses were characterized as operating expenses in determining operating net income. However, following the recent publication of ASU2017-01,Business Combinations (Topic 805): Clarifying the definition of business (“ASU2017-01”), acquisition fees and expenses are capitalized and depreciated under certain conditions. We elected to early adopt ASU2017-01 but did not experience a material impact from adopting this guidance. These expenses are paid in cash by us. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property. The acquisition of properties, and the corresponding acquisition fees and expenses, is the key operational feature of our business plan to generate operational income and cash flow to fund distributions to its stockholders. Further, under GAAP, certain contemplatednon-cash fair value and othernon-cash adjustments are considered operatingnon-cash adjustments to net income in determining cash flow from operating activities. In addition, we view fair value adjustments of derivatives and gains and losses from dispositions of assets asnon-recurring items or items which are unrealized and may not ultimately be realized, and which are not reflective ofon-going operations and are therefore typically adjusted for when assessing operating performance.

Our management uses MFFO and the adjustments used to calculate MFFO in order to evaluate our performance against other public,non-listed REITs which have limited lives with short and defined acquisition periods and targeted exit strategies shortly thereafter. As noted above, MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate in this manner. We believe that our use of MFFO and the adjustments used to calculate MFFO allow us to present our performance in a manner that reflects certain characteristics that are unique to public,non-listed REITs, such as their limited life, limited and defined acquisition period and targeted exit strategy, and hence that the use of such measures is useful to investors. By excluding expensed acquisition costs, that are not capitalized, the use of MFFO provides information consistent with management’s analysis of the operating performance of the properties. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such changes that may reflect anticipated and unrealized gains or losses, we believe MFFO provides useful supplemental information.

Presentation of this information is intended to provide useful information to investors as they compare the operating performance to that of other public,non-listed REITs, although it should be noted that not all public,non-listed REITs calculate FFO and MFFO the same way, so comparisons with other public,non-listed REITs may not be meaningful. Furthermore, FFO and MFFO are not necessarily indicative of cash flow available to

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fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs, including our ability to make distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with GAAP measurements as an indication of our performance. MFFO is useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete and net asset value is disclosed. MFFO is not a useful measure in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining MFFO.

Neither the SEC, NAREIT nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, the SEC, NAREIT or another regulatory body may decide to standardize the allowable adjustments across thenon-listed REIT industry and in response to such standardization we may have to adjust our calculation and characterization of FFO or MFFO accordingly.

Our calculation of FFO and MFFO is presented in the following table for the years ended December 31, 2018, 2017 and 2016:

	For the Year Ended December 31,
	2018			2017			2016
Reconciliation of net loss to MFFO:
Net loss	$	(49,100,346	)	$	(33,623,841	)	$	(37,682,474	)
Depreciation of real estate assets		70,993,280			67,407,444			54,857,243
Amortization of lease-related costs		—			1,010,112			13,134,300
FFO		21,892,934			34,793,715			30,309,069
Acquisition fees and expenses(1)(2)		858,712			2,185			5,987,477
Unrealized (gain) loss on derivative instruments		(87,160	)		447,668			270,222
Realized gain on derivative instruments		(270,000	)		—			—
Loss on debt extinguishment		4,975,497			—			—
MFFO	$	27,369,983		$	35,243,568		$	36,566,768
FFO per share—basic and diluted	$	0.43		$	0.69		$	0.64
MFFO per share—basic and diluted		0.53			0.70			0.78
Loss per common share—basic and diluted		(0.96	)		(0.67	)		(0.80	)
Weighted average number of common shares outstanding, basic and diluted		51,312,947			50,358,618			47,092,206

(1) By excluding expensed acquisition costs that are not capitalized, management believes MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition fees and expenses include payments to our advisor or third parties. Historically under GAAP, acquisition fees and expenses were considered operating expenses and as expenses included in the determination of net income (loss) and income (loss) from continuing operations, both of which are performance measures under GAAP. Following the recent publication of ASU2017-01, acquisition fees and expenses are capitalized and depreciated under certain conditions. We elected to early adopt ASU2017-01 but did not experience a material impact from adopting this new guidance. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to the property. The acquisition of properties, and the corresponding acquisition fees and expenses, is the key operational feature of our business plan to generate operational income and cash flow to fund distributions to its stockholders.

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(2) Acquisition fees and expenses for the years ended December 31, 2018, 2017 and 2016 include acquisition fees of $0, $0 and $2,766,209 and loan coordination fees of $0, $0 and $1,539,500, respectively, that are recorded in fees to affiliates in the accompanying consolidated statements of operations. Acquisition fees and expenses for the years ended December 31, 2018, 2017 and 2016 also include acquisition expenses of $858,712, $2,185 and $1,681,768, respectively, that did not meet the criteria for capitalization under ASU2017-01 and were recorded in acquisition costs in the accompanying consolidated statements of operations prior to the adoption of ASU2017-01 and in general and administrative expenses subsequent to its adoption.

FFO and MFFO may be used to fund all or a portion of certain capitalizable items that are excluded from FFO and MFFO, such as tenant improvements, building improvements and deferred leasing costs.

Inflation

Substantially all of our multifamily property leases are for a term of one year or less. In an inflationary environment, this may allow us to realize increased rents upon renewal of existing leases or the beginning of new leases. Short-term leases generally will minimize our risk from the adverse effects of inflation, although these leases generally permit residents to leave at the end of the lease term and therefore will expose us to the effects of a decline in market rents. In a deflationary rent environment, we may be exposed to declining rents more quickly under these shorter term leases.

With respect to other commercial properties, we expect in the future to include provisions in our leases designed to protect us from the impact of inflation. These provisions include reimbursement billings for operating expense pass-through charges, real estate tax and insurance reimbursements, or in some cases annual reimbursement of operating expenses above a certain allowance.

As of December 31, 2018, we had not entered into any material leases as a lessee.

REIT Compliance

To continue to qualify as a REIT for tax purposes, we are required to distribute at least 90% of our REIT taxable income (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP) to our stockholders. We must also meet certain asset and income tests, as well as other requirements. We monitor the operations and transactions that may potentially impact our REIT status. If we fail to qualify as a REIT in any taxable year following the year we initially elected to be taxed as a REIT, we would be subject to federal income tax on our taxable income at regular corporate rates.

Distributions

Our board of directors has declared daily distributions that are paid on a monthly basis. We expect to continue paying monthly distributions unless our results of operations, our general financial condition, general economic conditions or other factors prohibit us from doing so. We may declare distributions in excess of our funds from operations. As a result, our distribution rate and payment frequency may vary from time to time. However, to qualify as a REIT for tax purposes, we must make distributions equal to at least 90% of our “REIT taxable income” each year.

Distributions declared (1) accrued daily to our stockholders of record as of the close of business on each day, (2) are payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month and (3) were calculated at a rate of $0.002466 per share per day during the years ended December 31, 2018 and 2017, which if paid each day over a365-day period is equivalent to a 6.0% annualized distribution rate based on a purchase price of $15.00 per share of common stock.

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The distributions declared and paid for the four fiscal quarters of 2018, along with the amount of distributions reinvested pursuant to our distribution reinvestment plan, were as follows:

					Distributions Paid(3)						Sources of Distributions Paid				Net Cash Provided by Operating Activities
Period	Distributions Declared(1)		Distributions Declared Per Share(1)(2)		Cash		Reinvested		Total		Cash Flow From Operations		Notes Payable
First Quarter 2018	$	11,312,463	$	0.222	$	5,597,521	$	5,701,030	$	11,298,551	$	7,087,026	$	4,211,525	$	7,087,026
Second Quarter 2018		11,485,650		0.224		5,824,954		5,768,910		11,593,864		11,593,864		—		11,690,359
Third Quarter 2018		11,664,156		0.227		5,941,991		5,705,424		11,647,415		6,958,598		4,688,817		6,958,598
Fourth Quarter 2018		11,717,500		0.227		6,034,559		5,538,611		11,573,170		7,821,292		3,751,878		7,821,292
	$	46,179,769	$	0.900	$	23,399,025	$	22,713,975	$	46,113,000	$	33,460,780	$	12,652,220	$	33,557,275

(1) Distributions during the years ended December 31, 2018 and 2017 were based on daily record dates and calculated at a rate of $0.002466 per share per day.

(2) Assumes each share was issued and outstanding each day during the period presented.

(3) Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid approximately three days following month end.

For the year ended December 31, 2018, we paid aggregate distributions of $46,113,000, including $23,399,025 of distributions paid in cash and 1,507,497 shares of our common stock issued pursuant to our distribution reinvestment plan for $22,713,975. For the year ended December 31, 2018, our net loss was $49,100,346, we had FFO of $21,892,934 and net cash provided by operations of $33,557,275. For the year ended December 31, 2018, we funded $33,460,780, or 73%, of total distributions paid, including shares issued pursuant to our distribution reinvestment plan, from net cash provided by operating activities and $12,652,220, or 27%, from proceeds from the refinancing of our outstanding debt. Since inception, of the $151,688,727 in total distributions paid through December 31, 2018, including shares issued pursuant to our distribution reinvestment plan, 71% of such amounts were funded from cash flow from operations, 15% were funded from our revolving line of credit and the refinancing of our outstanding debt and 14% were funded from net public offering proceeds. For information on how we calculate FFO and the reconciliation of FFO to net loss, see “—Funds from Operations and Modified Funds from Operations.”

Our long-term policy is to pay distributions solely from cash flow from operations. Because we may receive income from interest or rents at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund capital expenditures and other expenses, we expect that from time to time during our operational stage, we will declare distributions in anticipation of cash flow that we expect to receive during a later period, and we expect to pay these distributions in advance of our actual receipt of these funds. In these instances, our board of directors has the authority under our organizational documents, to the extent permitted by Maryland law, to fund distributions from sources such as borrowings, offering proceeds or advances and the deferral of fees and expense reimbursements by our advisor, in its sole discretion. We have not established a limit on the amount of proceeds we may use from sources other than cash flow from operations to fund distributions. If we pay distributions from sources other than cash flow from operations, we will have fewer funds available for investments.

Off-Balance Sheet Arrangements

As of December 31, 2018 and 2017, we had nooff-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Related-Party Transactions and Agreements

We have entered into agreements with our advisor and its affiliates, whereby we pay or have paid certain fees to, or reimburse certain expenses of, our advisor or its affiliates for acquisition and advisory fees and

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expenses, financing coordination fees, organization and offering costs, sales commissions, dealer manager fees, asset and property management fees and expenses, leasing fees and reimbursement of certain operating costs. See Item 13. “Certain Relationships and Related Transactions, and Director Independence” and Note 7 (Related Party Arrangements) to the consolidated financial statements included in this annual report for a discussion of the various related-party transactions, agreements and fees.

Critical Accounting Policies

Below is a discussion of the accounting policies that we believe are critical because they involve significant judgments and assumptions, require estimates about matters that are inherently uncertain and because they are important for understanding and evaluating our reported financial results. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.

Real Estate Assets

Depreciation and Amortization

Real estate costs related to the development, construction and improvement of properties are capitalized. Acquisition costs related to business combinations are expensed as incurred. Acquisition costs related to asset acquisitions are capitalized. On January 1, 2017, we early adopted ASU2017-01, that 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. Repair and maintenance and tenant turnover costs are charged to expense as incurred and significant replacements and betterments are capitalized. Repair and maintenance and tenant turnover costs include all costs that do not extend the useful life of the real estate asset. We consider the period of future benefit of an asset to determine its appropriate useful life and anticipate the estimated useful lives of assets by class to be generally as follows:

Buildings	27.5 years
Building improvements	5-25 years
Tenant improvements	Shorter of lease term or expected useful life
Tenant origination and absorption costs	Remaining term of related lease
Furniture, fixtures, and equipment	5-10 years

Real Estate Purchase Price Allocation

Prior to the adoption of ASU2017-01, we recorded the acquisition of income-producing real estate or real estate that are used for the production of income as a business combination. All assets acquired and liabilities assumed in a business combination are measured at their acquisition-date fair values. Acquisition costs are expensed as incurred. Upon adoption of ASU2017-01, we record the acquisition of income-producing real estate or real estate that are used for the production of income as an asset acquisition. All assets acquired and liabilities assumed in an asset acquisition are measured at their acquisition-date fair values. Acquisition costs are capitalized and allocated between land, buildings and improvements and tenant origination and associated costs on the consolidated balance sheet.

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We assess the acquisition-date fair values of all tangible assets, identifiable intangible assets and assumed liabilities using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis) and that utilize appropriate discount and/or capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. The fair value of tangible assets of an acquired property considers the value of the property as if it was vacant.

Intangible assets include the value ofin-place leases, which represents the estimated value of the net cash flows of thein-place leases to be realized, as compared to the net cash flows that would have occurred had the property been vacant at the time of acquisition and subject tolease-up.

We estimate the value of resident origination and absorption costs by considering the estimated carrying costs during hypothetical expectedlease-up periods, considering current market conditions. In estimating carrying costs, we estimate the amount of lost rentals using market rates during the expectedlease-up periods.

We amortize the value ofin-place leases to expense over the remainingnon-cancelable term of the respective leases. Should a resident terminate its lease, the unamortized portion of thein-place lease value and customer relationship intangibles would be charged to expense in that period.

We record above-market and below-marketin-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 (1) the contractual amounts to be paid pursuant to thein-place leases and (2) our estimate of fair market lease rates for the correspondingin-place leases, measured over a period equal to the remainingnon-cancelable term of the lease. We amortize any capitalized above-market or below-market lease values as a reduction or increase to rental income over the remainingnon-cancelable terms of the respective leases.

Estimates of the fair values of the tangible assets, identifiable intangible assets and assumed liabilities require us to make significant assumptions to estimate market lease rates, property-operating expenses, carrying costs duringlease-up periods, discount rates, market absorption periods, and the number of years the property will be held for investment. The use of inappropriate assumptions could result in an incorrect valuation of acquired tangible assets, identifiable intangible assets and assumed liabilities, which could impact the amount of our net income (loss).

Impairment of Real Estate Assets

We account for our real estate assets in accordance with ASC 360,Property, Plant and Equipment, or ASC 360. ASC 360 requires us to continually monitor events and changes in circumstances that could indicate that the carrying amounts of our real estate and related intangible assets may not be recoverable. When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets and liabilities may not be recoverable, we assess the recoverability of the assets by estimating whether we will recover the carrying value of the asset through its undiscounted future cash flows and its eventual disposition. Based on this analysis, if we do not believe that we will be able to recover the carrying value of the real estate and related intangible assets and liabilities, we record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangible assets and liabilities. If any assumptions, projections or estimates regarding an asset changes in the future, we may have to record an impairment to reduce the net book value of such individual asset.

Rents and Other Receivables

We periodically evaluate the collectability of amounts due from residents and maintain an allowance for doubtful accounts for estimated losses resulting from the inability of residents to make required payments under lease agreements. We exercise judgment in establishing these allowances and consider payment history and

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current credit status of residents in developing these estimates. Due to the short-term nature of the operating leases, we do not maintain a deferred rent receivable related to the straight-lining of rents. Other receivables include amounts due from the transfer agent for stock subscription net proceeds.

Revenue Recognition

On January 1, 2018, the Company adopted ASC 606,Revenue from Contracts with Customers, (“ASC 606”), which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard requires the Company to recognize, for certain of its revenue sources, the transfer of promised goods or services to customers in an amount that reflects the consideration the Company is entitled to in exchange for those goods or services. The Company selected the modified retrospective transition method but had no cumulative effect adjustment to recognize as of the date of adoption on January 1, 2018.

The Company’s revenue consists of rental revenues and tenant reimbursements and other. There was no impact to the Company’s recognition of rental revenue from leasing arrangements as this was specifically excluded from ASC 606. The company identified limited sources of revenues fromnon-lease components but did not experience a material impact on its revenue recognition in the consolidated financial statements upon adoption. The Company leases apartment and condominium units under operating leases with terms generally of one year or less. Generally, credit investigations are performed for prospective residents and security deposits are obtained. The Company will recognize minimum rent, including rental abatements, concessions and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of thenon-cancellable term of the related lease and amounts expected to be received in later years will be recorded as 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 in accordance with ASC 840,Leases.

Fair Value Measurements

Under GAAP, we are required to measure certain financial instruments at fair value on a recurring basis. In addition, we are required to measure other assets and liabilities at fair value on anon-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:

Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.

When available, we utilize quoted market prices from an independent third-party source to determine fair value and will classify such items in Level 1 or Level 2. In instances where the market is not active, regardless of the availability of anon-binding quoted market price, observable inputs might not be relevant and could require us to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When we determine the market for a financial instrument we own to be illiquid or when market transactions for similar instruments do not appear orderly, we use several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and we establish a fair value by assigning weights to the various valuation sources.

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Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument.

Accounting for Stock-Based Compensation

We amortize the fair value of stock-based compensation awards to expense over the vesting period and record any dividend equivalents earned as dividends for financial reporting purposes. Stock-based compensation awards are valued at the fair value on the date of grant and amortized as an expense over the vesting period.

Income Taxes

We have elected to be taxed as a REIT under the Internal Revenue Code and have operated as such commencing with the taxable year ended December 31, 2014. To continue to qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to our stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, we generally will not be subject to federal income tax to the extent we distribute qualifying dividends to our stockholders. If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax on our taxable income at regular corporate income tax rates and generally would not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to stockholders. However, we believe we are organized and operate in such a manner as to qualify for treatment as a REIT.

We follow the income tax guidance under GAAP to recognize, measure, present and disclose in our consolidated financial statements uncertain tax positions that we have taken or expect to take on a tax return. As of December 31, 2018, 2017 and 2016, we did not have any liabilities for uncertain tax positions that we believe should be recognized in our consolidated financial statements. We have not been assessed material interest or penalties by any major tax jurisdictions. Our evaluation was performed for all tax years ended December 31, 2018, 2017 and 2016.

Subsequent Events

Distributions Paid

On January 1, 2019, we paid distributions of $3,953,499, which related to distributions declared for each day in the period from December 1, 2018 through December 31, 2018 and consisted of cash distributions paid in the amount of $2,092,671 and $1,860,828 in shares issued pursuant to our distribution reinvestment plan.

On February 1, 2019, we paid distributions of $3,962,806, which related to distributions declared for each day in the period from January 1, 2019 through January 31, 2019 and consisted of cash distributions paid in the amount of $2,110,932 and $1,851,874 in shares issued pursuant to our distribution reinvestment plan.

On March 1, 2019, we paid distributions of $3,578,717, which related to distributions declared for each day in the period from February 1, 2019 through February 28, 2019 and consisted of cash distributions paid in the amount of $1,914,109 and $1,664,608 in shares issued pursuant to our distribution reinvestment plan.

Estimated Value per Share

On March 12, 2019, our board of directors determined an estimated value per share of our common stock of $15.84 as of December 31, 2018. See Item 5. “Market For Registrant’s Common Equity, Related Shareholders

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Matters and Purchases of Equity Securities—Estimated Value Per Share.” In connection with the determination of an estimated value per share, our board of directors determined a price per share for our distribution reinvestment plan of $15.84, effective April 1, 2019. Distributions that accrue during the month of April 2019, which will be paid in May 2019, will be reinvested at $15.84 per share on the May distribution payment date pursuant to our distribution reinvestment plan.

Shares Repurchased

On January 31, 2019, the Company repurchased 138,961 shares of its common stock for a total repurchase value of $2,000,000, or $14.39 average price per share, pursuant to the Company’s share repurchase plan.

Distributions Declared

On March 12, 2019, our board of directors approved and authorized a daily distribution to stockholders of record as of the close of business on each day of the period commencing on April 1, 2019 and ending on June 30, 2019. The distributions will be equal to $0.002466 per share of our common stock. The distributions for each record date in April 2019, May 2019 and June 2019 will be paid in May 2019, June 2019 and July 2019, respectively. The distributions will be payable to stockholders from legally available funds therefor.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We may be exposed to the effects of interest rate changes as a result of borrowings used to maintain liquidity and to fund the acquisition, expansion and refinancing of our real estate investment portfolio and operations. We may be also exposed to the effects of changes in interest rates as a result of the acquisition and origination of mortgage, mezzanine, bridge and other loans. Our profitability and the value of our investment portfolio may be adversely affected during any period as a result of interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs. We have managed and will continue to manage interest rate risk by maintaining a ratio of fixed rate, long-term debt such that floating rate exposure is kept at an acceptable level. In addition, we may utilize a variety of financial instruments, including interest rate caps, collars, floors and swap agreements, in order to limit the effects of changes in interest rates on our operations. When we use these types of derivatives to hedge the risk of interest-earning assets or interest-bearing liabilities, we may be subject to certain risks, including the risk that losses on a hedge position will reduce the funds available for distributions to holders of our common stock and that the losses may exceed the amount we invested in the instruments.

We borrow funds and make investments at a combination of fixed and variable rates. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt unless such instruments mature or are otherwise terminated. However, interest rate changes will affect the fair value of our fixed rate instruments. At December 31, 2018, the fair value of our fixed rate debt was $685,392,843 and the carrying value of our fixed rate debt was $692,266,900. The fair value estimate of our fixed rate debt was estimated using a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining maturity if the loans were originated at December 31, 2018. As we expect to hold our fixed rate instruments to maturity and the amounts due under such instruments would be limited to the outstanding principal balance and any accrued and unpaid interest, we do not expect that fluctuations in interest rates, and the resulting change in fair value of our fixed rate instruments, would have a significant impact on our operations.

Conversely, movements in interest rates on our variable rate debt will change our future earnings and cash flows, but not significantly affect the fair value of those instruments. However, changes in required risk premiums will result in changes in the fair value of floating rate instruments. At December 31, 2018, the fair value of our variable rate debt was $356,966,041 and the carrying value of our variable rate debt was $357,888,843. Based on interest rates as of December 31, 2018, if interest rates are 100 basis points higher during the 12 months ending December 31, 2019, interest expense on our variable rate debt would increase by

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$3,651,848 and if interest rates are 100 basis points lower during the 12 months ending December 31, 2019, interest expense on our variable rate debt would decrease by $3,651,848.

At December 31, 2018, the weighted-average interest rate of our fixed rate debt and variable rate debt was 4.47% and 4.46%, respectively. The weighted-average interest rate of our blended fixed and variable rates was 4.46% at December 31, 2018. The weighted-average interest rate represents the actual interest rate in effect at December 31, 2018 (consisting of the contractual interest rate), using interest rate indices as of December 31, 2018, where applicable.

We may also be exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. If the fair value of a derivative contract is positive, the counterparty will owe us, which creates credit risk for us. If the fair value of a derivative contract is negative, we will owe the counterparty and, therefore, do not have credit risk. We will seek to minimize the credit risk in derivative instruments by entering into transactions with high-quality counterparties. As of December 31, 2018, we did not have counterparty risk on our interest rate cap agreements as the underlying variable rates for each of our interest rate cap agreements as of December 31, 2018 were not in excess of the capped rates. See also Note 10 (Derivative Financial Instruments) to our audited consolidated financial statements included in this annual report.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements and supplementary data can be found beginning atpage F-1 of this annual report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. 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 reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, including our chief executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and we necessarily are required to apply our judgment in evaluating whether the benefits of the controls and procedures that we adopt outweigh their costs.

As required by Rules13a-15(b) and15d-15(b) of the Exchange Act, an evaluation as of December 31, 2018, was conducted under the supervision and with the participation of our management, including our chief executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules13a-15(e) and15d-15(e) under the Exchange Act). Based on this evaluation, our chief executive officer and principal financial officer concluded that our disclosure controls and procedures, as of December 31, 2018, were effective at the reasonable assurance level.

Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules13a-15(f) or15d-15(f) promulgated under the Exchange Act.

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In connection with the preparation of this annual report, our management, including our chief executive officer and chief financial officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2018. In making that assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013 framework).

Based on its assessment, our management believes that, as of December 31, 2018, our internal control over financial reporting was effective based on those criteria. There have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Our directors and executive officers and their respective positions and offices are as follows:

Name	Age		Position
Rodney F. Emery		68	Chairman of the Board and Chief Executive Officer
Ella S. Neyland		64	Affiliated Director and President
Kevin J. Keating		56	Chief Financial Officer and Treasurer
Ana Marie del Rio		64	Secretary
G. Brian Christie		72	Independent Director
Thomas H. Purcell		68	Independent Director
Kerry D. Vandell		72	Independent Director

Rodney F. Emery has served as our Chairman of the Board since August 2013 and as our Chief Executive Officer since September 2013. Mr. Emery also serves as Chairman of the Board and Chief Executive Officer of Steadfast Income REIT, positions he has held since its inception in May 2009. In addition, Mr. Emery serves as the Chairman of the Board and Chief Executive Officer of Steadfast Apartment REIT III, positions he has held since January 2016 and August 2015, respectively. Mr. Emery is the founder of Steadfast Companies and is responsible for the corporate vision, strategy and overall guidance of the operations of Steadfast Companies. Mr. Emery chairs the Steadfast Executive Committee, which establishes policy and strategy and acts as the general oversight committee of Steadfast Companies. Mr. Emery also serves on the Steadfast Companies Investment Committee and is a member of the Board of Managers of Stira Capital Markets Group (formerly “Steadfast Capital Markets Group”). Prior to founding Steadfast Companies in 1994, Mr. Emery served for 17 years as the President of Cove Properties, a diversified commercial real estate firm specializing in property management, construction and development with a specialty in industrial properties. Mr. Emery received a Bachelor of Science in Accounting from the University of Southern California and serves on the board of directors of severalnon-profit organizations.

Our board of directors, excluding Mr. Emery, has determined that Mr. Emery is qualified to serve as one of our directors due to the leadership positions previously and currently held by Mr. Emery and Mr. Emery’s extensive experience acquiring, financing, developing and managing multifamily, hotel, office, industrial and retail real estate assets throughout the country.

Ella S. Neyland, has served as our President since September 2013 and an affiliated director since August 2013. Ms. Neyland also serves as President and an affiliated director of Steadfast Income REIT, positions she has held since October 2012, and she served as an independent director of Steadfast Income REIT from October 2011 to September 2012. In addition, Ms. Neyland serves as the President and an affiliated director of Steadfast Apartment REIT III, positions she has held since August 2015 and January 2016, respectively. Ms. Neyland was a founder of Thin Centers MD, or TCMD, which provides medically supervised weight loss programs, in June 2010, and served as its Chief Financial Officer from February 2011 to October 2011. Prior to founding TCMD, Ms. Neyland was a founder of Santa Barbara Medical Innovations, LLC, a privately owned company that owns and leaseslow-level lasers to medical groups, and served as its Chief Financial Officer from December 2008 to February 2011. From October 2004 to December 2008, Ms. Neyland was a financial advisor of Montecito Medical Investment Company, a private real estate acquisition and development company headquartered in Santa Barbara, California. From April 2001 to September 2004, Ms. Neyland served as the Executive Vice President, Treasurer and Investor Relations Officer of United Dominion Realty Trust, Inc., where she was responsible for capital market transactions, banking relationships and presentations to investors and Wall Street analysts. Ms. Neyland also served as a voting member of the Investment Committee of United Dominion Realty Trust, Inc. that approved the repositioning of over $3 billion of investments. Prior to working at United Dominion Realty Trust, Inc., Ms. Neyland served as the Chief Financial Officer at Sunrise Housing, Ltd, a

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privately owned apartment development company, from November 1999 to March 2001. Ms. Neyland also served as Executive Director of CIBC World Markets, which provides investment, research and corporate banking products, from November 1997 to October 1999. From July 1990 to October 1997, Ms. Neyland served as the Senior Vice President of Finance and the Vice President of Troubled Debt Restructures/Finance for the Lincoln Property Company, a commercial real estate development and management company. From November 1989 to July 1990, Ms. Neyland was the Vice President/Portfolio Manager at Bonnet Resources Corporation, a subsidiary of BancOne. Prior to her employment at Bonnet Resources Corporation, Ms. Neyland served on the board of directors and as the Senior Vice President/Director of Commercial Real Estate Lending at Commerce Savings Association, a subsidiary of the publicly held American Century Corporation, from May 1983 to March 1989. Ms. Neyland received a Bachelor of Science in Finance from Trinity University in San Antonio, Texas.

Our board of directors, excluding Ms. Neyland, has determined that Ms. Neyland is qualified to serve as one of our directors due to Ms. Neyland’s prior service as a director and as chief financial officer.

Kerry D. Vandell has served as one of our independent directors since August 2013. Dr. Vandell also served as an independent director of Steadfast Income REIT, Inc. from October 2012 to August 2015. In March 2016, Dr. Vandell was appointed as an independent member of the board of directors of the PREDEX Fund, a mutual fund invested in privately offered,non-traded, perpetual-life institutional real estate funds. Dr. Vandell currently serves as the Dean’s Professor Emeritus of Economics and Public Policy and Director Emeritus of the Center for Real Estate at the Paul Merage School of Business at the University of California-Irvine (UCI), having joined UCI in July 2006. He also has held courtesy appointments at UCI’s School of Law and the Department of Planning, Policy and Design in the School of Social Ecology since 2008. Before joining UCI, Dr. Vandell was on the faculty of the University of Wisconsin-Madison for 17 years (1989-2006), where he served as the Tiefenthaler Chaired Professor of Real Estate and Urban Land Economics, the Director of the Center for Urban Land Economics Research, and the Chairman of the Department of Real Estate and Urban Land Economics. His first academic appointment was at Southern Methodist University (1976-1989), where he ultimately served as Professor and Chairman of the Department of Real Estate and Regional Science. Dr. Vandell has researched and consulted extensively in the areas of real estate investment, urban/real estate/environmental economics, mortgage finance, housing economics and policy, and valuation theory and is principal in the consulting firm KDV Associates, providing expert testimony in major litigation matters internationally. He has also previously served as a board member for firms representing the commercial banking, REIT and shopping center sectors. Dr. Vandell received his Ph.D. from the Massachusetts Institute of Technology in Urban Studies and Planning, his M.C.P. in City and Regional Planning from Harvard University, and his undergraduate and master’s degrees in Mechanical Engineering from Rice University. He has authored orco-authored over 70 publications and has been invited to provide numerous presentations on the topics of finance, economics and real estate.

Our board of directors, excluding Dr. Vandell, has determined that Dr. Vandell is qualified to serve as one of our directors due to Dr. Vandell’s prior position as a finance professor and his real estate program experience.

G. Brian Christie has served as one of our independent directors since August 2013. Mr. Christie has practiced as an attorney in the real estate, corporate and banking fields since 1979. Mr. Christie currently serves as a principal of Christie Law Firm, a position he has held since 2005. From 1998 to 2005, Mr. Christie served as Chief Executive Officer of Liti Holographics, Inc., a3-D optical technology company. From 1992 to 1997, Mr. Christie served as a Director, Executive Vice President and General Counsel of ARV Assisted Living, Inc., or ARV, a company which acquired, developed and operated multifamily apartments, senior apartments and assisted living apartments. While at ARV, Mr. Christie played an integral role in the listing of ARV on NASDAQ. Prior to joining ARV, Mr. Christie was a partner at the law firm of Good, Wildman, Hegness and Walley. Mr. Christie received a Bachelor of Arts from Calvary Bible College, a Master of Theology from Dallas Theological Seminary and a Juris Doctor from the University of Texas Law School. Mr. Christie is a member of the State Bar of California, the State Bar of Virginia, and the American Bar Association.

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Our board of directors, excluding Mr. Christie, has determined that Mr. Christie is qualified to serve as one of our directors due to Mr. Christie’s prior experience as a director and officer in the multifamily industry.

Thomas H. Purcell has served as one of our independent directors since August 2013. Mr. Purcell has been actively involved in the real estate development business since 1972. Since September 2009, Mr. Purcell has served as Chairman and Chief Executive Officer of the Curci Companies, a real estate investment company that owns and manages office, industrial and retail property throughout the western United States. From April 1998 to August 2009, Mr. Purcell wasCo-Founder and President of Spring Creek Investors, LLC, a private equity capital business focused on real estate development. From 1996 to 1998, Mr. Purcell served as President of Diversified Shopping Centers, where he developed and managed neighborhood and community shopping centers. From 1977 to 1996, Mr. Purcell wasCo-Founder and President of a shopping center development business that developed and renovated over four million square feet of retail shopping centers. Prior to 1977, Mr. Purcell was employed at a shopping center development company where he headed the development and construction management team and served as the controller. Since 2007, Mr. Purcell has been a board member of Bixby Land Company, a private industrial REIT, where he also chairs the investment committee and is a member of the audit and compensation committees. Mr. Purcell is a member of the International Council of Shopping Centers, or ICSC, and previously served as Western Division Vice President and on the Board of Trustees and Executive Committee of ICSC and was a trustee of the ICSC Educational Foundation. He formerly served as a board member of the California Business Properties Association and an advisory board member of Buchanan Street Partners and Western National Realty Fund. Mr. Purcell received a Bachelor of Science in Finance from the University of Southern California.

Our board of directors, excluding Mr. Purcell, has determined that Mr. Purcell is qualified to serve as one of our directors due to Mr. Purcell’s prior experience as an executive of real estate investment and development companies.

Kevin J. Keating has served as our Chief Financial Officer and Treasurer since November 2017 and September 2013, respectively, and as our advisor’s Treasurer and Chief Accounting Officer since September 2013, where he focuses on the accounting function and compliance responsibilities for us and our advisor. Mr. Keating also serves as Chief Financial Officer and Treasurer of Steadfast Income REIT, positions he has held since November 2017 and April 2011, respectively, and Chief Financial Officer and Treasurer of Steadfast Apartment REIT III since November 2017 and August 2015, respectively. Mr. Keating served as the controller of Steadfast Income REIT from January 2011 to March 2011. Mr. Keating served as Senior Audit Manager with BDO, USA, LLP (formerly BDO Seidman, LLP), an accounting and audit firm, from June 2006 to January 2011. From June 2004 to June 2006, Mr. Keating served as Vice President and Corporate Controller of Endocare, Inc., a medical device manufacturer. Mr. Keating has extensive experience working with public companies and served as Assistant Controller and Audit Manager for Ernst & Young LLP from 1988 to 1999. Mr. Keating holds a Bachelor of Science in Accounting from St. John’s University in New York, New York and is a certified public accountant.

Ana Marie del Rio has served as our Secretary and Compliance Officer since September 2013. Ms. del Rio also serves as Secretary and Compliance Officer of Steadfast Income REIT, positions she has held since its inception in May 2009 and Secretary and Compliance Officer of Steadfast Apartment REIT III since August 2015. Ms. del Rio also serves as the Chief Legal Officer for Steadfast Companies and manages the Risk Management and Legal Services Departments for Steadfast Companies. Ms. del Rio works closely with Steadfast Management Company, Inc. in the management and operation of Steadfast Companies’ residential apartment homes, especially in the area of compliance. Prior to joining Steadfast Companies in April 2003, Ms. del Rio was a partner in the public finance group at Orrick, Herrington & Sutcliffe, LLP, where she practiced from September 1993 to April 2003, representing both issuers and underwriters in financing single-family and multifamily housing and other types of public-private and redevelopment projects. From 1979 to 1993, Ms. del Rioco-owned and operated a campaign consulting and research company specializing in local campaigns and ballot measures. Ms. del Rio received a Juris Doctor from the University of the Pacific, McGeorge School of

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Law, and received a Master of Public Administration and a Bachelor of Arts from the University of Southern California. Ms. del Rio serves on the Board of Directors of Project Access and is a lecturer for the University of California, Irvine, School of Law.

The Audit Committee

Our board of directors has established an audit committee. The audit committee’s function is to assist our board of directors in fulfilling its responsibilities by overseeing: (1) the systems of our internal accounting and financial controls; (2) our financial reporting processes; (3) the independence, objectivity and qualification of our independent auditors; (4) the annual audit of our financial statements; and (5) our accounting policies and disclosures. The members of the audit committee are G. Brian Christie, Thomas H. Purcell and Kerry D. Vandell. All of the members of the audit committee are “independent” as defined by our charter. Our shares are not listed for trading on any national securities exchange and therefore our audit committee members are not subject to the independence requirements of the New York Stock Exchange, or NYSE, or any other national securities exchange. However, each member of our audit committee is “independent” as defined by the NYSE. All members of the audit committee have significant financial and/or accounting experience. Our board of directors has determined that Dr. Vandell satisfies the SEC’s requirements for and serves as our “audit committee financial expert.”

Investment Committee

Our board of directors has established an investment committee. Our board of directors has delegated to the investment committee: (1) certain responsibilities with respect to investment in specific investments proposed by our advisor and (2) the authority to review our investment policies and procedures on an ongoing basis. The investment committee must at all times be comprised of at least three members, a majority of whom must be independent directors. The current members of the investment committee are Rodney F. Emery, G. Brian Christie and Thomas H. Purcell, with Mr. Emery serving as the chairman of the investment committee.

With respect to investments, the investment committee has the authority to approve all acquisitions, developments and dispositions of real estate and real estate-related assets consistent with our investment objectives, for a purchase price, total project cost or sales price of up to 10% of the cost of our total assets as of the date of investment.

Valuation Committee

Our board of directors has established a valuation committee. The valuation committee’s function, as recommended by the IPA, is to perform the following functions in connection with the determination of an estimated per share value of our common stock: (1) ratify and approve the engagement of valuation advisory services, its scope of work and any amendments thereto, (2) review and approve the proposed valuation process and methodology to be used to determine the estimation of the per share value of our common stock, or valuation, (3) review the reasonableness of the valuation or range of value resulting from the process and (4) recommend the final proposed valuation for approval by the board of directors. The members of the valuation committee are Thomas Purcell, G. Brian Christie and Kerry Vandell, with Mr. Purcell serving as chairman of the valuation committee.

Special Committee

Our board of directors has established a special committee. The special committee’s function is limited to the evaluation, negotiation and approval of (1) any agreement, arrangement or other transaction by and between our company, our advisor or any other affiliate of our sponsor related to compensation payable by our company to our advisor or any other affiliate of our sponsor in connection with the pursuit of strategic alternatives; (2) any strategic alternatives in which a counter party has expressed an interest in the contemporaneous or subsequent

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purchase of any other transaction related to Steadfast Companies; and (3) any other transaction which the board specifically identifies and delegates authority to the special committee. The members of the special committee are Thomas Purcell, G. Brian Christie and Kerry Vandell, with Mr. Purcell serving as the chairman of the special committee.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires each director, officer and individual beneficially owning more than 10% of our common stock to file with the SEC, within specified time frames, initial statements of beneficial ownership (Form 3) of our common stock and statements of changes in beneficial ownership (Forms 4 and 5) of our common stock. These specified time frames require the reporting of changes in ownership within two business days of the transaction giving rise to the reporting obligation. Reporting persons are required to furnish us with copies of all Section 16(a) forms filed with the SEC. Based solely on a review of the copies of such forms furnished to us during and with respect to the fiscal year ended December 31, 2018, or written representations that no additional forms were required, we believe that all required Section 16(a) filings were timely and correctly made by reporting persons during the year ended December 31, 2018.

Code of Conduct and Ethics

We have adopted a Code of Ethics that applies to all of our executive officers and directors, including but not limited to, our principal executive officer, principal financial officer and principal accounting officer. Our Code of Ethics can be found at our website:http://www.steadfastreits.com.

ITEM 11. EXECUTIVE COMPENSATION

Compensation of Executive Officers

Our executive officers do not receive compensation directly from us for services rendered to us and we do not intend to pay any compensation to our executive officers. We do not reimburse our advisor directly or indirectly for the salary or other compensation paid to any of our executive officers. As a result, we do not, nor has our board of directors considered, a compensation policy for our executive officers. Accordingly, we have not included a Compensation Discussion and Analysis in this annual report or other related disclosures pursuant to Item 402 of RegulationS-K and paragraphs (e)(4) and (e)(5) of Item 407 of RegulationS-K with respect to our executive officers. Our executive officers are officers and/or employees of, or hold an indirect ownership interest in, our advisor and/or its affiliates, and our executive officers are compensated by these entities, in part, for their services to us. See Item 13. “Certain Relationships and Related Transactions, and Director Independence—Certain Transactions with Related Persons” for a discussion of the fees paid to our advisor and its affiliates.

Compensation of Directors

If a director is also one of our executive officers or an affiliate of our advisor, we do not pay any compensation to that person for services rendered as a director. The amount and form of compensation payable to our independent directors for their service to us is determined by our board of directors, based upon recommendations from our advisor. Four of our executive officers, Messrs. Rodney F. Emery and Kevin Keating and Mses. Ana Marie del Rio and Ella Neyland, manage, control or are affiliated with our advisor, and through our advisor, they are involved in recommending the compensation to be paid to our independent directors.

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We have provided below certain information regarding compensation earned by or paid to our directors during the fiscal year ended December 31, 2018.

Name	Fees Earned or Paid in Cash in 2018(1)		Stock Awards		Option Awards		Non-Equity Incentive Plan Compensation		Change in Pension Value and Nonqualified Deferred Compensation		All Other Compensation		Total
G. Brian Christie(2)(3)	$	158,750	$	25,290	$	—	$	—	$	—	$	7,123	$	191,163
Thomas H. Purcell(2)(3)		170,000		25,290		—		—		—		—		195,290
Kerry D. Vandell(2)(3)		167,250		25,290		—		—		—		—		192,540
Ella S. Neyland(4)		—		—		—		—		—		—		—
Rodney F. Emery(4)		—		—		—		—		—		—		—
	$	496,000	$	75,870	$	—	$	—	$	—	$	7,123	$	578,993

(1) The amounts shown in this column include payments made to members of the special committee, which was formed during the year ended December 31, 2018. The members of the special committee are our independent directors. It was agreed that each independent director will receive retainers of $63,750 with the special committee chairperson receiving an additional $11,250. In addition, each member receives meeting fees as described below; provided there is no no daily limit for special committee meeting fees.

(2) Independent directors.

(3) On August 8, 2018, each of our three independent directors was granted 1,666 shares of restricted common stock in connection with theirre-election to the board of directors pursuant to our Independent Directors Compensation Plan (described below). The grant date fair value of the stock was $15.18 per share for an aggregate amount of $25,290 for each independent director. Of these shares of restricted common stock granted in 2018, each independent director had 1,250 shares of restricted common stock that remain unvested as of December 31, 2018. The amounts shown in this column reflect the aggregate fair value of shares of restricted stock granted, computed as of the grant date in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718.

(4) Directors who are also our executive officers or executive officers of our affiliates do not receive compensation for services rendered as a director.

Cash Compensation

We pay each of our independent directors:

• an annual retainer of $55,000 (the audit committee chairperson receives an additional $10,000 annual retainer);

• $2,500 for eachin-person board of directors meeting attended;

• $1,500 for eachin-person committee meeting attended; and

• $1,000 for each teleconference meeting of the board of directors or committee.

We will not pay in excess of $4,000 for any one set of meetings attended on any given day.

Equity Plan Compensation

Our board of directors has approved and adopted the Steadfast Apartment REIT, Inc. Independent Directors Compensation Plan, or the Plan, which operates as asub-plan of the Steadfast Apartment REIT, Inc. Amended and Restated 2013 Incentive Plan, or the Incentive Plan. Under the Plan and subject to such Plan’s conditions and restrictions, each of our current independent directors was entitled to receive 3,333 shares of restricted common stock once we raised $2,000,000 in gross offering proceeds from our public offering. Each subsequent independent director that joins our board of directors receives 3,333 shares of restricted common stock upon

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election to our board of directors. In addition, on the date following an independent director’sre-election to our board of directors, he or she receives 1,666 shares of restricted common stock. Grants of restricted common stock are subject to share availability under the Incentive Plan. The shares of restricted common stock granted pursuant to the Plan generally vest in four equal annual installments beginning on the date of grant and ending on the third anniversary of the date of grant; provided, however, that the restricted stock will become fully vested on the earlier to occur of: (1) the termination of the independent director’s service as a director due to his or her death or “disability”, or (2) a “change in control” of the Company (as such terms are defined in the Incentive Plan).

Compensation Committee Interlocks and Insider Participation

We currently do not have a compensation committee of our board of directors because we do not pay, or plan to pay, any compensation to our officers. There are no interlocks or insider participation as to compensation decisions required to be disclosed pursuant to SEC regulations.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Equity Compensation Plan Information

The following table provides information about our common stock that may be issued upon the exercise of options, warrants and rights under the Incentive Plan as of December 31, 2018.

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants  and Rights		Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance Under Equity Compensation  Plans
Equity compensation plans approved by security holders:		—		—		965,011
Equity compensation plans not approved by security holders:		N/A		N/A		N/A
Total		—		—		965,011

Security Ownership of Certain Beneficial Owners

The following table shows, as of March 7, 2019, the amount of our common stock beneficially owned (unless otherwise indicated) by: (1) any person who is known by us to be the beneficial owner of more than 5% of the outstanding shares of our common stock, (2) our directors, (3) our executive officers, and (4) all of our directors and executive officers as a group.

Name and Address of Beneficial Owner(1)	Amount and Nature of Beneficial Ownership(2)		Percentage
Rodney F. Emery(3)		38,532		*
G. Brian Christie		11,663		*
Thomas H. Purcell(4)		16,788		*
Kerry D. Vandell		13,443		*
Ella S. Neyland		370		*
Kevin J. Keating		—		*
Ana Marie del Rio		3,681		*
All officers and directors as a group (seven persons)		84,477		*

* Less than 1% of the outstanding common stock.

(1) The address of each named beneficial owner is c/o Steadfast Apartment REIT, Inc., 18100 Von Karman Avenue, Suite 500, Irvine, CA, 92612.

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(2) None of the shares are pledged as security.

(3) Includes 13,500 shares owned by Steadfast REIT Investments, LLC, which is primarily indirectly owned and controlled by Rodney F. Emery.

(4) Includes 3,704 shares owned by THP Management, LLC, which is primarily owned and controlled by Thomas H. Purcell.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Certain Transactions with Related Persons

The following describes all transactions during the year ended December 31, 2018 involving us, our directors, our advisor, our sponsor and any affiliate thereof and all such proposed transactions. See also Note 7 (Related Party Arrangements) to the consolidated financial statements included in this annual report. Our independent directors are specifically charged with and have examined the fairness of such transactions to our stockholders, and have determined that all such transactions are fair and reasonable to us.

Ownership Interests

On September 3, 2013, our sponsor purchased 13,500 shares of our common stock for an aggregate purchase price of $202,500 and was admitted as our initial stockholder. Our sponsor is majority owned and controlled indirectly by Rodney F. Emery, our chairman and chief executive officer. On September 3, 2013, our advisor purchased 1,000 shares of our convertible stock for an aggregate purchase price of $1,000. As of December 31, 2018, our advisor owned 100% of our outstanding convertible stock. We are the general partner of our operating partnership. Steadfast Apartment REIT Limited Partner, LLC, our wholly-owned subsidiary, has made a $1,000 capital contribution to our operating partnership as the initial limited partner.

Our convertible stock will convert into shares of our common stock if and when: (A) we have made total distributions on the then-outstanding shares of our common stock equal to the original issue price of those shares plus an aggregate 6.0% cumulative,non-compounded, annual return on the original issue price of those shares, (B) we list our common stock for trading on a national securities exchange, or (C) our advisory agreement is terminated or not renewed (other than for “cause” as defined in our advisory agreement). In the event of a termination ornon-renewal of our advisory agreement for cause, all of the shares of the convertible stock will be repurchased by us for $1.00. In general, each share of our convertible stock will convert into a number of shares of common stock equal to 1/1000 of the quotient of (A) 15% of the excess of (1) our “enterprise value” plus the aggregate value of distributions paid to date on the then outstanding shares of our common stock over (2) the aggregate purchase price paid by stockholders for those outstanding shares of common stock plus an aggregated 6.0% cumulative,non-compounded, annual return on the original issue price of those outstanding shares, divided by (B) our enterprise value divided by the number of outstanding shares of common stock on anas-converted basis, in each case calculated as of the date of the conversion.

Our Relationships with our Advisor and our Sponsor

Steadfast Apartment Advisor, LLC is our advisor and, as such, supervises and manages ourday-to-day operations and selects our real property investments and real estate-related assets, subject to oversight by our board of directors. Our advisor also provides marketing, sales and client services on our behalf. Our advisor is owned by our sponsor. Mr. Emery, our chairman of the board and chief executive officer, indirectly controls our sponsor, our advisor and the dealer manager. Ms. Ana Marie del Rio, our secretary, owns an indirect 7% interest in our sponsor, advisor and dealer manager. Crossroads Capital Multifamily, LLC, or Crossroads Capital Multifamily, owns a 25% membership interest in our sponsor. Pursuant to the Third Amended and Restated Operating Agreement of our sponsor, effective as of January 1, 2014, as amended, distributions are allocated to each member of our sponsor in an amount equal to such member’s accrued and unpaid 10% preferred return, as

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defined in the Third Amended and Restated Operating Agreement. Thereafter, all distributions to Crossroads Capital Multifamily are subordinated to distributions to the other member of our sponsor, Steadfast REIT Holdings, LLC, or Steadfast Holdings, until Steadfast Holdings has received an amount equal to certain expenses, including certain organization and offering costs, incurred by Steadfast Holdings and its affiliates on our behalf.

All of our other officers and directors, other than our independent directors, are officers of our advisor and officers, limited partners and/or members of our sponsor and other affiliates of our advisor.

We and our operating partnership have entered into the advisory agreement with our advisor and our operating partnership which has aone-year term expiring December 13, 2019, subject to an unlimited number of successiveone-year renewals upon mutual consent of the parties. We may terminate the advisory agreement without cause or penalty upon 60 days’ written notice and immediately upon fraud, criminal conduct, willful misconduct, gross negligence or material breach of the advisory agreement by our advisor or our advisor’s bankruptcy. If we terminate the advisory agreement, we will pay our advisor all unpaid advances for operating expenses and all earned but unpaid fees.

Services provided by our advisor under the terms of the advisory agreement include the following:

• finding, presenting and recommending investment opportunities to us consistent with our investment policies and objectives;

• making investment decisions for us, subject to the limitations in our charter and the direction and oversight of our board of directors;

• structuring the terms and conditions of our investments, sales and joint ventures;

• acquiring investments on our behalf in compliance with our investment objectives and policies;

• sourcing and structuring our loan originations;

• arranging for financing and refinancing of investments;

• entering into service agreements for our loans;

• supervising and evaluating each loan servicer’s and property manager’s performance;

• reviewing and analyzing the operating and capital budgets of the properties underlying our investments and the properties we may acquire;

• entering into leases and service contracts for our properties;

• assisting us in obtaining insurance;

• generating our annual budget;

• reviewing and analyzing financial information for each of our assets and our overall investment portfolio;

• formulating and overseeing the implementation of strategies for the administration, promotion, management, financing and refinancing, marketing, servicing and disposition of our investments;

• performing investor relations services;

• maintaining our accounting and other records and assisting us in filing all reports required to be filed with the SEC, the Internal Revenue Service and other regulatory agencies;

• engaging and supervising the performance of our agents, including our registrar and transfer agent; and

• performing any other services reasonably requested by us.

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The above summary is provided to illustrate the material functions that our advisor performs for us as an advisor and is not intended to include all of the services that may be provided to us by our advisor, its affiliates or third parties. Our advisor has also entered into an Advisory Services Agreement with Crossroads Capital Advisors, whereby Crossroads Capital Advisors provides certain advisory services to us on behalf of our advisor.

Fees and Expense Reimbursements Paid to our Advisor

Pursuant to the terms of our advisory agreement, we pay our advisor the fees described below.

• We pay our advisor an acquisition fee of 1.0% of the cost of investment, which includes the amount actually paid or budgeted to fund the acquisition, origination, development, construction or improvement (i.e., value-enhancement) of any real property or real estate-related asset acquired. For the year ended December 31, 2018, we did not incur or pay acquisition fees.

• We pay our advisor a loan coordination fee equal to 1.0% of the initial amount of the new debt financed or outstanding debt assumed in connection with the acquisition, development, construction, improvement or origination of a property or a real estate-related asset. In addition, in connection with any financing or the refinancing of any debt (in each case, other than identified at the time of the acquisition of a property or a real estate-related asset), we pay our advisor or its affiliate a loan coordination fee equal to 0.75% of the amount of debt financed or refinanced. For the year ended December 31, 2018, we incurred $3,562,595 and paid $4,290,695 of loan coordination fees.

• We pay our advisor an annual investment management fee that is payable monthly in an amount equal toone-twelfth of 1.0% of the cost of (1) real properties and real estate related assets acquired directly by us or (2) our allocable cost of each real property or real estate-related asset acquired through a joint venture. The investment management fee is calculated including acquisition fees, acquisition expenses, cost of development, construction or improvement and any debt attributable to such investments, or our proportionate share thereof in the case of investments made through joint ventures. For the year ended December 31, 2018, we incurred investment management fees to our advisor of $15,743,185. During the same period we paid $15,687,320 in investment management fees to our advisor.

• We will pay our advisor a disposition fee of up toone-half of the brokerage commissions paid but in no event to exceed 1.0% of the sales price of each property or real estate-related asset sold if our advisor or its affiliates provides a substantial amount of services, as determined by a majority of our independent directors, in connection with the sale of a real property or real estate-related asset. To the extent the disposition fee is paid upon the sale of any assets other than real property, it will be included as an operating expense for purposes of the 2%/25% Guidelines (discussed below). With respect to a property held in a joint venture, the foregoing commission will be reduced to a percentage of such amounts reflecting our economic interest in the joint venture. For the year ended December 31, 2018, we did not incur any disposition fees.

In addition to the fees we pay to our advisor pursuant to the advisory agreement, we also reimburse our advisor and its affiliates for the costs and expenses described below.

• We reimbursed our advisor and its affiliates for organization and offering expenses for actual legal, accounting, tax, printing mailing and filing fees, charges of our transfer agent, expenses of organizing the company, data processing fees, advertising and sales literature costs, outof-of-pocket due diligence costs, and amounts to reimburse our advisor or its affiliates for the salaries of its employees and other costs in connection with preparing supplemental sales materials and providing other administrative services in connection with our initial public offering. Any such reimbursement did not exceed actual expenses incurred by our advisor. For the year ended December 31, 2018, we paid our advisor $262,387 for the reimbursement of organization and offering expenses. Following the termination of our initial public offering, our advisor had an obligation to reimburse us to the extent total organization and offering expenses (including sales commissions and dealer manager fees) borne by us

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exceeded 15% of the gross proceeds raised in the initial public offering. Total organization and offering expenses borne by us did not exceed 15% of the gross offering proceeds in our public offering.

• Subject to the 2%/25% Guidelines discussed below, we reimburse our advisor for all expenses incurred by our advisor in providing services to us, including our allocable share of our advisor’s overhead, such as rent, employee costs, utilities and information technology costs; provided, however, that no reimbursement shall be made for costs of such personnel to the extent that personnel are used in transactions for which our advisor receives an acquisition fee, investment management fee, loan coordination fee or disposition fee or for the employee costs our advisor pays to our executive officers. For the year ended December 31, 2018, we reimbursed our advisor $1,157,836 for administrative services.

• We reimburse our advisor for acquisition expenses incurred related to the selection, evaluation, acquisition and development of real property investments and real estate-related investments as long as total acquisition fees and expenses (including any loan coordination fees at acquisition) relating to the purchase of an investment do not exceed 4.5% of the contract price of the property unless such excess is approved by our board of directors. For the year ended December 31, 2018, we incurred $26,113 and paid $24,507 of acquisition expenses.

2%/25% Guidelines

As described above, our advisor and its affiliates are entitled to reimbursement of actual expenses incurred for administrative and other services provided to us for which they do not otherwise receive a fee. However, we will not reimburse our advisor or its affiliates at the end of any fiscal quarter for “total operating expenses” that for the four consecutive fiscal quarters then ended, or the expense year, exceeded the greater of (1) 2% of our average invested assets or (2) 25% of our net income, which we refer to as the “2%/25% Guidelines,” and our advisor must reimburse us quarterly for any amounts by which our total operating expenses exceed the 2%/25% Guidelines in the expense year, unless our independent directors have determined that such excess expenses were justified based on unusual andnon-recurring factors.

For purposes of the 2%/25% Guidelines, “total operating expenses” means all costs and expenses paid or incurred by us, as determined under GAAP, that are in any way related to our operation or to corporate business, including advisory fees, but excluding (1) 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 listing of our shares of common stock, (2) interest payments, (3) taxes,(4) non-cash expenditures such as depreciation, amortization and bad debt reserves, (5) incentive fees, (6) acquisition fees and acquisition expenses (including expenses relating to potential acquisitions that we do not close), (7) real estate commissions on the sale of a real property, and (8) other expenses connected with the acquisition, disposition, management and ownership of real estate interests, mortgage loans or other property (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of real property).

At December 31, 2018, our total operating expenses did not exceed the 2%/25% Guideline.

Selling Commissions and Fees Paid to our Dealer Manager

The dealer manager for our initial public offering of common stock was Stira Capital Markets Group, LLC (formerly Steadfast Capital Markets Group, LLC), an affiliate of our sponsor. Our dealer manager is a licensed broker-dealer registered with FINRA. As the dealer manager for our initial public offering, Stira Capital Markets Group was entitled to certain selling commissions, dealer manager fees and reimbursements relating to raising capital. The dealer manager agreement with our dealer manager provides for the following compensation:

• We paid our dealer manager selling commissions of up to 7% of the gross offering proceeds from the sale of our shares, all of which could be reallowed to participating broker-dealers. We allowed a

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participating broker-dealer to elect to receive the 7% selling commission at the time of sale or elect to have the selling commission paid on a trailing basis. A participating broker-dealer electing to receive a trailing selling commission will be paid as follows: 3% at the time of sale and the remaining 4% paid ratably (1% per year) on each of the first four anniversaries of the sale. For the year ended December 31, 2018, we paid $262,387 in selling commissions to our dealer manager. We terminated our initial public offering on March 24, 2016, and as of December 31, 2018, expect to pay trailing selling commissions subsequent to that date of $299,952.

• We paid our dealer manager a dealer manager fee of 3% of the gross offering proceeds from the sale of our shares (a portion of which could be reallowed to participating broker-dealers). For the year ended December 31, 2018, no dealer manager fees were paid to our dealer manager.

Fees and Reimbursements Paid to Our Property Manager

• We have entered into property management agreements (each, as amended from time to time, a “property management agreement”) with Steadfast Management Company, Inc., or the property manager, an affiliate of our sponsor, or the “property manager”, in connection with the management of our multifamily properties. Pursuant to each property management agreement, we pay the property manager a monthly management fee equal to a range from 2.5% to 3.0% of each property’s gross revenues (as defined in the respective property management agreements) for each month. Each property management agreement has an initialone-year term and will continue thereafter on amonth-to-month basis unless either party gives prior 60 days’ notice of its desire to terminate the property management agreement, provided that we may terminate the property management agreement at any time upon a determination of gross negligence, willful misconduct or bad acts of the property manager or its employees or upon an uncured breach of the agreement upon 30 days’ prior written notice to the property manager. For the year ended December 31, 2018, we incurred $4,886,436 and paid $4,872,734 of property management fees to our property manager.

• The property management agreements specify that we are to reimburse the property manager for the salaries and related benefits ofon-site personnel. For the year ended December 31, 2018, we reimbursedon-site personnel costs of $14,958,751 to our property manager.

• The property management agreements also specify certain other fees payable to the property manager for benefit administration, information technology infrastructure, licenses, support, and training services and capital expenditures. We also reimburse the property manager for the salaries and related benefits ofon-site property management employees. For the year ended December 31, 2018, we paid other fees of $1,916,348 and paid capital expenditures of $7,295 to our property manager.

Payments to our Construction Manager

• We have entered into construction management agreements with Pacific Coast Land & Construction, Inc., or the construction manager, an affiliate of our sponsor, in connection with capital improvements and renovation or value-enhancement projects for certain of our properties. The construction management fee payable with respect to each property under the construction management agreement ranged from 8.0% to 12.0% of the costs of the improvements for which the construction manager has planning and oversight authority. Generally, each construction management agreement can be terminated by either party with 30 days’ prior written notice to the other party. For the year ended December 31, 2018, we incurred $585,532 and paid $700,410 of construction management fees to our construction manager.

• The construction management agreements also specify that we are to reimburse the construction manager for the salaries and related benefits of certain of its employees for time spent working on capital improvements and renovations. For the year ended December 31, 2018, we reimbursed labor costs of $941,879 to our construction manager.

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Other Transactions

• We deposit amounts with an affiliate of our sponsor to fund a prepaid insurance deductible account to cover the cost of required insurance deductibles across all properties owned by us and other affiliated entities of our sponsor. Upon filing a major claim, proceeds from the insurance deductible account may be used by us or another affiliate of our sponsor. In addition, we deposit amounts with an affiliate of our sponsor to cover the cost of property and property related insurance across certain of our properties. For the year ended December 31, 2018, we funded $1,323,074 into the prepaid insurance deductible and property insurance accounts to an affiliate of our sponsor and received $75,000 in insurance proceeds from an affiliate of our sponsor upon filing claims.

• We rent apartment homes to an affiliate of our sponsor for use as regional offices. For the year ended December 31, 2018, we earned $21,589 of rental revenue from our affiliates.

Currently Proposed Transactions

Other than as described above, there are no currently proposed material transactions with related persons other than those covered by the terms of the agreements described above.

Policies and Procedures for Transactions with Related Persons

In order to reduce or eliminate certain potential conflicts of interest, our charter and our advisory agreement contain restrictions and conflict resolution procedures relating to transactions we enter into with our advisor, our directors or their respective affiliates. Each of the restrictions and procedures that apply to transactions with our advisor and its affiliates will also apply to any transaction with any entity or real estate program controlled by our advisor and its affiliates. As a general rule, any related party transaction must be approved by a majority of the directors (including a majority of independent directors) not otherwise interested in the transaction. In determining whether to approve or authorize a particular related party transaction, these persons will consider whether the transaction between us and the related party is fair and reasonable to us and has terms and conditions no less favorable to us than those available from unaffiliated third parties.

We have also adopted a Code of Ethics that applies to each of our officers and directors, which we refer to as “covered persons.” The Code of Ethics sets forth certain conflicts of interest policies that limit and govern certain matters among us, the covered persons, our advisor and their respective affiliates.

Director Independence

Although our shares are not listed for trading on any national securities exchange, a majority of the members of our board of directors and all of the members of the audit committee are “independent” as defined by the NYSE. The NYSE standards provide that to qualify as an independent director, in addition to satisfying certain bright-line criteria, the board of directors must affirmatively determine that a director has no material relationship with us (either directly or as a partner, stockholder or officer of an organization that has a relationship with us). In addition, we have determined that these directors are independent pursuant to the definition of independence in our charter, which is based on the definition included in the North American Securities Administrators Association, Inc.’s Statement of Policy Regarding Real Estate Investment Trusts, as revised and adopted on May 7, 2007. Our board of directors has determined that G. Brian Christie, Thomas H. Purcell and Kerry D. Vandell each satisfies the bright-line criteria and that none has a relationship with us that would interfere with such person’s ability to exercise independent judgment as a member of our board of directors. None of these directors has ever served as (or is related to) an employee of ours or any of our predecessors or acquired companies or received any compensation from us or any such other entities except for compensation directly related to service as a director. Therefore, we believe that all of these directors are independent directors.

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ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Independent Registered Public Accounting Firm

During the years ended December 31, 2018 and 2017, Ernst & Young LLP, or Ernst & Young, served as our independent registered public accounting firm and provided us with certain tax and other services. Ernst & Young has served as our independent auditor since our formation.

Pre-Approval Policies

The audit committee charter imposes a duty on our audit committee topre-approve all auditing services performed for us by our independent auditors as well as all permittednon-audit services in order to ensure that the provision of such services does not impair the auditors’ independence. In determining whether or not topre-approve services, our audit committee will consider whether the service is a permissible service under the rules and regulations promulgated by the SEC. Our audit committee, may, in its discretion, delegate to one or more of its members the authority topre-approve any audit ornon-audit services to be performed by the independent auditors, provided any such approval is presented to and approved by the full audit committee at its next scheduled meeting.

All services rendered by Ernst & Young for the years ended December 31, 2018 and 2017 werepre-approved in accordance with the policies and procedures described above.

Principal Independent Registered Public Accounting Firm Fees

Our audit committee reviewed the audit andnon-audit services performed by Ernst & Young, as well as the fees charged by Ernst & Young for such services. In its review of thenon-audit service fees, our audit committee considered whether the provision of such services is compatible with maintaining the independence of Ernst & Young. The aggregate fees billed to us for professional accounting services, including the audit of our annual financial statements by Ernst & Young for the years ended December 31, 2018 and 2017, are set forth in the table below.

	2018		2017
Audit fees	$	497,652	$	477,285
Audit-related fees		—		—
Tax fees		111,033		70,296
All other fees		1,720		—
Total	$	610,405	$	547,581

For purposes of the preceding table, Ernst & Young’s professional fees are classified as follows:

• Audit fees—These are fees for professional services performed for the audit of our annual financial statements and the required review of quarterly financial statements and other procedures performed by Ernst & Young in order for them to be able to form an opinion on our consolidated financial statements. These fees also cover services that are normally provided by independent auditors in connection with statutory and regulatory filings or engagements.

• Audit-related fees—These are fees for assurance and related services that traditionally are performed by independent auditors that are reasonably related to the performance of the audit or review of the financial statements, such as due diligence related to acquisitions and dispositions, attestation services that are not required by statute or regulation, internal control reviews and consultation concerning financial accounting and reporting standards.

• Tax fees—These are fees for all professional services performed by professional staff in our independent auditor’s tax division, except those services related to the audit of our financial statements.

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These include fees for tax compliance, tax planning and tax advice, including federal, state and local issues. Services may also include assistance with tax audits and appeals before the Internal Revenue Service and similar state and local agencies, as well as federal, state and local tax issues related to due diligence.

• All other fees—These are fees for any services not included in the above-described categories.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

a. Financial Statement Schedules

See the Index to Financial Statements atpage F-1 of this report.

The following financial statement schedule is included herein at pageF-37 of this report:

Schedule III—Real Estate Assets and Accumulated Depreciation and Amortization

b. Exhibits

EXHIBIT LIST

Exhibit	Description
3.1	Articles of Amendment and Restatement of Steadfast Apartment REIT, Inc. (incorporated by reference to Exhibit 3.1 to Amendment No. 3 to the Registrant’s Registration Statement onForm S-11, filed December 16, 2013, Commission FileNo. 333-191049(“Form S-11 Amendment No. 3”))
3.2	Bylaws of Steadfast Apartment REIT, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Registration Statement onForm S-11, filed September 6, 2013, Commission FileNo. 333-191049)
4.1	Form of Subscription Agreement (incorporated by reference to Appendix B to the prospectus, dated April 15, 2015, of the Registrant)
4.2	Form of Distribution Reinvestment Plan (incorporated by reference to Appendix C to the prospectus, dated April 15, 2015, of the Registrant)
4.3	Form of Redemption Request Form (incorporated by reference to Appendix D to the prospectus, dated April 15, 2015, of the Registrant)
4.4	Form of Application for Transfer (incorporated by reference to Appendix E to the prospectus, dated April 15, 2015, of the Registrant)
4.5	Amended and Restated Distribution Reinvestment Plan (incorporated by reference to Exhibit 4.1 to Post-Effective Amendment No. 12 to FormS-11 on FormS-3, filed April 5, 2016, Commission FileNo. 333-191049)
4.6	Account Update Form (incorporated by reference to Appendix A to Post-Effective Amendment No. 12 to FormS-11 on FormS-3, filed April 5, 2016, Commission FileNo. 333-191049)
10.1	Advisory Agreement, dated as of December 13, 2013, by and among Steadfast Apartment REIT, Inc., Steadfast Apartment REIT Operating Partnership, L.P. and Steadfast Apartment Advisor, LLC (incorporated by reference to Exhibit 10.1 to theForm S-11 Amendment No. 3)
10.2	Amendment No. 1 to the Advisory Agreement, made and entered into as of November 11, 2014, by and among Steadfast Apartment REIT, Inc., Steadfast Apartment REIT Operating Partnership, L.P. and Steadfast Apartment Advisor, LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Form8-K filed November 13, 2014)
10.3	Amendment No. 2 to the Advisory Agreement, made and entered into as of November 11, 2015, by and among Steadfast Apartment REIT, Inc., Steadfast Apartment REIT Operating Partnership, L.P. and Steadfast Apartment Advisor, LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Form8-K filed November 12, 2015)

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Exhibit	Description
10.4	Amendment No. 3 to the Advisory Agreement, made and entered into as of November 9, 2016, by and among Steadfast Apartment REIT, Inc., Steadfast Apartment REIT Operating Partnership, L.P. and Steadfast Apartment Advisor, LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Form8-K filed November 10, 2016)
10.5	Amendment No. 4 to the Advisory Agreement, made and entered into as of November 8, 2017, by and among Steadfast Apartment REIT, Inc., Steadfast Apartment REIT Operating Partnership, L.P. and Steadfast Apartment Advisor, LLC, effective as of December 13, 2017 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form8-K filed November 13, 2017)
10.6	Amendment No. 5 to the Advisory Agreement, made and entered into as of November 7, 2018, by and among Steadfast Apartment REIT, Inc., Steadfast Apartment REIT Operating Partnership, L.P. and Steadfast Apartment Advisor, LLC, effective as of December 31, 2018 (incorporated by reference to Exhibit 10.1 to the Registrant’s Form8-K filed November 8, 2018)
10.7	Steadfast Apartment REIT, Inc. Amended and Restated 2013 Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrant’s Form8-K filed June 30, 2014)
10.8	Steadfast Apartment REIT, Inc. Independent Directors Compensation Plan (incorporated by reference to Exhibit 10.4 to theForm S-11 Amendment No. 3)
10.9	Second Amended and Restated Dealer Manager Agreement, dated October 15, 2015, by and among Steadfast Apartment REIT, Inc., Steadfast Apartment REIT Operating Partnership, L.P. and Steadfast Capital Markets Group, LLC (incorporated by reference to Exhibit 1.1 to the Registrant’s Post-Effective Amendment No. 9 filed October 15, 2015)
10.10	Multifamily Loan and Security Agreement, made as of November 29, 2017, by and between STAR Cumberland, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.1 to the Registrant’s Form8-K filed December 5, 2017)
10.11	Multifamily Mortgage, Assignment of Rents, Security Agreement and Fixture Filing, dated as of November 29, 2017, by and between STAR Cumberland, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.2 to the Registrant’s Form8-K filed December 5, 2017)
10.12	Assignment of Management Agreement and Subordination of Management Fees, dated as of November 29, 2017, by and among STAR Cumberland, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.3 to the Registrant’s Form8-K filed December 5, 2017)
10.13	Guaranty, dated as of November 29, 2017, by Steadfast Apartment REIT, Inc. for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.4 to the Registrant’s Form8-K filed December 5, 2017)
10.14	Multifamily Note, made as of November 29, 2017, by STAR Cumberland, LLC, in favor of PNC Bank, National Association (incorporated by reference to Exhibit 10.5 to the Registrant’sForm 8-K filed December 5, 2017)
10.15	Multifamily Loan and Security Agreement, made as of November 29, 2017, by and between STAR Park Valley, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.6 to the Registrant’s Form8-K filed December 5, 2017)
10.16	Multifamily Deed to Secure Debt, Assignment of Rents and Security Agreement, dated as of November 29, 2017, by and between STAR Park Valley, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.7 to the Registrant’s Form8-K filed December 5, 2017)

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Exhibit	Description
10.17	Assignment of Management Agreement and Subordination of Management Fees, dated as of November 29, 2017, by and among STAR Park Valley, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.8 to the Registrant’s Form8-K filed December 5, 2017)
10.18	Guaranty, dated as of November 29, 2017, by Steadfast Apartment REIT, Inc. for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.9 to the Registrant’s Form8-K filed December 5, 2017)
10.19	Multifamily Note, made as of November 29, 2017, by STAR Park Valley, LLC, in favor of PNC Bank, National Association (incorporated by reference to Exhibit 10.10 to the Registrant’sForm 8-K filed December 5, 2017)
10.20	Multifamily Loan and Security Agreement, made as of November 29, 2017, by and between STAR Horseshoe, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.11 to the Registrant’s Form8-K filed December 5, 2017)
10.21	Multifamily Deed of Trust, Assignment of Rents and Security Agreement, dated as of November 29, 2017, by STAR Horseshoe, LLC for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.12 to the Registrant’s Form8-K filed December 5, 2017)
10.22	Assignment of Management Agreement and Subordination of Management Fees, dated as of November 29, 2017, by and among STAR Horseshoe, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.13 to the Registrant’s Form8-K filed December 5, 2017)
10.23	Guaranty, dated as of November 29, 2017, by Steadfast Apartment REIT, Inc. to and for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.14 to the Registrant’s Form8-K filed December 5, 2017)
10.24	Multifamily Note, made as of November 29, 2017, by STAR Horseshoe, LLC, in favor of PNC Bank, National Association (incorporated by reference to Exhibit 10.15 to the Registrant’sForm 8-K filed December 5, 2017)
10.25	Multifamily Loan and Security Agreement, made as of December 29, 2017, by and between STAR Delano, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.1 to the Registrant’s Form8-K filed January 4, 2018)
10.26	Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated as of December 29, 2017, by and between STAR Delano, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.2 to the Registrant’s Form8-K filed January 4, 2018)
10.27	Assignment of Management Agreement and Subordination of Management Fees, dated as of December 29, 2017, by and among STAR Delano, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.3 to the Registrant’s Form8-K filed January 4, 2018)
10.28	Guaranty, dated as of December 29, 2017, by Steadfast Apartment REIT, Inc. for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.4 to the Registrant’s Form8-K filed January 4, 2018)
10.29	Multifamily Note, made as of December 29, 2017, by STAR Delano, LLC, in favor of PNC Bank, National Association (incorporated by reference to Exhibit 10.5 to the Registrant’s Form8-K filed January 4, 2018)

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Exhibit	Description
10.30	Multifamily Loan and Security Agreement, made as of December 29, 2017, by and between STAR Meadows, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.6 to the Registrant’s Form8-K filed January 4, 2018)
10.31	Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated as of December 29, 2017, by and between STAR Meadows, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.7 to the Registrant’s Form8-K filed January 4, 2018)
10.32	Assignment of Management Agreement and Subordination of Management Fees, dated as of December 29, 2017, by and among STAR Meadows, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.8 to the Registrant’s Form8-K filed January 4, 2018)
10.33	Guaranty, dated as of December 29, 2017, by Steadfast Apartment REIT, Inc. for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.9 to the Registrant’s Form8-K filed January 4, 2018)
10.34	Multifamily Note, made as of December 29, 2017, by STAR Meadows, LLC, in favor of PNC Bank, National Association (incorporated by reference to Exhibit 10.10 to the Registrant’sForm 8-K filed January 4, 2018)
10.35	Multifamily Loan and Security Agreement, made as of December 29, 2017, by and between STAR Monticello, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.11 to the Registrant’s Form8-K filed January 4, 2018)
10.36	Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated as of December 29, 2017, by STAR Monticello, LLC for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.12 to the Registrant’s Form8-K filed January 4, 2018)
10.37	Assignment of Management Agreement and Subordination of Management Fees, dated as of December 29, 2017, by and among STAR Monticello, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.13 to the Registrant’s Form8-K filed January 4, 2018)
10.38	Guaranty, dated as of December 29, 2017, by Steadfast Apartment REIT, Inc. to and for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.14 to the Registrant’s Form8-K filed January 4, 2018)
10.39	Multifamily Note, made as of December 29, 2017, by STAR Monticello, LLC, in favor of PNC Bank, National Association (incorporated by reference to Exhibit 10.15 to the Registrant’sForm 8-K filed January 4, 2018)
10.40	Master Credit Facility Agreement dated as of July 31, 2018, by and among STAR 1250 West, LLC, STAR Brookfield, LLC, STAR Bella Terra, LLC, STAR Carrington KC, LLC, STAR Summer Valley, LLC, STAR Wetherington, LLC, STAR Eagle Lake, LLC, STAR Harrison Place, LLC, STAR Hearthstone, LLC, STAR McGinnis Ferry, LLC, START-Bone, LLC, STAR Preston Hills, LLC, STAR Randall Highlands, LLC, STAR Hubbard, LLC, STAR Terrace Cove, LLC, STAR at Spring Hill, LLC and Berkeley Point Capital LLC

F-97

Exhibit	Description
10.41	Multifamily Note ($82,750,350) dated as of July 31, 2018, by STAR 1250 West, LLC, STAR Brookfield, LLC, STAR Bella Terra, LLC, STAR Carrington KC, LLC, STAR Summer Valley, LLC, STAR Wetherington, LLC, STAR Eagle Lake, LLC, STAR Harrison Place, LLC, STAR Hearthstone, LLC, STAR McGinnis Ferry, LLC, START-Bone, LLC, STAR Preston Hills, LLC, STAR Randall Highlands, LLC, STAR Hubbard, LLC, STAR Terrace Cove, LLC and STAR at Spring Hill, LLC for the benefit of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Form10-Q filed November 8, 2018)
10.42	Multifamily Note ($137,917,250) dated as of July 31, 2018, by STAR 1250 West, LLC, STAR Brookfield, LLC, STAR Bella Terra, LLC, STAR Carrington KC, LLC, STAR Summer Valley, LLC, STAR Wetherington, LLC, STAR Eagle Lake, LLC, STAR Harrison Place, LLC, STAR Hearthstone, LLC, STAR McGinnis Ferry, LLC, START-Bone, LLC, STAR Preston Hills, LLC, STAR Randall Highlands, LLC, STAR Hubbard, LLC, STAR Terrace Cove, LLC and STAR at Spring Hill, LLC for the benefit of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s Form10-Q filed November 8, 2018)
10.43	Multifamily Note ($331,001,400) dated as of July 31, 2018, by STAR 1250 West, LLC, STAR Brookfield, LLC, STAR Bella Terra, LLC, STAR Carrington KC, LLC, STAR Summer Valley, LLC, STAR Wetherington, LLC, STAR Eagle Lake, LLC, STAR Harrison Place, LLC, STAR Hearthstone, LLC, STAR McGinnis Ferry, LLC, START-Bone, LLC, STAR Preston Hills, LLC, STAR Randall Highlands, LLC, STAR Hubbard, LLC, STAR Terrace Cove, LLC and STAR at Spring Hill, LLC for the benefit of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.3 to the Registrant’s Form10-Q filed November 8, 2018)
10.44	Guaranty ofNon-Recourse Obligations dated as of July 31, 2018, by Steadfast Apartment REIT, Inc. for the benefit of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.4 to the Registrant’s Form10-Q filed November 8, 2018)
10.45	Environmental Indemnity Agreement dated as of July 31, 2018, by STAR 1250 West, LLC, STAR Brookfield, LLC, STAR Bella Terra, LLC, STAR Carrington KC, LLC, STAR Summer Valley, LLC, STAR Wetherington, LLC, STAR Eagle Lake, LLC, STAR Harrison Place, LLC, STAR Hearthstone, LLC, STAR McGinnis Ferry, LLC, START-Bone, LLC, STAR Preston Hills, LLC, STAR Randall Highlands, LLC, STAR Hubbard, LLC, STAR Terrace Cove, LLC and STAR at Spring Hill, LLC for the benefit of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.5 to the Registrant’s Form10-Q filed November 8, 2018)
10.46	Multifamily Loan and Security Agreement, dated as of July 31, 2018, by and between STAR Barrett Lakes, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.6 to the Registrant’s Form10-Q filed November 8, 2018)
10.47	Multifamily Deed to Secure Debt, Assignment of Rents and Security Agreement (Georgia), effective as of July 31, 2018, by and between STAR Barrett Lakes, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.7 to the Registrant’s Form10-Q filed November 8, 2018)
10.48	Assignment of Management Agreement and Subordination of Management Fees, effective as of July 31, 2018, by and among STAR Barrett Lakes, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.8 to the Registrant’s Form10-Q filed November 8, 2018)
10.49	Guaranty (Multistate), effective as of July 31, 2018, by Steadfast Apartment REIT, Inc. for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.9 to the Registrant’s Form10-Q filed November 8, 2018)

F-98

Exhibit	Description
10.50	Multifamily Note Fixed Rate Defeasance, effective as of July 31, 2018, by STAR Barrett Lakes, LLC, in favor of PNC Bank, National Association (incorporated by reference to Exhibit 10.10 to the Registrant’s Form10-Q filed November 8, 2018)
10.51	Multifamily Loan and Security Agreement, dated as of July 31, 2018, by and between STAR East Cobb, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.11 to the Registrant’s Form10-Q filed November 8, 2018)
10.52	Multifamily Deed to Secure Debt, Assignment of Rents and Security Agreement (Georgia), effective as of July 31, 2018, by and between STAR East Cobb, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.12 to the Registrant’s Form10-Q filed November 8, 2018)
10.53	Assignment of Management Agreement and Subordination of Management Fees, effective as of July 31, 2018, by and among STAR East Cobb, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.13 to the Registrant’s Form10-Q filed November 8, 2018)
10.54	Guaranty (Multistate), effective as of July 31, 2018, by Steadfast Apartment REIT, Inc. for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.14 to the Registrant’s Form10-Q filed November 8, 2018)
10.55	Multifamily Note Fixed Rate Defeasance, effective as of July 31, 2018, by STAR East Cobb, LLC, in favor of PNC Bank, National Association (incorporated by reference to Exhibit 10.15 to the Registrant’s Form10-Q filed November 8, 2018)
10.56	Multifamily Loan and Security Agreement, dated as of July 31, 2018, by and between STAR Heritage Place, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.16 to the Registrant’s Form10-Q filed November 8, 2018)
10.57	Multifamily Deed of Trust, Absolute Assignment of Leases and Rents and Security Agreement (Including Fixture Filing) (Tennessee), made as of July 31, 2018, by and between STAR Heritage Place, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.17 to the Registrant’s Form10-Q filed November 8, 2018)
10.58	Assignment of Management Agreement and Subordination of Management Fees, effective as of July 31, 2018, and among STAR Heritage Place, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.18 to the Registrant’s Form10-Q filed November 8, 2018)
10.59	Guaranty (Multistate), effective as of July 31, 2018, by Steadfast Apartment REIT, Inc. for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.19 to the Registrant’s Form10-Q filed November 8, 2018)
10.60	Multifamily Note Fixed Rate Defeasance, effective as of July 31, 2018, by STAR Heritage Place, LLC, in favor of PNC Bank, National Association (incorporated by reference to Exhibit 10.20 to the Registrant’s Form10-Q filed November 8, 2018)
10.61	Multifamily Loan and Security Agreement, dated as of July 31, 2018, by and between STAR Oasis, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.21 to the Registrant’s Form10-Q filed November 8, 2018)
10.62	Multifamily Deed of Trust, Assignment of Rents and Security Agreement (Colorado), effective as of July 31, 2018, by STAR Oasis, LLC for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.22 to the Registrant’s Form10-Q filed November 8, 2018)

F-99

Exhibit	Description
10.63	Assignment of Management Agreement and Subordination of Management Fees, effective as of July 31, 2018, by and among STAR Oasis, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.23 to the Registrant’sForm 10-Q filed November 8, 2018)
10.64	Guaranty (Multistate), effective as of July 31, 2018, by Steadfast Apartment REIT, Inc. for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.24 to the Registrant’s Form10-Q filed November 8, 2018)
10.65	Multifamily Note Fixed Rate Defeasance, effective as of July 31, 2018, by STAR Oasis, LLC, in favor of PNC Bank, National Association (incorporated by reference to Exhibit 10.25 to the Registrant’s Form10-Q filed November 8, 2018)
10.66	Multifamily Loan and Security Agreement, dated as of July 31, 2018, by and between STAR Ridge Crossings, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.26 to the Registrant’s Form10-Q filed November 8, 2018)
10.67	Multifamily Mortgage, Assignment of Rents and Security Agreement (Alabama), made as of July 31, 2018, by and between STAR Ridge Crossings, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.27 to the Registrant’s Form10-Q filed November 8, 2018)
10.68	Assignment of Management Agreement and Subordination of Management Fees, effective as of July 31, 2018, by and among STAR Ridge Crossings, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.28 to the Registrant’s Form10-Q filed November 8, 2018)
10.69	Guaranty (Multistate), effective as of July 31, 2018, by Steadfast Apartment REIT, Inc. for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.29 to the Registrant’s Form10-Q filed November 8, 2018)
10.70	Multifamily Note Fixed Rate Defeasance, effective as of July 31, 2018, by STAR Ridge Crossings, LLC, in favor of PNC Bank, National Association (incorporated by reference to Exhibit 10.30 to the Registrant’s Form10-Q filed November 8, 2018)
21.1*	Subsidiaries of the Company
23.1*	Consent of Ernst & Young LLP
31.1*	Certification of the Principal Executive Officer pursuant to Exchange Act Rule13a-14(a) or15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of the Principal Financial Officer pursuant to Exchange Act Rule13a-14(a) or15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1**	Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2**	Certification of the Principal Financial Officer pursuant to 18 U.S.C. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.1*	Consent of CBRE Capital Advisors, Inc.
101.INS*	XBRL Instance Document
101.SCH*	XBRL Taxonomy Extension Schema Document
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB*	XBRL Taxonomy Extension Labels Linkbase Document

F-100

Exhibit	Description
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document

* Filed herewith

** In accordance with Item 601(b)(32) of RegulationS-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

ITEM 16. FORM10-K SUMMARY

The Company has elected not to provide summary information.

F-101

STEADFAST APARTMENT REIT, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm	F-103
Consolidated Balance Sheets as of December 31, 2018 and 2017	F-104
Consolidated Statements of Operations for the Years Ended December 31, 2018, 2017 and 2016	F-105
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2018, 2017 and 2016	F-106
Consolidated Statements of Cash Flows for the Years Ended December 31, 2018, 2017 and 2016	F-107
Notes to Consolidated Financial Statements	F-109
Financial Statement Schedule
Schedule III—Real Estate Assets and Accumulated Depreciation and Amortization	F-144

All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

F-102

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of

Steadfast Apartment REIT, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Steadfast Apartment REIT, Inc. (the “Company”) as of December 31, 2018 and 2017, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2018, and the related notes and financial statement schedule listed in the Index at Item 15(a), Schedule III—Real Estate Assets and Accumulated Depreciation and Amortization (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2013.

Irvine, California

March 14, 2019

F-103

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED BALANCE SHEETS

	December 31,
	2018			2017
ASSETS
Assets:
Real Estate:
Land	$	164,113,072		$	164,113,072
Building and improvements		1,411,198,832			1,394,779,659
Total real estate, cost		1,575,311,904			1,558,892,731
Less accumulated depreciation and amortization		(218,672,162	)		(147,726,630	)
Total real estate, net		1,356,639,742			1,411,166,101
Cash and cash equivalents		58,880,007			27,298,855
Restricted cash		13,858,768			11,368,850
Rents and other receivables		1,836,406			1,722,065
Other assets		2,923,725			2,812,186
Total assets	$	1,434,138,648		$	1,454,368,057
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued liabilities	$	32,330,278		$	27,612,665
Notes Payable:
Mortgage notes payable, net		502,143,306			948,557,074
Credit facilities, net		548,012,437			44,848,788
Total notes payable, net		1,050,155,743			993,405,862
Distributions payable		3,953,499			3,886,730
Due to affiliates		1,711,168			2,760,555
Total liabilities		1,088,150,688			1,027,665,812
Commitments and contingencies (Note 9)
Redeemable common stock		—			36,397,062
Stockholders’ Equity:
Preferred stock, $0.01 par value per share; 100,000,000 shares authorized, no shares issued and outstanding		—			—
Common stock, $0.01 par value per share; 999,999,000 shares authorized, 51,723,801 and 50,842,640 shares issued and outstanding at December 31, 2018 and 2017, respectively		517,238			508,426
Convertible stock, $0.01 par value per share; 1,000 shares authorized, issued and outstanding as of December 31, 2018 and 2017, respectively		10			10
Additionalpaid-in capital		684,140,823			633,186,743
Cumulative distributions and net losses		(338,670,111	)		(243,389,996	)
Total stockholders’ equity		345,987,960			390,305,183
Total liabilities and stockholders’ equity	$	1,434,138,648		$	1,454,368,057

See accompanying notes to consolidated financial statements.

F-104

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	Year Ended December 31,
	2018			2017			2016
Revenues:
Rental income	$	150,900,039		$	146,032,596		$	128,723,298
Tenant reimbursements and other		19,063,191			17,365,562			15,287,216
Total revenues		169,963,230			163,398,158			144,010,514
Expenses:
Operating, maintenance and management		42,446,994			41,113,376			35,644,845
Real estate taxes and insurance		23,501,730			22,745,539			20,836,003
Fees to affiliates		25,976,226			24,342,996			24,629,873
Depreciation and amortization		70,993,280			68,417,556			67,991,543
Interest expense		44,374,484			34,944,074			26,060,155
Loss on debt extinguishment		4,975,497			—			—
General and administrative expenses		6,795,365			5,456,273			4,848,801
Acquisition costs		—			2,185			1,681,768
Total expenses		219,063,576			197,021,999			181,692,988
Net loss	$	(49,100,346	)	$	(33,623,841	)	$	(37,682,474	)
Loss per common share—basic and diluted	$	(0.96	)	$	(0.67	)	$	(0.80	)
Weighted average number of common shares outstanding—basic and diluted		51,312,947			50,358,618			47,092,206

See accompanying notes to consolidated financial statements.

F-105

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2018, 2017 AND 2016

	Common Stock						Convertible Stock				Additional Paid-In Capital			Cumulative Distributions & Net Losses			Total Stockholders’ Equity
	Shares			Amount			Shares		Amount
BALANCE, December 31, 2015		35,504,854		$	355,048			1,000	$	10	$	456,614,453		$	(84,404,930	)	$	372,564,581
Issuance of common stock		14,350,215			143,503			—		—		212,571,743			—			212,715,246
Commissions on sales of common stock and related dealer manager fees to affiliates		—			—			—		—		(17,659,380	)		—			(17,659,380	)
Transfers to redeemable common stock		—			—			—		—		(19,309,449	)		—			(19,309,449	)
Repurchase of common stock		(156,583	)		(1,566	)		—		—		(2,155,133	)		—			(2,156,699	)
Other offering costs to affiliates		—			—			—		—		(4,165,911	)		—			(4,165,911	)
Distributions declared		—			—			—		—		—			(42,357,688	)		(42,357,688	)
Amortization of stock-based compensation		—			—			—		—		100,060			—			100,060
Net loss		—			—			—		— ��		—			(37,682,474	)		(37,682,474	)
BALANCE, December 31, 2016		49,698,486			496,985			1,000		10		625,996,383			(164,445,092	)		462,048,286
Issuance of common stock		1,583,829			15,838			—		—		23,322,254			—			23,338,092
Transfers to redeemable common stock		—			—			—		—		(10,025,412	)		—			(10,025,412	)
Repurchase of common stock		(439,675	)		(4,397	)		—		—		(6,186,340	)		—			(6,190,737	)
Distributions declared		—			—			—		—		—			(45,321,063	)		(45,321,063	)
Amortization of stock-based compensation		—			—			—		—		79,858			—			79,858
Net loss		—			—			—		—		—			(33,623,841	)		(33,623,841	)
BALANCE, December 31, 2017		50,842,640			508,426			1,000		10		633,186,743			(243,389,996	)		390,305,183
Issuance of common stock		1,512,493			15,125			—		—		22,698,850			—			22,713,975
Commissions on sales of common stock and related dealer manager fees to affiliates		—			—			—		—		32,414			—			32,414
Transfers from redeemable common stock		—			—			—		—		37,028,102			—			37,028,102
Repurchase of common stock		(631,332	)		(6,313	)		—		—		(8,879,903	)		—			(8,886,216	)
Distributions declared		—			—			—		—		—			(46,179,769	)		(46,179,769	)
Amortization of stock-based compensation		—			—			—		—		74,617			—			74,617
Net loss		—			—			—		—		—			(49,100,346	)		(49,100,346	)
BALANCE, December 31, 2018		51,723,801		$	517,238			1,000	$	10	$	684,140,823		$	(338,670,111	)	$	345,987,960

See accompanying notes to consolidated financial statements.

F-106

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	Year ended December 31,
	2018			2017			2016
Cash Flows from Operating Activities:
Net loss	$	(49,100,346	)	$	(33,623,841	)	$	(37,682,474	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		70,993,280			68,417,556			67,991,543
Loss on disposal of buildings and improvements		493,941			109,321			94,010
Amortization of deferred financing costs		1,056,545			1,012,380			937,075
Amortization of stock-based compensation		74,617			79,858			100,060
Change in fair value of interest rate cap agreements		(87,160	)		447,668			270,222
Amortization of loan discount		207,074			354,984			90,718
Loss on debt extinguishment		4,975,497			—			—
Insurance claim recoveries		(441,087	)		(341,250	)		(658,886	)
Changes in operating assets and liabilities:
Rents and other receivables		(114,341	)		(60,878	)		(275,383	)
Other assets		(151,179	)		279,756			(956,089	)
Accounts payable and accrued liabilities		6,290,350			(1,380,056	)		8,181,287
Due to affiliates		(639,916	)		(625,107	)		129,657
Net cash provided by operating activities		33,557,275			34,670,391			38,221,740
Cash Flows from Investing Activities:
Acquisition of real estate investments		—			—			(210,030,200	)
Additions to real estate investments		(18,049,643	)		(26,826,024	)		(53,334,756	)
Escrow deposits for pending real estate acquisitions		(100,000	)		—			(7,092,300	)
Purchase of interest rate cap agreements		(43,200	)		(300,000	)		(116,100	)
Proceeds from settlement of interest rate cap agreements		270,000			—			—
Proceeds from insurance claims		441,087			341,250			658,886
Net cash used in investing activities		(17,481,756	)		(26,784,774	)		(269,914,470	)
Cash Flows from Financing Activities:
Proceeds from issuance of mortgage notes payable		160,850,000			197,832,000			41,850,000
Principal payments on mortgage notes payable		(611,459,963	)		(289,590	)		(255,878	)
Borrowings from credit facilities		562,669,000			10,000,000			35,000,000
Principal payments on credit facilities		(56,000,000	)		(186,300,000	)		—
Proceeds from issuance of common stock		—			—			193,953,605
Payments of commissions on sale of common stock and related dealer manager fees		(229,973	)		(234,942	)		(16,862,099	)
Reimbursement of other offering costs to affiliates		—			—			(5,485,093	)
Payment of deferred financing costs		(4,528,781	)		(965,063	)		(1,005,250	)
Payment of debt extinguishment costs		(1,019,491	)		—			—
Distributions to common stockholders		(23,399,025	)		(21,884,846	)		(19,252,136	)
Repurchase of common stock		(8,886,216	)		(6,190,737	)		(2,156,699	)
Net cash provided by (used in) financing activities		17,995,551			(8,033,178	)		225,786,450
Net increase (decrease) in cash, cash equivalents and restricted cash		34,071,070			(147,561	)		(5,906,280	)
Cash, cash equivalents and restricted cash, beginning of year		38,667,705			38,815,266			44,721,546
Cash, cash equivalents and restricted cash, end of year	$	72,738,775		$	38,667,705		$	38,815,266

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STEADFAST APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

	Year ended December 31,
	2018			2017			2016
Supplemental Disclosures of Cash Flow Information:
Interest paid	$	41,773,839		$	32,177,704		$	24,100,572
Supplemental Disclosures of Noncash Flow Transactions:
Increase in distributions payable	$	66,769		$	98,125		$	1,224,836
Application of escrow deposits to acquire real estate	$	—		$	—		$	7,092,300
Assumption of mortgage notes payable to acquire real estate	$	—		$	—		$	47,100,000
Discount on assumed mortgage notes payable	$	—		$	—		$	(2,721,540	)
Decrease in amounts receivable from transfer agent	$	—		$	—		$	(3,119,075	)
Decrease in amounts payable to affiliates for other offering costs	$	—		$	—		$	(1,319,182	)
Distributions paid to common stockholders through common stock issuances pursuant to the distribution reinvestment plan	$	22,713,975		$	23,338,092		$	21,880,716
(Decrease) increase in redeemable common stock	$	(36,397,062	)	$	10,025,412		$	19,309,449
(Decrease) increase in redemptions payable	$	(631,040	)	$	1,577,842		$	761,317
Decrease in accounts payable and accrued liabilities from additions to real estate investments	$	(941,697	)	$	(427,084	)	$	(89,223	)
Decrease in due to affiliates from additions to real estate investments	$	(147,084	)	$	(91,127	)	$	(303,902	)
(Decrease) increase in due to affiliates for commissions on sale of common stock and related dealer manager fees	$	(262,387	)	$	(234,942	)	$	797,281

See accompanying notes to consolidated financial statements.

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STEADFAST APARTMENT REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2018

1. Organization and Business

Steadfast Apartment REIT, Inc. (the “Company”) was formed on August 22, 2013, as a Maryland corporation that elected to qualify as a real estate investment trust (“REIT”) commencing with the taxable year ended December 31, 2014. On September 3, 2013, the Company was initially capitalized with the sale of 13,500 shares of common stock to Steadfast REIT Investments, LLC (the “Sponsor”) at a purchase price of $15.00 per share for an aggregate purchase price of $202,500. Steadfast Apartment Advisor, LLC (the “Advisor”), a Delaware limited liability company formed on August 22, 2013, invested $1,000 in the Company in exchange for 1,000 shares ofnon-participating,non-voting convertible stock (the “Convertible Stock”) as described in Note 6 (Stockholders’ Equity).

The Company owns and operates a diverse portfolio of multifamily properties located in targeted markets throughout the United States. As of December 31, 2018, the Company owned 34 multifamily properties comprising a total of 11,601 apartment homes. For more information on the Company’s real estate portfolio, see Note 3 (Real Estate).

Public Offering

On December 30, 2013, the Company commenced its initial public offering to offer a maximum of 66,666,667 shares of common stock for sale to the public at an initial price of $15.00 per share (with discounts available for certain categories of purchasers) (the “Primary Offering”). The Company also registered up to 7,017,544 shares of common stock for sale pursuant to the Company’s distribution reinvestment plan (the “DRP,” and together with the Primary Offering, the “Public Offering”) at an initial price of $14.25 per share. The Company terminated its Public Offering on March 24, 2016, but continues to offer shares of common stock pursuant to the DRP. As of the termination of the Public Offering, the Company had sold 48,625,651 shares of common stock in the Public Offering for gross proceeds of $724,849,631, including 1,011,561 shares of common stock issued pursuant to the DRP for gross offering proceeds of $14,414,752. As of December 31, 2018, the Company had issued 52,921,670 shares of common stock for gross offering proceeds of $788,339,974, including 5,307,643 shares of common stock issued pursuant to the DRP for gross offering proceeds of $77,905,095.

On February 14, 2017, the Company’s board of directors determined an estimated value per share of the Company’s common stock of $14.85 as of December 31, 2016. On March 14, 2018, the Company’s board of directors determined an estimated value per share of the Company’s common stock of $15.18 as of December 31, 2017. On March 12, 2019, the Company’s board of directors determined an estimated value per share of the Company’s common stock of $15.84 as of December 31, 2018. In connection with the determination of an estimated value per share, the Company’s board of directors determined a price per share for the DRP of $14.85, $15.18 and $15.84, effective March 1, 2017, April 1, 2018 and April 1, 2019, respectively. The Company’s board of directors may again, from time to time, in its sole discretion, change the price at which the Company offers shares pursuant to the DRP to reflect changes in the Company’s estimated value per share and other factors that the Company’s board of directors deems relevant.

The business of the Company is externally managed by the Advisor, pursuant to the Advisory Agreement dated December 13, 2013, by and among the Company, Steadfast Apartment REIT Operating Partnership, L.P. (the “Operating Partnership”) and the Advisor (as amended, the “Advisory Agreement”). The Advisory Agreement is subject to annual renewal by the Company’s board of directors. The current term of the Advisory Agreement expires on December 13, 2019. Subject to certain restrictions and limitations, the Advisor manages the Company’sday-to-day operations, manages the Company’s portfolio of properties and real estate-related assets, sources and presents investment opportunities to the Company’s board of directors and provides

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2018

investment management services on the Company’s behalf. The Advisor has also entered into an Advisory Services Agreement with Crossroads Capital Advisors, LLC (“Crossroads Capital Advisors”), whereby Crossroads Capital Advisors provides certain advisory services to the Company on behalf of the Advisor. The Company retained Stira Capital Markets Group, LLC (formerly known as Steadfast Capital Markets Group, LLC) (the “Dealer Manager”), an affiliate of the Sponsor, to serve as the dealer manager for the Public Offering. The Dealer Manager was responsible for marketing the Company’s shares of common stock offered pursuant to the Public Offering. The Advisor, along with the Dealer Manager, provides marketing, investor relations and other administrative services on the Company’s behalf.

Substantially all of the Company’s business is conducted through the Operating Partnership. The Company is the sole general partner of the Operating Partnership. The Company and Steadfast Apartment REIT Limited Partner, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company, entered into a Limited Partnership Agreement (the “Partnership Agreement”) on September 3, 2013.

As the Company accepted subscriptions for shares of its common stock, the Company transferred substantially all of the net offering proceeds from its Public Offering to the Operating Partnership as a contribution in exchange for partnership interests and the Company’s percentage ownership in the Operating Partnership increased proportionately. The Partnership Agreement provides that the Operating Partnership is operated in a manner that will enable the Company to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that the Operating Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), which classification could result in the Operating Partnership being taxed as a corporation. In addition to the administrative and operating costs and expenses incurred by the Operating Partnership in acquiring and operating real properties, the Operating Partnership pays all of the Company’s administrative costs and expenses, and such expenses are treated as expenses of the Operating Partnership.

The Company commenced its real estate operations on May 22, 2014, upon acquiring a fee simple interest in a multifamily property located in Spring Hill, Tennessee.

2. Summary of Significant Accounting Policies

There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form10-K for the year ended December 31, 2017, other than the adoption of Accounting Standards Update (“ASU”)2016-18, as further described below.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company, the Operating Partnership and its subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation. The financial statements of the Company’s subsidiaries are prepared using accounting policies consistent with those of the Company.

The accompanying consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) as contained within the Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC. Square footage, occupancy and certain other measures used to describe real estate included in the notes to the consolidated financial statements are presented on an unaudited basis.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2018

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.

Real Estate Assets

Depreciation and Amortization

Real estate costs related to the development, construction and improvement of properties are capitalized. Acquisition costs related to business combinations are expensed as incurred. Acquisition costs related to asset acquisitions are capitalized. On January 1, 2017, the Company early adopted ASU2017-01,Business Combinations (Topic 805): clarifying the definition of a business (“ASU2017-01”), that 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. Repair and maintenance and tenant turnover costs are charged to expense as incurred and significant replacements and betterments are capitalized. Repair and maintenance and tenant turnover costs include all costs that do not extend the useful life of the real estate asset. The Company considers the period of future benefit of an asset to determine its appropriate useful life and anticipates the estimated useful lives of assets by class to be generally as follows:

Buildings	27.5 years
Building improvements	5-25 years
Tenant improvements	Shorter of lease term or expected useful life
Tenant origination and absorption costs	Remaining term of related lease
Furniture, fixtures, and equipment	5-10 years

Real Estate Purchase Price Allocation

Prior to its adoption of ASU2017-01, the Company recorded the acquisition of income-producing real estate or real estate that will be used for the production of income as a business combination. All assets acquired and liabilities assumed in a business combination were measured at their acquisition-date fair values. Acquisition costs were expensed as incurred. Upon adoption of ASU2017-01, the Company records the acquisition of income-producing real estate or real estate that are used for the production of income as an asset acquisition. All assets acquired and liabilities assumed in the asset acquisition are measured at their acquisition date fair values. Acquisition costs are capitalized and allocated between land, buildings and improvements and tenant origination and associated costs on the consolidated balance sheet.

The Company assesses the acquisition-date fair values of all tangible assets, identifiable intangible assets and assumed liabilities using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis) and that utilize appropriate discount and/or capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. The fair value of tangible assets of an acquired property considers the value of the property as if it was vacant.

Intangible assets include the value ofin-place leases, which represents the estimated value of the net cash flows of thein-place leases to be realized, as compared to the net cash flows that would have occurred had the property been vacant at the time of acquisition and subject tolease-up.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2018

The Company estimates the value of tenant origination and absorption costs by considering the estimated carrying costs during hypothetical expectedlease-up periods, considering current market conditions. In estimating carrying costs, the Company estimates the amount of lost rentals using market rates during the expectedlease-up periods.

The Company amortizes the value ofin-place leases to expense over the remainingnon-cancelable term of the respective leases. Should a tenant terminate its lease, the unamortized portion of thein-place lease value and customer relationship intangibles would be charged to expense in that period.

The Company records above-market and below-marketin-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 (1) the contractual amounts to be paid pursuant to thein-place leases and (2) the Company’s estimate of fair market lease rates for the correspondingin-place leases, measured over a period equal to the remainingnon-cancelable term of the lease. The Company amortizes any capitalized above-market or below-market lease values as a reduction or increase to rental income over the remainingnon-cancelable terms of the respective leases.

The total amount of other intangible assets acquired will be further allocated toin-place lease values and customer relationship intangible values based on the Company’s evaluation of the specific characteristics of each tenant’s lease and its overall relationship with that respective tenant. Characteristics that the Company considers in allocating these values include the nature and extent of existing business relationships with the tenant, growth prospects for developing new business with the tenant, and the tenant’s credit quality and expectations of lease renewals (including those existing under the terms of the lease agreement), among other factors.

Estimates of the fair values of the tangible assets, identifiable intangible assets and assumed liabilities require the Company to make significant assumptions to estimate market lease rates, property-operating expenses, carrying costs duringlease-up periods, discount rates, market absorption periods, and the number of years the property will be held for investment. The use of inappropriate assumptions could result in an incorrect valuation of acquired tangible assets, identifiable intangible assets and assumed liabilities, which could impact the amount of the Company’s net income (loss).

Impairment of Real Estate Assets

The Company accounts for its real estate assets in accordance with ASC 360,Property, Plant and Equipment (“ASC 360”). ASC 360 requires the Company to continually monitor events and changes in circumstances that could indicate that the carrying amounts of the Company’s real estate and related intangible assets may not be recoverable. When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets and liabilities may not be recoverable, the Company assesses the recoverability of the assets by estimating whether the Company will recover the carrying value of the asset through its undiscounted future cash flows and its eventual disposition. Based on this analysis, if the Company does not believe that it will be able to recover the carrying value of the real estate and related intangible assets and liabilities, the Company records an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangible assets and liabilities. If any assumptions, projections or estimates regarding an asset changes in the future, the Company may have to record an impairment to reduce the net book value of such individual asset. The Company did not record any impairment loss on its real estate assets during the years ended December 31, 2018, 2017 and 2016.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2018

Rents and Other Receivables

The Company will periodically evaluate the collectability of amounts due from tenants and maintain an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments under lease agreements. The Company exercises judgment in establishing these allowances and considers payment history and current credit status of tenants in developing these estimates. Due to the short-term nature of the operating leases, the Company does not maintain a deferred rent receivable related to the straight-lining of rents.

Revenue Recognition

On January 1, 2018, the Company adopted ASC 606,Revenue from Contracts with Customers, (“ASC 606”), which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard requires the Company to recognize, for certain of its revenue sources, the transfer of promised goods or services to customers in an amount that reflects the consideration the Company is entitled to in exchange for those goods or services. The Company selected the modified retrospective transition method but had no cumulative effect adjustment to recognize as of the date of adoption on January 1, 2018.

The Company’s revenue consists of rental revenues and tenant reimbursements and other. There was no impact to the Company’s recognition of rental revenue from leasing arrangements as this was specifically excluded from ASC 606. The company identified limited sources of revenues fromnon-lease components but did not experience a material impact on its revenue recognition in the consolidated financial statements upon adoption. The Company leases apartment and condominium units under operating leases with terms generally of one year or less. Generally, credit investigations are performed for prospective residents and security deposits are obtained. The Company will recognize minimum rent, including rental abatements, concessions and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of thenon-cancellable term of the related lease and amounts expected to be received in later years will be recorded as 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 in accordance with ASC 840,Leases.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents may include cash and short-term investments. Short-term investments are stated at cost, which approximates fair value. As of December 31, 2018 and 2017, the Company had amounts in excess of federally insured limits in deposit accounts with a financial institution. The Company limits such deposits to financial institutions with high credit standing.

Restricted Cash

Restricted cash represents those cash accounts for which the use of funds is restricted by loan covenants. As of December 31, 2018 and 2017, the Company had a restricted cash balance of $13,858,768 and $11,368,850, respectively, which represents amounts set aside as impounds for future property tax payments, property insurance payments and tenant improvement payments as required by agreements with the Company’s lenders.

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STEADFAST APARTMENT REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2018

Deferred Financing Costs

The Company capitalizes deferred financing costs such as commitment fees, legal fees and other third-party costs associated with obtaining commitments for financing that result in a closing of such financing, as a contra liability against the respective outstanding debt balance. The Company amortizes these costs over the terms of the respective financing agreements using the effective interest method. The Company expenses unamortized deferred financing costs when the associated debt is refinanced or repaid before maturity unless specific rules are met that would allow for the carryover of such costs to the refinanced debt. Costs incurred in seeking financing transactions that do not close are expensed in the period in which it is determined that the financing will not close.

Derivative Financial Instruments

The Company accounts for its derivative instruments in accordance with ASC 815,Derivatives and Hedges. The Company’s objective in using derivatives is to add stability to interest expense and to manage the Company’s exposure to interest rate movements or other identified risks. To accomplish these objectives, the Company may use various types of derivative instruments to manage fluctuations in cash flows resulting from interest rate risk attributable to changes in the benchmark interest rate of LIBOR or other applicable benchmark rates.

The Company measures its derivative instruments and hedging activities at fair value and records them as an asset or liability, depending on its rights or obligations under the applicable derivative contract. For derivatives designated as fair value hedges, the changes in the fair value of both the derivative instrument and the hedged items are recorded in earnings. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. For derivatives designated as cash flow hedges, the effective portions of changes in fair value of the derivatives are reported in other comprehensive income (loss) and are subsequently reclassified into earnings when the hedged item affects earnings. Changes in fair value of derivative instruments not designated as hedges and ineffective portions of hedges are recognized in earnings in the affected period. The Company assesses the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designated hedged item or transaction.

As of December 31, 2018 and 2017, the Company did not have any derivatives designated as cash flow or fair value hedges, nor are derivatives being used for trading or speculative purposes.

Fair Value Measurements

Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other assets and liabilities at fair value on anon-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:

• Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

• Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2018

• Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.

When available, the Company utilizes quoted market prices from an independent third-party source to determine fair value and will classify such items in Level 1 or Level 2. In instances where the market is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require the Company to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When the Company determines the market for a financial instrument owned by the Company to be illiquid or when market transactions for similar instruments do not appear orderly, the Company uses several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and will establish a fair value by assigning weights to the various valuation sources.

The following describes the valuation methodologies used by the Company to measure fair value, including an indication of the level in the fair value hierarchy in which each asset or liability is generally classified.

Interest rate cap agreements—The Company has entered into certain interest rate cap agreements. These derivatives are recorded at fair value. Fair value was based on a model-driven valuation using the associated variable rate curve and an implied market volatility, both of which were observable at commonly quoted intervals for the full term of the interest rate cap agreements. Therefore, the Company’s interest rate cap agreements were classified within Level 2 of the fair value hierarchy and are included in other assets in the accompanying consolidated balance sheets. Changes in the fair value of the interest rate cap agreements are recorded as interest expense in the accompanying consolidated statements of operations.

The following tables reflect the Company’s assets required to be measured at fair value on a recurring basis on the consolidated balance sheets:

	December 31, 2018
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements	$	—	$	207,769	$	—

	December 31, 2017
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements	$	—	$	347,409	$	—

Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument.

Fair Value of Financial Instruments

The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities, distributions payable, due to affiliates and notes payable.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2018

The Company considers the carrying value of cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities and distributions payable to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. The fair value of amounts due to affiliates is not determinable due to the related party nature of such amounts. The Company has determined that its notes payable, net are classified as Level 3 within the fair value hierarchy.

The fair value of the notes payable, net is estimated using a discounted cash flow analysis using borrowing rates available to the Company for debt instruments with similar terms and maturities. As of December 31, 2018 and 2017, the fair value of the notes payable was $1,042,358,884 and $1,011,004,179, respectively, compared to the carrying value of $1,050,155,743 and $993,405,862, respectively.

Accounting for Stock-Based Compensation

The Company amortizes the fair value of stock-based compensation awards to expense over the vesting period and records any dividend equivalents earned as dividends for financial reporting purposes. Stock-based compensation awards are valued at the fair value on the date of grant and amortized as an expense over the vesting period.

Distribution Policy

The Company elected to be taxed as, and qualifies as, a REIT commencing with the taxable year ended December 31, 2014. To maintain its qualification as a REIT, the Company intends to make distributions each taxable year equal to at least 90% of its REIT taxable income (which is determined without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). Distributions declared during the year ended December 31, 2018, were based on daily record dates and calculated at a rate of $0.002466 per share per day during the period from January 1, 2018 to December 31, 2018.

Distributions to stockholders are determined by the board of directors of the Company and are dependent upon a number of factors relating to the Company, including funds available for the payment of distributions, financial condition, the timing of property acquisitions, capital expenditure requirements and annual distribution requirements in order for the Company to qualify as a REIT under the Internal Revenue Code. During the years ended December 31, 2018 and 2017, the Company declared distributions totaling $0.900 and $0.900 per share of common stock, respectively.

Operating Expenses

Pursuant to the Company’s Articles of Amendment and Restatement (the “Charter”), the Company is limited in the amount of certain operating expenses it may record on a rolling four-quarter basis to the greater of 2% of average invested assets and 25% of net income. Operating expenses include all costs and expenses incurred by the Company, as determined under GAAP, that in any way are related to the operation of the Company, excluding expenses of raising capital, interest payments, taxes, property operating expenses,non-cash expenditures, incentive fees, acquisition fees and expenses and investment management fees. During the four quarters ended December 31, 2018, the Company recorded operating expenses of $5,084,671, which includes $1,175,061 incurred by the Advisor on behalf of the Company, none of which was in excess of the 2%/25% limitation, and are included in general and administrative expenses in the accompanying consolidated statements of operations. Operating expenses of $93,740 remain payable and are included in due to affiliates in the accompanying consolidated balance sheet as of December 31, 2018.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2018

Income Taxes

The Company elected to be taxed as, and qualifies as, a REIT under the Internal Revenue Code and has operated as such commencing with the taxable year ended December 31, 2014. To qualify as a REIT, the Company must meet certain organizational and operational requirements, including the requirement to distribute at least 90% of the Company’s annual REIT taxable income to stockholders (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Company generally will not be subject to federal income tax to the extent it distributes qualifying dividends to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it would be subject to federal income tax on its taxable income at regular corporate income tax rates and generally would not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially and adversely affect the Company’s net income and net cash available for distribution to stockholders. However, the Company believes it is organized and operates in such a manner as to qualify for treatment as a REIT.

The Company follows ASC 740, Income Taxes, to recognize, measure, present and disclose in its accompanying consolidated financial statements uncertain tax positions that the Company has taken or expects to take on a tax return. As of December 31, 2018 and 2017, the Company had no liabilities for uncertain tax positions that it believes should be recognized in its accompanying consolidated financial statements. Due to uncertainty regarding the realization of certain deferred tax assets, the Company has established valuation allowances, primarily in connection with the net operating loss carryforwards related to the Company. The Company has not been assessed material interest or penalties by any major tax jurisdictions. The Company’s evaluations were performed for all open tax years ended December 31, 2018. As of December 31, 2018, the Company’s tax return for calendar year 2017, 2016 and 2015 remain subject to examination by major tax jurisdictions.

Per Share Data

Basic loss per share attributable to common stockholders for all periods presented are computed by dividing net loss by the weighted average number of shares of the Company’s common stock outstanding during the period. Diluted loss per share is computed based on the weighted average number of shares of the Company’s common stock and all potentially dilutive securities, if any. Distributions declared per common share assume each share was issued and outstanding each day during the period. Nonvested shares of the Company’s restricted common stock and convertible stock give rise to potentially dilutive shares of the Company’s common stock but such shares were excluded from the computation of diluted earnings per share because such shares were anti-dilutive during the period.

Segment Disclosure

The Company has determined that it has one reportable segment with activities related to investing in multifamily properties. The Company’s investments in real estate are in different geographic regions, and management evaluates operating performance on an individual asset level. However, as each of the Company’s assets has similar economic characteristics, tenants and products and services, its assets have been aggregated into one reportable segment.

Reclassifications

Certain amounts in the Company’s prior period consolidated financial statements were reclassified to conform to the current period presentation. These reclassifications did not change the results of operations of

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prior periods. On January 1, 2018, the Company adopted ASU2016-18, as further described below. As a result, the Company no longer presents transfers between cash and restricted cash in the consolidated statements of cash flows. Instead, restricted cash is included with cash and cash equivalents when reconciling the beginning of the period and end of the period total amounts shown on the consolidated statements of cash flows.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU2014-09, Revenue from Contracts with Customers (Topic 606)(“ASU2014-09”). ASU2014-09 requires an entity to recognize the revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. ASU2014-09 supersedes the revenue requirements in Revenue Recognition (Topic 605) and most industry-specific guidance throughout the Industry Topics of the Codification. ASU2014-09 does not apply to lease contracts within the scope of Leases (Topic 840). In August 2015, the FASB issued ASU2015-14,Revenue from Contracts with Customers (Topic 606), which delayed the effective date of ASU2014-09 by one year, which resulted in ASU2014-09 being effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and is to be applied retrospectively. Early adoption is permitted, but can be no earlier than the original public entity effective date of fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company selected the modified retrospective transition method had no cumulative effect adjustment to recognize as of the date of adoption on January 1, 2018. The Company identified limited sources of revenues fromnon-lease components, and the Company did not experience a material impact on its revenue recognition in the consolidated financial statements upon adoption. Additionally, there was no impact to the Company’s recognition of rental revenue, as rental revenue from leasing arrangements was specifically excluded from ASU2014-09.

In February 2016, the FASB issued ASU2016-02,Leases (“ASU2016-02”), amending the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU2016-02 requires a modified retrospective transition approach. ASU2016-02 will be effective in the first quarter of 2019 and allows for early adoption. The Company has selected the modified retrospective transition method with a cumulative effect recognized as of the date of adoption and adopted the new standard effective January 1, 2019. The Company evaluated the impact of ASU2016-02 on its leases both as it relates to the Company acting as a lessor and as a lessee. Based on its evaluation, as it relates to the former, the Company did not experience a material impact on the recognition of leases in the consolidated financial statements because under ASU2016-02, lessors will continue to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases, and operating leases. As it relates to the latter, the Company did not experience a material impact on the recognition of leases in the consolidated financial statements because the quantity of leased equipment by the Company is limited and immaterial to the consolidated financial statements.

In July 2018, the FASB issued ASU2018-11,Leases (Topic 842): Targeted Improvements (“ASU2018-11”). The FASB issued ASU2018-11 to clarify ASU2016-02. The amendments in ASU2018-11 provide entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies ASU2016-02 at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. ASU2018-11 also provides lessors with a practical expedient, by class of underlying asset, to not separate nonlease components from the associated lease component and, instead, to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue guidance (Topic 606) and both of the following are met: (1) the timing and pattern of transfer of the nonlease components and associated lease component are the same, and (2) the lease component, if accounted for separately, would be classified as an

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operating lease. If the nonlease components associated with the lease component are the predominant component of the combined component, an entity is required to account for the combined component in accordance with Topic 606. Otherwise, the entity must account for the combined component as an operating lease in accordance with Topic 842. For entities that have not adopted Topic 842 before the issuance of ASU2018-11, the effective date and transition requirements for ASU2018-11 related to separating components of a contract are the same as the effective date and transition requirements in ASU2016-02. In its capacity as a lessee, the Company elected to adopt the new transition method offered by ASU2018-11 and initially applied ASU2016-02 on January 1, 2019, and recognized a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In its capacity as a lessor and based on its evaluation of the components of its lease contracts, the Company also elected to use the practical expedient provided by ASU2018-11 and did not separate nonlease components from the associated lease components and instead accounted for those components as a single component.

In December 2018, the FASB issued ASU2018-20,Leases (Topic 842), Narrow-scope Improvements for Lessors (“ASU2018-20”). The FASB issued ASU2018-20 to allow lessors to make an accounting policy election not to evaluate whether sales taxes and other similar taxes imposed by a governmental authority on a specific lease revenue-producing transaction are the primary obligation of the lessor as the owner of the underlying leased asset. The amendments also clarify that when lessors allocate variable payments to lease andnon-lease components they are required to follow the recognition guidance in ASU2016-02 for the lease component and other applicable guidance, such as the new revenue standard, for thenon-lease component. The amendments have the same effective date and transition requirements as ASU2016-02 for entities that have not yet adopted ASU2016-02. The amendments may be applied either retrospectively or prospectively. The Company is currently evaluating the impact of ASU2018-20 will have on its consolidated financial statements and related disclosures and does not expect a material impact on its consolidated financial statements and related disclosures from its adoption.

In June 2016, the FASB issued ASU2016-13, Financial Instruments-Credit Losses(“ASU2016-13”). ASU2016-13 requires more timely recording of credit losses on loans and other financial instruments that are not accounted for at fair value through net income (loss), including loans held for investment,held-to-maturity debt securities, trade and other receivables, net investment in leases and other such commitments. ASU2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The amendments in ASU2016-13 require the Company to measure all expected credit losses based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets and eliminates the “incurred loss” methodology in current GAAP. In November 2018, the FASB issued ASU2018-19,Codification Improvements to Topic 326, Financial Instruments—Credit Losses (“ASU2018-19”), which clarifies that operating lease receivables accounted for under ASC 842Leases, are not in the scope of the new credit losses guidance. The effective date and transition requirements for this guidance are the same as for ASU2016-13. ASU2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and related disclosures and does not expect a material impact on its consolidated financial statements and related disclosures from its adoption.

In November 2016, the FASB issued ASU2016-18, Statement of Cash Flows (Topic 230), Restricted Cash(“ASU2016-18”), thatrequires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, restricted cash and restricted cash equivalents. Therefore, amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning of period and

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end of period total amounts shown on the statement of cash flows. ASU2016-18 is effective for annual periods beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted. The Company adopted ASU2016-18 on January 1, 2018 and applied it retrospectively. As a result of adopting ASU2016-18, the Company began presenting restricted cash along with cash and cash equivalents in its consolidated statements of cash flows.

In February 2017, the FASB issued ASU2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (“Subtopic610-20”): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU2017-05”), that clarifies that a financial asset is within the scope of Subtopic610-20 if it meets the definition of an in substance nonfinancial asset and defines the term in substance nonfinancial asset. ASU2017-05 also clarifies that nonfinancial assets within the scope of Subtopic610-20 may include nonfinancial assets transferred within a legal entity to a counterparty. Subtopic610-20, which was issued in May 2014 as part of ASU2014-09 (discussed above), provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. An entity is required to apply amendments in ASU2017-05 at the same time it applies the amendments in ASU2014-09. ASU2017-05 requires retrospective application and is effective for fiscal years beginning after December 15, 2017, including interim reporting periods within those fiscal years. The Company adopted ASU2017-05 on January 1, 2018. The Company did not experience a material impact from adopting ASU2017-05.

In May 2017, the FASB issued ASU2017-09,Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting(“ASU2017-09”). The FASB issued ASU2017-09 to provide clarity and reduce both (1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718,Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in ASU2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU2017-09 requires prospective application and is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. The Company adopted ASU2017-09 on January 1, 2018. The Company did not experience a material impact from adopting ASU2017-09.

In August 2018, the FASB issued ASU2018-13,Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement (“ASU2018-13”). The FASB issued ASU2018-13 to improve the effectiveness of fair value measurement disclosures by adding, eliminating, and modifying certain disclosure requirements. The amendments in ASU2018-13 modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in FASB Concepts Statement, Conceptual Framework for Financial Reporting-Chapter 8: Notes to Financial Statements, including the consideration of costs and benefits. ASU2018-13 requires prospective and retrospective application depending on the amendment and is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact ASU2018-13 will have on its consolidated financial statements and related disclosures and believes that certain disclosures of interest rate cap agreements in its consolidated financial statements may be impacted by the adoption of ASU2018-13.

3. Real Estate

As of December 31, 2018, the Company owned 34 multifamily properties comprising a total of 11,601 apartment homes. The total contract acquisition price of the Company’s real estate portfolio was $1,499,381,750. As of December 31, 2018 and 2017, the Company’s portfolio was approximately 93.9% and 93.1% occupied and the average monthly rent was $1,163 and $1,137, respectively.

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As of December 31, 2018 and 2017, accumulated depreciation and amortization related to the Company’s consolidated real estate properties were as follows:

	December 31, 2018
	Assets
	Land		Building and Improvements			Total Real Estate
Investments in real estate	$	164,113,072	$	1,411,198,832		$	1,575,311,904
Less: Accumulated depreciation and amortization		—		(218,672,162	)		(218,672,162	)
Net investments in real estate and related lease intangibles	$	164,113,072	$	1,192,526,670		$	1,356,639,742

	December 31, 2017
	Assets
	Land		Building and Improvements			Total Real Estate
Investments in real estate	$	164,113,072	$	1,394,779,659		$	1,558,892,731
Less: Accumulated depreciation and amortization		—		(147,726,630	)		(147,726,630	)
Net investments in real estate and related lease intangibles	$	164,113,072	$	1,247,053,029		$	1,411,166,101

Depreciation and amortization expense was $70,993,280, $68,417,556 and $67,991,543 for the years ended December 31, 2018, 2017 and 2016, respectively.

Depreciation of the Company’s buildings and improvements was $70,993,280, $67,407,444 and $54,857,243 for the years ended December 31, 2018, 2017 and 2016, respectively.

Amortization of the Company’s tenant origination and absorption costs was $0, $1,010,112 and $13,134,300 for the years ended December 31, 2018, 2017 and 2016, respectively. Tenant origination and absorption costs had a weighted-average amortization period as of the date of acquisition of less than one year. As of March 31, 2017, all tenant origination and absorption costs were fully amortized and written off.

Operating Leases

As of December 31, 2018, the Company’s real estate portfolio comprised 11,601 residential apartment homes and was 95.5% leased by a diverse group of residents. The residential lease terms consist of lease durations equal to twelve months or less.

Some residential leases contain provisions to extend the lease agreements, options for early termination after paying a specified penalty and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires security deposits from tenants in the form of a cash deposit. Amounts required as security deposits vary depending upon the terms of the respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in accounts payables and accrued liabilities in the accompanying consolidated balance sheets and totaled $4,130,860 and $3,613,649 as of December 31, 2018 and 2017, respectively.

As of December 31, 2018 and 2017, no tenant represented over 10% of the Company’s annualized base rent.

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4. Other Assets

As of December 31, 2018 and 2017, other assets consisted of:

	December 31,
	2018		2017
Prepaid expenses	$	1,690,959	$	1,411,353
Interest rate cap agreements		207,769		347,409
Escrow deposits for pending real estate acquisitions		100,000		—
Other deposits		924,997		1,053,424
Other assets	$	2,923,725	$	2,812,186

5. Debt

Mortgage Notes Payable

The following is a summary of mortgage notes payable, net secured by real property as of December 31, 2018 and 2017:

	December 31, 2018
					Interest Rate Range						Weighted Average Interest Rate
Type	Number of Instruments		Maturity Date Range		Minimum			Maximum						Principal Outstanding
Variable rate(1)		8		12/1/2024 - 11/1/2025		1-Mo LIBOR + 1.88	%		1-Mo LIBOR + 2.28	%		4.53	%	$	277,432,000
Fixed rate		7		7/1/2025 - 5/1/2054		4.34	%		4.60	%		4.45	%		228,127,333
Mortgage notes payable, gross		15										4.49	%		505,559,333
Discount, net(2)															—
Deferred financing costs, net(3)															(3,416,027	)
Mortgage notes payable, net														$	502,143,306

	December 31, 2017
					Interest Rate Range						Weighted Average Interest Rate
Type	Number of Instruments		Maturity Date Range		Minimum			Maximum						Principal Outstanding
Variable rate(1)		29		12/1/2021 - 9/1/2026		1-Mo LIBOR + 1.61	%		1-Mo LIBOR + 2.48	%		3.58	%	$	888,345,717
Fixed rate		2		7/1/2025 - 5/1/2054		4.34	%		4.60	%		4.51	%		67,823,579
Mortgage notes payable, gross		31										3.63	%		956,169,296
Discount, net(2)															(2,275,838	)
Deferred financing costs, net(3)															(5,336,384	)
Mortgage notes payable, net														$	948,557,074

(1) See Note 10 (Derivative Financial Instruments) for a discussion of the interest rate cap agreements used to manage the exposure to interest rate movement on the Company’s variable rate loans.

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(2) Accumulated amortization related to the debt discount as of December 31, 2018 and 2017 was $0 and $445,702, respectively.

(3) Accumulated amortization related to deferred financing costs as of December 31, 2018 and 2017 was $1,602,290 and $2,234,655, respectively.

Credit Facilities

Refinancing Transactions

On July 31, 2018, (the “Closing Date”), 16 indirect wholly-owned subsidiaries of the Company terminated the existing mortgage loans with their lenders for an aggregate principal amount of $479,318,649 and entered into a Master Credit Facility Agreement (“MCFA”) with Newmark Knight Frank (formerly with Berkeley Point Capital LLC) (“Facility Lender”) for an aggregate principal amount of $551,669,000. The MCFA provides for three tranches: (i) a fixed rate loan in the aggregate principal amount of $331,001,400 that accrues interest at 4.43% per annum; (ii) a fixed rate loan in the aggregate principal amount of $137,917,250 that accrues interest at 4.57%; and (iii) a variable rate loan in the aggregate principal amount of $82,750,350 that accrues interest at theone-month London Interbank Offered Rate (“LIBOR”) plus 1.70%. The loans have a maturity date of August 1, 2028, unless the maturity date is accelerated in accordance with the terms of the loan documents. Interest only payments are payable monthly through August 1, 2025, with interest and principal payments due monthly thereafter. The Company paid $1,930,842 in the aggregate in loan origination fees to the Facility Lender in connection with the refinancings, and paid the Advisor a loan coordination fee of $2,758,345.

On the Closing Date, five indirect wholly-owned subsidiaries of the Company terminated the existing mortgage loans with their lenders for an aggregate principal amount of $131,318,742 and entered into new loan agreements with PNC Bank, National Association (“PNC Bank”) for an aggregate principal amount of $160,850,000. Each loan agreement provides for a term loan (each a “CME Loan” and, collectively the “CME Loans”) with a maturity date of August 1, 2028, unless the maturity date is accelerated with the loan terms. Each CME Loan accrues interest at a fixed rate of 4.43% per annum. The entire outstanding principal balance and any accrued and unpaid interest on each of the CME Loans are due on the maturity date. Interest only payments on the CME Loans are payable monthly in arrears on specified dates as set forth in each loan agreement and interest and principal payments are due beginning September 1, 2023. Monthly payments are due and payable on the first day of each month, commencing September 1, 2018. The Company paid $643,400 in the aggregate in loan origination fees to PNC Bank in connection with the refinancings, and paid the Advisor a loan coordination fee of $804,250.

On November 29, 2017, three of the Company’s wholly-owned subsidiaries refinanced their existing loans under the Company’s revolving credit facility for an aggregate principal amount of $93,825,000 and entered into new loan agreements (each a “Tranche 1 Loan Agreement”), with PNC Bank, for an aggregate principal amount of $100,752,000, (the “November Refinancing Transactions”). Additionally, on December 29, 2017, another three of the Company’s wholly-owned subsidiaries refinanced their existing loans under the revolving credit facility for an aggregate principal amount of $92,475,000 and entered into new loan agreements, (each a “Tranche 2 Loan Agreement” and, together with the Tranche 1 Loan Agreement, the “Loan Agreements”) with PNC Bank for an aggregate principal amount of $97,080,000, (the “December Refinancing Transactions,” and, together with the November Refinancing Transactions, the “2017 Refinancing Transactions”).

In the 2017 Refinancing Transactions, each Loan Agreement was made pursuant to the Freddie Mac Capital Markets Execution Program (“CME”), as evidenced by a multifamily note. Pursuant to the CME, PNC Bank originates the mortgage loan and then transfers the loan to the Federal Home Loan Mortgage Corporation. Each Loan Agreement refinanced in November and December provides for a term loan with a maturity of December 1, 2024 or January 1, 2025, respectively, unless the maturity date is accelerated in accordance with its terms. Each

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loan refinanced in November and December accrues interest at theone-month LIBOR plus 1.94% or 1.88%, respectively. The entire outstanding principal balance and any accrued and unpaid interest on each of the loans are due on the maturity date. Interest and principal payments on the loans are payable monthly in arrears on specified dates as set forth in each loan agreement. Monthly payments are due and payable on the first day of each month commencing on January 1, or February 1, 2018, as applicable.

Revolving Credit Facility

On August 26, 2015, the Company entered into a revolving credit facility (the “Credit Facility”) with PNC Bank in an amount not to exceed $200,000,000, which provided for advances to purchase properties or refinance existing properties from time to time (subject to certain debt service and loan to value requirements). The Credit Facility had a maturity date of September 1, 2020, subject to extension (the “Maturity Date”). The maximum amount available to be drawn under the Credit Facility could have been increased up to $350,000,000 at any time during the period from January 1, 2016 to 12 months prior to the Maturity Date, as further described in the Credit Agreement (the “Credit Agreement”) entered into by certain of the Company’s wholly-owned subsidiaries with PNC Bank in connection with property acquisitions. For each advance drawn under the Credit Facility, an Addition Fee, as defined in the Credit Agreement, was incurred. Advances made under the Credit Facility were secured by the property for which such advances were used (each a “Loan” and collectively the “Loans”), as evidenced by the Credit Agreement, Multifamily Loan and Security Agreement (the “Loan and Security Agreement”), the Multifamily Revolving Credit Note (the “Note”) and a Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing (the “Mortgage”) and a Guaranty from the Company (the “Guaranty,” together with the Credit Agreement, the Loan and Security Agreement, the Note and the Mortgage, the “Loan Documents”). Each Loan was purchased from PNC Bank by the Federal Home Loan Mortgage Corporation (“Freddie Mac”). As of December 31, 2018, the Company had no outstanding balance under the Credit Facility. The Company is in the process of terminating the Credit Facility.

Interest on the outstanding principal balances of the loans accrued at theone-month LIBOR plus (1) the servicing spread of 0.05% and (2) the net spread, based on the debt service coverage ratio, of between 1.80% and 2.10%, as further described in the applicable Notes. Monthly interest payments were due and payable on the first day of each month until the maturity dates. The entire outstanding principal balance and any accrued and unpaid interest on the loans were due and payable in full on the maturity date. In addition to monthly interest payments, an unused commitment fee equal to 0.1% of the average daily difference between (1) the amount outstanding and (2) the maximum facility available was due and payable monthly. Additionally, an unused capacity fee equal to 1.0% of the average daily difference between the amount of the (1) maximum facility available and (2) the outstanding borrowing tranches, each as defined in the Credit Agreement, was due and payable monthly. Upon the second anniversary of each advance pursuant to the Credit Facility, a seasoning fee equal to 0.25% of such advance was due and payable monthly. The seasoning fee would increase by 0.25% on each subsequent anniversary until the Maturity Date.

Revolving Line of Credit

On May 18, 2016, the Company entered into a line of credit facility (the “Line of Credit”) with PNC Bank in an amount not to exceed $65,000,000. The Line of Credit provided for advances (each, an “LOC Loan” and collectively, the “LOC Loans”) solely for the purpose of financing the costs in connection with acquisitions and development of real estate projects and for general corporate purposes (subject to certain debt service and loan to value requirements). The Line of Credit had a maturity date of May 17, 2019, subject to extension (the “LOC Maturity Date”), as further described in the loan agreement (the “LOC Loan Agreement”) entered into by certain of the Company’s wholly-owned subsidiaries with PNC Bank in connection with the acquisition of the Landings

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of Brentwood Property (the “Mortgaged Property”). Advances made under the Line of Credit were secured by the Mortgaged Property, as evidenced by the LOC Loan Agreement, the Revolving Credit Loan Note (the “LOC Note”), the Deed of Trust and a Guaranty from the Company (the “LOC Guaranty,” together with the LOC Loan Agreement and the LOC Note, the “LOC Loan Documents”).

The Company had the option to select the interest rate in respect of the outstanding unpaid principal amount of the LOC Loans from the following options (the “Interest Rate Options”): (1) the sum of the Base Rate (as defined in the LOC Loan Agreement) plus 0.60%, or (2) a rate per annum fixed for the applicable LIBOR Interest Period (as defined in the LOC Loan Agreement) equal to the sum of LIBOR plus 1.60%. The Company could have selected different Interest Rate Options and different LIBOR Interest Periods to apply simultaneously to the LOC Loans comprising of different Borrowing Tranches (as defined in the LOC Loan Agreement) and could have converted to or renewed one or more Interest Rate Options with respect to all or any portion of the LOC Loans comprising any borrowing tranche provided that there could not have been at any time outstanding more than eight Borrowing Tranches. Monthly interest payments were due and payable in arrears on the first day of each month and on the LOC Maturity Date. The entire outstanding principal balance and any accrued and unpaid interest on the LOC Loans were due and payable in full on the LOC Maturity Date. In addition to monthly interest payments, the Company paid PNC Bank anon-refundable commitment fee equal to (a) the average daily difference between (i) the maximum principal amount of the LOC Loans minus (ii) the aggregate outstanding principal amount of all advances multiplied by (b) 0.15%. The commitment fee was payable in arrears on the first day of each calendar quarter until the LOC Maturity Date. The Company terminated the Line of Credit in January 2019.

As of December 31, 2018 and 2017, the advances obtained and certain financing costs incurred under the MCFA and the Line of Credit, which are included in credit facilities, net, in the accompanying consolidated balance sheets, are summarized in the following table:

	Amount of Advance as of December 31,
	2018			2017
Principal balance on revolving line of credit, gross(1)	$	—		$	45,000,000
Principal balance on master credit facility, gross		551,669,000			—
Deferred financing costs, neton master credit facility(2)		(3,612,316	)		—
Deferred financing costs, neton revolving line of credit(3)		(44,247	)		(151,212	)
Credit facilities, net	$	548,012,437		$	44,848,788

(1) At December 31, 2018, Landings of Brentwood was pledged as collateral pursuant to the Line of Credit. On January 9, 2019, the Company terminated the Line of Credit.

(2) Accumulated amortization related to deferred financing costs in respect of the MCFA as of December 31, 2018 and 2017, was $428,641 and $0, respectively.

(3) Accumulated amortization related to deferred financing costs in respect of the Line of Credit as of December 31, 2018 and 2017, was $280,753 and $173,788, respectively.

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Maturity and Interest

The following is a summary of the Company’s aggregate maturities as of December 31, 2018:

	Maturities During the Years Ending December 31,
Contractual Obligations	Total		2019		2020		2021		2022		2023		Thereafter
Principal payments on outstanding debt obligations(1)	$	1,057,228,333	$	966,946	$	1,186,787	$	5,099,404	$	5,204,834	$	6,018,069	$	1,038,752,293

(1) Projected principal payments on outstanding debt obligations are based on the terms of the notes payable agreements. Amounts exclude the amortization of deferred financing costs associated with the notes payable.

The Company’s notes payable contain customary financial andnon-financial debt covenants. As of December 31, 2018 and 2017, the Company was in compliance with all debt covenants.

For the years ended December 31, 2018, 2017 and 2016, the Company incurred interest expense of $44,374,484, $34,944,074 and $26,060,155, respectively. Interest expense for the years ended December 31, 2018, 2017 and 2016 includes amortization of deferred financing costs of $1,056,545, $1,012,380 and $937,075, net unrealized (gain) loss from the change in fair value of interest rate cap agreements of $(87,160), $447,668 and $270,222, amortization of loan discount of $207,074, $354,984 and $90,718, seasoning fees on the Credit Facility of $0, $85,426 and $0, Credit Facility commitment fees of $57,007, $45,680 and $65,302 and costs associated with the refinancing of debt of $587,520, $664,880 and $0, respectively.

Interest expense of $4,006,127 and $2,581,941 was payable as of December 31, 2018 and 2017, respectively, and is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.

6. Stockholders’ Equity

General

Under the Charter, the total number of shares of capital stock authorized for issuance is 1,100,000,000 shares, consisting of 999,999,000 shares of common stock with a par value of $0.01 per share, 1,000 shares of convertible stock with a par value of $0.01 per share and 100,000,000 shares designated as preferred stock with a par value of $0.01 per share.

Common Stock

The shares of the Company’s common stock entitle the holders to one vote per share on all matters upon which stockholders are entitled to vote, to receive dividends and other distributions as authorized by the Company’s board of directors in accordance with the Maryland General Corporation Law and to all rights of a stockholder pursuant to the Maryland General Corporation Law. The common stock has no preferences or preemptive, conversion or exchange rights.

On September 3, 2013, the Company issued 13,500 shares of common stock to the Sponsor for $202,500. From inception through March 24, 2016, the date of the termination of the Public Offering, the Company had issued 48,625,651 shares of common stock in its Public Offering for offering proceeds of $640,012,497, including 1,011,561 shares of common stock issued pursuant to the DRP for total proceeds of $14,414,752, net of offering costs of $84,837,134. Following the termination of the Public Offering, the Company continues to offer

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shares pursuant to the DRP. As of December 31, 2018, the Company had issued 52,921,670 shares of common stock for offering proceeds of $703,502,840, including 5,307,643 shares of common stock issued pursuant to the DRP for total proceeds of $77,905,095, net of offering costs of $84,837,134. The Offering costs primarily consisted of selling commissions and dealer manager fees.

As further discussed in Note 8 (Incentive Award Plan and Independent Director Compensation), the shares of restricted common stock vest and becomenon-forfeitable in four equal annual installments beginning on the date of grant and ending on the third anniversary of the date of grant or will become fully vested and becomenon-forfeitable on the earlier to occur of (1) the termination of the independent director’s service as a director due to his or her death or disability or (2) a change in control of the Company.

The issuance and vesting activity for the years ended December 31, 2018, 2017 and 2016 for the restricted stock issued to the Company’s independent directors as compensation for services in connection with the Company raising $2,000,000 in the Public Offering and the independent directors’re-election to the board of directors at the Company’s annual meeting were as follows:

	Year Ended December 31,
	2018			2017			2016
Nonvested shares at the beginning of the period		7,497			9,997			11,247
Granted shares		4,998			4,998			4,998
Vested shares		(4,998	)		(7,498	)		(6,248	)
Nonvested shares at the end of the period		7,497			7,497			9,997

Additionally, the weighted average fair value of restricted common stock issued to the Company’s independent directors for the years ended December 31, 2018, 2017 and 2016 was as follows:

Grant Year	Weighted Average Fair Value
2016	$	14.46
2017		14.85
2018		15.18

Included in general and administrative expenses is $74,617, $79,858 and $100,060 for the years ended December 31, 2018, 2017 and 2016, respectively, for compensation expense related to the issuance of restricted common stock. As of December 31, 2018, the compensation expense related to the issuance of the restricted common stock not yet recognized was $90,259. The weighted average remaining term of the restricted common stock was approximately one year as of December 31, 2018. As of December 31, 2018, no shares of restricted common stock issued to the independent directors have been forfeited.

Convertible Stock

The Company issued 1,000 shares of Convertible Stock to the Advisor for $1,000. The Convertible Stock will convert into shares of common stock if and when: (A) the Company has made total distributions on the then-outstanding shares of its common stock equal to the original issue price of those shares plus an aggregate 6.0% cumulative,non-compounded, annual return on the original issue price of those shares, (B) the Company lists its common stock for trading on a national securities exchange, or (C) the Advisory Agreement is terminated or not renewed (other than for “cause” as defined in the Advisory Agreement). In the event of a termination ornon-renewal of the Advisory Agreement for cause, all of the shares of the Convertible Stock will be repurchased

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for $1.00. In general, each share of Convertible Stock will convert into a number of shares of common stock equal to 1/1000 of the quotient of (A) 15% of the excess of (1) the Company’s “enterprise value” plus the aggregate value of distributions paid to date on the then outstanding shares of the Company’s common stock over (2) the aggregate purchase price paid by stockholders for those outstanding shares of common stock plus an aggregated 6.0% cumulative,non-compounded, annual return on the original issue price of those outstanding shares, divided by (B) the Company’s enterprise value divided by the number of outstanding shares of common stock on anas-converted basis, in each case calculated as of the date of the conversion.

Preferred Stock

The Charter also provides the Company’s board of directors with the authority to issue one or more classes or series of preferred stock, and prior to the issuance of such shares of preferred stock, the board of directors shall have the power from time to time to classify or reclassify, in one or more series, any unissued shares and designate the preferences, rights and privileges of such shares of preferred stock. The Company’s board of directors is authorized to amend the Charter without the approval of the stockholders to increase the aggregate number of authorized shares of capital stock or the number of shares of any class or series that the Company has authority to issue. As of December 31, 2018 and 2017, no shares of the Company’s preferred stock were issued and outstanding.

Distribution Reinvestment Plan

The Company’s board of directors has approved the DRP through which common stockholders may elect to reinvest an amount equal to the distributions declared on their shares of common stock in additional shares of the Company’s common stock in lieu of receiving cash distributions. The purchase price per share under the DRP was initially $14.25. On March 12, 2019, March 14, 2018 and February 14, 2017, the Company’s board of directors determined a price per share for the DRP of $15.84, $15.18 and $14.85, effective April 1, 2019, April 1, 2018 and March 1, 2017, respectively, in connection with the determination of an estimated value per share of the Company’s common stock.

The Company’s board of directors may again, in its sole discretion, from time to time, change this price based upon changes in the Company’s estimated value per share and other factors that the Company’s board of directors deems relevant.

No sales commissions or dealer manager fees are payable on shares sold through the DRP. The Company’s board of directors may amend, suspend or terminate the DRP at its discretion at any time upon ten days’ notice to the Company’s stockholders. Following any termination of the DRP, all subsequent distributions to stockholders will be made in cash.

Share Repurchase Plan and Redeemable Common Stock

The Company’s share repurchase plan may provide an opportunity for stockholders to have their shares of common stock repurchased by the Company, subject to certain restrictions and limitations. No shares can be repurchased under the Company’s share repurchase plan until after the first anniversary of the date of purchase of such shares; provided, however, that this holding period shall not apply to repurchases requested within two years after the death or disability of a stockholder.

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From March 29, 2016, the date the Company first published an estimated value per share, until April 14, 2018, the purchase price for shares repurchased under the Company’s share repurchase plan was as follows:

Share Purchase Anniversary	Repurchase Price on Repurchase Date(1)
Less than 1 year	No Repurchase Allowed
1 year	92.5% of Estimated Value per Share(2)
2 years	95.0% of Estimated Value per Share(2)
3 years	97.5% of Estimated Value per Share(2)
4 years	100.0% of Estimated Value per Share(2)
In the event of a stockholder’s death or disability(3)	Average Issue Price for Shares(4)

On March 14, 2018, the board of directors of the Company determined to amend the terms of the Company’s share repurchase plan effective as of April 15, 2018 to (1) limit the amount of shares repurchased pursuant to the Company’s share repurchase plan each quarter to $2,000,000 and (2) revise the repurchase price to an amount equal to 93% of the most recent publicly disclosed estimated value per share. Pursuant to the amended share repurchase plan, the current share repurchase price is $14.73 per share, which represents 93% of the estimated value per share of $15.84. The share repurchase price is further reduced based on how long the stockholder has held the shares as follows:

Share Purchase Anniversary	Repurchase Price on Repurchase Date(1)
Less than 1 year	No Repurchase Allowed
1 year	92.5% of the Share Repurchase Price(2)
2 years	95.0% of the Share Repurchase Price(2)
3 years	97.5% of the Share Repurchase Price(2)
4 years	100.0% of the Share Repurchase Price(2)
In the event of a stockholder’s death or disability(3)	Average Issue Price for Shares(4)

(1) As adjusted for any stock dividends, combinations, splits, recapitalizations or any similar transaction with respect to the shares of common stock. Repurchase price includes the full amount paid for each share, including all sales commissions and dealer manager fees.

(2) The “Share Repurchase Price” equals 93% of the Estimated Value per Share. The “Estimated Value Per Share” is the most recent publicly disclosed estimated value per share determined by the Company’s board of directors.

(3) The requiredone-year holding period does not apply to repurchases requested within two years after the death or disability of a stockholder.

(4) The purchase price per share for shares repurchased upon the death or disability of a stockholder will be equal to the average issue price per share for all of the stockholder’s shares.

The purchase price per share for shares repurchased pursuant to the Company’s share repurchase plan will be further reduced by the aggregate amount of net proceeds per share, if any, distributed to the Company’s stockholders prior to the Repurchase Date (defined below) as a result of the sale of one or more of the Company’s assets that constitutes a return of capital as a result of such sales.

Repurchases of shares of the Company’s common stock are made quarterly upon written request to the Company at least 15 days prior to the end of the applicable quarter. Repurchase requests are honored approximately 30 days following the end of the applicable quarter (“Repurchase Date”). Stockholders may withdraw their repurchase request at any time up to three business days prior to the Repurchase Date.

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During the year ended December 31, 2018, the Company repurchased a total of 631,332 shares with a total repurchase value of $8,886,216 and received requests for repurchases of 1,814,302 shares with a total repurchase value of $25,249,054. During the year ended December 31, 2017, the Company repurchased a total of 439,675 shares with a total repurchase value of $6,190,737 and received requests for the repurchase of 548,395 shares with a total repurchase value of $7,766,028, respectively.

As of December 31, 2018 and 2017, the Company’s total outstanding repurchase requests received that were subject to the Company’s limitations on repurchases (discussed below) were 1,334,360 shares and 548,395 shares, respectively, with a total net repurchase value of $18,591,460 and $7,766,028, respectively.

The Company cannot guarantee that the funds set aside for the share repurchase plan will be sufficient to accommodate all repurchase requests made in any quarter. In the event that the Company does not have sufficient funds available to repurchase all of the shares of the Company’s common stock for which repurchase requests have been submitted in any quarter, priority will be given to repurchase requests in the case of the death or disability of a stockholder. If the Company repurchases less than all of the shares subject to a repurchase request in any quarter, with respect to any shares which have not been repurchased, the Company will treat the shares that have not been repurchased as a request for repurchase in the following quarter pursuant to the limitations of the share repurchase plan and when sufficient funds are available, unless the stockholder withdraws the request for repurchase. Such pending requests will be honored among all requests for repurchases in any given repurchase period as follows: first, pro rata as to repurchases sought upon a stockholder’s death or disability; and, next, pro rata as to other repurchase requests.

The Company is not obligated to repurchase shares of its common stock under the share repurchase plan. The share repurchase plan limits the number of shares to be repurchased in any calendar year to (1) 5% of the weighted average number of shares of common stock outstanding during the prior calendar year and (2) those that could be funded from the net proceeds from the sale of shares under the DRP in the prior calendar year, plus such additional funds as may be reserved for that purpose by the Company’s board of directors. Such sources of funds could include cash on hand, cash available from borrowings and cash from liquidations of securities investments as of the end of the applicable month, to the extent that such funds are not otherwise dedicated to a particular use, such as working capital, cash distributions to stockholders or purchases of real estate assets. The Company’s board of directors has further limited the amount of shares that may be repurchased pursuant to the share repurchase plan to $2,000,000 per quarter. There is no fee in connection with a repurchase of shares of the Company’s common stock pursuant to the Company’s share repurchase plan. As of December 31, 2018, the Company has recognized repurchases payable of $2,000,000, which is included in accounts payable and accrued liabilities on the accompanying consolidated balance sheets.

The Company’s board of directors may, in its sole discretion, further amend, suspend or terminate the share repurchase plan at any time upon 30 days’ notice to its stockholders if it determines that the funds available to fund the share repurchase plan are needed for other business or operational purposes or that amendment, suspension or termination of the share repurchase plan is in the best interest of the Company’s stockholders. Therefore, a stockholder may not have the opportunity to make a repurchase request prior to any potential termination or suspension of the Company’s share repurchase plan. The share repurchase plan will terminate in the event that a secondary market develops for the Company’s shares of common stock.

Pursuant to the share repurchase plan, for the year ended December 31, 2018, the Company reclassified $37,028,102, net of $8,886,216 of fulfilled redemption requests, from temporary equity to permanent equity, which is included as additionalpaid-in capital on the accompanying consolidated balance sheets. For the year ended December 31, 2017, the Company reclassified $10,025,412, net of $6,190,737 of fulfilled redemption

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requests, from permanent equity to temporary equity, which is included as redeemable common stock on the accompanying consolidated balance sheets.

Distributions

The Company’s long-term policy is to pay distributions solely from cash flow from operations. However, because the Company may receive income from interest or rents at various times during the Company’s fiscal year and because the Company may need cash flow from operations during a particular period to fund capital expenditures and other expenses, the Company expects that from time to time during the Company’s operational stage, the Company will declare distributions in anticipation of cash flow that the Company expects to receive during a later period, and the Company expects to pay these distributions in advance of its actual receipt of these funds. The Company’s board of directors has the authority under its organizational documents, to the extent permitted by Maryland law, to fund distributions from sources such as borrowings, offering proceeds or advances and the deferral of fees and expense reimbursements by the Advisor, in its sole discretion. The Company has not established a limit on the amount of proceeds it may use to fund distributions from sources other than cash flow from operations. If the Company pays distributions from sources other than cash flow from operations, the Company will have fewer funds available and stockholders’ overall return on their investment in the Company may be reduced.

To maintain the Company’s qualification as a REIT, the Company must make aggregate annual distributions to its stockholders of at least 90% of its REIT taxable income (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). If the Company meets the REIT qualification requirements, the Company generally will not be subject to federal income tax on the income that the Company distributes to its stockholders each year.

Distributions Declared

The Company’s board of directors approved a cash distribution that accrued at a rate of $0.002466 per day for each share of the Company’s common stock during the years ended December 31, 2018 and 2017, which, if paid over a365-day period, is equivalent to a 6.0% annualized distribution rate based on a purchase price of $15.00 per share of the Company’s common stock. The distributions declared accrue daily to stockholders of record as of the close of business on each day and are payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month. There is no guarantee that the Company will continue to pay distributions at this rate or at all.

Distributions declared for the years ended December 31, 2018 and 2017 were $46,179,769 and $45,321,063, including $22,603,893 and $23,316,731, or 1,497,359 shares and 1,573,774 shares of common stock, respectively, attributable to the DRP.

As of December 31, 2018 and 2017, $3,953,499 and $3,886,730 of distributions declared were payable, which included $1,860,828 and $1,970,910, or 122,584 shares and 132,721 shares of common stock, attributable to the DRP, respectively.

Distributions Paid

For the years ended December 31, 2018 and 2017, the Company paid cash distributions of $23,399,025 and $21,884,846, which related to distributions declared for each day in the period from December 1, 2017 through

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November 30, 2018 and December 1, 2016 through November 30, 2017, respectively. Additionally, for the years ended December 31, 2018 and 2017, 1,507,497 and 1,578,832 shares of common stock were issued pursuant to the DRP for gross offering proceeds of $22,713,975 and $23,338,092, respectively. For the years ended December 31, 2018 and 2017, the Company paid total distributions of $46,113,000 and $45,222,938, respectively.

7. Related Party Arrangements

The Company has entered into the Advisory Agreement with the Advisor and a Dealer Manager Agreement with the Dealer Manager. Pursuant to the Advisory Agreement and Dealer Manager Agreement, the Company is or was obligated to pay the Advisor and the Dealer Manager specified fees upon the provision of certain services related to the Public Offering, the investment of funds in real estate and real estate-related investments and the management of the Company’s investments and for other services (including, but not limited to, the disposition of investments). Subject to the limitations described below, the Company is also obligated to reimburse the Advisor and its affiliates for organization and offering costs incurred by the Advisor and its affiliates on behalf of the Company, as well as acquisition and origination expenses and certain operating expenses incurred on behalf of the Company or incurred in connection with providing services to the Company.

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Amounts attributable to the Advisor and its affiliates incurred (earned) for the years ended December 31, 2018, 2017 and 2016 are as follows:

	Incurred (Earned) For the Year Ended December 31,
	2018			2017			2016
Consolidated Statements of Operations:
Expensed
Investment management fees(1)	$	15,743,185		$	16,904,458		$	15,096,243
Acquisition fees(1)		—			—			2,766,209
Acquisition expenses(2)		—			—			782,047
Loan coordination fees(1)		3,562,595			1,483,740			1,539,500
Property management:
Fees(1)		4,886,436			4,706,698			4,140,513
Reimbursement of onsite personnel(3)		14,959,964			14,194,648			13,013,601
Other fees(1)		1,784,010			1,248,100			1,087,408
Other fees—property operations(3)		82,461			103,320			—
Other fees—G&A(4)		49,916			92,488			66,064
Other operating expenses(4)		1,175,061			1,449,733			1,231,329
Insurance proceeds(5)		(150,000	)		(172,213	)		—
Property insurance(6)		1,394,218			909,568			174,281
Rental revenue(7)		(21,589	)		—			—
Consolidated Balance Sheets:
Capitalized
Acquisition expenses(8)		26,113			—			—
Capital expenditures(9)		7,295			28,691			23,178
Construction management:
Fees(9)		585,532			1,453,859			3,601,084
Reimbursement of labor costs(9)		908,206			2,551,463			3,804,318
Deferred financing costs(10)		18,923			—			—
Additionalpaid-in capital
Other offering costs reimbursement		—			—			4,165,911
Selling commissions		—			—			12,017,003
Dealer manager fees		—			—			5,642,377
	$	45,012,326		$	44,954,553		$	69,151,066

(1) Included in fees to affiliates in the accompanying consolidated statements of operations.

(2) Included in acquisition costs in the accompanying consolidated statements of operations.

(3) Included in operating, maintenance and management in the accompanying consolidated statements of operations.

(4) Included in general and administrative expenses in the accompanying consolidated statements of operations.

(5) Included in tenant reimbursements and other in the accompanying consolidated statements of operations.

(6) Property related insurance expense and the amortization of the prepaid insurance deductible account are included in general and administrative expenses in the accompanying consolidated statements of operations. The amortization of the prepaid property insurance is included in operating, maintenance and management expenses in the accompanying consolidated statements of operations. The prepaid insurance is included in other assets in the accompanying consolidated balance sheets upon payment.

(7) Included in rental income in the accompanying consolidated statements of operations.

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(8) Included in total real estate, cost in the accompanying consolidated balance sheets following the adoption of ASU2017-01 as of January 1, 2017.

(9) Included in building and improvements in the accompanying consolidated balance sheets.

(10) Included in credit facilities, net in the accompanying consolidated balance sheets.

Amounts attributable to the Advisor and its affiliates paid (received) for the years ended December 31, 2018, 2017 and 2016 are as follows:

	Paid (Received) During the Year Ended December 31,
	2018			2017			2016
Consolidated Statements of Operations:
Expensed
Investment management fees	$	15,687,320		$	18,317,568		$	14,734,308
Acquisition fees		—			—			3,276,927
Acquisition expenses		—			—			927,647
Loan coordination fees		4,290,695			755,640			1,539,500
Property management:
Fees		4,872,734			4,685,475			4,053,502
Reimbursement of onsite personnel		14,958,751			14,022,282			12,831,296
Other fees		1,783,971			1,245,748			1,078,882
Other fees—property operations		82,461			103,320			—
Other fees—G&A		49,916			92,488			66,064
Other operating expenses		1,157,836			1,585,631			1,085,134
Insurance proceeds		(75,000	)		(172,213	)		—
Property insurance		1,323,074			1,001,744			230,241
Rental revenue		(21,589	)		—			—
Consolidated Balance Sheets:
Capitalized
Acquisition expenses		24,507			—			—
Capital expenditures		7,295			28,691			23,178
Construction management:
Fees		700,410			1,431,290			3,625,869
Reimbursement of labor costs		941,879			2,665,299			4,083,432
Deferred financing costs		18,923			—			—
Additionalpaid-in capital
Other offering costs reimbursement		—			—			5,485,093
Selling commissions		262,387			234,942			11,219,722
Dealer manager fees		—			—			5,642,377
	$	46,065,570		$	45,997,905		$	69,903,172

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Amounts attributable to the Advisor and its affiliates that are payable (prepaid) as of December 31, 2018 and 2017, are as follows:

	Payable (Prepaid) as of December 31,
	2018			2017
Consolidated Statements of Operations:
Expensed
Investment management fees	$	55,865		$	—
Loan coordination fees		—			728,100
Property management:
Fees		410,424			396,722
Reimbursement of onsite personnel		768,107			766,894
Other fees		41,989			41,950
Other operating expenses		93,740			76,515
Insurance proceeds		(75,000	)		—
Property insurance		(101,573	)		(172,717	)
Consolidated Balance Sheets:
Capitalized
Acquisition expenses		1,607			—
Construction management:
Fees		10,281			125,159
Reimbursement of labor costs		29,203			62,876
Additionalpaid-in capital
Selling commissions		299,952			562,339
	$	1,534,595		$	2,587,838

Investment Management Fee

The Company pays the Advisor a monthly investment management fee equal toone-twelfth of 1.0% of (1) the cost of real properties and real estate related assets acquired directly by us or (2) our allocable cost of each real property or real estate-related asset acquired through a joint venture. The investment management fee is calculated including acquisition fees, acquisition expenses, cost of development, construction or improvement and any debt attributable to such investments, or our proportionate share thereof in the case of investments made through joint ventures. the cost of the Company’s investments in real properties and real estate-related assets or the Company’s proportionate share thereof in the case of investments made through joint ventures. Such fee is calculated including acquisition fees, acquisition expenses and any debt attributable to such investments.

Acquisition Fees and Expenses

The Company pays the Advisor an acquisition fee equal to 1.0% of the cost of investment, which includes the amount actually paid or budgeted to fund the acquisition, origination, development, construction or improvement (i.e. value-enhancement) of any real property or real estate-related asset acquired. In addition to acquisition fees, the Company reimburses the Advisor for amounts directly incurred by the Advisor and amounts the Advisor pays to third parties in connection with the selection, evaluation, acquisition and development of a property or acquisition of real estate-related assets, whether or not the Company ultimately acquires the property or the real estate-related assets.

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The Charter limits the Company’s ability to pay acquisition fees if the total of all acquisition fees and expenses relating to the purchase would exceed 4.5% of the contract purchase price. Under the Charter, a majority of the Company’s board of directors, including a majority of the independent directors, is required to approve any acquisition fees (or portion thereof) that would cause the total of all acquisition fees and expenses relating to an acquisition to exceed 4.5% of the contract purchase price. In connection with the purchase of securities, the acquisition fee may be paid to an affiliate of the Advisor that is registered as a FINRA member broker-dealer if applicable FINRA rules would prohibit the payment of the acquisition fee to a firm that is not a registered broker-dealer.

Loan Coordination Fee

The Company pays the Advisor or its affiliate a loan coordination fee equal to 1.0% of the initial amount of the new debt financed or outstanding debt assumed in connection with the acquisition, development, construction, improvement or origination of a property or a real estate-related asset. In addition, in connection with any financing or the refinancing of any debt (in each case, other than identified at the time of the acquisition of a property or a real estate-related asset), the Company pays the Advisor or its affiliate a loan coordination fee equal to 0.75% of the amount of debt financed or refinanced.

Property Management Fees and Expenses

The Company has entered into property management agreements (each, as amended from time to time, a “Property Management Agreement”) with Steadfast Management Company, Inc., an affiliate of the Sponsor (the “Property Manager”), in connection with the management of each of the Company’s properties. The property management fee payable with respect to each property under the Property Management Agreements at December 31, 2018 ranged from 2.5% to 3.0% of the annual gross revenue collected at the property, as determined by the Advisor and approved by a majority of the Company’s board of directors, including a majority of the independent directors. Each Property Management Agreement has aninitial one-year term and continues thereafter on amonth-to-month basis unless either party gives 60 days’ prior notice of its desire to terminate the Property Management Agreement, provided that the Company may terminate the Property Management Agreement at any time upon a determination of gross negligence, willful misconduct or bad acts of the Property Manager or its employees or upon an uncured breach of the Property Management Agreement upon 30 days’ prior written notice to the Property Manager.

In addition to the property management fee, the Property Management Agreements specify certain other fees payable to the Property Manager for benefit administration, information technology infrastructure, licenses, support and training services and capital expenditures. The Company also reimburses the Property Manager for the salaries and related benefits ofon-site property management employees.

Construction Management Fees and Expenses

The Company has entered into construction management agreements (each a “Construction Management Agreement”) with Pacific Coast Land & Construction, Inc., an affiliate of the Sponsor (the “Construction Manager”), in connection with capital improvements and renovation or value-enhancement projects for certain properties the Company acquires. The construction management fee payable with respect to each property under the Construction Management Agreements ranges from 8.0% to 12.0% of the costs of the improvements for which the Construction Manager has planning and oversight authority. Generally, each Construction Management Agreement can be terminated by either party with 30 days’ prior written notice to the other party. Construction management fees are capitalized to the respective real estate properties in the period in which they

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are incurred as such costs relate to capital improvements and renovations for apartment homes taken out of service while they undergo the planned renovation.

The Company may also reimburse the Construction Manager for the salaries and related benefits of certain of its employees for time spent working on capital improvements and renovations.

Property Insurance

The Company deposits amounts with an affiliate of the Sponsor to fund a prepaid insurance deductible account to cover the cost of required insurance deductibles across all properties of the Company and other affiliated entities. Upon filing a major claim, proceeds from the insurance deductible account may be used by the Company or another affiliate of the Sponsor. In addition, the Company deposits amounts with an affiliate of the Sponsor to cover the cost of property and property related insurance across certain properties of the Company.

Other Operating Expense Reimbursement

In addition to the various fees paid to the Advisor, the Company is obligated to pay directly or reimburse all expenses incurred by the Advisor in providing services to the Company, including the Company’s allocable share of the Advisor’s overhead, such as rent, employee costs, utilities and information technology costs. The Company will not reimburse the Advisor for employee costs in connection with services for which the Advisor or its affiliates receive acquisition fees or disposition fees or for the salaries the Advisor pays to the Company’s executive officers.

The Charter limits the Company’s total operating expenses during any four fiscal quarters to the greater of 2% of the Company’s average invested assets or 25% of the Company’s net income for the same period (the “2%/25% Limitation”). The Company may reimburse the Advisor, at the end of each fiscal quarter, for operating expenses incurred by the Advisor; provided, however, that the Company shall not reimburse the Advisor at the end of any fiscal quarter for operating expenses that exceed the 2%/25% Limitation unless the independent directors have determined that such excess expenses were justified based on unusual andnon-recurring factors. The Advisor must reimburse the Company for the amount by which the Company’s operating expenses for the preceding four fiscal quarters then ended exceed the 2%/25% Limitation, unless approved by the independent directors. For purposes of determining the 2%/25% Limitation amount, “average invested assets” means the average monthly book value of the Company’s assets invested directly or indirectly in equity interests and loans secured by real estate during the12-month period before deducting depreciation, bad debts reserves or othernon-cash reserves. “Total operating expenses” means all expenses paid or incurred by the Company that are in any way related to the Company’s operation, including the Company’s allocable share of Advisor overhead, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, listing and registration of shares of the Company’s common stock; (b) interest payments; (c) taxes;(d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based on the gain in the sale of the Company’s assets; (f) acquisition fees and acquisition expenses (including expenses relating to potential acquisitions that the Company does not close) and investment management fees; (g) real estate commissions on the resale of investments; and (h) other expenses connected with the acquisition, disposition, management and ownership of investments (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of real property).

For the year ended December 31, 2018, the Advisor and its affiliates incurred $1,175,061 of the Company’s operating expenses, including the allocable share of the Advisor’s overhead expenses of $790,466, none of which

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were in excess of the 2%/25% Limitation and are included in the $6,795,365 of general and administrative expenses recognized by the Company.

As of December 31, 2018, the Company’s total operating expenses, as defined above, did not exceed the 2%/25% Limitation.

For the year ended December 31, 2017, the Advisor and its affiliates incurred $1,449,733 of the Company’s operating expenses, including the allocable share of the Advisor’s overhead expenses of $974,471, none of which were in excess of the 2%/25% Limitation and are included in the $5,456,273 of general and administrative expenses recognized by the Company.

For the year ended December 31, 2016, the Advisor and its affiliates incurred $1,231,329 of the Company’s operating expenses, including the allocable share of the Advisor’s overhead expenses of $919,868, none of which were in excess of the 2%/25% Limitation and are included in the $4,848,801 of general and administrative expenses recognized by the Company.

Disposition Fee

If the Advisor or its affiliates provide a substantial amount of services in connection with the sale of a property or real estate-related asset as determined by a majority of the Company’s independent directors, the Company will pay the Advisor or its affiliatesone-half of the brokerage commissions paid, but in no event to exceed 1% of the sales price of each property or real estate-related asset sold. To the extent the disposition fee is paid upon the sale of any assets other than real property, it will be included as an operating expense for purposes of the 2%/25% Limitation. In connection with the sale of securities, the disposition fee may be paid to an affiliate of the Advisor that is registered as a FINRA member broker-dealer if applicable FINRA rules would prohibit the payment of the disposition fee to a firm that is not a registered broker-dealer. As of December 31, 2018, the Company had not sold or otherwise disposed of any properties or any real estate-related assets. Accordingly, the Company had not incurred any disposition fees as of December 31, 2018.

Selling Commissions and Dealer Manager Fees

The Company paid the Dealer Manager up to 7% and 3% of the gross offering proceeds from the Primary Offering as selling commissions and dealer manager fees, respectively. The Dealer Manager reallowed 100% of sales commissions earned to participating broker-dealers. The Dealer Manager could also reallow to any participating broker-dealer a portion of the dealer manager fee that was attributable to that participating broker-dealer for certain marketing costs of that participating broker-dealer. The Dealer Manager negotiated the reallowance of the dealer manager fee on acase-by-case basis with each participating broker-dealer subject to various factors associated with the cost of the marketing program. The Company allowed a participating broker-dealer to elect to receive the 7% selling commissions at the time of sale or elect to have the selling commission paid on a trailing basis. A participating broker-dealer that elected to receive a trailing selling commission is paid as follows: 3% at the time of sale and the remaining 4% paid ratably (1% per year) on each of the first four anniversaries of the sale. A reduced sales commission and dealer manager fee was paid in connection with volume discounts and certain other categories of sales. No sales commission or dealer manager fee was paid with respect to shares of common stock issued pursuant to the DRP. The Company terminated the Public Offering on March 24, 2016, and as of December 31, 2018 and 2017, expects to pay trailing selling commissions of $299,952 and $562,339, respectively, which were charged to additionalpaid-in capital and included within amounts due to affiliates in the accompanying consolidated balance sheets.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2018

8. Incentive Award Plan and Independent Director Compensation

The Company has adopted an incentive award plan (the “Incentive Award Plan”) that provides for the grant of equity awards to its employees, directors and consultants and those of the Company’s affiliates. The Incentive Award Plan authorizes the grant ofnon-qualified and incentive stock options, restricted stock awards, restricted stock units, stock appreciation rights, dividend equivalents and other stock-based awards or cash-based awards.

Under the Company’s independent directors’ compensation plan, which is asub-plan of the Incentive Award Plan, each of the Company’s independent directors received 3,333 shares of restricted common stock once the Company raised $2,000,000 in gross offering proceeds in the Public Offering. Each subsequent independent director that joins the Company’s board of directors receives 3,333 shares of restricted common stock upon election to the Company’s board of directors. In addition, on the date following an independent director’sre-election to the Company’s board of directors, he or she receives 1,666 shares of restricted common stock.One-fourth of the shares of restricted common stock generally vest and becomenon-forfeitable upon issuance and the remaining portion will vest in three equal annual installments beginning on the date of grant and ending on the third anniversary of the date of grant; provided, however, that the restricted stock will become fully vested and becomenon-forfeitable on the earlier to occur of (1) the termination of the independent director’s service as a director due to his or her death or disability, or (2) a change in control of the Company. These awards entitle the holders to participate in distributions.

The Company recorded stock-based compensation expense of $74,617, $79,858 and $100,060 for the years ended December 31, 2018, 2017 and 2016, respectively, related to the independent directors’ restricted common stock.

In addition to the stock awards, the Company pays each of its independent directors an annual retainer of $55,000, prorated for any partial term (the audit committee chairperson receives an additional $10,000 annual retainer, prorated for any partial term). The independent directors are also paid for attending meetings as follows: (i) $2,500 for each board meeting attended in person, (ii) $1,500 for each committee meeting attended in person in such director’s capacity as a committee member, (iii) $1,000 for each board meeting attended via teleconference (not to exceed $4,000 for any one set of meetings attended on any given day). All directors also receive reimbursement of reasonable out of pocket expenses incurred in connection with attendance at meetings of the board of directors. Director compensation is an operating expense of the Company that is subject to the operating expense reimbursement obligation of the Advisor discussed in Note 7 (Related Party Arrangements). The Company recorded an operating expense of $496,000, $242,500 and $239,000 for the years ended December 31, 2018, 2017 and 2016, respectively, related to the independent directors’ annual retainer and attending board meetings, which is included in general and administrative expenses in the accompanying consolidated statements of operations. As of December 31, 2018 and 2017, $151,750 and $55,750, respectively, related to the independent directors’ annual retainer and board meetings attendance is included in accounts payable and accrued liabilities in the consolidated balance sheets.

9. Commitments and Contingencies

Economic Dependency

The Company is dependent on the Advisor for certain services that are essential to the Company, including the identification, evaluation, negotiation, purchase and disposition of real estate and real estate-related investments; management of the daily operations of the Company’s real estate and real estate-related investment portfolio; and other general and administrative responsibilities. In the event that the Advisor is unable to provide such services, the Company will be required to obtain such services from other sources. The Company may not be able to retain services from such other sources on favorable terms or at all.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

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Concentration of Credit Risk

The geographic concentration of the Company’s portfolio makes it particularly susceptible to adverse economic developments in the Atlanta, Georgia, Dallas/Fort Worth, Texas and Nashville, Tennessee apartment markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, relocations of businesses, increased competition from other apartment communities, decrease in demand for apartments or any other changes, could adversely affect the Company’s operating results and its ability to make distributions to stockholders.

Environmental

As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. The Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s properties, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the properties could result in future environmental liabilities.

Legal Matters

From time to time, the Company is subject, or party, to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on the Company’s results of operations or financial condition nor is the Company aware of any such legal proceedings contemplated by government agencies.

10. Derivative Financial Instruments

The Company uses interest rate derivatives with the objective of managing exposure to interest rate movements thereby minimizing the effect of interest rate changes and the effect they could have on future cash flows. Interest rate cap agreements are used to accomplish this objective. The following table provides the terms of the Company’s interest rate derivative instruments that were in effect at December 31, 2018 and 2017:

December 31, 2018
Type	Maturity Date Range		Based on		Number of Instruments		Notional Amount		Variable Rate			Weighted Average Rate Cap			Fair Value
Interest Rate Cap		1/1/2019 - 8/1/2021		One-Month LIBOR		22	$	713,237,850		2.52	%		3.46	%	$	207,769

December 31, 2017
Type	Maturity Date Range		Based on		Number of Instruments		Notional Amount		Variable Rate			Weighted Average Rate Cap			Fair Value
Interest Rate Cap		6/1/2018 - 1/1/2021		One-Month LIBOR		29	$	888,368,100		1.56	%		3.17	%	$	347,409

The interest rate cap agreements are not designated as effective cash flow hedges. Accordingly, the Company records any changes in the fair value of the interest rate cap agreements as interest expense. The change in the fair value of the interest rate cap agreements for the years ended December 31, 2018, 2017 and 2016, resulted in an unrealized (gain) loss of $(87,160), $447,668 and $270,222, respectively, which is included

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2018

in interest expense in the accompanying consolidated statements of operations. During the years ended December 31, 2018 and 2017, the Company acquired interest rate cap agreements of $43,200 and $300,000, respectively, and received settlement proceeds from interest rate cap agreements of $270,000 and $0, respectively. The fair value of the interest rate cap agreements of $207,769 and $347,409 as of December 31, 2018 and 2017, is included in other assets on the accompanying consolidated balance sheets.

11. Pro Forma Information (unaudited)

The following table summarizes, on an unaudited basis, the consolidated pro forma results of operations of the Company for the years ended December 31, 2016 and 2015. The Company acquired four properties during the year ended December 31, 2016. These properties contributed $12,408,647 of revenues and $4,723,946 of net loss, including $10,154,803 of depreciation and amortization, to the Company’s results of operations from the date of acquisition to December 31, 2016. The following unaudited pro forma information for the years ended December 31, 2016 and 2015 have been provided to give effect to the acquisitions of the properties as if they had occurred on January 1, 2015. This pro forma information does not purport to represent what the actual results of operations of the Company would have been had these acquisitions occurred on this date, nor does it purport to predict the results of operations for future periods.

	Year Ended December 31,
	2016			2015
Revenues	$	156,616,663		$	154,697,793
Net loss	$	(37,701,106	)	$	(46,322,812	)
Loss per common share, basic and diluted	$	(0.80	)	$	(2.13	)

The pro forma information reflects adjustments for actual revenues and expenses of the properties acquired during the year ended December 31, 2016 for the respective period prior to acquisition by the Company. Net loss has been adjusted as follows: (1) interest expense has been adjusted to reflect the additional interest expense that would have been charged had the Company acquired the properties on January 1, 2015 under the same financing arrangements as existed as of the acquisition date; (2) depreciation and amortization has been adjusted based on the Company’s basis in the properties; and (3) transaction costs have been adjusted for the acquisition of the properties.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2018

12. Selected Quarterly Results (unaudited)

Presented below is a summary of the Company’s unaudited quarterly financial information for the years ended December 31, 2018 and 2017:

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter			Total
2018
Revenues	$	41,367,026		$	42,475,166		$	43,155,379		$	42,965,659		$	169,963,230
Net loss		(8,018,094	)		(8,946,178	)		(20,671,331	)		(11,464,743	)		(49,100,346	)
Loss per common share, basic and diluted		(0.16	)		(0.17	)		(0.40	)		(0.22	)		(0.96	)
Distributions declared per common share		0.222			0.224			0.227			0.227			0.900
2017
Revenues	$	39,704,775		$	40,820,869		$	41,590,622		$	41,281,892		$	163,398,158
Net loss		(8,413,038	)		(6,959,061	)		(8,132,098	)		(10,119,644	)		(33,623,841	)
Loss per common share, basic and diluted		(0.17	)		(0.14	)		(0.16	)		(0.20	)		(0.67	)
Distributions declared per common share		0.222			0.224			0.227			0.227			0.900

13. Subsequent Events

Distributions Paid

On January 1, 2019, the Company paid distributions of $3,953,499, which related to distributions declared for each day in the period from December 1, 2018 through December 31, 2018 and consisted of cash distributions paid in the amount of $2,092,671 and $1,860,828 in shares issued pursuant to the DRP.

On February 1, 2019, the Company paid distributions of $3,962,806, which related to distributions declared for each day in the period from January 1, 2019 through January 31, 2019 and consisted of cash distributions paid in the amount of $2,110,932 and $1,851,874 in shares issued pursuant to the DRP.

On March 1, 2019, the Company paid distributions of $3,578,717, which related to distributions declared for each day in the period from February 1, 2019 through February 28, 2019 and consisted of cash distributions paid in the amount of $1,914,109 and $1,664,608 in shares issued pursuant to the DRP.

Estimated Value per Share

On March 12, 2019, the Company’s board of directors determined an estimated value per share of the Company’s common stock of $15.84 as of December 31, 2018. In connection with the determination of an estimated value per share, the Company’s board of directors determined a price per share for the DRP of $15.84, effective April 1, 2019.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

DECEMBER 31, 2018

Shares Repurchased

On January 31, 2019, the Company repurchased 138,961 shares of its common stock for a total repurchase value of $2,000,000, or $14.39 average price per share, pursuant to the Company’s share repurchase plan.

Distributions Declared

On March 12, 2019, the Company’s board of directors approved and authorized a daily distribution to stockholders of record as of the close of business on each day of the period commencing on April 1, 2019 and ending on June 30, 2019. The distributions will be equal to $0.002466 per share of the Company’s common stock per day. The distributions for each record date in April 2019, May 2019 and June 2019 will be paid in May 2019, June 2019 and July 2019, respectively. The distributions will be payable to stockholders from legally available funds therefor.

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STEADFAST APARTMENT REIT, INC.

SCHEDULE III

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION AND AMORTIZATION

DECEMBER 31, 2018

							Initial Cost of Company(2)								Gross Amount at which Carried at Close of Period
Description	Location	Ownership Percent			Encumbrances(1)		Land		Building and Improvements(3)		Total		Cost Capitalized Subsequent to Acquisition		Land		Building and Improvements(3)		Total(4)		Accumulated Depreciation			Original Date of Construction		Date Acquired
Villages at Spring Hill Apartments	Spring Hill, TN		100	%	$	—	$	1,130,314	$	13,069,686	$	14,200,000	$	2,432,058	$	1,130,314	$	15,082,124	$	16,212,438	$	(3,381,917	)		1994		5/22/2014
Harrison Place Apartments	Indianapolis, IN		100	%		—		3,087,687		24,776,563		27,864,250		2,651,851		3,087,687		26,940,657		30,028,344		(5,696,001	)		2001		6/30/2014
Club at Summer Valley	Austin, TX		100	%		—		4,850,153		16,649,847		21,500,000		2,643,762		4,850,153		18,600,763		23,450,916		(3,709,669	)		1983		8/28/2014
Terrace Cove Apartment Homes	Austin, TX		100	%		—		5,469,361		18,030,639		23,500,000		3,618,337		5,469,361		20,861,651		26,331,012		(4,515,179	)		1986		8/28/2014
The Residences on McGinnis Ferry	Suwanee, GA		100	%		—		8,682,823		89,817,177		98,500,000		10,542,693		8,682,823		98,215,985		106,898,808		(18,677,946	)		1998/2002		10/16/2014
The 1800 at Barrett Lakes	Kennesaw, GA		100	%		40,581,410		7,012,787		41,987,213		49,000,000		6,931,373		7,012,787		47,689,032		54,701,819		(9,597,787	)		1988/1997		11/20/2014
The Oasis	Colorado Springs, CO		100	%		39,446,852		4,325,607		35,674,393		40,000,000		3,599,085		4,325,607		38,475,242		42,800,849		(7,111,313	)		1996		12/19/2014
Columns on Wetherington	Florence, KY		100	%		—		1,276,787		23,723,213		25,000,000		2,527,834		1,276,787		25,700,654		26,977,441		(4,757,117	)		2002		2/26/2015
Preston Hills at Mill Creek	Buford, GA		100	%		—		5,813,218		45,186,782		51,000,000		6,304,793		5,813,218		49,898,882		55,712,100		(9,269,171	)		2000		3/10/2015
Eagle Lake Landing Apartments	Speedway, IN		100	%		—		1,607,980		17,592,020		19,200,000		1,273,947		1,607,980		18,207,774		19,815,754		(2,865,589	)		1976		3/27/2015
Reveal on Cumberland	Fishers, IN		100	%		21,610,489		3,299,502		25,939,054		29,238,556		488,671		3,299,502		25,939,938		29,239,440		(4,281,274	)		2014		3/30/2015
Randall Highlands Apartments	North Aurora, IL		100	%		—		2,499,350		29,787,091		32,286,441		403,686		2,499,350		29,429,169		31,928,519		(4,440,746	)		2013		3/31/2015
Heritage Place Apartments	Franklin, TN		100	%		8,573,416		1,697,036		7,952,964		9,650,000		1,852,727		1,697,036		9,625,050		11,322,086		(1,858,096	)		1982		4/27/2015
Rosemont at East Cobb	Marietta, GA		100	%		13,238,815		3,599,586		12,850,414		16,450,000		3,282,088		3,599,586		15,519,029		19,118,615		(2,986,811	)		1980		5/21/2015
Ridge Crossings Apartments	Hoover, AL		100	%		57,605,492		7,747,295		64,252,705		72,000,000		5,751,824		7,747,295		68,191,056		75,938,351		(11,380,243	)		1991		5/28/2015
Bella Terra at City Center	Aurora, CO		100	%		—		5,895,389		31,704,611		37,600,000		3,717,531		5,895,389		34,618,393		40,513,782		(6,028,447	)		1980		6/11/2015
Hearthstone at City Center	Aurora, CO		100	%		—		7,219,143		46,180,857		53,400,000		5,309,908		7,219,143		49,883,346		57,102,489		(8,681,129	)		1984		6/25/2015
Arbors at Brookfield	Mauldin, SC		100	%		—		7,553,349		59,246,651		66,800,000		8,595,856		7,553,349		66,104,357		73,657,706		(10,867,459	)		1989		6/30/2015
Carrington Park	Kansas City, MO		100	%		—		2,517,886		36,962,114		39,480,000		2,546,434		2,517,886		38,606,792		41,124,678		(5,662,459	)		2007		8/19/2015

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STEADFAST APARTMENT REIT, INC.

SCHEDULE III

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION AND AMORTIZATION

DECEMBER 31, 2018

								Initial Cost of Company(2)								Gross Amount at which Carried at Close of Period
Description	Location		Ownership Percent			Encumbrances(1)		Land		Building and Improvements(3)		Total		Cost Capitalized Subsequent to Acquisition		Land		Building and Improvements(3)		Total(4)		Accumulated Depreciation			Original Date of Construction		Date Acquired
Delano at North Richland Hills		North Richland Hills, TX		100	%		29,790,989		3,941,458		34,558,542		38,500,000		3,702,724		3,941,458		37,252,805		41,194,263		(6,234,139	)		2003		8/26/2015
Meadows at North Richland Hills		North Richland Hills, TX		100	%		25,436,887		4,054,337		28,545,663		32,600,000		3,516,866		4,054,337		31,132,540		35,186,877		(5,450,226	)		1999		8/26/2015
Kensington by the Vineyard		Euless, TX		100	%		34,087,674		3,938,677		42,261,323		46,200,000		1,036,500		3,938,677		42,054,107		45,992,784		(5,846,391	)		1997		8/26/2015
Monticello by the Vineyard		Euless, TX		100	%		41,159,556		5,386,400		46,813,600		52,200,000		3,920,646		5,386,400		49,410,763		54,797,163		(7,640,967	)		2002		9/23/2015
The Shores		Oklahoma City, OK		100	%		23,944,543		2,100,531		34,149,469		36,250,000		301,757		2,100,531		33,541,460		35,641,991		(4,320,907	)		2013		9/29/2015
Lakeside at Coppell		Coppell, TX		100	%	$	45,217,115	$	4,789,210	$	55,710,790	$	60,500,000	$	1,770,874	$	4,789,210	$	55,947,601	$	60,736,811	$	(7,520,681	)		1999		10/7/2015
Meadows at River Run		Bolingbrook, IL		100	%		43,065,800		1,899,956		56,600,044		58,500,000		3,680,102		1,899,956		58,919,335		60,819,291		(8,154,462	)		2001		10/30/2015
PeakView atT-Bone Ranch		Greeley, CO		100	%		—		2,461,583		37,838,417		40,300,000		1,390,664		2,461,583		38,420,847		40,882,430		(4,743,945	)		2002		12/11/2015
Park Valley Apartments		Smyrna, GA		100	%		44,691,749		9,991,810		41,408,190		51,400,000		5,514,893		9,991,810		45,712,749		55,704,559		(6,508,171	)		1987		12/11/2015
PeakView by Horseshoe Lake		Loveland, CO		100	%		33,692,519		2,436,847		41,763,153		44,200,000		1,868,333		2,436,847		42,824,231		45,261,078		(5,750,808	)		2002		12/18/2015
Stoneridge Farms		Smyrna, TN		100	%		—		4,064,811		43,685,189		47,750,000		2,887,680		4,064,811		45,577,550		49,642,361		(5,914,788	)		2005		12/30/2015
Fielder’s Creek		Englewood, CO		100	%		—		4,219,943		28,180,057		32,400,000		1,819,354		4,219,943		29,324,342		33,544,285		(3,618,169	)		1983		3/23/2016
Landings of Brentwood(6)		Brentwood, TN		100	%		—		14,525,434		95,474,566		110,000,000		8,014,414		14,525,434		100,249,262		114,774,696		(11,469,916	)		1986-89		5/18/2016
1250 West Apartments		Marietta, GA		100	%		—		9,304,511		46,467,989		55,772,500		929,233		9,304,511		45,991,839		55,296,350		(4,612,531	)		1987 / 95		8/12/2016
Sixteen50 @ Lake Ray Hubbard		Rockwall, TX		100	%		—		5,712,311		57,616,149		63,328,460		1,095,957		5,712,311		57,249,507		62,961,818		(5,117,708	)		2009		9/29/2016
						$	502,143,306	$	164,113,072	$	1,332,457,135	$	1,496,570,207	$	115,924,455	$	164,113,072	$	1,411,198,832	$	1,575,311,904	$	(218,672,162	)

(1) Encumbrances are net of deferred financing costs associated with the loans for each individual property listed above.

(2) Initial cost of company represents costs at acquisition that are included in real estate on the accompanying consolidated balance sheets.

(3) Building and improvements include tenant origination and absorption costs.

(4) The aggregate cost of real estate for federal income tax purposes was $1.6 billion (unaudited) as of December 31, 2018.

(5) Encumbrances exclude the principal balance of $551,669,000 and associated deferred financing costs of $3,656,563 related to the master credit facility.

(6) At December 31, 2018, Landings of Brentwood was pledged as collateral pursuant to the Line of Credit. On January 9, 2019, the Company terminated the Line of Credit.

F-145

STEADFAST APARTMENT REIT, INC.

SCHEDULE III

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION AND AMORTIZATION

DECEMBER 31, 2018

A summary of activity for real estate and accumulated depreciation for the years ended December 31, 2018, 2017 and 2016:

	2018			2017			2016
Real Estate:
Balance at the beginning of the year	$	1,558,892,731		$	1,535,484,890		$	1,238,065,773
Acquisitions		—			—			261,500,960
Improvements		16,960,862			26,307,813			52,941,631
Write-off of disposed and fully depreciated and amortized assets		(541,689	)		(2,899,972	)		(17,023,474	)
Balance at the end of the year	$	1,575,311,904		$	1,558,892,731		$	1,535,484,890
Accumulated depreciation:
Balance at the beginning of the year	$	147,726,630		$	82,099,725		$	31,037,647
Depreciation expense		70,993,280			68,417,556			67,991,543
Write-off of disposed and fully depreciated and amortized assets		(47,748	)		(2,790,651	)		(16,929,465	)
Balance at the end of the year	$	218,672,162		$	147,726,630		$	82,099,725

F-146

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Irvine, State of California, on March 14, 2019.

Steadfast Apartment REIT, Inc.
By:	/s/ Rodney F. Emery
	Rodney F. Emery   Chief Executive Officer and Chairman of the Board

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated:

Name	Title	Date
/s/ Rodney F. Emery   Rodney F. Emery	Chief Executive Officer and Chairman of the Board (principal executive officer)	March 14, 2019
/s/ Kevin J. Keating   Kevin J. Keating	Chief Financial Officer and Treasurer (principal financial officer and principal accounting officer)	March 14, 2019
/s/ Ella S. Neyland   Ella S. Neyland	President and Director	March 14, 2019
/s/ G. Brian Christie   G. Brian Christie	Director	March 14, 2019
/s/ Thomas H. Purcell   Thomas H. Purcell	Director	March 14, 2019
/s/ Kerry D. Vandell   Kerry D. Vandell	Director	March 14, 2019

F-147

Annex G

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR

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

For the transition period from                      to                     

Commission file number000-55428

STEADFAST APARTMENT REIT, INC.

(Exact Name of Registrant as Specified in Its Charter)

Maryland	36-4769184
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

18100 Von Karman Avenue, Suite 500 Irvine, California	92612
(Address of Principal Executive Offices)	(Zip Code)

(949) 852-0700

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” inRule 12b-2 of the Exchange Act.

Large Accelerated filer	☐	Accelerated filer	☐
Non-Accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☒

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of November 1, 2019, there were 52,505,445 shares of the Registrant’s common stock issued and outstanding.

STEADFAST APARTMENT REIT, INC.

INDEX

	Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements		G-2
Consolidated Balance Sheets as of September 30, 2019 (unaudited) and December 31, 2018		G-2
Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018 (unaudited)		G-3
Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2019 and 2018 (unaudited)		G-4
Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 (unaudited)		G-6
Condensed Notes to Consolidated Financial Statements as of September 30, 2019 (unaudited)		G-8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		G-43
Item 3. Quantitative and Qualitative Disclosures About Market Risk		G-68
Item 4. Controls and Procedures		G-69	��
PART II — OTHER INFORMATION
Item 1. Legal Proceedings		G-70
Item 1A. Risk Factors		G-70
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds		G-70
Item 3. Defaults Upon Senior Securities		G-71
Item 4. Mine Safety Disclosures		G-71
Item 5. Other Information		G-71
Item 6. Exhibits		G-72
Signatures		G-74

G-1

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED BALANCE SHEETS

	September 30, 2019			December 31, 2018
	(Unaudited)
ASSETS
Assets:
Real Estate:
Land	$	161,613,722		$	161,613,722
Building and improvements		1,401,105,029			1,381,769,664
Total real estate held for investment, cost		1,562,718,751			1,543,383,386
Less accumulated depreciation and amortization		(268,924,964	)		(214,231,416	)
Total real estate held for investment, net		1,293,793,787			1,329,151,970
Real estate held for development		4,305,247			—
Real estate held for sale, net		—			27,487,772
Total real estate, net		1,298,099,034			1,356,639,742
Cash and cash equivalents		74,816,801			58,880,007
Restricted cash		47,261,216			13,858,768
Rents and other receivables		1,849,239			1,836,406
Other assets		4,174,228			2,923,725
Total assets	$	1,426,200,518		$	1,434,138,648
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued liabilities	$	32,023,162		$	31,389,375
Notes Payable, net:
Mortgage notes payable, net		551,806,409			502,143,306
Credit facilities, net		548,358,514			548,012,437
Total notes payable, net		1,100,164,923			1,050,155,743
Distributions payable		3,873,086			3,953,499
Due to affiliates		2,677,408			1,711,168
Liabilities related to real estate held for sale		—			940,903
Total liabilities		1,138,738,579			1,088,150,688
Commitments and contingencies (Note 9)
Redeemable common stock		1,182,360			—
Stockholders’ Equity:
Preferred stock, $0.01 par value per share; 100,000,000 shares authorized, no shares issued and outstanding		—			—
Common stock, $0.01 par value per share; 999,999,000 shares authorized, 52,341,643 and 51,723,801 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		523,416			517,238
Convertible stock, $0.01 par value per share; 1,000 shares authorized, issued and outstanding as of September 30, 2019 and December 31, 2018, respectively		10			10
Additionalpaid-in capital		694,224,617			684,140,823
Cumulative distributions and net losses		(408,468,464	)		(338,670,111	)
Total stockholders’ equity		286,279,579			345,987,960
Total liabilities and stockholders’ equity	$	1,426,200,518		$	1,434,138,648

See accompanying notes to consolidated financial statements.

G-2

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Revenues:
Rental income	$	43,962,752		$	42,791,623		$	129,166,798		$	125,428,614
Other income		536,512			363,756			2,055,689			1,568,957
Total revenues		44,499,264			43,155,379			131,222,487			126,997,571
Expenses:
Operating, maintenance and management		11,788,068			11,413,882			32,325,417			31,828,565
Real estate taxes and insurance		6,086,781			5,581,414			19,111,364			17,229,297
Fees to affiliates		6,917,303			9,626,258			19,248,909			21,249,639
Depreciation and amortization		18,632,477			17,855,195			55,430,404			52,920,337
Interest expense		12,562,978			12,273,389			36,962,055			31,619,697
Loss on debt extinguishment		—			4,975,497			41,609			4,975,497
General and administrative expenses		2,230,541			2,101,075			6,173,895			4,810,141
Total expenses		58,218,148			63,826,710			169,293,653			164,633,173
Loss before other income		(13,718,884	)		(20,671,331	)		(38,071,166	)		(37,635,602	)
Other income:
Gain on sale of real estate, net		3,329,078			—			3,329,078			—
Total other income		3,329,078			—			3,329,078			—
Net loss	$	(10,389,806	)	$	(20,671,331	)	$	(34,742,088	)	$	(37,635,602	)
Loss per common share—basic and diluted	$	(0.20	)	$	(0.40	)	$	(0.67	)	$	(0.74	)
Weighted average number of common shares outstanding—basic and diluted		52,279,878			51,422,384			52,096,357			51,198,919

See accompanying notes to consolidated financial statements.

G-3

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 (Unaudited)

	Common Stock						Convertible Stock				Additional Paid-In Capital			Cumulative Distributions & Net Losses			Total Stockholders’ Equity
	Shares			Amount			Shares		Amount
BALANCE, July 1, 2019		52,142,845		$	521,428			1,000	$	10	$	690,921,687		$	(386,218,653	)	$	305,224,472
Issuance of common stock		334,187			3,342			—		—		5,290,186			—			5,293,528
Repurchase of common stock		(135,389	)		(1,354	)		—		—		(1,998,646	)		—			(2,000,000	)
Distributions declared ($0.227 per share of common stock)		—			—			—		—		—			(11,860,005	)		(11,860,005	)
Amortization of stock-based compensation		—			—			—		—		11,390			—			11,390
Net loss		—			—			—		—		—			(10,389,806	)		(10,389,806	)
BALANCE, September 30, 2019		52,341,643		$	523,416			1,000	$	10	$	694,224,617		$	(408,468,464	)	$	286,279,579

	Common Stock						Convertible Stock				Additional Paid-In Capital			Cumulative Distributions & Net Losses			Total Stockholders’ Equity
	Shares			Amount			Shares		Amount
BALANCE, January 1, 2019		51,723,801		$	517,238			1,000	$	10	$	684,140,823		$	(338,670,111	)	$	345,987,960
Issuance of common stock		1,028,077			10,280			—		—		16,040,510			—			16,050,790
Repurchase of common stock		(410,235	)		(4,102	)		—		—		(5,995,898	)		—			(6,000,000	)
Distributions declared ($0.673 per share of common stock)		—			—			—		—		—			(35,056,265	)		(35,056,265	)
Amortization of stock-based compensation		—			—			—		—		39,182			—			39,182
Net loss		—			—			—		—		—			(34,742,088	)		(34,742,088	)
BALANCE, September 30, 2019		52,341,643		$	523,416			1,000	$	10	$	694,224,617		$	(408,468,464	)	$	286,279,579

See accompanying notes to consolidated financial statements.

G-4

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 (Unaudited)

	Common Stock						Convertible Stock				Additional Paid-In Capital			Cumulative Distributions & Net Losses			Total Stockholders’ Equity
	Shares			Amount			Shares		Amount
BALANCE, July 1, 2018		51,262,810		$	512,628			1,000	$	10	$	676,854,459		$	(283,152,381	)	$	394,214,716
Issuance of common stock		380,849			3,809			—		—		5,701,615			—			5,705,424
Repurchase of common stock		(142,393	)		(1,424	)		—		—		(1,998,576	)		—			(2,000,000	)
Distributions declared ($0.227 per share of common stock)		—			—			—		—		—			(11,664,156	)		(11,664,156	)
Amortization of stock-based compensation		—			—			—		—		33,043			—			33,043
Net loss		—			—			—		—		—			(20,671,331	)		(20,671,331	)
BALANCE, September 30, 2018		51,501,266		$	515,013			1,000	$	10	$	680,590,541		$	(315,487,868	)	$	365,617,696

	Common Stock						Convertible Stock				Additional Paid-In Capital			Cumulative Distributions & Net Losses			Total Stockholders’ Equity
	Shares			Amount			Shares		Amount
BALANCE, January 1, 2018		50,842,640		$	508,426			1,000	$	10	$	633,186,743		$	(243,389,996	)	$	390,305,183
Issuance of common stock		1,147,631			11,477			—		—		17,163,887			—			17,175,364
Commissions on sales of common stock and related dealer manager fees to affiliates		—			—			—		—		32,414			—			32,414
Transfers from redeemable common stock		—			—			—		—		37,028,102			—			37,028,102
Repurchase of common stock		(489,005	)		(4,890	)		—		—		(6,881,326	)		—			(6,886,216	)
Distributions declared ($0.673 per share of common stock)		—			—			—		—		—			(34,462,270	)		(34,462,270	)
Amortization of stock-based compensation		—			—			—		—		60,721			—			60,721
Net loss		—			—			—		—		—			(37,635,602	)		(37,635,602	)
BALANCE, September 30, 2018		51,501,266		$	515,013			1,000	$	10	$	680,590,541		$	(315,487,868	)	$	365,617,696

See accompanying notes to consolidated financial statements.

G-5

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2019			2018
Cash Flows from Operating Activities:
Net loss	$	(34,742,088	)	$	(37,635,602	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization		55,430,404			52,920,337
Loss on disposal of buildings and improvements		150,978			211,742
Amortization of deferred financing costs		750,751			762,658
Amortization of stock-based compensation		39,182			60,721
Change in fair value of interest rate cap agreements		223,867			(641,013	)
Gain on sale of real estate		(3,329,078	)		—
Amortization of loan discount		—			207,074
Loss on debt extinguishment		41,609			4,975,497
Insurance claim recoveries		(706,654	)		(331,716	)
Changes in operating assets and liabilities:
Rents and other receivables		(87,831	)		(136,231	)
Other assets		(799,448	)		(351,980	)
Accounts payable and accrued liabilities		1,014,193			5,900,772
Due to affiliates		807,450			(206,276	)
Net cash provided by operating activities		18,793,335			25,735,983
Cash Flows from Investing Activities:
Acquisition of real estate held for development		(2,158,815	)		—
Additions to real estate investments		(19,206,964	)		(13,049,961	)
Additions to real estate held for development		(1,789,630	)		—
Escrow deposits for pending real estate acquisitions		(700,100	)		—
Capitalized acquisition costs related to mergers		(10,471	)		—
Purchase of interest rate cap agreements		(18,000	)		(43,200	)
Net proceeds from sale of real estate investments		29,944,301			—
Proceeds from settlement of interest rate cap agreements		—			270,000
Proceeds from insurance claims		781,654			331,716
Net cash provided by (used in) investing activities		6,841,975			(12,491,445	)
Cash Flows from Financing Activities:
Proceeds from issuance of mortgage notes payable		126,121,000			160,850,000
Principal payments on mortgage notes payable		(76,105,725	)		(611,223,676	)
Borrowings from credit facilities		—			562,669,000
Principal payments on credit facilities		—			(56,000,000	)
Payments of commissions on sale of common stock		(172,278	)		(173,111	)
Payment of loan financing deposits		(254,722	)		—
Payment of deferred financing costs		(798,455	)		(4,538,261	)
Payment of debt extinguishment costs		—			(1,019,491	)
Distributions to common stockholders		(19,085,888	)		(17,364,466	)
Repurchase of common stock		(6,000,000	)		(6,886,216	)
Net cash provided by financing activities		23,703,932			26,313,779
Net increase in cash, cash equivalents and restricted cash		49,339,242			39,558,317
Cash, cash equivalents and restricted cash, beginning of the period		72,738,775			38,667,705
Cash, cash equivalents and restricted cash, end of the period	$	122,078,017		$	78,226,022

G-6

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited)

	Nine Months Ended September 30,
	2019		2018
Supplemental Disclosures of Cash Flow Information:
Interest paid, net of amounts capitalized of $49,068 and $0 for the nine months ended September 30, 2019 and 2018, respectively	$	36,328,593	$	30,062,317
Supplemental Disclosures of Noncash Flow Transactions:
Distributions payable	$	3,873,086	$	3,809,169
Distributions paid to common stockholders through common stock issuances pursuant to the distribution reinvestment plan	$	16,050,790	$	17,175,364
Redeemable common stock	$	1,182,360	$	—
Redemptions payable	$	817,640	$	2,000,000
Accounts payable and accrued liabilities from additions to real estate investments	$	729,005	$	189,223
Due to affiliates from additions to real estate investments	$	62,159	$	50,519
Accounts payable & accrued liabilities from capitalized acquisition costs related to the proposed mergers	$	503,041	$	—
Accounts payable & accrued liabilities from additions to real estate held for development	$	41,434	$	—
Due to affiliates for commissions on sale of common stock	$	127,673	$	356,814
Restricted cash held as substitution deposit for MCFA from proceeds from sale of real estate investments	$	17,514,055	$	—
Operating leaseright-of-use asset, net	$	3,462	$	—
Operating lease liabilities, net	$	4,989	$	—

See accompanying notes to consolidated financial statements.

G-7

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

1. Organization and Business

Steadfast Apartment REIT, Inc. (the “Company”) was formed on August 22, 2013, as a Maryland corporation that elected to qualify as a real estate investment trust (“REIT”) commencing with the taxable year ended December 31, 2014. On September 3, 2013, the Company was initially capitalized with the sale of 13,500 shares of common stock to Steadfast REIT Investments, LLC (the “Sponsor”) at a purchase price of $15.00 per share for an aggregate purchase price of $202,500. Steadfast Apartment Advisor, LLC (the “Advisor”), a Delaware limited liability company formed on August 22, 2013, invested $1,000 in the Company in exchange for 1,000 shares ofnon-participating,non-voting convertible stock (the “Convertible Stock”) as described in Note 6 (Stockholders’ Equity).

The Company owns and operates a diverse portfolio of multifamily properties located in targeted markets throughout the United States. As of September 30, 2019, the Company owned 33 multifamily properties comprising a total of 11,455 apartment homes and one parcel of land held for the development of apartment homes. The Company may acquire additional multifamily properties or pursue multifamily developments in the future. For more information on the Company’s real estate portfolio, see Note 3 (Real Estate).

Public Offering

On December 30, 2013, the Company commenced its initial public offering to offer a maximum of 66,666,667 shares of common stock for sale to the public at an initial price of $15.00 per share (with discounts available for certain categories of purchasers) (the “Primary Offering”). The Company also registered up to 7,017,544 shares of common stock for sale pursuant to the Company’s distribution reinvestment plan (the “DRP,” and together with the Primary Offering, the “Public Offering”) at an initial price of $14.25 per share. The Company terminated its Public Offering on March 24, 2016, but continues to offer shares of common stock pursuant to the DRP. As of the termination of the Public Offering, the Company had sold 48,625,651 shares of common stock in the Public Offering for gross proceeds of $724,849,631, including 1,011,561 shares of common stock issued pursuant to the DRP for gross offering proceeds of $14,414,752. As of September 30, 2019, the Company had issued 53,949,748 shares of common stock for gross offering proceeds of $804,390,765, including 6,335,721 shares of common stock issued pursuant to the DRP for gross offering proceeds of $93,955,886.

On March 12, 2019, the Company’s board of directors approved an estimated value per share of the Company’s common stock of $15.84 as of December 31, 2018. In connection with the determination of an estimated value per share, the Company’s board of directors approved a price per share for the DRP of $15.84, effective April 1, 2019. The Company’s board of directors may again, from time to time, in its sole discretion, change the price at which the Company offers shares pursuant to the DRP to reflect changes in the Company’s estimated value per share and other factors that the Company’s board of directors deems relevant.

The business of the Company is externally managed by the Advisor, pursuant to the Advisory Agreement dated December 13, 2013, by and among the Company, Steadfast Apartment REIT Operating Partnership, L.P. (the “Operating Partnership”) and the Advisor (as amended, the “Advisory Agreement”). The Advisory Agreement is subject to annual renewal by the Company’s board of directors. The current term of the Advisory Agreement expires on December 13, 2020. Subject to certain restrictions and limitations, the Advisor manages the Company’sday-to-day operations, manages the Company’s portfolio of properties, sources and presents

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

investment opportunities to the Company’s board of directors and provides investment management services on the Company’s behalf. The Advisor has also entered into an Advisory Services Agreement with Crossroads Capital Advisors, LLC (“Crossroads Capital Advisors”), whereby Crossroads Capital Advisors provides certain advisory services to the Company on behalf of the Advisor. Stira Capital Markets Group, LLC (formerly known as Steadfast Capital Markets Group, LLC) (the “Dealer Manager”), an affiliate of the Advisor, served as the dealer manager for the Public Offering. The Dealer Manager was responsible for marketing the Company’s shares of common stock offered pursuant to the Public Offering. The Advisor, along with the Dealer Manager, provides marketing, investor relations and other administrative services on the Company’s behalf.

Substantially all of the Company’s business is conducted through the Operating Partnership. The Company is the sole general partner of the Operating Partnership. The Company and Steadfast Apartment REIT Limited Partner, LLC, a Delaware limited liability company and a wholly-owned subsidiary of the Company, entered into the Limited Partnership Agreement of Steadfast Apartment REIT Operating Partnership L.P. on September 3, 2013 (as amended, the “Partnership Agreement”). Steadfast Apartment REIT Limited Partner, LLC made a $1,000 capital contribution to the Operating Partnership as the initial limited partner.

As the Company accepted subscriptions for shares of its common stock, the Company transferred substantially all of the net offering proceeds from its Public Offering to the Operating Partnership as a contribution in exchange for partnership interests and the Company’s percentage ownership in the Operating Partnership increased proportionately. The Partnership Agreement provides that the Operating Partnership is operated in a manner that will enable the Company to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that the Operating Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), which classification could result in the Operating Partnership being taxed as a corporation. In addition to the administrative and operating costs and expenses incurred by the Operating Partnership in acquiring and operating real properties, the Operating Partnership pays all of the Company’s administrative costs and expenses, and such expenses are treated as expenses of the Operating Partnership.

Pending Mergers with Steadfast Income REIT, Inc. and Steadfast Apartment REIT III, Inc.

On August 5, 2019, the Company entered into the Merger Agreements (as defined herein) to acquire each of Steadfast Income REIT, Inc. (“SIR”) and Steadfast Apartment REIT III, Inc. (“STAR III”), which are publicnon-traded REITs sponsored by the Sponsor. As described in greater detail below, both pending mergersare stock-for-stock transactions whereby each of SIR and STAR III will be merged with and into a wholly-owned subsidiary of the Company. The consummation of the Company’s merger with SIR is not contingent upon the completion of the Company’s merger with STAR III, and the consummation of the Company’s merger with STAR III is not contingent upon the completion of the Company’s merger with SIR.

Proposed SIR Merger

On August 5, 2019, the Company, SIR, the Operating Partnership, Steadfast Income REIT Operating Partnership, L.P., the operating partnership of SIR, and SI Subsidiary, LLC, a wholly-owned subsidiary of the

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Company (the “SIR Merger Sub”) entered into an Agreement and Plan of Merger (the “SIR Merger Agreement”). Subject to the terms and conditions of the SIR Merger Agreement, SIR will merge with and into SIR Merger Sub (the “SIR Merger”), with SIR Merger Sub surviving the SIR Merger, such that following the SIR Merger, the surviving entity will continue as a wholly-owned subsidiary of the Company. In accordance with the applicable provisions of the Maryland General Corporation Law (“MGCL”) the separate existence of SIR shall cease.

At the effective time of the SIR Merger and subject to the terms and conditions of the SIR Merger Agreement, each issued and outstanding share of SIR’s common stock (or a fraction thereof), $0.01 par value per share (the “SIR Common Stock”), will be converted into the right to receive 0.5934 shares of the Company’s common stock.

The obligations of each party to consummate the SIR Merger are subject to a number of conditions, including receipt of the approval of the SIR Merger and of an amendment to SIR’s charter to delete certain provisions regardingroll-up transactions by the holders of a majority of the outstanding shares of SIR Common Stock.

Proposed STAR III Merger

On August 5, 2019, the Company, STAR III, the Operating Partnership, Steadfast Apartment REIT III Operating Partnership, L.P., the operating partnership of STAR III, and SIII Subsidiary, LLC, a wholly-owned subsidiary of the Company, (the “STAR III Merger Sub,”) entered into an Agreement and Plan of Merger (the “STAR III Merger Agreement” and together with the SIR Merger Agreement, the “Merger Agreements”). Subject to the terms and conditions of the STAR III Merger Agreement, STAR III will merge with and into the STAR III Merger Sub (the “STAR III Merger”), with STAR III Merger Sub surviving the STAR III Merger, such that following the STAR III Merger, the surviving entity will continue as a wholly-owned subsidiary of the Company. In accordance with the applicable provisions of the MGCL the separate existence of STAR III shall cease.

At the effective time of the STAR III Merger and subject to the terms and conditions of the STAR III Merger Agreement, each issued and outstanding share of STAR III’s common stock (or a fraction thereof), $0.01 par value per share (the “STAR III Common Stock”), will be converted into the right to receive 1.430 shares of the Company’s common stock.

The obligations of each party to consummate the STAR III Merger are subject to a number of conditions, including receipt of the approval of the STAR III Merger and of an amendment to STAR III’s charter to delete certain provisions regardingroll-up transactions by the holders of a majority of the outstanding shares of STAR III Common Stock.

Combined Company

The combined company after the STAR III Merger and/or the SIR Merger will retain the name “Steadfast Apartment REIT, Inc.” The mergers are each intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code.

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

2. Summary of Significant Accounting Policies

There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form10-K for the year ended December 31, 2018, other than Accounting Standards Update (“ASU”)2016-02 and the Securities and Exchange Commission’s (“SEC”) Disclosure Update and Simplification rule (Release33-10532), as further described below. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2018, included in the Company’s Annual Report on Form10-K filed with the SEC on March 14, 2019.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company, the Operating Partnership and its subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation. The financial statements of the Company’s subsidiaries are prepared using accounting policies consistent with those of the Company.

The accompanying unaudited consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form10-Q and Article 10 ofRegulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments that are of a normal and recurring nature and necessary for a fair and consistent presentation of the results of such periods. Operating results for the three and nine months ended September 30, 2019, are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. The unaudited consolidated financial statements herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form10-K for the year ended December 31, 2018.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.

Fair Value Measurements

Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other assets and liabilities at fair value on anon-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:

• Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

• Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

• Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.

When available, the Company utilizes quoted market prices from an independent third-party source to determine fair value and will classify such items in Level 1 or Level 2. In instances where the market is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require the Company to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When the Company determines the market for a financial instrument owned by the Company to be illiquid or when market transactions for similar instruments do not appear orderly, the Company uses several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and will establish a fair value by assigning weights to the various valuation sources.

The following describes the valuation methodologies used by the Company to measure fair value, including an indication of the level in the fair value hierarchy in which each asset or liability is generally classified.

Interest rate cap agreements—The Company has entered into certain interest rate cap agreements. These derivatives are recorded at fair value. Fair value was based on a model-driven valuation using the associated variable rate curve and an implied market volatility, both of which were observable at commonly quoted intervals for the full term of the interest rate cap agreements. Therefore, the Company’s interest rate cap agreements were classified within Level 2 of the fair value hierarchy and are included in other assets in the accompanying consolidated balance sheets. Changes in the fair value of the interest rate cap agreements are recorded as interest expense in the accompanying consolidated statements of operations.

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

The following tables reflect the Company’s assets required to be measured at fair value on a recurring basis on the consolidated balance sheets:

	September 30, 2019
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements	$	—	$	1,902	$	—

	December 31, 2018
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements	$	—	$	207,769	$	—

Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument.

Fair Value of Financial Instruments

The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities, distributions payable, due to affiliates and notes payable.

The Company considers the carrying value of cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities and distributions payable to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. The fair value of amounts due to affiliates is not determinable due to the related party nature of such amounts. The Company has determined that its notes payable, net are classified as Level 3 within the fair value hierarchy.

The fair value of the notes payable, net is estimated using a discounted cash flow analysis using borrowing rates available to the Company for debt instruments with similar terms and maturities. As of September 30, 2019 and December 31, 2018, the fair value of the notes payable was $1,129,952,413 and $1,042,358,884, respectively, compared to the carrying value of $1,100,164,923 and $1,050,155,743, respectively.

Restricted Cash

Restricted cash represents those cash accounts for which the use of funds is restricted by loan covenants and cash is placed with a qualified intermediary for reinvestment under Section 1031 of the Internal Revenue Code. As of September 30, 2019, the Company had a restricted cash balance of $47,261,216, which includes $19,714,500 in allocated loan amounts held by the lender of the Company’s master credit facility and

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

$12,382,678 of cash proceeds from the sale of one property that are being held by qualified intermediaries as of September 30, 2019. As of December 31, 2018, the Company had a restricted cash balance of $13,858,768, which consisted primarily of real estate tax impounds. In connection with the property sale, the Company was required to deposit $19,714,500, as substitution for the loan amount allocated in the Company’s master credit facility to the sold property, $17,514,055 of which was funded from proceeds from the sale of the property. For more information on the Company’s master credit facility, see Note 5 (Debt).

The following table represents the components of the cash, cash equivalents and restricted cash presented on the accompanying consolidated statements of cash flows for the nine months ended September 30, 2019 and 2018:

	September 30,
	2019		2018
Cash and cash equivalents	$	74,816,801	$	62,267,700
Restricted cash		47,261,216		15,958,322
Total cash, cash and cash equivalents and restricted cash	$	122,078,017	$	78,226,022

Distribution Policy

The Company elected to be taxed, and currently qualifies, as a REIT commencing with the taxable year ended December 31, 2014. To maintain its qualification as a REIT, the Company intends to make distributions each taxable year equal to at least 90% of its REIT taxable income (which is determined without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). Distributions declared during the three and nine months ended September 30, 2019, were based on daily record dates and calculated at a rate of $0.002466 per share per day during the period from January 1, 2019 through September 30, 2019.

Distributions to stockholders are determined by the board of directors of the Company and are dependent upon a number of factors relating to the Company, including funds available for the payment of distributions, financial condition, the timing of property acquisitions, capital expenditure requirements and annual distribution requirements in order for the Company to qualify as a REIT under the Internal Revenue Code. During the three and nine months ended September 30, 2019, the Company declared distributions totaling $0.227 and $0.673 per share of common stock, respectively. During the three and nine months ended September 30, 2018, the Company declared distributions totaling $0.227 and $0.673 per share of common stock, respectively.

Per Share Data

Basic loss per share attributable to common stockholders for all periods presented are computed by dividing net loss by the weighted average number of shares of the Company’s common stock outstanding during the period. Diluted loss per share is computed based on the weighted average number of shares of the Company’s common stock and all potentially dilutive securities, if any. Distributions declared per common share assume each share was issued and outstanding each day during the period. Nonvested shares of the Company’s restricted common stock and convertible stock give rise to potentially dilutive shares of the Company’s common stock but

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

such shares were excluded from the computation of diluted earnings per share because such shares were anti-dilutive during the period.

Segment Disclosure

The Company has determined that it has one reportable segment with activities related to investing in multifamily properties. The Company’s investments in real estate are in different geographic regions, and management evaluates operating performance on an individual asset level. However, as each of the Company’s assets has similar economic characteristics, tenants and products and services, its assets have been aggregated into one reportable segment.

Reclassifications

Certain amounts in the Company’s prior period consolidated financial statements were reclassified to conform to the current presentation. These reclassifications did not change the results of operations of those prior periods. On January 1, 2019, the Company adopted ASU2016-02, as further described below. As a result, all income earned pursuant to tenant leases is reflected as one line item, “Rental Income,” in the consolidated statements of operations. To facilitate comparability, the Company has reclassified the prior period’s lease andnon-lease income consistently with the current periods presented.

The table below provides a reconciliation of the prior period presentation of the income statement line items that were reclassified in our consolidated statements of operations to conform to the current period presentation, pursuant to the adoption of the new lease accounting standard and election of the single component practical expedient:

	Three Months Ended September 30, 2018		Nine Months Ended September 30, 2018
Rental income (presentation prior to January 1, 2019)	$	38,226,188	$	112,776,421
Tenant reimbursements(1)(presentation prior to January 1, 2019)		4,565,435		12,652,193
Rental income (presentation effective January 1, 2019)	$	42,791,623	$	125,428,614

(1) Tenant reimbursements include reimbursements for recoverable costs.

Recent Accounting Pronouncements

In February 2016, the FASB established ASC Topic 842, Leases (“ASC 842”), by issuing ASU2016-02, which requires lessees to recognizeright-of-use assets and lease liabilities for operating leases on the balance sheet and disclose key information about leasing arrangements. ASC 842 also makes targeted changes to lessor accounting. ASC 842 was subsequently amended by ASU2018-01, Land Easement Practical Expedient forTransition to Topic 842 (“ASU2018-01”), ASU2018-10, Codification Improvements to Topic 842 (“ASU2018-10”), ASU2018-11, Targeted Improvements (“ASU2018-11”) and ASU2018-20, Leases (Topic 842), Narrow-scope Improvements for Lessors (“ASU2018-20”). ASC 842 requires a modified retrospective transition approach that was effective in the first quarter of 2019, subject to early adoption. The Company elected an optional transition method that allows entities to initially apply ASC 842 at the adoption date (January 1,

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

2019) and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company evaluated the impact of ASC 842 on its leases both as it relates to the Company acting as a lessee and as a lessor. Based on its evaluation, as it relates to the former, the Company elected to apply each of the practical expedients described in ASC842-10-65-1(f) that allowed the Company, among other things, to not reassess lease classification conclusions or initial direct cost accounting as of December 31, 2018, therefore these leases continue to be accounted for as operating leases. The Company also elected the practical expedient described in ASC842-20-25-2 not to apply the recognition requirements in ASC 842 to short-term leases and instead, to recognize lease payments in the consolidated statement of operations on a straight-line basis over the lease term. The Company did not experience a material impact on the recognition of leases in the consolidated financial statements because the quantity of leased equipment by the Company is limited and immaterial to the consolidated financial statements. Upon adoption, the Company recognized an initial operating leaseright-of-use asset, net, of $7,656 and an operating lease liability, net, of $7,720.

As it relates to the Company as lessor, the Company did not experience a material impact on the recognition of leases in the consolidated financial statements because under ASC 842, lessors continue to account for leases using an approach that is substantially equivalent to historical guidance for sales-type leases, direct financing leases, and operating leases. The Company elected a practical expedient which allows lessors to not separatenon-lease components from the lease component when the timing and pattern of transfer for the lease components andnon-lease components are the same and if the lease component is classified as an operating lease. As a result, on January 1, 2019, the Company began presenting all rentals and reimbursements from tenants as a single line item rental income within the consolidated statements of operations. As of January 1, 2019, the Company implemented changes to its business processes and controls related to accounting for and the presentation and disclosure of leases, including the reclassification of tenant reimbursements, previously disclosed as part of tenant reimbursements and other, to rental income, in the consolidated statements of operations.

Under ASC 842, beginning on January 1, 2019, changes in the probability of collecting tenant rental income could result in direct adjustments of rental income and tenant receivables. The Company did not experience a material impact on its rental income and tenant receivables as of the adoption date.

The Company’s rental income consists of fixed rental payments from tenants under operating leases and is recognized on a straight-line basis over the respective operating lease terms. The Company recognizes minimum rent, including rental abatements, concessions and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of thenon-cancelable term of the related lease. The Company’s rental income that relates to variable lease payments consists of tenant reimbursements and includes reimbursements for recoverable costs, which are recognized as revenue in the period during which the applicable expenses are incurred and the tenant’s obligation to reimburse the Company arises.

The Company recognized $43,962,752 and $129,166,798 of rental income related to operating lease payments, of which $4,740,396 and $13,150,831 was for variable lease payments for the three and nine months ended September 30, 2019, respectively.

In June 2016, the FASB issued ASU2016-13, Financial Instruments-Credit Losses (“ASU2016-13”). ASU2016-13 requires more timely recording of credit losses on loans and other financial instruments that are not

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

accounted for at fair value through net income (loss), including loans held for investment,held-to-maturity debt securities, trade and other receivables, net investment in leases and other such commitments. ASU2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The amendments in ASU2016-13 require the Company to measure all expected credit losses based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets and eliminates the “incurred loss” methodology in current GAAP. In November 2018, the FASB issued ASU2018-19, Codification Improvements to Topic 326, Financial Instruments—Credit Losses (“ASU2018-19”), which clarifies that operating lease receivables accounted for under ASC 842 Leases, are not in the scope of the new credit losses guidance. The effective date and transition requirements for this guidance are the same as for ASU2016-13. ASU2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and related disclosures and does not expect a material impact on its consolidated financial statements and related disclosures from its adoption.

In August 2018, the FASB issued ASU2018-13,Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement (“ASU2018-13”). The FASB issued ASU2018-13 to improve the effectiveness of fair value measurement disclosures by adding, eliminating, and modifying certain disclosure requirements. The issuance of ASU2018-13 is part of a disclosure framework project. The disclosure framework project’s objective and primary focus are to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear communication of the information required by GAAP that is most important to users of each entity’s financial statements. Achieving the objective of improving the effectiveness of the notes to financial statements includes: (1) the development of a framework that promotes consistent decisions by the FASB board about disclosure requirements and (2) the appropriate exercise of discretion by reporting entities. The amendments in ASU2018-13 modify the disclosure requirements on fair value measurements in Topic 820, Fair Value Measurement, based on the concepts in FASB Concepts Statement, Conceptual Framework for Financial Reporting-Chapter 8: Notes to Financial Statements, including the consideration of costs and benefits. ASU2018-13 removed certain disclosure requirements under Topic 820 such as the disclosure requirements of the valuation process for level 3 fair value measurements and modified and added certain of the disclosure requirements in Topic 820. ASU2018-13 requires prospective and retrospective application depending on the amendment and is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact ASU2018-13 will have on its consolidated financial statements and related disclosures and believes that certain disclosures of interest rate cap agreements in its consolidated financial statements may be impacted by the adoption of ASU2018-13.

The SEC’s Disclosure Update and Simplification rule (Release33-10532) amends the interim financial statement requirements to require a reconciliation of changes in stockholder’ equity in the notes or as a separate statement. This analysis should reconcile the beginning balance to the ending balance of each caption in stockholders’ equity for each period for which an income statement is required to be filed and comply with the remaining content requirements ofRule 3-04 of RegulationS-X. As a result, registrants will have to provide the reconciliation for both theyear-to-date and quarterly periods and comparable periods in Form10-Q but only for

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

theyear-to-date periods in registration statements. The rule does not prescribe the format of the presentation as long as the appropriate periods are provided. Per a Compliance and Disclosure Interpretation (Q 105.09, Exchange Act Forms,10-Q), “the amendments are effective for all filings made on or after November 5, 2018. In light of the timing of effectiveness of the amendments and proximity of effectiveness to the filing date for most filers’ quarterly reports, the staff would not object if the filer’s first presentation of the changes in the shareholders’ equity is included in its Form10-Q for the quarter that begins after the effective date of the amendments.” This allowed the Company to adopt the amendment for the Company’s first quarter 2019 filing. The Company first adopted this guidance in the three months ended March 31, 2019, by presenting a reconciliation of changes in stockholders’ equity for the current and prior period as a separate statement.

3. Real Estate

As of September 30, 2019, the Company owned 33 multifamily properties comprising a total of 11,455 apartment homes and one parcel of land held for the development of apartment homes. The total contract acquisition price of the Company’s real estate portfolio was $1,471,571,997, including development costs. As of September 30, 2019 and December 31, 2018, the Company’s portfolio was approximately 94.4% and 93.9% occupied and the average monthly rent was $1,190 and $1,163, respectively.

As of September 30, 2019 and December 31, 2018, accumulated depreciation and amortization related to the Company’s consolidated real estate properties was as follows:

	September 30, 2019
	Assets
	Land		Building and Improvements(1)			Total Real Estate Held for Investment			Real Estate Under Development		Real Estate Held for Sale
Investments in real estate	$	161,613,722	$	1,401,105,029		$	1,562,718,751		$	4,305,247	$	—
Less: Accumulated depreciation and amortization		—		(268,924,964	)		(268,924,964	)		—		—
Net investments in real estate and related lease intangibles	$	161,613,722	$	1,132,180,065		$	1,293,793,787		$	4,305,247	$	—

G-18

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

(1) During the three and nine months ended September 30, 2019, the Company capitalized $513,512 of costs related to the pending mergers with SIR and STAR III, included in building and improvements in the accompanying consolidated balance sheets.

	December 31, 2018
	Assets
	Land		Building and Improvements			Total Real Estate Held for Investment			Real Estate Under Development		Real Estate Held for Sale
Investments in real estate	$	161,613,722	$	1,381,769,664		$	1,543,383,386		$	—	$	31,928,519
Less: Accumulated depreciation and amortization		—		(214,231,416	)		(214,231,416	)		—		(4,440,747	)
Net investments in real estate and related lease intangibles	$	161,613,722	$	1,167,538,248		$	1,329,151,970		$	—	$	27,487,772

Total depreciation and amortization expense was $18,632,477 and $55,430,404 for the three and nine months ended September 30, 2019, respectively, and $17,855,195 and $52,920,337 for the three and nine months ended September 30, 2018, respectively.

Depreciation of the Company’s buildings and improvements was $18,631,573 and $55,429,500 for the three and nine months ended September 30, 2019, respectively, and $17,855,195 and $52,920,337 for the three and nine months ended September 30, 2018, respectively.

Real Estate Under Development

During the nine months ended September 30, 2019, the Company acquired the following land held for the development of apartment homes:

Development Name	Location	Purchase Date		Land Held for Development		Construction in Progress		Total Carrying Value
Garrison Station	Murfreesboro, TN		5/30/2019	$	2,469,183	$	1,836,063	$	4,305,246

Capitalized Acquisition Costs Related to the Pending Mergers with SIR and STAR III

The SIR Merger and STAR III Merger are each accounted for as an asset acquisition. In accordance with the asset acquisition method of accounting, costs incurred to acquire the asset are capitalized as part of the acquisition price. Upon signing both the SIR Merger Agreement and the STAR III Merger Agreement on August 5, 2019, the SIR Merger and STAR III Merger were considered probable of occurring, at which point the Company began to capitalize the merger related acquisition costs to building and improvements in the accompanying consolidated balance sheets. Prior to such date, the merger related acquisition costs were expensed to general and administrative expenses in the accompanying consolidated statements of operations.

G-19

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Operating Leases

As of September 30, 2019, the Company’s real estate portfolio comprised 11,455 residential apartment homes and was 96.4% leased by a diverse group of residents. The residential lease terms consist of lease durations equal to twelve months or less.

Some residential leases contain provisions to extend the lease agreements, options for early termination after paying a specified penalty and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires security deposits from tenants in the form of a cash deposit. Amounts required as security deposits vary depending upon the terms of the respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in accounts payables and accrued liabilities in the accompanying consolidated balance sheets and totaled $4,329,563 and $4,130,860 as of September 30, 2019 and December 31, 2018, respectively.

At September 30, 2019 and 2018, no tenant represented over 10% of the Company’s annualized base rent.

2019 Dispositions

Randall Highlands Apartments

On March 31, 2015, the Company, through an indirect wholly-owned subsidiary, acquired Randall Highlands Apartments, a multifamily property located in North Aurora, Illinois, containing 146 apartment homes. The purchase price of Randall Highlands Apartments was $32,115,000, exclusive of closing costs. On September 26, 2019, the Company sold Randall Highlands Apartments for $31,000,000, resulting in a gain of $3,329,078, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Randall Highlands Apartments was not affiliated with the Company or the Advisor.

G-20

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

The results of operations for the three and nine months ended September 30, 2019 and 2018, through the date of sale for Randall Highlands Apartments, were included in continuing operations on the Company’s consolidated statements of operations and are as follows:

	For the Three Months Ended September 30,				For the Nine Months Ended September 30,
	2019		2018		2019		2018
Revenues:
Rental income	$	789,589	$	815,168	$	2,366,420	$	2,314,405
Other income		1,041		1,072		4,754		8,635
Total revenues		790,630		816,240		2,371,174		2,323,040
Expenses:
Operating, maintenance and management		199,831		177,373		529,200		508,808
Real estate taxes and insurance		169,267		209,923		571,248		577,792
Fees to affiliates		36,135		33,012		103,855		88,769
Depreciation and amortization		96,270		303,428		709,579		904,845
Interest expense		—		75,800		—		484,049
Loss on debt extinguishment		—		184,527		—		184,527
General and administrative expenses		1,656		2,602		9,407		7,524
Total expenses	$	503,159	$	986,665	$	1,923,289	$	2,756,314

4. Other Assets

As of September 30, 2019 and December 31, 2018, other assets consisted of:

	September 30, 2019		December 31, 2018
Prepaid expenses	$	1,148,875	$	1,690,959
Interest rate cap agreements (Note 10)		1,902		207,769
Escrow deposits for pending real estate acquisitions		500,100		100,000
Other deposits		2,502,717		924,997
Operating leaseright-of-use assets, net		20,634		—
Other assets	$	4,174,228	$	2,923,725

Amortization of the Company’s operating leaseright-of-use asset for the three and nine months ended September 30, 2019, was $904 and $904, respectively. Amortization of the Company’s operating leaseright-of-use asset for the three and nine months ended September 30, 2018, was $0 and $0, respectively.

G-21

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

5. Debt

Mortgage Notes Payable

The following is a summary of mortgage notes payable, net, secured by real property as of September 30, 2019 and December 31, 2018.

	September 30, 2019
	Number of Instruments		Maturity Date Range		Interest Rate Range				Weighted Average Interest Rate
Type					Minimum		Maximum					Principal Outstanding
Variable rate(1)		6		12/1/2024 - 9/1/2025		1-Mo LIBOR + 1.88%		1-Mo LIBOR + 2.28%		3.99	%	$	202,046,000
Fixed rate		10		7/1/2025 - 5/1/2054		3.36%		4.60%		4.11	%		353,528,608
Mortgage notes payable, gross		16								4.07	%		555,574,608
Deferred financing costs, net(2)													(3,768,199	)
Mortgage notes payable, net												$	551,806,409

	December 31, 2018
	Number of Instruments		Maturity Date Range		Interest Rate Range				Weighted Average Interest Rate
Type					Minimum		Maximum					Principal Outstanding
Variable rate(1)		8		12/1/2024 - 11/1/2025		1-Mo LIBOR + 1.88%		1-Mo LIBOR + 2.28%		4.53	%	$	277,432,000
Fixed rate		7		7/1/2025 - 5/1/2054		4.34%		4.60%		4.45	%		228,127,333
Mortgage notes payable, gross		15								4.49	%		505,559,333
Deferred financing costs, net(2)													(3,416,027	)
Mortgage notes payable, net												$	502,143,306

(1) See Note 10 (Derivative Financial Instruments) for a discussion of the interest rate cap agreements used to manage the exposure to interest rate movement on the Company’s variable rate loans.

(2) Accumulated amortization related to deferred financing costs as of September 30, 2019 and December 31, 2018 was $2,048,573 and $1,602,290, respectively.

Stoneridge Farms Financing

On July 30, 2019, one of the Company’s indirect wholly-owned subsidiaries entered into a loan agreement with Berkeley Point Capital LLC, d/b/a Newmark Knight Frank (“Berkeley Point”), for the principal amount

G-22

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

of $45,711,000. The loan agreement provides for a term loan with a maturity date of August 1, 2029, unless the maturity date is accelerated pursuant to the loan agreement’s terms. The loan accrues interest at a fixed rate of 3.36% per annum. The entire outstanding principal balance and any accrued and unpaid interest on the loan is due on the maturity date. Interest only payments on the loan are payable monthly in arrears on specified dates as set forth in the loan agreement and interest and principal payments are due beginning September 1, 2024. Monthly payments are due and payable on the first day of each month, commencing September 1, 2019. The loan is secured by Stoneridge Farms,a 336-unit property located in Smyrna, Tennessee. The Company paid $228,555 in loan origination fees to Berkeley Point in connection with the financing, and paid the Advisor a loan coordination fee of $342,833.

Refinancing Transactions

On September 27, 2019, the Company, through its wholly-owned subsidiaries (each, a “Borrower” and collectively, the “Borrowers”), refinanced $75,386,000 of existing variable rate loans with its existing lender, PNC Bank, National Association (“PNC Bank”) with new fixed rate Freddie Mac loans in an aggregate principal amount of $80,410,000. Each of the loans has a maturity date of October 1, 2029. Interest only payments are payable monthly through November 1, 2024, with interest and principal payments due monthly thereafter. The Borrowers paid $301,538 in the aggregate in loan origination fees to PNC Bank in connection with the refinancing, and the Advisor earned loan coordination fees of $200,000. The refinancing transactions are treated as loan modifications in accordance with ASC 470Debt, with lender direct expenses capitalized as deferred financing costs in mortgage notes payable, net in the accompanying consolidated balance sheets and third-party loan fees expensed in interest expense in the accompanying consolidated statements of operations.

The following is a summary of the refinancing of mortgage notes payable secured by real property during the three months ended September 30, 2019:

Property	Closing Date		Lender		Interest Rate			Loan Amount
Delano at North Richland Hills		9/27/2019		PNC Bank		3.56	%	$	32,159,000
Lakeside at Coppell		9/27/2019		PNC Bank		3.56	%		48,251,000
								$	80,410,000

Master Credit Facility

On July 31, 2018, (the “Closing Date”), 16 indirect wholly-owned subsidiaries of the Company terminated the existing mortgage loans with their lenders for an aggregate principal amount of $479,318,649 and entered into a Master Credit Facility Agreement (“MCFA”) with Newmark Group Inc. (“Facility Lender”) for an aggregate principal amount of $551,669,000. The MCFA provides for three tranches: (i) a fixed rate loan in the aggregate principal amount of $331,001,400 that accrues interest at 4.43% per annum; (ii) a fixed rate loan in the aggregate principal amount of $137,917,250 that accrues interest at 4.57%; and (iii) a variable rate loan in the aggregate principal amount of $82,750,350 that accrues interest at theone-month London Interbank Offered Rate (“LIBOR”) plus 1.70%. The loans have a maturity date of August 1, 2028, unless the maturity date is accelerated in accordance with the terms of the loan documents. Interest only payments are payable monthly through August 1, 2025, with interest and principal payments due monthly thereafter. The Company paid $1,930,842 in

G-23

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

the aggregate in loan origination fees to the Facility Lender in connection with the refinancings, and paid the Advisor a loan coordination fee of $2,758,345.

CME Loans

Additionally, on the Closing Date, five of the Company’s indirect wholly-owned subsidiaries terminated the existing mortgage loans with their lenders for an aggregate principal amount of $131,318,742 and entered into new loan agreements with PNC Bank for an aggregate principal amount of $160,850,000. Each loan agreement provides for a term loan, a (“CME Loan” and, collectively, the “CME Loans”), with a maturity date of August 1, 2028, unless the maturity date is accelerated in accordance with the loan terms. Each CME Loan accrues interest at a fixed rate of 4.43% per annum. The entire outstanding principal balance and any accrued and unpaid interest on each of the CME Loans are due on the maturity date. Interest only payments on the CME Loans are payable monthly in arrears on specified dates as set forth in each loan agreement and interest and principal payments are due beginning September 1, 2023. Monthly payments are due and payable on the first day of each month, commencing September 1, 2018. The Company paid $643,400 in the aggregate in loan origination fees to PNC Bank in connection with the refinancings, and paid the Advisor a loan coordination fee of $804,250.

Line of Credit

On May 18, 2016, the Company entered into a line of credit facility (the “Line of Credit”) with PNC Bank in an amount not to exceed $65,000,000. The Line of Credit provided for advances (each, an “LOC Loan” and collectively, the “LOC Loans”) solely for the purpose of financing the costs in connection with acquisitions and development of real estate projects and for general corporate purposes (subject to certain debt service and loan to value requirements). The Line of Credit had a maturity date of May 17, 2019, subject to extension (the “LOC Maturity Date”), as further described in the loan agreement (the “LOC Loan Agreement”) entered into by certain of the Company’s wholly-owned subsidiaries with PNC Bank in connection with the acquisition of the Landings of Brentwood Property (the “Mortgaged Property”). Advances made under the Line of Credit were secured by the Mortgaged Property, as evidenced by the LOC Loan Agreement, the Revolving Credit Loan Note (the “LOC Note”), the Deed of Trust and a Guaranty from the Company (the “LOC Guaranty,” together with the LOC Loan Agreement and the LOC Note, the “LOC Loan Documents”).

The Company had the option to select the interest rate in respect of the outstanding unpaid principal amount of the LOC Loans from the following options (the “Interest Rate Options”): (1) the sum of the Base Rate (as defined in the LOC Loan Agreement) plus 0.60%, or (2) a rate per annum fixed for the applicable LIBOR Interest Period (as defined in the LOC Loan Agreement) equal to the sum of LIBOR plus 1.60%. The Company terminated the Line of Credit on January 9, 2019.

G-24

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

As of September 30, 2019 and December 31, 2018, the advances obtained and certain financing costs incurred under the MCFA and Line of Credit, which is included in credit facilities, net, in the accompanying consolidated balance sheets, are summarized in the following table.

	Amount of Advance as of
	September 30, 2019			December 31, 2018
Principal balance on Line of Credit, gross(1)	$	—		$	—
Principal balance on MCFA, gross		551,669,000			551,669,000
Deferred financing costs, neton MCFA(2)		(3,310,486	)		(3,612,316	)
Deferred financing costs, neton Line of Credit(3)		—			(44,247	)
Credit facilities, net	$	548,358,514		$	548,012,437

(1) At December 31, 2018, Landings of Brentwood was pledged as collateral pursuant to the Line of Credit. On January 9, 2019, the Company terminated the Line of Credit.

(2) Accumulated amortization related to deferred financing costs in respect of the MCFA as of September 30, 2019 and December 31, 2018, was $730,471 and $428,641, respectively.

(3) Accumulated amortization related to deferred financing costs in respect of the Line of Credit as of September 30, 2019 and December 31, 2018, was $0 and $280,753, respectively.

Maturity and Interest

The following is a summary of the Company’s aggregate maturities as of September 30, 2019:

					Maturities During the Years Ending December 31,
Contractual Obligations	Total		Remainder of 2019		2020		2021		2022		2023		Thereafter
Principal payments on outstanding debt(1)	$	1,107,243,608	$	247,221	$	1,142,443	$	4,327,459	$	4,412,236	$	5,231,961	$	1,091,882,288

(1) Projected principal payments on outstanding debt obligations are based on the terms of the notes payable agreements. Amounts exclude the amortization of deferred financing costs associated with the notes payable.

The Company’s notes payable contain customary financial andnon-financial debt covenants. At September 30, 2019, the Company was in compliance with all debt covenants.

For the three and nine months ended September 30, 2019, the Company incurred interest expense of $12,562,978 and $36,962,055, respectively. Interest expense for the three and nine months ended September 30, 2019, includes amortization of deferred financing costs of $256,547 and $750,751, net unrealized losses from the change in fair value of interest rate cap agreements of $24,144 and $223,867 and credit facility commitment fees of $0 and $2,137, net of capitalized interest of $49,068 and $49,068, respectively. The capitalized interest is included in real estate held for development on the consolidated balance sheets.

For the three and nine months ended September 30, 2018, the Company incurred interest expense of $12,273,389 and $31,619,697, respectively. Interest expense for the three and nine months ended September 30,

G-25

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

2018, includes amortization of deferred financing costs of $269,417 and $762,658, net unrealized gains from the change in fair value of interest rate cap agreements of $62,119 and $641,013, credit facility commitment fees of $16,101 and $30,978, loan fees associated with mortgage notes refinancing of $566,048 and $587,520 and loan discount amortization of $29,582 and $207,074, respectively.

Interest expense of $3,664,971 and $4,006,127 was payable as of September 30, 2019 and December 31, 2018, respectively, and is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.

6. Stockholders’ Equity

General

Under the Company’s Articles of Amendment and Restatement (the “Charter”), the total number of shares of capital stock authorized for issuance is 1,100,000,000 shares, consisting of 999,999,000 shares of common stock with a par value of $0.01 per share, 1,000 shares of convertible stock with a par value of $0.01 per share and 100,000,000 shares of preferred stock with a par value of $0.01 per share.

Common Stock

The shares of the Company’s common stock entitle the holders to one vote per share on all matters upon which stockholders are entitled to vote, to receive dividends and other distributions as authorized by the Company’s board of directors in accordance with the Maryland General Corporation Law and to all rights of a stockholder pursuant to the Maryland General Corporation Law. The common stock has no preferences or preemptive, conversion or exchange rights.

On September 3, 2013, the Company issued 13,500 shares of common stock to the Sponsor for $202,500. From inception through March 24, 2016, the date of the termination of the Public Offering, the Company had issued 48,625,651 shares of common stock in its Public Offering for offering proceeds of $640,012,497, including 1,011,561 shares of common stock issued pursuant to the DRP for total proceeds of $14,414,752, net of offering costs of $84,837,134. Following the termination of the Public Offering, the Company continues to offer shares pursuant to the DRP. As of September 30, 2019, the Company had issued 53,949,748 shares of common stock for offering proceeds of $719,553,631, including 6,335,721 shares of common stock issued pursuant to the DRP for total proceeds of $93,955,886, net of offering costs of $84,837,134. The offering costs primarily consisted of selling commissions and dealer manager fees paid in the Primary Offering.

As further discussed in Note 8 (Incentive Award Plan and Independent Director Compensation), the shares of restricted common stock vest and becomenon-forfeitable in four equal annual installments beginning on the date of grant and ending on the third anniversary of the date of grant or will become fully vested and becomenon-forfeitable on the earlier to occur of (1) the termination of the independent director’s service as a director due to his or her death or disability or (2) a change in control of the Company.

G-26

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

The issuance and vesting activity for the nine months ended September 30, 2019 and year ended December 31, 2018, for the restricted stock issued to the Company’s independent directors were as follows:

	Nine Months Ended September 30, 2019			Year Ended December 31, 2018
Nonvested shares at the beginning of the period		7,497			7,497
Granted shares		—			4,998
Vested shares		(3,749	)		(4,998	)
Nonvested shares at the end of the period		3,748			7,497

Additionally, the weighted average fair value of restricted common stock issued to the Company’s independent directors for the nine months ended September 30, 2019 and year ended December 31, 2018 was as follows:

Grant Year	Weighted Average Fair Value
2018	$	15.18
2019		n/a

Included in general and administrative expenses is $11,390 and $39,182 for the three and nine months ended September 30, 2019, and $33,044 and $60,721 for the three and nine months ended September 30, 2018, respectively, for compensation expense related to the issuance of restricted common stock. As of September 30, 2019, the compensation expense related to the issuance of the restricted common stock not yet recognized was $51,076. The weighted average remaining term of the restricted common stock was approximately 1.2 years as of September 30, 2019. As of September 30, 2019, no shares of restricted common stock issued to the independent directors have been forfeited.

Convertible Stock

The Company issued 1,000 shares of Convertible Stock to the Advisor for $1,000. The Convertible Stock will convert into shares of common stock if and when: (A) the Company has made total distributions on the then-outstanding shares of its common stock equal to the original issue price of those shares plus an aggregate 6.0% cumulative,non-compounded, annual return on the original issue price of those shares, (B) the Company lists its common stock for trading on a national securities exchange or (C) the Advisory Agreement is terminated or not renewed (other than for “cause” as defined in the Advisory Agreement). In the event of a termination ornon-renewal of the Advisory Agreement for cause, all of the shares of the Convertible Stock will be repurchased for $1.00. In general, each share of Convertible Stock will convert into a number of shares of common stock equal to 1/1000 of the quotient of (A) 15% of the excess of (1) the Company’s “enterprise value” plus the aggregate value of distributions paid to date on the then outstanding shares of the Company’s common stock over (2) the aggregate purchase price paid by stockholders for those outstanding shares of common stock plus an aggregated 6.0% cumulative,non-compounded, annual return on the original issue price of those outstanding shares, divided by (B) the Company’s enterprise value divided by the number of outstanding shares of common stock on anas-converted basis, in each case calculated as of the date of the conversion.

G-27

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Preferred Stock

The Charter also provides the Company’s board of directors with the authority to issue one or more classes or series of preferred stock, and prior to the issuance of such shares of preferred stock, the board of directors shall have the power from time to time to classify or reclassify, in one or more series, any unissued shares and designate the preferences, rights and privileges of such shares of preferred stock. The Company’s board of directors is authorized to amend the Charter without the approval of the stockholders to increase the aggregate number of authorized shares of capital stock or the number of shares of any class or series that the Company has authority to issue. As of September 30, 2019 and December 31, 2018, no shares of the Company’s preferred stock were issued and outstanding.

Distribution Reinvestment Plan

The Company’s board of directors has approved the DRP through which common stockholders may elect to reinvest an amount equal to the distributions declared on their shares of common stock in additional shares of the Company’s common stock in lieu of receiving cash distributions. The purchase price per share under the DRP was initially $14.25. On March 12, 2019, March 14, 2018 and February 14, 2017, the Company’s board of directors approved a price per share for the DRP of $15.84, $15.18 and $14.85, effective April 1, 2019, April 1, 2018 and March 1, 2017, respectively, in connection with the determination of an estimated value per share of the Company’s common stock.

The Company’s board of directors may again, in its sole discretion, from time to time, change this price based upon changes in the Company’s estimated value per share and other factors that the Company’s board of directors deems relevant.

No sales commissions or dealer manager fees are payable on shares sold through the DRP. The Company’s board of directors may amend, suspend or terminate the DRP at its discretion at any time upon ten days’ notice to the Company’s stockholders. Following any termination of the DRP, all subsequent distributions to stockholders will be made in cash.

Share Repurchase Plan and Redeemable Common Stock

The Company’s share repurchase plan may provide an opportunity for stockholders to have their shares of common stock repurchased by the Company, subject to certain restrictions and limitations. No shares can be repurchased under the Company’s share repurchase plan until after the first anniversary of the date of purchase of such shares; provided, however, that this holding period shall not apply to repurchases requested within two years after the death or disability of a stockholder.

G-28

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

From March 29, 2016, the date the Company first published an estimated value per share, until April 14, 2018, the purchase price for shares repurchased under the Company’s share repurchase plan was as follows:

Share Purchase Anniversary	Repurchase Price on Repurchase Date(1)
Less than 1 year	No Repurchase Allowed
1 year	92.5% of Estimated Value per Share(2)
2 years	95.0% of Estimated Value per Share(2)
3 years	97.5% of Estimated Value per Share(2)
4 years	100.0% of Estimated Value per Share(2)
In the event of a stockholder’s death or disability(3)	Average Issue Price for Shares(4)

(1) As adjusted for any stock dividends, combinations, splits, recapitalizations or any similar transaction with respect to the shares of common stock. Repurchase price includes the full amount paid for each share, including all sales commissions and dealer manager fees.

(2) The “Estimated Value per Share” is the most recent publicly disclosed estimated value per share determined by the Company’s board of directors.

(3) The requiredone-year holding period does not apply to repurchases requested within two years after the death or disability of a stockholder.

(4) The purchase price per share for shares repurchased upon the death or disability of a stockholder will be equal to the average issue price per share for all of the stockholder’s shares.

On March 14, 2018, the board of directors of the Company determined to amend the terms of the Company’s share repurchase plan effective as of April 15, 2018 to (1) limit the amount of shares repurchased pursuant to the Company’s share repurchase plan each quarter to $2,000,000 and (2) revise the repurchase price to an amount equal to 93% of the most recently publicly disclosed estimated value per share. Pursuant to the amended share repurchase plan, the current share repurchase price is $14.73 per share, which represents 93% of the estimated value per share of $15.84. The share repurchase price is further reduced based on how long the stockholder has held the shares as follows:

Share Purchase Anniversary	Repurchase Price on Repurchase Date(1)
Less than 1 year	No Repurchase Allowed
1 year	92.5% of the Share Repurchase Price(2)
2 years	95.0% of the Share Repurchase Price(2)
3 years	97.5% of the Share Repurchase Price(2)
4 years	100.0% of the Share Repurchase Price(2)
In the event of a stockholder’s death or disability(3)	Average Issue Price for Shares(4)

(1) As adjusted for any stock dividends, combinations, splits, recapitalizations or any similar transaction with respect to the shares of common stock. Repurchase price includes the full amount paid for each share, including all sales commissions and dealer manager fees.

(2) The “Share Repurchase Price” equals 93% of the Estimated Value per Share.

(3) The requiredone-year holding period does not apply to repurchases requested within two years after the death or disability of a stockholder.

G-29

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

(4) The purchase price per share for shares repurchased upon the death or disability of a stockholder will be equal to the average issue price per share for all of the stockholder’s shares.

The purchase price per share for shares repurchased pursuant to the Company’s share repurchase plan will be further reduced by the aggregate amount of net proceeds per share, if any, distributed to the Company’s stockholders prior to the Repurchase Date (defined below) as a result of the sale of one or more of the Company’s assets that constitutes a return of capital as a result of such sales.

Repurchases of shares of the Company’s common stock are made quarterly upon written request to the Company at least 15 days prior to the end of the applicable quarter. Repurchase requests are honored approximately 30 days following the end of the applicable quarter (“Repurchase Date”). Stockholders may withdraw their repurchase request at any time up to three business days prior to the Repurchase Date.

In connection with the proposed SIR Merger and STAR III Merger, on August 5, 2019, the Company’s board of directors approved the Amended and Restated Share Repurchase Plan (the “Amended & Restated SRP”), which became effective September 5, 2019, and will apply with repurchases made on the repurchase dates subsequent to the effective date of the Amended & Restated SRP. Under the Amended & Restated SRP, the Company will only repurchase shares of common stock in connection with the death or qualifying disability (as determined by the Company’s board in its sole discretion) of a stockholder, subject to certain terms and conditions specified in the Amended & Restated SRP. Repurchases pursuant to the Amended and Restated SRP will continue to be limited to $2,000,000 per quarter. The Company expects that the board of directors of the Combined Company will determine the terms of the share repurchase plan at a later date following consummation of the SIR Merger and STAR III Merger.

The Company is not obligated to repurchase shares of its common stock under the share repurchase plan. In no event shall repurchases under the share repurchase plan exceed 5% of the weighted average number of shares of common stock outstanding during the prior calendar year or the $2,000,000 limit for any quarter put in place by the Company’s board of directors. There is no fee in connection with a repurchase of shares of the Company’s common stock pursuant to the Company’s share repurchase plan. As of September 30, 2019 and 2018, the Company had outstanding and unfulfilled repurchase requests of 55,166 (pursuant to the Amended & Restated SRP) and 142,393 shares of common stock, respectively, and recorded $817,640 and $2,000,000, respectively, in accounts payable and accrued liabilities on the accompanying consolidated balance sheets related to these unfulfilled repurchase requests, all of which were repurchased on the October 31, 2019 and 2018 repurchase dates.

During the three and nine months ended September 30, 2019, the Company repurchased a total of 135,389 and 410,234 shares with a total repurchase value of $2,000,000 and $6,000,000, and received requests for repurchases of 55,301 and 851,817 shares with a total repurchase value of $819,634 and $12,443,570, respectively.

During the three and nine months ended September 30, 2018, the Company repurchased a total of 142,393 and 489,003 shares with a total repurchase value of $2,000,000 and $6,886,216, and received requests for the repurchase of 837,351 and 1,378,877 shares with a total repurchase value of $11,690,162 and $19,165,825, respectively.

G-30

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

The Company cannot guarantee that the funds set aside for the share repurchase plan will be sufficient to accommodate all repurchase requests made in any quarter. In the event that the Company does not have sufficient funds available to repurchase all of the shares of the Company’s common stock for which repurchase requests have been submitted in any quarter, priority will be given to repurchase requests in the case of the death or disability of a stockholder. If the Company repurchases less than all of the shares subject to a repurchase request in any quarter, with respect to any shares which have not been repurchased, the Company will treat the shares that have not been repurchased as a request for repurchase in the following quarter pursuant to the limitations of the share repurchase plan and when sufficient funds are available, unless the stockholder withdraws the request for repurchase. Such pending requests will be honored among all requests for repurchases in any given repurchase period as follows: first, pro rata as to repurchases sought upon a stockholder’s death or disability; and, next, pro rata as to other repurchase requests.

The Company’s board of directors may, in its sole discretion, amend, suspend or terminate the share repurchase plan at any time upon 30 days’ notice to its stockholders if it determines that the funds available to fund the share repurchase plan are needed for other business or operational purposes or that amendment, suspension or termination of the share repurchase plan is in the best interest of the Company’s stockholders. Therefore, a stockholder may not have the opportunity to make a repurchase request prior to any potential termination or suspension of the Company’s share repurchase plan. The share repurchase plan will terminate in the event that a secondary market develops for the Company’s shares of common stock.

For the three and nine months ended September 30, 2019, the Company reclassified $1,182,360, net pursuant to the share repurchase plan from accounts payable and accrued liabilities to temporary equity. For the three and nine months ended September 30, 2018, the Company reclassified $0 and $37,028,102, net of $2,000,000 and $6,886,216 of fulfilled redemption requests, respectively, from temporary equity to permanent equity, which is included in additionalpaid-in capital on the accompanying consolidated balance sheets.

Distributions

The Company’s long-term goal is to pay distributions solely from cash flow from operations. However, because the Company may receive income from interest or rents at various times during the Company’s fiscal year and because the Company may need cash flow from operations during a particular period to fund capital expenditures and other expenses, the Company expects that at times during the Company’s operational stage, the Company will declare distributions in anticipation of cash flow that the Company expects to receive during a later period, and the Company expects to pay these distributions in advance of its actual receipt of these funds. The Company’s board of directors has the authority under its organizational documents, to the extent permitted by Maryland law, to fund distributions from sources such as borrowings, offering proceeds or advances and the deferral of fees and expense reimbursements by the Advisor, in its sole discretion. The Company has not established a limit on the amount of proceeds it may use to fund distributions from sources other than cash flow from operations. If the Company pays distributions from sources other than cash flow from operations, the Company will have fewer funds available and stockholders’ overall return on their investment in the Company may be reduced.

To maintain the Company’s qualification as a REIT, the Company must make aggregate annual distributions to its stockholders of at least 90% of its REIT taxable income (which is computed without regard to the

G-31

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). If the Company meets the REIT qualification requirements, the Company generally will not be subject to federal income tax on the income that the Company distributes to its stockholders each year.

Distributions Declared

The Company’s board of directors approved a cash distribution that accrues at a rate of $0.002466 per day for each share of the Company’s common stock during each of the three and nine months ended September 30, 2019 and 2018, which, if paid over a365-day period is equivalent to a 6.0% annualized distribution rate based on a purchase price of $15.00 per share of the Company’s common stock. The distributions declared accrue daily to stockholders of record as of the close of business on each day and are payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month. There is no guarantee that the Company will continue to pay distributions at this rate or at all.

Distributions declared for the three and nine months ended September 30, 2019, were $11,860,005 and $35,056,265, including $5,269,020 and $15,899,564, or 332,640 and 1,018,429 shares of common stock, respectively, attributable to the DRP.

Distributions declared for the three and nine months ended September 30, 2018, were $11,664,156 and $34,462,269, including $5,672,728 and $17,042,127, or 373,697 and 1,130,971 shares of common stock, respectively, attributable to the DRP.

As of September 30, 2019 and December 31, 2018, $3,873,086 and $3,953,499 of distributions declared were payable, which included $1,709,602 and $1,860,828, or 107,929 shares and 122,584 shares of common stock, attributable to the DRP, respectively.

Distributions Paid

For the three and nine months ended September 30, 2019, the Company paid cash distributions of $6,550,164 and $19,085,888, which related to distributions declared for each day in the period from June 1, 2019 through August 31, 2019 and December 1, 2018 through August 31, 2019, respectively. Additionally, for the three and nine months ended September 30, 2019, 334,187 shares and 1,028,071 shares of common stock were issued pursuant to the DRP for gross offering proceeds of $5,293,528 and $16,050,790, respectively. For the three and nine months ended September 30, 2019, the Company paid total distributions of $11,843,692 and $35,136,678, respectively.

For the three and nine months ended September 30, 2018, the Company paid cash distributions of $5,941,991 and $17,364,466, which related to distributions declared for each day in the period from June 1, 2018 through August 31, 2018 and December 1, 2017 through August 31, 2018, respectively. Additionally, for the three and nine months ended September 30, 2018, 375,851 shares and 1,142,634 shares of common stock were issued pursuant to the DRP for gross offering proceeds of $5,705,424 and $17,175,364, respectively. For the three and nine months ended September 30, 2018, the Company paid total distributions of $11,647,415 and $34,539,830, respectively.

G-32

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

7. Related Party Arrangements

The Company has entered into the Advisory Agreement with the Advisor. Pursuant to the Advisory Agreement, the Company is obligated to pay the Advisor specified fees upon the provision of certain services related to the investment of funds in real estate and real estate-related investments and the management of the Company’s investments and for other services (including, but not limited to, the disposition of investments). Subject to the limitations described below, the Company is also obligated to reimburse the Advisor and its affiliates for organization and offering costs incurred by the Advisor and its affiliates on behalf of the Company, as well as acquisition and origination expenses and certain operating expenses incurred on behalf of the Company or incurred in connection with providing services to the Company.

G-33

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Amounts attributable to the Advisor and its affiliates incurred (earned) for the three and nine months ended September 30, 2019 and 2018, and amounts attributable to the Advisor and its affiliates that are payable (prepaid) as of September 30, 2019 and December 31, 2018, are as follows:

	Incurred (Earned) For the Three Months Ended September 30,						Incurred (Earned) For the Nine Months Ended September 30,						Payable (Prepaid) as of
	2019			2018			2019			2018			September 30, 2019			December 31, 2018
Consolidated Statements of Operations:
Expensed
Investment management fees(1)	$	4,190,746		$	4,282,469		$	12,525,074		$	12,826,487		$	2,487		$	55,865
Acquisition expenses(2)		5,933			—			98,594			—			—			—
Loan coordination fees(1)		542,833			3,562,595			542,833			3,562,595			200,000			—
Disposition fees(3)		310,000			—			310,000			—			310,000			—
Disposition transaction costs(3)		3,252			—			3,252			—			—			—
Property management:
Fees(1)		1,276,621			1,241,104			3,756,048			3,653,311			427,803			410,424
Reimbursement of onsite personnel(4)		3,937,443			3,947,855			11,441,579			11,164,448			1,240,363			768,107
Reimbursement of other(1)		907,103			540,090			2,424,954			1,207,246			49,272			41,989
Reimbursement of property operations(4)		28,519			25,118			78,261			71,761			—			—
Reimbursement of property G&A(2)		14,269			9,894			76,101			29,581			—			—
Other operating expenses(2)		493,915			326,867			1,322,066			867,968			257,651			93,740
Insurance proceeds(5)		—			—			—			—			—			(75,000	)
Property insurance(6)		891,113			353,715			1,533,091			1,111,904			(500,727	)		(101,573	)
Rental revenue(7)		(14,745	)		(6,840	)		(44,235	)		(6,840	)		—			—
Consolidated Balance Sheets:
Capitalized
Acquisition fees(8)		—			—			48,343			—			—			—
Acquisition expenses(9)		278,311			—			497,023			—			—			1,607
Capital expenditures(10)		—			—			—			7,295			—			—
Construction management:
Fees(10)		492,218			162,951			953,635			351,053			47,120			10,281
Reimbursement of labor costs(10)		117,871			224,473			379,176			724,860			15,038			29,203
Deferred financing costs(11)		3,594			18,923			3,594			18,923			—			—
Additionalpaid-in capital
Selling commissions		—			—			—			—			127,674			299,952
	$	13,478,996		$	14,689,214		$	35,949,389		$	35,590,592		$	2,176,681		$	1,534,595

(1) Included in fees to affiliates in the accompanying consolidated statements of operations.

(2) Included in general and administrative expenses in the accompanying consolidated statements of operations.

G-34

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

(3) Included in gain on sale of real estate, net in the accompanying consolidated statements of operations.

(4) Included in operating, maintenance and management in the accompanying consolidated statements of operations.

(5) Included in other income in the accompanying consolidated statements of operations.

(6) Property related insurance expense and the amortization of the prepaid insurance deductible account are included in general and administrative expenses in the accompanying consolidated statements of operations. The amortization of the prepaid property insurance is included in operating, maintenance and management expenses in the accompanying consolidated statements of operations. The prepaid insurance is included in other assets in the accompanying consolidated balance sheets upon payment.

(7) Included in rental income in the accompanying consolidated statements of operations.

(8) Included in real estate held for development in the accompanying consolidated balance sheets.

(9) Included in total real estate, net in the accompanying consolidated balance sheets.

(10) Included in building and improvements in the accompanying consolidated balance sheets.

(11) Included in notes payable, net in the accompanying consolidated balance sheets.

Investment Management Fee

The Company pays the Advisor a monthly investment management fee equal toone-twelfth of 1.0% of (1) the cost of investments in real properties and real estate-related assets acquired directly by the Company or (2) the Company’s allocable cost of each investment in real property or real estate related asset acquired through a joint venture. The investment management fee is calculated including the amount actually paid or budgeted to fund acquisition fees, acquisition expenses, cost of development, construction or improvement and any debt attributable to such investments, or the Company’s proportionate share thereof in the case of investments made through joint ventures.

Acquisition Fees and Expenses

The Company pays the Advisor an acquisition fee equal to 1.0% of the cost of investment, which includes the amount actually paid or budgeted to fund the acquisition, origination, development, construction or improvement of any real property or real estate-related asset acquired. In addition to acquisition fees, the Company reimburses the Advisor for amounts directly incurred by the Advisor and amounts the Advisor pays to third parties in connection with the selection, evaluation, acquisition and development of a property or acquisition of real estate-related assets, whether or not the Company ultimately acquires the property or the real estate-related assets.

The Charter limits the Company’s ability to pay acquisition fees if the total of all acquisition fees and expenses relating to the purchase would exceed 4.5% of the contract purchase price. Under the Charter, a majority of the Company’s board of directors, including a majority of the independent directors, is required to approve any acquisition fees (or portion thereof) that would cause the total of all acquisition fees and expenses relating to an acquisition to exceed 4.5% of the contract purchase price. In connection with the purchase of securities, the acquisition fee may be paid to an affiliate of the Advisor that is registered as a Financial Industry Regulatory Authority, Inc. (“FINRA”) member broker-dealer if applicable FINRA rules would prohibit the payment of the acquisition fee to a firm that is not a registered broker-dealer.

Loan Coordination Fee

The Company pays the Advisor or its affiliate a loan coordination fee equal to 1.0% of the initial amount of the new debt financed or outstanding debt assumed in connection with the acquisition, development,

G-35

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

construction, improvement or origination of a property or a real estate-related asset. In addition, in connection with any financing or the refinancing of any debt (in each case, other than identified at the time of the acquisition of a property or a real estate-related asset), the Company pays the Advisor or its affiliate a loan coordination fee equal to 0.75% of the amount of debt financed or refinanced. In some instances, the Company and the Advisor agreed to a loan coordination fee of $100,000 per loan refinanced.

Property Management Fees and Expenses

The Company has entered into property management agreements (each, as amended from time to time, a “Property Management Agreement”) with Steadfast Management Company, Inc., an affiliate of the Sponsor (the “Property Manager”), in connection with the management of each of the Company’s properties. At September 30, 2019, the property management fee payable with respect to each property under the Property Management Agreements ranged from 2.50% to 3.0% of the annual gross revenue collected at the property, as determined by the Advisor and approved by a majority of the Company’s board of directors, including a majority of the independent directors. Each Property Management Agreement has aninitial one-year term and continues thereafter on amonth-to-month basis unless either partygives 60-days’ prior notice of its desire to terminate the Property Management Agreement, provided that the Company may terminate the Property Management Agreement at any time upon a determination of gross negligence, willful misconduct or bad acts of the Property Manager or its employees or upon an uncured breach of the Property Management Agreement upon 30 days’ prior written notice to the Property Manager.

In addition to the property management fee, the Property Management Agreements also specify certain other reimbursements payable to the Property Manager for benefit administration, information technology infrastructure, licenses, support and training services and capital expenditures. The Company also reimburses the Property Manager for the salaries and related benefits ofon-site property management employees.

Construction Management Fees and Expenses

The Company has entered into construction management agreements (each, a “Construction Management Agreement”) with Pacific Coast Land & Construction, Inc., an affiliate of the Sponsor (the “Construction Manager”), in connection with capital improvements and renovation or value-enhancement projects for certain properties the Company acquires. The construction management fee payable with respect to each property under the Construction Management Agreements ranges from 8.0% to 12.0% of the costs of the improvements for which the Construction Manager has planning and oversight authority. Generally, each Construction Management Agreement can be terminated by either party with 30 days’ prior written notice to the other party. Construction management fees are capitalized to the respective real estate properties in the period in which they are incurred as such costs relate to capital improvements and renovations for apartment homes taken out of service while they undergo the planned renovation.

The Company may also reimburse the Construction Manager for the salaries and related benefits of certain of its employees for time spent working on capital improvements and renovations.

G-36

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Development Services

In some instances, the Company may enter into a Development Services Agreement with Steadfast Multifamily Development, Inc., an affiliate of the Advisor, (the “Developer”), in connection with a development project, pursuant to which the Developer will receive a development fee and reimbursement for certain expenses for overseeing the development project. The Company entered into a Development Services Agreement with the Developer in connection with the Garrison Station development project that provided for a development fee equal to 4% of the hard and soft costs of the development project as specified in the Development Services Agreement. 75% of the development fee will be paid in 14 monthly installments and the remaining 25% will be paid upon delivery by the Developer to us of a certificate of occupancy. As of September 30, 2019, no amounts had been paid pursuant to the Development Services Agreement.

Property Insurance

The Company deposits amounts with an affiliate of the Sponsor to fund a prepaid insurance deductible account to cover the cost of required insurance deductibles across all properties of the Company and other affiliated entities. Upon filing a major claim, proceeds from the insurance deductible account may be used by the Company or another affiliate of the Sponsor. In addition, the Company deposits amounts with an affiliate of the Sponsor to cover the cost of property and property related insurance across certain properties of the Company.

Other Operating Expense Reimbursement

In addition to the various fees paid to the Advisor, the Company is obligated to pay directly or reimburse all expenses incurred by the Advisor in providing services to the Company, including the Company’s allocable share of the Advisor’s overhead, such as rent, employee costs, utilities and information technology costs. The Company will not reimburse the Advisor for employee costs in connection with services for which the Advisor or its affiliates receive acquisition fees or disposition fees or for the salaries the Advisor pays to the Company’s executive officers.

The Charter limits the Company’s total operating expenses during any four fiscal quarters to the greater of 2% of the Company’s average invested assets or 25% of the Company’s net income for the same period (the “2%/25% Limitation”). The Company may reimburse the Advisor, at the end of each fiscal quarter, for operating expenses incurred by the Advisor; provided, however, that the Company shall not reimburse the Advisor at the end of any fiscal quarter for operating expenses that exceed the 2%/25% Limitation unless the independent directors have determined that such excess expenses were justified based on unusual andnon-recurring factors. The Advisor must reimburse the Company for the amount by which the Company’s operating expenses for the preceding four fiscal quarters then ended exceed the 2%/25% Limitation, unless approved by the independent directors. For purposes of determining the 2%/25% Limitation amount, “average invested assets” means the average monthly book value of the Company’s assets invested directly or indirectly in equity interests and loans secured by real estate during the12-month period before deducting depreciation, bad debts reserves or othernon-cash reserves. “Total operating expenses” means all expenses paid or incurred by the Company that are in any way related to the Company’s operation, including the Company’s allocable share of Advisor overhead, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred

G-37

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

in connection with the issuance, distribution, transfer, listing and registration of shares of the Company’s common stock; (b) interest payments; (c) taxes;(d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based on the gain in the sale of the Company’s assets; (f) acquisition fees and acquisition expenses (including expenses relating to potential acquisitions that the Company does not close) and investment management fees; (g) real estate commissions on the resale of investments; and (h) other expenses connected with the acquisition, disposition, management and ownership of investments (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of real property).

As of September 30, 2019, the Company’s total operating expenses, as defined above, did not exceed the 2%/25% Limitation.

Disposition Fee

If the Advisor or its affiliates provide a substantial amount of services in connection with the sale of a property or real estate-related asset as determined by a majority of the Company’s independent directors, the Company will pay the Advisor or its affiliates a fee equivalent toone-half of the brokerage commissions paid, but in no event to exceed 1% of the sales price of each property or real estate-related asset sold. To the extent the disposition fee is paid upon the sale of any assets other than real property, it will be included as an operating expense for purposes of the 2%/25% Limitation. In connection with the sale of securities, the disposition fee may be paid to an affiliate of the Advisor that is registered as a FINRA member broker-dealer if applicable FINRA rules would prohibit the payment of the disposition fee to a firm that is not a registered broker-dealer.

Selling Commissions and Dealer Manager Fees

The Company entered into the Dealer Manager Agreement with the Dealer Manager in connection with the Public Offering. The Company paid the Dealer Manager up to 7% and 3% of the gross offering proceeds from the Primary Offering as selling commissions and dealer manager fees, respectively. The Dealer Manager reallowed 100% of sales commissions earned to participating broker-dealers. The Dealer Manager could also reallow to any participating broker-dealer a portion of the dealer manager fee that was attributable to that participating broker-dealer for certain marketing costs of that participating broker-dealer. The Dealer Manager negotiated the reallowance of the dealer manager fee on acase-by-case basis with each participating broker-dealer subject to various factors associated with the cost of the marketing program. The Company allowed a participating broker-dealer to elect to receive the 7% selling commissions at the time of sale or elect to have the selling commission paid on a trailing basis. A participating broker-dealer that elected to receive a trailing selling commission is paid as follows: 3% at the time of sale and the remaining 4% paid ratably (1% per year) on each of the first four anniversaries of the sale. A reduced selling commission and dealer manager fee was paid in connection with volume discounts and certain other categories of sales. No selling commissions or dealer manager fee was paid with respect to shares of common stock issued pursuant to the DRP. The Company terminated the Public Offering on March 24, 2016, and as of September 30, 2019 and December 31, 2018, expects to pay trailing selling commissions of $127,674 and $299,952, respectively, which were charged to additionalpaid-in capital and included within amounts due to affiliates in the accompanying consolidated balance sheets.

G-38

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Pending Mergers with Steadfast Income REIT and Steadfast Apartment REIT III

Amended and Restated Advisory Agreement

Concurrently with the entry into the Merger Agreements, the Company and the Advisor entered into the Amended and Restated STAR Advisory Agreement (the “Amended STAR Advisory Agreement”), which will become effective at the effective time of the earlier of the SIR Merger and STAR Merger. The Amended STAR Advisory Agreement amends the existing Advisory Agreement to lower certain fees and to change the form of consideration for the investment management fee so that such fees are paid 50% in cash and 50% in STAR common stock. Any acquisition fee, disposition fee or loan coordination fee payable to the Advisor will be 0.5% of the cost of investment, sales price or amount financed, as applicable. Any loan coordination fee related tonon-acquisition financing or refinancing will be payable to the Advisor in the form of the Company’s common stock. In addition, the Amended STAR Advisory Agreement provides for a Subordinated Incentive Listing Fee, Subordinated Share of Net Sales Proceeds and Performance Fee (each as defined in the Amended STAR Advisory Agreement) to be payable to the Advisor in exchange for the redemption of the 1,000 shares of Convertible Stock currently owned by the Advisor.

Pursuant to the Merger Agreements, the Advisor may request to receive a new class of convertible stock in exchange for the Convertible Stock owned by the Advisor in lieu of the Subordinated Incentive Listing Fee, Subordinated Share of Net Sales Proceeds and Performance Fee provided for in the Amended STAR Advisory Agreement; provided that such request must be made prior to the consummation of either of the mergers.

8. Incentive Award Plan and Independent Director Compensation

The Company has adopted an incentive award plan (the “Incentive Award Plan”) that provides for the grant of equity awards to its employees, directors and consultants and those of the Company’s affiliates. The Incentive Award Plan authorizes the grant ofnon-qualified and incentive stock options, restricted stock awards, restricted stock units, stock appreciation rights, dividend equivalents and other stock-based awards or cash-based awards.

Under the Company’s independent directors’ compensation plan, which is asub-plan of the Incentive Award Plan, each of the Company’s independent directors received 3,333 shares of restricted common stock once the Company raised $2,000,000 in gross offering proceeds in the Public Offering. Each subsequent independent director that joins the Company’s board of directors receives 3,333 shares of restricted common stock upon election to the Company’s board of directors. In addition, on the date following an independent director’sre-election to the Company’s board of directors, he or she receives 1,666 shares of restricted common stock.One-fourth of the shares of restricted common stock generally vest and becomenon-forfeitable upon issuance and the remaining portion will vest in three equal annual installments beginning on the date of grant and ending on the third anniversary of the date of grant; provided, however, that the restricted stock will become fully vested and becomenon-forfeitable on the earlier to occur of (1) the termination of the independent director’s service as a director due to his or her death or disability or (2) a change in control of the Company. These restricted stock awards entitle the holders to participate in distributions even if the shares are not fully vested.

The Company recorded stock-based compensation expense of $11,390 and $39,182 for the three and nine months ended September 30, 2019 and $33,044 and $60,721 for the three and nine months ended September 30, 2018, respectively, related to the independent directors’ restricted common stock.

G-39

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

In addition to the stock awards, the Company pays each of its independent directors an annual retainer of $55,000, prorated for any partial term (the audit committee chairperson receives an additional $10,000 annual retainer, prorated for any partial term). The independent directors are also paid for attending meetings as follows: (i) $2,500 for each board meeting attended in person, (ii) $1,500 for each committee meeting attended in person in such director’s capacity as a committee member, (iii) $1,000 for each board meeting attended via teleconference (not to exceed $4,000 for any one set of meetings attended on any given day). All directors also receive reimbursement of reasonable out of pocket expenses incurred in connection with attendance at meetings of the board of directors. Director compensation is an operating expense of the Company that is subject to the operating expense reimbursement obligation of the Advisor discussed in Note 7 (Related Party Arrangements). The Company recorded an operating expense of $94,750 and $346,750 for the three and nine months ended September 30, 2019, and $235,750 and $353,250 for the three and nine months ended September 30, 2018, related to the independent directors’ annual retainer and attending board and committee meetings, which is included in general and administrative expenses in the accompanying consolidated statements of operations. As of September 30, 2019 and December 31, 2018, $94,750 and $151,750, respectively, related to the independent directors’ annual retainer and board meetings attendance is included in accounts payable and accrued liabilities in the consolidated balance sheets.

9. Commitments and Contingencies

Economic Dependency

The Company is dependent on the Advisor for certain services that are essential to the Company, including the identification, evaluation, negotiation, purchase and disposition of real estate and real estate-related investments; management of the daily operations of the Company’s real estate and real estate-related investment portfolio; and other general and administrative responsibilities. In the event that the Advisor is unable to provide such services, the Company will be required to obtain such services from other sources. The Company may not be able to retain services from such other sources on favorable terms or at all.

Concentration of Credit Risk

The geographic concentration of the Company’s portfolio makes it particularly susceptible to adverse economic developments in the Atlanta, Georgia, Dallas/Fort Worth, Texas and Nashville, Tennessee apartment markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, relocations of businesses, increased competition from other apartment communities, decrease in demand for apartments or any other changes, could adversely affect the Company’s operating results and its ability to make distributions to stockholders.

Environmental

As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. The Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s properties, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the properties could result in future environmental liabilities.

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Legal Matters

From time to time, the Company is subject, or party, to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on the Company’s results of operations or financial condition nor is the Company aware of any such legal proceedings contemplated by government agencies.

10. Derivative Financial Instruments

The Company uses interest rate derivatives with the objective of managing exposure to interest rate movements thereby minimizing the effect of interest rate changes and the effect they could have on future cash flows. Interest rate cap agreements are used to accomplish this objective. The following table provides the terms of the Company’s interest rate derivative instruments that were in effect at September 30, 2019 and December 31, 2018:

September 30, 2019
Type	Maturity Date Range		Based on		Number of Instruments		Notional Amount		Variable Rate			Weighted Average Rate Cap			Fair Value
Interest Rate Cap		10/1/2019  - 8/1/2021		One-Month LIBOR		11	$	395,592,350		2.02	%		3.46	%	$	1,902

December 31, 2018
Type	Maturity Date Range		Based on		Number of Instruments		Notional Amount		Variable Rate			Weighted Average Rate Cap			Fair Value
Interest Rate Cap		1/1/2019 - 8/1/2021		One-Month LIBOR		22	$	713,237,850		2.52	%		3.46	%	$	207,769

The interest rate cap agreements are not designated as effective cash flow hedges. Accordingly, the Company records any changes in the fair value of the interest rate cap agreements as interest expense. The change in the fair value of the interest rate cap agreements for the three and nine months ended September 30, 2019, resulted in an unrealized loss of $24,144 and $223,867, respectively, and for the three and nine months ended September 30, 2018, resulted in an unrealized gain of $62,119 and $641,013, respectively, which is included in interest expense in the accompanying consolidated statements of operations. During the three and nine months ended September 30, 2019, the Company acquired interest rate cap agreements of $18,000. During the three and nine months ended September 30, 2018, the Company acquired interest rate cap agreements of $43,200 and received settlement proceeds from interest rate cap agreements of $270,000. The fair value of the interest rate cap agreements of $1,902 and $207,769 as of September 30, 2019 and December 31, 2018, respectively, is included in other assets on the accompanying consolidated balance sheets.

11. Subsequent Events

Distributions Paid

On October 1, 2019, the Company paid distributions of $3,873,086, which related to distributions declared for each day in the period from September 1, 2019 through September 30, 2019 and consisted of cash distributions paid in the amount of $2,163,484 and $1,709,602 in shares issued pursuant to the DRP.

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

On November 1, 2019, the Company paid distributions of $4,009,485, which related to distributions declared for each day in the period from October 1, 2019 through October 31, 2019 and consisted of cash distributions paid in the amount of $2,248,504 and $1,760,981 in shares issued pursuant to the DRP.

Shares Repurchased

On October 31, 2019, the Company repurchased 55,166 shares of its common stock for a total repurchase value of $817,640, or $14.79 per share, pursuant to the Company’s share repurchase plan.

Refinancing Transactions

On October 1, 2019, the Company, through the indirect wholly-owned subsidiaries set out in the table below (each a “Borrower” and collectively, the “Borrowers”), refinanced $126,376,000 of existing variable rate loans with PNC Bank with new fixed rate Freddie Mac loans in an aggregate principal amount of $135,524,000 (the “Loans”). Each of the Loans has a ten year term, with interest only payments for the first five years. The Borrowers paid $508,215 in the aggregate in loan origination fees to PNC Bank in connection with the refinancings, and the Advisor earned a loan coordination fee of $400,000.

Property	Borrower	Closing Date		Lender		Loan Amount		Interest Rate
Meadows at N. Richland Hills	STAR Meadows, LLC		10/1/2019		PNC Bank	$	26,888,000		3.56	%
Park Valley	STAR Park Valley, LLC		10/1/2019		PNC Bank		49,100,000		3.56	%
Peak View by Horseshoe Lake	STAR Horseshoe, LLC		10/1/2019		PNC Bank		38,421,000		3.56	%
Reveal on Cumberland	STAR Cumberland, LLC		10/1/2019		PNC Bank		21,115,000		3.56	%
						$	135,524,000

Distributions Declared

On November 5, 2019, the Company’s board of directors approved and authorized a daily distribution to stockholders of record as of the close of business on each day of the period commencing on January 1, 2020 and ending on March 31, 2020. The distributions will be equal to $0.002459 per share of the Company’s common stock per day. The distributions for each record date in January 2020, February 2020 and March 2020 will be paid in February 2020, March 2020 and April 2020, respectively. The distributions will be payable to stockholders from legally available funds therefor.

Restricted Stock Grant

On November 6, 2019, the Company granted 1,666 shares of restricted common stock to each of its three independent directors upon theirre-election to the Company’s board of directors at the 2019 annual meeting of stockholders.

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the accompanying unaudited consolidated financial statements of Steadfast Apartment REIT, Inc. and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to Steadfast Apartment REIT, Inc., a Maryland corporation, and, as required by context, Steadfast Apartment REIT Operating Partnership, L.P., a Delaware limited partnership, which we refer to as our “operating partnership,” and to their subsidiaries.

Forward-Looking Statements

Certain statements included in this Quarterly Report onForm 10-Q that are not historical facts (including any statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto) are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual events or our investments and results of operations could differ materially from those expressed or implied in any forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms and other comparable terminology.

The forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs that involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. Factors that could have a material adverse effect on our operations and future prospects include, but are not limited to:

• the fact that we have a limited operating history and commenced operations on May 22, 2014;

• the fact that we have had a net loss for each quarterly and annual period since inception;

• changes in economic conditions generally and the real estate and debt markets specifically;

• our ability to secure resident leases for our multifamily properties at favorable rental rates;

• risks inherent in the real estate business, including resident defaults, potential liability relating to environmental matters and the lack of liquidity of real estate investments;

• the fact that we pay fees and expenses to our advisor and its affiliates that were not negotiated on an arm’s length basis and the fact that the payment of these fees and expenses increases the risk that our stockholders will not earn a profit on their investment in us;

• our ability to retain our executive officers and other key personnel of our advisor, our property manager and other affiliates of our advisor;

• our ability to generate sufficient cash flows to pay distributions for our stockholders;

• completion of the proposed mergers described herein are subject to many conditions and if these conditions are not satisfied or waived, the mergers will not be completed, which could result in the expenditure of significant unrecoverable transaction costs;

• failure to complete either of the mergers could negatively impact our future business and financial results;

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PART I — FINANCIAL INFORMATION (continued)

• the pendency of the mergers, including as a result of the restrictions on the operation of our business during the period between signing of the Merger Agreements (defined herein) and the completion of either merger, could adversely affect our business and operations;

• legislative or regulatory changes (including changes to the laws governing the taxation of real estate investment trusts, or REITs);

• the availability of capital;

• changes in interest rates; and

• changes to generally accepted accounting principles, or GAAP.

Any of the assumptions underlying forward-looking statements could be inaccurate. You are cautioned not to place undue reliance on any forward-looking statements included in this quarterly report. All forward-looking statements are made as of the date of this quarterly report and the risk that actual results will differ materially from the expectations expressed in this quarterly report will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements after the date of this quarterly report, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this quarterly report, the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this quarterly report will be achieved.

All forward looking statements included herein should be read in connection with the risks identified in the “Risk Factors” section of our Annual Report on Form10-K for the year ended December 31, 2018, filed with the Securities and Exchange Commission, or the SEC, on March 14, 2019.

Overview

We were formed on August 22, 2013, as a Maryland corporation that elected to be taxed as, and qualifies as, a REIT. As described in more detail below, we own and manage a diverse portfolio of 33 multifamily properties, located in the United States comprising a total of 11,455 apartment homes and one parcel of land held for the development of apartment homes. We may acquire additional multifamily properties or pursue multifamily development projects in the future.

On December 30, 2013, we commenced an initial public offering of up to 66,666,667 shares of common stock at an initial price of $15.00 per share and up to 7,017,544 shares of common stock pursuant to our distribution reinvestment plan at an initial price of $14.25 per share. On March 24, 2016, we terminated our initial public offering. As of March 24, 2016, we had sold 48,625,651 shares of common stock for gross offering proceeds of $724,849,631, including 1,011,561 shares of common stock issued pursuant to our distribution reinvestment plan for gross offering proceeds of $14,414,752. Following the termination of our initial public offering, we have continued to offer shares of our common stock pursuant to our distribution reinvestment plan. As of September 30, 2019, we had sold 53,949,748 shares of common stock for gross proceeds of $804,390,765, including 6,335,721 shares of common stock issued pursuant to our distribution reinvestment plan for gross offering proceeds of $93,955,886.

On March 12, 2019, our board of directors approved an estimated value per share of our common stock of $15.84 as of December 31, 2018. In connection with the determination of an estimated value per share, our board of directors determined a price per share for the distribution reinvestment plan of $15.84, effective April 1, 2019. In the future, our board of directors may, in its sole discretion and from time to time, change the price at which we offer shares pursuant to our distribution reinvestment plan to reflect changes in our estimated value per share and other factors that our board of directors deems relevant.

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PART I — FINANCIAL INFORMATION (continued)

Subject to certain restrictions and limitations, Steadfast Apartment Advisor, LLC, which we refer to as our “advisor,” manages ourday-to-day operations and our portfolio of properties and real estate-related assets. Our advisor sources and presents investment opportunities to our board of directors. Our advisor also provides investment management, marketing, investor relations and other administrative services on our behalf.

Substantially all of our business is conducted through Steadfast Apartment REIT Operating Partnership, L.P., our operating partnership. We are the sole general partner of our operating partnership and one of our wholly-owned subsidiaries is the only limited partner of our operating partnership. As we accepted subscriptions for shares of common stock in our initial public offering, we transferred substantially all of the net proceeds to our operating partnership as a capital contribution. The limited partnership agreement of our operating partnership provides that our operating partnership will be operated in a manner that will enable us to (1) satisfy the requirements for being classified as a REIT for federal income tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that our operating partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, which classification could result in our operating partnership being taxed as a corporation, rather than as a disregarded entity. In addition to the administrative and operating costs and expenses incurred by our operating partnership in acquiring and operating our investments, our operating partnership will pay all of our administrative costs and expenses, and such expenses will be treated as expenses of our operating partnership.

We elected to be taxed as a REIT under the Internal Revenue Code commencing with our taxable year ended December 31, 2014. As a REIT, we generally will not be subject to federal income tax to the extent that we distribute qualifying dividends to our stockholders. If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax on our taxable income at regular corporate rates and would not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year in which qualification is lost, unless the Internal Revenue Service grants us relief under certain statutory provisions. Failing to qualify as a REIT could materially and adversely affect our net income and results of operations.

Proposed Merger with Steadfast Income REIT, Inc.

On August 5, 2019, we, Steadfast Income REIT, Inc., or SIR, our operating partnership, Steadfast Income REIT Operating Partnership, L.P., the operating partnership of SIR, and SI Subsidiary, LLC, our wholly-owned subsidiary, or SIR Merger Sub, entered into an Agreement and Plan of Merger, or the SIR Merger Agreement. Subject to the terms and conditions of the SIR Merger Agreement, SIR will merge with and into SIR Merger Sub, or the SIR Merger, with SIR Merger Sub surviving the SIR Merger, such that following the SIR Merger, the surviving entity will continue as a wholly-owned subsidiary of ours. In accordance with the applicable provisions of the Maryland General Corporation Law, or MGCL, the separate existence of SIR shall cease.

At the effective time of the SIR Merger and subject to the terms and conditions of the SIR Merger Agreement, each issued and outstanding share of SIR’s common stock (or a fraction thereof), $0.01 par value per share, or the SIR Common Stock, will be converted into the right to receive 0.5934 shares of our common stock.

The obligations of each party to consummate the SIR Merger are subject to a number of conditions, including receipt of the approval of the SIR Merger and of an amendment to SIR’s charter to delete certain provisions regardingroll-up transactions by the holders of a majority of the outstanding shares of SIR Common Stock.

Proposed Merger with Steadfast Apartment REIT III, Inc.

On August 5, 2019, we, Steadfast Apartment REIT III, Inc., or STAR, our operating partnership, Steadfast Apartment REIT III Operating Partnership, L.P., the operating partnership of STAR III, and SIII Subsidiary,

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PART I — FINANCIAL INFORMATION (continued)

LLC, our wholly-owned subsidiary, or the STAR III Merger Sub, entered into an Agreement and Plan of Merger, or the STAR III Merger Agreement and together with the SIR Merger Agreement, the Merger Agreements. Subject to the terms and conditions of the STAR III Merger Agreement, STAR III will merge with and into STAR III Merger Sub, or the STAR III Merger, with STAR III Merger Sub surviving the STAR III Merger, such that following the STAR III Merger, the surviving entity will continue as a wholly-owned subsidiary of ours. In accordance with the applicable provisions of the MGCL, the separate existence of STAR III shall cease.

At the effective time of the STAR III Merger and subject to the terms and conditions of the STAR III Merger Agreement, each issued and outstanding share of STAR III’s common stock (or a fraction thereof), $0.01 par value per share, or the STAR III Common Stock, will be converted into the right to receive 1.430 shares of our common stock.

The obligations of each party to consummate the STAR III Merger are subject to a number of conditions, including receipt of the approval of the STAR III Merger and of an amendment to STAR III’s charter to delete certain provisions regardingroll-up transactions by the holders of a majority of the outstanding shares of STAR III Common Stock.

For additional information on the SIR Merger and the STAR III Merger, see our Current Report onForm 8-K filed with the SEC on August 6, 2019.

Market Outlook

We believe economic and demographic trends will benefit our existing portfolio and that we have unique future investment opportunities in the multifamily sector. Home ownership rates are at nearall-time lows. Demographic and economic factors favor the flexibility of rental housing and discourage the potential financial burden associated with home ownership. Additionally, Millennials and Baby Boomers, the two largest demographic groups comprising roughly half of the total population in the United States, are increasingly choosing rental housing over home ownership. Demographic studies suggest that Baby Boomers are downsizing their suburban homes and relocating to multifamily apartments. Millennials are renting multifamily apartments due to high levels of student debt and increased credit standards in order to qualify for a home mortgage. According to the Federal Reserve Bank of New York, aggregate student debt has surpassed automotive, home equity lines of credit and credit card debt. Millennials are also getting married and having children later and are choosing to live in apartment communities until theirmid-30s. Today, approximately 30% of Millennials are still living with their parents or are still in school. When they are employed, Millennials will likely rent moderate income apartments based upon an average income of $45,000 to $65,000. Our plan is to provide rental housing for these generational groups as they age. We believe these factors will continue to contribute to the demand for multifamily housing.

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PART I — FINANCIAL INFORMATION (continued)

Our Real Estate Portfolio

As of September 30, 2019, we owned the 33 multifamily apartment communities and one parcel of land held for the development of apartment homes listed below:

Property Name		Location	Purchase Date	Number of Units		Contract Purchase Price		Mortgage Debt Outstanding(3)			Average Monthly Occupancy(1)						Average Monthly Rent(2)
											Sep 30, 2019			Dec 31, 2018			Sep 30, 2019		Dec 31, 2018
1	Villages at Spring Hill Apartments	Spring Hill, TN	5/22/2014		176	$	14,200,000			(4)		94.9	%		94.9	%	$	1,120	$	996
2	Harrison Place Apartments	Indianapolis, IN	6/30/2014		307		27,864,250			(4)		93.5	%		95.4	%		981		971
3	Club at Summer Valley	Austin, TX	8/28/2014		260		21,500,000			(4)		95.0	%		92.3	%		926		913
4	Terrace Cove Apartment Homes	Austin, TX	8/28/2014		304		23,500,000			(4)		95.1	%		95.7	%		961		918
5	The Residences on McGinnis Ferry	Suwanee, GA	10/16/2014		696		98,500,000			(4)		94.5	%		93.0	%		1,341		1,282
6	The 1800 at Barrett Lakes	Kennesaw, GA	11/20/2014		500		49,000,000		40,613,028			93.0	%		95.2	%		1,086		1,035
7	The Oasis	Colorado Springs, CO	12/19/2014		252		40,000,000		39,486,587			95.6	%		93.7	%		1,402		1,349
8	Columns on Wetherington	Florence, KY	2/26/2015		192		25,000,000			(4)		93.8	%		94.3	%		1,209		1,153
9	Preston Hills at Mill Creek	Buford, GA	3/10/2015		464		51,000,000			(4)		92.2	%		93.5	%		1,186		1,113
10	Eagle Lake Landing Apartments	Speedway, IN	3/27/2015		277		19,200,000			(4)		94.6	%		94.6	%		892		865
11	Reveal on Cumberland	Fishers, IN	3/30/2015		220		29,500,000		21,638,579			96.4	%		94.5	%		1,130		1,104
12	Heritage Place Apartments	Franklin, TN	4/27/2015		105		9,650,000		8,586,593			96.2	%		96.2	%		1,152		1,130
13	Rosemont at East Cobb	Marietta, GA	5/21/2015		180		16,450,000		13,253,459			93.9	%		92.8	%		1,046		991
14	Ridge Crossings Apartments	Hoover, AL	5/28/2015		720		72,000,000		57,653,083			95.0	%		94.7	%		1,004		979
15	Bella Terra at City Center	Aurora, CO	6/11/2015		304		37,600,000			(4)		94.4	%		91.8	%		1,185		1,150
16	Hearthstone at City Center	Aurora, CO	6/25/2015		360		53,400,000			(4)		96.1	%		92.2	%		1,253		1,224
17	Arbors at Brookfield	Mauldin, SC	6/30/2015		702		66,800,000			(4)		92.0	%		93.0	%		940		929
18	Carrington Park	Kansas City, MO	8/19/2015		298		39,480,000			(4)		94.3	%		94.0	%		1,038		1,013
19	Delano at North Richland Hills	North Richland Hills, TX	8/26/2015		263		38,500,000		31,803,343			95.8	%		94.3	%		1,475		1,439
20	Meadows at North Richland Hills	North Richland Hills, TX	8/26/2015		252		32,600,000		25,462,929			96.0	%		93.7	%		1,396		1,339
21	Kensington by the Vineyard	Euless, TX	8/26/2015		259		46,200,000		34,105,671			96.5	%		95.0	%		1,482		1,485
22	Monticello by the Vineyard	Euless, TX	9/23/2015		354		52,200,000		41,212,446			97.2	%		95.2	%		1,337		1,336
23	The Shores	Oklahoma City, OK	9/29/2015		300		36,250,000		23,727,188			94.7	%		94.0	%		1,018		1,000
24	Lakeside at Coppell	Coppell, TX	10/7/2015		315		60,500,000		47,871,611			97.5	%		94.6	%		1,725		1,687
25	Meadows at River Run	Bolingbrook, IL	10/30/2015		374		58,500,000		42,599,949			88.2	%		91.4	%		1,376		1,408
26	PeakView atT-Bone Ranch	Greeley, CO	12/11/2015		224		40,300,000			(4)		93.3	%		95.5	%		1,342		1,295
27	Park Valley Apartments	Smyrna, GA	12/11/2015		496		51,400,000		44,735,111			93.8	%		92.9	%		1,069		1,012
28	PeakView by Horseshoe Lake	Loveland, CO	12/18/2015		222		44,200,000		33,727,620			95.0	%		94.1	%		1,408		1,388
29	Stoneridge Farms	Smyrna, TN	12/30/2015		336		47,750,000		45,329,213			93.8	%		93.8	%		1,206		1,178
30	Fielder’s Creek	Englewood, CO	3/23/2016		217		32,400,000		—			95.4	%		95.9	%		1,209		1,193
31	Landings of Brentwood	Brentwood, TN	5/18/2016		724		110,000,000		—			96.7	%		95.9	%		1,251		1,191

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PART I — FINANCIAL INFORMATION (continued)

Property Name		Location	Purchase Date	Number of Units		Contract Purchase Price		Mortgage Debt Outstanding(3)			Average Monthly Occupancy(1)						Average Monthly Rent(2)
											Sep 30, 2019			Dec 31, 2018			Sep 30, 2019		Dec 31, 2018
32	1250 West Apartments	Marietta, GA	8/12/2016		468	$	55,772,500			(4)		92.7	%		90.4	%	$	1,038	$	1,008
33	Sixteen50 @ Lake Ray Hubbard	Rockwall, TX	9/29/2016		334		66,050,000			(4)		95.2	%		94.6	%		1,503		1,492
34	Garrison Station Development(5)	Murfreesboro, TN	5/30/2019		—		4,305,247		—			—	%		—	%		—		—
					11,455	$	1,471,571,997	$	551,806,410			94.4	%		93.9	%	$	1,190	$	1,163

(1) As of September 30, 2019, our portfolio was approximately 96.4% leased, calculated using the number of occupied and contractually leased units divided by total units.

(2) Average monthly rent is based upon the effective rental income after considering the effect of vacancies, concessions and write-offs.

(3) Mortgage debt outstanding is net of deferred financing costs associated with the loans for each individual property listed above but excludes the principal balance of $551,669,000 and associated deferred financing costs of $3,310,487 related to the refinancings pursuant to our Master Credit Facility Agreement, or MCFA.

(4) Properties secured under the terms of the MCFA.

(5) We acquired the Garrison Station property (formerly known as Victory Station) on May 30, 2019, which included unimproved land, currently zoned as a Planned Unit Development, or PUD. The current zoning permits the development of the property into a multifamily community including 176 units of 1, 2 and3-bedroom units with a typical unit mix for this market.

2019 Property Dispositions

Randall Highlands Apartments

On March 31, 2015, we, through an indirect wholly-owned subsidiary, acquired Randall Highlands Apartments, a multifamily property located in North Aurora, Illinois, containing 146 apartment homes. The purchase price of Randall Highlands Apartments was $32,115,000, exclusive of closing costs. On September 26, 2019, we sold Randall Highlands Apartments for $31,000,000, resulting in a gain of $3,329,078, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Randall Highlands Apartments was not affiliated with us or our advisor.

Critical Accounting Policies

The preparation of our financial statements requires significant management judgments, assumptions and estimates about matters that are inherently uncertain. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. A discussion of the accounting policies that management considers critical in that they involve significant management judgments, assumptions and estimates is included in our Annual Report on Form10-K for the year ended December 31, 2018, filed with the SEC on March 14, 2019. There have been no significant changes to our accounting policies during the period covered by this report, except as discussed in Note 2 (Summary of Significant Accounting Policies), to our condensed consolidated unaudited financial statements in this quarterly report.

Income Taxes

We have elected to be taxed as a REIT under the Internal Revenue Code and have operated as such commencing with our taxable year ended December 31, 2014. To continue to qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our

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PART I — FINANCIAL INFORMATION (continued)

annual REIT taxable income to our stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, we generally will not be subject to federal income tax to the extent we distribute qualifying dividends to our stockholders. If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax on our taxable income at regular corporate income tax rates and generally would not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to stockholders. However, we believe we are organized and operate in such a manner as to qualify for treatment as a REIT.

We follow the income tax guidance under GAAP to recognize, measure, present and disclose in our consolidated financial statements uncertain tax positions that we have taken or expect to take on a tax return. As of September 30, 2019 and December 31, 2018, we did not have any liabilities for uncertain tax positions that we believe should be recognized in our consolidated financial statements. We have not been assessed material interest or penalties by any major tax jurisdictions. Our evaluation was performed for all open tax years through December 31, 2018.

Distributions

Our board of directors has historically declared daily distributions that are paid on a monthly basis. We expect to continue paying monthly distributions unless our results of operations, our general financial condition, general economic conditions or other factors prohibit us from doing so. We have and may in the future continue to declare distributions in excess of our cash flow from operations. As a result, our distribution rate and payment frequency may vary from time to time. However, to qualify as a REIT for tax purposes, we must make distributions equal to at least 90% of our “REIT taxable income” each year.

Distributions declared (1) accrue daily to our stockholders of record as of the close of business on each day, (2) are payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month and (3) were calculated at a rate of $0.002466 per share per day during the period during the nine months ended September 30, 2019, which if paid over a365-day period is equivalent to a 6.0% annualized distribution rate based on a purchase price of $15.00 per share of common stock.

The distributions declared and paid during the first, second, and third fiscal quarters of 2019, along with the amount of distributions reinvested pursuant to the distribution reinvestment plan were as follows:

					Distributions Paid(3)						Sources of Distributions Paid
Period	Distributions Declared(1)		Distributions Declared Per Share(1)(2)		Cash		Reinvested		Total		Cash Flow From   Operations		Cash and Cash   Equivalents		Net Cash Provided by Operating Activities
First Quarter 2019	$	11,511,537	$	0.222	$	6,116,456	$	5,378,566	$	11,495,022	$	2,276,063	$	9,218,959	$	2,276,063
Second Quarter 2019		11,684,723		0.224		6,419,268		5,378,696		11,797,964		8,905,513		2,892,451		8,905,513
Third Quarter 2019		11,860,005		0.227		6,550,164		5,293,528		11,843,692		7,611,759		4,231,933		7,611,759
	$	35,056,265	$	0.673	$	19,085,888	$	16,050,790	$	35,136,678	$	18,793,335	$	16,343,343	$	18,793,335

(1) Distributions during the three and nine months ended September 30, 2019, were based on daily record dates and calculated at a rate of $0.002466 per share per day.

(2) Assumes each share was issued and outstanding each day during the period presented.

(3) Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid approximately three days following month end.

For the three and nine months ended September 30, 2019, we paid aggregate distributions of $11,843,692 and $35,136,678, including $6,550,164 and $19,085,888 of distributions paid in cash and 334,187 and 1,028,071

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PART I — FINANCIAL INFORMATION (continued)

shares of our common stock issued pursuant to our distribution reinvestment plan for $5,293,528 and $16,050,790, respectively. For the three and nine months ended September 30, 2019, our net loss was $10,389,806 and $34,742,088, we had funds from operations, or FFO, of $4,912,689 and $17,358,334 and net cash provided by operations of $7,611,759 and $18,793,335, respectively. For the three and nine months ended September 30, 2019, we funded $7,611,759 and $18,793,335, or 64% and 53%, and $4,231,933 and $16,343,343, or 36% and 47%, of total distributions paid, including shares issued pursuant to our distribution reinvestment plan, from net cash provided by operating activities and from cash and cash equivalents, respectively. Since inception, of the $186,825,406 in total distributions paid through September 30, 2019, including shares issued pursuant to our distribution reinvestment plan, 68% of such amounts were funded from cash flow from operations, 12% were funded from proceeds from our refinancings, 11% were funded from net public offering proceeds and 9% were funded from cash and cash equivalents. For information on how we calculate FFO and the reconciliation of FFO to net loss, see “—Funds from Operations and Modified Funds from Operations.”

Our long-term policy is to pay distributions solely from cash flow from operations. Because we may receive income from interest or rents at various times during our fiscal year and because we may need cash flow from operations during a particular period to fund capital expenditures and other expenses, we expect that from time to time during our operational stage, we will declare distributions in anticipation of cash flow that we expect to receive during a later period, and we expect to pay these distributions in advance of our actual receipt of these funds. In these instances, our board of directors has the authority under our organizational documents, to the extent permitted by Maryland law, to fund distributions from sources such as borrowings, offering proceeds or advances and the deferral of fees and expense reimbursements by our advisor, in its sole discretion. We have not established a limit on the amount of proceeds we may use from sources other than cash flow from operations to fund distributions. If we pay distributions from sources other than cash flow from operations, we will have fewer funds available for investments.

Inflation

Substantially all of our multifamily property leases are for a term of one year or less. In an inflationary environment, this may allow us to realize increased rents upon renewal of existing leases or the beginning of new leases. Short-term leases generally will minimize our risk from the adverse effects of inflation, although these leases generally permit residents to leave at the end of the lease term and therefore will expose us to the effects of a decline in market rents. In a deflationary rent environment, we may be exposed to declining rents more quickly under these shorter term leases.

With respect to other commercial properties we may own, we expect in the future to include provisions in our leases designed to protect us from the impact of inflation. These provisions may include reimbursement billings for operating expense pass-through charges, real estate tax and insurance reimbursements, or in some cases annual reimbursement of operating expenses above a certain allowance.

As of September 30, 2019, we had not entered into any material leases as a lessee.

REIT Compliance

To qualify as a REIT for tax purposes, we are required to distribute at least 90% of our REIT taxable income (which is computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP) to our stockholders. We must also meet certain asset and income tests, as well as other requirements. We monitor the operations and transactions that may potentially impact our REIT status. If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates.

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PART I — FINANCIAL INFORMATION (continued)

Liquidity and Capital Resources

We use secured borrowings, and intend to use in the future secured and unsecured borrowings. At September 30, 2019, our debt was approximately 62% of the value of our properties, as determined by the most recent valuations performed by an independent third-party appraiser as of December 31, 2018. Going forward, we expect that our borrowings will be approximately 55% to 60% of the value of our properties (after debt amortization) and other real estate-related assets. Under our Articles of Amendment and Restatement, or the Charter, we are prohibited from borrowing in excess of 300% of the value of our net assets, which generally approximates to 75% of the aggregate cost of our assets, though we may exceed this limit only under certain circumstances.

In addition to making investments in accordance with our investment objectives, we use our capital resources to make certain payments to our advisor and its affiliates. During our organization and offering stage, we made payments to the dealer manager for sales commissions and dealer manager fees and payments to our advisor for reimbursement of certain organization and offering expenses. Currently, during our operating stage, we make payments to our advisor in connection with the acquisition of investments, the management of our assets and costs incurred by our advisor in providing services to us.

Our principal demand for funds will be to fund value-enhancement and other capital improvement projects, to pay operating expenses and interest on our outstanding indebtedness and to make distributions to our stockholders. Over time, we intend to generally fund our cash needs, other than asset acquisitions, from operations. Otherwise, we expect that our principal sources of working capital will include:

• current unrestricted cash balance, which was $74,816,801 as of September 30, 2019;

• various forms of secured and unsecured financing, including the financing of our unencumbered properties;

• borrowings under master repurchase agreements;

• equity capital from joint venture partners; and

• proceeds from our distribution reinvestment plan.

Over the short term, we believe that our sources of capital, specifically our cash balances, cash flow from operations, our ability to raise equity capital from joint venture partners and our ability to obtain various forms of secured and unsecured financing will be adequate to meet our liquidity requirements and capital commitments.

Over the longer term, in addition to the same sources of capital we will rely on to meet our short-term liquidity requirements, we may also conduct additional public or private offerings of our securities, refinance debt or dispose of assets to fund our operating activities, debt service, distributions and future property acquisitions and development projects. We expect these resources will be sufficient to fund our ongoing operating activities as well as providing capital for investment in future development and other joint ventures along with potential forward purchase commitments.

Stoneridge Farms Financing

On July 30, 2019, one of our indirect wholly-owned subsidiaries entered into a loan agreement with Berkeley Point Capital LLC, d/b/a Newmark Knight Frank, or Berkeley Point, for the principal amount of $45,711,000. The loan agreement provides for a term loan with a maturity date of August 1, 2029, unless the maturity date is accelerated pursuant to the loan agreement’s terms. The loan accrues interest at a fixed rate of 3.36% per annum. The entire outstanding principal balance and any accrued and unpaid interest on the loan is due on the maturity date. Interest only payments on the loan are payable monthly in arrears on specified dates as

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PART I — FINANCIAL INFORMATION (continued)

set forth in the loan agreement and interest and principal payments are due beginning September 1, 2024. Monthly payments are due and payable on the first day of each month, commencing September 1, 2019. The loan is secured by Stoneridge Farms,a 336-unit property located in Smyrna, Tennessee. The Company paid $228,555 in loan origination fees to Berkeley Point in connection with the financing, and paid our advisor a loan coordination fee of $342,833.

Refinancing Transactions

On September 27, 2019, we, through our wholly-owned subsidiaries, each a borrower and collectively, the borrowers, refinanced $75,386,000 of existing variable rate loans with our existing lender, PNC Bank, National Association, or PNC Bank, with new fixed rate Freddie Mac loans in an aggregate principal amount of $80,410,000. Each of the loans has a maturity date of October 1, 2029. Interest only payments payable monthly through November 1, 2024, with interest and principal payments due monthly thereafter. The borrowers paid $301,538 in the aggregate in loan origination fees to PNC Bank in connection with the refinancing, and our advisor earned loan coordination fees of $200,000.

The following is a summary of the financing of mortgage notes payable secured by real property during the three months ended September 30, 2019:

Property	Closing Date		Lender		Interest Rate			Loan Amount
Delano at North Richland Hills		9/27/2019		PNC Bank		3.56	%	$	32,159,000
Lakeside at Coppell		9/27/2019		PNC Bank		3.56	%		48,251,000
								$	80,410,000

Line of Credit

On May 18, 2016, we entered into a secured revolving line of credit, or the line of credit, with PNC Bank in an amount not to exceed $65,000,000. The line of credit provided for advances solely for the purpose of financing the costs in connection with acquisitions and development of real estate projects and for general corporate purposes (subject to certain debt service and loan to value requirements). The line of credit had a maturity date of May 17, 2019, subject to extension, as further described in the loan agreement entered into by certain of our wholly-owned subsidiaries with PNC Bank in connection with the acquisition of the Landings of Brentwood property. We terminated the line of credit on January 9, 2019. For additional information on our line of credit, see Note 5 (Debt) to the unaudited consolidated financial statements contained in this quarterly report.

Master Credit Facility

On July 31, 2018, or the closing date, 16 of our indirect wholly-owned subsidiaries terminated the existing mortgage loans with their lenders for an aggregate principal amount of $479,318,649 and entered into the MCFA with Newmark Group, Inc., or the facility lender, for an aggregate principal amount of $551,669,000. The MCFA provides for three tranches: (1) a fixed rate loan in the aggregate principal amount of $331,001,400 that accrues interest at 4.43% per annum; (2) a fixed rate loan in the aggregate principal amount of $137,917,250 that accrues interest at 4.57%; and (3) a variable rate loan in the aggregate principal amount of $82,750,350 that accrues interest at theone-month LIBOR plus 1.70%. The loans have a maturity date of August 1, 2028, unless the maturity date is accelerated in accordance with the terms of the loan documents. Interest only payments are payable monthly through August 1, 2025, with interest and principal payments due monthly thereafter. We paid $1,930,842 in the aggregate in loan origination fees to the facility lender in connection with the refinancings, and paid our advisor a loan coordination fee of $2,758,345.

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PART I — FINANCIAL INFORMATION (continued)

CME Loans

Additionally, on the closing date, five of our indirect wholly-owned subsidiaries terminated the existing mortgage loans with their lenders for an aggregate principal amount of $131,318,742 and entered into new loan agreements with PNC Bank, for an aggregate principal amount of $160,850,000. Each loan agreement provides for a term loan, or a CME Loan and, collectively, the CME Loans, with a maturity date of August 1, 2028, unless the maturity date is accelerated with the loan terms. Each CME Loan accrues interest at a fixed rate of 4.43% per annum. The entire outstanding principal balance and any accrued and unpaid interest on each of the CME Loans are due on the maturity date. Interest only payments on the CME Loans are payable monthly in arrears on specified dates as set forth in each loan agreement and interest and principal payments are due beginning September 1, 2023. Monthly payments are due and payable on the first day of each month, commencing September 1, 2018. We paid $643,400 in the aggregate in loan origination fees to PNC Bank in connection with the refinancings, and paid our advisor a loan coordination fee of $804,250.

Cash Flows Provided by Operating Activities

During the nine months ended September 30, 2019, net cash provided by operating activities was $18,793,335, compared to $25,735,983 for the nine months ended September 30, 2018. The change in net cash provided by operating activities is primarily due to the decrease in net loss and decrease in accounts payable and accrued liabilities, partially offset by increases in due to affiliates, other assets and the change in the fair value of interest rate cap agreements. We expect to continue to generate cash flows from operations as we complete our value-enhancement program.

Cash Flows Provided by (Used in) Investing Activities

During the nine months ended September 30, 2019, net cash provided by investing activities was $6,841,975, compared to $12,491,445 of net cash used during the nine months ended September 30, 2018. The increase in net cash provided by investing activities was primarily the result of the disposition of real estate investments and proceeds from insurance claims, offset by the increase in additions to real estate investments, acquisition of real estate held for development and increase in additions to real estate held for development during the nine months ended September 30, 2019, compared to the nine months ended September 30, 2018. Net cash used in investing activities during the nine months ended September 30, 2019, consisted of the following:

• $2,158,815 of cash used for the acquisition of real estate held for development;

• $19,206,964 of cash used for improvements to real estate investments;

• $1,789,630 of cash used for additions to real estate held for development;

• $700,100 of cash used for escrow deposits of pending real estate acquisitions;

• $10,471 of cash used for capitalized acquisition costs related to the SIR Merger and STAR III Merger;

• $18,000 of cash used to purchase interest rate cap agreements;

• $29,944,301 of net proceeds from the sale of real estate investments; and

• $781,654 of cash provided by proceeds from insurance claims.

Cash Flows Used in Financing Activities

During the nine months ended September 30, 2019 and 2018, net cash provided by financing activities was $23,703,932, and $26,313,779, respectively. The decrease in net cash provided by financing activities was primarily due to the decrease in proceeds from the issuance of mortgage notes payable and an increase in distributions paid to common stockholders during the nine months ended September 30, 2019 compared to the

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PART I — FINANCIAL INFORMATION (continued)

same prior year period, partially offset by a decrease in repurchases of common stock during the nine months ended September 30, 2019 compared to the same prior year period. Net cash used in financing activities during the nine months ended September 30, 2019, consisted of the following:

• $48,962,098 of proceeds from the issuance of mortgage notes payable, net of $76,105,725 of principal payments on mortgage notes payable, $254,722 of cash deposited to finance loans and $798,455 of payments for deferred financing costs;

• $172,278 of payments of commissions on sales of common stock;

• $19,085,888 of net cash distributions to our stockholders, after giving effect to distributions reinvested by stockholders of $16,050,790; and

• $6,000,000 of cash paid for the repurchase of common stock.

Contractual Commitments and Contingencies

We use secured debt, and intend to use in the future secured and unsecured debt. We believe that the careful use of borrowings will help us achieve our diversification goals and potentially enhance the returns on our investments. At September 30, 2019, our debt was approximately 62% of the value of our properties, as determined by the most recent valuations performed by an independent third-party appraiser as of December 31, 2018. Going forward, we expect that our borrowings will be approximately 55% to 60% of the value of our properties (after debt amortization) and other real estate-related assets. Under our Charter, we are prohibited from borrowing in excess of 300% of our net assets, which generally approximates to 75% of the aggregate cost of our assets unless such excess is approved by a majority of the independent directors and disclosed to stockholders, along with a justification for such excess, in our next quarterly report. In such event, we will monitor our debt levels and take action to reduce any such excess as practicable. Our aggregate borrowings are reviewed by our board of directors at least quarterly. As of September 30, 2019, our aggregate borrowings were not in excess of 300% of the value of our net assets.

In addition to using our capital resources for investing purposes and meeting our debt obligations, we expect to use our capital resources to make certain payments to our advisor in connection with the management of our asset portfolio and costs incurred by our advisor in providing services to us.

As of September 30, 2019, we had indebtedness totaling $1,100,164,923, comprised of an aggregate principal amount of $1,107,243,608 and net deferred financing costs of $7,078,685. The following is a summary of our contractual obligations as of September 30, 2019:

			Payments due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Interest payments on outstanding debt obligations(1)	$	212,132,556	$	11,907,768	$	69,810,774	$	44,587,536	$	85,826,478
Principal payments on outstanding debt obligations(2)		1,107,243,608		247,221		5,469,902		9,644,197		1,091,882,288
Total	$	1,319,376,164	$	12,154,989	$	75,280,676	$	54,231,733	$	1,177,708,766

(1) Scheduled interest payments on outstanding debt obligations are based on the outstanding principal amounts and interest rates in effect at September 30, 2019. We incurred interest of $12,562,978 and $36,962,055 during the three and nine months ended September 30, 2019, including amortization of deferred financing costs totaling $256,547 and $750,751, net unrealized losses from the change in fair value of interest rate cap agreements of $24,144 and $223,867 and credit facility commitment fees of $0 and $2,137, net of capitalized interest of $49,068 and $49,068, respectively. The capitalized interest is included in real estate on the consolidated balance sheets.

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PART I — FINANCIAL INFORMATION (continued)

(2) Scheduled principal payments on outstanding debt obligations are based on the terms of the notes payable agreements. Amounts exclude the amortization of the net deferred financing costs associated with certain notes payable.

Our debt obligations contain customary financial andnon-financial debt covenants. As of September 30, 2019, and December 31, 2018, we were in compliance with all debt covenants.

Results of Operations

Overview

The discussion that follows is based on our consolidated results of operations for the three and nine months ended September 30, 2019 and 2018. The ability to compare one period to another is affected by the one disposition made during those periods and implementation of our value-enhancement strategy. The number of multifamily properties wholly owned by us decreased to 33 as of September 30, 2019, from 34 as of September 30, 2018. As of September 30, 2019, we owned 33 multifamily properties and one parcel of land held for the development of apartment homes. Our results of operations were primarily affected by (1) the disposition of one multifamily property during the three months ended September 30, 2019, (2) the increase in rents as of September 30, 2019 and (3) our value-enhancement activity completed through September 30, 2019, as further discussed below.

Our results of operations for the three and nine months ended September 30, 2019 and 2018, are not indicative of those expected in future periods. For the three and nine months ended September 30, 2019, we continued to perform value-enhancement projects, which may have an impact on our future results of operations. In general, we expect that our revenues and expenses related to our portfolio will increase in future periods as a result of organic rent increases, anticipated value-enhancement projects and the completion of real estate under development. Additionally, our results of operations will be significantly impacted if we consummate the SIR Merger and or the STAR Merger.

To provide additional insight into our operating results, we are also providing a detailed analysis of same-store net operating income, or NOI. For more information on NOI and a reconciliation of NOI (anon-GAAP financial measure) to net loss, see “—Net Operating Income.”

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PART I — FINANCIAL INFORMATION (continued)

Consolidated Results of Operations for the Three Months Ended September 30, 2019, Compared to the Three Months Ended September 30, 2018

The following table summarizes the consolidated results of operations for the three months ended September 30, 2019 and 2018:

	For the Three Months Ended September 30,												$ Change Due to Dispositions(1)			$ Change Due to Properties Held Throughout Both  Periods(2)
	2019			2018			Change $			Change %
Total revenues	$	44,499,264		$	43,155,379		$	1,343,885			3	%	$	(25,610	)	$	1,369,495
Operating, maintenance and management		(11,788,068	)		(11,413,882	)		(374,186	)		(3	)%		(22,458	)		(351,728	)
Real estate taxes and insurance		(6,086,781	)		(5,581,414	)		(505,367	)		(9	)%		40,656			(546,023	)
Fees to affiliates		(6,917,303	)		(9,626,258	)		2,708,955			28	%		112,023			2,596,932
Depreciation and amortization		(18,632,477	)		(17,855,195	)		(777,282	)		(4	)%		207,158			(984,440	)
Interest expense		(12,562,978	)		(12,273,389	)		(289,589	)		(2	)%		75,800			(365,389	)
Loss on debt extinguishment		—			(4,975,497	)		4,975,497			100	%		184,527			4,790,970
General and administrative expenses		(2,230,541	)		(2,101,075	)		(129,466	)		(6	)%		946			(130,412	)
Gain on sale of real estate, net		3,329,078			—			3,329,078			100	%		3,329,078			—
Net loss	$	(10,389,806	)	$	(20,671,331	)	$	10,281,525			50	%
NOI(3)	$	24,132,267		$	24,319,707		$	(187,440	)		(1	)%
FFO(4)	$	4,912,689		$	(2,816,136	)	$	7,728,825			274	%
MFFO(4)	$	5,624,394		$	2,097,242		$	3,527,152			168	%

(1) Represents the favorable (unfavorable) dollar amount change for the three months ended September 30, 2019, compared to the three months ended September 30, 2018, related to multifamily properties disposed of on or after July 1, 2018.

(2) Represents the favorable (unfavorable) dollar amount change for the three months ended September 30, 2019, compared to the three months ended September 30, 2018, related to multifamily properties owned by us throughout both periods presented.

(3) NOI is anon-GAAP financial measure used by investors and our management to evaluate and compare the performance of our properties and to determine trends in earnings. However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, interest income and other expense, acquisition costs (those that did not meet the criteria for capitalization under ASU2017-01,Business Combinations (Topic 805): Clarifying the definition of business, or ASU2017-01), certain fees to affiliates, depreciation and amortization expense and gains or losses from the sale of our properties and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs, all of which are significant economic costs. ASU2017-01 now forms part of ASC 805,Business Combinations, or ASC 805. For additional information on how we calculate NOI and a reconciliation of NOI to net loss, see “—Net Operating Income.”

(4) GAAP basis accounting for real estate assets utilizes historical cost accounting and assumes real estate values diminish over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets the Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT, established the measurement tool of FFO. Since its introduction, FFO has

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become a widely usednon-GAAP financial measure among REITs. Additionally, we use modified funds from operations, or MFFO, as defined by the Institute for Portfolio Alternatives (formerly known as the Investment Program Association), or IPA, as a supplemental measure to evaluate our operating performance. MFFO is based on FFO but includes certain adjustments we believe are necessary due to changes in accounting and reporting under GAAP since the establishment of FFO. Neither FFO nor MFFO should be considered as alternatives to net loss or other measurements under GAAP as indicators of our operating performance, nor should they be considered as alternatives to cash flow from operating activities or other measurements under GAAP as indicators of liquidity. For additional information on how we calculate FFO and MFFO and a reconciliation of FFO and MFFO to net loss, see “—Funds From Operations and Modified Funds From Operations.”

Net loss

For the three months ended September 30, 2019, we had a net loss of $10,389,806, compared to a net loss of $20,671,331 for the three months ended September 30, 2018. The decrease in net loss of $10,281,525 over the comparable prior year period was due to the increase in total revenues of $1,343,885, the decrease in fees to affiliates of $2,708,955, the decrease in loss on debt extinguishment of $4,975,497 and the gain on sale of real estate, net of $3,329,078, partially offset by the increase in operating, maintenance and management expenses of $374,186, the increase in real estate taxes and insurance of $505,367, the increase in depreciation and amortization expense of $777,282, the increase in interest expense of $289,589 and the increase in general and administrative expenses of $129,466.

Total revenues

Total revenues were $44,499,264 for the three months ended September 30, 2019, compared to $43,155,379 for the three months ended September 30, 2018. The increase of $1,343,885 was primarily due to increases in average monthly rents as a result of ordinary monthly rent increases and monthly rent increases driven by our value-enhancement projects. Average monthly rents per unit increased from $1,159 as of September 30, 2018, to $1,190 as of September 30, 2019. We expect rental and other income to increase in future periods as a result of ordinary monthly rent increases, improved occupancy and the implementation of our value-enhancement strategy.

Operating, maintenance and management expenses

Operating, maintenance and management expenses for the three months ended September 30, 2019, were $11,788,068, compared to $11,413,882 for the three months ended September 30, 2018. The increase of $374,186 was primarily due to increases in repairs, maintenance, turnover, advertising and utility costs, partially offset by a decrease in property-related general and administrative costs during the three months ended September 30, 2019, compared to the three months ended September 30, 2018. We expect that these amounts will decrease as a percentage of total revenues as we implement operational efficiencies at our multifamily properties.

Real estate taxes and insurance

Real estate taxes and insurance expenses were $6,086,781 for the three months ended September 30, 2019, compared to $5,581,414 for the three months ended September 30, 2018. The increase of $505,367 was primarily due to increases in taxes as a result of increases in assessed real estate tax values. We expect these amounts may increase in future periods as a result of municipal property tax rate increases as well as increases in the assessed value of our property portfolio.

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PART I — FINANCIAL INFORMATION (continued)

Fees to affiliates

Fees to affiliates were $6,917,303 for the three months ended September 30, 2019, compared to $9,626,258 for the three months ended September 30, 2018. The decrease of $2,708,955 was primarily due to the decrease in loan coordination fees during the three months ended September 30, 2019 compared to the same prior year period. We expect fees to affiliates related to theon-going management of our real estate portfolio to increase in future periods as a result of increased investment management fees from anticipated increases in the cost of investments and increased property management fees from anticipated increases in future rental income.

Depreciation and amortization

Depreciation and amortization expenses were $18,632,477 for the three months ended September 30, 2019, compared to $17,855,195 for the three months ended September 30, 2018. The increase of $777,282 was primarily due to the net increase in depreciable and amortizable assets of $24,943,540 since September 30, 2018, due to capital improvements offset by a decrease in the number of properties owned subsequent to September 30, 2018. We expect these amounts to increase slightly in future periods as a result of anticipated future enhancements to our real estate portfolio.

Interest expense

Interest expense for the three months ended September 30, 2019, was $12,562,978, compared to $12,273,389 for the three months ended September 30, 2018. The increase of $289,589 was primarily due to the increase in the notes payable, net balance of $50,076,260 since September 30, 2018, due to financing incurred in connection with the refinancing of two multifamily properties and the financing of one of our unencumbered multifamily properties since September 30, 2018. Included in interest expense is the amortization of deferred financing costs of $256,547 and $269,417, the unrealized loss (gain) on derivative instruments of $24,144 and $(62,119), credit facility commitment fees of $0 and $16,101 and amortization of loan discounts of $0 and $29,582 for the three months ended September 30, 2019 and 2018, respectively. Our interest expense in future periods will vary based on the impact of changes to LIBOR, or the adoption of a replacement to LIBOR, our level of future borrowings, which will depend on the availability and cost of debt financing and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives.

General and administrative expenses

General and administrative expenses for the three months ended September 30, 2019, were $2,230,541, compared to $2,101,075 for the three months ended September 30, 2018. These general and administrative costs consisted primarily of legal fees, insurance premiums, audit fees, other professional fees and independent director compensation. The increase of $129,466 was primarily due to increases in director meeting fees as a result of an increase in the number of meetings compared to the prior year period and legal fees and expenses related to the proposed SIR Merger and STAR III Merger that were expensed prior to the date of signing the Merger Agreements. We expect general and administrative expenses to decrease as a percentage of total revenues.

Gain on sales of real estate

Gain on sales of real estate for the three months ended September 30, 2019, was $3,329,078 compared to $0 for the three months ended September 30, 2018. The gain on sales of real estate consisted of the gain recognized on the disposition of our multifamily property during the three months ended September 30, 2019, net of Illinois state taxes. No multifamily property dispositions occurred during the three months ended September 30, 2018. Our gain on sales of real estate in future periods will vary based on the opportunity to sell real properties and real estate-related investments.

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PART I — FINANCIAL INFORMATION (continued)

Consolidated Results of Operations for the Nine Months Ended September 30, 2019, Compared to the Nine Months Ended September 30, 2018

The following table summarizes the consolidated results of operations for the nine months ended September 30, 2019 and 2018:

	For the Nine Months Ended September 30,												$ Change Due to Dispositions(1)			$ Change Due to Properties Held Throughout Both  Periods(2)
	2019			2018			Change $			Change %
Total revenues	$	131,222,487		$	126,997,571		$	4,224,916			3	%	$	48,134		$	4,176,782
Operating, maintenance and management		(32,325,417	)		(31,828,565	)		(496,852	)		(2	)%		(20,392	)		(476,460	)
Real estate taxes and insurance		(19,111,364	)		(17,229,297	)		(1,882,067	)		(11	)%		6,544			(1,888,611	)
Fees to affiliates		(19,248,909	)		(21,249,639	)		2,000,730			9	%		99,333			1,901,397
Depreciation and amortization		(55,430,404	)		(52,920,337	)		(2,510,067	)		(5	)%		195,266			(2,705,333	)
Interest expense		(36,962,055	)		(31,619,697	)		(5,342,358	)		(17	)%		484,049			(5,826,407	)
Loss on debt extinguishment		(41,609	)		(4,975,497	)		4,933,888			99	%		184,527			4,749,361
General and administrative expenses		(6,173,895	)		(4,810,141	)		(1,363,754	)		(28	)%		(1,883	)		(1,361,871	)
Gain on sale of real estate, net		3,329,078			—			3,329,078			100	%		3,329,078			—
Net loss	$	(34,742,088	)	$	(37,635,602	)	$	2,893,514			8	%
NOI(3)	$	72,373,111		$	72,646,207		$	(273,096	)		—	%
FFO(4)	$	17,358,334		$	15,284,735		$	2,073,599			14	%
MFFO(4)	$	19,119,839		$	19,619,219		$	(499,380	)		(3	)%

(1) Represents the favorable (unfavorable) dollar amount change for the nine months ended September 30, 2019, compared to the nine months ended September 30, 2018, related to multifamily properties disposed of on or after January 1, 2018.

(2) Represents the favorable (unfavorable) dollar amount change for the nine months ended September 30, 2019, compared to the nine months ended September 30, 2018, related to multifamily properties owned by us throughout both periods presented.

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

(4) See “—Funds From Operations and Modified Funds From Operations” below for a reconciliation of FFO and MFFO to net loss.

Net loss

For the nine months ended September 30, 2019, we had a net loss of $34,742,088, compared to $37,635,602 for the nine months ended September 30, 2018. The decrease in net loss of $2,893,514 over the comparable prior year period was primarily due to the increase in total revenues of $4,224,916, the decrease in loss on debt extinguishment of $4,933,888, the increase in gain on sale of real estate, net of $3,329,078 and the decrease in fees to affiliates of $2,000,730, partially offset by the increase in operating, maintenance and management expenses of $496,852, the increase in real estate taxes and insurance of $1,882,067, the increase in depreciation and amortization expense of $2,510,067, the increase in interest expense of $5,342,358, and the increase in general and administrative expenses of $1,363,754.

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PART I — FINANCIAL INFORMATION (continued)

Total revenues

Total revenues were $131,222,487 for the nine months ended September 30, 2019, compared to $126,997,571 for the nine months ended September 30, 2018. The increase of $4,224,916 was primarily due to increases in average monthly rents as a result of ordinary monthly rent increases and monthly rent increases driven by our value-enhancement projects. Average monthly rents per unit increased from $1,159 as of September 30, 2018, to $1,190 as of September 30, 2019. We expect rental and other income to increase in future periods as a result of ordinary monthly rent increases and the continuing implementation of our value-enhancement strategy.

Operating, maintenance and management expenses

Operating, maintenance and management expenses were $32,325,417 for the nine months ended September 30, 2019, compared to $31,828,565 for the nine months ended September 30, 2018. The increase of $496,852 was primarily due to increases in payroll and utility costs, partially offset by a decrease in property-related general and administrative costs during the nine months ended September 30, 2019, compared to the nine months ended September 30, 2018. We expect that these amounts will decrease as a percentage of total revenues as we implement operational efficiencies at our multifamily properties.

Real estate taxes and insurance

Real estate taxes and insurance expenses were $19,111,364 for the nine months ended September 30, 2019, compared to $17,229,297 for the nine months ended September 30, 2018. The increase of $1,882,067 was due to increases in taxes as a result of increases in assessed real estate tax values. We expect these amounts may increase in future periods as a result of municipal property tax rate increases as well as increases in the assessed value of our property portfolio.

Fees to affiliates

Fees to affiliates were $19,248,909 for the nine months ended September 30, 2019, compared to $21,249,639 for the nine months ended September 30, 2018. The decrease of $2,000,730 was primarily due to the decrease in loan coordination fees during the nine months ended September 30, 2019, compared to the nine months ended September 30, 2018. We expect fees to affiliates related to theon-going management of our real estate portfolio to increase in future periods as a result of increased investment management fees from anticipated increases in the cost of investments and increased property management fees from anticipated increases in future rental income.

Depreciation and amortization

Depreciation and amortization expenses were $55,430,404 for the nine months ended September 30, 2019, compared to $52,920,337 for the nine months ended September 30, 2018. The increase of $2,510,067 was primarily due to the net increase in depreciable and amortizable assets of $24,943,540 since September 30, 2018, due to capital improvements offset by a decrease in the number of properties owned subsequent to September 30, 2018. We expect these amounts to increase slightly in future periods as a result of anticipated future enhancements to our real estate portfolio.

Interest expense

Interest expense for the nine months ended September 30, 2019, was $36,962,055 compared to $31,619,697 for the nine months ended September 30, 2018. The increase of $5,342,358 was primarily due to the increase in the notes payable, net balance of $50,076,260 since September 30, 2018, due to financing incurred in connection

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PART I — FINANCIAL INFORMATION (continued)

with the refinancing of two multifamily properties and the financing of one of our unencumbered multifamily properties since September 30, 2018. Included in interest expense is the amortization of deferred financing costs of $750,751 and $762,658, unrealized loss (gain) on derivative instruments of $223,867 and $(641,013), amortization of loan discount of $0 and $207,074 and credit facility commitment fees of $2,137 and $30,978 for the nine months ended September 30, 2019 and 2018, respectively. Our interest expense in future periods will vary based on the impact of changes to LIBOR, or the adoption of a replacement to LIBOR, our level of future borrowings, which will depend on the availability and cost of debt financing and the opportunity to acquire real estate and real estate-related investments meeting our investment objectives.

Loss on debt extinguishment

Loss on debt extinguishment for the nine months ended September 30, 2019, was $41,609 compared to $4,975,497 for the nine months ended September 30, 2018. These expenses consisted of prepayment penalties and the expense of the deferred financing costs, net related to the repayment and extinguishment of debt in conjunction with the refinancing of 21 multifamily properties during the nine months ended September 30, 2018. The loss on debt extinguishment will vary in future periods if we repay the remaining outstanding principal prior to the scheduled maturity dates of the notes payable.

General and administrative expenses

General and administrative expenses for the nine months ended September 30, 2019, were $6,173,895 compared to $4,810,141 for the nine months ended September 30, 2018. These general and administrative costs consisted primarily of legal fees, insurance premiums, audit fees, other professional fees and independent director compensation. The increase of $1,363,754 was primarily due to the increases in director meeting fees as a result of an increase in the number of meetings compared to the prior year period and legal fees and expenses related to the proposed SIR Merger and STAR III Merger that were expensed prior to the date of signing the Merger Agreements. We expect general and administrative expenses to decrease as a percentage of total revenues in future periods.

Gain on sales of real estate

Gain on sales of real estate for the nine months ended September 30, 2019, was $3,329,078 compared to $0 for the nine months ended September 30, 2018. The gain on sales of real estate consisted of the gain recognized on the disposition of our multifamily property during the nine months ended September 30, 2019, net of Illinois state taxes. No multifamily property dispositions occurred during the nine months ended September 30, 2018. Our gain on sales of real estate in future periods will vary based on the opportunity to sell real properties and real estate-related investments.

Property Operations for the Three Months Ended September 30, 2019, Compared to the Three Months Ended September 30, 2018

For purposes of evaluating comparative operating performance, we categorize our properties as “same-store” or“non-same-store.” A “same-store” property is a property that was owned at July 1, 2018. A“non-same-store” property is a property that was acquired, placed into service or disposed of after July 1, 2018. As of September 30, 2019, 33 properties were categorized as same-store properties.

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PART I — FINANCIAL INFORMATION (continued)

The following table presents the same-store results from operations for the three months ended September 30, 2019 and 2018:

	For the Three Months Ended September 30,
	2019		2018		Change $			Change %
Same-store properties:
Revenues	$	43,400,211	$	42,279,956	$	1,120,255			2.6	%
Operating expenses		19,653,340		18,356,182		1,297,158			7.1	%
Net operating income		23,746,871		23,923,774		(176,903	)		(0.7	)%
Non-same-store properties:
Net operating income		385,396		395,933		(10,537	)
Total Net operating income(1)	$	24,132,267	$	24,319,707	$	(187,440	)

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

Net Operating Income

Same-store net operating income for the three months ended September 30, 2019, was $23,746,871 compared to $23,923,774 for the three months ended September 30, 2018. The 0.7% decrease in same-store net operating income was a result of a 2.6% increase in same-store rental revenues offset by a 7.1% increase in same-store operating expenses.

Revenues

Same-store revenues for the three months ended September 30, 2019, were $43,400,211 compared to $42,279,956 for the three months ended September 30, 2018. The 2.6% increase in same-store revenues was primarily due to average rent increases at the same-store properties from $1,151 as of September 30, 2018, to $1,190 as of September 30, 2019, as a result of ordinary monthly rent increases and monthly rent increases from the completion of value-enhancement projects, partially offset by a same-store occupancy decrease from 94.5% as of September 30, 2018, to 94.4% as of September 30, 2019.

Operating Expenses

Same-store operating expenses for the three months ended September 30, 2019, were $19,653,340 compared to $18,356,182 for the three months ended September 30, 2018. The increase in same-store operating expenses was primarily attributable to higher real estate taxes, general and administrative costs, turnover costs, utility costs, repairs and maintenance and payroll during the three months ended September 30, 2019, compared to the three months ended September 30, 2018.

Net Operating Income

NOI is anon-GAAP financial measure of performance. NOI is used by investors and our management to evaluate and compare the performance of our properties, to determine trends in earnings and to compute the fair value of our properties as it is not affected by (1) the cost of funds, (2) acquisition costs,(3) non-operating fees to affiliates, (4) the impact of depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP or (5) general and administrative expenses and other gains and losses that are specific to us. The cost of funds is eliminated from net income (loss) because it is specific to our particular financing capabilities and constraints. The cost of funds is also eliminated because it is dependent on historical interest rates and other costs of capital as well as

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past decisions made by us regarding the appropriate mix of capital which may have changed or may change in the future. Acquisition costs (those that did not meet the criteria for capitalization under ASC 805) andnon-operating fees to affiliates are eliminated because they do not reflect continuing operating costs of the property owner.

Depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets are eliminated because they may not accurately represent the actual change in value in our multifamily properties that result from use of the properties or changes in market conditions. While certain aspects of real property do decline in value over time in a manner that is reasonably captured by depreciation and amortization, the value of the properties as a whole have historically increased or decreased as a result of changes in overall economic conditions instead of from actual use of the property or the passage of time. Gains and losses from the sale of real property vary from property to property and are affected by market conditions at the time of sale which will usually change from period to period. These gains and losses can create distortions when comparing one period to another or when comparing our operating results to the operating results of other real estate companies that have not made similarly timed purchases or sales. We believe that eliminating these costs from net income (loss) is useful because the resulting measure captures the actual revenue generated and actual expenses incurred in operating our properties as well as trends in occupancy rates, rental rates and operating costs.

However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, interest income and other expense, acquisition costs (those that did not meet the criteria for capitalization under ASC 805), certain fees to affiliates, depreciation and amortization expense and gains or losses from the sale of properties, and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, all of which are significant economic costs. NOI may fail to capture significant trends in these components of net income which further limits its usefulness.

NOI is a measure of the operating performance of our properties but does not measure our performance as a whole. NOI is therefore not a substitute for net income (loss) as computed in accordance with GAAP. This measure should be analyzed in conjunction with net income (loss) computed in accordance with GAAP and discussions elsewhere in “—Results of Operations” regarding the components of net income (loss) that are eliminated in the calculation of NOI. Other companies may use different methods for calculating NOI or similarly entitled measures and, accordingly, our NOI may not be comparable to similarly entitled measures reported by other companies that do not define the measure exactly as we do.

The following is a reconciliation of our NOI to net loss for the three and nine months ended September 30, 2019 and 2018 computed in accordance with GAAP:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
Net loss	$	(10,389,806	)	$	(20,671,331	)	$	(34,742,088	)	$	(37,635,602	)
Fees to affiliates(1)		4,733,579			7,845,064			13,067,907			16,389,082
Depreciation and amortization		18,632,477			17,855,195			55,430,404			52,920,337
Interest expense		12,562,978			12,273,389			36,962,055			31,619,697
Loss on debt extinguishment		—			4,975,497			41,609			4,975,497
General and administrative expenses		2,230,541			2,101,075			6,173,895			4,810,141
Gain on sale of real estate, net		(3,329,078	)		—			(3,329,078	)		—
Other gains(2)		(308,424	)		(59,182	)		(1,231,593	)		(432,945	)
Net operating income	$	24,132,267		$	24,319,707		$	72,373,111		$	72,646,207

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(1) Fees to affiliates for the three and nine months ended September 30, 2019, exclude property management fees of $1,276,621 and $3,756,048 and other reimbursements of $907,103 and $2,424,954, respectively, that are included in NOI. Fees to affiliates for the three and nine months ended September 30, 2018, exclude property management fees of $1,241,104 and $3,653,311 and other reimbursements of $540,090 and $1,207,246, respectively, that are included in NOI.

(2) Other gains for the three and nine months ended September 30, 2019 and 2018, includesnon-recurring insurance claim recoveries and interest income that are not included in NOI.

Funds from Operations and Modified Funds from Operations

Due to certain unique operating characteristics of real estate companies, as discussed below, NAREIT, an industry trade group, has promulgated a measure known as FFO, which we believe to be an appropriate supplemental measure to reflect the operating performance of a REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO is not equivalent to our net income (loss) as determined under GAAP.

We define FFO, anon-GAAP financial measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in December 2018, or the White Paper. The White Paper defines FFO as net income (loss) computed in accordance with GAAP, excluding gains or losses from sales of property andnon-cash impairment charges of real estate related investments, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. In particular, we believe it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations and assessments regarding general market conditions which can change over time. An asset will only be evaluated for impairment if certain impairment indications exist and if the carrying, or book value, exceeds the total estimated undiscounted future cash flows (including net rental and lease revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) from such asset. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and the relatively limited term of our operations, it could be difficult to recover any impairment charges. Our FFO calculation complies with NAREIT’s policy described above.

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or as requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. We adopted ASU2016-02,Leases, or ASU2016-02 on January 1, 2019, which requires us, as a lessee, to recognize a liability for obligations under a lease contract and a

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right-of-use asset. The carrying amount of theright-of-use asset is amortized over the term of the lease. Because we have no ownership rights (current or residual) in the underlying asset, NAREIT concluded that the amortization of theright-of-use asset should not be added back to GAAP net income (loss) in calculating FFO. This amortization expense is included in FFO. However, FFO, and MFFO as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than thenon-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.

Changes in the accounting and reporting promulgations under GAAP (for acquisition fees and expenses from a capitalization/depreciation model to anexpensed-as-incurred model) that were put into effect in 2009 and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT’s definition of FFO have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses for all industries as items that are expensed under GAAP, that are typically accounted for as operating expenses. Management believes these fees and expenses do not affect our overall long-term operating performance. Publicly registered,non-listed REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation. While otherstart-up entities may also experience significant acquisition activity during their initial years, we believe that public,non-listed REITs, like us, are unique in that they have a limited life with targeted exit strategies within a relatively limited time frame after acquisition activity ceases.

Due to the above factors and other unique features of publicly registered,non-listed REITs, the IPA, an industry trade group, has standardized a measure known as MFFO, which the IPA has recommended as a supplemental measure for publicly registerednon-listed REITs and which we believe to be another appropriate supplemental measure to reflect the operating performance of a public,non-listed REIT having the characteristics described above. MFFO is not equivalent to our net income or loss as determined under GAAP, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate with a limited life and targeted exit strategy, as currently intended. We believe that, because MFFO excludes costs that we consider more reflective of investing activities and othernon-operating items included in FFO and also excludes acquisition fees and expenses that are not capitalized, as discussed below, and affect our operations only in periods in which properties are acquired, MFFO can provide, on a going forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance after the period in which we are acquiring our properties and once our portfolio is in place. By providing MFFO, we believe we are presenting useful information that assists investors and analysts to better assess the sustainability of our operating performance after our offering has been completed and our properties have been acquired. We also believe that MFFO is a recognized measure of sustainable operating performance by thenon-listed REIT industry. Further, we believe MFFO is useful in comparing the sustainability of our operating performance after our offering and acquisitions are completed with the sustainability of the operating performance of other real estate companies that are not as involved in acquisition activities. Investors are cautioned that MFFO should only be used to assess the sustainability of our operating performance after our offering has been completed and properties have been acquired, as it excludes acquisition costs that have a negative effect on our operating performance during the periods in which properties are acquired.

We define MFFO, anon-GAAP financial measure, consistent with the IPA’s Guideline2010-01, Supplemental Performance Measure for Publicly Registered,Non-Listed REITs: Modified Funds from Operations, or the Practice Guideline, issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income: acquisition fees and expenses; amounts relating to deferred rent receivables and amortization of above and below market leases and liabilities (which are adjusted in order to reflect such payments from a GAAP

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PART I — FINANCIAL INFORMATION (continued)

accrual basis to a cash basis of disclosing the rent and lease payments); accretion of discounts and amortization of premiums on debt investments;mark-to-market adjustments included in net income; nonrecurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums on debt investments, nonrecurring unrealized gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operating activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized. While we rely on our advisor for managing interest rate, hedge and foreign exchange risk, we do not retain an outside consultant to review all our hedging agreements. Inasmuch as interest rate hedges are not a fundamental part of our operations, we believe it is appropriate to exclude suchnon-recurring gains and losses in calculating MFFO, as such gains and losses are not reflective ofon-going operations.

Our MFFO calculation complies with the IPA’s Practice Guideline described above, except with respect to certain acquisition fees and expenses as discussed below. In calculating MFFO, we exclude acquisition related expenses, amortization of above and below market leases, fair value adjustments of derivative financial instruments, deferred rent receivables and the adjustments of such items related to noncontrolling interests. Historically under GAAP, acquisition fees and expenses were characterized as operating expenses in determining operating net income. However, following the publication of ASU2017-01, which now forms part of ASC 805, acquisition fees and expenses are capitalized and depreciated under certain conditions. These expenses are paid in cash by us. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property. The acquisition of properties, and the corresponding acquisition fees and expenses, is the key operational feature of our business plan to generate operational income and cash flow to fund distributions to its stockholders. Further, under GAAP, certain contemplatednon-cash fair value and othernon-cash adjustments are considered operatingnon-cash adjustments to net income in determining cash flow from operating activities. In addition, we view fair value adjustments of derivatives and gains and losses from dispositions of assets asnon-recurring items or items which are unrealized and may not ultimately be realized, and which are not reflective ofon-going operations and are therefore typically adjusted for when assessing operating performance.

Our management uses MFFO and the adjustments used to calculate MFFO in order to evaluate our performance against other public,non-listed REITs which have limited lives with short and defined acquisition periods and targeted exit strategies shortly thereafter. As noted above, MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate in this manner. We believe that our use of MFFO and the adjustments used to calculate MFFO allow us to present our performance in a manner that reflects certain characteristics that are unique to public,non-listed REITs, such as their limited life, limited and defined acquisition period and targeted exit strategy, and hence that the use of such measures is useful to investors. By excluding expensed acquisition costs, that are not capitalized, the use of MFFO provides information consistent with management’s analysis of the operating performance of the properties. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such changes that may reflect anticipated and unrealized gains or losses, we believe MFFO provides useful supplemental information.

Presentation of this information is intended to provide useful information to investors as they compare the operating performance to that of other public,non-listed REITs, although it should be noted that not all public,

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PART I — FINANCIAL INFORMATION (continued)

non-listed REITs calculate FFO and MFFO the same way, so comparisons with other public,non-listed REITs may not be meaningful. Furthermore, FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs, including our ability to make distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with GAAP measurements as an indication of our performance. MFFO is useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete and net asset value is disclosed. MFFO is not a useful measure in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining MFFO.

Neither the SEC, NAREIT nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, the SEC, NAREIT or another regulatory body may decide to standardize the allowable adjustments across thenon-listed REIT industry and in response to such standardization we may have to adjust our calculation and characterization of FFO or MFFO accordingly.

Our calculation of FFO and MFFO is presented in the following table for the three and nine months ended September 30, 2019 and 2018:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
Reconciliation of net loss to MFFO:
Net loss	$	(10,389,806	)	$	(20,671,331	)	$	(34,742,088	)	$	(37,635,602	)
Depreciation of real estate assets		18,631,573			17,855,195			55,429,500			52,920,337
Gain on sale of real estate, net		(3,329,078	)		—			(3,329,078	)		—
FFO		4,912,689			(2,816,136	)		17,358,334			15,284,735
Acquisition fees and expenses(1)(2)		687,561			—			1,496,029			—
Unrealized loss (gain) on derivative instruments		24,144			(62,119	)		223,867			(641,013	)
Loss on debt extinguishment		—			4,975,497			41,609			4,975,497
MFFO	$	5,624,394		$	2,097,242		$	19,119,839		$	19,619,219

(1) By excluding expensed acquisition costs that are not capitalized, management believes MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition fees and expenses include payments to our advisor or third parties. Historically under GAAP, acquisition fees and expenses were considered operating expenses and as expenses included in the determination of net income (loss) and income (loss) from continuing operations, both of which are performance measures under GAAP. Following the publication of ASU2017-01, which now forms part of ASC 805, acquisition fees and expenses are capitalized and depreciated under certain conditions. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to the property. The acquisition of properties, and the corresponding acquisition fees and expenses, is the key operational feature of our business plan to generate operational income and cash flow to fund distributions to its stockholders.

(2) Acquisition fees and expenses for the three and nine months ended September 30, 2019 and 2018 include acquisition expenses of $687,561 and $1,496,029 and $0 and $0, respectively, that did not meet the criteria

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PART I — FINANCIAL INFORMATION (continued)

for capitalization under ASC 805 and were recorded in general and administrative expenses in the accompanying consolidated statements of operations. These expenses largely pertained to the proposed SIR Merger and STAR III Merger that were incurred and expensed through the date of the Merger Agreement. Upon signing the Merger Agreement, merger related acquisition expenses met the definition of capitalized expenses and were therefore capitalized in the accompanying consolidated balance sheets thereby not impacting MFFO. Also included in expensed acquisition expenses are acquisition expenses related to real estate projects that did not come to fruition.

FFO and MFFO may be used to fund all or a portion of certain capitalizable items that are excluded from FFO and MFFO, such as tenant improvements, building improvements and deferred leasing costs.

Off-Balance Sheet Arrangements

As of September 30, 2019, we had nooff-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Related-Party Transactions and Agreements

We have entered into agreements with our advisor and its affiliates, whereby we pay certain fees to, or reimburse certain expenses of, our advisor or its affiliates for acquisition and advisory fees and expenses, financing coordination fees, organization and offering costs, sales commissions, dealer manager fees, asset and property management fees and expenses, leasing fees and reimbursement of certain operating costs. Refer to Note 7 (Related Party Arrangements) to the unaudited consolidated financial statements included in this quarterly report for a discussion of the various related-party transactions, agreements and fees.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We may be exposed to the effects of interest rate changes as a result of borrowings used to maintain liquidity and to fund the acquisition, expansion and refinancing of our real estate investment portfolio and operations. We may be also exposed to the effects of changes in interest rates as a result of the acquisition and origination of mortgage, mezzanine, bridge and other loans. Our profitability and the value of our investment portfolio may be adversely affected during any period as a result of interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs. We have managed and will continue to manage interest rate risk by maintaining a ratio of fixed rate, long-term debt such that floating rate exposure is kept at an acceptable level. In addition, we may utilize a variety of financial instruments, including interest rate caps, collars, floors and swap agreements, in order to limit the effects of changes in interest rates on our operations. When we use these types of derivatives to hedge the risk of interest-earning assets or interest-bearing liabilities, we may be subject to certain risks, including the risk that losses on a hedge position will reduce the funds available for distributions to holders of our common stock and that the losses may exceed the amount we invested in the instruments.

We borrow funds and make investments at a combination of fixed and variable rates. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt unless such instruments mature or are otherwise terminated. However, interest rate changes will affect the fair value of our fixed rate instruments. At September 30, 2019, the fair value of our fixed rate debt was $851,221,877 and the carrying value of our fixed rate debt was $817,028,790. The fair value estimate of our fixed rate debt was estimated using a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining maturity if the loans were originated at September 30, 2019. As we expect to hold our fixed rate instruments to maturity and the amounts due under such instruments would be limited to the outstanding principal balance and any accrued and unpaid interest, we do not expect that fluctuations in interest rates, and the resulting change in fair value of our fixed rate instruments, would have a significant impact on our operations.

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PART I — FINANCIAL INFORMATION (continued)

Conversely, movements in interest rates on our variable rate debt will change our future earnings and cash flows, but not significantly affect the fair value of those instruments. However, changes in required risk premiums will result in changes in the fair value of floating rate instruments. At September 30, 2019, the fair value of our variable rate debt was $278,730,536 and the carrying value of our variable rate debt was $283,136,133. Based on interest rates as of September 30, 2019, if interest rates are 100 basis points higher during the 12 months ending September 30, 2020, interest expense on our variable rate debt would increase by $2,895,430 and if interest rates are 100 basis points lower during the 12 months ending September 30, 2020, interest expense on our variable rate debt would decrease by $2,895,430.

At September 30, 2019, the weighted-average interest rate of our fixed rate debt and variable rate debt was 4.32% and 3.91%, respectively. The weighted-average interest rate of our blended fixed and variable rates was 4.21% at September 30, 2019. The weighted-average interest rate represents the actual interest rate in effect at September 30, 2019 (consisting of the contractual interest rate), using interest rate indices as of September 30, 2019, where applicable.

We may also be exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. If the fair value of a derivative contract is positive, the counterparty will owe us, which creates credit risk for us. If the fair value of a derivative contract is negative, we will owe the counterparty and, therefore, do not have credit risk. We will seek to minimize the credit risk in derivative instruments by entering into transactions with high-quality counterparties. As of September 30, 2019, we did not have counterparty risk on our interest rate cap agreements as the underlying variable rates for each of our interest rate cap agreements as of September 30, 2019 were not in excess of the capped rates. See also Note 10 (Derivative Financial Instruments) to our unaudited consolidated financial statements included in this quarterly report.

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 reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, including our chief executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and we necessarily are required to apply our judgment in evaluating whether the benefits of the controls and procedures that we adopt outweigh their costs.

As required by Rules13a-15(b) and15d-15(b) of the Exchange Act, an evaluation as of September 30, 2019, was conducted under the supervision and with the participation of our management, including our chief executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules13a-15(e) and15d-15(e) under the Exchange Act). Based on this evaluation, our chief executive officer and principal financial officer concluded that our disclosure controls and procedures, as of September 30, 2019, were effective at the reasonable assurance level.

Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

PART II

Item 1. Legal Proceedings

From time to time, we are party to legal proceedings that arise in the ordinary course of our business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by government agencies.

Item 1A. Risk Factors

There have been no material changes to the risk factors contained in Part I, Item 1A set forth in our Annual Report on Form10-K filed with the SEC on March 14, 2019 and in our Quarterly Report on Form10-Q filed with the SEC on August 13, 2019.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended September 30, 2019, we did not sell any equity securities that were not registered under the Securities Act.

During the three months ended September 30, 2019, we fulfilled repurchase requests and repurchased shares of our common stock pursuant to our share repurchase plan as follows:

	Total Number of Shares Requested to be Repurchased(1)		Total Number of Shares Repurchased		Average Price Paid per Share(2)(3)		Approximate Dollar Value of Shares Available That May Yet Be Repurchased Under the Program
July 2019		18,740		135,389	$	14.77		(4)
August 2019		25,214		—		—		(4)
September 2019		11,347		—		—		(4)
		55,301		135,389

(1) We generally repurchase shares approximately 30 days following the end of the applicable quarter in which requests were received. As of September 30, 2019, we had $817,640, representing 55,166 shares of outstanding and unfulfilled repurchase requests, all of which were fulfilled on October 31, 2019.

(2) We currently repurchase shares at prices determined as follows:

• 92.5% of the Share Repurchase Price for stockholders who have held their shares for at least one year;

• 95.0% of the Share Repurchase Price for stockholders who have held their shares for at least two years;

• 97.5% of the Share Repurchase Price for stockholders who have held their shares for at least three years; and

• 100% of the Share Repurchase Price for stockholders who have held their shares for at least four years.

The share repurchase price is 93% of the most recently determined estimated value per share. Notwithstanding the above, the repurchase price for repurchases sought upon a stockholder’s death or qualifying disability will be equal to the average issue price per share for all of the stockholder’s shares.

(3) From inception through September 30, 2019, our share repurchases have been funded exclusively from the net proceeds we received from the sale of shares under our distribution reinvestment plan.

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PART II — OTHER INFORMATION (continued)

(4) We are not obligated to repurchase shares of our common stock under the share repurchase plan. In no event will repurchases under the share repurchase plan exceed 5% of the weighted average number of shares of common stock outstanding during the prior calendar year or the $2,000,000 limit for any quarter put in place by our board of directors. In connection with the proposed SIR Merger and STAR III Merger, on August 5, 2019, our board of directors approved the Amended and Restated Share Repurchase Plan or the Amended & Restated SRP, which became effective September 5, 2019, and will apply with repurchases made on the repurchase dates subsequent to the effective date of the Amended & Restated SRP. Under the Amended & Restated SRP, we will only repurchase shares of common stock in connection with the death or qualifying disability (as determined by our board of directors in its sole discretion) of a stockholder, subject to certain terms and conditions specified in the Amended & Restated SRP. Repurchases pursuant to the Amended & Restated SRP will continue to be limited to $2,000,000 per quarter. We expect that the board of directors of the combined company will determine the terms of the share repurchase plan at a later date following consummation of the SIR Merger and STAR III Merger.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Other Information

None.

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PART II — OTHER INFORMATION (continued)

Item 6. Exhibits

EXHIBIT LIST

Exhibit	Description
2.1	Agreement and Plan of Merger, dated as of August 5, 2019, by and among Steadfast Apartment REIT, Inc., Steadfast Apartment REIT Operating Partnership, L.P., SI Subsidiary, LLC, Steadfast Income REIT, Inc. and Steadfast Income REIT Operating Partnership, L.P. (included as Exhibit 2.1 to the Company’s Current Report on Form8-K (FileNo. 000-55428) filed with the SEC on August 6, 2019, and incorporated herein by reference).
2.2	Agreement and Plan of Merger, dated as of August 5, 2019, by and among Steadfast Apartment REIT, Inc., Steadfast Apartment REIT Operating Partnership, L.P., SIII Subsidiary, LLC, Steadfast Apartment REIT III, Inc. and Steadfast Apartment REIT III Operating Partnership, L.P. (included as Exhibit 2.2 to the Company’s Current Report on Form8-K (FileNo. 000-55428) filed with the SEC on August 6, 2019, and incorporated herein by reference).
3.1	Articles of Amendment and Restatement of Steadfast Apartment REIT, Inc. (incorporated by reference to Exhibit 3.1 toPre-Effective Amendment No. 3 to the Registrant’s Registration Statement onForm S-11, filed December 16, 2013, Commission FileNo. 333-191049)
3.2	Bylaws of Steadfast Apartment REIT, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Registration Statement onForm S-11, filed September 6, 2013, Commission FileNo. 333-191049)
4.1	Form of Distribution Reinvestment Plan (incorporated by reference to Appendix C to the prospectus, dated April 15, 2015, of the Registrant)
4.2	Form of Redemption Request Form (incorporated by reference to Appendix D to the prospectus, dated April 15, 2015, of the Registrant)
4.3	Form of Application for Transfer (incorporated by reference to Appendix E to the prospectus, dated April 15, 2015, of the Registrant)
4.5	Amended and Restated Distribution Reinvestment Plan (incorporated by reference to Exhibit 4.1 to Post-Effective Amendment No. 12 to FormS-11 on FormS-3, filed April 5, 2016, Commission FileNo. 333-191049
4.6	Account Update Form (incorporated by reference to Appendix A to Post-Effective Amendment No. 12 to FormS-11 on FormS-3, filed April 5, 2016, Commission FileNo. 333-191049)
10.1	Amended and Restated STAR Advisory Agreement, dated as of August 5, 2019, by and among Steadfast Apartment REIT, Inc., Steadfast Apartment REIT Operating Partnership, L.P. and Steadfast Apartment Advisor, LLC (included as Exhibit 10.1 to the Company’s Current Report on Form8-K (FileNo. 000-55428) filed with the SEC on August 6, 2019, and incorporated herein by reference).
99.1	Amended and Restated Share Repurchase Plan (included as Exhibit 99.3 to the Company’s Current Report on Form8-K (FileNo. 000-55428) filed with the SEC on August 6, 2019, and incorporated herein by reference).
31.1*	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2*	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

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PART II — OTHER INFORMATION (continued)

Exhibit	Description
32.1**	Certification of Principal Executive Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002
32.2**	Certification of Principal Financial Officer pursuant to 18 U.S.C. 1350, as created by Section 906 of the Sarbanes-Oxley Act of 2002

* Filed herewith.

** In accordance with Item 601(b)(32) of RegulationS-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

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PART II — OTHER INFORMATION (continued)

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	Steadfast Apartment REIT, Inc.
Date: November 8, 2019	By:	/s/ Rodney F. Emery
		Rodney F. Emery
		Chief Executive Officer and Chairman of the Board
		(Principal Executive Officer)
Date: November 8, 2019	By:	/s/ Kevin J. Keating
		Kevin J. Keating
		Chief Financial Officer and Treasurer
		(Principal Financial and Accounting Officer)

G-74

Annex H

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-K

(Mark One)

☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2018

OR

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

For the transition period from                    to                    

Commission file number000-54674

STEADFAST INCOME REIT, INC.

(Exact Name of Registrant as Specified in Its Charter)

Maryland	27-0351641
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)

18100 Von Karman Avenue, Suite 500
Irvine, California	92612
(Address of Principal Executive Offices)	(Zip Code)

(949) 852-0700

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

None

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $0.01 par value per share

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ☐    No  ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes   ☐    No  ☒

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 ofRegulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of thisForm 10-K or any amendment to this Form 10-K.  ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” inRule 12b-2 of the Exchange Act.

Large Accelerated filer	☐	Accelerated filer	☐
Non-Accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

There is no established market for the registrant’s shares of common stock. There were approximately 73,997,772 shares of common stock held bynon-affiliates at June 29, 2018, the last business day of the registrant’s most recently completed second fiscal quarter, for an aggregate market value of $728,138,077, assuming an estimated value per share of $9.84 per share.

As of March 7, 2019, there were 74,425,373 shares of the Registrant’s common stock issued and outstanding.

STEADFAST INCOME REIT, INC.

INDEX

		Page
Cautionary Note Regarding Forward-Looking Statements			2
PART I
Item 1.	Business		H-1
Item 1A.	Risk Factors		H-8
Item 1B.	Unresolved Staff Comments		H-37
Item 2.	Properties		H-37
Item 3.	Legal Proceedings		H-38
Item 4.	Mine Safety Disclosures		H-38
PART II
Item 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities		H-34
Item 6.	Selected Financial Data		H-43
Item 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		H-44
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk		H-73
Item 8.	Financial Statements and Supplementary Data		H-74
Item 9.	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure		H-74
Item 9A.	Controls and Procedures		H-74
Item 9B.	Other Information		H-75
PART III
Item 10.	Directors, Executive Officers and Corporate Governance		H-76
Item 11.	Executive Compensation		H-80
Item 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters		H-82
Item 13.	Certain Relationships and Related Transactions, and Director Independence		H-83
Item 14.	Principal Accountant Fees and Services		H-89
PART IV
Item 15.	Exhibits and Financial Statement Schedules		H-90
Item 16.	Form10-K Summary		H-100
	Index to Consolidated Financial Statements		H-111

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain statements of Steadfast Income REIT, Inc. (“we,” “our,” “us” or the “Company”) included in this annual report on Form10-K that are not historical facts (including any statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto) are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual events or our investments and results of operations could differ materially from those expressed or implied in any forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms and other comparable terminology.

The forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs, which involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. Factors that could have a material adverse effect on our operations and future prospects include, but are not limited to:

• changes in economic conditions generally and the real estate and debt markets specifically;

• risks inherent in the real estate business, including tenant defaults, potential liability relating to environmental matters and the lack of liquidity of real estate investments;

• our ability to secure tenant leases at favorable rental rates;

• our ability to carry out any value-enhancement projects;

• risks related to owning investments with joint venture partners;

• our ability to identify and acquire multifamily properties;

• changes to our share repurchase program, distribution rate and similar matters;

• the fact we pay fees and expenses to our advisor and its affiliates that were not negotiated on an arm’s length basis and the payment of these fees and expenses increases the risk that our stockholders will not earn a profit on their investment in us;

• our ability to retain our executive officers and other key personnel of our advisor, our property manager and our affiliates;

• legislative or regulatory changes (including changes to the laws governing the taxation of real estate investment trusts, or REITs);

• our ability to generate sufficient cash flows to pay distributions to our stockholders;

• the availability of capital;

• changes in interest rates; and

• changes to generally accepted accounting principles, or GAAP.

Any of the assumptions underlying the forward-looking statements included herein could be inaccurate and undue reliance should not be placed on any such forward-looking statements. All forward-looking statements are made as of the date this annual report is filed with the U.S. Securities and Exchange Commission, or the SEC, and the risk that actual results will differ materially from the expectations expressed herein will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements made herein, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this annual report, including, without limitation, the risks described under “Risk Factors,” the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this annual report will be achieved.

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PART I

ITEM 1. BUSINESS

Overview

Steadfast Income REIT, Inc. (which is referred to in this Annual Report, as the context requires, as the “Company,” “we,” “us” or “our”) was formed on May 4, 2009, as a Maryland corporation that elected to be taxed as, and currently qualifies as, a real estate investment trust, or REIT. We own and manage a diverse portfolio of real estate investments, primarily in the multifamily sector, located throughout the United States. Substantially all of our business is conducted through Steadfast Income REIT Operating Partnership, L.P., a Delaware limited partnership formed on July 6, 2009, which we refer to as our “operating partnership.” We are the sole general partner of our operating partnership. As of December 31, 2018, we owned 35 multifamily properties comprised of a total of 9,442 apartment homes, an additional 21,130 square feet of rentable commercial space at two properties and a 10% interest in one unconsolidated joint venture that owns 20 multifamily properties comprised of a total of 4,584 apartment homes. For more information on our real estate portfolio, see “—Our Real Estate Portfolio” below.

On July 19, 2010, we commenced our initial public offering of up to 150,000,000 shares of common stock and up to 15,789,474 shares of common stock pursuant to our distribution reinvestment plan. Upon termination of our initial public offering on December 20, 2013, we had sold 73,608,337 shares of common stock for gross offering proceeds of $745,389,748, including 1,588,289 shares of common stock issued pursuant to our distribution reinvestment plan for gross offering proceeds of $15,397,232. Following the termination of our initial public offering, we continued to offer shares of our common stock pursuant to our distribution reinvestment plan until our board of directors determined to suspend our distribution reinvestment plan, effective December 1, 2014. Through December 1, 2014, we sold 76,095,116 shares of common stock in our public offering for gross offering proceeds of $769,573,363, including 4,073,759 shares of common stock issued pursuant to our distribution reinvestment plan for gross offering proceeds of $39,580,847.

On March 10, 2015, our board of directors determined an estimated value per share of our common stock of $10.35 as of December 31, 2014. On February 25, 2016, our board of directors determined an estimated value per share of our common stock of $11.44 as of December 31, 2015. On February 15, 2017, our board of directors determined an estimated value per share of our common stock of $11.65 as of December 31, 2016. On March 13, 2018, our board of directors determined an estimated value per share of our common stock of $10.84 as of December 31, 2017. On May 9, 2018, our board of directors determined an estimated value per share of our common stock of $9.84, which represents the estimated value per share of our common stock of $10.84 as of December 31, 2017, less the special distribution of $1.00 per share of common stock that was paid to stockholders of record as of the close of business on April 20, 2018. On March 13, 2019, our board of directors determined an estimated value per share of our common stock of $9.40 as of December 31, 2018. See Item 5. “Market for Registrant’s Common Equity, Related Stockholder Matters and Purchase of Equity Securities—Market Information—Estimated Value Per Share” for further information regarding the estimated value per share.

Prior to the commencement of our initial public offering, we sold shares of our common stock in a private offering exempt from the registration requirements of the Securities Act of 1933, as amended, or the Securities Act. Upon termination of the private offering, we had sold 637,279 shares of common stock at $9.40 per share (subject to certain discounts) for net offering proceeds of $5,844,325.

We are externally managed by Steadfast Income Advisor, LLC, which we refer to as our “advisor,” pursuant to the Advisory Agreement, as amended, or the advisory agreement, by and among us, our operating partnership and our advisor. Subject to certain restrictions and limitations, our advisor manages ourday-to-day operations and our portfolio of properties and real estate-related assets. Our advisor sources and presents investment opportunities to our board of directors and provides investment management services on our behalf. We retained our affiliate Stira Capital Markets Group, LLC (formerly known as Steadfast Capital Markets Group, LLC), which we refer to as our “dealer manager,” to serve as the dealer manager for our initial public offering. The dealer manager was responsible for marketing our shares of common stock being offered pursuant to our initial public offering. The advisor, along with the dealer manager, also provides marketing, investor relations and other administrative services on our behalf.

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Our Structure

The chart below shows the relationships among our company and various affiliates.

(1) Crossroads Capital Multifamily, LLC, or Crossroads Capital Multifamily, and Crossroads Capital Advisors, LLC, or Crossroads Capital Advisors, are affiliated entities, each being wholly-owned subsidiaries of Crossroads Capital Group, LLC.

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Objectives and Strategies

Our primary investment objectives are to:

• preserve, protect and return invested capital;

• pay attractive and stable cash distributions to stockholders; and

• realize capital appreciation in the value of our investments over the long term.

We own and actively manage, stabilized and income-producing properties with the objective of providing a stable and secure source of income for our stockholders and maximizing potential returns upon disposition of our assets through capital appreciation. Should we acquire additional properties, we may make investments directly or through joint ventures, in each case provided that the underlying real estate or real estate-related asset generally meets our criteria for direct investment.

2018 Highlights

During 2018, we:

• Acquired two multifamily properties with a total of 744 apartment homes for an aggregate purchase price of $135,486,062;

• invested $9,564,647 in improvements to our real estate assets;

• paid a special distribution in the amount of $1.00 per share, or $75,298,163 in the aggregate, to stockholders of record as of the close of business on April 20, 2018, representing a return of capital;

• paid cash distributions of $46,836,685, which constituted a 7.0% annualized distribution rate to our stockholders based on a purchase price of $10.24 per share for distributions paid during the three months ended March 31, 2018, a 6.0% annualized distribution rate to our stockholders based on a purchase price of $10.24 per share for distributions paid during the three months ended June 30, 2018 and a 6.0% annualized distribution rate to our stockholders based on a purchase price of $9.24 per share for distributions paid during the six months ended December 30, 2018;

• generated cash flows from operations of $27,071,435;

• generated net operating income, or NOI, of $74,317,686 (for further information on how we calculate NOI and a reconciliation of NOI to net loss, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Net Operating Income”);

• generated funds from operations, or FFO, of $21,749,778 (for further information on how we calculate FFO and a reconciliation of FFO to net income (loss), please refer to Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds From Operations and Modified Funds From Operations”);

• generated modified funds from operations, or MFFO, of $26,057,105 (for further information on how we calculate MFFO and a reconciliation of MFFO to net income (loss), please refer to Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds From Operations and Modified Funds From Operations”);

• disposed of 15 multifamily properties, including the contribution of eight properties to a joint venture with Blackstone Real Estate Investment Trust, Inc., or the joint venture, for a gross sales price of $392,920,000, exclusive of closing costs, for a gain on sales of real estate of $118,215,618; and

• generated net income of $89,083,552.

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Plan of Liquidation

Pursuant to our Third Articles of Amendment and Restatement, or our charter, our board of directors is required to annually consider a resolution declaring that a proposed liquidation of us is advisable on substantially the terms and conditions set forth in the resolution, or the Plan of Liquidation, and direct that the proposed Plan of Liquidation be submitted for consideration at either an annual or special meeting of the stockholders. The adoption of a Plan of Liquidation and the submission to the stockholders may be postponed if a majority of directors, including a majority of independent directors, determine that a liquidation is not then in the best interest of the stockholders. On March 13, 2019, our board of directors, including a majority of the independent directors, determined that a liquidation is not in the best interests of the stockholders at this time, and, therefore, to postpone presenting a liquidation decision to stockholders. In accordance with our charter, the board of directors will reconsider whether to seek stockholder approval of our liquidation at least annually. The board of directors, pursuant to its fiduciary duties, continuously evaluates our long-term and short-term opportunities.

Our Real Estate Portfolio

As of December 31, 2018, we owned the 35 multifamily properties described below.

Property Name		Location	Number of Units		Average Monthly Occupancy (1)			Average Monthly Rent (2)		Purchase Date		Total Purchase Price		Mortgage Debt Outstanding
1	Clarion Park Apartments(3)	Olathe, KS		220		96.4	%	$	841		6/28/2011	$	11,215,000	$	11,930,339
2	Truman Farm Villas (4)	Grandview, MO		200		98.5	%		781		12/22/2011		9,100,000		—
3	EBT Lofts	Kansas City, MO		102		91.2	%		1,131		12/30/2011		8,575,000		—
4	Spring Creek of Edmond	Edmond, OK		252		94.0	%		848		3/9/2012		19,350,000		17,113,376
5	Montclair Parc Apartments	Oklahoma City, OK		360		94.4	%		857		4/26/2012		35,750,000		21,719,269
6	Sonoma Grande Apartments	Tulsa, OK		336		93.5	%		895		5/24/2012		32,200,000		20,451,101
7	Estancia Apartments	Tulsa, OK		294		95.6	%		891		6/29/2012		27,900,000		—
8	Hilliard Park Apartments	Columbus, OH		201		94.5	%		1,120		9/11/2012		19,800,000		12,390,229
9	Sycamore Terrace Apartments	Terre Haute, IN		250		94.0	%		1,138		9/20/2012 & 3/5/2014		23,174,157		17,847,045
10	Hilliard Summit Apartments	Columbus, OH		208		95.7	%		1,217		9/28/2012		24,100,000		15,027,104
11	Forty-57 Apartments	Lexington, KY		436		93.1	%		912		12/20/2012		52,500,000		35,563,625
12	Riverford Crossing Apartments	Frankfort, KY		300		97.3	%		933		12/28/2012		30,000,000		20,229,093
13	Montecito Apartments	Austin, TX		268		95.1	%		1,008		12/31/2012		19,000,000		12,823,790
14	Hilliard Grand Apartments	Dublin, OH		314		96.5	%		1,290		12/31/2012		40,500,000		28,392,107
15	Library Lofts East (5)	Kansas City, MO		118		94.1	%		1,082		2/28/2013		12,750,000		8,166,247
16	Deep Deuce at Bricktown(6)	Oklahoma City, OK		294		93.9	%		1,235		3/28/2013		38,271,000		32,069,379

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Property Name		Location	Number of Units		Average Monthly Occupancy (1)			Average Monthly Rent (2)		Purchase Date		Total Purchase Price		Mortgage Debt Outstanding
17	Retreat at Quail North	Oklahoma City, OK		240		92.9	%	$	954		6/12/2013	$	25,250,000	$	16,268,147
18	Waterford on the Meadow	Plano, TX		350		94.9	%		1,037		7/3/2013		23,100,000		15,175,716
19	Tapestry Park Apartments	Birmingham, AL		354		92.9	%		1,311		8/13/2013 & 12/1/2014		50,285,000		43,712,670
20	Dawntree Apartments	Carrollton, TX		400		95.3	%		1,016		8/15/2013		24,000,000		14,450,118
21	Stuart Hall Lofts (7)	Kansas City, MO		115		93.9	%		1,366		8/27/2013		16,850,000		16,045,948
22	BriceGrove Park Apartments	Canal Winchester, OH		240		95.8	%		879		8/29/2013		20,100,000		17,133,615
23	Retreat at Hamburg Place	Lexington, KY		150		96.0	%		897		9/5/2013		16,300,000		12,072,255
24	Villas at Huffmeister	Houston, TX		294		93.9	%		1,209		10/10/2013		37,600,000		27,058,201
25	Villas at Kingwood	Kingwood, TX		330		94.8	%		1,282		10/10/2013		40,150,000		35,156,654
26	Waterford Place at Riata Ranch	Cypress, TX		228		93.9	%		1,104		10/10/2013		23,400,000		—
27	Carrington Place	Houston, TX		324		91.7	%		1,076		11/7/2013		32,900,000		27,384,768
28	Carrington at Champion Forest	Houston, TX		284		94.0	%		1,106		11/7/2013		33,000,000		24,978,692
29	Carrington Park at Huffmeister	Cypress, TX		232		94.4	%		1,198		11/7/2013		25,150,000		19,440,839
30	Heritage Grand at Sienna Plantation	Missouri City, TX		240		95.8	%		1,147		12/20/2013		27,000,000		16,822,121
31	Mallard Crossing	Loveland, OH		350		93.7	%		1,095		12/27/2013		39,800,000		33,367,682
32	Reserve at Creekside	Chattanooga, TN		192		96.4	%		1,040		3/28/2014		18,875,000		14,241,494
33	Oak Crossing	Fort Wayne, IN		222		95.9	%		1,002		6/3/2014		24,230,000		20,204,961
34	Double Creek Flats	Plainfield, IN		240		93.8	%		1,063		5/7/2018		31,852,079		21,877,897
35	Jefferson at Perimeter Apartments	Dunwoody, GA		504		89.3	%		1,331		6/11/2018		103,633,983		64,387,092
				9,442		94.3	%	$	1,068			$	1,017,661,219	$	693,501,574

(1) At December 31, 2018, our portfolio was approximately 95.5% leased. As of December 31, 2018, no single tenant accounted for greater than 10% of our 2018 gross annualized rental revenues.

(2) Average monthly rent is based upon the effective rental income after considering the effect of vacancies, concessions and write-offs.

(3) 100% of the units are required to be rented to tenants earning no more than 60% of the median income in the local area.

H-5

(4) Approximately 74% of the units are required to be rented to tenants earning no more than 60% of the median income in the local area.

(5) Library Lofts East contains 16,680 rentable square feet of commercial space. As of December 31, 2018, the commercial space, which represents approximately 14.1% of the rentable square feet of Library Lofts East, was 100% occupied by two tenants. The lease terms of the two tenants occupying the commercial space expire between 2019 and 2025. The tenants pay an average annual rent of $212,634, or approximately $12.75 per square foot.

(6) Deep Deuce at Bricktown, comprised of 294 apartment homes, was acquired by us on March 28, 2013. On June 12, 2017, we acquired a land parcel adjacent to Deep Deuce at Bricktown for a purchase price of $51,000.

(7) Stuart Hall Lofts contains 4,450 rentable square feet of commercial space. As of December 31, 2018, the commercial space, which represents approximately 3.1% of the rentable square feet of Stuart Hall Lofts, was 100% occupied by one tenant. The lease term of the tenant occupying the commercial space expires in 2019. The tenant pays an average annual rent of $64,863, or approximately $14.58 per square foot.

At December 31, 2018, our portfolio was approximately 94.3% occupied and the average monthly rent per leased multifamily home in our portfolio was $1,068. The weighted-average remaining lease term of our portfolio is less than one year. The weighted-average remaining lease term of our commercial office space leases is 3.44 years.

We plan to invest approximately $3.5 million during the year ended December 31, 2019 for interior renovations at certain properties in our portfolio. These renovations are primarily to enhance the interior amenities of the apartment homes and will be performed initially on vacant units and thereafter on units vacated from time to time in the ordinary course.

The following information generally applies to all of our properties:

• we believe all of our properties are adequately covered by insurance and are suitable for their intended purposes;

• except as noted above, we have no plans for any material renovations, improvements or developments with respect to any of our properties; and

• our properties face competition in attracting new residents and retaining current residents from other multifamily properties in and around their respective submarkets.

Joint Venture

As of December 31, 2018, we also owned a 10% interest in one unconsolidated joint venture that owns 20 multifamily properties comprised of a total of 4,584 apartment homes.

Debt Policy

We use, and intend to use in the future, secured and unsecured borrowings. We believe that the careful use of borrowings will help us achieve our diversification goals and potentially enhance the returns on our investments. At December 31, 2018, our debt was approximately 57% of the value of our properties, as determined by the most recent valuations performed by an independent third-party appraiser as of December 31, 2018. Going forward, we expect that our borrowings will be approximately 65% of the value of our properties, as determined by an independent third-party appraiser or qualified independent valuation expert. Under our charter we are prohibited from borrowing in excess of 300% of our net assets, which generally approximates to 75% of the aggregate cost of our assets. We may borrow in excess of this amount if such excess is approved by a majority of our independent directors and disclosed to stockholders in our next quarterly report, along with a justification for such excess. In such event, we will monitor our debt levels and take action to reduce any such

H-6

excess as practicable. Our aggregate borrowings are reviewed by our board of directors at least quarterly. As of December 31, 2018 , our aggregate borrowings were not in excess of 300% of the value of our net assets.

Employees

We have no paid employees. The employees of our advisor or its affiliates provide management, acquisition, advisory and certain administrative services for us.

Competition

We are subject to significant competition in seeking real estate investments and residents. We compete with many third parties engaged in real estate investment activities, including other REITs, specialty finance companies, savings and loan associations, banks, mortgage bankers, insurance companies, mutual funds, institutional investors, investment banking firms, lenders, hedge funds, governmental bodies and other entities. Many of our competitors have substantially greater financial and other resources than we have and may have substantially more operating experience than us. They also may enjoy significant competitive advantages that result from, among other things, a lower cost of capital.

We may also compete with Steadfast Apartment REIT, Inc., or Steadfast Apartment REIT, and Steadfast Apartment REIT III, Inc., or Steadfast Apartment REIT III,non-traded REITs sponsored by our sponsor that commenced their ongoing initial public offerings in December 2013 and February 2016, respectively, and have similar investment strategies as us. However, we expect any competition with Steadfast Apartment REIT or Steadfast Apartment REIT III for property acquisitions to be limited as our initial public offering terminated on December 20, 2013, and we have deployed all of the net offering proceeds raised in our initial public offering. Additionally, Steadfast Apartment REIT and Steadfast Apartment REIT III terminated their initial public offerings on March 24, 2016 and August 31, 2018, respectively, and have deployed all of their net offering proceeds raised in their initial public offerings. However, we may compete with Steadfast Apartment REIT and Steadfast Apartment REIT III to the extent they raise additional capital or deploy proceeds from asset dispositions at the same time we are engaged in similar activities.

The multifamily property market in particular is highly competitive. This competition could reduce occupancy levels and revenues at our multifamily properties, which would adversely affect our operations. We face competition from many sources, including from other multifamily properties both in the immediate vicinity and the geographic market where our multifamily properties are and will be located. In addition, overbuilding of multifamily properties may occur, which would increase the number of multifamily homes available and may decrease occupancy and unit rental rates. Furthermore, multifamily properties we acquire most likely compete, or will compete, with numerous housing alternatives in attracting residents, including owner occupied single- and multifamily homes available to rent or purchase. Competitive housing in a particular area and the increasing affordability of owner occupied single- and multifamily homes available to rent or buy could adversely affect our ability to retain our residents, lease apartment homes and increase or maintain rental rates.

Regulations

Our investments are subject to various federal, state, and local laws, ordinances, and regulations, including, among other things, zoning regulations, land use controls, environmental controls relating to air and water quality, noise pollution, and indirect environmental impacts such as increased motor vehicle activity. We believe that we have all permits and approvals necessary under current law to operate our investments.

Income Taxes

We elected to be taxed as, and currently qualify as, a REIT under the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, and have operated as such commencing with the taxable year ended

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December 31, 2010. To continue to qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, we generally would not be subject to federal income tax to the extent we distribute qualifying dividends to our stockholders. If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax on our taxable income at regular corporate income tax rates and generally would not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants us relief under certain statutory provisions.

Financial Information About Industry Segments

Our current business consists of owning, managing, operating, leasing, acquiring, developing, investing in, and disposing of real estate assets. We internally evaluate all of our real estate assets as one industry segment, and, accordingly, we do not report segment information.

Available Information

We are subject to the reporting requirements of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and, as a result, file periodic reports, proxy statements and other information with the SEC. Access to copies of our Annual Reports on Form10-K, Quarterly Reports on Form10-Q, Current Reports on Form8-K, proxy statements and other filings with the SEC, including amendments to such filings, may be obtained free of charge from our website,http://www.steadfastreits.com. These filings are available promptly after we file them with, or furnish them to, the SEC. We are not incorporating our website or any information from the website into this annual report. The SEC also maintains a website,http://www.sec.gov, that contains our Annual Reports on Form10-K, Quarterly Reports on Form10-Q, Current Report on Form8-K, proxy statements and other filings with the SEC. Access to these filings is free of charge.

ITEM 1A.  RISK FACTORS

The following are some of the risks and uncertainties that could cause our actual results to differ materially from those presented in our forward-looking stateisk associated with debtments. The risks and uncertainties described below are not the only ones we face but do represent those risks and uncertainties that we believe are material to us. Additional risks and uncertainties not presently known to us or that we currently deem immaterial may also harm our business. References to “shares” and “our common stock” refer to the shares of common stock of Steadfast Income REIT, Inc.

General Investment Risks

There is no public trading market for shares of our common stock and we are not required to effectuate a liquidity event by a certain date. As a result, it will be difficult for you to sell your shares of common stock and, if you are able to sell your shares, you are likely to sell them at a substantial discount.

There is no current public market for the shares of our common stock and we have no obligation to list our shares on any public securities market or provide any other type of liquidity to our stockholders by a particular date. It may therefore be difficult for you to sell your shares of common stock. Even if you are able to sell your shares of common stock, the absence of a public market may cause the price received for any shares of our common stock sold to be less than what you paid or less than your proportionate value of the assets we own. We initially adopted a share repurchase program that allowed stockholders to sell to us their shares of common stock, subject to certain limitations. However, our share repurchase program was suspended effective November 20, 2014. We subsequently reinstated our share repurchase program effective July 1, 2015, subject to certain limitations on the amount of shares we will repurchase quarterly. Our board of directors may again in the future,

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amend, suspend, or terminate our share repurchase program upon 30 days’ notice. Additionally, our charter does not require that we consummate a transaction to provide liquidity to stockholders on any date certain. As a result, you must be prepared to hold your shares for an indefinite period of time.

We have paid, and it is likely we will continue to pay, distributions from sources other than our cash flow from operations, including from the proceeds of our public offering. To the extent that we pay distributions from sources other than our cash flow from operations, we will have reduced funds available for investment and the overall return to our stockholders may be reduced.

Our organizational documents permit us to pay distributions from any source, including net proceeds from our public offerings, borrowings, advances from our sponsor or advisor and the deferral of fees and expense reimbursements by our advisor, in its sole discretion. To the extent that our cash flow from operations has been or is insufficient to fully cover our distributions, we have paid, and may continue to pay, distributions from sources other than cash flow from operations.

If we are unable to consistently fund distributions to our stockholders entirely from our cash flow from operations, the value of your shares upon a listing of our common stock, the sale of our assets or any other liquidity event may be reduced. To the extent that we fund distributions from sources other than our cash flow from operations, our funds available for investment will be reduced relative to the funds available for investment if our distributions were funded solely from cash flow from operations, our ability to achieve our investment objectives will be negatively impacted and the overall return to our stockholders may be reduced. In addition, if we make a distribution in excess of our current and accumulated earnings and profits, the distribution will be treated first as atax-free return of capital, which will reduce the stockholder’s tax basis in its shares of common stock. The amount, if any, of each distribution in excess of a stockholder’s tax basis in its shares of common stock will be taxable as gain realized from the sale or exchange of property.

For the year ended December 31, 2018, we paid aggregate distributions of $122,134,848. All such distributions were paid in cash. For the year ended December 31, 2018, our net income was $89,083,552, we had FFO of $21,749,778 and net cash provided by operations of $27,071,435. For the year ended December 31, 2018, of the $122,134,848 in total distributions paid, all of which were paid in cash, we funded $27,071,435, or 22%, of distributions paid with net cash provided by operating activities, $19,765,250, or 16%, with existing cash and cash equivalents, and $75,298,163, or 62%, from the sales of real estate investments. Since inception, of the $375,233,687 in total distributions paid through December 31, 2018, including shares issued pursuant to our distribution reinvestment plan, 60% of such amounts were funded from cash flow from operations, 20% of such amounts were funded from the sales of real estate investments, 10% of such amounts were funded from offering proceeds, 2% of such amounts were funded from credit facilities and 8% of such amounts were funded from cash and cash equivalents. For information on how we calculate FFO and the reconciliation of FFO to net loss, see Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Funds from Operations and Modified Funds from Operations”.

We face risks associated with the acquisition and value-enhancement of properties.

We may in the future acquire and renovate existing properties (which we refer to as “value-enhancement projects”). These activities are subject to various risks. We may not be successful in pursuing value-enhancement project opportunities. In addition, completed value-enhancement projects may not perform as well as expected. We are subject to other risks in connection with any acquisition and value-enhancement activities, including the following:

• costs of a project may be higher than projected, potentially making the project unfeasible or unprofitable;

• we may not have funds available or be able to obtain financing for our value-enhancement projects on favorable terms, if at all; and

• occupancy rates and rents may not meet our projections and that project may not be profitable.

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If a value-enhancement project is unsuccessful, either because it is not meeting our expectations when operational or was not completed according to the value-enhancement project planning, the value of our investment in the project may decrease.

Financial regulatory reforms could have a significant impact on our business, financial condition and results of operations.

On July 21, 2010, the Dodd-Frank Wall Street Reform and Consumer Protection Act, or the Dodd-Frank Act, was signed into law. The Dodd-Frank Act represents a significant change in the American financial regulatory environment and impacts nearly every aspect of the U.S. financial services industry. The Dodd-Frank Act requires various federal agencies to adopt hundreds of new rules to implement the Dodd-Frank Act and to deliver to Congress numerous studies and reports that may influence future legislation. The Dodd-Frank Act leaves significant discretion to federal agencies as to exactly how to implement the broad provisions of the Dodd-Frank Act. Some provisions of the Dodd-Frank Act are subject to rule making and will take effect over several years, making it difficult to anticipate the overall impact on us. The changes resulting from the Dodd-Frank Act may impact the profitability of business activities, require changes to certain business practices, impose more stringent capital, liquidity and leverage requirements or otherwise adversely affect our business.

The geographic concentration of our portfolio may make us particularly susceptible to adverse economic developments in the real estate markets of those areas.

In addition to general, regional and national economic conditions, our operating results are impacted by the economic conditions of the specific markets in which we have concentrations of properties. As of December 31, 2018, of our $1,017,661,219 of real estate assets, 21.54% were located in the Houston metropolitan statistical area, 11.66% were located in the Oklahoma City metropolitan statistical area, 10.27% were located in the Columbus metropolitan statistical area and 10.18% were located in the Atlanta metropolitan statistical area. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, industry slowdowns, relocations of businesses, changing demographics and other factors, or any decrease in demand for multifamily property space resulting from the local business climate, could adversely affect our property revenue, and hence net operating income.

A cybersecurity incident and other technology disruptions could negatively impact our business.

We use technology in substantially all aspects of our business operations. We also use mobile devices, social networking, outside vendors and other online activities to connect with our residents, suppliers and employees of our affiliates. Such uses give rise to potential cybersecurity risks, including security breach, espionage, system disruption, theft and inadvertent release of information. Our business involves the storage and transmission of numerous classes of sensitive and confidential information and intellectual property, including residents’ and suppliers’ personal information, private information about employees of our affiliates, and financial and strategic information about us. If we fail to assess and identify cybersecurity risks associated with our operations, we may become increasingly vulnerable to such risks. Additionally, the measures we have

implemented to prevent security breaches and cyber incidents may not be effective. The theft, destruction, loss, misappropriation, or release of sensitive and/or confidential information or intellectual property, or interference with our information technology systems or the technology systems of third parties on which we rely, could result in business disruption, negative publicity, brand damage, violation of privacy laws, loss of residents, potential liability and competitive disadvantage, any of which could result in a material adverse effect on our financial condition or results of operations.

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Our board of directors determined an estimated value per share of $9.40 for shares of our common stock as of December 31, 2018. You should not rely on the estimated value per share as being an accurate measure of the current value of our shares of common stock.

On March 13, 2019, our board of directors determined an estimated value per share of our common stock of $9.40 as of December 31, 2018. Our board of directors’ objective in determining the estimated value per share was to arrive at a value, based on the most recent data available, that it believed was reasonable based on methodologies that it deemed appropriate after consultation with our advisor. However, the market for commercial real estate can fluctuate quickly and substantially and the value of our assets is expected to change in the future and may decrease. Also, our board of directors did not consider certain other factors, such as a liquidity discount to reflect the fact that our shares are not currently traded on a national securities exchange and the limitations on the ability to redeem shares pursuant to our share repurchase program.

As with any valuation methodology, the methodologies used to determine the estimated value per share were based upon a number of assumptions, estimates and judgments that may not be accurate or complete. Our assets have been valued based upon appraisal standards and the value of our assets using these methodologies are not required to be a reflection of market value under those standards and will not result in a reflection of fair value under GAAP. Further, different parties using different property-specific and general real estate and capital market assumptions, estimates, judgments and standards could derive a different estimated value per share, which could be significantly different from the estimated value per share determined by our board of directors. The estimated value per share does not represent the fair value of our assets less liabilities in accordance with GAAP as of December 31, 2018. The estimated value per share is not a representation or indication that: a stockholder would be able to realize the estimated value per share if he or she attempts to sell shares; a stockholder would ultimately realize distributions per share equal to the estimated value per share upon liquidation of assets and settlement of our liabilities or upon a sale of our company; shares of our common stock would trade at the estimated value per share on a national securities exchange; a third party would offer the estimated value per share in an arms-length transaction to purchase all or substantially all of our shares of common stock; or the methodologies used to estimate the value per share would be acceptable to FINRA, the Employee Retirement Income Security Act of 1974, or ERISA, the Internal Revenue Code or other applicable law, or the applicable provisions of a retirement plan or individual retirement account, or IRA, with respect to their respective requirements. Further, the estimated value per share was calculated as of a moment in time and the value of our shares will fluctuate over time as a result of, among other things, future acquisitions or dispositions of assets (including acquisitions and dispositions of real estate investments since December 31, 2018 ), developments related to individual assets and changes in the real estate and capital markets.

The actual value of shares that we repurchase under our share repurchase program may be substantially less than what we pay.

We adopted a share repurchase program through which shares may be repurchased at varying prices depending on (1) the number of years the shares have been held, (2) the purchase price paid for the shares and (3) whether the redemptions are sought upon a stockholder’s death or disability. Effective November 20, 2014, our board of directors suspended our share repurchase program. Effective July 1, 2015, our board of directors reinstated our share repurchase program, subject to certain limitations on the amount of shares we will repurchase quarterly. Effective April 28, 2018, our board of directors suspended our share repurchase program. Effective May 20, 2018, our board of directors reinstated and amended the terms of our share repurchase program. The repurchase price is likely to differ from the price at which a stockholder could resell his or her shares. If the actual value of the shares that we repurchase is less than the repurchase price, the repurchase could be dilutive to our remaining stockholders. Even at lower repurchase prices, the actual value of the shares may be substantially less than what we pay and the repurchase may be dilutive to our remaining stockholders.

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Because our charter does not require our listing or liquidation by a specified date, you should be prepared to hold our shares for an indefinite period of time.

Under our charter, if we had not determined to pursue a liquidity event by December 31, 2016, our charter required that we either (1) seek stockholder approval of our liquidation or (2) postpone presenting the liquidation decision to our stockholders if a majority of our board of directors, including a majority of the independent directors, determined that liquidation was not then in the best interests of our stockholders. If a majority of our board of directors, including a majority of the independent directors, determined that liquidation was not then in the best interests of our stockholders, our charter requires our board of directors to reconsider whether to seek stockholder approval of our liquidation at least annually. Our board of directors, including a majority of the independent directors, determined that a liquidation is not in the best interests of the stockholders at this time and, therefore, to postpone presenting a liquidation decision to stockholders. In accordance with our charter, the board of directors will reconsider whether to seek stockholder approval of our liquidation at least annually. The board of directors, pursuant to its fiduciary duties, continuously evaluates opportunities, including possible liquidation events, of us.

Further postponement of a liquidity event or stockholder action regarding liquidation would only be permitted if a majority of our board of directors, including a majority of the independent directors, again determined that liquidation would not be in the best interests of our stockholders. If we sought and failed to obtain stockholder approval of our liquidation, our charter would not require us to consummate our liquidation and would not require our board of directors to reconsider whether to seek stockholder approval of our liquidation. There is no guarantee as to when our board of directors will pursue a liquidity event or submit a liquidation decision to our stockholders, if at all, and you should therefore be prepared to hold our shares for an indefinite period of time.

Payment of fees to our advisor and its affiliates reduces cash available for investment, which may result in our stockholders not receiving a full return of their invested capital.

Because a portion of the offering proceeds from the sale of our shares and cash flow generated from our operations were used to pay fees and expenses to our advisor and its affiliates, the amount of cash available for investments in real properties and real estate-related assets was reduced. As a result, stockholders will only receive a full return of their invested capital if we either: (1) sell our assets or our company for a sufficient amount in excess of the original purchase price of our assets or (2) the market value of our company after we list our shares of common stock on a national securities exchange is substantially in excess of the original purchase price of our assets.

If we internalize our management functions, your interest in us could be diluted and we could incur other significant costs associated with being self-managed.

Our board of directors may decide in the future to internalize our management functions. If we do so, we may elect to negotiate to acquire our advisor’s assets and personnel. At this time, we cannot anticipate the form or amount of consideration or other terms relating to any such acquisition. Such consideration could take many forms, including cash payments, promissory notes and shares of our common stock. The payment of such consideration could result in dilution of your interests as a stockholder and could have an adverse effect on our financial condition and ability to make distributions to our stockholders.

Additionally, while we would no longer bear the costs of the various fees and expenses we expect to pay to our advisor under the advisory agreement, our direct expenses would include general and administrative costs, including legal, accounting and other expenses related to corporate governance, SEC reporting and compliance. We would also be required to employ personnel and would be subject to potential liabilities commonly faced by employers, such as workers disability and compensation claims, potential labor disputes and other employee-related liabilities and grievances as well as incur the compensation and benefits costs of our officers and other

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employees and consultants that will be paid by our advisor or its affiliates. We may issue equity awards to officers, employees and consultants, which awards would decrease net income and funds from operations and may further dilute your investment. We cannot reasonably estimate the amount of fees to our advisor we would save or the costs we would incur if we became self-managed. If the expenses we assume as a result of an internalization are higher than the expenses we avoid paying to our advisor, our funds from operations would be lower as a result of the internalization than they otherwise would have been, potentially decreasing the amount of funds available to distribute to our stockholders.

Internalization transactions involving the acquisition of advisors have also, in some cases, been the subject of litigation. Even if these claims are without merit, we could be forced to spend significant amounts of money defending claims which would reduce the amount of funds available for us to invest or to pay distributions.

You are limited in your ability to have your shares of common stock repurchased pursuant to our share repurchase program. You may not be able to sell any of your shares of our common stock back to us, and if you do sell your shares, you may not receive the price you paid upon subscription.

Our share repurchase program may provide you with an opportunity to have your shares of common stock repurchased by us. No shares may be repurchased under our share repurchase program until after the first anniversary of the date of purchase of such shares. Prior to the first determination of our estimated value per share following the completion of our offering stage, we repurchased shares of our common stock pursuant to our share repurchase program at a discount from the purchase price based upon how long such shares have been held. Following the first determination of our estimated value per share following the completion of our offering stage, shares of our common stock are repurchased at a price equal to a price based upon our estimated value per share as of our most recent appraisal.

Our share repurchase program contains certain restrictions and limitations, including those relating to the number of shares of our common stock that we can repurchase at any given time and limiting the repurchase price. Specifically, the share repurchase program limits the number of shares to be repurchased during any calendar year to no more than 5.0% of the weighted average number of shares of our common stock outstanding in the prior calendar year. Effective July 1, 2015, our board of directors amended our share repurchase program so that in no event would the value of the shares repurchased pursuant to the share repurchase program exceed $2,000,000 during the quarter beginning July 1, 2015, with each subsequent quarter not to exceed $1,000,000. On August 9, 2016, our board of directors approved and authorized an increase to the value of the shares that may be repurchased pursuant to the share repurchase program from $1,000,000 to $2,000,000, effective on the October 2016 repurchase date. On April 28, 2018, our board of directors suspended the share repurchase program. On May 20, 2018, our board of directors subsequently reinstated and amended the share repurchase program whereby the share repurchase price is equal to 93% of the most recently determined estimated value per share less reductions due to the holding period for shares and other events specified in the share repurchase program.

We have no obligation to repurchase shares if the repurchase would violate the restrictions on distributions under Maryland law, which prohibits distributions that would cause a corporation to fail to meet statutory tests of solvency. Our board of directors reserves the right to reject any repurchase request for any reason or no reason or to amend or terminate the share repurchase program at any time upon 30 days’ notice to our stockholders. Therefore, you may not have the opportunity to make a repurchase request prior to a potential termination of the share repurchase program and you may not be able to sell any of your shares of common stock back to us. Moreover, if you do sell your shares of common stock back to us pursuant to the share repurchase program, you may be forced to do so at a discount to the purchase price you paid for your shares.

Our success is dependent on the performance of our advisor and its affiliates.

Our ability to achieve our investment objectives and to pay distributions is dependent upon the performance of our advisor and its affiliates. Our advisor and its affiliates are sensitive to trends in the general economy, as

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well as the commercial real estate and credit markets. The most recent economic recession and accompanying credit crisis negatively impacted the value of commercial real estate assets, contributing to a general slow down in the real estate industry. The failure of a sustained economic recovery or renewed economic downturn could result in reductions in overall transaction volume and size of sales and leasing activities, which could put downward pressure on our advisor’s and its affiliates’ revenues and operating results. To the extent that any decline in revenues and operating results impacts the performance of our advisor and its affiliates, our financial condition and ability to pay distributions to our stockholders could also suffer.

Additionally, our advisor relies primarily on the fees it receives pursuant to the advisory agreement and capital from our sponsor to fund its operations and liabilities. If our advisor has insufficient cash from operations to meet its obligations under the advisory agreement and is unable to obtain financing, we would be adversely impacted.

Events in U.S. financial markets have had, and may continue to have, a negative impact on the terms and availability of credit and the overall national economy, which could have an adverse effect on our business and our results of operations.

The failure of large U.S. financial institutions in 2008 and the resulting turmoil in the U.S. financial sector has had a negative impact on the terms and availability of credit and the state of the economy generally within the United States. This turmoil in the capital markets resulted in constrained equity and debt capital available for investment in the real estate market, resulting in fewer buyers seeking to acquire real properties, increases in capitalization rates and lower property values. The tightening of the U.S. credit markets resulted in a lack of adequate credit. Some lenders continue to impose more stringent restrictions on the terms of credit, including shorter terms and more conservativeloan-to-value underwriting than was previously customary. The negative impact of the tightening of the credit markets may limit our ability to finance the acquisition of properties and other real estate-related assets on favorable terms, if at all, and may result in increased financing costs or financing with increasingly restrictive covenants.

Additionally, decreasing home prices and mortgage defaults may again result in uncertainty in the real estate and real estate securities and debt markets. Until recently, the market for new issuances of commercial mortgage-backed securities, or CMBS, had been significantly reduced as a result of the recent turmoil in the financial markets and banks generally are providing limited debt financing with more stringent conditions for investments in real estate-related assets. As a result, the valuation of real estate-related assets has been volatile and is likely to continue to be volatile in the future. The volatility in markets may make it more difficult for us to obtain adequate financing or realize gains on our investments which could have an adverse effect on our business and our results of operations.

We are uncertain of our sources for funding our future capital needs. If we do not have sufficient funds from operations to cover our expenses, repay maturing debt obligations or to fund improvements to our real estate and cannot obtain debt or equity financing on acceptable terms, our ability to cover our expenses, repay maturing debt obligations or to fund improvements to our real estate may be adversely affected.

We terminated our initial public offering on December 20, 2013. In the event that we develop a need for additional capital in the future for the repayment of maturing debt obligations, the improvement of our real properties or for any other reason, sources of funding may not be available to us. If we do not have sufficient funds from cash flow generated by our investments or out of net sale proceeds, or cannot obtain debt or equity financing on acceptable terms, our financial condition and ability to make distributions may be adversely affected.

If we cease to retain our advisor or one of its affiliates to perform substantial advisory services for us, we may be required to cease to conduct business under or use the name “Steadfast” or any derivative thereof.

Pursuant to the terms of the advisory agreement, if we cease to retain our advisor or one of its affiliates to perform substantial advisory services for us, we are required, upon receipt of written request from our advisor, to

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cease to conduct business under or use the name “Steadfast” or any derivative thereof and to change our name and the names of our subsidiaries to a name that does not contain the word “Steadfast” or any other word or words that might, in the reasonable discretion of our advisor, indicate some form of relationship between us and our advisor or its affiliates. If we are required to cease to conduct business under or use the name “Steadfast” or any derivative thereof, it could have an adverse effect on our ability to achieve our investment objectives.

Risks Relating to Our Organizational Structure

Maryland law and our organizational documents limit your right to bring claims against our officers and directors.

Maryland law provides that a director will not have any liability as a director so long as he or she performs his or her duties in accordance with the applicable standard of conduct. In addition, our charter provides that, subject to the applicable limitations set forth therein or under Maryland law, no director or officer will be liable to us or our stockholders for monetary damages. Our charter also provides that we will generally indemnify our directors, our officers, our advisor and its affiliates for losses they may incur by reason of their service in those capacities unless their act or omission was material to the matter giving rise to the proceeding and was committed in bad faith or was the result of active and deliberate dishonesty, they actually received an improper personal benefit in money, property or services or, in the case of any criminal proceeding, they had reasonable cause to believe the act or omission was unlawful. Moreover, we have entered into separate indemnification agreements with each of our directors and executive officers. As a result, we and our stockholders may have more limited rights against these persons than might otherwise exist under common law. In addition, we may be obligated to fund the defense costs incurred by these persons. However, our charter provides that we may not indemnify our directors, our advisor and its affiliates for loss or liability suffered by them or hold our directors or our advisor and its affiliates harmless for loss or liability suffered by us unless they have determined that the course of conduct that caused the loss or liability was in our best interests, they were acting on our behalf or performing services for us, the liability was not the result of negligence or misconduct by ournon-independent directors, our advisor and its affiliates or gross negligence or willful misconduct by our independent directors, and the indemnification or agreement to hold harmless is recoverable only out of our net assets, including the proceeds of insurance, and not from the stockholders. As a result of these limitations on liability and indemnification provisions and agreements, we and our stockholders may be entitled to a more limited right of action than we would otherwise have if indemnification rights were not granted.

Risks associated withco-ownership arrangements with ourco-venture partners,co-tenants or other partners.

As of December 31, 2018, we owned a 10% interest in the joint venture. In the future, we may enter into additional joint ventures or otherco-ownership arrangements for the acquisition, development or improvement of communities as well as the acquisition of real estate-related investments. We may also purchase and develop communities in joint ventures or in partnerships,co-tenancies or otherco-ownership arrangements with the sellers of the communities, affiliates of the sellers, developers or other persons. Such investments may involve risks not otherwise present with other forms of real estate investment, including the possibility that our partner in an investment might be unable to or otherwise refuse to make capital contributions when due; that we may incur liabilities as the result of action taken by our partner; that our partner might at any time have economic or business interests or goals that are inconsistent with ours; and that our partner may be in a position to take action contrary to our instructions or requests. Frequently, we and our partner may each have the right to trigger a buy/sell arrangement, which could cause us to sell our interest, or acquire our partner’s interest, at a time when we otherwise would not have initiated such a transaction. Any of these events could have an adverse effect on our results of operations.

The limit on the percentage of shares of our common stock that any person may own may discourage a takeover or business combination that may benefit our stockholders.

Our charter restricts the direct or indirect ownership by one person or entity to no more than 9.8% of the value of our then outstanding capital stock (which includes common stock and any preferred stock we may issue)

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and no more than 9.8% of the value or number of shares, whichever is more restrictive, of our then outstanding common stock unless exempted by our board of directors. These restrictions may discourage a change of control of us and may deter individuals or entities from making tender offers for shares of our common stock on terms that might be financially attractive to stockholders or which may cause a change in our management. In addition to deterring potential transactions that may be favorable to our stockholders, these provisions may also decrease your ability to sell your shares of our common stock.

We may issue preferred stock or other classes of common stock, which issuance could adversely affect the holders of our common stock.

Investors in our common stock do not have preemptive rights to any shares issued by us in the future. We may issue, without stockholder approval, preferred stock or other classes of common stock with rights that could dilute the value of your shares of common stock. However, the issuance of preferred stock must also be approved by a majority of our independent directors not otherwise interested in the transaction, who will have access, at our expense, to our legal counsel or to independent legal counsel. The issuance of preferred stock or other classes of common stock may increase the number of stockholders entitled to distributions without simultaneously increasing the size of our asset base. Under our charter, we have authority to issue a total of 1,100,000,000 shares of capital stock, of which 999,999,000 shares are designated as common stock with a par value of $0.01 per share, 100,000,000 shares are designated as preferred stock with a par value of $0.01 per share, and 1,000 shares are designated as convertible stock with a par value of $0.01 per share. Our board of directors, with the approval of a majority of the entire board of directors and without any action by our stockholders, may amend our charter from time to time to increase or decrease the aggregate number of shares of capital stock or the number of shares of capital stock of any class or series that we have authority to issue. If we ever created and issued preferred stock with a distribution preference over common stock, payment of any distribution preferences of outstanding preferred stock would reduce the amount of funds available for the payment of distributions on our common stock. Further, holders of preferred stock are normally entitled to receive a preference payment in the event we liquidate, dissolve or wind up before any payment is made to our common stockholders, likely reducing the amount common stockholders would otherwise receive upon such an occurrence. In addition, under certain circumstances, the issuance of preferred stock or a separate class or series of common stock may render more difficult or tend to discourage a merger, tender offer or proxy contest, the assumption of control by a holder of a large block of our securities, or the removal of incumbent management.

Your investment will be diluted upon conversion of the convertible stock.

We have issued 1,000 shares of our convertible stock to our advisor. Under limited circumstances, each outstanding share of our convertible stock may be converted into shares of our common stock, which will have a dilutive effect to our stockholders. Our convertible stock will be converted into shares of common stock if (1) we have made total distributions on the then outstanding shares of our common stock equal to the price paid for those shares plus an 8.0% cumulative,non-compounded, annual return on that price, (2) we list our common stock for trading on a national securities exchange or enter into a merger whereby holders of our common stock receive listed securities of another issuer or (3) our advisory agreement is terminated or not renewed (other than for “cause” as defined in our advisory agreement). Upon any of these events, each share of convertible stock will be converted into a number of shares of common stock equal to 1/1000 of the quotient of (A) 10% of the amount, if any, by which (i) our “enterprise value” plus the aggregate value of the distributions paid to date on the then outstanding shares exceeds (ii) the aggregate purchase price paid by stockholders for those outstanding shares plus an 8.0% cumulative,non-compounded, annual return on the original issue price of the shares, divided by (B) our enterprise value divided by the number of outstanding shares of our common stock on anas-converted basis as of the date of conversion. In the event of a termination ornon-renewal of our advisory agreement for cause, the convertible stock will be redeemed by us for $1.00. Upon the issuance of our common stock in connection with the conversion of our convertible stock, your interests in us will be diluted.

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The conversion of the convertible stock held by our advisor due upon termination of the advisory agreement and the voting rights granted to the holder of our convertible stock, may discourage a takeover attempt or prevent us from effecting a merger that otherwise would have been in the best interests of our stockholders.

If we engage in a merger in which we are not the surviving entity or our advisory agreement is terminated without cause, our advisor may be entitled to conversion of the shares of our convertible stock it holds and to require that we purchase all or a portion of the limited partnership interests in our operating partnership that it holds at any time thereafter for cash or our common stock. The existence of this convertible stock may deter a prospective acquirer from bidding on our company, which may limit the opportunity for stockholders to receive a premium for their stock that might otherwise exist if an investor attempted to acquire us through a merger.

The affirmative vote oftwo-thirds of the outstanding shares of convertible stock, voting as a single class, will be required (1) for any amendment, alteration or repeal of any provision of our charter that materially and adversely changes the rights of the convertible stock and (2) to effect a merger of our company into another entity, or a merger of another entity into our company, unless in each case each share of convertible stock (A) will remain outstanding without a material and adverse change to its terms and rights or (B) will be converted into or exchanged for shares of stock or other ownership interest of the surviving entity having rights identical to that of our convertible stock. In the event that we propose to merge with or into another entity, including another REIT, our advisor could, by exercising these voting rights, determine whether or not we are able to complete the proposed transaction. By voting against a proposed merger, our advisor could prevent us from effecting the merger, even if the merger otherwise would have been in the best interests of our stockholders.

We grant stock-based awards to our directors and may in the future grant such awards to our advisor’s employees and consultants pursuant to our long-term incentive plan, which will have a dilutive effect on your investment in us.

We have adopted a long-term incentive plan pursuant to which we are authorized to grant restricted stock, stock options, stock appreciation rights, restricted or deferred stock units, performance awards, dividend equivalents or other stock-based awards to directors, our advisor’s employees and consultants selected by our board of directors for participation in the plan. As of December 31, 2018, we had issued an aggregate of 101,500 shares of restricted stock to our independent directors pursuant to this plan. If we issue additional stock-based awards to eligible participants under our long-term incentive plan, the issuance of these stock-based awards will dilute your investment in our shares of common stock.

Certain features of our long-term incentive plan could have a dilutive effect on your investment in us, including (1) a lack of annual award limits, individually or in the aggregate (subject to the limit on the maximum number of shares which may be issued pursuant to awards granted under the plan), (2) the fact that the limit on the maximum number of shares which may be issued pursuant to awards granted under the plan is not tied to the amount of proceeds raised in the offering and (3) share counting procedures which provide that shares subject to certain awards, including, without limitation, substitute awards granted by us to employees of another entity in connection with our merger or consolidation with such company or shares subject to outstanding awards of another company assumed by us in connection with our merger or consolidation with such company, are not subject to the limit on the maximum number of shares which may be issued pursuant to awards granted under the plan.

Our UPREIT structure may result in potential conflicts of interest with limited partners in our operating partnership whose interests may not be aligned with those of our stockholders.

Limited partners in our operating partnership have the right to vote on certain amendments to the operating partnership agreement, as well as on certain other matters. Persons holding such voting rights may exercise them in a manner that conflicts with the interests of our stockholders. As general partner of our operating partnership, we are obligated to act in a manner that is in the best interest of all partners of our operating partnership.

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Circumstances may arise in the future when the interests of limited partners in our operating partnership may conflict with the interests of our stockholders. These conflicts may be resolved in a manner stockholders do not believe are in their best interest.

Our bylaws designate the Circuit Court for Baltimore City, Maryland as the sole and exclusive forum for certain actions and proceedings that may be initiated by our stockholders.

Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or, if that Court does not have jurisdiction, the U.S. District Court for the District of Maryland, Baltimore Division, will be the sole and exclusive forum for: (1) any derivative action or proceeding brought on our behalf, (2) any action asserting a claim of breach of any duty owed by any of our directors or officers or employees to us or to our stockholders, (3) any action asserting a claim against us or any of our directors or officers or employees arising pursuant to any provision of the Maryland General Corporation Law, or the MGCL, or our charter or bylaws or (4) any action asserting a claim against us or any of our directors or officers or employees that is governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring or holding any interest in our shares shall be deemed to have notice of and to have consented to these provisions of our bylaws, as they may be amended from time to time. Our board of directors, without stockholder approval, adopted this provision of the bylaws so that we can respond to such litigation more efficiently and reduce the costs associated with our responses to such litigation, particularly litigation that might otherwise be brought in multiple forums. This exclusive forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that the stockholder believes is favorable for disputes with us or our directors, officers, agents or employees, if any, and may discourage lawsuits against us and our directors, officers, agents or employees, if any. Alternatively, if a court were to find this provision of our bylaws inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings notwithstanding that the MGCL expressly provides that the charter or bylaws of a Maryland corporation may require that any internal corporate claim be brought only in courts sitting in one or more specified jurisdictions, we may incur additional costs that we do not currently anticipate associated with resolving such matters in other jurisdictions, which could adversely affect our business, financial condition and results of operations.

We may change our targeted investments and investment guidelines without stockholder consent.

Our board of directors may change our targeted investments and investment guidelines at any time without the consent of our stockholders, which could result in our making investments that are different from, and possibly riskier than, the investments we currently own. A change in our targeted investments or investment guidelines may increase our exposure to interest rate risk, default risk and real estate market fluctuations, all of which could adversely affect the value of our common stock and our ability to make distributions to you.

Your investment return may be reduced if we are required to register as an investment company under the Investment Company Act of 1940, as amended, or the Investment Company Act; if we are subject to registration under the Investment Company Act, we will not be able to continue our business.

Neither we, our operating partnership or any of our subsidiaries intend to register as an investment company under the Investment Company Act. Our operating partnership’s and subsidiaries’ investments in real estate will represent the substantial majority of our total asset mix. In order for us not to be subject to regulation under the Investment Company Act, we engage, through our operating partnership and our wholly and majority owned subsidiaries, primarily in the business of buying real estate. These investments must be made within a year after our public offering ends.

We expect that most of our assets will be held through wholly-owned or majority-owned subsidiaries of our operating partnership. We expect that most of these subsidiaries will be outside the definition of an “investment company” under Section 3(a)(1) of the Investment Company Act as they are generally expected to hold at least 60% of their assets in real property. Section 3(a)(1)(A) of the Investment Company Act defines an investment

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company as any issuer that is or holds itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. Section 3(a)(1)(C) of the Investment Company Act defines an investment company as any issuer that is engaged or proposes to engage in the business of investing, reinvesting, owning, holding or trading in securities and owns or proposes to acquire investment securities having a value exceeding 40% of the value of the issuer’s total assets (exclusive of U.S. government securities and cash items) on an unconsolidated basis, which we refer to as the “40% test.” Excluded from the term “investment securities,” among other things, are U.S. government securities and securities issued by majority-owned subsidiaries that are not themselves investment companies and are not relying on the exception from the definition of investment company set forth in Section 3(c)(1) or Section 3(c)(7) of the Investment Company Act.

We believe that we, our operating partnership and most of the subsidiaries of our operating partnership will not fall within either definition of investment company under Section 3(a)(1) of the Investment Company Act as we intend to invest primarily in real property, through our wholly or majority-owned subsidiaries, the majority of which we expect to have at least 60% of their assets in real property. As these subsidiaries would be investing either solely or primarily in real property, they would be outside of the definition of “investment company” under Section 3(a)(1) of the Investment Company Act. We are organized as a holding company that conducts its businesses primarily through our operating partnership, which in turn is a holding company conducting its business through its subsidiaries. Both we and our operating partnership intend to conduct our operations so that they comply with the 40% test. We will monitor our holdings to ensure continuing and ongoing compliance with this test. In addition, we believe that neither we nor our operating partnership will be considered an investment company under Section 3(a)(1)(A) of the Investment Company Act because neither we nor our operating partnership will engage primarily or hold itself out as being engaged primarily in the business of investing, reinvesting or trading in securities. Rather, through our operating partnership’s wholly owned or majority owned subsidiaries, we and our operating partnership will be primarily engaged in thenon-investment company businesses of these subsidiaries, namely the business of purchasing or otherwise acquiring real property.

In the event that the value of investment securities held by a subsidiary of our operating partnership were to exceed 40% of the value of its total assets, we expect that subsidiary to be able to rely on the exclusion from the definition of “investment company” provided by Section 3(c)(5)(C) of the Investment Company Act. Section 3(c)(5)(C), as interpreted by the staff of the SEC, requires each of our subsidiaries relying on this exception to invest at least 55% of its portfolio in “mortgage and other liens on and interests in real estate,” which we refer to as “qualifying real estate assets,” and maintain at least 80% of its assets in qualifying real estate assets or other real estate-related assets. The remaining 20% of the portfolio can consist of miscellaneous assets. What we buy and sell is therefore limited by these criteria. How we determine to classify our assets for purposes of the Investment Company Act will be based in large measure uponno-action letters issued by the SEC staff in the past and other SEC interpretive guidance and, in the absence of SEC guidance, on our view of what constitutes a qualifying real estate asset and a real estate-related asset. Theseno-action positions were issued in accordance with factual situations that may be substantially different from the factual situations we may face, and a number of theseno-action positions were issued more than ten years ago. Pursuant to this guidance, and depending on the characteristics of the specific investments, certain mortgage loans, participations in mortgage loans, mortgage-backed securities, mezzanine loans, joint venture investments and the equity securities of other entities may not constitute qualifying real estate assets and therefore investments in these types of assets may be limited. No assurance can be given that the SEC staff will concur with our classification of our assets. Future revisions to the Investment Company Act or further guidance from the SEC or its staff may cause us to lose our exclusion from the definition of investment company or force us tore-evaluate our portfolio and our investment strategy. Such changes may prevent us from operating our business successfully.

There can be no assurance that the laws and regulations governing the Investment Company Act status of REITs, including more specific or different guidance regarding these exclusions that may be published by the SEC or its staff, will not change in a manner that adversely affects our operations. In addition, the SEC or its staff could take action that results in our or our subsidiary’s failure to maintain an exception or exemption from the Investment Company Act.

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In the event that we, or our operating partnership, were to acquire assets that could make either entity fall within the definition of an investment company under Section 3(a)(1) of the Investment Company Act, we believe that we would still qualify for an exclusion from registration pursuant to Section 3(c)(6). Although the SEC staff has issued little interpretive guidance with respect to Section 3(c)(6), we believe that we and our operating partnership may rely on Section 3(c)(6) if 55% of the assets of our operating partnership consist of, and at least 55% of the income of our operating partnership is derived from, qualifying real estate assets owned by wholly owned or majority-owned subsidiaries of our operating partnership.

To ensure that neither we, our operating partnership or any of our subsidiaries are required to register as an investment company, each entity may be unable to sell assets that it would otherwise want to sell and may need to sell assets that it would otherwise wish to retain. In addition, we, our operating partnership or our subsidiaries may be required to acquire additional income- or loss-generating assets that we might not otherwise acquire or forego opportunities to acquire interests in companies that we would otherwise want to acquire. Although we, our operating partnership and our subsidiaries intend to monitor our portfolio periodically and prior to each acquisition and disposition, any of these entities may not be able to remain outside the definition of investment company or maintain an exclusion from the definition of investment company. If we, our operating partnership or our subsidiaries are required to register as an investment company but fail to do so, the unregistered entity would be prohibited from engaging in our business, and criminal and civil actions could be brought against such entity. In addition, the contracts of such entity would be unenforceable unless a court required enforcement, and a court could appoint a receiver to take control of the entity and liquidate its business.

Risks Related to Conflicts of Interest

We depend on our advisor and its key personnel and if any of such key personnel were to cease to be affiliated with our advisor, our business could suffer.

Our ability to achieve our investment objectives is dependent upon the performance of our advisor. Our success depends to a significant degree upon the continued contributions of certain of the key personnel of our advisor, each of whom would be difficult to replace. We currently do not have key man life insurance on any of our advisor’s personnel. If our advisor were to lose the benefit of the experience, efforts and abilities of any these individuals, our operating results could suffer.

Our advisor and its affiliates, including our officers and our affiliated directors, will face conflicts of interest caused by compensation arrangements with us, which could result in actions that are not in the best interests of our stockholders.

Our advisor and its affiliates receive substantial fees from us in return for their services and these fees could influence the advice provided to us. Among other matters, these compensation arrangements could affect their judgment with respect to:

• future public offerings of equity by us, which would allow the dealer manager to earn additional dealer manager fees and allows our advisor to earn increased acquisition fees and investment management fees;

• real property sales, since the investment management fees and property management fees payable to our advisor and its affiliates would decrease upon the disposition of an investment; and

• the purchase of assets from our sponsor and its affiliates, which may allow our advisor or its affiliates to earn additional acquisition fees, investment management fees and property management fees.

Further, our advisor may recommend that we invest in a particular asset or pay a higher purchase price for the asset than it would otherwise recommend if it did not receive an acquisition fee in connection with such transactions. Certain potential acquisition fees and investment management fees payable to our advisor and property management fees payable to our property manager will be paid irrespective of the quality of the

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underlying real estate or property management services. These fees may influence our advisor to recommend transactions with respect to the sale of a property or properties that may not be in our best interest. Our advisor will have considerable discretion with respect to the terms and timing of our acquisition, disposition and leasing transactions. In evaluating investments and other management strategies, the opportunity to earn these fees may lead our advisor to place undue emphasis on criteria relating to its compensation at the expense of other criteria, such as the preservation of capital, to achieve higher short-term compensation. This could result in decisions that are not in the best interests of our stockholders.

We may compete with Steadfast Apartment REIT, Steadfast Apartment REIT III and other affiliates of our sponsor for opportunities to acquire or sell investments, which may have an adverse impact on our operations.

We may compete for investment opportunities with Steadfast Apartment REIT or Steadfast Apartment REIT III, public,non-listed REITs sponsored by our sponsor that also focus their investment strategy on multifamily properties located in the United States. Steadfast Apartment REIT and Steadfast Apartment REIT III have both terminated their respective initial public offerings. Steadfast Apartment REIT continues to offer shares pursuant to its distribution reinvestment plan, but each of these REITs, however, could engage in future public offerings for its shares, including, with respect to Steadfast Apartment REIT III, a public offering of shares pursuant to its distribution reinvestment plan. Additionally, each REIT may reinvest any proceeds from a sale of assets or the refinancing of debt or raise additional funds available for investment. Although Steadfast Apartment REIT and Steadfast Apartment REIT III are the only investment programs currently sponsored by or affiliated with our sponsor that may directly compete with us for investment opportunities, our sponsor may launch additional investment programs in the future that compete with us for investment opportunities. To the extent that we compete with Steadfast Apartment REIT, Steadfast Apartment REIT III or any other program affiliated with our sponsor for investments, our sponsor will face potential conflicts of interest and there is a risk that our sponsor will select investment opportunities for us that provide lower returns than the investments selected for other such programs, or that certain otherwise attractive investment opportunities will not be available to us. In addition, certain of our affiliates currently own or manage multifamily properties in geographical areas in which we own multifamily properties. As a result of our potential competition with Steadfast Apartment REIT, Steadfast Apartment REIT III and other affiliates of our sponsor, certain investment opportunities that would otherwise be available to us may not in fact be available. Such competition may also result in conflicts of interest that are not resolved in our favor.

The time and resources that our sponsor and its affiliates could devote to us may be diverted to other investment activities, and we may face additional competition due to the fact that our sponsor and its affiliates are not prohibited from raising money for, or managing, another entity that makes the same or other types of investments that we do.

Our sponsor and its affiliates are not prohibited from raising money for, or managing, another investment entity that makes the same or other types of investments as we do. As a result, the time and resources our sponsor and its affiliates could devote to us may be diverted to other investment activities. Additionally, some of our directors and officers may serve as directors and officers of investment entities sponsored by our sponsor and its affiliates, including Steadfast Apartment REIT, Steadfast Apartment REIT III and Stira Alcentra Global Credit Fund. We cannot currently estimate the time our officers and directors will be required to devote to us because the time commitment required of our officers and directors will vary depending upon a variety of factors, including, but not limited to, general economic and market conditions affecting us and our advisor’s ability to locate and acquire investments that meet our investment objectives. Since these professionals engage in and will continue to engage in other business activities on behalf of themselves and others, these professionals will face conflicts of interest in allocating their time among us, our advisor and its affiliates and other business activities in which they are involved. This could result in actions that are more favorable to affiliates of our advisor than to us.

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In addition, we may compete with affiliates of our advisor for the same investors and investment opportunities. We may alsoco-invest with any such investment entity. Even though all suchco-investments will be subject to approval by our independent directors, they could be on terms not as favorable to us as those we could achieveco-investing with a third party.

Our advisor may have conflicting fiduciary obligations if we acquire assets from affiliates of our sponsor or enter into joint ventures with affiliates of our sponsor. As a result, in any such transaction we may not have the benefit ofarm’s-length negotiations of the type normally conducted between unrelated parties.

Our advisor may cause us to invest in a property owned by, or make an investment in equity securities in or real estate-related loans to, our sponsor or its affiliates or through a joint venture with affiliates of our sponsor. In these circumstances, our advisor will have a conflict of interest when fulfilling its fiduciary obligation to us. In any such transaction, we would not have the benefit ofarm’s-length negotiations of the type normally conducted between unrelated parties.

The fees we pay to affiliates in connection with the acquisition and management of our investments were determined without the benefit ofarm’s-length negotiations of the type normally conducted between unrelated parties.

The fees to be paid to our advisor, our property managers and other affiliates for services they provide for us were determined without the benefit ofarm’s-length negotiations of the type normally conducted between unrelated parties, may be in excess of amounts that we would otherwise pay to third parties for such services and may reduce the amount of cash that would otherwise be available for investments in real properties and distributions to our stockholders.

Risks Related to Investments in Real Estate

Our operating results will be affected by economic and regulatory changes that impact the real estate market in general.

Our investments in real properties will be subject to risks generally attributable to the ownership of real property, including:

• changes in global, national, regional or local economic, demographic or real estate market conditions;

• changes in supply of or demand for similar properties in an area;

• increased competition for real property investments targeted by our investment strategy;

• bankruptcies, financial difficulties or lease defaults by our tenants;

• changes in interest rates and availability of financing;

• changes in the terms of available financing, including more conservativeloan-to-value requirements and shorter debt maturities;

• competition from residential buildings;

• the inability or unwillingness of residents to pay rent increases;

• changes in government rules, regulations and fiscal policies, including changes in tax, real estate, environmental and zoning laws;

• the severe curtailment of liquidity for certain real estate-related assets; and

• rent restrictions due to government program requirements.

All of these factors are beyond our control. Any negative changes in these factors could affect our ability to meet our obligations and make distributions to stockholders.

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We are unable to predict future changes in global, national, regional or local economic, demographic or real estate market conditions. For example, a recession or rise in interest rates could make it more difficult for us to lease or dispose of real properties and could make alternative interest-bearing and other investments more attractive and therefore potentially lower the relative value of the real estate assets we acquire. These conditions, or others we cannot predict, may adversely affect our results of operations and returns to our stockholders. In addition, the value of the real properties we acquire may decrease following the date we acquire such properties due to the risks described above or any other unforeseen changes in market conditions. If the value of our real properties decreases, we may be forced to dispose of the properties at a price lower than the price we paid to acquire our properties, which could adversely impact results of our operations and our ability to make distributions and return capital to our investors.

A concentration of our investments in the apartment community sector may leave our profitability vulnerable to a downturn or slowdown in the sector.

Our property portfolio is comprised solely of multifamily properties. As a result, we will be subject to risks inherent in investments in a single type of property. Because our investments are in the apartment community sector, the potential effects on our revenues, and as a result, on cash available for distribution to our stockholders, resulting from a downturn or slowdown in the apartment community sector could be more pronounced than if we had more fully diversified our investments.

We depend on tenants for our revenue, and, accordingly, our revenue and our ability to make distributions to our stockholders is dependent upon the ability of the tenants of our properties to generate enough income to pay their rents in a timely manner. Substantialnon-renewals, terminations or lease defaults could reduce our net income and limit our ability to make distributions to our stockholders.

The underlying value of our properties and the ability to make distributions to our stockholders depend upon the ability of the tenants of our properties to generate enough income to pay their rents in a timely manner, and the success of our investments depends upon the occupancy levels, rental income and operating expenses of our properties and our company. Tenants’ inability to timely pay their rents may be impacted by employment and other constraints on their personal finances, including debts, purchases and other factors. These and other changes beyond our control may adversely affect our tenants’ ability to make lease payments. In the event of a tenant default or bankruptcy, we may experience delays in enforcing our rights as landlord and may incur costs in protecting our investment andre-leasing our property. We may be unable tore-lease the property for the rent previously received. We may be unable to sell a property with low occupancy without incurring a loss. These events and others could cause us to reduce the amount of distributions we make to stockholders and the value of our stockholders’ investment to decline.

We may be unable to secure funds for future capital improvements, which could adversely impact our ability to make cash distributions to our stockholders.

When residents do not renew their leases or otherwise vacate their apartment homes, in order to attract replacement residents, we may be required to expend funds for capital improvements to the vacated apartment homes. In addition, we may require substantial funds to renovate an apartment community in order to sell it, upgrade it or reposition it in the market. If we have insufficient capital reserves, we will have to obtain financing from other sources. We intend to establish capital reserves in an amount we, in our discretion, believe is necessary. A lender also may require escrow of capital reserves in excess of any established reserves. If these reserves or any reserves otherwise established are designated for other uses or are insufficient to meet our cash needs, we may have to obtain financing from either affiliated or unaffiliated sources to fund our cash requirements. We cannot assure our stockholders that sufficient financing will be available or, if available, will be available on economically feasible terms or on terms acceptable to us. Moreover, certain reserves required by lenders may be designated for specific uses and may not be available for capital purposes such as future capital improvements. Additional borrowing for capital needs and capital improvements will increase our interest expense, and therefore our financial condition and our ability to make cash distributions to our stockholders may be adversely affected.

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Real property that experiences significant vacancy could be difficult to sell orre-lease.

A real property may experience a vacancy either by the continued default of a tenant under its lease or the expiration of one of our leases. Certain of the real properties we acquire may have some level of vacancy at the time of closing of our acquisition of the property. Certain other real properties may not be specifically suited to the particular needs of a tenant and may become vacant. There can be no assurances that we will have the funds available to correct defects or make capital improvements necessary to attract replacement tenants. As a result, we may have difficulty obtaining a new tenant for any vacant space we have in our real properties. If the vacancy continues for a long period of time, we may suffer reduced revenues resulting in lower cash distributions to stockholders. In addition, the resale value of the real property could be diminished because the market value may depend principally upon the value of the leases of such real property.

We will compete with numerous other persons and entities for real estate assets and tenants.

We will compete with numerous other persons and entities in acquiring real property and attracting tenants to real properties we acquire. These persons and entities may have greater experience and financial strength than us. There is no assurance that we will be able to acquire real properties or attract tenants to real properties we acquire on favorable terms, if at all. For example, our competitors may be willing to offer space at rental rates below our rates, causing us to lose existing or potential tenants and pressuring us to reduce our rental rates to retain existing tenants or convince new tenants to lease space at our properties. Each of these factors could adversely affect our results of operations, financial condition, value of our investments and ability to pay distributions to you.

Real properties are illiquid investments, and we may be unable to adjust our portfolio in response to changes in economic or other conditions or sell a property if or when we decide to do so.

Real properties are illiquid investments. We may be unable to adjust our portfolio in response to changes in economic or other conditions. In addition, the real estate market is affected by many factors, such as general economic conditions, availability of financing, interest rates, supply and demand, and other factors that are beyond our control. We cannot predict whether we will be able to sell any real property for the price or on the terms set by us, or whether any price or other terms offered by a prospective purchaser would be acceptable to us. We cannot predict the length of time needed to find a willing purchaser and to close the sale of a real property. Additionally, we may be required to expend funds to correct defects or to make improvements before a real property can be sold. We cannot assure you that we will have funds available to correct such defects or to make such improvements.

In acquiring a real property, we may agree to restrictions that prohibit the sale of that real property for a period of time or impose other restrictions, such as a limitation on the amount of debt that can be placed or repaid on that real property. All these provisions would restrict our ability to sell a property, which could reduce the amount of cash available for distribution to our stockholders.

Competition from other apartment communities for residents could reduce our profitability and the return on your investment.

The apartment sector is highly competitive. This competition could reduce occupancy levels and revenues at our apartment communities, which would adversely affect our operations. We expect to face competition from many sources. We will face competition from other apartment communities both in the immediate vicinity and in the larger geographic market where our apartment communities are located. These competitors may have greater experience and financial resources than us giving them an advantage in attracting residents to their properties. In addition, increases in operating costs due to inflation may not be offset by increased apartment rental rates.

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Increased competition and increased affordability of single-family homes could limit our ability to retain residents, lease apartment homes or increase or maintain rents.

Any apartment communities we may acquire will most likely compete with numerous housing alternatives in attracting residents, including single-family homes, as well as owner occupied single- and multifamily homes available to rent. Competitive housing in a particular area and the increasing affordability of owner occupied single- and multifamily homes available to rent or buy caused by declining mortgage interest rates and government programs to promote home ownership could adversely affect our ability to retain our residents, lease apartment homes and increase or maintain rental rates.

Short-term apartment leases expose us to the effects of declining market rent, which could adversely impact our ability to make cash distributions to our stockholders.

Substantially all of our apartment leases are for a term of one year or less. Because these leases generally permit the residents to leave at the end of the lease term without penalty, our rental revenues may be impacted by declines in market rents more quickly than if our leases were for longer terms.

Increased construction of similar properties that compete with our apartment communities in any particular location could adversely affect the operating results of our properties and our cash available for distribution to our stockholders.

We may have acquired apartment communities in locations that may be experiencing increases in the construction of properties that compete with our apartment communities. This increased competition and construction could:

• make it more difficult for us to find residents to lease apartment homes in our apartment communities;

• force us to lower our rental prices in order to lease apartment homes in our apartment communities; and/or

• substantially reduce our revenues and cash available for distribution to our stockholders.

Our leases with commercial tenants at some of our properties are short-term leases, which may result in increased operating expenses if those tenants vacate their space and we are forced to locate new tenants.

A portion of our portfolio of real property investments is comprised of properties with commercial tenants. The leases for these commercial tenants are short-term leases, ranging from zero to six year terms. Short-term leases are generally less desirable than long-term leases because long-term leases provide a more predictable income stream over a longer period. Long-term leases also make it easier for us to obtain longer-term, fixed-rate mortgage financing with principal amortization, thereby moderating the interest rate risk associated with financing or refinancing our real properties portfolio by reducing the outstanding principal balance over time. Short-term commercial leases at our properties increase the risk of an extended vacancy due to the difficulty we may experience in finding new tenants upon the expiration of the leases. Additionally, we may incur significant costs related to leasing commissions and tenant improvements to attract new tenants. To the extent that a portion of our real estate portfolio is leased under the terms of short-term leases, we will be subject to the risks of a less predictable income stream and greater exposure to the fluctuations in market rental rates. We will also be subject to interest rate risks should the short-term leases result in a mismatch with any long-term mortgage financing on the real properties.

Our real properties will be subject to property taxes that may increase in the future, which could adversely affect our cash flow.

Our real properties are subject to real and personal property taxes that may increase as tax rates change and as the real properties are assessed or reassessed by taxing authorities. While certain of our leases, such as leases

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at our multifamily properties, will generally provide that we are responsible for the property taxes, or increases therein, our commercial leases may provide that such taxes are charged to the lessees as an expense related to the real properties that they occupy. In any case, as the owner of the properties, we are ultimately responsible for payment of the taxes to the applicable government authorities. If we fail to pay any such taxes, the applicable taxing authority may place a lien on the real property and the real property may be subject to a tax sale. In addition, we will generally be responsible for real property taxes related to any vacant space. An increase in the property taxes that we may be required to pay could have an adverse effect on our results of operations.

Uninsured losses or premiums for insurance coverage relating to real property may adversely affect your returns.

We will attempt to adequately insure all of our real properties against casualty losses. The nature of the activities at certain properties, such asage-restricted communities, may expose us and our operators to potential liability for personal injuries and property damage claims. In addition, there are types of losses, generally catastrophic in nature, such as losses due to wars, acts of terrorism, earthquakes, floods, hurricanes, pollution or environmental matters that are uninsurable or not economically insurable, or may be insured subject to limitations, such as large deductibles orco-payments. Risks associated with potential acts of terrorism could sharply increase the premiums we pay for coverage against property and casualty claims. Mortgage lenders sometimes require commercial property owners to purchase specific coverage against acts of terrorism as a condition for providing mortgage loans. These policies may not be available at a reasonable cost, if at all, which could inhibit our ability to finance or refinance our real properties. In such instances, we may be required to provide other financial support, either through financial assurances or self-insurance, to cover potential losses. Changes in the cost or availability of insurance could expose us to uninsured casualty losses. In the event that any of our real properties incurs a casualty loss that is not fully covered by insurance, the value of our assets will be reduced by any such uninsured loss. In addition, we cannot assure you that funding will be available to us for repair or reconstruction of damaged real property in the future.

Costs of complying with governmental laws and regulations related to environmental protection and human health and safety may be high.

All real property investments and the operations conducted in connection with such investments are subject to federal, state and local laws and regulations relating to environmental protection and human health and safety. Some of these laws and regulations may impose joint and several liability on customers, owners or operators for the costs to investigate or remediate contaminated properties, regardless of fault or whether the acts causing the contamination were legal.

Under various federal, state and local environmental laws, a current or previous owner or operator of real property may be liable for the cost of removing or remediating hazardous or toxic substances on such real property. These environmental laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of such hazardous or toxic substances. In addition, the presence of hazardous substances, or the failure to properly remediate these substances, may adversely affect our ability to sell, rent or pledge such real property as collateral for future borrowings. Environmental laws also may impose restrictions on the manner in which real property may be used or businesses may be operated. Some of these laws and regulations have been amended so as to require compliance with new or more stringent standards as of future dates. Compliance with new or more stringent laws or regulations or stricter interpretation of existing laws may require us to incur material expenditures. Future laws, ordinances or regulations may impose material environmental liability. Additionally, our tenants’ operations, the existing condition of land when we buy it, operations in the vicinity of our real properties, such as the presence of underground storage tanks, or activities of unrelated third parties, may affect our real properties. There are also various local, state and federal fire, health, life-safety and similar regulations with which we may be required to comply and which may subject us to liability in the form of fines or damages for noncompliance. In connection with the acquisition and ownership of our real properties, we may be exposed to these costs in connection with such regulations. The cost of defending

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against environmental claims, any damages or fines we must pay, compliance with environmental regulatory requirements or remediating any contaminated real property could materially and adversely affect our business and results of operations, lower the value of our assets and, consequently, lower the amounts available for distribution to our stockholders.

The costs associated with complying with the Americans with Disabilities Act of 1990, as amended, or the ADA, may reduce the amount of cash available for distribution to our stockholders.

Investment in real properties may also be subject to the ADA. Under the ADA, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. The ADA has separate compliance requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services be made accessible and available to people with disabilities. Changes to these rules and regulations may increase the costs of our compliance with the ADA. With respect to the properties we acquire, the ADA’s requirements could require us to remove access barriers and could result in the imposition of injunctive relief, monetary penalties or, in some cases, an award of damages. We will attempt to acquire properties that comply with the ADA or place the burden on the seller or other third party, such as a tenant, to ensure compliance with the ADA. We cannot assure you that we will be able to acquire properties or allocate responsibilities in this manner. Any monies we use to comply with the ADA will reduce the amount of cash available for distribution to our stockholders.

To the extent we invest inage-restricted communities, we may incur liability by failing to comply with the Housing for Older Persons Act, or HOPA, the Fair Housing Act, or FHA, or certain state regulations, which may affect cash available for distribution to our stockholders.

To the extent we invest inage-restricted communities, any such properties must comply with the FHA and the HOPA. The FHA generally prohibitsage-based housing discrimination; however certain exceptions exist for housing developments that qualify as housing for older persons. HOPA provides the legal requirements for such housing developments. In order for housing to qualify as housing for older persons, HOPA requires (1) all residents of such developments to be at least 62 years of age or (2) that at least 80% of the occupied apartment homes are occupied by at least one person who is at least 55 years of age and that the housing community publish and adhere to policies and procedures that demonstrate this required intent and comply with rules issued by the United States Department of Housing and Urban Development, or HUD, for verification of occupancy. In addition, certain states require thatage-restricted communities register with the state. Noncompliance with the FHA, HOPA or state registration requirements could result in the imposition of fines, awards of damages to private litigants, payment of attorneys’ fees and other costs to plaintiffs, substantial litigation costs and substantial costs of remediation, all of which would reduce the amount of cash available for distribution to our stockholders.

Government housing regulations may limit the opportunities at some of the government-assisted housing properties we invest in, and failure to comply with resident qualification requirements may result in financial penalties and/or loss of benefits, such as rental revenues paid by government agencies.

To the extent that we invest in government-assisted housing, we may acquire properties that benefit from governmental programs intended to provide affordable housing to individuals with low or moderate incomes. These programs, which are typically administered by HUD or state housing finance agencies, typically provide mortgage insurance, favorable financing terms, tax credits or rental assistance payments to property owners. As a condition of the receipt of assistance under these programs, the properties must comply with various requirements, which typically limit rents topre-approved amounts and impose restrictions on resident incomes. Failure to comply with these requirements and restrictions may result in financial penalties or loss of benefits. In addition, we will typically need to obtain the approval of HUD in order to acquire or dispose of a significant interest in or manage aHUD-assisted property.

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Risks Associated with Real Estate-Related Assets

Disruptions in the financial markets and deteriorating economic conditions could adversely impact the commercial mortgage market as well as the market for real estate-related assets and debt-related investments generally, which could hinder our ability to implement our business strategy and generate returns to our stockholders.

We may invest in real estate-related assets backed by multifamily properties. The returns available to investors in these investments are determined by: (1) the supply and demand for such investments; and (2) the existence of a market for such investments, which includes the ability to sell or finance such investments.

During periods of volatility the number of investors participating in the market may change at an accelerated pace. As liquidity or “demand” increases the returns available to investors will decrease. Conversely, a lack of liquidity will cause the returns available to investors to increase. Concerns pertaining to the deterioration of credit in the residential mortgage market may adversely impact almost all areas of the debt capital markets including corporate bonds, asset-backed securities and commercial real estate bonds and loans. Future instability in the financial markets or weakened economic conditions may interfere with the successful implementation of our business strategy.

To the extent we hold investments in real estate-related assets that are illiquid, we may not be able to vary our portfolio in response to changes in economic and other conditions.

Certain of the real estate-related assets that we may purchase in connection with privately negotiated transactions will not be registered under the relevant securities laws, resulting in a prohibition against their transfer, sale, pledge or other disposition except in a transaction that is exempt from the registration requirements of, or is otherwise in accordance with, those laws. The mezzanine and bridge loans we may purchase would be particularly illiquid investments due to their short life, their unsuitability for securitization and the greater difficulty of recoupment in the event of a borrower’s default. As a result, our ability to vary our portfolio in response to changes in economic and other conditions may be relatively limited.

Our real estate-related assets may be sensitive to fluctuations in interest rates, and our hedging strategies may not be effective.

We may use various investment strategies to hedge interest rate risks with respect to our portfolio of real estate-related assets. The use of interest rate hedging transactions involves certain risks. These risks include: (1) the possibility that the market will move in a manner or direction that would have resulted in gain for us had an interest rate hedging transaction not been utilized, in which case our performance would have been better had we not engaged in the interest rate hedging transaction; (2) the risk of imperfect correlation between the risk sought to be hedged and the interest rate hedging transaction used; (3) potential illiquidity for the hedging instrument used, which may make it difficult for us toclose-out or unwind an interest rate hedging transaction; and (4) the possibility that the counterparty fails to honor its obligation. In addition, because we have elected to be taxed as a REIT under the Internal Revenue Code beginning with the taxable year ending December 31, 2010, for federal income tax purposes, we will have limitations on our income sources and the hedging strategies available to us will be more limited than those available to companies that are not REITs. To the extent that we do not hedge our interest rate exposure, our profitability may be negatively impacted by changes in long-term interest rates.

Declines in the market values of the real estate-related assets in which we invest may adversely affect our periodic reported results of operations and credit availability, which may reduce earnings and, in turn, cash available for distribution to our stockholders.

A portion of our real estate-related assets may be classified for accounting purposes as“held-for-sale.” These investments are carried at the lower of carrying value or estimated fair value less cost to sell. If these

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investments are carried at estimated fair value and temporary changes in the market values of those assets will be directly charged or credited to stockholders’ equity without impacting net income on our income statement. Market values of our investments may decline for a number of reasons, such as market illiquidity, changes in prevailing market rates, increases in defaults, increases in voluntary prepayments for those of our investments that are subject to prepayment risk, widening of credit spreads and downgrades of ratings of the securities by ratings agencies. If we determine that a decline in the estimated fair value of anavailable-for-sale security below its amortized value is other-than-temporary, we will recognize a loss on that security in our income statement, which will reduce our earnings in the period recognized.

A decline in the market value of our real estate-related assets may adversely affect us particularly in instances where we have borrowed money based on the market value of those assets. If the market value of those assets declines, the lender may require us to post additional collateral to support the loan. If we were unable to post the additional collateral, we may have to sell assets at a time when we might not otherwise choose to do so. A reduction in credit available may reduce our earnings and, in turn, cash available for distribution to stockholders. Further, credit facility providers may require us to maintain a certain amount of cash reserves or to set aside unlevered assets sufficient to maintain a specified liquidity position. As a result, we may not be able to leverage our assets as fully as we would choose, which could reduce our return on equity. In the event that we are unable to meet these contractual obligations, our financial condition could deteriorate rapidly.

Some of the real estate-related assets in which we invest will be carried at estimated fair value as determined by us and, as a result, there may be uncertainty as to the value of these investments.

Some of the real-estate-related assets in which we invest may be in the form of securities that are recorded at fair value but that have limited liquidity or are not publicly traded. The fair value of securities and other investments that have limited liquidity or are not publicly traded may not be readily determinable. We estimate the fair value of these investments on a quarterly basis. Because such valuations are inherently uncertain, may fluctuate over short periods of time and may be based on numerous estimates, our determinations of fair value may differ materially from the values that would have been used if a ready market for these securities existed. The value of our common stock could be adversely affected if our determinations regarding the fair value of these investments are materially higher than the values that we ultimately realize upon their disposal.

Risks Associated with Debt Financing

We will incur mortgage indebtedness and other borrowings which increase our business risks and could hinder our ability to make distributions and decrease the value of your investment.

We financed a portion of the purchase price of our real properties by borrowing funds. We may continue to incur mortgage debt and pledge some or all of our investments as security for that debt to obtain funds to acquire additional investments or for working capital. We may also borrow funds as necessary or advisable to ensure we maintain our REIT tax qualification, including the requirement that we distribute at least 90% of our annual REIT taxable income to our stockholders (computed without regard to the distribution paid deduction and excluding net capital gains). However, there is no assurance that we will be able to obtain such borrowings on satisfactory terms.

High debt levels will cause us to incur higher interest charges, which would result in higher debt service payments and could be accompanied by restrictive covenants. If there is a shortfall between the cash flow from a property and the cash flow needed to service mortgage debt on that property, then the amount available for distributions to stockholders may be reduced. In addition, incurring mortgage debt increases the risk of loss since defaults on indebtedness secured by a property may result in lenders initiating foreclosure actions. In that case, we could lose the property securing the loan that is in default, thus reducing the value of your investment. For tax purposes, a foreclosure on any of our properties will be treated as a sale of the property for a purchase price equal to the outstanding balance of the debt secured by the mortgage. If the outstanding balance of the debt secured by

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the mortgage exceeds our tax basis in the property, we will recognize taxable income on foreclosure, but we would not receive any cash proceeds. If any mortgage contains cross collateralization or cross default provisions, a default on a single property could affect multiple properties. If any of our properties are foreclosed upon due to a default, our ability to pay cash distributions to our stockholders will be adversely affected.

Instability in the debt markets and our inability to find financing on attractive terms may make it more difficult for us to finance or refinance properties, and could reduce the amount of cash distributions we can make to our stockholders.

If mortgage debt is unavailable on reasonable terms as a result of increased interest rates, underwriting standards, capital market instability or other factors, we run the risk of being unable to refinance such debt when the loans come due, or of being unable to refinance on favorable terms, to the extent that we place mortgage debt on properties. If interest rates are higher when we refinance debt, our income could be reduced. We may be unable to refinance debt at appropriate times, which may require us to sell properties on terms that are not advantageous to us, or could result in the foreclosure of such properties. If any of these events occur, our cash flow would be reduced. This, in turn, would reduce cash available for distribution to our stockholders and may hinder our ability to raise more capital by issuing securities or by borrowing more money.

Increases in interest rates could increase the amount of our debt payments and negatively impact our operating results.

Interest we pay on our debt obligations reduces our cash available for distributions. Utilization of variable rate debt, combined with increases in interest rates would increase our interest costs, which would reduce our cash flows and our ability to make distributions to our stockholders. If we need to repay existing debt during periods of rising interest rates, we could be required to liquidate one or more of our investments at times which may not permit realization of the maximum return on such investments.

Changes in banks’ inter-bank lending rate reporting practices or the method pursuant to which LIBOR is determined may impact our variable rate debt and adversely affect our ability to manage and hedge our debt.

Our variable rate debt is tied to the benchmark LIBOR. LIBOR and other indices are the subject of recent national, international, and other regulatory guidance and proposals for reform. Some of these reforms are already effective while others are still to be implemented. These reforms may cause such benchmarks to perform differently than in the past, or have other consequences which cannot be predicted. LIBOR is calculated by reference to a market for interbank lending that continues to shrink, as it’s based on increasingly fewer actual transactions. This increases the subjectivity of the LIBOR calculation process and increases the risk of manipulation. Actions by the regulators or law enforcement agencies, as well as ICE Benchmark Administration (the current administrator of LIBOR), may result in changes to the manner in which LIBOR is determined or the establishment of alternative reference rates. For example, on July 27, 2017, the U.K. Financial Conduct Authority announced that it intends to stop persuading or compelling banks to submit LIBOR rates after 2021.

It is likely that, over time, U.S. Dollar LIBOR will be replaced by the Secured Overnight Financing Rate, or SOFR, published by the Federal Reserve Bank of New York. However, the manner and timing of this shift is currently unknown. SOFR is an overnight rate instead of a term rate, making SOFR an inexact replacement for LIBOR. There is currently no perfect way to create robust, forward-looking, SOFR term rates. Market participants are still considering how various types of financial instruments and securitization vehicles should react to a discontinuation of LIBOR. It is possible that not all of our variable rate debt will transition away from LIBOR at the same time, and it is possible that not all of our variable rate debt will transition to the same alternative reference rate, in each case increasing the difficulty of hedging. Switching existing financial instruments and hedging transactions from LIBOR to SOFR requires calculations of a spread. Industry organizations are attempting to structure the spread calculation in a manner that minimizes the possibility of value transfer between counterparties, borrowers, and lenders by virtue of the transition, but there is no assurance

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that the calculated spread will be fair and accurate or that all asset types and all types of securitization vehicles will use the same spread. We and other market participants have less experience understanding and modeling SOFR-based assets and liabilities than LIBOR-based assets and liabilities, increasing the difficulty of investing, hedging, and risk management. The process of transition involves operational risks. It is also possible that no transition will occur for many financial instruments, meaning that those instruments would continue to be subject to the weaknesses of the LIBOR calculation process. At this time, it is not possible to predict the effect of any such changes, any establishment of alternative reference rates or any other reforms to LIBOR that may be implemented. If LIBOR ceases to exist, we may need to renegotiate with borrowers and financing institutions that utilize LIBOR as a factor in determining the interest rate to replace LIBOR with the new standard that is established. As such, the potential effect of any such event on our cost of capital and interest income cannot yet be determined.

Lenders may require us to enter into restrictive covenants relating to our operations, which could limit our ability to make distributions to our stockholders.

When providing financing, a lender may impose restrictions on us that affect our distribution and operating policies and our ability to incur additional debt. Loan documents we enter into may contain covenants that limit our ability to further mortgage a property, discontinue insurance coverage, or replace our advisor. In addition, loan documents may limit our ability to replace a property’s property manager or terminate certain operating or lease agreements related to a property. These or other limitations may adversely affect our flexibility and our ability to achieve our investment objectives.

The derivative financial instruments that we use to hedge against interest rate fluctuations may not be successful in mitigating our risks associated with interest rates and could reduce the overall returns on your investment.

We may use derivative financial instruments, such as interest rate cap or collar agreements and interest rate swap agreements, to hedge exposures to changes in interest rates on loans secured by our assets, but no hedging strategy can protect us completely. These agreements involve risks, such as the risk that counterparties may fail to honor their obligations under these arrangements and that these arrangements may not be effective in reducing our exposure to interest rate changes. We cannot assure you that our hedging strategy and the derivatives that we use will adequately offset the risk of interest rate volatility or that our hedging transactions will not result in losses. In addition, the use of such instruments may reduce the overall return on our investments. These instruments may also generate income that may not be treated as qualifying REIT income for purposes of the 75% or 95% REIT gross income tests.

Federal Income Tax Risks

Failure to qualify as a REIT would reduce our net earnings available for investment or distribution.

If we fail to qualify as a REIT for any taxable year and we do not qualify for certain statutory relief provisions, we will be subject to federal income tax on our taxable income at corporate rates. In addition, we would generally be disqualified from treatment as a REIT for the four taxable years following the year of losing our REIT status. Losing our REIT status would reduce our net earnings available for investment or distribution to stockholders because of the additional tax liability. In addition, distributions to stockholders would no longer qualify for the dividends paid deduction and we would no longer be required to make distributions. If this occurs, we might be required to borrow funds or liquidate some investments in order to pay the applicable tax.

You may have current tax liability on distributions you elect to reinvest in our common stock.

If you participate in our distribution reinvestment plan, you will be deemed to have received, and for income tax purposes will be taxed on, the amount reinvested in shares of our common stock to the extent the amount

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reinvested was not atax-free return of capital. In addition, you will be treated for tax purposes as having received an additional distribution to the extent the shares are purchased at a discount to fair market value. As a result, unless you are atax-exempt entity, you may have to use funds from other sources to pay your tax liability on the value of the shares of common stock received.

Distributions payable by REITs generally are subject to a higher tax rate than regular corporate dividends under current law.

The maximum U.S. federal income tax rate for certain qualified dividends payable to U.S. stockholders that are individuals, trusts and estates generally is 20%. Dividends payable by REITs, however, are generally subject to a higher rate when paid to such stockholders (but under the Tax Act (as defined below), U.S. shareholders that are individuals, trusts and estates generally may deduct 20% of ordinary dividends from a REIT for taxable years beginning after December 31, 2017, and before January 1, 2026). The more favorable rates applicable to regular corporate dividends under current law could cause investors who are individuals, trusts and estates or are otherwise sensitive to these lower rates to perceive investments in REITs to be relatively less attractive than investments in the stocks ofnon-REIT corporations that pay distributions, which could adversely affect the value of the stock of REITs, including our shares of our common stock.

Even if we qualify as a REIT for federal income tax purposes, we may be subject to other tax liabilities that reduce our cash flow and our ability to make distributions to you.

Even if we qualify as a REIT for federal income tax purposes, we may be subject to some federal, state and local taxes on our income or property. For example:

• In order to qualify as a REIT, we must distribute annually at least 90% of our REIT taxable income (which is determined without regard to the dividends paid deduction or net capital gain for this purpose) to our stockholders. To the extent that we satisfy the distribution requirement but distribute less than 100% of our REIT taxable income, we will be subject to federal corporate income tax on the undistributed income.

• We will be subject to a 4% nondeductible excise tax on the amount, if any, by which distributions we pay in any calendar year are less than the sum of 85% of our ordinary income, 95% of our capital gain net income and 100% of our undistributed income from prior years.

• If we have net income from the sale of foreclosure property that we hold primarily for sale to customers in the ordinary course of business or othernon-qualifying income from foreclosure property, we must pay a tax on that income at the highest corporate income tax rate.

• If we sell an asset, other than foreclosure property, that we hold primarily for sale to customers in the ordinary course of business, our gain would be subject to the 100% “prohibited transaction” tax unless such sale were made by one of our taxable REIT subsidiaries.

REIT distribution requirements could adversely affect our ability to execute our business plan.

We generally must distribute annually at least 90% of our REIT taxable income (which is determined without regard to the dividends paid deduction or net capital gain for this purpose) in order to qualify as a REIT. To the extent that we satisfy this distribution requirement, but distribute less than 100% of our REIT taxable income (including net capital gain), we will be subject to federal corporate income tax on our undistributed REIT taxable income. In addition, we will be subject to a 4% nondeductible excise tax if the actual amount that we pay out to our stockholders in a calendar year is less than a minimum amount specified under federal tax laws. We intend to make distributions to our stockholders to comply with the REIT requirements of the Internal Revenue Code.

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From time to time, we may generate taxable income greater than our taxable income for financial reporting purposes, or our taxable income may be greater than our cash flow available for distribution to stockholders. If we do not have other funds available in these situations we could be required to borrow funds, sell investments at disadvantageous prices or find another alternative source of funds to make distributions sufficient to enable us to pay out enough of our taxable income to satisfy the REIT distribution requirement and to avoid corporate income tax and the 4% excise tax in a particular year. There is no assurance that outside financing will be available to us. Even if available, the use of outside financing or other alternative sources of funds to pay distributions could increase our costs or dilute our stockholders’ equity interests. Thus, compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits.

To maintain our REIT status, we may be forced to forgo otherwise attractive opportunities, which may delay or hinder our ability to meet our investment objectives and reduce your overall return.

To maintain our REIT status, we must satisfy certain tests on an ongoing basis concerning, among other things, the sources of our income, nature of our assets and the amounts we distribute to our stockholders. We may be required to make distributions to stockholders at times when it would be more advantageous to reinvest cash in our business or when we do not have funds readily available for distribution. Compliance with the REIT requirements may hinder our ability to operate solely on the basis of maximizing profits and the value of your investment.

Our gains from sales of our assets are potentially subject to the prohibited transaction tax, which could reduce the return on your investment.

Our ability to dispose of property during the first few years following acquisition is restricted to a substantial extent as a result of our REIT status. We will be subject to a 100% tax on any gain realized on the sale or other disposition of any property (other than foreclosure property) we own, directly or through any subsidiary entity, including our operating partnership, but excluding our taxable REIT subsidiaries, that is deemed to be inventory or property held primarily for sale to customers in the ordinary course of trade or business. Whether property is inventory or otherwise held primarily for sale to customers in the ordinary course of a trade or business depends on the particular facts and circumstances surrounding each property. We intend to avoid the 100% prohibited transaction tax by (1) conducting activities that may otherwise be considered prohibited transactions through a taxable REIT subsidiary, (2) conducting our operations in such a manner so that no sale or other disposition of an asset we own, directly or through any subsidiary other than a taxable REIT subsidiary, will be treated as a prohibited transaction or (3) structuring certain dispositions of our properties to comply with certain safe harbors available under the Internal Revenue Code for properties held at least two years. However, no assurance can be given that any particular property we own, directly or through any subsidiary entity, including our operating partnership, but excluding our taxable REIT subsidiaries, will not be treated as inventory or property held primarily for sale to customers in the ordinary course of a trade or business.

Complying with REIT requirements may force us to liquidate otherwise attractive investments.

To maintain our REIT status, we must ensure that at the end of each calendar quarter, at least 75% of the value of our assets consists of cash, cash items, government securities and qualifying real estate assets, including certain mortgage loans and mortgage-backed securities. The remainder of our investment in securities (other than government securities and qualified real estate assets) generally cannot include more than 10% of the outstanding voting securities of any one issuer or more than 10% of the total value of the outstanding securities of any one issuer. In addition, in general, no more than 5% of the value of our assets (other than government securities and qualified real estate assets) can consist of the securities of any one issuer. No more than 20% of the value of our total assets can be represented by securities of one or more taxable REIT subsidiaries, and not more than 25% of the value of our assets may consist of “nonqualified publicly offered REIT debt instruments.”

If we fail to comply with these requirements at the end of any calendar quarter, we must correct the failure within 30 days after the end of the calendar quarter or qualify for certain statutory relief provisions to avoid

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losing our REIT qualification and suffering adverse tax consequences. As a result, we may be required to liquidate from our portfolio otherwise attractive investments. These actions could have the effect of reducing our income and amounts available for distribution to our stockholders.

Liquidation of assets may jeopardize our REIT status.

To maintain our REIT status, we must comply with requirements regarding our assets and our sources of income. If we are compelled to liquidate our investments to repay obligations to our lenders, we may be unable to comply with these requirements, ultimately jeopardizing our qualification as a REIT, or we may be subject to a 100% tax on any resultant gain if we sell assets that are treated as dealer property or inventory.

The failure of a mezzanine loan to qualify as a real estate asset could adversely affect our ability to qualify as a REIT.

We may acquire mezzanine loans. The Internal Revenue Service has provided a safe harbor in Revenue Procedure2003-65 for structuring mezzanine loans so that they will be treated by the Internal Revenue Service as a real estate asset for purposes of the REIT asset tests, and interest derived from mezzanine loans will be treated as qualifying mortgage interest for purposes of the 75% gross income test. Although the Revenue Procedure provides a safe harbor on which taxpayers may rely, it does not prescribe rules of substantive tax law. We may acquire mezzanine loans that do not meet all of the requirements of the safe harbor. In the event we own a mezzanine loan that does not meet the safe harbor, the Internal Revenue Service could challenge such loan’s treatment as a real estate asset for purposes of the REIT asset and income tests and, if such a challenge were sustained, we could fail to continue to qualify as a REIT.

If our operating partnership fails to maintain its status as a partnership, its income may be subject to taxation, which would reduce the cash available for distribution to you and likely result in a loss of our REIT status.

We intend to maintain the status of the operating partnership as a partnership for U.S. federal income tax purposes. However, if the Internal Revenue Service were to successfully challenge the status of the operating partnership as a partnership for such purposes, it would be taxable as a corporation. In such event, this would reduce the amount of distributions that the operating partnership could make to us. This would also likely result in our losing REIT status, and, if so, becoming subject to a corporate level tax on our own income. This would substantially reduce any cash available to pay distributions. In addition, if any of the partnerships or limited liability companies through which the operating partnership owns its properties, in whole or in part, loses its characterization as a partnership and is otherwise not disregarded for U.S. federal income tax purposes, it would be subject to taxation as a corporation, thereby reducing distributions to the operating partnership. Such a recharacterization of an underlying property owner could also threaten our ability to maintain our status as a REIT.

Legislative or regulatory action could adversely affect investors.

In recent years, numerous legislative, judicial and administrative changes have been made in the provisions of U.S. federal income tax laws applicable to investments similar to an investment in shares of our common stock. Additional changes to the tax laws are likely to continue to occur, and we cannot assure our stockholders that any such changes will not adversely affect our taxation and our ability to continue to qualify as a REIT or the taxation of a stockholder. Any such changes could have an adverse effect on an investment in our shares or on the market value or the resale potential of our assets. Our stockholders are urged to consult with their tax advisor with respect to the impact of recent legislation on their investment in our shares and the status of legislative, regulatory or administrative developments and proposals and their potential effect on an investment in our shares.

Although REITs generally receive better tax treatment than entities taxed as regular corporations, it is possible that future legislation would result in a REIT having fewer tax advantages, and it could become more

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advantageous for a company that invests in real estate to elect to be treated for U.S. federal income tax purposes as a regular corporation. As a result, our charter provides our board of directors with the power, under certain circumstances, to revoke or otherwise terminate our REIT election and cause us to be taxed as a regular corporation, without the vote of our stockholders. Our board of directors has fiduciary duties to us and our stockholders and could only cause such changes in our tax treatment if it determines in good faith that such changes are in the best interests of our stockholders.

In addition, on December 22, 2017, the Tax Cuts and Jobs Act, or the Tax Act, was signed into law. The Tax Act made significant changes to the U.S. federal income tax rules for taxation of individuals and businesses, generally effective for taxable years beginning after December 31, 2017. In addition to reducing corporate and individual tax rates, the Tax Act eliminates or restricts various deductions. Most of the changes applicable to individuals are temporary and apply only to taxable years beginning after December 31, 2017 and before January 1, 2026. The Tax Act made numerous large and small changes to the tax rules that do not affect the REIT qualification rules directly, but may otherwise affect us or our stockholders.

While the changes in the Tax Act generally appear to be favorable with respect to REITs, the extensive changes tonon-REIT provisions in the Internal Revenue Code may have unanticipated effects on us or our stockholders. Moreover, Congressional leaders have recognized that the process of adopting extensive tax legislation in a short amount of time without hearings and substantial time for review is likely to have led to drafting errors, issues needing clarification and unintended consequences that will have to be revisited in subsequent tax legislation. At this point, it is not clear if or when Congress will address these issues or when the IRS will issue administrative guidance on the changes made in the Tax Act.

We urge our stockholders to consult with their own tax advisor with respect to the status of the Tax Act and other legislative, regulatory or administrative developments and proposals and their potential effect on an investment in shares of our common stock.

Our property taxes could increase due to property tax rate changes or reassessment, which would impact our cash flows.

Even if we qualify as a REIT for federal income tax purposes, we will be required to pay some state and local taxes on our properties. The real property taxes on our properties may increase as property tax rates change or as our properties are assessed or reassessed by taxing authorities. Therefore, the amount of property taxes we pay in the future may increase substantially. If the property taxes we pay increase and if any such increase is not reimbursable under the terms of our lease, then our cash flows will be impacted, and our ability to pay expected distributions to our stockholders could be adversely affected.

Non-U.S. investors may be subject to FIRPTA on the sale of shares of our common stock if we are unable to qualify as a “domestically controlled qualified investment entity.”

Anon-U.S. person disposing of a U.S. real property interest, including shares of a U.S. corporation whose assets consist principally of U.S. real property interests, is generally subject to a tax, known as FIRPTA, on the gain recognized on the disposition of such interest. However, qualified foreign pension plans and certain foreign publicly traded entities are exempt from FIRPTA withholding. Further, FIRPTA does not apply to the disposition of stock in a REIT if the REIT is a “domestically controlled qualified investment entity.” A REIT is a domestically controlled qualified investment entity if, at all times during a specified testing period (the continuous five year period ending on the date of disposition or, if shorter, the entire period of the REIT’s existence), less than 50% in value of its shares is held directly or indirectly bynon-U.S. holders. We cannot assure you that we will qualify as a domestically controlled qualified investment entity. If we were to fail to so qualify, gain realized by anon-U.S. investor on a sale of our common stock would be subject to FIRPTA unless our common stock was traded on an established securities market and thenon-U.S. investor did not at any time during a specified testing period directly or indirectly own more than 10% of the value of our outstanding common stock.

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Retirement Plan Risks

If a stockholder that is a Benefit Plan or IRA fails to meet the fiduciary and other standards under ERISA or the Internal Revenue Code as a result of an investment in our stock, such stockholder could be subject to civil (and criminal, if the failure is willful) penalties.

There are special considerations that apply to employee benefit plans subject to ERISA (such as pension, profit-sharing or 401(k) plans) and other retirement plans or accounts subject to Section 4975 of the Internal Revenue Code (such as an IRA or Keogh plan), including assets of an insurance company general account or entity whose assets are considered “plan assets” under ERISA (which we refer to collectively as “Benefit Plans and IRAs”) whose assets are invested in our common stock. Stockholders that are Benefit Plans and IRAs should satisfy themselves that:

• the investment is consistent with the fiduciary obligations under ERISA and the Internal Revenue Code, or any other applicable governing authority in the case of a plan not subject to ERISA or the Internal Revenue Code;

• the investment is made in accordance with the documents and instruments governing the Benefit Plan or IRA, including any investment policy;

• the investment satisfies the prudence, diversification and other requirements of Section 404(a)(1)(B) and 404(a)(1) (C) of ERISA and other applicable provisions of ERISA and/or the Internal Revenue Code and any other applicable law;

• the investment will not impair the liquidity needs, the minimum and other distribution requirements, and the withholding requirements that may be applicable to the Benefit Plan or IRA;

• the investment will not produce unrelated business taxable income, referred to as UBTI, for the Benefit Plan or IRA;

• the Benefit Plans and IRAs will be able to value the assets of the Benefit Plan or IRA annually (or more frequently) in accordance with ERISA, the Internal Revenue Code and applicable provisions of the Benefit Plan or IRA;

• the investment will not constitute a prohibited transaction under Section 406 of ERISA, Section 4975 of the

• Internal Revenue Code, or any similar rule under other applicable law; and

• the investment will cause our assets to be treated as “plan assets” of the Benefit Plan or IRA.

Failure to satisfy the fiduciary standards of conduct and other applicable requirements of ERISA, the Internal Revenue Code or other applicable statutory or common law may result in the imposition of civil and criminal (if the violation is willful) penalties and could subject the fiduciary to equitable remedies. In addition, if an investment in our common stock constitutes a prohibited transaction under ERISA or the Internal Revenue Code, the“party-in-interest” (within the meaning of ERISA) or “disqualified person” (within the meaning of the Internal Revenue Code) who authorized or directed the investment may have to compensate the plan for any losses the plan suffered as a result of the transaction or restore to the plan any profits made by such person as a result of the transaction, or may be subject to excise taxes with respect to the amount involved. In the case of a prohibited transaction involving an IRA, the IRA may be disqualified and all of the assets of the IRA may be deemed distributed and subject to tax.

In addition to considering their fiduciary responsibilities under ERISA and the prohibited transaction rules of ERISA and the Internal Revenue Code, stockholders that are Benefit Plans and IRAs should consider the effect of the plan assets regulation, U.S. Department of Labor RegulationSection 2510.3-101, as modified by ERISA Section 3(42). We cannot guarantee our stockholders that we will qualify for an exemption from the plan assets regulation. If we do not qualify for an exemption from the plan assets regulation, our underlying assets

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would be treated as “plan assets” of the investing Benefit Plan or IRA under the plan assets regulation and (i) we would be an ERISA fiduciary and subject to certain fiduciary requirements of ERISA with which it would be difficult for us to comply and (ii) we could be restricted from entering into favorable transactions if the transaction, absent an exemption, would constitute a prohibited transaction under ERISA or the Internal Revenue Code. Even if our assets are not considered to be “plan assets,” a prohibited transaction could occur if we or any of our affiliates is a fiduciary (within the meaning of ERISA) of a Benefit Plan or IRA stockholder.

Due to the complexity of these rules and the potential penalties that may be imposed, it is important that stockholders that are Benefit Plans and IRAs consult with their own advisors regarding the potential applicability of ERISA, the Internal Revenue Code and any similar applicable law.

Stockholders that are Benefit Plans and IRAs may be limited in their ability to withdraw required minimum distributions as a result of an investment in shares of our common stock.

If Benefit Plans or IRAs invest in our common stock, the Internal Revenue Code may require such plan or IRA to withdraw required minimum distributions from such plan or IRA in the future. Our stock will be highly illiquid, and our share repurchase program only offers limited liquidity. If a Benefit Plan or IRA requires liquidity, it may generally sell its shares, but such sale may be at a price less than the price at which such plan or IRA initially purchased its shares of our common stock. If a Benefit Plan or IRA fails to make required minimum distributions, it may be subject to certain taxes and tax penalties.

Specific rules apply to foreign, governmental and church plans.

As a general rule, certain employee benefit plans, including foreign pension plans, governmental plans established or maintained in the United States (as defined in Section 3(32) of ERISA), and certain church plans (as defined in Section 3(33) of ERISA), are not subject to ERISA’s requirements and are not “benefit plan investors” within the meaning of the plan assets regulation of the U.S. Department of Labor. Any such plan that is qualified and exempt from taxation under Sections 401(a) and 501(a) of the Code may nonetheless be subject to the prohibited transaction rules set forth in Section 503 of the Code and, under certain circumstances in the case of church plans, Section 4975 of the Code. Also, some foreign plans and governmental plans may be subject to foreign, state, or local laws which are, to a material extent, similar to the provisions of ERISA or Section 4975 of the Code. Each fiduciary of a plan subject to any such similar law should make its own determination as to the need for and the availability of any exemption relief.

ITEM 1B. UNRESOLVED STAFF COMMENTS

We have no unresolved staff comments.

ITEM 2. PROPERTIES

As of December 31, 2018, we owned 35 multifamily properties consisting of an aggregate of 9,442 multifamily homes and 21,130 square feet of rentable commercial space at two properties. The total purchase price of our real estate portfolio, as of December 31, 2018 was $1,017,661,219. For additional information on our real estate portfolio, see Part I, Item 1. “Business—Our Real Estate Portfolio” of this Annual Report onForm 10-K. As of December 31, 2018, we also owned a 10% interest in one unconsolidated joint venture that owns 20 multifamily properties comprised of a total of 4,584 apartment homes.

Our principal executive offices are located at 18100 Von Karman Avenue, Suite 500, Irvine, CA 92612. Our telephone number, general facsimile number and website address are(949) 852-0700,(949) 852-0143 andhttp://www.steadfastreits.com, respectively.

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ITEM 3. LEGAL PROCEEDINGS

From time to time, we are party to legal proceedings that arise in the ordinary course of our business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by government agencies.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND PURCHASES OF EQUITY SECURITIES

Stockholder Information

As of March 7, 2019, we had approximately 74.4 million shares of common stock outstanding held by a total of approximately 19,000 stockholders. The number of stockholders is based on the records of DST Systems, Inc., who serves as our transfer agent.

Market Information

No public market currently exists for our shares of common stock and we currently have no plans to list our shares on a national securities exchange. Until our shares are listed, if ever, our stockholders may not sell their shares unless the buyer meets the applicable suitability and minimum purchase requirements. In addition, our charter prohibits the ownership of more than 9.8% in value of our outstanding capital stock (which includes common stock and preferred stock we may issue) and more than 9.8% in value or number of shares, whichever is more restrictive, of our outstanding common stock, unless exempted by our board of directors. Consequently, there is the risk that our stockholders may not be able to sell their shares at a time or price acceptable to them.

Estimated Value Per Share

Background

In November 2018, our board of directors initiated a process to determine an estimated value per share of the shares of our common stock. We are providing an estimated value per share to assist broker-dealers that participated in our public offering in meeting their customer account statement reporting obligations under National Association of Securities Dealers Conduct Rule 2340, as required by the Financial Industry Regulatory Authority, Inc. (“FINRA”). This valuation was performed in accordance with Practice Guideline2013-01,Valuations of Publicly RegisteredNon-Listed REITs, issued by the Institute for Portfolio Alternatives (formerly known as the Investment Program Association), or IPA, in April 2013, or the IPA valuation guidelines. Our board of directors formed a valuation committee, or the valuation committee, comprised solely of independent directors, to oversee the process of determining our estimated value per share. Upon approval of the board of directors, we engaged CBRE Capital Advisors, Inc., or CBRE Cap, a FINRA registered broker dealer firm that specializes in providing real estate financial services, to provide property-level and aggregate valuation analyses and a range for the estimated value per share of our common stock as of December 31, 2018.

From the date of CBRE Cap’s engagement through the issuance of its valuation report on March 13, 2019, or the valuation report, CBRE Cap held discussions with our advisor and our senior management and conducted or commissioned such investigations, research, review and analyses as it deemed necessary. CBRE Cap based its calculation of the range for our estimated value per share of our common stock upon appraisals of all our real properties, or the appraisals, performed by CBRE, Inc., or CBRE, an affiliate of CBRE Cap and an independent third party appraisal firm, and valuations performed by our advisor with respect to our other assets and liabilities. The valuation committee, upon its receipt and review of the valuation report, concluded that the range between $8.92 and $9.89 for our estimated value per share proposed in the valuation report was reasonable and recommended that our board of directors adopt $9.40 as the estimated value per share of our common stock as of December 31, 2018. The estimated value per share represents the weighted average of the range reflecting the effect of using differing discount rates and terminal capitalization rates in the sensitivity analysis. On March 13, 2019, our board of directors accepted the valuation committee’s and recommendation and approved $9.40 as the estimated value per share of our common stock as of December 31, 2018. CBRE Cap is not responsible for the determination of the estimated value per share of our common stock as of December 31, 2018.

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Valuation Methodology

In preparing the valuation report, CBRE Cap, among other things:

• reviewed financial and operating information requested from or provided by our advisor and us;

• reviewed and discussed with us and our advisor the historical and anticipated future financial performance of our multifamily properties, including forecasts prepared by us and our advisor;

• reviewed appraisals commissioned by us which contained analysis on each of our multifamily properties and performed analyses and studies for each property;

• conducted or reviewed CBRE Cap proprietary research, including market and sector capitalization rate surveys;

• reviewed third-party research, including equity reports and online data providers;

• compared our financial information to similar information of companies that CBRE Cap deemed to be comparable;

• reviewed our reports filed with the SEC, including our Quarterly Report on Form10-Q for the period ended September 30, 2018, and the unaudited financial statements therein; and

• reviewed the unaudited financial statements as of December 31, 2018, as prepared by us.

The appraisals were performed in accordance with Uniform Standards of Professional Appraisal Practice and were all Member of Appraisal Institute, or MAI, appraisals. The appraisals were prepared by CBRE and personnel who are members and hold the MAI designation. CBRE Cap reviewed and took into consideration the appraisals, and described the results of the appraisals in its valuation report. Discreet values were assigned to each property in our portfolio.

Our valuation committee and board of directors considered the following valuation methodology with respect to each multifamily property, which was applied by CBRE Cap in its valuation report. Unlevered,ten-year discounted cash flow analyses from appraisals were created for our fully operational properties. Fornon-stabilized properties,lease-up discounts were applied to discounted cash flow to arrive at an “As Is” value. The “terminal capitalization rate” method was used to calculate terminal value of the assets, with such rates varying based on the specific geographic location and other relevant factors.

Valuation Summary: Material Assumptions

The valuation process we used to determine an estimated value per share was designed to follow the recommendations of the IPA valuation guidelines.

The following table summarizes the key assumptions that were employed by CBRE Cap in the discounted cash flow models to estimate the value of our real estate assets:

	Range		Weighted-Average
Terminal capitalization rate		5.94% - 6.24%		6.09%
Discount rate		7.08% - 7.44%		7.26%

While we believe that CBRE’s assumptions and inputs are reasonable, a change in these assumptions and inputs may significantly impact the appraised value of the real estate properties and our estimated value per share. The table below illustrates the impact on the estimated value per share if the terminal capitalization rates or discount rates were adjusted by 2.5% in either direction, which represents a 5% sensitivity analysis, in accordance with the IPA valuation guidelines, assuming all other factors remain unchanged:

	Increase (Decrease) on the Estimated Value per Share due to
	Decrease of 2.5%		Increase of 2.5%
Terminal capitalization rate	$	0.25	$	(0.25	)
Discount rate		0.22		(0.24	)

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In its valuation report, CBRE Cap included an estimate of the December 31, 2018 value of our assets, including cash, our investment in an unconsolidated joint venture and selected other assets net of payables, and accruals and other liabilities including notes payable. The estimated values of our notes payable are equal to the GAAP fair values for the year ended December 31, 2018, but do not equal the book value of the loans in accordance with GAAP. The GAAP fair values of our notes payable were determined using a discounted cash flow analysis. The discounted cash flow analysis was based on projected cash flow over the remaining loan terms and on management’s estimates of current market interest rates for instruments with similar characteristics. The carrying values of a majority of our other assets and liabilities are considered to equal their fair value due to their short term maturities or liquid nature. Certain balances, such as lease intangible assets and liabilities related to real estate investments and deferred financing costs, have been eliminated for the purpose of the valuation due to the fact that the value of those balances was already considered in the appraisals of the real estate properties.

As of December 31, 2018, we held one investment in an unconsolidated joint venture. The investment in an unconsolidated joint venture represents a 10% interest in a joint venture which owns 20 multifamily properties with 4,584 apartment homes. CBRE Cap relied on the appraised values of the multifamily properties in the unconsolidated joint venture provided by CBRE along with the fair value of other assets and liabilities of the unconsolidated joint venture as determined by our advisor, and then calculated the amount that we would receive in a hypothetical liquidation of the real estate at its appraised value and the other assets and liabilities at their fair values based on the profit participation thresholds contained in the joint venture agreement. The resulting amount was the fair value assigned to our 10% interest in the unconsolidated joint venture.

Our estimated value per share takes into consideration any potential liability related to an incentive fee our advisor is entitled to upon meeting certain stockholder return thresholds in accordance with our charter. For purposes of determining the estimated value per share, our advisor calculated the potential liability related to this incentive fee based on a hypothetical liquidation of our assets and liabilities at their estimated fair values, without considering the impact of any potential closing costs and fees related to the disposition of real estate properties, and determined that there would be no liability related to the incentive fee.

Taking into consideration the reasonableness of the valuation methodology, assumptions and conclusions contained in the valuation report, our board of directors determined the estimated value of our equity interest in its real estate portfolio to be in the range of $1,200,232,477 to $1,268,900,255 and the Company’s estimated net asset value to range between $666,736,194 and $738,227,129, or between $8.92 and $9.89 per share, based on a share count of 74,650,139 shares issued and outstanding as of December 31, 2018.

As with any valuation methodology, the methodologies considered by our valuation committee and our board of directors in reaching an estimate of the value of our shares are based upon all of the foregoing estimates, assumptions, judgments and opinions that may, or may not, prove to be correct. The use of different estimates, assumptions, judgments or opinions may have resulted in significantly different estimates of the value of our shares.

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The following table summarizes the material components of our estimated value and estimated value per share as of December 31, 2018 and 2017.

	Estimated Value as of December 31,						Estimated Value Per Share as of December 31,
	2018			2017			2018			2017
Real estate properties	$	1,233,530,000		$	1,511,655,000		$	16.52		$	20.02
Cash		154,192,443			171,228,485			2.06			2.26
Investment in unconsolidated joint venture		25,959,904			16,240,815			0.35			0.21
Other assets		4,490,319			39,863,907			0.06			0.52
Mortgage debt		(681,095,544	)		(878,382,692	)		(9.12	)		(11.63	)
Other liabilities		(35,395,090	)		(39,507,167	)		(0.47	)		(0.52	)
Incentive fee		—			(2,429,119	)		—			(0.03	)
Estimated value per share	$	701,682,032		$	818,669,229			9.40	(1)	$	10.84

(1) On May 9, 2018, our board of directors determined an estimated value per share of our common stock of $9.84, which represents the estimated value per share of our common stock of $10.84 as of December 31, 2017, less the $1.00 per share special distribution that was paid to stockholders of record as of the close of business on April 20, 2018.

The estimated value of the real estate properties as of December 31, 2018 and 2017 was $1,233,530,000 and $1,511,655,000, respectively, while the total cost of the real estate properties was $1,064,306,039 and $1,267,108,290, respectively (comprised of the aggregate contractual purchase price and capital expenditures subsequent to acquisition).

Additional Information Regarding the Valuation, Limitations of Estimated Value per Share and the Engagement of CBRE Cap

In accordance with the IPA valuation guidelines, the valuation committee reviewed, confirmed and approved the processes and methodologies employed by CBRE Cap, their consistency with real estate industry standards and best practices and the reasonableness of the assumptions utilized in the valuation.

The valuation report issued March 13, 2019, was based upon market, economic, financial and other information, circumstances and conditions existing prior to December 31, 2018, and any material change in such information, circumstances and/or conditions may have a material effect on the estimated value per share. CBRE Cap’s valuation materials were addressed solely to our board of directors to assist it in establishing an estimated value of our common stock. CBRE Cap’s valuation materials were restricted, were not addressed to the public and should not be relied upon by any other person to establish an estimated value of our common stock. The valuation report does not constitute a recommendation by CBRE Cap to purchase or sell any shares of our common stock and should not be represented as such.

Each of CBRE Cap and CBRE reviewed the information supplied or otherwise made available to it by us or our advisor, for reasonableness, and assumed and relied upon the accuracy and completeness of all such information and of all information supplied or otherwise made available to it by any other party, and did not undertake any duty or responsibility to verify independently any such information. With respect to operating or financial forecasts and other information and data provided to or otherwise reviewed by or discussed with CBRE Cap and CBRE, CBRE Cap and CBRE assumed that such forecasts and other information and data were reasonably prepared in good faith reflecting our and our advisor’s best currently available estimates and judgments and other subjective judgments, and relied upon us and our advisor to advise CBRE Cap and CBRE promptly if any information previously provided became inaccurate or was required to be updated during the period of its review. CBRE Cap assumes no obligation to update or otherwise revise these materials. In preparing

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its valuation materials, CBRE Cap did not, and was not requested to, solicit third party indications of interest for us in connection with possible purchases of our securities or the acquisition of all or any part of us.

In performing its analyses, CBRE Cap made numerous assumptions as of various points in time with respect to industry performance, general business, economic and regulatory conditions, current and future rental market for our operating properties and those in development and other matters, many of which are necessarily subject to change and beyond the control of CBRE Cap and us. The analyses performed by CBRE Cap are not necessarily indicative of actual values, trading values or actual future results of our common stock that might be achieved, all of which may be significantly more or less favorable than suggested by the valuation report. The analyses do not purport to be appraisals or to reflect the prices at which the properties may actually be sold, and such estimates are inherently subject to uncertainty. The actual value of our common stock may vary significantly depending on numerous factors that generally impact the price of securities, our financial condition and the state of the real estate industry more generally. Accordingly, with respect to the estimated value per share of our common stock, neither we nor CBRE Cap can give any assurance that:

• a stockholder would be able to resell shares at this estimated value;

• a stockholder would ultimately realize distributions per share equal to our estimated value per share upon liquidation of our assets and settlement of our liabilities or a sale of the Company;

• another independent third party appraiser or third party valuation firm would agree with our estimated value per share;

• a third party would offer the estimated value per share in an arm’s-length transaction to purchase all or substantially all of our shares of common stock;

• our shares would trade at a price equal to or greater than the estimated value per share if we listed them on a national securities exchange; or

• the methodology used to estimate our value per share would be acceptable to FINRA or the reporting requirements under ERISA, the Internal Revenue Code or other applicable law, or the applicable provisions of a Benefit Plan or IRA.

Similarly, the amount a stockholder may receive upon repurchase of his or her shares pursuant to our share repurchase program may be greater or less than the amount a stockholder paid for the shares, regardless of any increase in the underlying value of assets owned by us.

The December 31, 2018 estimated value per share was reviewed and recommended by our valuation committee and approved by our board of directors at meetings held on March 13, 2019. The value of our common stock will fluctuate over time as a result of, among other things, developments related to individual assets and responses to the real estate and capital markets. We expect to utilize an independent valuation firm to update the estimated value per share as of December 31, 2019, in accordance with the IPA valuation guidelines.

The estimated value per share does not reflect a discount for the fact that we are externally managed, nor does it reflect a real estate portfolio premium/discount versus the sum of the individual property values. The estimated value per share does not take into account estimated disposition costs and fees for real estate properties that are not under contract to sell or debt prepayment penalties that could apply upon the prepayment of certain of our debt obligations or the impact of restrictions on the assumption of debt.

CBRE Cap is a FINRA registered broker-dealer and is an investment banking firm that specializes in providing real estate financial services. CBRE is actively engaged in the business of appraising commercial real estate properties similar to those owned by us in connection with public securities offerings, private placements, business combinations and similar transactions. We commissioned CBRE to deliver an appraisal report relating to our real estate properties and CBRE received fees upon delivery of such report. In addition, we have agreed to indemnify CBRE Cap against certain liabilities arising out of this engagement. Each of CBRE Cap and CBRE is

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an affiliate of CBRE Group, Inc., or CBRE group, a Fortune 500 and S&P 500 company headquartered in Los Angeles, California, one of the world’s largest commercial real estate services and investment firms (in terms of 2018 revenue) and a parent holding company of affiliated companies that are engaged in the ordinary course of business in many areas related to commercial real estate and related services. CBRE Cap and its affiliates possess substantial experience in the valuation of assets similar to those owned by us and regularly undertake the valuation of securities in connection with public offerings, private placements, business combinations and similar transactions. For the preparation of the valuation report, we paid CBRE Cap a customary fee for services of this nature, no part of which was contingent relating to the provision of services or specific findings. We did not engage CBRE Cap for any other services. During the past five years, CBRE Cap assisted our board of directors in the determination of the estimated value per share and certain of our affiliates engaged affiliates of CBRE primarily for various real estate-related services and these affiliates of CBRE received fees in connection with such services. We anticipate that affiliates of CBRE will continue to provide similar or other real estate-related services in the future for us and our affiliates. In addition, we may in our discretion engage CBRE Cap to assist our board of directors in future determinations of our estimated value per share. We are not affiliated with CBRE, CBRE Cap or any of their affiliates. CBRE Cap and CBRE and their affiliates may from time to time in the future perform other commercial real estate appraisal, valuation and financial advisory services for us and our affiliates in transactions related to the properties that are the subjects of the appraisals, so long as such other services do not adversely affect the independence of the applicable CBRE appraiser. While we and affiliates of our advisor have engaged and may engage CBRE Cap or its affiliates in the future for commercial real estate services of various kinds, we believe that there are no material conflicts of interest with respect to our engagement of CBRE Cap.

In the ordinary course of their business, each of CBRE Cap and CBRE, and their respective affiliates, directors and officers may structure and effect transactions for their own accounts or for the accounts of their customers in commercial real estate assets of the same kind and in the same markets as our assets.

Distribution Information

To qualify and maintain our qualification as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our REIT taxable income (computed without regard to the dividends-paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). Our board of directors may authorize distributions in excess of those required for us to maintain REIT status depending on our financial condition and such other factors as our board of directors deems relevant.

We declared distributions based on daily record dates for each day during the period commencing August 12, 2010 (the day following our first property acquisition) through December 31, 2018. Distributions declared for all record dates of a given month are paid approximately three days aftermonth-end. During the six months ended December 31, 2018, distributions were calculated at a rate of $0.001519 per share per day, which if paid each day over a365-day period, is equivalent to a 6.0% annualized distribution rate based on a purchase price of $9.24 per share of common stock that reflected theone-time special distribution to stockholders discussed below. During the three months ended June 30, 2018, distributions were calculated at a rate of $0.001683 per share per day, which if paid each day over a365-day period, is equivalent to a 6.0% annualized distribution rate based on a purchase price of $10.24 per share of common stock. From January 1, 2017 to March 31, 2018, distributions were calculated at a rate of $0.001964 per share per day, which if paid each day over a365-day period, is equivalent to a 7.0% annualized distribution rate based on a purchase price of $10.24 per share of common stock. On April 16, 2018, our board of directors declared a special distribution in the amount of $1.00 per share, or $75,298,163 in the aggregate, to stockholders of record as of the close of business on April 20, 2018.

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Distributions declared during the years ended December 31, 2018 and 2017 are as follows:

	2018
	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter			Total
Total Distributions Declared	$	13,320,570		$	86,819,112		$	10,472,649		$	10,442,526		$	121,054,857
Total Per Share Distribution	$	0.177		$	1.153		$	0.140		$	0.140		$	1.610
Annualized Rate Based on Purchase Price		7.0	%		6.0	%		6.0	%		6.0	%		6.3	%
	2017
	1st Quarter			2nd Quarter			3rd Quarter			4th Quarter			Total
Total Distributions Declared	$	13,447,122		$	13,563,610		$	13,681,897		$	13,647,194		$	54,339,823
Total Per Share Distribution	$	0.177		$	0.179		$	0.181		$	0.181		$	0.718
Annualized Rate Based on Purchase Price		7.0	%		7.0	%		7.0	%		7.0	%		7.0	%

The tax composition of our distributions declared for the years ended December 31, 2018 and 2017 was as follows:

	December 31,
	2018			2017
Ordinary income		—	%		—	%
Return of capital		40.4	%		20.5	%
Capital gain		59.6	%		79.5	%
Total		100.0	%		100.0	%

On October 21, 2014, our board of directors elected to suspend our distribution reinvestment plan, effective with distributions earned beginning on December 1, 2014. All distributions paid following November 20, 2014, are paid in cash. For additional information on our distributions, see Item 7. “Management’sDiscussion and Analysis of Financial Condition and Results of Operations— Distributions.”

Unregistered Sales of Equity Securities

On August 9, 2018, we granted each of the three independent directors 2,500 shares of restricted common stock uponre-election to our board of directors pursuant to our independent directors’ compensation plan. The shares of restricted common stock issued pursuant to our independent directors’ compensation plan were issued in transactions exempt from registration pursuant to Section 4(a)(2) of the Securities Act.

Share Repurchase Program

Our share repurchase program may provide an opportunity for our stockholders to have their shares of common stock repurchased by us, subject to certain restrictions and limitations. No shares can be repurchased under our share repurchase program until after the first anniversary of the date of purchase of such shares; provided, however, that this holding period does not apply to repurchases requested within two years after the death or disability of a stockholder.

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The purchase price for shares repurchased under our share repurchase program prior to April 28, 2018, was as follows:

Share Purchase Anniversary	Repurchase Price on Repurchase Date(1)
Less than 1 year	No Repurchase Allowed
1 year	92.5% of Estimated Value per Share(2)
2 years	95.0% of Estimated Value per Share(2)
3 years	97.5% of Estimated Value per Share(2)
4 years	100.0% of Estimated Value per Share(2)
In the event of a stockholder’s death or disability(3)	Average Issue Price for Shares(4)

Our board of directors elected to suspend our share repurchase program, effective April 28, 2018. Our board of directors subsequently determined to reinstate and amend the terms of our share repurchase program, effective May 20, 2018. Pursuant to our amended and reinstated share repurchase program, the revised repurchase price is equal to 93% of the most recent publicly disclosed estimated value per share. From May 20, 2018 to December 31, 2018, the share repurchase price was $9.15 per share, which represented 93% of the estimated value per share of $9.84, as determined by our board of directors. The share repurchase price is further reduced based on how long the stockholder has held the shares as follows:

Share Purchase Anniversary	Repurchase Price on Repurchase Date(1)
Less than 1 year	No Repurchase Allowed
1 year	92.5% of the Share Repurchase Price(2)
2 years	95.0% of the Share Repurchase Price(2)
3 years	97.5% of the Share Repurchase Price(2)
4 years	100.0% of the Share Repurchase Price(2)
In the event of a stockholder’s death or disability(3)	Average Issue Price for Shares(4)

(1) As adjusted for any stock dividends, combinations, splits, recapitalizations or any similar transaction with respect to the shares of common stock.

(2) The “Share Repurchase Price” shall equal 93% of the Estimated Value per Share. The “Estimated Value per Share” equals the most recently determined estimated value per share determined by our board of directors.

(3) The required one -year holding period to be eligible to repurchase shares under our share repurchase program does not apply in the event of death or disability of a stockholder.

(4) The repurchase price per share for shares repurchased upon the death or disability of a stockholder will be equal to the average issue price per share for all of the stockholder’s shares.

The purchase price per share for shares repurchased pursuant to the share repurchase program is further reduced by the aggregate amount of net proceeds per share, if any, distributed to our stockholders prior to the repurchase date as a result of the sale of one or more of our assets that constitutes a return of capital distribution as a result of such sales.

Repurchases of shares of our common stock are made quarterly upon written request to us at least 15 days prior to the end of the applicable quarter during which the share repurchase program is in effect. Repurchase requests are honored approximately 30 days following the end of the applicable quarter, referred to herein as the “repurchase date”. Stockholders may withdraw their repurchase request at any time up to three business days prior to the end of the applicable quarter.

We cannot guarantee that the funds set aside for the share repurchase program will be sufficient to accommodate all repurchase requests made in any quarter. To the extent that repurchase requests exceed our limitations on repurchases or we do not have sufficient funds available to repurchase all of the shares of our common stock for which repurchase requests have been submitted in any quarter, priority is given to repurchase

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requests in the case of the death or disability of a stockholder. If we repurchase less than all of the shares subject to a repurchase request in any quarter, with respect to any shares that have not been repurchased, the requesting stockholder could (1) withdraw the request for repurchase or (2) ask that we honor the request in a future quarter, if any, when such repurchases may be made pursuant to the limitations of the share repurchase program and when sufficient funds were available. Such pending requests are honored among all requests for repurchases in any given repurchase period as follows: first, pro rata as to repurchases sought upon a stockholder’s death or disability; and, next, pro rata as to other repurchases requests.

We are not obligated to repurchase shares of our common stock under the share repurchase program. In no event shall repurchases under the share repurchase program exceed 5% of the weighted average number of shares of our common stock outstanding during the prior calendar year or $2,000,000 during any quarter. There is no fee in connection with a repurchase of shares of our common stock.

Our board of directors may, in its sole discretion, amend, suspend, or terminate the share repurchase program at any time upon 30 days’ notice to our stockholders if it determines that the funds available to fund the share repurchase program are needed for other business or operational purposes or that amendment, suspension or termination of the share repurchase program is in the best interest of our stockholders. Therefore, stockholders may not have the opportunity to make a repurchase request prior to any potential termination or suspension of our share repurchase program.

During the year ended December 31, 2018, we fulfilled repurchase requests and repurchased shares of our common stock pursuant to our share repurchase program as follows:

	Total Number of Shares Requested to be Repurchased (1)		Total Number of Shares Repurchased (2)		Average Price Paid per Share (3)(4)		Approximate Dollar Value of Shares Available That May Yet Be Repurchased Under the Program
January 2018		264,434		181,404	$	11.03		(5)
February 2018		122,608		—		—		(5)
March 2018		229,319		—		—		(5)
April 2018		113,202		—		—		(5)
May 2018		541,610		218,011		9.17		(5)
June 2018		300,481		—		—		(5)
July 2018		215,326		218,555		9.15		(5)
August 2018		168,165		—		—		(5)
September 2018		156,607		—		—		(5)
October 2018		316,304		218,800		9.14		(5)
November 2018		145,797		—		—		(5)
December 2018		213,142		—		—		(5)
		2,786,995		836,770

(1) We generally repurchased shares on the last business day of the month following the end of each fiscal quarter in which requests were received. We suspended our share repurchase program, effective April 28, 2018. Our board of directors subsequently decided to reinstate and amend the share repurchase program, effective May 20, 2018. Due to the suspension and subsequent reinstatement of the share repurchase program, valid repurchase requests received during the three months ended March 31, 2018, were honored on May 31, 2018. On January 31, 2019, we repurchased 219,696 shares of our common stock for a total repurchase value of $2,000,000, or $9.10 per share, pursuant to our share repurchase program.

(2) We are not obligated to repurchase shares under the share repurchase program.

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(3) Pursuant to the program, as amended, we currently repurchase shares at prices determined as follows:

• 92.5% of the share repurchase price for stockholders who have held their shares for at least one year;

• 95.0% of the share repurchase price for stockholders who have held their shares for at least two years;

• 97.5% of the share repurchase price for stockholders who have held their shares for at least three years; and

• 100.0% of the share repurchase price for stockholders who have held their shares for at least four years.

Effective May 20, 2018, the “share repurchase price” is equal to 93% of the Estimated Value per Share less reductions due to the holding period for shares and other events specified in the share repurchase program. Notwithstanding the above, the repurchase price for repurchases sought upon a stockholder’s death or “qualifying disability” will be equal to the average issue price per share for all of the stockholder’s shares purchased from us.

(4) For the year ended December 31, 2018, the sources of the cash used to repurchase shares were 100% from existing cash and cash equivalents.

(5) The number of shares that may be repurchased pursuant to the share repurchase program during any calendar year is limited to 5% of the weighted average number of shares outstanding during the prior calendar year and the value of the shares repurchased shall not exceed $2,000,000 in any quarter.

ITEM 6. SELECTED FINANCIAL DATA

The following selected financial data as of December 31, 2018, 2017, 2016, 2015 and 2014, and for the years then ended, should be read in conjunction with the accompanying consolidated financial statements and related notes thereto and Item 7. “Management’sDiscussion and Analysis of Financial Condition and Results of Operations.”

Our results of operations for the periods presented below are not indicative of those expected in future periods.

	As of December 31,
	2018		2017		2016		2015		2014
Balance sheet data
Total real estate, net	$	846,889,837	$	1,026,715,330	$	1,461,534,875	$	1,503,455,095	$	1,538,610,961
Total assets		1,019,657,998		1,245,940,878		1,592,934,785		1,570,303,350		1,609,067,128
Notes payable		693,501,574		875,785,938		1,217,716,280		1,115,752,899		1,084,757,025
Total liabilities		728,896,664		915,293,105		1,272,506,542		1,163,855,827		1,132,003,898
Total stockholders’ equity		290,761,334		330,647,773		320,428,243		406,447,523		477,063,230

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	For the Years Ended December 31,
	2018			2017			2016			2015			2014
Operating data
Total revenues	$	141,988,859		$	212,969,240		$	218,237,532		$	209,390,658		$	195,929,856
Net income (loss)		89,083,552			72,473,867			(25,579,651	)		(13,024,358	)		(25,742,292	)
Net income (loss) attributable to common stockholders		89,083,552			72,473,867			(25,579,651	)		(13,024,358	)		(25,742,292	)
Income (loss) per common share - basic and diluted		1.19			0.96			(0.34	)		(0.18	)		(0.34	)
Other data
Cash flows provided by operating activities		27,071,435			43,764,300			54,741,338			54,246,418			51,517,772
Cash flows provided by (used in) investing activities		227,256,726			135,341,199			(57,534,074	)		(30,260,677	)		(127,748,779	)
Cash flows (used in) provided by financing activities		(305,231,726	)	��	(67,787,369	)		36,793,221			(19,216,599	)		86,443,737
Distributions declared		121,054,857			54,339,823			54,828,267			55,076,217			54,296,664
Distributions declared per common share (1)		1.610			0.718			0.716			0.718			0.718
Weighted-average number of common shares outstanding, basic and diluted		75,049,667			75,794,705			76,195,083			76,335,114			75,450,215
FFO(2)		21,749,778			44,485,775			43,933,833			52,615,838			33,994,751
MFFO(2)		26,057,105			47,472,599			49,117,817			55,143,904			45,002,936

(1) Distributions declared per common share for the years ended December 31, 2018, 2017, 2016, 2015 and 2014 assumes each share was issued and outstanding each day of each year. During the six months ended December 31, 2018, distributions were calculated at a rate of $0.001519 per share per day, which if paid each day over a365-day period, is equivalent to a 6.0% annualized distribution rate based on a purchase price of $9.24 per share of common stock that reflects theone-time special distribution discussed below. During the three months ended June 30, 2018, distributions were calculated at a rate of $0.001683 per share per day, which if paid each day over a365-day period, is equivalent to a 6.0% annualized distribution rate based on a purchase price of $10.24 per share of common stock. From January 1, 2017 to March 31, 2018, distributions were calculated at a rate of $0.001964 per share per day, which if paid each day over a365-day period, is equivalent to a 7.0% annualized distribution rate based on a purchase price of $10.24 per share of common stock. On April 16, 2018, our board of directors declared a special distribution in the amount of $1.00 per share, or $75,298,163 in the aggregate, to stockholders of record as of the close of business on April 20, 2018. From April 1, 2016 to December 31, 2016, distributions were calculated at a rate of $0.001958 per share of common stock per day, which if paid each day over a366-day period was equivalent to a 7.0% annualized distribution rate based on a purchase price of $10.24 per share of common stock. From September 10, 2012 to March 31, 2016, distributions were calculated at a rate of $0.001964 per share of common stock per day, which if paid each day over a365-day period was equivalent to a 7.0% annualized distribution rate based on a purchase price of $10.24 per share of common stock.

(2) GAAP basis accounting for real estate assets utilizes historical cost accounting and assumes real estate values diminish over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets, the Board of Governors of the National Association of Real Estate Investment Trusts, or NAREIT, established the measurement tool of FFO. Since its introduction, FFO has become a widely usednon-GAAP financial measure among REITs. Additionally, we use MFFO as defined by the IPA as a supplemental measure to evaluate our operating performance. MFFO is based on FFO but includes certain adjustments we believe are necessary due to changes in accounting and reporting under GAAP since the establishment of FFO. Neither FFO nor MFFO should be considered as alternatives to net loss or other measurements under GAAP as indicators of our operating performance, nor should they be

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considered as alternatives to cash flow from operating activities or other measurements under GAAP as indicators of liquidity. For additional information on how we calculate FFO and MFFO and a reconciliation of FFO and MFFO to net loss, see Item 7. “Management’sDiscussion and Analysis of Financial Condition and Results of Operations—Funds From Operations and Modified Funds From Operations.”

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis should be read in conjunction with the “Selected Financial Data ” above and our accompanying consolidated financial statements and the notes thereto included in this annual report. Also see “Cautionary Note Regarding Forward-Looking Statements” preceding Part I of this Annual Report on Form10-K.

Overview

We were formed on May 4, 2009, as a Maryland corporation that elected to be taxed as, and currently qualifies as, a REIT. As described in more detail below, we own and manage a diverse portfolio of real estate investments, primarily in the multifamily sector, located throughout the United States.

On July 19, 2010, we commenced our initial public offering of up to a maximum of 150,000,000 shares of common stock and up to 15,789,474 shares of common stock pursuant to our distribution reinvestment plan. Upon termination of our public offering on December 20, 2013, we had sold 73,608,337 shares of common stock for gross offering proceeds of $745,389,748, including 1,588,289 shares of common stock issued pursuant to our distribution reinvestment plan for gross offering proceeds of $15,397,232. Following the termination of our initial public offering, we continued to offer shares of our common stock pursuant to our distribution reinvestment plan until our board of directors determined to suspend our distribution reinvestment plan effective with distributions earned beginning on December 1, 2014. Our board of directors may, in its sole discretion, reinstate the distribution reinvestment plan and change the price at which we offer shares of common stock to our stockholders pursuant to the distribution reinvestment plan based upon changes in the estimated value per share and other factors our board of directors deems relevant.

On March 10, 2015, our board of directors determined an estimated value per share of our common stock of $10.35 as of December 31, 2014. On February 25, 2016, our board of directors determined an estimated value per share of our common stock of $11.44 as of December 31, 2015. On February 15, 2017, our board of directors determined an estimated value per share of our common stock of $11.65 as of December 31, 2016. On March 13, 2018, our board of directors determined an estimated value per share of our common stock of $10.84 as of December 31, 2017. On May 9, 2018, our board of directors determined an estimated value per share of our common stock of $9.84, which represents the estimated value per share of our common stock of $10.84 as of December 31, 2017, less the $1.00 per share special distribution that was paid to stockholders of record as of the close of business on April 20, 2018. On March 13, 2019, our board of directors determined an estimated value per share of our common stock of $9.40 as of December 31, 2018.

Prior to the commencement of our public offering, we sold shares of our common stock in a private offering exempt from the registration requirements of the Securities Act. Upon termination of the private offering, we had sold 637,279 shares of common stock at $9.40 per share (subject to certain discounts) for gross offering proceeds of $5,844,325.

As of December 31, 2018, we owned 35 multifamily properties located within the greater midwest and southern geographic regions of the United States. As of December 31, 2018, our property portfolio was comprised of a total of 9,442 apartment homes and an additional 21,130 square feet of rentable commercial space at two properties. The total purchase price of our real estate portfolio was $1,017,661,219. At December 31, 2018, our portfolio was approximately 95.5% leased. As of December 31, 2018, we also owned a 10% interest in one unconsolidated joint venture that owned 20 multifamily properties with a total of 4,584 apartment homes.

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Steadfast Income Advisor, LLC is our advisor. Subject to certain restrictions and limitations, our advisor manages ourday-to-day operations and our portfolio of properties and real estate-related assets. Our advisor sources and presents investment opportunities to our board of directors. Our advisor also provides investment management, marketing, investor relations and other administrative services on our behalf.

Substantially all of our business is conducted through Steadfast Income REIT Operating Partnership, L.P., our operating partnership. We are the sole general partner of our operating partnership. The initial limited partner of our operating partnership is our advisor. The limited partnership agreement of our operating partnership provides that our operating partnership will be operated in a manner that will enable us to: (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that our operating partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code, which classification could result in our operating partnership being taxed as a corporation, rather than as a partnership. In addition to the administrative and operating costs and expenses incurred by our operating partnership in acquiring and operating real properties, our operating partnership will pay all of our administrative costs and expenses, and such expenses will be treated as expenses of our operating partnership.

We elected to be taxed as a REIT under the Internal Revenue Code commencing with the taxable year ended December 31, 2010. As a REIT, we generally will not be subject to federal income tax on income that we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax on our taxable income at regular corporate rates and would not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year in which qualification is denied. Failing to qualify as a REIT could materially and adversely affect our net income.

Market Outlook

The economy in the United States has improved since the last recession; however, there is no assurance that economic conditions will continue to improve or will not worsen in the future. We believe economic and demographic trends will benefit our existing portfolio and that we have unique future investment opportunities in the multifamily sector. Home ownership rates are at nearall-time lows. Demographic and economic factors favor the flexibility of rental housing and discourage the potential financial burden associated with home ownership. Additionally, Millennials and Baby Boomers, the two largest demographic groups comprising roughly half of the total population in the United States, are increasingly choosing rental housing over home ownership. Demographic studies suggest that Baby Boomers are downsizing their suburban homes and relocating to multifamily apartments. Millennials are renting multifamily apartments due to high levels of student debt and increased credit standards in order to qualify for a home mortgage. According to the Federal Reserve Bank of New York, aggregate student debt has surpassed automotive, home equity lines of credit and credit card debt. Millennials are also getting married and having children later and are choosing to live in apartment communities until theirmid-30s. Today, 30% of Millennials are still living with their parents or are still in school. When they get a job, Millennials will likely rent moderate income apartments based upon an average income of $45,000 to $65,000. Our plan is to provide rental housing for these generational groups as they age. We believe these factors will continue to contribute to the demand for multifamily housing.

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Our Real Estate Portfolio

As of December 31, 2018, we owned the 35 multifamily properties listed below:

						Total Purchase Price		Mortgage Debt Outstanding at December 31, 2018		Average Occupancy (1) as of						Average Monthly Rent(2) as of
Property Name			Location	Purchase Date	Number of Units					Dec 31, 2018			Dec 31, 2017			Dec 31, 2018		Dec 31, 2017
	1	Clarion Park Apartments	Olathe, KS	6/28/2011	220	$	11,215,000	$	11,930,339		96.4	%		89.5	%	$	841	$	832
	2	Truman Farm Villas	Grandview, MO	12/22/2011	200		9,100,000		—		98.5	%		99.0	%		781		743
	3	EBT Lofts	Kansas City, MO	12/30/2011	102		8,575,000		—		91.2	%		89.2	%		1,131		1,064
	4	Spring Creek Apartments	Edmond, OK	3/9/2012	252		19,350,000		17,113,376		94.0	%		93.3	%		848		844
	5	Montclair Parc Apartment Homes	Oklahoma City, OK	4/26/2012	360		35,750,000		21,719,269		94.4	%		94.7	%		857		849
	6	Sonoma Grande Apartments	Tulsa, OK	5/24/2012	336		32,200,000		20,451,101		93.5	%		92.6	%		895		902
	7	Estancia Apartments	Tulsa, OK	6/29/2012	294		27,900,000		—		95.6	%		94.9	%		891		919
	8	Hilliard Park Apartments	Columbus, OH	9/11/2012	201		19,800,000		12,390,229		94.5	%		93.0	%		1,120		1,030
	9	Sycamore Terrace Apartments	Terre Haute, IN	9/20/2012 & 3/5/2014	250		23,174,157		17,847,045		94.0	%		93.2	%		1,138		1,107
	10	Hilliard Summit Apartments	Columbus, OH	9/28/2012	208		24,100,000		15,027,104		95.7	%		94.7	%		1,217		1,191
	11	Forty 57 Apartments	Lexington, KY	12/20/2012	436		52,500,000		35,563,625		93.1	%		95.0	%		912		923
	12	Riverford Crossing Apartments	Frankfort, KY	12/28/2012	300		30,000,000		20,229,093		97.3	%		95.0	%		933		903
	13	Montecito Apartments	Austin, TX	12/31/2012	268		19,000,000		12,823,790		95.1	%		90.7	%		1,008		981
	14	Hilliard Grand Apartments	Dublin, OH	12/31/2012	314		40,500,000		28,392,107		96.5	%		94.6	%		1,290		1,240
	15	Library Lofts East	Kansas City, MO	2/28/2013	118		12,750,000		8,166,247		94.1	%		87.3	%		1,082		1,059
	16	Deep Deuce at Bricktown(3)	Oklahoma City, OK	3/28/2013	294		38,271,000		32,069,379		93.9	%		91.5	%		1,235		1,157
	17	Retreat at Quail North	Oklahoma City, OK	6/12/2013	240		25,250,000		16,268,147		92.9	%		94.6	%		954		942
	18	Waterford on the Meadow	Plano, TX	7/3/2013	350		23,100,000		15,175,716		94.9	%		94.3	%		1,037		1,028
	19	Tapestry Park Apartments	Birmingham, AL	8/13/2013 & 12/1/2014	354		50,285,000		43,712,670		92.9	%		93.2	%		1,311		1,291
	20	Dawntree Apartments	Carrollton, TX	8/15/2013	400		24,000,000		14,450,118		95.3	%		93.0	%		1,016		990
	21	Stuart Hall Lofts	Kansas City, MO	8/27/2013	115		16,850,000		16,045,948		93.9	%		90.4	%		1,366		1,282
	22	BriceGrove Park Apartments	Canal Winchester, OH	8/29/2013	240		20,100,000		17,133,615		95.8	%		93.8	%		879		868
	23	Retreat at Hamburg Place	Lexington, KY	9/5/2013	150		16,300,000		12,072,255		96.0	%		92.7	%		897		1,011
	24	Villas at Huffmeister	Houston, TX	10/10/2013	294		37,600,000		27,058,201		93.9	%		92.9	%		1,209		1,149
	25	Villas at Kingwood	Kingwood, TX	10/10/2013	330		40,150,000		35,156,654		94.8	%		96.7	%		1,282		1,240
	26	Waterford Place at Riata Ranch	Cypress, TX	10/10/2013	228		23,400,000		—		93.9	%		92.5	%		1,104		1,075
	27	Carrington Place	Houston, TX	11/7/2013	324		32,900,000		27,384,768		91.7	%		93.2	%		1,076		1,077

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								Total Purchase Price		Mortgage Debt Outstanding at December 31, 2018		Average Occupancy (1) as of						Average Monthly Rent(2) as of
Property Name			Location		Purchase Date		Number of Units					Dec 31, 2018			Dec 31, 2017			Dec 31, 2018		Dec 31, 2017
	28	Carrington at Champion Forest		Houston, TX		11/7/2013	284	$	33,000,000	$	24,978,692		94.0	%		97.2	%	$	1,106	$	1,091
	29	Carrington Park at Huffmeister		Cypress, TX		11/7/2013	232		25,150,000		19,440,839		94.4	%		94.0	%		1,198		1,157
	30	Heritage Grand at Sienna Plantation		Missouri City, TX		12/20/2013	240		27,000,000		16,822,121		95.8	%		94.2	%		1,147		1,151
	31	Mallard Crossing Apartments		Loveland, OH		12/27/2013	350		39,800,000		33,367,682		93.7	%		95.4	%		1,095		1,073
	32	Reserve at Creekside		Chattanooga, TN		3/28/2014	192		18,875,000		14,241,494		96.4	%		90.6	%		1,040		950
	33	Oak Crossing		Fort Wayne, IN		6/3/2014	222		24,230,000		20,204,961		95.9	%		96.8	%		1,002		987
	34	Double Creek Flats		Plainfield, IN		5/7/2018	240		31,852,079		21,877,897		93.8	%		—	%		1,063		—
	35	Jefferson at Perimeter Apartments		Dunwoody, GA		6/11/2018	504		103,633,983		64,387,092		89.3	%		—	%		1,331		—
							9,442	$	1,017,661,219	$	693,501,574		94.3	%		93.8	%	$	1,068	$	1,037

(1) At December 31, 2018 and 2017, our portfolio was approximately 95.5% and 95.4% leased, respectively.

(2) Average monthly rent is based upon the effective rental income after considering the effect of vacancies, concessions and write-offs.

(3) Deep Deuce at Bricktown, comprised of 294 apartment homes, was acquired by us on March 28, 2013. On June 12, 2017, we acquired a land parcel adjacent to Deep Deuce at Bricktown for a purchase price of $51,000.

Joint Venture Arrangement with Blackstone Real Estate Income Trust, Inc.

On November 10, 2017, we, BREIT Steadfast MF JV LP, or the joint venture, BREIT Steadfast MF Parent LLC, or BREIT LP, and BREIT Steadfast MF GP LLC, or BREIT GP, and together with BREIT LP, “BREIT,” executed a Contribution Agreement whereby we agreed to contribute a portfolio of 20 properties owned by us to the joint venture in exchange for a combination of cash and a 10% ownership interest in the joint venture. BREIT LP owns a 90% interest in the joint venture and BREIT GP serves as the general partner of the joint venture. Each of BREIT LP and BREIT GP is a wholly-owned subsidiary of Blackstone Real Estate Income Trust, Inc. SIR LANDS Holdings, LLC, or SIR LP, our wholly-owned subsidiary, holds our 10% interest in the joint venture.

The 20 properties contributed by us to the joint venture consist of properties located in Austin, Dallas and San Antonio, Texas, Nashville, Tennessee and Louisville, Kentucky, which we refer to as the “LANDS Portfolio.” The value of the LANDS Portfolio under the Contribution Agreement was approximately $512 million, subject to adjustment.

The transaction closed in two stages. The first closing occurred November 15, 2017, and included those properties for which the existing debt was prepaid at closing. The second closing occurred January 31, 2018, and included those properties for which the joint venture assumed the existing loans. At the first closing, SIR LP and BREIT entered into a joint venture agreement that sets forth the rights and obligations of the parties to the joint venture. The management of the joint venture is vested in BREIT GP; SIR LP has limited consent rights and limited liquidity rights. We received approximately $153.8 million in net cash proceeds from the contribution of our properties to the joint venture.

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At each closing, the new joint venture property owner entered into a Property Management Agreement with Steadfast Management Company, Inc. as property manager. We also entered into an Investment Agreement with affiliates of BREIT whereby we will undertake to present certain investment opportunities in multifamily properties to ato-be-formed joint venture between us and certain affiliates of BREIT. Our obligation to present investment opportunities is not exclusive and neither BREIT nor any of its affiliates has any obligation to invest in any such investment opportunity. Effective December 10, 2018, the joint venture terminated the Property Management Agreements with the property manager.

Our advisor entered into an Accounting and Administrative Agreement with the joint venture at the first closing whereby the advisor will provide certain accounting and administrative services for a fee.

The LANDS Portfolio consisted of the following properties:

Legal Owner	Property	Units	Metro
SIR Arbors, LLC	Arbors of Carrollton	131	DFW
SIR Ashley Oaks, LLC	Ashley Oaks	462	San Antonio
SIR Audubon Park, LLC	Audubon Park	256	Nashville
SIR Belmont Apartments, LLC	Belmont	260	DFW
SIR Cantare, LLC	Cantare at ILV	206	Nashville
SIR Cooper Creek, LLC	Cooper Creek	123	Louisville
SIR Grayson Ridge, LLC	Grayson Ridge	240	DFW
SIR Fairmarc, LLC	Hills at Fair Oaks	288	San Antonio
SIR Keystone, LLC	Keystone Farms	90	Nashville
SIR Mansfield Landing, LLC	Landing at Mansfield	336	DFW
SIR Steiner Ranch Apartments, LLC	Meritage at Steiner Ranch	502	Austin
SIR Montelena, LLC	Montelena	232	Austin
SIR Renaissance, LLC	Renaissance St. Andrews	216	Louisville
SIR Richland, LLC	Richland Falls	276	Nashville
SIR Rosemont, LLC	Rosemont at Olmos Park	144	San Antonio
SIR Renaissance Condos, LLC	RSA - Condos	30	Louisville
SIR SM Apartments, LLC	Springmarc Apartments	240	Austin
SIR Buda Ranch, LLC	Trails at Buda Ranch	264	Austin
SIR Valley Farms, LLC	Valley Farms	160	Louisville
SIR Valley Farms North, LLC	Valley Farms North	128	Louisville
SIR Valley Farms Clubhouse, LLC	Valley Farms	—	Louisville

2018 Property Acquisitions

Double Creek Flats

On May 7, 2018, we, through an indirect wholly-owned subsidiary, acquired Double Creek Flats, a multifamily property located in Plainfield, Indiana, containing 240 apartment homes. The purchase price of Double Creek Flats was $31,852,079. We financed the acquisition of Double Creek Flats with (1) cash proceeds from property dispositions in atax-free exchange pursuant to Section 1031 of the Internal Revenue Code and (2) the proceeds of a secured loan in the aggregate principal amount of $22,050,000 from a financial institution.

Jefferson at Perimeter Apartments

On June 11, 2018, we, through an indirect wholly-owned subsidiary, acquired Jefferson at Perimeter Apartments, a multifamily property located in Dunwoody, Georgia, containing 504 apartment homes. The purchase price of the Jefferson at Perimeter Apartments was $103,633,983. We financed the acquisition of the Jefferson at Perimeter Apartments with (1) cash proceeds from property dispositions in atax-free exchange pursuant to Section 1031 of the Internal Revenue Code and (2) the assumption of a loan in the aggregate principal amount of $65,000,000 from a financial institution.

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2018 Property Dispositions

The following provides information on property dispositions during 2018, excluding the contribution of properties to the joint venture discussed above.

The Moorings Apartments

We acquired The Moorings Apartments, a multifamily property located in Roselle, Illinois, containing 216 apartment homes, on November 30, 2012. The purchase price of The Moorings Apartments was $20,250,000, exclusive of closing costs. On January 5, 2018, we sold The Moorings Apartments for $28,100,000, resulting in a gain of $9,658,823, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of The Moorings Apartments was not affiliated with us or our advisor.

Arrowhead Apartment Homes

We acquired Arrowhead Apartment Homes, a multifamily property located in Palatine, Illinois, containing 200 apartment homes, on November 30, 2012. The purchase price of the Arrowhead Apartment Homes was $16,750,000, exclusive of closing costs. On January 31, 2018, we sold the Arrowhead Apartment Homes for $23,600,000, resulting in a gain of $8,928,691, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of the Arrowhead Apartment Homes was not affiliated with us or our advisor.

Willow Crossing Apartments

We acquired Willow Crossing Apartments, a multifamily property located in Elk Grove, Illinois, containing 579 apartment homes, on November 20, 2013. The purchase price of the Willow Crossing Apartments was $58,000,000, exclusive of closing costs. On February 28, 2018, we sold the Willow Crossing Apartments for $79,000,000, resulting in a gain of $24,136,113, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of the Willow Crossing Apartments was not affiliated with us or our advisor.

Mapleshade Park

We acquired Mapleshade Park, a multifamily property located in Dallas, Texas, containing 148 apartment homes, on March 31, 2014. The purchase price of Mapleshade Park was $23,325,000, exclusive of closing costs. On November 30, 2018, we sold Mapleshade Park for $30,750,000, resulting in a gain of $9,628,549, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Mapleshade Park was not affiliated with us or our advisor.

Echo at Katy Ranch

We acquired Echo at Katy Ranch, a multifamily property located in Katy, Texas, containing 260 apartment homes, on December 19, 2013. The purchase price of Echo at Katy Ranch was $35,100,000, exclusive of closing costs. On December 12, 2018, we sold Echo at Katy Ranch for $35,100,000, resulting in a gain of $5,072,584, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Echo at Katy Ranch was not affiliated with us or our advisor.

Heights at 2121

We acquired Heights at 2121, a multifamily property located in Houston, Texas, containing 504 apartment homes, on September 30, 2013. The purchase price of Heights at 2121 was $37,000,000, exclusive of closing costs. On December 21, 2018, we sold Heights at 2121 for $47,000,000, resulting in a gain of $14,394,129, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Heights at 2121 was not affiliated with us or our advisor.

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Lodge at Trails Edge

We acquired Lodge at Trails Edge, a multifamily property located in Indianapolis, Indiana, containing 268 apartment homes, on June 18, 2013. The purchase price of Lodge at Trails Edge was $18,400,000, exclusive of closing costs. On December 21, 2018, we sold Lodge at Trails Edge for $24,000,000, resulting in a gain of $7,873,302, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Lodge at Trails Edge was not affiliated with us or our advisor.

Review of our Policies

Our board of directors, including our independent directors, has reviewed our policies described in this Annual Report on Form10-K, including policies regarding our investments, leverage and conflicts of interest, and determined that the policies are in the best interests of our stockholders.

Liquidity and Capital Resources

We use, and intend to use in the future, secured and unsecured borrowings. At December 31, 2018, our debt was approximately 57% of the value of our properties, as determined by the most recent valuations performed by an independent third-party appraiser as of December 31, 2018. Going forward, we expect that our borrowings will be approximately 65% of the value of our properties, as determined by an independent third-party appraiser or qualified independent valuation expert. Under our charter, we have a limitation on borrowing in excess of 300% of the value of our net assets, which generally approximates to 75% of the aggregate cost of our assets, though we may exceed this limit under certain circumstances. As of December 31, 2018, our aggregate borrowings were not in excess of 300% of the value of our net assets.

Our principal demand for funds will be to acquire investments in accordance with our investment strategy, fund value-enhancement and other capital improvement projects at our properties, pay operating expenses and interest on our outstanding indebtedness and to make distributions to our stockholders. In addition to making investments in accordance with our investment objectives, we expect to use our capital resources to make certain payments to our advisor in connection with the acquisition and disposal of investments, the management of our assets and costs incurred by our advisor in providing services to us. We intend to generally fund our cash needs for items, other than asset acquisitions, from operations. Otherwise, we expect that our principal sources of working capital will include:

• current unrestricted cash balance, which was $142,078,166 as of December 31, 2018;

• various forms of secured and unsecured financing; and

• equity capital from joint venture partners.

Over the short term, we believe that our sources of capital, specifically our cash balance, cash flow from operations, our ability to raise equity capital from joint venture partners and our ability to obtain various forms of secured and unsecured financing will be adequate to meet our liquidity requirements and capital commitments.

Over the longer term, in addition to the sources of capital noted above, which we will rely on to meet our short term liquidity requirements, we may also utilize proceeds from the sale of our properties. We may also conduct additional public or private offerings. We expect these resources to be adequate to fund our operating activities, debt service and distributions, which we presently anticipate will grow over time, and will be sufficient to fund our ongoing operating activities as well as providing capital for investment in future development and other joint ventures along with potential forward purchase commitments.

On October 22, 2012, we entered into a revolving credit facility with PNC Bank, National Association, or PNC Bank, to borrow up to $5,000,000. On April 25, 2013, we amended the revolving credit facility to increase the borrowing capacity to $20,000,000. On July 18, 2014, we further amended the revolving credit facility, to,

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among other things, increase the borrowing capacity from $20,000,000 to $35,000,000. The amended and restated credit facility consisted of a Tranche A and a Tranche B, and provided certain security for borrowings under the credit facility. The maximum amounts that could be borrowed under Tranche A and Tranche B were $20,000,000 and $15,000,000, respectively. The amended and restated credit facility had a maturity date of July 17, 2016, subject to extension. On June 30, 2016, we repaid all outstanding amounts due and terminated the amended and restated credit facility.

On July 29, 2016, we entered into a credit agreement and a multifamily note with PNC Bank that provide for a credit facility in an amount not to exceed $350,000,000 to refinance certain of our then-existing mortgage loans. The credit facility has a maturity date of August 1, 2021, subject to extension, as further described in the credit agreement. Advances made under the credit facility are secured by certain of our properties. The credit facility accrues interest at theone-month LIBOR plus (1) the servicing spread of 0.05% and (2) the net spread, based on the debt service coverage ratio, of between 1.73% and 1.93%, as further described in the credit agreement. Interest only payments on the credit facility are payable monthly in arrears and are due and payable on the first day of each month, commencing September 1, 2016. The entire outstanding principal balance and any accrued and unpaid interest on the credit facility are due on the maturity date. See Note 6 (Debt) of the accompanying consolidated financial statements for a description of our credit facility. Between November 15, 2017 and May 31, 2018, seven of the collateralized properties were either disposed or refinanced, with the advances made to each of the collateralized properties being repaid in full. As of December 31, 2018, $52,656,750 was outstanding under our credit facility.

On June 29, 2016 and June 30, 2016, 14 of our wholly-owned subsidiaries terminated the existing mortgage loans with their respective lenders for an aggregate principal amount of $283,313,677 and entered into new loan agreements, each a loan agreement, with, as applicable, PNC Bank and Newmark Knight Frank (formerly known as Berkeley Point Capital LLC), or Newmark, for an aggregate principal amount of $358,002,000, which we refer to as the “June Refinancing Transactions.” On July 29, 2016, nine of our wholly-owned subsidiaries also entered into a credit agreement with PNC Bank in connection with the refinancing of certain additional mortgage loans, which we refer to as the “July Refinancing Transactions.” Further, on August 30, 2016 and September 29, 2016, three of our wholly-owned subsidiaries terminated the existing mortgage loans with their respective lenders for an aggregate principal amount of $61,575,025 and entered into new mortgage notes for an aggregate principal amount of $63,620,600, together with the June Refinancing Transactions and the July Refinancing Transactions, the “Refinancing Transactions.”

In the June Refinancing Transactions, each loan agreement was made pursuant to the Freddie Mac Capital Markets Execution Program, or the CME, as evidenced by a multifamily note. Pursuant to the CME, the applicable Lender originates the mortgage loan and then transfers the loan to the Federal Home Loan Mortgage Association. Each loan agreement provides for a term loan with a maturity date of July 1, 2023, unless the maturity date is accelerated in accordance with its terms. Each loan accrues interest atone-month LIBOR plus 2.31%. The entire outstanding principal balance and any accrued and unpaid interest on each of the loans are due on the maturity date. Interest and principal payments on the loans are payable monthly in arrears on specified dates as set forth in each loan agreement. Monthly payments are due and payable on the first day of each month, commencing August 1, 2016. We continue to evaluate possible sources of capital, including, without limitation, entering into additional credit facilities. There can be no assurance that we will be able to obtain any such financings on favorable terms, if at all.

Cash Flows Provided by Operating Activities

We commenced real estate operations with the acquisition of our first multifamily property on August 11, 2010. As of December 31, 2018, we owned 35 multifamily properties. During the year ended December 31, 2018, net cash provided by operating activities was $27,071,435 compared to $43,764,300 for the year ended December 31, 2017. The decrease in net cash provided by operating activities during the year ended December 31, 2018, was primarily due to the disposition of seven multifamily properties and the contribution of

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eight multifamily properties to the joint venture in exchange for cash and a 10% interest in the joint venture, partially offset by the acquisition of two multifamily properties subsequent to December 31, 2017.

Cash Flows Provided By Investing Activities

During the year ended December 31, 2018, net cash provided by investing activities was $227,256,726, compared to $135,341,199 during the year ended December 31, 2017. The increase in net cash provided by investing activities during the year ended December 31, 2018, was primarily due to the disposition of seven multifamily properties and the contribution of eight multifamily properties to the joint venture in exchange for cash and a 10% interest in the joint venture during the year ended December 31, 2018, partially offset by the acquisition of two multifamily properties, compared to the disposition of five multifamily properties and the contribution of 12 multifamily properties to the joint venture in exchange for cash and a 10% interest in the joint venture during the year ended December 31, 2017. Net cash provided by investing activities during the year ended December 31, 2018, consisted of the following:

• $2,905,311 of cash used for the investment in an unconsolidated joint venture, net of distributions received from the unconsolidated joint venture of $530,100;

• $67,886,062 of cash used relating to the acquisition of our multifamily properties;

• $9,564,647 of cash used for improvements to real estate investments;

• $2,600,000 of cash used for deposits for potential real estate acquisitions;

• $223,300 of cash used to purchase interest rate cap agreements;

• $310,434,652 of cash provided by the sales of real estate investments; and

• $1,394 of cash provided by insurance claims.

Cash Flows Used in Financing Activities

During the year ended December 31, 2018, net cash used in financing activities was $305,231,726, compared to $67,787,369 during the year ended December 31, 2017. The increase in cash flows used in financing activities is due primarily to the increase in principal repayments on mortgage notes payable, net of borrowings, the payment of debt extinguishment costs of $2,572,386, in addition to the special distribution of $75,298,163 paid to stockholders. Net cash used in financing activities during the year ended December 31, 2018, consisted of the following:

• $134,113,992 net cash used for principal payments of mortgage notes payable, net of deferred financing costs in the amount of $1,323,128 and proceeds from the issuance of mortgage notes payable of $106,482,000;

• $38,410,500 of cash used for principal payments on the credit facility;

• $2,572,386 of cash paid for the extinguishment of debt;

• $122,134,848 of cash distributions; and

• $8,000,000 of cash paid for the repurchase of common stock.

Contractual Commitments and Contingencies

We use, and intend to use in the future, secured and unsecured debt. We believe that the careful use of borrowings will help us achieve our diversification goals and potentially enhance the returns on our investments. At December 31, 2018, our debt was approximately 57% of the value of our properties, as determined by the most recent valuations performed by an independent third-party appraiser as of December 31, 2018. Going forward, we expect that our borrowings will be approximately 65% of the value of our properties. Under our

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charter, we are prohibited from borrowing in excess of 300% of our net assets, which generally approximates to 75% of the aggregate cost of our assets. We may borrow in excess of this amount if such excess is approved by a majority of our independent directors and disclosed to stockholders in our next quarterly report, along with a justification for such excess. In such event, we will monitor our debt levels and take action to reduce any such excess as practicable. Our aggregate borrowings are reviewed by our board of directors at least quarterly. As of December 31, 2018, our aggregate borrowings were not in excess of 300% of the value of our net assets.

In addition to using our capital resources for investing purposes and meeting our debt obligations, we expect to use our capital resources to make certain payments to our advisor or its affiliates. We expect to make payments to our advisor or its affiliates in connection with the selection and origination or purchase of real estate and real estate-related investments, the management of our assets, the management of the development or improvement of our assets and costs incurred by our advisor in providing services to us.

As of December 31, 2018, we had indebtedness totaling an aggregate principal amount of $693,501,574, including net premiums on certain notes payable of $302,530 and net deferred financing costs of $4,227,995. For more information on our outstanding indebtedness, seeNote 6 (Debt) to the consolidated financial statements included in this annual report.

The following is a summary of our contractual obligations as of December 31, 2018:

			Payments due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Interest payments on outstanding debt obligations(1)	$	195,785,965	$	29,208,988	$	53,312,853	$	40,104,023	$	73,160,101
Principal payments on outstanding debt obligations (2)		697,427,039		51,047,863		111,907,004		248,331,924		286,140,248
Total	$	893,213,004	$	80,256,851	$	165,219,857	$	288,435,947	$	359,300,349

(1) Projected interest payments on outstanding debt obligations are based on the outstanding principal amounts and interest rates in effect at December 31, 2018. We incurred interest expense of $33,158,759 during the year ended December 31, 2018, including amortization of deferred financing costs totaling $1,056,249, amortization of loan premiums of $270,792, net unrealized losses from the change in fair value of interest rate cap agreements of $157,268 and costs associated with the refinancing of debt of $398,781.

(2) Projected principal payments on outstanding debt obligations are based on the terms of the notes payable agreements. Amounts exclude the amortization of the debt premiums in addition to net deferred financing costs associated with certain notes payable.

Our debt obligations contain customary financial ornon-financial debt covenants. As of December 31, 2018 and 2017, we were in compliance with all of our financial andnon-financial debt covenants.

Results of Operations

Overview

The discussion that follows is based on our consolidated results of operations for the years ended December 31, 2018, 2017 and 2016. The ability to compare one period to another is affected by the acquisitions and dispositions made during those periods and our value-enhancement strategy. The number of multifamily properties wholly owned by us decreased to 35 as of December 31, 2018, from 48 and 65 as of December 31, 2017 and 2016, respectively. Our results of operations during these periods were primarily affected by (1) the disposition of seven multifamily properties, the contribution of eight multifamily properties to the joint venture

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and the acquisition of two multifamily properties during the year ended December 31, 2018, (2) the disposition of five multifamily properties and the contribution of 12 multifamily properties to the joint venture during the year ended December 31, 2017 and (3) the construction of an additional 86 apartment homes at one existing multifamily property during the year ended December 31, 2016. Our results of operations were also impacted by our value-enhancement activity completed through December 31, 2018, as further discussed below.

Throughout this “Results of Operations” discussion, for the years ended December 31, 2018 and 2017, references to the disposition of 15 and 17 multifamily properties includes the contribution of eight and 12 multifamily properties to the joint venture, respectively.

Our results of operations for the years ended December 31, 2018, 2017 and 2016, are not indicative of those expected in future periods. In general, we expect that our income and expenses related to our portfolio will increase in future periods as a result of organic rent increases and, to a lesser extent, the impact of anticipated value-enhancement projects.

To provide additional insight into our operating results, we are also providing a detailed analysis of same-store versusnon-same-store net operating income, or NOI. For more information on NOI and a reconciliation of NOI (anon-GAAP measure) to net loss, see “—Net Operating Income.”

Consolidated Results of Operations for the Years Ended December 31, 2018 and 2017

The following table summarizes the consolidated results of operations for the years ended December 31, 2018 and 2017:

	For the Years Ended December 31,												$ Change Due to Acquisitions and Dispositions(1)			$ Change Due to Properties Held Throughout Both Years(2)
	2018			2017			Change $			Change%
Total revenues	$	141,988,859		$	212,969,240		$	(70,980,381	)		(33	)%	$	(74,024,312	)	$	3,043,931
Operating, maintenance and management		(38,512,239	)		(58,347,903	)		19,835,664			34	%		21,261,204			(1,425,540	)
Real estate taxes and insurance		(24,230,326	)		(35,114,937	)		10,884,611			31	%		13,048,131			(2,163,520	)
Fees to affiliates		(15,879,702	)		(21,960,145	)		6,080,443			28	%		7,237,283			(1,156,840	)
Depreciation and amortization		(46,109,794	)		(67,755,152	)		21,645,358			32	%		21,205,221			440,137
Interest expense		(33,158,759	)		(44,114,130	)		10,955,371			25	%		13,420,703			(2,465,332	)
Loss on debt extinguishment		(3,621,665	)		(2,380,051	)		(1,241,614	)		(52	)%		(958,719	)		(282,895	)
General and administrative expenses		(6,269,238	)		(6,732,330	)		463,092			7	%		605,889			(142,797	)
Equity in loss from unconsolidated joint venture		(3,339,202	)		(663,896	)		(2,675,306	)		(403	)%		(2,675,306	)		—
Gain on sales of real estate, net		118,215,618			96,573,171			21,642,447			22	%		21,642,447			—
Net income	$	89,083,552		$	72,473,867		$	16,609,685			23	%
NOI(3)	$	74,317,686		$	110,547,074		$	(36,229,388	)		(33	)%
FFO(4)	$	21,749,778		$	44,485,775		$	(22,735,997	)		(51	)%
MFFO(4)	$	26,057,105		$	47,472,599		$	(21,415,494	)		(45	)%

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(1) Represents the favorable (unfavorable) dollar amount change for the year ended December 31, 2018, compared to the year ended December 31, 2017, related to multifamily properties acquired or disposed of on or after January 1, 2017.

(2) Represents the favorable (unfavorable) dollar amount change for the year ended December 31, 2018, compared to the year ended December 31, 2017, related to multifamily properties owned by us throughout both periods presented.

(3) NOI is anon-GAAP financial measure used by investors and our management to evaluate and compare the performance of our properties and to determine trends in earnings. However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, interest income and other expense, acquisition costs, certain fees to affiliates, depreciation and amortization expense and gains or losses from the sale of our properties and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs, all of which are significant economic costs. For additional information on how we calculate NOI and a reconciliation of NOI to net loss, see “—Net Operating Income.”

(4) GAAP basis accounting for real estate assets utilizes historical cost accounting and assumes real estate values diminish over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets, the Board of Governors of NAREIT established the measurement tool of FFO. Since its introduction, FFO has become a widely usednon-GAAP financial measure among REITs. Additionally, we use MFFO, as defined by the IPA as a supplemental measure to evaluate our operating performance. MFFO is based on FFO but includes certain adjustments we believe are necessary due to changes in accounting and reporting under GAAP since the establishment of FFO. Neither FFO nor MFFO should be considered as alternatives to net loss or other measurements under GAAP as indicators of our operating performance, nor should they be considered as alternatives to cash flow from operating activities or other measurements under GAAP as indicators of liquidity. For additional information on how we calculate FFO and MFFO and a reconciliation of FFO and MFFO to net loss, see “—Funds From Operations and Modified Funds From Operations.”

Net income

For the year ended December 31, 2018, we had net income of $89,083,552, compared to net income of $72,473,867 for the year ended December 31, 2017. The increase in net income of $16,609,685 over the comparable prior year period was primarily due to the increase in gain on sales of real estate, net of $21,642,447, the decrease in operating, maintenance and management expenses of $19,835,664, the decrease in real estate taxes and insurance of $10,884,611, the decrease in fees to affiliates of $6,080,443, the decrease in depreciation and amortization expense of $21,645,358, the decrease in interest expense of $10,955,371 and the decrease in general and administrative expenses of $463,092, partially offset by the decrease in total revenues of $70,980,381, the increase in loss on debt extinguishment of $1,241,614 and the increase in equity in loss of unconsolidated joint venture partner of $2,675,306. Our results of operations were primarily impacted by the disposition of 15 multifamily properties and the acquisition of two multifamily properties during the year ended December 31, 2018, and the disposition of 17 multifamily properties during the year ended December 31, 2017.

Total revenues

Rental income and tenant reimbursements for the year ended December 31, 2018, were $141,988,859, compared to $212,969,240 for the year ended December 31, 2017. The decrease of $70,980,381 was primarily due to a net decrease of $74,024,312 as a result of the decrease in the number of properties in our portfolio subsequent to December 31, 2017, and during the year ended December 31, 2017. Our total number of units decreased by 2,714 from 12,156 at December 31, 2017, to 9,442 at December 31, 2018, as a result of the disposition of 15 multifamily properties, partially offset by the acquisition of two multifamily properties, subsequent to December 31, 2017. The average occupancy increased from 93.8% at December 31, 2017, to 94.3% at December 31, 2018. The average monthly rent for our property portfolio increased from $1,037 at

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December 31, 2017, to $1,068 at December 31, 2018, primarily attributable to ordinary monthly rent increases and the completion of value-enhancement projects. We expect rental income and tenant reimbursements to increase in future periods as a result of ordinary monthly rent increases, any value-enhancement projects and a full year of ownership of the two multifamily properties acquired during the year ended December 31, 2018.

Operating, maintenance and management expense

Operating, maintenance and management expenses for the year ended December 31, 2018, were $38,512,239, compared to $58,347,903 for the year ended December 31, 2017. The decrease of $19,835,664 was primarily due to a net decrease of $21,261,204 as a result of the reduction in the number of properties in our portfolio subsequent to December 31, 2017, and the disposition of 17 multifamily properties during the year ended December 31, 2017, offset by the increase of $1,425,540 at the properties held throughout both periods due to increased repairs and maintenance, utilities and wages and salaries during the year ended December 31, 2018. We expect that these amounts will decrease as a percentage of total revenues as we continue to implement operational efficiencies at our multifamily properties.

Real estate taxes and insurance

Real estate taxes and insurance expenses for the year ended December 31, 2018, were $24,230,326, compared to $35,114,937 for the year ended December 31, 2017. The decrease of $10,884,611 was primarily due to a decrease of $13,048,131 related to the reduction in the number of properties in our portfolio subsequent to December 31, 2017, and the disposition of 17 multifamily properties during the year ended December 31, 2017, offset by the increase of $2,163,520 at the properties held throughout both periods due to increased assessed values at certain of our properties resulting in higher property taxes. We expect these amounts may increase in future periods as a result of municipal property tax increases as well as increases in the assessed value of our properties.

Fees to affiliates

Fees to affiliates for the year ended December 31, 2018, were $15,879,702, compared to $21,960,145 for the year ended December 31, 2017. This decrease of $6,080,443 was primarily due to the decrease of investment management fees and property management fees as a result of the reduction in the number of properties in our portfolio subsequent to December 31, 2017 and the disposition of 17 multifamily properties during the year ended December 31, 2017. We expect fees to affiliates to increase in future periods as a result of higher property management fees from anticipated increases in future rental income.

Depreciation and amortization

Depreciation and amortization expenses for the year ended December 31, 2018, were $46,109,794, compared to $67,755,152 for the year ended December 31, 2017. The decrease of $21,645,358 was primarily due to the reduction in the number of properties in our portfolio subsequent to December 31, 2017, and the disposition of 17 multifamily properties during the year ended December 31, 2017. We expect these amounts to increase slightly in future periods as a result of anticipated future enhancements to our real estate portfolio.

Interest expense

Interest expense for the year ended December 31, 2018, was $33,158,759, compared to $44,114,130 for the year ended December 31, 2017. The decrease of $10,955,371 was primarily due to a net decrease of $182,284,364 in our total notes payable balance as a result of the reduction in the number of properties in our portfolio subsequent to December 31, 2017, and the disposition of 17 multifamily properties during the year ended December 31, 2017, partially offset by increases in LIBOR from December 31, 2017 to December 31, 2018, that impact the interest on our variable rate loans and the increase in costs related to the refinancing at four

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multifamily properties during the year ended December 31, 2018, compared to the costs related to the refinancing at one multifamily property during the year ended December 31, 2017. Included in interest expense is the amortization of deferred financing costs of $1,056,249 and $1,839,952, amortization of loan premiums of $270,792 and $1,129,960, unrealized loss on derivative instruments of $157,268 and $604,545 and costs associated with the refinancing of debt of $398,781 and $0 for the years ended December 31, 2018 and 2017, respectively. Our interest expense in future periods will vary based on the impact changes to LIBOR will have on our variable rate debt and our level of borrowings, which will depend on the availability and cost of debt financing, the opportunity to acquire real estate and real estate-related investments meeting our investment objectives and the opportunity to sell real estate properties and real estate-related investments.

Loss on debt extinguishment

Loss on debt extinguishment for the year ended December 31, 2018, was $3,621,665, compared to $2,380,051 for the year ended December 31, 2017. These expenses consisted of prepayment penalties, the expense of the deferred financing costs, net and loan premiums related to the repayment and extinguishment of the debt in conjunction with the sale of 13 multifamily properties (including the contribution of seven multifamily properties to the joint venture), repayment of notes payable at four multifamily properties and refinancing of notes payable at four multifamily properties during the year ended December 31, 2018, compared to the prepayment penalties and the expense of the deferred financing costs, net related to the repayment and extinguishment of the debt in conjunction with the disposition of 17 multifamily properties and refinancing at one multifamily property during the year ended December 31, 2017. The loss on debt extinguishment will vary in future periods if we repay the remaining outstanding principal prior to the scheduled maturity dates of the mortgage notes payable.

General and administrative expense

General and administrative expenses for the year ended December 31, 2018, were $6,269,238, compared to $6,732,330 for the year ended December 31, 2017. These general and administrative costs consisted primarily of legal fees, insurance premiums, audit fees, other professional fees, independent director compensation and certain state taxes. The decrease of $463,092 was primarily due to a net decrease of $605,889 as a result of the reduction in the number of properties in our portfolio subsequent to December 31, 2017, and the disposition of 17 multifamily properties during the year ended December 31, 2017, offset by increases in independent directors’ meeting fees as a result of an increase in the number of meetings compared to the prior year period and increase in acquisition expenses that did not meet the capitalization criteria under ASU2017-01 compared to the prior year period. We expect general and administrative expenses to decrease as a percentage of total revenues.

Equity in loss from unconsolidated joint venture

Equity in loss from unconsolidated joint venture for the year ended December 31, 2018, was $3,339,202 compared to $663,896 for the year ended December 31, 2017. The increase in equity in loss from unconsolidated joint venture was due to the fact that the joint venture was comprised of 12 properties during the year ended December 31, 2017, compared to 20 properties during the year ended December 31, 2018. Our investment in the joint venture has been accounted for as an unconsolidated joint venture under the equity method of accounting. Equity in loss from unconsolidated joint venture is based on the operating results of the joint venture.

Gain on sales of real estate

Gain on sales of real estate for the year ended December 31, 2018, was $118,215,618, compared to $96,573,171 for the year ended December 31, 2017. The gain on sales of real estate consists of the gain recognized on the disposition of 15 multifamily properties during the year ended December 31, 2018, compared to the disposition of 17 multifamily properties during the year ended December 31, 2017. Our gain on sales of real estate in future periods will vary based on the opportunity to sell real properties and real estate-related investments.

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Consolidated Results of Operations for the Years Ended December 31, 2017 and 2016

The following table summarizes the consolidated results of operations for the years ended December 31, 2017 and 2016:

	For the Years Ended December 31,												$ Change Due to Dispositions(1)			$ Change Due to Properties Held Throughout Both Years(2)
	2017			2016			Change $			Change%
Total revenues	$	212,969,240		$	218,237,532		$	(5,268,292	)		(2	)%	$	(5,841,969	)	$	573,677
Operating, maintenance and management		(58,347,903	)		(57,832,187	)		(515,716	)		(1	)%		715,615			(1,231,331	)
Real estate taxes and insurance		(35,114,937	)		(36,507,827	)		1,392,890			4	%		472,839			920,051
Fees to affiliates		(21,960,145	)		(25,440,718	)		3,480,573			14	%		1,825,306			1,655,267
Depreciation and amortization		(67,755,152	)		(69,513,484	)		1,758,332			3	%		2,363,126			(604,794	)
Interest expense		(44,114,130	)		(41,772,682	)		(2,341,448	)		(6	)%		(622,297	)		(1,719,151	)
Loss on debt extinguishment		(2,380,051	)		(4,932,369	)		2,552,318			52	%		(892,240	)		3,444,558
General and administrative expenses		(6,732,330	)		(7,817,916	)		1,085,586			14	%		203,088			882,498
Equity in loss from unconsolidated joint venture		(663,896	)		—			(663,896	)		(100	)%		(663,896	)		—
Gain on sales of real estate, net		96,573,171			—			96,573,171			100	%		96,573,171			—
Net income (loss)	$	72,473,867		$	(25,579,651	)	$	98,053,518			383	%
NOI(3)	$	110,547,074		$	113,675,575		$	(3,128,501	)		(3	)%
FFO(4)	$	44,485,775		$	43,933,833		$	551,942			1	%
MFFO(4)	$	47,472,598		$	49,117,817		$	(1,645,219	)		(3	)%

(1) Represents the favorable (unfavorable) dollar amount change for the year ended December 31, 2017, compared to the year ended December 31, 2016, related to multifamily properties acquired or disposed of on or after January 1, 2016 through December 31, 2017.

(2) Represents the favorable (unfavorable) dollar amount change for the year ended December 31, 2017, compared to the year ended December 31, 2016, related to multifamily properties owned by us throughout both periods presented.

(3) For information on how we calculate NOI and a reconciliation of NOI to net income (loss), see “—Net Operating Income.”

(4) For information on how we calculate FFO and MFFO and a reconciliation of FFO and MFFO to net income (loss), see “—Funds From Operations and Modified Funds From Operations.”

Net income (loss)

For the year ended December 31, 2017, we had a net income of $72,473,867 compared to a net loss of $25,579,651 for the year ended December 31, 2016. The increase in net income of $98,053,518 over the prior year was primarily due to the decrease in real estate taxes and insurance of $1,392,890, the decrease in fees to affiliates of $3,480,573, the decrease in depreciation and amortization expense of $1,758,332, the decrease in loss on debt extinguishment of $2,552,318, the decrease in general and administrative expenses of $1,085,586 and the increase in gain on sales of real estate of $96,573,171, partially offset by the decrease in total revenues of

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$5,268,292, the increase in operating, maintenance and management expenses of $515,716, the increase in interest expense of $2,341,448 and the equity in loss of unconsolidated joint venture of $663,896. Our operations were primarily impacted by the disposition of 17 multifamily properties during the year ended December 31, 2017.

Total revenues

Rental income and tenant reimbursements for the year ended December 31, 2017, were $212,969,240, compared to $218,237,532 for the year ended December 31, 2016. The decrease of $5,268,292 was primarily due to our total units decreasing by 4,553 from 16,709 at December 31, 2016 to 12,156 at December 31, 2017, as a result of the disposition of 17 multifamily properties during the year ended December 31, 2017, partially offset by average monthly rents increasing from $1,028 at December 31, 2016, to $1,037 at December 31, 2017 and average occupancy increasing from 93.4% at December 31, 2016 to 93.8% at December 31, 2017 at the properties held throughout both periods.

Operating, maintenance and management

Operating, maintenance and management expenses for the year ended December 31, 2017, were $58,347,903, compared to $57,832,187 for the year ended December 31, 2016. The increase of $515,716 was due to an increase of $1,231,331 primarily for payroll, credit card processing fees, repairs and maintenance and turnover costs during the year ended December 31, 2017, compared to the year ended December 31, 2016, for those properties held throughout both periods, partially offset by a decrease of $715,615 at the 17 multifamily properties disposed during the year ended December 31, 2017.

Real estate taxes and insurance

Real estate taxes and insurance expenses for the year ended December 31, 2017, were $35,114,937, compared to $36,507,827 for the year ended December 31, 2016. The decrease of $1,392,890 was due to a decrease of $472,839 related to the disposition of 17 multifamily properties during the year ended December 31, 2017, in addition to a decrease in real estate taxes of $920,051 at the properties held throughout both periods due to negotiating reduced assessed values on certain properties, which reduced the real estate tax liabilities.

Fees to affiliates

Fees to affiliates for the year ended December 31, 2017, were $21,960,145 compared to $25,440,718, for the year ended December 31, 2016. The decrease of $3,480,573 was primarily due to $3,283,737 in refinancing fees incurred in connection with the Refinancing Transactions during the year ended December 31, 2016, compared to $86,675 in refinancing fees incurred during the year ended December 31, 2017. Additionally, investment management fees and property management fees decreased from the year ended December 31, 2016, to the year ended December 31, 2017, as a result of the disposition of 17 multifamily properties during the year ended December 31, 2017.

Depreciation and amortization

Depreciation and amortization expenses for the year ended December 31, 2017 were $67,755,152, compared to $69,513,484 for the year ended December 31, 2016. The decrease of $1,758,332 was primarily due to the net decrease in depreciable and amortizable assets of $402,519,616 since December 31, 2016, from the disposition of 17 multifamily properties during the year ended December 31, 2017, and an additional 10 multifamily properties that are classified as held for sale at December 31, 2017, and depreciation is no longer recognized. The depreciation and amortization expense increased at the properties held for both periods due to an increase in depreciable and amortizable assets of $9,345,741 since December 31, 2016.

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Interest expense

Interest expense for the year ended December 31, 2017, was $44,114,130, compared to $41,772,682 for the year ended December 31, 2016. The increase of $2,341,448 was primarily due to the net increase in the notes payable balance of $101,963,381 during the year ended December 31, 2016 related to the Refinancing Transactions that experienced a full year of interest expense during the year ended December 31, 2017, partially offset by the decrease of $341,930,342 in notes payable balance from December 31, 2016 to December 31, 2017 related primarily to the disposition of 17 multifamily properties during the year ended December 31, 2017. In addition, increases in LIBOR from December 31, 2016 to December 31, 2017 impacted the interest rate on our variable rate loans. Included in interest expense is the amortization of deferred financing costs of $1,839,952 and $1,723,186 for the years ended December 31, 2017 and 2016, amortization of loan premiums and discounts of $1,129,960 and $1,243,385 for the years ended December 31, 2017 and 2016, unrealized loss on derivative instruments of $604,545 for the year ended December 31, 2017, and unrealized gain on derivative instruments of $61,698 for the year ended December 31, 2016, and costs associated with the refinancing of debt of $0 and $1,221,254 for the years ended December 31, 2017 and 2016, respectively.

Loss on debt extinguishment

Loss on debt extinguishment for the year ended December 31, 2017, was $2,380,051, compared to $4,932,369 for the year ended December 31, 2016. These expenses consisted of prepayment penalties and the expense of the deferred financing costs, net related to the repayment and extinguishment of the debt in conjunction with the disposition of 17 multifamily properties and refinancing at one multifamily property during the year ended December 31, 2017, and the Refinancing Transactions during the year ended December 31, 2016.

General and administrative expenses

General and administrative expenses for the year ended December 31, 2017, were $6,732,330, compared to $7,817,916 for the year ended December 31, 2016. These general and administrative costs consisted primarily of legal fees, insurance premiums, audit fees, other professional fees, independent director compensation and certain state taxes. The decrease of $1,085,586 was primarily due to a decrease in legal fees during the year ended December 31, 2017 compared to the year ended December 31, 2016.

Equity in loss from unconsolidated joint venture

Equity in loss from unconsolidated joint venture for the year ended December 31, 2017, was $663,896, compared to $0 for the year ended December 31, 2016. Our investment in the joint venture has been accounted for as an unconsolidated joint venture under the equity method of accounting beginning in November 2017.

Gain on sales of real estate

Gain on sales of real estate for the year ended December 31, 2017, were $96,573,171, compared to $0 for the year ended December 31, 2016. The gain on sales of real estate consist of the gain recognized on the disposition of 17 multifamily properties during the year ended December 31, 2017, net of state taxes related to properties sold in the states of Tennessee and Texas. No multifamily property dispositions occurred during the year ended December 31, 2016.

Property Operations for the Years Ended December 31, 2018 and 2017

For purposes of evaluating comparative operating performance for the year, we categorize our properties as “same-store” or“non-same-store.” A “same-store” property is a property that was owned at January 1, 2017. A“non-same-store” property is a property that was acquired, placed into service or disposed of after January 1, 2017. As of December 31, 2018, 33 properties were categorized as same-store properties.

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The following table presents the same-store andnon-same-store results from operations for the years ended December 31, 2018 and 2017:

	For the Year Ended December 31,
	2018		2017		Change $			Change%
Same-store properties:
Revenues	$	115,460,457	$	113,886,812	$	1,573,645			1	%
Operating expenses		55,675,893		51,651,716		4,024,177			8	%
NOI		59,784,564		62,235,096		(2,450,532	)		(4	)%
Non-same-store properties:
NOI		14,533,122		48,311,978		(33,778,856	)
Total NOI(1)	$	74,317,686	$	110,547,074	$	(36,229,388	)

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

Net Operating Income

Same-store net operating income for the year ended December 31, 2018, was $59,784,564, compared to $62,235,096 for the year ended December 31, 2017. The 4% decrease in same-store net operating income was primarily due to the 1% increase in same-store rental revenues offset by a 8% increase in same-store operating expenses over the comparable prior year period.

Revenues

Same-store revenues for the year ended December 31, 2018, were $115,460,457, compared to $113,886,812 for the year ended December 31, 2017. The 1% increase in same-store revenues was primarily due to average monthly rent increases at the same-store properties from $1,032 as of December 31, 2017, to $1,053 as of December 31, 2018, primarily attributable to ordinary monthly rent increases, the completion of value-enhancement projects and an increase in occupancy at the same-store properties from 93.8% as of December 31, 2017, to 94.6% as of December 31, 2018.

Operating Expenses

Same-store operating expenses for the year ended December 31, 2018, were $55,675,893, compared to $51,651,716 for the year ended December 31, 2017. The 8% increase in same-store operating expenses was primarily due to increased payroll, repairs and maintenance, utilities, property level general and administrative expenses and property tax expense during the year ended December 31, 2018, compared to the prior year.

Net Operating Income

NOI is anon-GAAP financial measure of performance. NOI is used by investors and our management to evaluate and compare the performance of our properties and to determine trends in earnings and to compute the fair value of our properties as it is not affected by (1) the cost of funds, (2) acquisition costs,(3) non-operating fees to affiliates, (4) the impact of depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP or (5) general and administrative expenses and other gains and losses that are specific to us. The cost of funds is eliminated from net income (loss) because it is specific to our particular financing capabilities and constraints. The cost of funds is also eliminated because it is dependent on historical interest rates and other costs of capital as well as past decisions made by us regarding the appropriate mix of capital which may have changed or may change in the future. Acquisition costs andnon-operating fees to affiliates are eliminated because they do not reflect continuing operating costs of the property owner.

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Depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets are eliminated because they may not accurately represent the actual change in value in our multifamily properties that result from use of the properties or changes in market conditions. While certain aspects of real property do decline in value over time in a manner that is reasonably captured by depreciation and amortization, the value of the properties as a whole have historically increased or decreased as a result of changes in overall economic conditions instead of from actual use of the property or the passage of time. Gains and losses from the sale of real property vary from property to property and are affected by market conditions at the time of sale which will usually change from period to period. These gains and losses can create distortions when comparing one period to another or when comparing our operating results to the operating results of other real estate companies that have not made similarly timed purchases or sales. We believe that eliminating these costs from net income is useful because the resulting measure captures the actual revenue generated and actual expenses incurred in operating our properties as well as trends in occupancy rates, rental rates and operating costs.

The usefulness of NOI is limited because it excludes general and administrative costs, interest expense, interest income and other expense, acquisition costs, certain fees to affiliates, depreciation and amortization expense and gains or losses from the sale of properties, and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, all of which are significant economic costs. NOI may fail to capture significant trends in these components of net income which further limits its usefulness.

NOI is a measure of the operating performance of our properties but does not measure our performance as a whole. NOI is therefore not a substitute for net income (loss) as computed in accordance with GAAP. This measure should be analyzed in conjunction with net income (loss) computed in accordance with GAAP and discussions elsewhere in “—Results of Operations” regarding the components of net income (loss) that are eliminated in the calculation of NOI. Other companies may use different methods for calculating NOI or similarly entitled measures and, accordingly, our NOI may not be comparable to similarly entitled measures reported by other companies that do not define the measure exactly as we do.

The following is a reconciliation of our NOI to net income (loss) for the three months ended December 31, 2018 and 2017 and for the years ended December 31, 2018, 2017 and 2016, computed in accordance with GAAP:

	For the Three Months Ended December 31,						For the Years Ended December 31,
	2018			2017			2018			2017			2016
Net income (loss)	$	30,225,757		$	86,101,893		$	89,083,552		$	72,473,867		$	(25,579,651	)
Fees to affiliates(1)		2,489,669			3,186,582			10,221,495			13,909,675			17,360,515
Depreciation and amortization		11,328,072			13,902,611			46,109,794			67,755,152			69,513,484
Interest expense		8,750,432			10,350,173			33,158,759			44,114,130			41,772,682
Loss on debt extinguishment		1,339,418			1,978,377			3,621,665			2,380,051			4,932,369
General and administrative expenses		1,820,862			1,513,444			6,269,238			6,732,330			7,817,916
Gain on sales of real estate, net		(36,968,564	)		(91,190,324	)		(118,215,618	)		(96,573,171	)		—
Adjustments for investment in unconsolidated joint venture (2)		931,022			970,819			6,167,115			970,819			—
Other gains(3)		(837,463	)		(769,037	)		(2,098,314	)		(1,215,779	)		(2,141,740	)
Net operating income	$	19,079,205		$	26,044,538		$	74,317,686		$	110,547,074		$	113,675,575

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(1) Fees to affiliates for the three months and year ended December 31, 2018, exclude property management fees of $1,020,538 and $4,059,216 and other fees of $515,066 and $1,598,991, respectively, that are included in NOI. Fees to affiliates for the three months and year ended December 31, 2017, exclude property management fees of $1,407,012 and $6,278,850 and other fees of $393,646 and $1,771,620, respectively, that are included in NOI. Fees to affiliates for the year ended December 31, 2016, exclude property management fees of $6,406,479 and other fees of $1,673,724 that are included in NOI.

(2) Reflects adjustments to add back our noncontrolling interest share of the adjustments to reconcile our net income (loss) attributable to common stockholders to NOI for our equity investment in the unconsolidated joint venture, which principally consists of depreciation, amortization and interest expense incurred by the joint venture.

(3) Other gains for the years ended December 31, 2018, 2017 and 2016, includenon-recurring insurance proceeds and interest income that are not included in NOI.

Funds from Operations and Modified Funds from Operations

Due to certain unique operating characteristics of real estate companies, as discussed below, NAREIT, an industry trade group, has promulgated the measure of FFO, which we believe to be an appropriate supplemental measure to reflect the operating performance of a real estate investment trust, or REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO is not equivalent to our net income (loss) as determined under GAAP.

We define FFO, anon-GAAP financial measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in February 2004, or the White Paper. The White Paper defines FFO as net income (loss) computed in accordance with GAAP, excluding gains or losses from sales of property andnon-cash impairment charges of real estate related investments, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. In particular, we believe it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations and assessments regarding general market conditions which can change over time. An asset will only be evaluated for impairment if certain impairment indications exist and if the carrying, or book value, exceeds the total estimated undiscounted future cash flows (including net rental and lease revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) from such asset. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and the relatively limited term of our operations, it could be difficult to recover any impairment charges. Our FFO calculation complies with NAREIT’s policy described above.

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or as requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, provides a more complete understanding of our performance to investors

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and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. However, FFO, and MFFO as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than thenon-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.

Changes in the accounting and reporting promulgations under GAAP (for acquisition fees and expenses from a capitalization/depreciation model to anexpensed-as-incurred model) that were put into effect in 2009 and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT’s definition of FFO have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses for all industries as items that are expensed under GAAP, that are typically accounted for as operating expenses. Management believes these fees and expenses do not affect our overall long-term operating performance. Publicly registered,non-listed REITs typically have a significant amount of acquisition activity and are substantially more dynamic during their initial years of investment and operation. While otherstart-up entities may also experience significant acquisition activity during their initial years, we believe that public,non-listed REITs, like us, are unique in that they have a limited life with targeted exit strategies within a relatively limited time frame after acquisition activity ceases. Our board of directors will determine to pursue a liquidity event when it believes that the then-current market conditions are favorable. Thus, as a limited life REIT, we will not continuously purchase assets and will have a limited life.

Due to the above factors and other unique features of publicly registered,non-listed REITs, the IPA, an industry trade group, has standardized a measure known as MFFO, which the IPA has recommended as a supplemental measure for publicly registerednon-listed REITs and which we believe to be another appropriate supplemental measure to reflect the operating performance of a public,non-listed REIT having the characteristics described above. MFFO is not equivalent to our net income (loss) as determined under GAAP, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate with a limited life and targeted exit strategy, as currently intended. We believe that, because MFFO excludes costs that we consider more reflective of investing activities and othernon-operating items included in FFO and also excludes acquisition fees and expenses that are not capitalized, as discussed below, and affect our operations only in periods in which properties are acquired, MFFO can provide, on a going forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance after the period in which we are acquiring our properties and once our portfolio is in place. By providing MFFO, we believe we are presenting useful information that assists investors and analysts to better assess the sustainability of our operating performance after our offering has been completed and our properties have been acquired. We also believe that MFFO is a recognized measure of sustainable operating performance by thenon-listed REIT industry. Further, we believe MFFO is useful in comparing the sustainability of our operating performance after our offering and acquisitions are completed with the sustainability of the operating performance of other real estate companies that are not as involved in acquisition activities. Investors are cautioned that MFFO should only be used to assess the sustainability of our operating performance after our offering has been completed and properties have been acquired, as it excludes acquisition costs that have a negative effect on our operating performance during the periods in which properties are acquired.

We define MFFO, anon-GAAP financial measure, consistent with the IPA’s Guideline2010-01,Supplemental Performance Measure for Publicly Registered,Non-Listed REITs: Modified Funds from Operations, or the Practice Guideline, issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income: acquisition fees and expenses; amounts relating to deferred rent receivables and amortization of above and below market leases and liabilities (which are adjusted in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments); accretion of discounts and amortization

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of premiums on debt investments;mark-to-market adjustments included in net income; nonrecurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums on debt investments, nonrecurring unrealized gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operating activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized. While we rely on our advisor for managing interest rate, hedge and foreign exchange risk, we do not retain an outside consultant to review all our hedging agreements. Inasmuch as interest rate hedges are not a fundamental part of our operations, we believe it is appropriate to exclude suchnon-recurring gains and losses in calculating MFFO, as such gains and losses are not reflective ofon-going operations.

Our MFFO calculation complies with the IPA’s Practice Guideline described above, except with respect to certain acquisition fees and expenses as discussed below. In calculating MFFO, we exclude acquisition related expenses that are not capitalized, amortization of above and below market leases, fair value adjustments of derivative financial instruments, deferred rent receivables and the adjustments of such items related to noncontrolling interests. Historically, under GAAP, acquisition fees and expenses were characterized as operating expenses in determining operating net income. However, following the recent publication of ASU2017-01,Business Combinations (Topic 805): Clarifying the definition of business, or ASU2017-01, acquisition fees and expenses are capitalized and depreciated under certain conditions. We elected to early adopt ASU2017-01, resulting in a substantial part of acquisition fees and expenses being capitalized and therefore not excluded from the calculation of MFFO but captured as depreciation in calculating FFO. However, these expenses are paid in cash by us. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property. In the event that operational earnings and cash flow are not available to fund our reimbursement of acquisition fees and expenses incurred by our advisor, such fees and expenses will need to be reimbursed to our advisor from other sources, including debt, net proceeds from the sale of properties, or from ancillary cash flows. The acquisition of properties, and the corresponding acquisition fees and expenses, is the key operational feature of our business plan to generate operational income and cash flow to fund distributions to our stockholders. Further, under GAAP, certain contemplatednon-cash fair value and othernon-cash adjustments are considered operatingnon-cash adjustments to net income in determining cash flow from operating activities. In addition, we view fair value adjustments of derivatives and gains and losses from dispositions of assets asnon-recurring items or items which are unrealized and may not ultimately be realized, and which are not reflective ofon-going operations and are therefore typically adjusted for when assessing operating performance.

Our management uses MFFO and the adjustments used to calculate MFFO in order to evaluate our performance against other public,non-listed REITs which have limited lives with short and defined acquisition periods and targeted exit strategies shortly thereafter. As noted above, MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate in this manner. We believe that our use of MFFO and the adjustments used to calculate MFFO allow us to present our performance in a manner that reflects certain characteristics that are unique to public,non-listed REITs, such as their limited life, limited and defined acquisition period and targeted exit strategy, and hence that the use of such measures is useful to investors. By excluding expensed acquisition costs that are not capitalized, the use of MFFO provides information consistent with management’s analysis of the operating performance of the properties. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such changes that may reflect anticipated and unrealized gains or losses, we believe MFFO provides useful supplemental information.

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Presentation of this information is intended to provide useful information to investors as they compare the operating performance to that of other public,non-listed REITs, although it should be noted that not all public,non-listed REITs calculate FFO and MFFO the same way, so comparisons with other public,non-listed REITs may not be meaningful. Furthermore, FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income (loss) or income (loss) from continuing operations as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs, including our ability to make distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with GAAP measurements as an indication of our performance. MFFO is useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete and net asset value is disclosed. MFFO is not a useful measure in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining MFFO.

Neither the SEC, NAREIT nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, the SEC, NAREIT or another regulatory body may decide to standardize the allowable adjustments across thenon-listed REIT industry and in response to such standardization we may have to adjust our calculation and characterization of FFO or MFFO accordingly.

Our calculation of FFO and MFFO is presented in the following table for the years ended December 31, 2018, 2017 and 2016:

	For the Years Ended December 31,
Reconciliation of net income (loss) to MFFO:	2018			2017			2016
Net income (loss)	$	89,083,552		$	72,473,867		$	(25,579,651	)
Depreciation of real estate assets		44,189,723			67,601,984			69,360,316
Amortization of lease-related costs		1,920,071			153,168			153,168
Gain on sales of real estate, net		(118,215,618	)		(96,573,171	)		—
Adjustments for investment in unconsolidated joint venture (1)		4,772,050			829,927			—
FFO		21,749,778			44,485,775			43,933,833
Acquisition fees and expenses(2)(3)		528,516			2,291			960
Unrealized loss (gain) on derivative instruments		157,268			604,545			(61,698	)
Loss on debt extinguishment		3,621,665			2,380,051			4,932,369
Change in value of restricted common stock to Advisor		—			—			312,353
Adjustments for investment in unconsolidated joint venture (1)		(122	)		(63	)		—
MFFO	$	26,057,105		$	47,472,599		$	49,117,817
FFO per share - basic and diluted	$	0.29		$	0.59		$	0.58
MFFO per share - basic and diluted		0.35			0.63			0.64
Income (loss) per common share - basic and diluted		1.19			0.96			(0.34	)
Weighted average number of common shares outstanding, basic		75,049,667			75,794,705			76,195,083
Weighted average number of common shares outstanding, diluted		75,062,053			75,807,710			76,195,083

(1) Reflects adjustments to add back our noncontrolling interest share of the adjustments to reconcile our net income (loss) attributable to common stockholders to FFO for our equity investment in the unconsolidated joint venture, which principally consists of depreciation and amortization incurred by the joint venture.

(2) By excluding acquisition fees and expenses, management believes MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition fees and expenses include

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payments to our advisor or third parties. Historically, acquisition fees and expenses under GAAP were considered operating expenses and as expenses included in the determination of net income (loss) and income (loss) from continuing operations, both of which are performance measures under GAAP. Following the recent publication of ASU2017-01, acquisition expenses are capitalized and depreciated under certain conditions. We elected to early adopt ASU2017-01 resulting in a substantial part of our acquisition fees and expenses being capitalized and therefore not excluded from the calculation of MFFO but are captured as depreciation in calculating FFO. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to the property. In the event that operational earnings and cash flows are not available to fund our reimbursement of acquisition fees and expenses incurred by our advisor, such fees and expenses will need to be reimbursed to the advisor from other sources, including debt, operational earnings or cash flow, net proceeds from the sale of properties, or from ancillary cash flows.

(3) Acquisition expenses for the years ended December 31, 2018 and 2017 of $528,516 and $2,291, respectively, did not meet the criteria for capitalization under ASU2017-01 and are recorded in general and administrative expenses in the accompanying consolidated statements of operations. Acquisition fees for the year ended December 31, 2016 of $960, are recorded in fees to affiliates in the accompanying consolidated statements of operations.

FFO and MFFO may be used to fund all or a portion of certain capitalizable items that are excluded from FFO and MFFO, such as tenant improvements, building improvements and deferred leasing costs.

Inflation

Substantially all of our multifamily property leases are for a term of one year or less. In an inflationary environment, this may allow us to realize increased rents upon renewal of existing leases or the beginning of new leases. Short-term leases generally will minimize our risk from the adverse effects of inflation, although these leases generally permit tenants to leave at the end of the lease term and therefore will expose us to the effects of a decline in market rents. In a deflationary rent environment, we may be exposed to declining rents more quickly under these shorter term leases.

With respect to other commercial properties, we include in our leases future provisions designed to protect us from the impact of inflation. These provisions will include reimbursement billings for operating expense pass-through charges, real estate tax and insurance reimbursements, or in some cases annual reimbursement of operating expenses above a certain allowance. We believe that shorter term lease contracts lessen the impact of inflation due to the ability to adjust rental rates to market levels as leases expire.

As of December 31, 2018, we had not entered into any material leases as a lessee.

REIT Compliance

To qualify as a REIT for tax purposes, we are required to distribute at least 90% of our REIT taxable income (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP) to our stockholders. We must also meet certain asset and income tests, as well as other requirements. We monitor the business and transactions that may potentially impact our REIT status. If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates.

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Distributions

Our board of directors has declared daily distributions that are paid on a monthly basis. We expect to continue paying monthly distributions unless our results of operations, our general financial condition, general economic conditions or other factors prohibit us from doing so. We may declare distributions in excess of our cash from operations. As a result, our distribution rate and payment frequency may vary from time to time. However, to qualify as a REIT for tax purposes, we must make distributions equal to at least 90% of our “REIT taxable income” each year.

Distributions declared (1) accrued daily to our stockholders of record as of the close of business on each day, (2) are payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month and (3) were calculated at a rate of $0.001519 per share per day during the six months ended December 31, 2018, at a rate of $0.001683 per share per day during the three months ended June 30, 2018, and at a rate of $0.001964 per share per day during the three months ended March 31, 2018.

Distributions declared and paid during each of the four quarters ended December 31, 2018 were as follows:

Period	Distributions Declared(1)		Distributions Declared Per Share(1)(2)		Distributions Paid(3)		Sources of Distributions Paid						Net Cash Provided By (Used In) Operating Activities
							Cash Flow From Operations		Sale of Real Estate Investments		Cash and Cash Equivalents
First Quarter 2018	$	13,320,570	$	0.177	$	13,331,421	$	—	$	—	$	13,331,421	$	(1,457,476	)
Second Quarter 2018		86,819,112		1.153		87,612,706		10,633,355		75,298,163		1,681,188		10,633,355
Third Quarter 2018		10,472,649		0.140		10,851,615		10,776,188		—		75,427		10,776,188
Fourth Quarter 2018		10,442,526		0.140		10,339,106		7,119,368		—		3,219,738		7,119,368
	$	121,054,857	$	1.610	$	122,134,848	$	28,528,911	$	75,298,163	$	18,307,774	$	27,071,435

(1) Distributions are based on daily record dates and calculated at a rate of $0.001519 per share per day during the six months ended December 31, 2018, at a rate of $0.001683 per share per day during the three months ended June 30, 2018, and at a rate of $0.001964 per share per day during the three months ended March 31, 2018. Additionally, on April 16, 2018, our board of directors declared a special distribution in the amount of $1.00 per share to stockholders of record as of the close of business on April 20, 2018, which was paid on May 2, 2018.

(2) Assumes each share was issued and outstanding each day during the periods presented.

(3) Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid approximately three days following month end. All distributions were paid in cash.

For the year ended December 31, 2018, we paid aggregate distributions of $122,134,848. For the year ended December 31, 2018, our net income was $89,083,552, we had FFO of $21,749,778 and net cash provided by operating activities of $27,071,435. For the year ended December 31, 2018, of the $122,134,848 in total distributions paid, we funded $27,071,435, or 22%, of distributions paid with net cash provided by operating activities, $19,765,250, or 16%, with existing cash and cash equivalents, and $75,298,163, or 62%, from the sales of real estate investments. Since inception, of the $375,233,687 in total distributions paid through December 31, 2018, including shares issued pursuant to our distribution reinvestment plan, 60% of such amounts were funded from cash flow from operations, 20% of such amounts were funded from the sale of real estate investments, 10% of such amounts were funded from offering proceeds, 2% of such amounts were funded from credit facilities and

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8% of such amounts were funded from cash and cash equivalents. For information on how we calculate FFO and the reconciliation of FFO to net income (loss), see “—Funds from Operations and Modified Funds from Operations.”

Over the long-term, we expect that our distributions will be paid from cash flow from operations (except with respect to distributions related to sales of our real estate investments). However, our operating performance cannot be accurately predicted and may deteriorate in the future due to numerous factors, including those discussed under “Risk Factors,” and “—Results of Operations.” In the event our cash flow from operations decreases in the future, the level of our distributions may also decrease.

Off-Balance Sheet Arrangements

As of December 31, 2018 and 2017, we had nooff-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Related-Party Transactions and Agreements

We have entered into agreements with our advisor and its affiliates, whereby we have paid, and may continue to pay, certain fees to, or reimburse certain expenses of, our advisor or its affiliates for acquisition and advisory fees and expenses, loan coordination fees, organization and offering costs, asset and property management fees and expenses, leasing fees and reimbursement of certain operating costs. See Item 13. “Certain Relationships and Related Transactions, Director Independence” and Note 9 (Related Party Arrangements) to the consolidated financial statements included in this annual report for a discussion of the various related-party transactions, agreements and fees.

Critical Accounting Policies

Below is a discussion of the accounting policies that we believe are critical because they involve significant judgments and assumptions, require estimates about matters that are inherently uncertain and because they are important for understanding and evaluating our reported financial results. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses.

Real Estate Assets

Depreciation and Amortization

Real estate costs related to the development, construction and improvement of properties are capitalized. Acquisition costs related to business combinations are expensed as incurred. Acquisition costs related to asset acquisitions are capitalized. Repair and maintenance and tenant turnover costs are charged to expense as incurred and significant replacements and betterments are capitalized. Repair and maintenance and tenant turnover costs include all costs that do not extend the useful life of the real estate asset. We consider the period of future benefit of an asset to determine its appropriate useful life and anticipate the estimated useful lives of assets by class to be generally as follows:

Buildings	27.5 years
Building improvements	5-25 years
Tenant improvements	Shorter of lease term or expected useful life
Tenant origination and absorption costs	Remaining term of related lease
Furniture, fixtures, and equipment	5-10 years

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Real Estate Purchase Price Allocation

Prior to the adoption of ASU2017-01, Business Combinations (Topic 805): Clarifying the definition of business, or ASU2017-01, we recorded the acquisition of income-producing real estate or real estate that are used for the production of income as a business combination. All assets acquired and liabilities assumed in a business combination were measured at their acquisition-date fair values. Acquisition costs were expensed as incurred. Upon adoption of ASU2017-01, we record the acquisition of income-producing real estate or real estate that are used for the production of income as an asset acquisition. All assets acquired and liabilities assumed in an asset acquisition are measured at their acquisition-date fair values. Acquisition costs are capitalized and allocated between land, buildings and improvements and tenant origination and associated costs on the consolidated balance sheet.

We assess the acquisition-date fair values of all tangible assets, identifiable intangible assets and assumed liabilities using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis) and that utilize appropriate discount and/or capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. The fair value of tangible assets of an acquired property considers the value of the property as if it was vacant.

Intangible assets include the value ofin-place leases, which represents the estimated value of the net cash flows of thein-place leases to be realized, as compared to the net cash flows that would have occurred had the property been vacant at the time of acquisition and subject tolease-up.

We estimate the value of tenant origination and absorption costs by considering the estimated carrying costs during hypothetical expectedlease-up periods, considering current market conditions. In estimating carrying costs, we estimate the amount of lost rentals using market rates during the expectedlease-up periods.

We amortize the value ofin-place leases to expense over the remainingnon-cancelable term of the respective leases. Should a tenant terminate its lease, the unamortized portion of thein-place lease value and customer relationship intangibles would be charged to expense in that period.

We record above-market and below-marketin-place lease values for acquired properties, if any, based on the present value (using an interest rate that reflects the risks associated with the leases acquired) of the difference between (1) the contractual amounts to be paid pursuant to thein-place leases and (2) our estimate of fair market lease rates for the correspondingin-place leases, measured over a period equal to the remainingnon-cancelable term of the lease. We amortize any capitalized above-market or below-market lease values as a reduction or increase to rental income over the remainingnon-cancelable terms of the respective leases.

Estimates of the fair values of the tangible assets, identifiable intangible assets and assumed liabilities require us to make significant assumptions to estimate market lease rates, property-operating expenses, carrying costs duringlease-up periods, discount rates, market absorption periods, and the number of years the property will be held for investment. The use of inappropriate assumptions could result in an incorrect valuation of acquired tangible assets, identifiable intangible assets and assumed liabilities, which could impact the amount of our net income (loss).

Sale of Real Estate Assets

We record property sales or dispositions when title transfers to unrelated third parties, contingencies have been removed and sufficient cash consideration has been received by us. Upon disposition, the related costs and accumulated depreciation are removed from the respective accounts. Any gain or loss on sale is recognized in accordance with GAAP.

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Gains and losses on the sale of real estate are recognized pursuant to ASC Topic610-20, Gains and Losses from the Derecognition of Nonfinancial Assets. We recognize a gain (loss) on sale of real estate when the criteria for an asset to be derecognized are met, which include when: (i) a contract exists, (ii) the buyer obtains control of the asset, and (iii) it is probable that we will receive substantially all of the consideration to which we are entitled. These criteria are generally satisfied at the time of sale. For partial sale of real estate resulting in transfer of control, we measure any noncontrolling interest retained at fair value and recognize a gain or loss on the difference between fair value and the carrying amount of the real estate assets retained. We classify real estate assets as real estate held for sale once the criteria, as defined by GAAP, have been met.

Impairment of Real Estate Assets

We account for our real estate assets in accordance with ASC 360—Property, Plant and Equipment (“ASC 360”). ASC 360 requires that we continually monitor events and changes in circumstances that could indicate that the carrying amounts of our real estate and related intangible assets may not be recoverable. When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets and liabilities may not be recoverable, we assess the recoverability of the assets by estimating whether we will recover the carrying value of the asset through its undiscounted future cash flows and its eventual disposition. Based on this analysis, if we do not believe that we will be able to recover the carrying value of the real estate and related intangible assets and liabilities, we record an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangible assets and liabilities. If any assumptions, projections or estimates regarding an asset changes in the future, we may have to record an impairment to reduce the net book value of such individual asset.

Investments in Unconsolidated Joint Ventures

We account for investments in unconsolidated joint venture entities in which we may exercise significant influence over, but do not control, using the equity method of accounting. Under the equity method, the investment is initially recorded at cost and subsequently adjusted to reflect additional contributions or distributions and our proportionate share of equity in the joint venture’s income (loss). We recognize our proportionate share of the ongoing income or loss of the unconsolidated joint venture as equity in income (loss) of unconsolidated joint venture on the consolidated statements of operations. On a quarterly basis, we evaluate our investment in an unconsolidated joint venture for other-than-temporary impairments.

Rents and Other Receivables

We periodically evaluate the collectability of amounts due from tenants and maintain an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments under lease agreements. We exercise judgment in establishing these allowances and consider payment history and current credit status of tenants in developing these estimates. Due to the short-term nature of the operating leases, we do not maintain an allowance for deferred rent receivable related to the straight-lining of rents.

Revenue Recognition

On January 1, 2018, we adopted ASC 606,Revenue from Contracts with Customers, (“ASC 606”), which establishes a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and supersedes most of the existing revenue recognition guidance. This standard requires us to recognize, for certain of our revenue sources, the transfer of promised goods or services to customers in an amount that reflects the consideration we are entitled to in exchange for those goods or services. We selected the modified retrospective transition method but we had no cumulative effect adjustment to recognize as of the date of adoption on January 1, 2018.

Our revenue consists of rental revenues and tenant reimbursements and other. There was no impact to our recognition of rental revenue from leasing arrangements as this was specifically excluded from ASC 606. We

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identified limited sources of revenues fromnon-lease components but did not experience a material impact on its revenue recognition in the consolidated financial statements upon adoption. We lease apartment and condominium units under operating leases with terms generally of one one year or less. Generally, credit investigations are performed for prospective residents and security deposits are obtained. We will recognize minimum rent, including rental abatements, concessions and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of thenon-cancellable term of the related lease and amounts expected to be received in later years will be recorded as deferred rents. We record 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 in accordance with ASC 840,Leases.

Fair Value Measurements

Under GAAP, we are required to measure certain financial instruments at fair value on a recurring basis. In addition, we are required to measure other assets and liabilities at fair value on anon-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:

Level 1:	unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;
Level 2:	quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and
Level 3:	prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.

When available, we utilize quoted market prices from an independent third-party source to determine fair value and will classify such items in Level 1 or Level 2. In instances where the market is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require us to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When we determine the market for a financial instrument we own to be illiquid or when market transactions for similar instruments do not appear orderly, we use several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and we establish a fair value by assigning weights to the various valuation sources.

Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument.

Accounting for Stock-Based Compensation

We amortize the fair value of stock-based compensation awards to expense over the vesting period and record any dividend equivalents earned as dividends for financial reporting purposes. Stock-based compensation awards are valued at the fair value on the date of grant and amortized as an expense over the vesting period.

Income Taxes

We elected to be taxed as, and currently qualify as, a REIT under the Internal Revenue Code and have operated as such commencing with the taxable year ended December 31, 2010. To continue to qualify as a REIT,

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we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to our stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, we generally will not be subject to federal income tax to the extent we distribute qualifying dividends to our stockholders. If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax on our taxable income at regular corporate income tax rates and generally would not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification was lost, unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to our stockholders. However, we believe we are organized and operate in such a manner as to qualify for treatment as a REIT.

We follow the income tax guidance under GAAP to recognize, measure, present and disclose in our consolidated financial statements uncertain tax positions that we have taken or expect to take on a tax return. As of December 31, 2018 and 2017, we did not have any liabilities for uncertain tax positions that we believe should be recognized in our consolidated financial statements. Due to uncertainty regarding the realization of certain deferred tax assets, we have established valuation allowances, primarily in connection with the net operating loss carryforward related to the REIT. We have not been assessed material interest or penalties by any major tax jurisdictions. Our evaluations were performed for all open tax years through December 31, 2018.

Subsequent Events

Distributions Paid

On January 2, 2019, we paid distributions of $3,515,310, which related to distributions declared for each day in the period from December 1, 2018 through December 31, 2018. All such distributions were paid in cash.

On February 1, 2019, we paid distributions of $3,514,980, which related to distributions declared for each day in the period from January 1, 2019 through January 31, 2019. All such distributions were paid in cash.

On March 1, 2019, we paid distributions of $3,165,776, which related to distributions declared for each day in the period from February 1, 2019 through February 28, 2019. All such distributions were paid in cash.

Repayment of Credit Facility

On January 29, 2019, we made a principal payment in the amount of $3,089,477 on the credit facility with PNC Bank.

Shares Repurchased

On January 31, 2019, we repurchased 219,696 shares of our common stock, for an aggregate repurchase price of $2,000,000, or $9.10 per share, pursuant to our share repurchase program.

Estimated Value per Share

On March 13, 2019, our board of directors determined an estimated value per share of our common stock of $9.40 as of December 31, 2018.

Distribution Declared

On March 13, 2019, our board of directors approved and authorized a daily distribution to stockholders of record as of the close of business on each day for the period commencing on April 1, 2019, and ending on

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June 30, 2019. The distributions will be equal to $0.001519 per share of our common stock per day, which if paid each day over a365-day period is equivalent to a 6.0% annualized distribution rate based on a purchase price of $9.24 per share of common stock. The distributions for each record date in April 2019, May 2019 and June 2019 will be paid in May 2019, June 2019 and July 2019, respectively. The distributions will be payable to stockholders from legally available funds therefor.

Sale of Dawntree Apartments

On March 8, 2019, we, through SIR Dawntree, LLC, or SIR Dawntree, our indirect, wholly-owned subsidiary, sold our fee simple interest in Dawntree Apartments,a 400-unit residential property located in Carrollton, Texas, to an unaffiliated third-party buyer. SIR Dawntree sold Dawntree Apartments for an aggregate sales price of $46,200,000, excluding closing costs.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We may be exposed to the effects of interest rate changes as a result of borrowings used to maintain liquidity and to fund the acquisition, expansion and refinancing of our real estate investment portfolio and operations. We may be also exposed to the effects of changes in interest rates as a result of the acquisition and origination of mortgage, mezzanine, bridge and other loans. Our profitability and the value of our investment portfolio may be adversely affected during any period as a result of interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs. We have managed and will continue to manage interest rate risk by maintaining a ratio of fixed rate, long-term debt such that floating rate exposure is kept at an acceptable level. In addition, we have and may in the future, utilize a variety of financial instruments, including interest rate caps, floors and swap agreements, in order to limit the effects of changes in interest rates on our operations. When we use these types of derivatives to hedge the risk of interest-earning assets or interest-bearing liabilities, we may be subject to certain risks, including the risk that losses on a hedge position will reduce the funds available for payments to holders of our common stock and that the losses may exceed the amount we invested in the instruments.

We borrow funds and make investments at a combination of fixed and variable rates. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt unless such instruments mature or are otherwise terminated. However, interest rate changes will affect the fair value of our fixed rate instruments. At December 31, 2018, the fair value of our fixed rate debt was $344,536,162 and the carrying value of our fixed rate debt was $360,115,457. The fair value estimate of our fixed rate debt was estimated using a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining maturity if the loans were originated at December 31, 2018. As we expect to hold our fixed rate instruments to maturity and the amounts due under such instruments would be limited to the outstanding principal balance and any accrued and unpaid interest, we do not expect that fluctuations in interest rates, and the resulting change in fair value of our fixed rate instruments, would have a significant impact on our operations.

Conversely, movements in interest rates on our variable rate debt would change our future earnings and cash flows, but not significantly affect the fair value of those instruments. However, changes in required risk premiums would result in changes in the fair value of floating rate instruments. At December 31, 2018, the fair value of our variable rate debt was $336,559,382 and the carrying value of our variable rate debt was $333,386,117. Based on interest rates as of December 31, 2018, if interest rates are 100 basis points higher during the 12 months ending December 31, 2019, interest expense on our variable rate debt would increase by $3,409,478 and if interest rates are 100 basis points lower during the 12 months ending December 31, 2019, interest expense on our variable rate debt would decrease by $3,409,361.

At December 31, 2018, the weighted-average interest rate of our fixed rate debt and variable rate debt was 3.95% and 4.66%, respectively. The weighted-average interest rate of our blended fixed and variable rates was

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4.29% at December 31, 2018. The weighted-average interest rate represents the actual interest rate in effect at December 31, 2018 (consisting of the contractual interest rate), using interest rate indices as of December 31, 2018, where applicable.

We will also be exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of a derivative contract. If the fair value of a derivative contract is positive, the counterparty will owe us, which creates credit risk for us. If the fair value of a derivative contract is negative, we will owe the counterparty and, therefore, do not have credit risk. We will seek to minimize the credit risk in derivative instruments by entering into transactions with high-quality counterparties. As of December 31, 2018, we did not have counterparty risk on our interest rate cap agreements as the underlying variable rates for each of our interest rate cap agreements as of December 31, 2018 were not in excess of the capped rates. See also Note 12 (Derivative Financial Instruments) of the accompanying consolidated financial statements.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Our consolidated financial statements and supplementary data can be found beginning at pageF-1 of this annual report.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

None.

ITEM 9A. 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 reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, including our chief executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and we necessarily are required to apply our judgment in evaluating whether the benefits of the controls and procedures that we adopt outweigh their costs.

As required by Rules13a-15(b) and15d-15(b) of the Exchange Act, an evaluation as of December 31, 2018, was conducted under the supervision and with the participation of our management, including our chief executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules13a-15(e) and15d-15(e) under the Exchange Act). Based on this evaluation, our chief executive officer and principal financial officer concluded that our disclosure controls and procedures, as of December 31, 2018, were effective at the reasonable assurance level.

Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule13a-15(f) or15d-15(f) promulgated under the Exchange Act.

In connection with the preparation of this annual report, our management, including our chief executive officer and chief accounting officer, assessed the effectiveness of our internal control over financial reporting as of December 31, 2018. In making that assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework (2013 framework).

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Based on its assessment, our management believes that, as of December 31, 2018, our internal control over financial reporting was effective based on those criteria.

There have been no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

ITEM 9B. OTHER INFORMATION

None.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

Our directors and executive officers and their respective positions and offices are as follows:

Name	Age	Position
Rodney F. Emery	68	Chairman of the Board and Chief Executive Officer
Ella S. Neyland	64	Affiliated Director and President
Kevin J. Keating	56	Chief Financial Officer and Treasurer
Ana Marie del Rio	64	Secretary
Scot B. Barker	70	Independent Director
Ned W. Brines	57	Independent Director
Don B. Saulic	60	Independent Director

Rodney F. Emery serves as our Chairman of the Board and Chief Executive Officer, positions he has held since our inception in May 2009. Mr. Emery also serves as Chairman of the Board and Chief Executive Officer of Steadfast Apartment REIT, positions he has held since August 2013 and September 2013, respectively. In addition, Mr. Emery serves as Chairman of the Board and Chief Executive Officer of Steadfast Apartment REIT III, positions he has held since January 2016 and August 2015, respectively. Mr. Emery is the founder of Steadfast Companies and is responsible for the corporate vision, strategy and overall guidance of the operations of Steadfast Companies. Mr. Emery chairs the Steadfast Executive Committee, which establishes policy and strategy and acts as the general oversight committee of Steadfast Companies. Mr. Emery also serves on the Steadfast Companies Investment Committee and is a member of the Board of Managers of Stira Capital Markets Group, LLC. Prior to founding Steadfast Companies in 1994, Mr. Emery served for 17 years as the President of Cove Properties, a diversified commercial real estate firm specializing in property-management, construction and development with a specialty in industrial properties. Mr. Emery received a Bachelor of Science in Accounting from the University of Southern California and serves on the board of directors of severalnon-profit organizations.

Our board of directors, excluding Mr. Emery, has determined that the leadership positions previously and currently held by Mr. Emery and Mr. Emery’s extensive experience acquiring, financing, developing and managing hotel, multifamily, office, and retail real estate assets throughout the country have provided Mr. Emery with the experience, skills and attributes necessary to effectively carry out his duties and responsibilities as a director. Consequently, our board of directors has determined that Mr. Emery is highly qualified to serve as one of our directors.

Ella S. Neyland, serves as our President and an affiliated director, positions she has held since October 2012. Ms. Neyland has also served as one of our independent directors, a position she held from October 2011 to September 2012. Ms. Neyland also serves as President and an affiliated director of Steadfast Apartment REIT, positions she has held since September 2013 and August 2013, respectively. In addition, Ms. Neyland serves as President and an affiliated director of Steadfast Apartment REIT III, positions she has held since August 2015 and January 2016, respectively. Ms. Neyland founded Thin Centers MD, or TCMD, which provides medically supervised weight loss programs, in June 2010, and served as its Chief Financial Officer from February 2011 to October 2011. Prior to founding TCMD, Ms. Neyland was a founder of Santa Barbara Medical Innovations, LLC, a privately owned company that owns and leaseslow-level lasers to medical groups, and served as its Chief Financial Officer from December 2008 to February 2011. From October 2004 to December 2008, Ms. Neyland was a financial advisor of Montecito Medical Investment Company, a private real estate acquisition and development company headquartered in Santa Barbara, California. From April 2001 to September 2004, Ms. Neyland served as the Executive Vice President, Treasurer and Investor Relations Officer of United Dominion Realty Trust, Inc., where she was responsible for capital market transactions, banking relationships and presentations to investors and Wall Street analysts. Ms. Neyland also served as a voting member of the Investment Committee of United Dominion Realty Trust, Inc. that approved the repositioning of over $3 billion

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of investments. Prior to working at United Dominion Realty Trust, Inc., Ms. Neyland served as the Chief Financial Officer at Sunrise Housing, Ltd, a privately owned apartment development company, from November 1999 to March 2001. Ms. Neyland also served as Executive Director of CIBC World Markets, which provides investment, research and corporate banking products, from November 1997 to October 1999. From July 1990 to October 1997, Ms. Neyland served as the Senior Vice President of Finance and the Vice President of Troubled Debt Restructures/Finance for the Lincoln Property Company, a commercial real estate development and management company. From November 1989 to July 1990, Ms. Neyland was the Vice President/Portfolio Manager at Bonnet Resources Corporation, a subsidiary of BancOne. Prior to her employment at Bonnet Resources Corporation, Ms. Neyland served on the board of directors and as the Senior Vice President/Director of Commercial Real Estate Lending at Commerce Savings Association, a subsidiary of the publicly held American Century Corporation, from May 1983 to March 1989. Ms. Neyland received a Bachelor of Science in Finance from Trinity University in San Antonio, Texas.

Our board of directors, excluding Ms. Neyland, has determined that Ms. Neyland’s prior service as a director and as chief financial officer have provided Ms. Neyland with the experience, skills and attributes necessary to effectively carry out her duties and responsibilities as a director. Consequently, our board of directors has determined that Ms. Neyland is highly qualified to serve as one of our directors.

Kevin J. Keating serves as our Chief Financial Officer and Treasurer, positions he has held since November 2017 and April 2011, respectively, and as our advisor’s Chief Accounting Officer since April 2011, where he has focused primarily on the accounting function and compliance responsibilities for us and our advisor. Mr. Keating has also served as Chief Financial Officer and Treasurer of Steadfast Apartment REIT since November 2017 and September 2013, respectively, and Steadfast Apartment REIT III since November 2017 and August 2015, respectively. In addition, Mr. Keating has served as the Treasurer of Steadfast Apartment Advisor, LLC since September 2013. Prior to joining us and our advisor, Mr. Keating served as Senior Audit Manager with BDO USA, LLP (formerly BDO Seidman, LLP), an accounting and audit firm, from June 2006 to January 2011. From June 2004 to June 2006, Mr. Keating served as Vice President and Corporate Controller of Endocare, Inc., a medical device manufacturer. Mr. Keating has extensive experience working with public companies and served as Assistant Controller and Audit Manager for Ernst & Young LLP from 1988 to 1999. Mr. Keating holds a Bachelor of Science, Accounting from St. John’s University in New York, New York and is a certified public accountant.

Ana Marie del Rio serves as our Secretary and Compliance Officer, positions she has held since our inception in May 2009. Ms. del Rio has also served as Secretary and Compliance Officer of Steadfast Apartment REIT since September 2013 and as Secretary and Compliance Officer of Steadfast Apartment REIT III since August 2015. Ms. del Rio also serves as the Chief Legal Officer for Steadfast Companies and manages the Risk Management and Legal Services Departments for Steadfast Companies. Ms. del Rio works closely with Steadfast Management Company, Inc. in the management and operation of Steadfast Companies’ residential apartment homes, especially in the area of compliance. Prior to joining Steadfast Companies in April 2003, Ms. del Rio was a partner in the public finance group at Orrick, Herrington & Sutcliffe, LLP, where she practiced from September 1993 to April 2003, representing both issuers and underwriters in financing single-family and multifamily housing and other types of public-private and redevelopment projects. From 1979 to 1993, Ms. del Rioco-owned and operated a campaign consulting and research company specializing in local campaigns and ballot measures. Ms. del Rio received a Juris Doctor from the University of the Pacific, McGeorge School of Law, and received a Master of Public Administration and a Bachelor of Arts from the University of Southern California. Ms. del Rio serves on the Board of Directors of Project Access and is a lecturer for the University of California, Irvine, School of Law.

Scot B. Barker serves as one of our independent directors, a position he has held since September 2009. From December 2003 to his retirement in December 2005, Mr. Barker served as President and Chief Operating Officer of GMAC Commercial Holding Corp., or GMACCH, one of the nation’s largest financiers of commercial real estate. Mr. Barker served as President of GMACCH Capital Markets Corp from 1998 to

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December 2003. During his tenure at GMACCH, Mr. Barker oversaw the firm’s real estate lending and investing activities in North America, Latin America, Asia and Europe. In 1978, Mr. Barker and several associates formed Newman and Associates, Inc., an investment banking firm specializing in financing affordable multifamily housing with tax exempt municipal securities. Mr. Barker served as Vice-President of Newman and Associates, Inc. from 1978 to 1984 and as President from 1984 to 1998, when Newman and Associates was acquired by GMACCH. Prior to founding Newman and Associates, Inc., Mr. Barker served as Vice-President with Gerwin & Co. from 1973 to 1978. Mr. Barker has been involved in a variety of professional andnot-for-profit groups primarily focused on housing related business. Mr. Barker currently serves on the board of directors of Mountain Asset Management, a wholly-owned subsidiary of The Great-West Life Assurance Company. Mr. Barker was a past president of the National Housing and Rehabilitation Association and a past member of the Federal National Mortgage Association (Fannie Mae) Housing Impact Advisory Council. Mr. Barker received a Bachelor of Arts from Colorado College and a Master of Business Administration from the University of Denver.

Our board of directors, excluding Mr. Barker, has determined that the prior leadership positions which Mr. Barker has held and Mr. Barker’s extensive experience with the financing of commercial real estate and multifamily housing have provided Mr. Barker with the experience, skills and attributes necessary to effectively carry out his duties and responsibilities as a director. Consequently, our board of directors has determined that Mr. Barker is highly qualified to serve as one of our directors.

Ned W. Brines serves as one of our independent directors, a position he has held since October 2012. Mr. Brines has also served as an independent director and audit committee chairman for Steadfast Apartment REIT III, since January 2016, and as an independent trustee of Stira Alcentra Global Credit Fund since March 2017. Mr. Brines is presently the Director of Investments for Arnel & Affiliates where he oversees the management of the assets of a private family with significant and diversified holdings. From 2012 to 2016, Mr. Brines served as the Chief Investment Officer for the CitizenTrust Wealth Management and Trust division of Citizens Business Bank, where he was responsible for the investment management discipline, process, products and related sources. In addition, in September 2008 Mr. Brines founded Montelena Asset Management, a California based registered investment advisor firm, and served as its Chief Investment Officer until December 2018. From June 2010 to July 2012, Mr. Brines served as a portfolio manager for Andell Holdings, a private family office with significant and diversified holdings. From May 2001 to September 2008, Mr. Brines served as a Senior Vice President and senior portfolio manager with Provident Investment Counsel in Pasadena managing their Small Cap Growth Fund with $1.6 billion in assets under management (AUM). Mr. Brines was with Roger Engemann & Associate in Pasadena from September 1994 to March 2001 in which he served as both an analyst and portfolio manager for their mid cap mutual fund and large cap Private Client business as the firm grew from $3 billion to over $19 billion in AUM. Mr. Brines earned a Master of Business Administration degree from the University of Southern California and a Bachelor of Science degree from San Diego State University. Mr. Brines also holds the Chartered Financial Analyst (CFA) designation and is involved in various community activities including serving on the investment committee of City of Hope as well as the Orange County Regional Counsel for San Diego State University.

Our board of directors, excluding Mr. Brines, has determined that Mr. Brines’ prior service as a director and as chief investment officer have provided Mr. Brines with the experience, skills and attributes necessary to effectively carry out his duties and responsibilities as a director. Consequently, our board of directors has determined that Mr. Brines is highly qualified to serve as one of our directors.

Don B. Saulic serves as one of our independent directors, a position he has held since August 2015. Mr. Saulic has been actively involved in real estate and financial services for over 30 years. Mr. Saulic currently serves as Partner for The Bahnsen Group, LLC, a position he has held since August 2015. In his role, Mr. Saulic provides comprehensive financial planning, investment advisory, and risk management to high net worth investors, businesses and institutions. From April 2013 to August 2015, Mr. Saulic served as a Private Wealth Advisor at Capstone Partners Financial and Insurance Services, LLC. From June 2012 to August 2015, Mr. Saulic served as Chief Executive Officer for King Crown Capital Corporation, a company providing strategic

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business planning and consulting services. From January 2013 to April 2014, Mr. Saulic was a Private Wealth Advisor for Stephen A. Kohn & Associates, LTD. In his role, Mr. Saulic provided financial planning and investment advisory services. From June 2006 to March 2014, Mr. Saulic served as President and Chief Operating Officer for Cornerstone Ventures, Inc., a real estate investment company. In his role, he helped manage real estate and wholesale distribution operations, including private client services, compliance, investor relations, human resources, information technology, and administration. From June 2012 to March 2013, Mr. Saulic was Chief Operating Officer for Healthcare Real Estate Partners, LLC, a company focused on acquiring and developing healthcare real estate. In his role, Mr. Saulic helped in managing company operations. From March 2008 to December 2012, Mr. Saulic was Chief Operating Officer for Pacific Cornerstone Capital, Inc. In his role, he managed sales operations, compliance, technology and investment services. From 1987 to 2008, Mr. Saulic served in Chief Information Officer roles for Corinthian Colleges, Inc., North American Van Lines, Inc., BAX Global, and Budget Rent a Car Corporation. Prior to 1987 he worked in the financial services industry in management positions with Ernst and Young, GATX Corporation and Kemper Financial Services. Mr. Saulic earned a Masters of Business Administration from DePaul University, a Bachelor of Science in Accounting with a minor in Economics from Illinois State University, and is a Certified Financial Planner^®, a Certified Public Accountant and a member of the American Institute of CPAs. Mr. Saulic is involved in various community activities and is a Board Member for Vanguard University, YMCA, and the Forum of Christian Business Leaders.

Our board of directors, excluding Mr. Saulic, has determined that the prior leadership positions which Mr. Saulic has held and Mr. Saulic’s extensive real estate and investment management experience have provided Mr. Saulic with the experience, skills and attributes necessary to effectively carry out his duties and responsibilities as a director. Consequently, our board of directors has determined that Mr. Saulic is highly qualified to serve as one of our directors.

The Audit Committee

Our board of directors has established an audit committee. The audit committee’s function is to assist our board of directors in fulfilling its responsibilities by overseeing: (1) the integrity of our financial statements, (2) our compliance with legal and regulatory requirements, (3) our independent auditors’ qualifications and independence and (4) the performance of the independent auditors and our internal audit function. The members of the audit committee are Scot B. Barker, Ned W. Brines and Don B. Saulic. All of the members of the audit committee are “independent” as defined by our charter. Our shares are not listed for trading on any national securities exchange and therefore our audit committee members are not subject to the independence requirements of the New York Stock Exchange, or NYSE, or any other national securities exchange. However, each member of our audit committee is “independent” as defined by the NYSE. All members of the audit committee have significant financial and/or accounting experience. Our board of directors has determined that Mr. Brines satisfies the SEC’s requirements for and serves as our “audit committee financial expert.”

Investment Committee

Our board of directors has established an investment committee. Our board of directors has delegated to the investment committee: (1) certain responsibilities with respect to investment in specific investments proposed by our advisor and (2) the authority to review our investment policies and procedures on an ongoing basis. The investment committee must at all times be comprised of at least three members and a majority of independent directors. The current members of the investment committee are Rodney F. Emery, Scot B. Barker and Don B. Saulic, with Mr. Emery serving as the chairman of the investment committee.

With respect to investments, the investment committee has the authority to approve all real property acquisitions, developments and dispositions, including real property portfolio acquisitions, developments and dispositions, as well as all real estate-related investments and all investments consistent with our investment objectives, for a purchase price, total project cost or sales price of up to 10% of the cost of our net assets as of the date of investment.

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Valuation Committee

Our board of directors has established a valuation committee. The valuation committee’s function, as recommended by the IPA, is to perform the following functions: (1) ratify and approve the engagement of an independent third-party valuation firm, its scope of work and any amendments thereto, (2) review and approve the proposed valuation process and methodology to be used to determine a valuation, (3) review the reasonableness of the valuation or range of value resulting from the process and (4) recommend the final proposed valuation for approval by the board of directors. The members of the valuation committee are Scot B. Barker, Ned W. Brines, and Don B. Saulic, with Mr. Brines serving as the chairman of the valuation committee.

Special Committee

Our board of directors established a special committee. The special committee was formed for the purpose of reviewing, considering, investigating, evaluating and, if deemed appropriate by the special committee, negotiating strategic alternatives. The members of the special committee are Scot B. Barker, Ned W. Brines and Don B. Saulic, with Mr. Barker serving as the chairman of the special committee.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires each director, officer and individual beneficially owning more than 10% of our common stock to file with the SEC, within specified time frames, initial statements of beneficial ownership (Form 3) of our common stock and statements of changes in beneficial ownership (Forms 4 and 5) of our common stock. These specified time frames require the reporting of changes in ownership within two business days of the transaction giving rise to the reporting obligation. Reporting persons are required to furnish us with copies of all Section 16(a) forms filed with the SEC. Based solely on a review of the copies of such forms furnished to us during and with respect to the fiscal year ended December 31, 2018, or written representations that no additional forms were required, we believe that all required Section 16(a) filings were timely and correctly made by reporting persons during the year ended December 31, 2018.

Code of Conduct and Ethics

We have adopted a Code of Ethics that applies to all of our executive officers and directors, including but not limited to, our principal executive officer, principal financial officer and principal accounting officer. Our Code of Ethics can be found at our website:http://www.steadfastreits.com.

ITEM 11. EXECUTIVE COMPENSATION

Compensation of Executive Officers

Our executive officers do not receive compensation directly from us for services rendered to us and we do not intend to pay any compensation to our executive officers. We do not reimburse our advisor directly or indirectly for the salary or other compensation paid to any of our executive officers. As a result, we do not, nor has our board of directors considered, a compensation policy for our executive officers. Accordingly, we have not included a Compensation Discussion and Analysis in this annual report or other related disclosures pursuant to Item 402 of RegulationS-K and paragraphs (e)(4) and (e)(5) of Item 407 of RegulationS-K with respect to our executive officers. Our executive officers are officers and/or employees of, or hold an indirect ownership interest in our advisor, and/or its affiliates, and our executive officers are compensated by these entities, in part, for their services to us. See Item 13. “Certain Relationships and Related Transactions, and Director Independence—Certain Transactions with Related Persons” for a discussion of the fees paid to our advisor and its affiliates.

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Compensation of Directors

If a director is also one of our executive officers or an affiliate of our advisor, we do not pay any compensation to that person for services rendered as a director. The amount and form of compensation payable to our independent directors for their service to us is determined by our board of directors, based upon recommendations from our advisor. Four of our executive officers, Messrs. Rodney F. Emery and Kevin Keating and Mses. Ana Marie del Rio and Ella Neyland, manage, control or are affiliated with our advisor, and through our advisor, they are involved in recommending the compensation to be paid to our independent directors.

We have provided below certain information regarding compensation earned by or paid to our directors during fiscal year December 31, 2018:

Name	Fees Earned or Paid in Cash in 2018(1)		Stock Awards (2)		Option Awards		Non-Equity Incentive Plan Compensation		Change in Pension Value and Nonqualified Deferred Compensation		All Other Compensation (3)		Total
Scot B. Barker (4)(5)	$	170,001	$	24,600	$	—	$	—	$	—	$	4,525	$	199,126
Ned W. Brines (4)(5)		179,998		24,600		—		—		—		—		204,598
Don B. Saulic(4)(5)		167,001		24,600		—		—		—		—		191,601
Ella S. Neyland(6)		—		—		—		—		—		—		—
Rodney F. Emery (6)		—		—		—		—		—		—		—
	$	517,000	$	73,800	$	—	$	—	$	—	$	4,525	$	595,325

(1) The amounts shown in this column include payments made to members of the special committee, which was formed during the year ended December 31, 2018. The members of the special committee are our independent directors. It was agreed that each independent director will receive aone-time retainer of $60,000, with the special committee chairperson receiving an additionalone-time retainer of $5,000. In addition, each member of the special committee receives $2,500 for eachin-person committee meeting attended and $1,000 for each teleconference meeting attended.

(2) The amounts shown in this column reflect the aggregate fair value of shares of restricted stock granted under our Independent Directors Compensation Plan (described below), computed as of the grant date in accordance with Financial Accounting Standards Board Accounting Standards Codification Topic 718.

(3) Amount represents reimbursement of expenses incurred by directors to attend various board of directors’ meetings.

(4) Independent Directors.

(5) On August 9, 2018, each of our three independent directors was granted 2,500 shares of restricted common stock in connection with theirre-election to the board of directors pursuant to our Independent Directors Compensation Plan (described below). The grant date fair value of the stock was $9.84 per share for an aggregate amount of $24,600 for each independent director. Of these shares of restricted common stock granted in 2018, each independent director had 1,875 shares of restricted common stock that remained unvested as of December 31, 2018.

(6) Directors who are also our executive officers or executive officers of our affiliates do not receive compensation for services rendered as a director.

Cash Compensation to Independent Directors

We pay each of our independent directors:

• an annual retainer of $65,000 (the audit committee chairperson receives an additional $10,000 annual retainer);

• $3,000 for eachin-person board of directors meeting attended;

• $2,000 for eachin-person committee meeting attended; and

• $1,000 for each teleconference meeting of the board of directors or committee.

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Under the Independent Directors Compensation Plan, directors may elect to receive their retainers and meeting fees in cash or fully vested restricted stock, provided that their election is made prior to the plan year in which retainers and meeting fees are earned.

Equity Plan Compensation to Independent Directors

We have approved and adopted the Steadfast Income REIT, Inc. Independent Directors Compensation Plan, or the Plan, which operates as asub-plan of Steadfast Income REIT, Inc. 2009 Incentive Plan, or the Incentive Plan. Under the Plan and subject to such Plan’s conditions and restrictions, each of our then independent directors was entitled to receive 5,000 shares of restricted common stock in connection with the initial meeting of the full board of directors. Our initial board of directors, and each of the independent directors, agreed to delay the initial grant of restricted stock until we raised $2,000,000 in gross offering proceeds. Each new independent director that joins our board of directors receives 5,000 shares of restricted common stock upon election to our board of directors. In addition, on the date following an independent director’sre-election to our board of directors, he or she receives 2,500 shares of restricted common stock. Grants of restricted stock are subject to share availability under the Incentive Plan. The shares of restricted common stock granted pursuant to the Plan generally vest in four equal annual installments beginning on the date of grant and ending on the third anniversary of the date of grant; provided, however, that the restricted stock will become fully vested on the earlier to occur of: (1) the termination of the independent director’s service as a director due to his or her death or “disability”, or (2) our “change in control” (as such terms are defined in the Incentive Plan) or as otherwise provided in the Plan.

Compensation Committee Interlocks and Insider Participation

We currently do not have a compensation committee of our board of directors because we do not pay any compensation to our officers. There are no interlocks or insider participation as to compensation decisions required to be disclosed pursuant to SEC regulations.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Equity Compensation Plan Information

The following table provides information about our common stock that may be issued upon the exercise of options, warrants and rights under the Incentive Plan as of December 31, 2018.

Plan Category	Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights		Weighted-Average Exercise Price of Outstanding Options, Warrants and Rights		Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans
Equity compensation plans approved by security holders:		—		—		898,500
Equity compensation plans not approved by security holders:		N/A		N/A		N/A
Total		—		—		898,500

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Security Ownership of Certain Beneficial Owners

The following table shows, as of March 7, 2019, the amount of our common stock beneficially owned (unless otherwise indicated) by: (1) any person who is known by us to be the beneficial owner of more than 5% of the outstanding shares of our common stock, (2) our directors, (3) our executive officers, and (4) all of our directors and executive officers as a group.

Name and Address of Beneficial Owner(1)	Amount and Nature of Beneficial Ownership (2)		Percentage
Rodney F. Emery(3)		510,504		*
Scot B. Barker		42,052		*
Don B. Saulic		12,500		*
Ned W. Brines		29,956		*
Ella S. Neyland		9,900		*
Kevin J. Keating		4,706		*
Ana Marie del Rio		5,496		*
All officers and directors as a group (seven persons)		615,114		*

* Less than 1% of the outstanding common stock.

(1) The address of each named beneficial owner is c/o Steadfast Income REIT, Inc., 18100 Von Karman Avenue, Suite 500, Irvine, CA, 92612.

(2) None of the shares are pledged as security.

(3) Consists of 22,223 shares owned by Steadfast REIT Investments, LLC, and 488,281 shares owned by Steadfast Income Advisor, LLC, which are each primarily indirectly owned and controlled by Rodney F. Emery.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

Certain Transactions with Related Persons

The following describes all transactions during the year ended December 31, 2018, involving us, our directors, our advisor, our sponsor and any affiliate thereof and all such proposed transactions. See also Note 9 (Related Party Arrangements) to the consolidated financial statements included in this annual report. Our independent directors are specifically charged with and have examined the fairness of such transactions to our stockholders, and have determined that all such transactions are fair and reasonable to us.

Ownership Interests

On June 12, 2009, our sponsor, Steadfast REIT Investments, LLC, purchased 22,223 shares of our common stock for an aggregate purchase price of $200,007 and was admitted as our initial stockholder. Our sponsor is majority owned and controlled indirectly by Rodney F. Emery, our chairman and chief executive officer. On July 10, 2009, our advisor purchased 1,000 shares of our convertible stock for an aggregate purchase price of $1,000. As of December 31, 2018, our advisor owned 100% of our outstanding convertible stock. We are the general partner of our operating partnership and our advisor has made a $1,000 capital contribution to our operating partnership as the initial limited partner.

Our convertible stock will convert into shares of our common stock if and when: (A) we have made total distributions on the then outstanding shares of our common stock equal to the original issue price of those shares plus an aggregate 8.0% cumulative,non-compounded, annual return on the original issue price of those shares, (B) we list our common stock for trading on a national securities exchange or (C) our advisory agreement is terminated or not renewed (other than for “cause” as defined in our advisory agreement). In the event of a termination ornon-renewal of our advisory agreement for cause, the convertible stock will be redeemed by us for

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$1.00. In general, each share of our convertible stock will convert into a number of shares of common stock equal to 1/1000 of the quotient of: (A) 10% of the excess of (1) our “enterprise value” (as defined in our charter) plus the aggregate value of distributions paid to date on the then outstanding shares of our common stock over (2) the aggregate purchase price paid by stockholders for those outstanding shares of common stock plus an 8.0% cumulative,non-compounded, annual return on the original issue price of those outstanding shares, divided by (B) our enterprise value divided by the number of outstanding shares of common stock on anas-converted basis, in each case calculated as of the date of the conversion. Shares of our convertible stock are not paid dividends and as of December 31, 2018, all shares of convertible stock remained outstanding.

Additionally, on June 11, 2014, we entered into a restricted stock agreement with our advisor whereby we issued to our advisor 488,281.25 restricted shares of our common stock at a fair market value of $10.24 per share in satisfaction of certain deferred fees due to the advisor in the aggregate amount of $5,000,000. Pursuant to the restricted stock agreement, the shares of restricted stock vested and becamenon-forfeitable 50% at December 31, 2015 and 50% at December 31, 2016.

Our Relationships with our Advisor and our Sponsor

Steadfast Income Advisor, LLC is our advisor and, as such, manages ourday-to-day operations and our portfolio of properties and real estate-related assets. Our advisor sources and presents investment opportunities to our board of directors. Our advisor also provides investment management, marketing, investor relations and other administrative services on our behalf. Our advisor is owned by our sponsor. Mr. Emery, our chairman and chief executive officer, indirectly controls our sponsor, our advisor and our dealer manager. Ms. Ana Marie del Rio, our Secretary, owns an indirect 7% interest in our sponsor, our advisor and our dealer manager. Crossroads Capital Multifamily, LLC, or Crossroads Capital Multifamily, owns a 25% membership interest in our sponsor. Pursuant to the Third Amended and Restated Operating Agreement of our sponsor, effective as of January 1, 2014, all distributions to Crossroads Capital Multifamily are subordinated to distributions to the other member of our sponsor, Steadfast REIT Holdings, LLC, or Steadfast Holdings, until Steadfast Holdings has received an amount equal to certain expenses, including certain organization and offering costs, incurred by Steadfast Holdings and its affiliates on our behalf.

All of our other officers and directors, other than our independent directors, are officers of our advisor and officers, limited partners and/or members of our sponsor and other affiliates of our advisor.

We and our operating partnership have entered into the advisory agreement with our advisor and our operating partnership which has aone-year term expiring November 15, 2019, subject to an unlimited number of successiveone-year renewals upon mutual consent of the parties. We may terminate the advisory agreement without cause or penalty upon 60 days’ written notice and immediately upon fraud, criminal conduct, willful misconduct, gross negligence or material breach of the advisory agreement by our advisor or our advisor’s bankruptcy. If we terminate the advisory agreement, we will pay our advisor all unpaid advances for operating expenses and all earned but unpaid fees.

Services provided by our advisor under the terms of the advisory agreement include the following:

• finding, presenting and recommending investment opportunities to us consistent with our investment policies and objectives;

• making investment decisions for us, subject to the limitations in our charter and the direction and oversight of our board of directors;

• structuring the terms and conditions of our investments, sales and joint ventures;

• acquiring investments on our behalf in compliance with our investment objectives and policies;

• sourcing and structuring our loan originations;

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• arranging for financing and refinancing of investments;

• entering into service agreements for our loans;

• supervising and evaluating each loan servicer’s and property manager’s performance;

• reviewing and analyzing the operating and capital budgets of the properties underlying our investments and the properties we may acquire;

• entering into leases and service contracts for our properties;

• assisting us in obtaining insurance;

• generating our annual budget;

• reviewing and analyzing financial information for each of our assets and our overall investment portfolio;

• formulating and overseeing the implementation of strategies for the administration, promotion, management, financing and refinancing, marketing, servicing and disposition of our investments;

• performing investor relations services;

• maintaining our accounting and other records and assisting us in filing all reports required to be filed with the SEC, the Internal Revenue Service and other regulatory agencies;

• engaging and supervising the performance of our agents, including our registrar and transfer agent; and

• performing any other services reasonably requested by us.

The above summary is provided to illustrate the material functions that our advisor performs for us as an advisor and is not intended to include all of the services that may be provided to us by our advisor, its affiliates or third parties. The advisor has also entered into a Services Agreement with Crossroads Capital Advisors, LLC, or Crossroads Capital Advisors, an affiliate of Crossroads Capital Multifamily, whereby Crossroads Capital Advisors provides advisory services to us on behalf of our advisor.

Fees and Expense Reimbursements Paid to our Advisor

Pursuant to the terms of our advisory agreement, we pay our advisor the fees described below.

• We pay our advisor an acquisition fee of 2.0% of: (1) the total cost of investment, as defined in connection with the investigation, selection and acquisition (by purchase, investment or exchange) of any type of real property or real estate-related asset; provided, however, that the total acquisition fee payable by us to our advisor or its affiliates shall equal 0.5% of the cost of investment in the event that proceeds from a prior sale of an investment are used to fund the acquisition of an investment, or (2) our allocable cost of a real property or real estate-related asset acquired in a joint venture, in each case including purchase price, acquisition expenses and any debt attributable to such investments. For the year ended December 31, 2018, we incurred and paid acquisition fees of $705,722 in connection with the acquisition of two multifamily properties.

• We pay our advisor an annual investment management fee that is payable monthly in an amount equal toone-twelfth of 0.8% of: (1) the cost of real properties and real estate-related assets acquired directly by us or (2) our allocable cost of each real property or real estate-related asset acquired through a joint venture. The investment management fee is calculated including acquisition fees, acquisition expenses, cost of development, construction or improvement and any debt attributable to such investments, or our proportionate share thereof in the case of investments made through joint ventures. For the year ended December 31, 2018, we incurred investment management fees to our advisor of $9,799,335. During the same period, we paid $8,158,850 in investment management fees to our advisor.

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• We pay our advisor a disposition fee in connection with a sale of an investment and in the event of the sale of the entire Company, which we refer to as a “final liquidity event,” in either case when our advisor or its affiliates provides a substantial amount of services as determined by a majority of our independent directors. With respect to a sale of an investment, we pay our advisor a disposition fee equal to 1.5% of the contract sales price of the investment sold. With respect to a final liquidity event, we pay our advisor a disposition fee equal to (i) 0.5% of the total consideration paid in a final liquidity event if the price per share paid to stockholders is less than or equal to $9.00; (ii) 0.75% of the total consideration paid in a final liquidity event if the price per share paid to stockholders is between $9.01 and $10.24; (iii) 1.00% of the total consideration paid in a final liquidity event if the price per share paid to stockholders is between $10.25 and $11.24; (iv) 1.25% of the total consideration paid in a final liquidity event if the price per share paid to stockholders is between $11.25 and $12.00; and (v) 1.50% of the total consideration paid in a final liquidity event if the price per share paid to stockholders is greater than or equal to $12.01; provided, however, that the price per share paid to stockholders as listed in each of clauses (i) through (v) above shall be adjusted for any special distributions, stock splits, combinations, recapitalizations or any similar transaction with respect to our shares. Our charter limits the maximum amount of disposition fees payable to our advisor for the sale of any real property to the lesser ofone-half of the brokerage commission paid or 3% of the contract sales price, but in no event shall the total real estate commissions paid, including any disposition fees payable to our advisor, exceed 6% of the contract sales price. With respect to a property held in a joint venture, the foregoing commission will be reduced to a percentage of such amounts reflecting our economic interest in the joint venture. For the year ended December 31, 2018, we incurred disposition fees to our advisor of $5,893,800. During the same period, we paid $4,407,675 in disposition fees to our advisor.

• We pay our advisor a loan coordination fee in connection with any financing or refinancing of any debt (in each case, other than at the time of the acquisition of an investment) equal to 0.50% of the initial amount of new debt financed or the amount of any debt refinanced or our proportionate share of the initial amount of new debt financed or the amount of any debt refinanced in the case of investments made through a joint venture. For the year ended December 31, 2018, we incurred loan coordination fees to our advisor of $422,160. During the same period, we paid $508,835 in loan coordination fees to our advisor.

In addition to the fees we pay to our advisor pursuant to the advisory agreement, we also reimburse our advisor and its affiliates for the costs and expenses described below.

• Subject to the 2%/25% Guidelines discussed below, we reimburse our advisor for the cost of administrative services, including personnel costs and our allocable share of other overhead of the advisor such as rent and utilities; provided, however, that no reimbursement shall be made for costs of such personnel to the extent that personnel are used in transactions for which our advisor receives an acquisition fee, investment management fee or disposition fee or for the employee costs our advisor pays to our executive officers. For the year ended December 31, 2018, $960,376 was reimbursed to our advisor for administrative services.

• We reimburse our advisor for acquisition expenses incurred related to the selection and acquisition of real property investments and real estate-related investments. For the year ended December 31, 2018, we incurred acquisition expenses of $689,523. During the same period, we reimbursed $478,335 of acquisition expenses.

2%/25% Guidelines

As described above, our advisor and its affiliates are entitled to reimbursement of actual expenses incurred for administrative and other services provided to us for which they do not otherwise receive a fee. However, we will not reimburse our advisor or its affiliates at the end of any fiscal quarter for “total operating expenses” that for the four consecutive fiscal quarters then ended, or the expense year, exceeded the greater of (1) 2% of our

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average invested assets or (2) 25% of our net income, which we refer to as the “2%/25% Guidelines,” and our advisor must reimburse us quarterly for any amounts by which our total operating expenses exceed the 2%/25% Guidelines in the expense year, unless our independent directors have determined that such excess expenses were justified based on unusual andnon-recurring factors.

For purposes of the 2%/25% Guidelines, “total operating expenses” means all costs and expenses paid or incurred by us, as determined under GAAP, that are in any way related to our operation or to corporate business, including advisory fees, but excluding (1) 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 the listing of our shares of common stock, (2) interest payments, (3) taxes,(4) non-cash expenditures such as depreciation, amortization and bad debt reserves, (5) incentive fees, (6) acquisition fees and acquisition expenses, (7) real estate commissions on the sale of a real property, and (8) other fees and expenses connected with the acquisition, disposition, management and ownership of real estate interests, mortgage loans or other property (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair, and improvement of property).

At December 31, 2018, our total operating expenses, as defined above, did not exceed the 2%/25% Guidelines.

Fees and Reimbursements Paid to Our Property Manager

• We have entered into property management agreements with Steadfast Management Company, Inc., or the property manager, an affiliate of our sponsor, with respect to the management of 32 of our multifamily properties. Pursuant to each property management agreement, we pay the property manager a monthly property management fee equal to a certain percentage, which ranges from 2.50% to 3.50%, of each property’s gross revenues (as defined in the respective property management agreements) for each month. The property manager also receives an oversight fee of 1% of gross revenues at certain of the properties at which it does not serve as a property manager. Each property management agreement has an initial one year term and will continue thereafter on amonth-to-month basis unless either party gives 60 days’ prior notice of its desire to terminate the property management agreement, provided that we may terminate each property management agreement upon an uncured breach of the agreement upon 30 days’ prior written notice to the property manager. For the year ended December 31, 2018, we incurred property management fees of $4,059,216 to our property manager. During the same period, we paid property management fees of $4,126,954 to our property manager.

• The property management agreements specify that we are to reimburse the property manager for the salaries and related benefits ofon-site personnel. For the year ended December 31, 2018, we reimbursedon-site personnel costs of $13,040,470 to our property manager.

• The property management agreements also specify certain other fees payable to the property manager for benefit administration, information technology infrastructure, licenses, support and training services and capital expenditures. For the year ended December 31, 2018, we paid other fees of $1,869,080 to our property manager.

• Upon entering into the joint venture with BREIT, the property manager entered into Property Management Agreements with each wholly-owned subsidiary of the joint venture that directly owned a property in the LANDS Portfolio. Effective December 10, 2018, the joint venture terminated the Property Management Agreements with the property manager. The property management fee payable by the joint venture is a component of equity in loss of unconsolidated joint venture in the consolidated statements of operations.

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Payments to Our Construction Manager

• We have entered into construction management agreements with Pacific Coast Land and Construction, Inc., or the construction manager, an affiliate of our sponsor, in connection with the planned renovation for certain of our properties. The construction management fee payable with respect to each property pursuant to construction management agreements ranges from 6.0% to 12.0% of the costs of the improvements for which the construction manager has oversight authority. Generally, each construction management agreement has a term equal to the planned renovation timeline unless either party gives 30 days’ prior notice of its desire to terminate the construction management agreement. For the year ended December 31, 2018, we incurred construction management fees of $209,829 to our construction manager. During the same period, we paid construction management fees of $213,652 to our construction manager.

• The construction management agreements also specify that we are to reimburse the construction manager for the salaries and related benefits of certain of its employees for time spent working on capital improvements and renovations. For the year ended December 31, 2018, we reimbursed labor costs of $95,730 to our construction manager.

Other Transactions

• We deposit amounts with an affiliate of our sponsor to fund a prepaid insurance deductible account to cover the cost of required insurance deductibles across all properties owned by us and other affiliated entities of our sponsor. Upon filing a major claim, proceeds from the insurance deductible account may be used by us or another affiliate of our sponsor. In addition, we deposit amounts with an affiliate of our sponsor to cover the cost of property insurance across certain of our properties. For the year ended December 31, 2018, we funded $1,555,825 of property insurance to an affiliate of our sponsor. Additionally, for the year ended December 31, 2018, we did not receive any proceeds from an affiliate of our sponsor upon filing a major claim.

• Certain of our subsidiaries and the property manager were named as defendants in two Texas class action lawsuits alleging violations of the Texas Water Code, collectively, the “Actions.” Our subsidiaries and the property manager disputed plaintiffs’ claims in the Actions; however, to avoid the time and expense associated with defending the Actions, our subsidiaries and other affiliated Steadfast entities, collectively, the “Steadfast Parties,” entered into Settlement Agreements with the plaintiffs that provided for a settlement payment to the class members and a release of claims by plaintiffs and class members against the Steadfast Parties. In connection with the Settlement Agreements, on April 17, 2017, the Steadfast Parties entered into a contribution, settlement and release agreement whereby all agreed to an allocation of all costs related to the actions and their settlements and a release of all claims a Steadfast Party may have against any other Steadfast Party. Our proportionate share of the settlements was $378,405, which consisted of funds used to pay a portion of (1) the settlement payments to the plaintiffs and class members in the actions and (2) legal costs, less insurance proceeds. During the year ended December 31, 2018, we had recorded $305,000 as reimbursement for funds spent by us in excess of its proportionate share, all of which was collected from other Steadfast Parties as of December 31, 2018.

Currently Proposed Transactions

Other than as described above, there are no currently proposed material transactions with related persons other than those covered by the terms of the agreements described above.

Policies and Procedures for Transactions with Related Persons

In order to reduce or eliminate certain potential conflicts of interest, our charter and our advisory agreement contain restrictions and conflict resolution procedures relating to transactions we enter into with our advisor, our

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directors or their respective affiliates. Each of the restrictions and procedures that apply to transactions with our advisor and its affiliates will also apply to any transaction with any entity or real estate program controlled by our advisor and its affiliates. As a general rule, any related party transaction must be approved by a majority of the directors (including a majority of independent directors) not otherwise interested in the transaction. In determining whether to approve or authorize a particular related party transaction, these persons will consider whether the transaction between us and the related party is fair and reasonable to us and has terms and conditions no less favorable to us than those available from unaffiliated third parties.

We have also adopted a Code of Ethics that applies to each of our officers and directors, which we refer to as “covered persons.” The Code of Ethics sets forth certain conflicts of interest policies that limit and govern certain matters among us, the covered persons, our advisor and their respective affiliates.

Director Independence

Although our shares are not listed for trading on any national securities exchange, a majority of the members of our board of directors and all of the members of the audit committee are “independent” as defined by the NYSE. The NYSE standards provide that to qualify as an independent director, in addition to satisfying certain bright-line criteria, the board of directors must affirmatively determine that a director has no material relationship with us (either directly or as a partner, stockholder or officer of an organization that has a relationship with us). In addition, we have determined that these directors are independent pursuant to the definition of independence in our charter, which is based on the definition included in the North American Securities Administrators Association, Inc.’s Statement of Policy Regarding Real Estate Investment Trusts, as revised and adopted on May 7, 2007. Our board of directors has determined that Scot B. Barker, Don B. Saulic and Ned W. Brines each satisfies the bright-line criteria and that none has a relationship with us that would interfere with such person’s ability to exercise independent judgment as a member of our board of directors. None of these directors has ever served as (or is related to) an employee of ours or any of our predecessors or acquired companies or received any compensation from us or any such other entities except for compensation directly related to service as a director. Therefore, we believe that all of these directors are independent directors.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

Independent Registered Public Accounting Firm

During the years ended December 31, 2018 and 2017, Ernst & Young LLP, or Ernst & Young, served as our independent registered public accounting firm and provided us with certain tax and other services. Ernst & Young has served as our independent auditor since our formation.

Pre-Approval Policies

The audit committee charter imposes a duty on our audit committee topre-approve all auditing services performed for us by our independent auditors as well as all permittednon-audit services in order to ensure that the provision of such services does not impair the auditors’ independence. In determining whether or not topre-approve services, our audit committee will consider whether the service is a permissible service under the rules and regulations promulgated by the SEC. Our audit committee, may, in its discretion, delegate to one or more of its members the authority topre-approve any audit ornon-audit services to be performed by the independent auditors, provided any such approval is presented to and approved by the full audit committee at its next scheduled meeting.

All services rendered by Ernst & Young for the years ended December 31, 2018 and 2017 werepre-approved in accordance with the policies and procedures described above.

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Principal Independent Registered Public Accounting Firm Fees

Our audit committee reviewed the audit andnon-audit services performed by Ernst & Young, as well as the fees charged by Ernst & Young for such services. In its review of thenon-audit service fees, our audit committee considered whether the provision of such services is compatible with maintaining the independence of Ernst & Young. The aggregate fees billed to us for professional accounting services, including the audit of our annual financial statements by Ernst & Young for the years ended December 31, 2018 and 2017, are set forth in the table below.

	2018		2017
Audit fees	$	531,230	$	439,123
Audit-related fees		34,589		91,067
Tax fees		184,846		203,487
All other fees		1,720		665
Total	$	752,385	$	734,342

For purposes of the preceding table, Ernst & Young’s professional fees are classified as follows:

• Audit fees - These are fees for professional services performed for the audit of our annual financial statements and the required review of quarterly financial statements and other procedures performed by Ernst & Young in order for them to be able to form an opinion on our consolidated financial statements. These fees also cover services that are normally provided by independent auditors in connection with statutory and regulatory filings or engagements.

• Audit-related fees - These are fees for assurance and related services that traditionally are performed by independent auditors that are reasonably related to the performance of the audit or review of the financial statements, such as due diligence related to acquisitions and dispositions, attestation services that are not required by statute or regulation, internal control reviews and consultation concerning financial accounting and reporting standards.

• Tax fees - These are fees for all professional services performed by professional staff in our independent auditor’s tax division, except those services related to the audit of our financial statements. These include fees for tax compliance, tax planning and tax advice, including federal, state and local issues. Services may also include assistance with tax audits and appeals before the Internal Revenue Service and similar state and local agencies, as well as federal, state and local tax issues related to due diligence.

• All other fees - These are fees for any services not included in the above-described categories.

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PART IV

ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES

a. Financial Statement Schedules

See the Index to Financial Statements at pageF-1 of this report.

The following financial statement schedule is included herein at pageF- 44 of this report:

Schedule III - Real Estate Assets and Accumulated Depreciation and Amortization

b. Exhibits

EXHIBIT INDEX

Effective February 1, 2010, Steadfast Secure Income REIT, Inc., Steadfast Secure Income Advisor, LLC and Steadfast Secure Income REIT Operating Partnership, L.P. changed their names to Steadfast Income REIT, Inc., Steadfast Income Advisor, LLC and Steadfast Income REIT Operating Partnership, L.P., respectively. With respect to documents executed prior to the name change, the following Exhibit Index refers to the entity names used prior to the name changes in order to accurately reflect the names of the entities that appear on such documents.

The following exhibits are included, or incorporated by reference, in this Annual Report on Form10-K for the year ended December 31, 2018 (and are numbered in accordance with Item 601 of RegulationS-K).

Exhibit	Description
3.1	Third Articles of Amendment and Restatement of Steadfast Income REIT, Inc. (incorporated by reference to Exhibit 3.1 to Registrant’s Form8-K filed August 6, 2014)
3.2	Bylaws of Steadfast Income REIT, Inc. (incorporated by reference to Exhibit 3.2 to the Registrant’s Registration Statement on FormS-11, filed July 23, 2009, Commission FileNo. 333-160748)
4.1	Form of Subscription Agreement (incorporated by reference to Appendix B to the prospectus, dated July 9, 2010 of the Registrant)
4.2	Form of Distribution Reinvestment Plan (incorporated by reference to Appendix C to the prospectus, dated July 9, 2010, of the Registrant)
10.1	Amended and Restated Advisory Agreement, dated as of May 4, 2010, by and among Steadfast Income REIT, Inc., Steadfast Secure Income REIT Operating Partnership, L.P. and Steadfast Income Advisor, LLC (incorporated by reference to Exhibit 10.1 toPre-Effective Amendment No. 4 to the Registrant’s Registration Statement on FormS-11, filed May 6, 2010, Commission FileNo. 333-160748(“Pre-Effective Amendment No. 4”))
10.2	Amended and Restated Limited Partnership Agreement of Steadfast Income REIT Operating Partnership, L.P. (incorporated by reference to Exhibit 10.3 toPre-Effective Amendment No. 1 to the Registrant’s Registration Statement on FormS-11, filed October 15, 2009, Commission FileNo. 333-160748(“Pre-Effective Amendment No. 1”))
10.3	Steadfast Income REIT, Inc. 2009 Long-Term Incentive Plan (incorporated by reference to Exhibit 10.4 toPre-Effective Amendment No. 1)
10.4	Steadfast Income REIT, Inc. Independent Directors Compensation Plan (incorporated by reference to Exhibit 10.5 toPre-Effective Amendment No. 1)

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Exhibit	Description
10.5	Form of Restricted Stock Award Certificate (incorporated by reference to Exhibit 10.6 toPre-Effective Amendment No. 4)
10.6	Amendment No. 1 to the Amended and Restated Advisory Agreement, dated as of March 21, 2011, by and among Steadfast Income REIT, Inc., Steadfast Income REIT Operating Partnership, L.P. and Steadfast Income Advisor, LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s Annual Report on Form10-K filed March 22, 2011)
10.7	Amendment No. 2 to the Amended and Restated Advisory Agreement, dated as of April 11, 2012, by and among Steadfast Income REIT, Inc., Steadfast Income REIT Operating Partnership, L.P. and Steadfast Income Advisor, LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Form8-K filed April 16, 2012)
10.8	Amendment No. 3 to the Amended and Restated Advisory Agreement, dated as of March 13, 2013, by and among Steadfast Income REIT, Inc., Steadfast Income REIT Operating Partnership, L.P. and Steadfast Income Advisor, LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Form8-K filed March 25, 2013)
10.9	Amendment No. 4 to the Amended and Restated Advisory Agreement, dated as of May 14, 2013, by and among Steadfast Income REIT, Inc., Steadfast Income REIT Operating Partnership, L.P. and Steadfast Income Advisor, LLC (incorporated by reference to Exhibit 10.1 of the Registrant’s Form8-K filed May 17, 2013)
10.10	Amendment No. 5 to the Amended and Restated Advisory Agreement, dated as of March 12, 2014, by and among Steadfast Income REIT, Inc., Steadfast Income REIT Operating Partnership, L.P. and Steadfast Income Advisor, LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Form8-K filed March 13, 2014)
10.11	Amendment No. 6 to the Amended and Restated Advisory Agreement, dated as of June 11, 2014, by and among Steadfast Income REIT, Inc., Steadfast Income REIT Operating Partnership, L.P. and Steadfast Income Advisor, LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s Form8-K filed June 13, 2014)
10.12	Amendment No. 7 to the Amended and Restated Advisory Agreement, dated as of April 13, 2015, by and among Steadfast Income REIT, Inc., Steadfast Income REIT Operating Partnership, L.P. and Steadfast Income Advisor, LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Form8-K filed April 15, 2015)
10.13	Amendment No. 8 to the Amended and Restated Advisory Agreement, dated as of November 10, 2015, by and among Steadfast Income REIT, Inc., Steadfast Income REIT Operating Partnership, L.P. and Steadfast Income Advisor, LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Form8-K filed November 12, 2015)
10.14	Multifamily Loan and Security Agreement, made as of June 29, 2016, by and between SIR Heights, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.1 to the Registrant’s Form8-K filed July 5, 2016)
10.15	Multifamily Note, made as of June 29, 2016, by SIR Heights, LLC, in favor of PNC Bank, National Association (incorporated by reference to Exhibit 10.2 to the Registrant’s Form8-K filed July 5, 2016)
10.16	Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated as of June 29, 2016, by SIR Heights, LLC to Gary S. Farmer for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.3 to the Registrant’s Form8-K filed July 5, 2016)

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Exhibit	Description
10.17	Guaranty, dated as of June 29, 2016, by Steadfast Income REIT, Inc. to and for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.4 to the Registrant’s Form8-K filed July 5, 2016)
10.18	Assignment of Management Agreement and Subordination of Management Fees, dated as of June 29, 2016, by and among SIR Heights, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.5 to the Registrant’s Form8-K filed July 5, 2016)
10.19	Multifamily Loan and Security Agreement, made as of June 29, 2016, by and between SIR Huffmeister Villas, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.6 to the Registrant’s Form8-K filed July 5, 2016)
10.20	Multifamily Note, made as of June 29, 2016, by SIR Huffmeister Villas, LLC, in favor of PNC Bank, National Association (incorporated by reference to Exhibit 10.7 to the Registrant’s Form8-K filed July 5, 2016)
10.21	Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated as of June 29, 2016, by SIR Huffmeister Villas, LLC to Gary S. Farmer for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.8 to the Registrant’s Form8-K filed July 5, 2016)
10.22	Guaranty, dated as of June 29, 2016, by Steadfast Income REIT, Inc. to and for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.9 to the Registrant��s Form8-K filed July 5, 2016)
10.23	Assignment of Management Agreement and Subordination of Management Fees, dated as of June 29, 2016, by and among SIR Huffmeister Villas, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.10 to the Registrant’s Form8-K filed July 5, 2016)
10.24	Multifamily Loan and Security Agreement, made as of June 29, 2016, by and between SIR Kingwood Villas, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.11 to the Registrant’s Form8-K filed July 5, 2016)
10.25	Multifamily Note, made as of June 29, 2016, by SIR Kingwood Villas, LLC, in favor of PNC Bank, National Association (incorporated by reference to Exhibit 10.12 to the Registrant’s Form8-K filed July 5, 2016)
10.26	Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated as of June 29, 2016, by SIR Kingwood Villas, LLC to Gary S. Farmer for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.13 to the Registrant’s Form8-K filed July 5, 2016)
10.27	Guaranty, dated as of June 29, 2016, by Steadfast Income REIT, Inc. to and for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.14 to the Registrant’s Form8-K filed July 5, 2016)
10.28	Assignment of Management Agreement and Subordination of Management Fees, dated as of June 29, 2016, by and among SIR Kingwood Villas, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.15 to the Registrant’s Form8-K filed July 5, 2016)
10.29	Multifamily Loan and Security Agreement, made as of June 29, 2016, by and between SIR Waterford Riata, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.16 to the Registrant’s Form8-K filed July 5, 2016)

H-100

Exhibit	Description
10.30	Multifamily Note, made as of June 29, 2016, by SIR Waterford Riata, LLC, in favor of PNC Bank, National Association (incorporated by reference to Exhibit 10.17 to the Registrant’s Form8-K filed July 5, 2016)
10.31	Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated as of June 29, 2016, by SIR Waterford Riata, LLC to Gary S. Farmer for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.18 to the Registrant’s Form8-K filed July 5, 2016)
10.32	Guaranty, dated as of June 29, 2016, by Steadfast Income REIT, Inc. to and for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.19 to the Registrant’s Form8-K filed July 5, 2016)
10.33	Assignment of Management Agreement and Subordination of Management Fees, dated as of June 29, 2016, by and among SIR Waterford Riata, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.20 to the Registrant’s Form8-K filed July 5, 2016)
10.34	Multifamily Loan and Security Agreement, made as of June 29, 2016, by and between SIR Mansfield Landing, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.21 to the Registrant’s Form8-K filed July 5, 2016)
10.35	Multifamily Note, made as of June 29, 2016, by SIR Mansfield Landing, LLC, in favor of PNC Bank, National Association (incorporated by reference to Exhibit 10.22 to the Registrant’s Form8-K filed July 5, 2016)
10.36	Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated as of June 29, 2016, by SIR Mansfield Landing, LLC to Gary S. Farmer for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.23 to the Registrant’s Form8-K filed July 5, 2016)
10.37	Guaranty, dated as of June 29, 2016, by Steadfast Income REIT, Inc. to and for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.24 to the Registrant’s Form8-K filed July 5, 2016)
10.38	Assignment of Management Agreement and Subordination of Management Fees, dated as of June 29, 2016, by and among SIR Mansfield Landing, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.25 to the Registrant’s Form8-K filed July 5, 2016)
10.39	Multifamily Loan and Security Agreement, made as of June 29, 2016, by and between Brice Grove Apartments, LLC and Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.26 to the Registrant’s Form8-K filed July 5, 2016)
10.40	Multifamily Note, made as of June 29, 2016, by Brice Grove Apartments, LLC, in favor of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.27 to the Registrant’s Form8-K filed July 5, 2016)
10.41	Multifamily Mortgage, Assignment of Rents and Security Agreement, dated as of June 29, 2016, by Brice Grove Apartments, LLC to and for the benefit of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.28 to the Registrant’s Form8-K filed July 5, 2016)
10.42	Guaranty, dated as of June 29, 2016, by Steadfast Income REIT, Inc. to and for the benefit of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.29 to the Registrant’s Form8-K filed July 5, 2016)

H-101

Exhibit	Description
10.43	Assignment of Management Agreement and Subordination of Management Fees, dated as of June 29, 2016, by and among Brice Grove Apartments, LLC, Berkeley Point Capital LLC and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.30 to the Registrant’s Form8-K filed July 5, 2016)
10.44	Multifamily Loan and Security Agreement, made as of June 29, 2016, by and between SIR Grayson Ridge, LLC and Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.31 to the Registrant’s Form8-K filed July 5, 2016)
10.45	Multifamily Note, made as of June 29, 2016, by SIR Grayson Ridge, LLC, in favor of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.32 to the Registrant’s Form8-K filed July 5, 2016)
10.46	Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated as of June 29, 2016, by SIR Grayson Ridge, LLC to Melissa A. Johnson for the benefit of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.33 to the Registrant’s Form8-K filed July 5, 2016)
10.47	Guaranty, dated as of June 29, 2016, by Steadfast Income REIT, Inc. to and for the benefit of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.34 to the Registrant’s Form8-K filed July 5, 2016)
10.48	Assignment of Management Agreement and Subordination of Management Fees, dated as of June 29, 2016, by and among SIR Grayson Ridge, LLC, Berkeley Point Capital LLC and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.35 to the Registrant’s Form8-K filed July 5, 2016)
10.49	Multifamily Loan and Security Agreement, made as of June 29, 2016, by and between SIR Mallard Crossing, LLC and Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.36 to the Registrant’s Form8-K filed July 5, 2016)
10.50	Multifamily Note, made as of June 29, 2016, by SIR Mallard Crossing, LLC, in favor of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.37 to the Registrant’s Form8-K filed July 5, 2016)
10.51	Multifamily Mortgage, Assignment of Rents and Security Agreement, dated as of June 29, 2016, by SIR Mallard Crossing, LLC to and for the benefit of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.38 to the Registrant’s Form8-K filed July 5, 2016)
10.52	Guaranty, dated as of June 29, 2016, by Steadfast Income REIT, Inc. to and for the benefit of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.39 to the Registrant’s Form8-K filed July 5, 2016)
10.53	Assignment of Management Agreement and Subordination of Management Fees, dated as of June 29, 2016, by and among SIR Mallard Crossing, LLC, Berkeley Point Capital LLC and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.40 to the Registrant’s Form8-K filed July 5, 2016)
10.54	Multifamily Loan and Security Agreement, made as of June 30, 2016, by and between SIR Mapleshade, LLC and Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.41 to the Registrant’s Form8-K filed July 5, 2016)
10.55	Multifamily Note, made as of June 30, 2016, by SIR Mapleshade, LLC, in favor of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.42 to the Registrant’s Form8-K filed July 5, 2016)

H-102

Exhibit	Description
10.56	Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated as of June 30, 2016, by SIR Mapleshade, LLC to Melissa A. Johnson for the benefit of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.43 to the Registrant’s Form8-K filed July 5, 2016)
10.57	Guaranty, dated as of June 30, 2016, by Steadfast Income REIT, Inc. to and for the benefit of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.44 to the Registrant’s Form8-K filed July 5, 2016)
10.58	Assignment of Management Agreement and Subordination of Management Fees, dated as of June 30, 2016, by and among SIR Mapleshade, LLC, Berkeley Point Capital LLC and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.45 to the Registrant’s Form8-K filed July 5, 2016)
10.59	Multifamily Loan and Security Agreement, made as of June 30, 2016, by and between SIR Tapestry Park, LLC and Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.46 to the Registrant’s Form8-K filed July 5, 2016)
10.60	Multifamily Note, made as of June 30, 2016, by SIR Tapestry Park, LLC, in favor of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.47 to the Registrant’s Form8-K filed July 5, 2016)
10.61	Multifamily Mortgage, Assignment of Rents and Security Agreement, dated as of June 30, 2016, by SIR Tapestry Park, LLC to and for the benefit of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.48 to the Registrant’s Form8-K filed July 5, 2016)
10.62	Guaranty, dated as of June 30, 2016, by Steadfast Income REIT, Inc. to and for the benefit of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.49 to the Registrant’s Form8-K filed July 5, 2016)
10.63	Assignment of Management Agreement and Subordination of Management Fees, dated as of June 30, 2016, by and among SIR Tapestry Park, LLC, Berkeley Point Capital LLC and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.50 to the Registrant’s Form8-K filed July 5, 2016)
10.64	Multifamily Loan and Security Agreement, made as of June 30, 2016, by and between SIR Park Shore, LLC and Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.51 to the Registrant’s Form8-K filed July 5, 2016)
10.65	Multifamily Note, made as of June 30, 2016, by SIR Park Shore, LLC, in favor of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.52 to the Registrant’s Form8-K filed July 5, 2016)
10.66	Multifamily Mortgage, Assignment of Rents and Security Agreement, dated as of June 30, 2016, by SIR Park Shore, LLC to and for the benefit of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.53 to the Registrant’s Form8-K filed July 5, 2016)
10.67	Guaranty, dated as of June 30, 2016, by Steadfast Income REIT, Inc. to and for the benefit of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.54 to the Registrant’s Form8-K filed July 5, 2016)
10.68	Assignment of Management Agreement and Subordination of Management Fees, dated as of June 30, 2016, by and among SIR Park Shore, LLC, Berkeley Point Capital LLC and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.55 to the Registrant’s Form8-K filed July 5, 2016)

H-103

Exhibit	Description
10.69	Multifamily Loan and Security Agreement, made as of June 30, 2016, by and between SIR Carol Stream, LLC and Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.56 to the Registrant’s Form8-K filed July 5, 2016)
10.70	Multifamily Note, made as of June 30, 2016, by SIR Carol Stream, LLC, in favor of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.57 to the Registrant’s Form8-K filed July 5, 2016)
10.71	Multifamily Mortgage, Assignment of Rents and Security Agreement, dated as of June 30, 2016, by SIR Carol Stream, LLC to and for the benefit of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.58 to the Registrant’s Form8-K filed July 5, 2016)
10.72	Guaranty, dated as of June 30, 2016, by Steadfast Income REIT, Inc. to and for the benefit of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.59 to the Registrant’s Form8-K filed July 5, 2016)
10.73	Assignment of Management Agreement and Subordination of Management Fees, dated as of June 30, 2016, by and among SIR Carol Stream, LLC, Berkeley Point Capital LLC and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.60 to the Registrant’s Form8-K filed July 5, 2016)
10.74	Multifamily Loan and Security Agreement, made as of June 30, 2016, by and between SIR Cantare, LLC and Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.61 to the Registrant’s Form8-K filed July 5, 2016)
10.75	Multifamily Note, made as of June 30, 2016, by SIR Cantare, LLC, in favor of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.62 to the Registrant’s Form8-K filed July 5, 2016)
10.76	Multifamily Deed of Trust, Absolute Assignment of Leases and Rents and Security Agreement (Including Fixture Filing), dated as of June 30, 2016, by SIR Cantare, LLC to Joseph B. Pitts, Jr. for the benefit of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.63 to the Registrant’s Form8-K filed July 5, 2016)
10.77	Guaranty, dated as of June 30, 2016, by Steadfast Income REIT, Inc. to and for the benefit of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.64 to the Registrant’s Form8-K filed July 5, 2016)
10.78	Assignment of Management Agreement and Subordination of Management Fees, dated as of June 30, 2016, by and among SIR Cantare, LLC, Berkeley Point Capital LLC and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.65 to the Registrant’s Form8-K filed July 5, 2016)
10.79	Multifamily Loan and Security Agreement, made as of June 30, 2016, by and between SIR Stuart Hall, LLC and Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.66 to the Registrant’s Form8-K filed July 5, 2016)
10.80	Multifamily Note, made as of June 30, 2016, by SIR Stuart Hall, LLC, in favor of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.67 to the Registrant’s Form8-K filed July 5, 2016)
10.81	Multifamily Deed of Trust, Assignment of Rents and Security Agreement, dated as of June 30, 2016, by SIR Stuart Hall, LLC to Steven M. Leigh for the benefit of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.68 to the Registrant’s Form8-K filed July 5, 2016)
10.82	Guaranty, dated as of June 30, 2016, by Steadfast Income REIT, Inc. to and for the benefit of Berkeley Point Capital LLC (incorporated by reference to Exhibit 10.69 to the Registrant’s Form8-K filed July 5, 2016)

H-104

Exhibit	Description
10.83	Assignment of Management Agreement and Subordination of Management Fees, dated as of June 30, 2016, by and among SIR Stuart Hall, LLC, Berkeley Point Capital LLC and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.70 to the Registrant’s Form8-K filed July 5, 2016)
10.84	Assignment of Management Agreement and Subordination of Management Fees, dated as of June 30, 2016, by and among SIR Stuart Hall, LLC, Berkeley Point Capital LLC and Embassy Properties, Inc. (incorporated by reference to Exhibit 10.71 to the Registrant’s Form8-K filed July 5, 2016)
10.85	Multifamily Loan and Security Agreement, made as of July 29, 2016, by and between SIR Ashley Oaks, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.1 to the Registrant’s Form8-K filed August 3, 2016)
10.86	Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated as of July 29, 2016, by SIR Ashley Oaks, LLC to Ann Johnson for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.2 to the Registrant’s Form8-K filed August 3, 2016)
10.87	Assignment of Management Agreement and Subordination of Management Fees, dated as of July 29, 2016, by and among SIR Ashley Oaks, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.3 to the Registrant’s Form8-K filed August 3, 2016)
10.88	Multifamily Loan and Security Agreement, made as of July 29, 2016, by and between SIR Buda Ranch, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.4 to the Registrant’s Form8-K filed August 3, 2016)
10.89	Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated as of July 29, 2016, by SIR Buda Ranch, LLC to Ann Johnson for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.5 to the Registrant’s Form8-K filed August 3, 2016)
10.90	Assignment of Management Agreement and Subordination of Management Fees, dated as of July 29, 2016, by and among SIR Buda Ranch, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.6 to the Registrant’s Form8-K filed August 3, 2016)
10.91	Multifamily Loan and Security Agreement, made as of July 29, 2016, by and between SIR Deer Valley, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.7 to the Registrant’s Form8-K filed August 3, 2016)
10.92	Multifamily Mortgage, Assignment of Rents and Security Agreement, dated as of July 29, 2016, by and between SIR Deer Valley, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.8 to the Registrant’s Form8-K filed August 3, 2016)
10.93	Assignment of Management Agreement and Subordination of Management Fees, dated as of July 29, 2016, by and among SIR Deer Valley, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.9 to the Registrant’s Form8-K filed August 3, 2016)
10.94	Multifamily Loan and Security Agreement, made as of July 29, 2016, by and between SIR Carrington Park, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.10 to the Registrant’s Form8-K filed August 3, 2016)
10.95	Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated as of July 29, 2016, by SIR Carrington Park, LLC to Ann Johnson for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.11 to the Registrant’s Form8-K filed August 3, 2016)

H-105

Exhibit	Description
10.96	Assignment of Management Agreement and Subordination of Management Fees, dated as of July 29, 2016, by and among SIR Carrington Park, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.12 to the Registrant’s Form8-K filed August 3, 2016)
10.97	Multifamily Loan and Security Agreement, made as of July 29, 2016, by and between SIR Carrington Place, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.13 to the Registrant’s Form8-K filed August 3, 2016)
10.98	Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated as of July 29, 2016, by SIR Carrington Place, LLC to Ann Johnson for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.14 to the Registrant’s Form8-K filed August 3, 2016)
10.99	Assignment of Management Agreement and Subordination of Management Fees, dated as of July 29, 2016, by and among SIR Carrington Place, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.15 to the Registrant’s Form8-K filed August 3, 2016)
10.100	Multifamily Loan and Security Agreement, made as of July 29, 2016, by and between SIR Carrington Champion, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.16 to the Registrant’s Form8-K filed August 3, 2016)
10.101	Multifamily Deed Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated as of July 29, 2016, by SIR Carrington Champion, LLC to Ann Johnson for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.17 to the Registrant’s Form8-K filed August 3, 2016)
10.102	Assignment of Management Agreement and Subordination of Management Fees, dated as of July 29, 2016, by and among SIR Carrington Champion, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.18 to the Registrant’s Form8-K filed August 3, 2016)
10.103	Multifamily Loan and Security Agreement, made as of July 29, 2016, by and between SIR Audubon Park, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.19 to the Registrant’s Form8-K filed August 3, 2016)
10.104	Multifamily Deed of Trust, Absolute Assignment of Leases and Rents and Security Agreement (Including Fixture Filing), dated as of July 29, 2016, by SIR Audubon Park, LLC to Joseph B. Pitt, Jr. for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.20 to the Registrant’s Form8-K filed August 3, 2016)
10.105	Assignment of Management Agreement and Subordination of Management Fees, dated as of July 29, 2016, by and among SIR Audubon Park, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.21 to the Registrant’s Form8-K filed August 3, 2016)
10.106	Multifamily Loan and Security Agreement, made as of July 29, 2016, by and between SIR Oak Crossing, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.22 to the Registrant’s Form8-K filed August 3, 2016)
10.107	Multifamily Mortgage, Assignment of Rents, Security Agreement and Fixture Filing, dated as of July 29, 2016, by and between SIR Oak Crossing, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.23 to the Registrant’s Form8-K filed August 3, 2016)

H-106

Exhibit	Description
10.108	Assignment of Management Agreement and Subordination of Management Fees, dated as of July 29, 2016, by and among SIR Oak Crossing, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.24 to the Registrant’s Form8-K filed August 3, 2016)
10.109	Multifamily Loan and Security Agreement, made as of July 29, 2016, by and between SIR Steiner Ranch Apartments, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.25 to the Registrant’s Form8-K filed August 3, 2016)
10.110	Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated as of July 29, 2016, by SIR Steiner Ranch Apartments, LLC to Ann Johnson for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.26 to the Registrant’s Form8-K filed August 3, 2016)
10.111	Assignment of Management Agreement and Subordination of Management Fees, dated as of July 29, 2016, by and among SIR Steiner Ranch Apartments, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (incorporated by reference to Exhibit 10.27 to the Registrant’s Form8-K filed August 3, 2016)
10.112	Credit Agreement, dated July 29, 2016, by and between SIR Ashley Oaks, LLC, SIR Buda Ranch, LLC, SIR Deer Valley, LLC, SIR Carrington Park, LLC, SIR Carrington Place, LLC, SIR Carrington Champion, SIR Audubon Park, LLC, SIR Oak Crossing, LLC, SIR Steiner Ranch Apartments, LLC and PNC Bank, National Association (incorporated by reference to Exhibit 10.28 to the Registrant’s Form8-K filed August 3, 2016)
10.113	Multifamily Note, made as of July 29, 2016, by SIR Ashley Oaks, LLC, SIR Audubon Park, LLC, SIR Carrington Champion, LLC, SIR Carrington Park, LLC, SIR Carrington Place, LLC, SIR Deer Valley, LLC, SIR Steiner Ranch Apartments, LLC, SIR Oak Crossing, LLC and SIR Buda Ranch, LLC, in favor of PNC Bank, National Association (incorporated by reference to Exhibit 10.29 to the Registrant’s Form8-K filed August 3, 2016)
10.114	Guaranty, dated as of July 29, 2016, by Steadfast Income REIT, Inc. to and for the benefit of PNC Bank, National Association (incorporated by reference to Exhibit 10.30 to the Registrant’s Form8-K filed August 3, 2016)
10.115	Amendment No. 9 to the Amended and Restated Advisory Agreement, dated as of November 8, 2016, by and among Steadfast Income REIT, Inc., Steadfast Income REIT Operating Partnership, L.P. and Steadfast Income Advisor, LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Form8-K filed November 14, 2016)
10.116	Contribution Agreement, dated as of November 10, 2017, by and among, Steadfast Income REIT, Inc., BREIT Steadfast MF JV LP, BREIT Steadfast MF Parent LLC and BREIT Steadfast MF GP LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Form8-K filed November 13, 2017)
10.117	Amendment No. 10 to the Amended and Restated Advisory Agreement, dated as of November 7, 2017, by and among Steadfast Income REIT, Inc., Steadfast Income REIT Operating Partnership, L.P. and Steadfast Income Advisor, LLC (incorporated by reference to Exhibit 10.2 to the Registrant’s Form8-K filed November 13, 2017)
10.118	Multifamily Loan and Security Agreement, made as of May 31, 2018, by and between SIR Oak Crossing, LLC and PNC Bank, National Association (included as Exhibit 10.1 to the Company’s Current Report on Form8-K filed June 6, 2018 and incorporated herein by reference).
10.119	Multifamily Mortgage, Assignment of Rents, Security Agreement and Fixture Filing, dated as of May 31, 2018, by and between SIR Oak Crossing, LLC and PNC Bank, National Association (included as Exhibit 10.2 to the Company’s Current Report on Form8-K filed June 6, 2018 and incorporated herein by reference).

H-107

Exhibit	Description
10.120	Assignment of Management Agreement and Subordination of Management Fees, dated as of May 31, 2018, by and among SIR Oak Crossing, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (included as Exhibit 10.3 to the Company’s Current Report on Form8-K filed June 6, 2018 and incorporated herein by reference).
10.121	Guaranty, dated as of May 31, 2018, by Steadfast Income REIT, Inc. for the benefit of PNC Bank, National Association (included as Exhibit 10.4 to the Company’s Current Report on Form8-K filed June 6, 2018 and incorporated herein by reference).
10.122	Multifamily Note, made as of May 31, 2018, by SIR Oak Crossing, LLC, in favor of PNC Bank, National Association (included as Exhibit 10.5 to the Company’s Current Report on Form8-K filed June 6, 2018 and incorporated herein by reference).
10.123	Multifamily Loan and Security Agreement, made as of May 31, 2018, by and between SIR Carrington Park, LLC and PNC Bank, National Association (included as Exhibit 10.6 to the Company’s Current Report on Form8-K filed June 6, 2018 and incorporated herein by reference).
10.124	Multifamily Deed of Trust, Assignment of Rents, Security Agreement and Fixture Filing, dated as of May 31, 2018, by and between SIR Carrington Park, LLC and PNC Bank, National Association (included as Exhibit 10.7 to the Company’s Current Report on Form8-K filed June 6, 2018 and incorporated herein by reference).
10.125	Assignment of Management Agreement and Subordination of Management Fees, dated as of May 31, 2018, by and among SIR Carrington Park, LLC, PNC Bank, National Association and Steadfast Management Company, Inc. (included as Exhibit 10.8 to the Company’s Current Report on Form8-K filed June 6, 2018 and incorporated herein by reference).
10.126	Guaranty, dated as of May 31, 2018, by Steadfast Income REIT, Inc. for the benefit of PNC Bank, National Association (included as Exhibit 10.9 to the Company’s Current Report on Form8-K filed June 6, 2018 and incorporated herein by reference).
10.127	Multifamily Note, made as of May 31, 2018, by SIR Carrington Park, LLC, in favor of PNC Bank, National Association (included as Exhibit 10.10 to the Company’s Current Report on Form8-K filed June 6, 2018 and incorporated herein by reference).
10.128	Purchase and Sale Agreement and Joint Escrow Instructions, made and entered into as of March 26, 2018, by and between Steadfast Asset Holdings, Inc. and BRE Jefferson St. Andrews Owner LLC, with First American Title Insurance Company as the title company (included as Exhibit 10.1 to the Company’s Current Report on Form8-K filed June 15, 2018 and incorporated herein by reference).
10.129	First Amendment to Purchase and Sale Agreement and Joint Escrow Instructions, entered into as of April 13, 2018, by and between Steadfast Asset Holdings, Inc. and BRE Jefferson St. Andrews Owner LLC (included as Exhibit 10.2 to the Company’s Current Report on Form8-K filed June 15, 2018 and incorporated herein by reference).
10.130	Assignment and Assumption of Purchase Agreement, dated as of June 11, 2018, by and between Steadfast Asset Holdings, Inc. and SIR Jefferson, LLC (included as Exhibit 10.3 to the Company’s Current Report on Form8-K filed June 15, 2018 and incorporated herein by reference).
10.131	Property Management Agreement, entered into as of June 11, 2018, by and between Steadfast Management Company, Inc. and SIR Jefferson, LLC (included as Exhibit 10.4 to the Company’s Current Report on Form8-K filed June 15, 2018 and incorporated herein by reference).
10.132	Construction Management Services Agreement, entered into as of June 11, 2018, by and between SIR Jefferson, LLC and Pacific Coast Land & Construction, Inc. (included as Exhibit 10.5 to the Company’s Current Report on Form8-K filed June 15, 2018 and incorporated herein by reference).

H-108

Exhibit	Description
10.133	Assumption and Release Agreement, entered into as of June 11, 2018, by and between BRE Jefferson St. Andrews Owner, LLC, SIR Jefferson, LLC, BRE Imagination Holdco LLC, Steadfast Income REIT, Inc. and Fannie Mae (included as Exhibit 10.6 to the Company’s Current Report on Form8-K filed June 15, 2018 and incorporated herein by reference).
10.134	First Amendment to Multifamily Loan and Security Agreement and Other Loan Documents, entered into as of June 11, 2018, by and between SIR Jefferson, LLC and Fannie Mae (included as Exhibit 10.7 to the Company’s Current Report on Form8-K filed June 15, 2018 and incorporated herein by reference).
10.135	Interest Rate Cap Reserve and Security Agreement, entered into as of June 11, 2018, by and between SIR Jefferson, LLC and Fannie Mae (included as Exhibit 10.8 to the Company’s Current Report on Form8-K filed June 15, 2018 and incorporated herein by reference).
10.136	Multifamily Loan and Security Agreement dated as of October 31, 2017 by and between BRE Jefferson St. Andrews Owner LLC and Jones Lang LaSalle Multifamily, LLC (included as Exhibit 10.9 to the Company’s Current Report on Form8-K filed June 15, 2018 and incorporated herein by reference).
10.137	Multifamily Note dated as of October 31, 2017, by BRE Jefferson St. Andrews Owner LLC for the benefit of Jones Lang LaSalle Multifamily, LLC (included as Exhibit 10.10 to the Company’s Current Report on Form8-K filed June 15, 2018 and incorporated herein by reference).
10.138	Multifamily Deed to Secure Debt, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of October 31, 2017, by BRE Jefferson St. Andrews Owner LLC for the benefit of Jones Lang LaSalle Multifamily, LLC (included as Exhibit 10.11 to the Company’s Current Report on Form8-K filed June 15, 2018 and incorporated herein by reference).
10.139	Guaranty ofNon-Recourse Obligations dated as of October 31, 2017, by BRE Imagination Holdco LLC (included as Exhibit 10.12 to the Company’s Current Report on Form8-K filed June 15, 2018 and incorporated herein by reference).
10.140	Environmental Indemnity Agreement dated as of October 31, 2017, by BRE Jefferson St. Andrews Owner LLC for the benefit of Jones Lang LaSalle Multifamily, LLC (included as Exhibit 10.13 to the Company’s Current Report on Form8-K filed June 15, 2018 and incorporated herein by reference).
10.141	Amendment No. 11 to the Amended and Restated Advisory Agreement, dated as of November 7, 2018, by and among Steadfast Income REIT, Inc., Steadfast Income REIT Operating Partnership, L.P. and Steadfast Income Advisor, LLC (incorporated by reference to Exhibit 10.1 to the Registrant’s Form8-K filed November 8, 2018)
21.1*	Subsidiaries of the Company
23.1*	Consent of Ernst & Young LLP
31.1*	Certification of the Principal Executive Officer pursuant to Exchange Act Rule13a-14(a) or15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of the Principal Financial Officer pursuant to Exchange Act Rule13a-14(a) or15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
99.1*	Consent of CBRE Capital Advisors, Inc.

H-109

Exhibit	Description
101.INS*	XBRL Instance Document.
101.SCH*	XBRL Taxonomy Extension Schema Document.
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB*	XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document.

* Filed herewith.

** In accordance with Item 601(b)(32) of RegulationS-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

ITEM 16. FORM10-K SUMMARY

The Company has elected not to provide summary information.

H-110

STEADFAST INCOME REIT, INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm	H-112
Consolidated Balance Sheets as of December 31, 2018 and 2017	H-113
Consolidated Statements of Operations for the Years Ended December  31, 2018, 2017 and 2016	H-114
Consolidated Statements of Stockholders’ Equity for the Years Ended December 31, 2018, 2017 and 2016	H-115
Consolidated Statements of Cash Flows for the Years Ended December  31, 2018, 2017 and 2016	H-116
Notes to Consolidated Financial Statements	H-118
Financial Statement Schedule
Schedule III - Real Estate Assets and Accumulated Depreciation and Amortization	H-158

All other schedules are omitted because they are not applicable or the required information is shown in the financial statements or notes thereto.

H-111

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders of

Steadfast Income REIT, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Steadfast Income REIT, Inc. (the “Company”) as of December 31, 2018 and 2017, the related consolidated statements of operations, stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2018, and the related notes and financial statement schedule listed in the Index at Item 15(a), Schedule III - Real Estate Assets and Accumulated Depreciation and Amortization (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with U.S. generally accepted accounting principles.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young LLP

We have served as the Company’s auditor since 2009.

Irvine, California

March 15, 2019

H-112

STEADFAST INCOME REIT, INC.

CONSOLIDATED BALANCE SHEETS

	December 31,
	2018			2017
ASSETS
Assets:
Real Estate:
Land	$	105,754,646		$	86,684,470
Building and improvements		942,484,745			819,267,249
Other intangible assets		2,644,263			2,644,263
Total real estate held for investment, cost		1,050,883,654			908,595,982
Less accumulated depreciation and amortization		(203,993,817	)		(164,048,221	)
Total real estate held for investment, net		846,889,837			744,547,761
Real estate held for sale, net		—			282,167,569
Total real estate, net		846,889,837			1,026,715,330
Cash and cash equivalents		142,078,166			171,228,485
Restricted cash		12,114,277			28,959,004
Investment in unconsolidated joint venture		14,085,399			8,133,156
Rents and other receivables		1,791,881			2,737,800
Assets related to real estate held for sale		—			4,908,519
Other assets		2,698,438			3,258,584
Total assets	$	1,019,657,998		$	1,245,940,878
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued liabilities	$	26,893,862		$	24,399,352
Notes payable:
Mortgage notes payable, net		641,138,114			555,581,831
Credit facility, net		52,363,460			90,222,098
Notes payable related to real estate held for sale, net		—			229,982,009
Total notes payable, net		693,501,574			875,785,938
Distributions payable		3,515,310			4,595,301
Due to affiliates		4,985,918			1,967,129
Liabilities related to real estate held for sale		—			8,545,385
Total liabilities		728,896,664			915,293,105
Commitments and contingencies (Note 11)
Stockholders’ Equity:
Preferred stock, $0.01 par value per share; 100,000,000 shares authorized, no shares issued and outstanding		—			—
Common stock $0.01 par value per share; 999,999,000 shares authorized, 74,650,139 and 75,479,409 shares issued and outstanding at December 31, 2018 and 2017, respectively		746,502			754,794
Convertible stock, $0.01 par value per share; 1,000 shares authorized, issued and outstanding as of December 31, 2018 and 2017, respectively		10			10
Additionalpaid-in capital		656,204,073			664,110,915
Cumulative distributions and net income		(366,189,251	)		(334,217,946	)
Total stockholders’ equity		290,761,334			330,647,773
Total liabilities and stockholders’ equity	$	1,019,657,998		$	1,245,940,878

See accompanying notes to consolidated financial statements.

H-113

STEADFAST INCOME REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

	For the year ended December 31,
	2018			2017			2016
Revenues:
Rental income	$	124,498,400		$	188,019,112		$	192,088,348
Tenant reimbursements and other		17,490,459			24,950,128			26,149,184
Total revenues		141,988,859			212,969,240			218,237,532
Expenses:
Operating, maintenance and management		38,512,239			58,347,903			57,832,187
Real estate taxes and insurance		24,230,326			35,114,937			36,507,827
Fees to affiliates		15,879,702			21,960,145			25,440,718
Depreciation and amortization		46,109,794			67,755,152			69,513,484
Interest expense		33,158,759			44,114,130			41,772,682
Loss on debt extinguishment		3,621,665			2,380,051			4,932,369
General and administrative expenses		6,269,238			6,732,330			7,817,916
Total expenses		167,781,723			236,404,648			243,817,183
Loss before other income (expense)		(25,792,864	)		(23,435,408	)		(25,579,651	)
Other income (expense):
Equity in loss of unconsolidated joint venture		(3,339,202	)		(663,896	)		—
Gain on sales of real estate, net		118,215,618			96,573,171			—
Total other income (loss)		114,876,416			95,909,275			—
Net income (loss)	$	89,083,552		$	72,473,867		$	(25,579,651	)
Income (loss) per common share — basic and diluted	$	1.19		$	0.96		$	(0.34	)
Weighted average number of common shares outstanding — basic		75,049,667			75,794,705			76,195,083
Weighted average number of common shares outstanding — diluted		75,062,053			75,807,710			76,195,083

See accompanying notes to consolidated financial statements.

H-114

STEADFAST INCOME REIT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2018, 2017 AND 2016

	Common Stock						Convertible Stock				Additional Paid- In Capital			Cumulative Distributions & Net Income			Total Stockholders’ Equity
	Shares			Amount			Shares		Amount
BALANCE, December 31, 2015		76,674,502		$	766,745			1,000	$	10	$	677,624,840		$	(271,944,072	)	$	406,447,523
Issuance of common stock		7,500			75			—		—		(75	)		—			—
Transfers to redeemable common stock		—			—			—		—		(1,000,000	)		—			(1,000,000	)
Repurchase of common stock		(479,140	)		(4,791	)		—		—		(4,995,209	)		—			(5,000,000	)
Distributions declared		—			—			—		—		—			(54,828,267	)		(54,828,267	)
Amortization of stock-based compensation		—			—			—		—		76,285			—			76,285
Change in value of restricted common stock to Advisor		—			—			—		—		312,353			—			312,353
Net loss for the year ended December 31, 2016		—			—			—		—		—			(25,579,651	)		(25,579,651	)
BALANCE, December 31, 2016		76,202,862			762,029			1,000		10		672,018,194			(352,351,990	)		320,428,243
Issuance of common stock		7,500			75			—		—		(75	)		—			—
Repurchase of common stock		(730,953	)		(7,310	)		—		—		(7,992,690	)		—			(8,000,000	)
Distributions declared		—			—			—		—		—			(54,339,823	)		(54,339,823	)
Amortization of stock-based compensation		—			—			—		—		85,486			—			85,486
Net income for the year ended December 31, 2017		—			—			—		—		—			72,473,867			72,473,867
BALANCE, December 31, 2017		75,479,409			754,794			1,000		10	$	664,110,915			(334,217,946	)		330,647,773
Issuance of common stock		7,500			75			—		—		(75	)		—			—
Repurchase of common stock		(836,770	)		(8,367	)		—		—		(7,991,633	)		—			(8,000,000	)
Distributions declared		—			—			—		—		—			(121,054,857	)		(121,054,857	)
Amortization of stock-based compensation		—			—			—		—		84,866			—			84,866
Net income for year ended December 31, 2018		—			—			—		—		—			89,083,552			89,083,552
BALANCE, December 31, 2018		74,650,139		$	746,502			1,000	$	10	$	656,204,073		$	(366,189,251	)	$	290,761,334

See accompanying notes to consolidated financial statements.

H-115

STEADFAST INCOME REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

	For the year ended December 31,
	2018			2017			2016
Cash Flows from Operating Activities:
Net income (loss)	$	89,083,552		$	72,473,867		$	(25,579,651	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization		46,109,794			67,755,152			69,513,484
Amortization of deferred financing costs		1,056,249			1,839,952			1,723,186
Amortization of stock-based compensation		84,866			85,486			76,285
Change in value of restricted common stock to Advisor		—			—			312,353
Amortization of loan premiums and discounts		(270,792	)		(1,129,960	)		(1,243,385	)
Change in fair value of interest rate cap agreements		157,268			604,545			(61,698	)
Loss on debt extinguishment		3,621,665			2,380,051			4,932,369
Gain on sales of real estate		(118,215,618	)		(96,573,171	)		—
Insurance claim recoveries		(1,394	)		(352,497	)		(993,527	)
Loss on disposal of buildings and improvements		25,892			147,085			892,396
Unrealized gain on short-term investments		—			(278,883	)		(84,750	)
Equity in loss of unconsolidated joint venture		3,339,202			663,896			—
Changes in operating assets and liabilities:
Rents and other receivables		945,919			(333,347	)		(8,509	)
Other assets		626,178			960,983			(250,396	)
Accounts payable and accrued liabilities		(461,309	)		(3,106,834	)		5,246,172
Due to affiliates		969,963			(1,372,025	)		267,009
Net cash provided by operating activities		27,071,435			43,764,300			54,741,338
Cash Flows from Investing Activities:
Short-term investments		—			30,363,633			(30,000,000	)
Cash contributions to unconsolidated joint venture		(3,435,411	)		(3,854,197	)		—
Cash distributions from unconsolidated joint venture		530,100			—			—
Acquisition of real estate investments		(67,886,062	)		—			—
Additions to real estate investments		(9,564,647	)		(16,401,961	)		(28,268,601	)
Escrow deposits for pending real estate acquisitions		(2,600,000	)		—			—
Purchase of interest rate cap agreements		(223,300	)		(37,350	)		(259,000	)
Proceeds from sales of real estate, net		310,434,652			124,918,577			—
Proceeds from insurance claims		1,394			352,497			993,527
Net cash provided by (used in) investing activities		227,256,726			135,341,199			(57,534,074	)
Cash Flows from Financing Activities:
Proceeds from issuance of mortgage notes payable		106,482,000			17,638,751			428,196,350
Principal payments on mortgage notes payable		(239,272,864	)		(22,745,424	)		(557,964,896	)
Borrowings from credit facilities		—			—			251,124,750
Principal payments on credit facilities		(38,410,500	)		—			(16,000,000	)
Payment of deferred financing costs		(1,323,128	)		(310,819	)		(5,489,473	)
Payment of debt extinguishment costs		(2,572,386	)		—			(3,202,337	)
Distributions to common stockholders		(122,134,848	)		(54,369,877	)		(54,871,173	)
Repurchases of common stock		(8,000,000	)		(8,000,000	)		(5,000,000	)
Net cash (used in) provided by financing activities		(305,231,726	)		(67,787,369	)		36,793,221
Net (decrease) increase in cash, cash equivalents and restricted cash		(50,903,565	)		111,318,130			34,000,485
Cash, cash equivalents and restricted cash, beginning of year		205,096,008			93,777,878			59,777,393
Cash, cash equivalents and restricted cash, end of year	$	154,192,443		$	205,096,008		$	93,777,878

H-116

STEADFAST INCOME REIT, INC.

CONSOLIDATED STATEMENT OF CASH FLOWS (CONTINUED)

	For the year ended December 31,
	2018			2017			2016
Supplemental Disclosure of Cash Flow Information:
Interest paid, net of amounts capitalized of $0, $0 and $80,166 for the years ended December 31, 2018, 2017 and 2016, respectively	$	32,461,746		$	43,477,719		$	39,622,084
Supplemental Disclosure of Noncash Transactions:
Decrease in distributions payable	$	(1,079,991	)	$	(30,054	)	$	(42,906	)
Assumption of mortgage notes payable to acquire real estate	$	65,000,000		$	—		$	—
Application of escrow deposits to acquire real estate	$	2,600,000		$	—		$	—
Increase in redeemable common stock payable	$	—		$	—		$	1,000,000
Non-cash contribution to unconsolidated joint venture	$	—		$	(3,281,298	)	$	—
Mortgage notes payable assumed by buyer in connection with property sales	$	(67,140,194	)	$	—		$	—
Assets and liabilities deconsolidated in connection with property sales:
Real estate, net	$	(98,350,076	)	$	(382,696,431	)	$	—
Notes payable, net	$	76,336,778		$	337,214,942		$	—
Restricted cash	$	(913,408	)	$	(7,699,698	)	$	—
Rents and other receivables	$	—		$	(346,067	)	$	—
Accounts payable and accrued liabilities	$	674,912		$	11,330,808		$	—
(Decrease) increase in accounts payable and accrued liabilities from additions to investment in unconsolidated joint venture	$	(398,817	)	$	398,817		$	—
Increase (decrease) in accounts payable and accrued liabilities from additions to real estate investments	$	346,169		$	(607,801	)	$	378,711
Decrease in due to affiliates from additions to real estate investments	$	(3,924	)	$	(15,037	)	$	(161,652	)

See accompanying notes to consolidated financial statements.

H-117

STEADFAST INCOME REIT, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2018

1. Organization and Business

Steadfast Income REIT, Inc. (the “Company”) was formed on May 4, 2009, as a Maryland corporation that elected to be taxed as, and currently qualifies as, a real estate investment trust (“REIT”). On June 12, 2009, the Company was initially capitalized pursuant to the sale of 22,223 shares of common stock to Steadfast REIT Investments, LLC (the “Sponsor”) at a purchase price of $9.00 per share for an aggregate purchase price of $200,007. On July 10, 2009, Steadfast Income Advisor, LLC (the “Advisor”), a Delaware limited liability company formed on May 1, 2009, invested $1,000 in the Company in exchange for 1,000 shares of convertible stock (the “Convertible Stock”) as described in Note 7 (Stockholders’ Equity).

The Company owns a diverse portfolio of real estate investments, primarily in the multifamily sector, located throughout the United States. As of December 31, 2018, the Company owned 35 multifamily properties comprising a total of 9,442 apartment homes, an additional 21,130 square feet of rentable commercial space at two properties and a 10% interest in one unconsolidated joint venture that owned 20 multifamily properties with a total of 4,584 apartment homes.

Private Offering

On October 13, 2009, the Company commenced a private offering of up to $94,000,000 in shares of the Company’s common stock at a purchase price of $9.40 per share (with discounts available for certain categories of purchasers) (the “Private Offering”). The Company offered its shares of common stock for sale in the Private Offering pursuant to a confidential private placement memorandum and only to persons that were “accredited investors,” as that term is defined under the Securities Act of 1933, as amended (the “Securities Act”), and Regulation D promulgated thereunder. On July 9, 2010, the Company terminated the Private Offering and on July 19, 2010, the Company commenced its registered Public Offering (defined and described below). The Company sold 637,279 shares of common stock in the Private Offering for gross offering proceeds of $5,844,325.

Public Offering

On July 19, 2010, the Company commenced its initial public offering of up to a maximum of 150,000,000 shares of common stock for sale to the public at an initial price of $10.00 per share (with discounts available for certain categories of purchasers) (the “Primary Offering”). The Company also offered up to 15,789,474 shares of common stock for sale pursuant to the Company’s distribution reinvestment plan (the “DRP,” and together with the Primary Offering, the “Public Offering”) at an initial price of $9.50 per share.

The Company terminated its Public Offering on December 20, 2013. Following termination of the Public Offering, the Company continued to offer shares of common stock pursuant to the DRP until the Company’s board of directors suspended the DRP effective with distributions earned beginning on December 1, 2014. Through December 1, 2014, the Company sold 76,095,116 shares of common stock in the Public Offering for gross offering proceeds of $769,573,363, including 4,073,759 shares of common stock issued pursuant to the DRP for gross offering proceeds of $39,580,847.

On March 10, 2015, the Company’s board of directors determined an estimated value per share of the Company’s common stock of $10.35 as of December 31, 2014. On February 25, 2016, the Company’s board of directors determined an estimated value per share of the Company’s common stock of $11.44 as of December 31, 2015. On February 15, 2017, the Company’s board of directors determined an estimated value per share of the Company’s common stock of $11.65 as of December 31, 2016. On March 13, 2018, the Company’s board of

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directors determined an estimated value per share of the Company’s common stock of $10.84 as of December 31, 2017. On May 9, 2018, the Company’s board of directors determined an estimated value per share of the Company’s common stock of $9.84, which represents the estimated value per share of the Company’s common stock of $10.84 as of December 31, 2017, less the special distribution of $1.00 per share of common stock that was paid to stockholders of record as of the close of business on April 20, 2018. On March 13, 2019, the Company’s board of directors determined an estimated value per share of the Company’s common stock of $9.40 as of December 31, 2018.

The business of the Company is externally managed by the Advisor, pursuant to the Advisory Agreement by and among the Company, Steadfast Income REIT Operating Partnership, L.P., a Delaware limited partnership formed on July 6, 2009 (the “Operating Partnership”) and the Advisor (as amended, the “Advisory Agreement”), which is subject to annual renewal by the Company’s board of directors. The current term of the Advisory Agreement expires on November 15, 2019. Subject to certain restrictions and limitations, the Advisor manages the Company’sday-to-day operations, manages the Company’s portfolio of properties and real estate-related assets, sources and presents investment opportunities to the Company’s board of directors and provides investment management services on the Company’s behalf. Stira Capital Markets Group, LLC (formerly knows as Steadfast Capital Markets Group, LLC) (the “Dealer Manager”), an affiliate of the Company, served as the dealer manager for the Public Offering. The Advisor, along with the Dealer Manager, also provides marketing, investor relations and other administrative services on the Company’s behalf.

Substantially all of the Company’s business is conducted through the Operating Partnership. The Company is the sole general partner of the Operating Partnership. The Company and Advisor entered into an Amended and Restated Limited Partnership Agreement of the Operating Partnership (the “Partnership Agreement”) on September 28, 2009.

The Partnership Agreement provides that the Operating Partnership is operated in a manner that will enable the Company to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that the Operating Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), which classification could result in the Operating Partnership being taxed as a corporation, rather than as a partnership. In addition to the administrative and operating costs and expenses incurred by the Operating Partnership in acquiring and operating real properties, the Operating Partnership will pay all of the Company’s administrative costs and expenses, and such expenses will be treated as expenses of the Operating Partnership.

2. Summary of Significant Accounting Policies

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company, the consolidated variable interest entity (“VIE”) that the Company controls and of which the Company is the primary beneficiary, and the Operating Partnership’s subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation. The financial statements of the Company’s subsidiaries are prepared using accounting policies consistent with those of the Company. The Operating Partnership is a VIE as the limited partner lacks substantivekick-out rights and substantive participating rights. The Company is the primary beneficiary of, and consolidates, the Operating Partnership.

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The accompanying consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) as contained within the Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC.

Square footage, occupancy and certain other measures used to describe real estate included in the notes to the consolidated financial statements are presented on an unaudited basis.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.

Real Estate Assets

Depreciation and Amortization

Real estate costs related to the development, construction and improvement of properties are capitalized. Acquisition costs related to business combinations are expensed as incurred. Acquisition costs related to asset acquisitions are capitalized. Repair and maintenance and tenant turnover costs are charged to expense as incurred and significant replacements and betterments are capitalized. Repair and maintenance and tenant turnover costs include all costs that do not extend the useful life of the real estate asset. The Company considers the period of future benefit of an asset to determine its appropriate useful life and anticipates the estimated useful lives of assets by class to be generally as follows:

Buildings	27.5 years
Building improvements	5-25 years
Tenant improvements	Shorter of lease term or expected useful life
Tenant origination and absorption costs	Remaining term of related lease
Furniture, fixtures, and equipment	5-10 years

Real Estate Purchase Price Allocation

Prior to the Company’s adoption of ASU2017-01, Business Combinations (Topic 805): Clarifying the definition of business, or ASU2017-01, in January 2017, the Company recorded the acquisition of income-producing real estate or real estate that will be used for the production of income as a business combination. All assets acquired and liabilities assumed in a business combination were measured at their acquisition-date fair values. Acquisition costs were expensed as incurred. Upon adoption of ASU2017-01, the Company records the acquisition of income-producing real estate or real estate that are used for the production of income as an asset acquisition. All assets acquired and liabilities assumed in the asset acquisition are measured at their acquisition date fair values. Acquisition costs are capitalized and allocated between land, buildings and improvements and tenant origination and associated costs on the consolidated balance sheet.

The Company assesses the acquisition-date fair values of all tangible assets, identifiable intangible assets and assumed liabilities using methods similar to those used by independent appraisers (e.g., discounted cash flow analysis) and that utilize appropriate discount and/or capitalization rates and available market information. Estimates of future cash flows are based on a number of factors including historical operating results, known and anticipated trends, and market and economic conditions. The fair value of tangible assets of an acquired property considers the value of the property as if it was vacant.

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Intangible assets include the value ofin-place leases, which represents the estimated value of the net cash flows of thein-place leases to be realized, as compared to the net cash flows that would have occurred had the property been vacant at the time of acquisition and subject tolease-up.

The Company estimates the value of tenant origination and absorption costs by considering the estimated carrying costs during hypothetical expectedlease-up periods, considering current market conditions. In estimating carrying costs, the Company estimates the amount of lost rentals using market rates during the expectedlease-up periods.

The Company amortizes the value ofin-place leases to expense over the remainingnon-cancelable term of the respective leases. Should a tenant terminate its lease, the unamortized portion of thein-place lease value and customer relationship intangibles would be charged to expense in that period.

The Company records above-market and below-marketin-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 (1) the contractual amounts to be paid pursuant to thein-place leases and (2) the Company’s estimate of fair market lease rates for the correspondingin-place leases, measured over a period equal to the remainingnon-cancelable term of the lease. The Company amortizes any capitalized above-market or below-market lease values as a reduction or increase to rental income over the remainingnon-cancelable terms of the respective leases.

The total amount of other lease-related intangible assets acquired will be further allocated toin-place lease values and customer relationship intangible values based on the Company’s evaluation of the specific characteristics of each tenant’s lease and its overall relationship with that respective tenant. Characteristics that the Company considers in allocating these values include the nature and extent of existing business relationships with the tenant, growth prospects for developing new business with the tenant, and the tenant’s credit quality and expectations of lease renewals (including those existing under the terms of the lease agreement), among other factors.

The total amount ofnon-lease-related intangible assets, including amenity access agreements, tax abatement agreements or other contract rights assumed as part of the acquisition of certain properties, will be allocated to other intangible assets based on the present value of the difference between contractual amounts to be paid pursuant to the contracts assumed and the Company’s estimate of the fair market contract rates for corresponding contracts measured over a period equal to the remainingnon-cancelable term of the contracts assumed. Other intangible assets are amortized using the straight-line method over the remainingnon-cancelable term of the related contracts.

Estimates of the fair values of the tangible assets, identifiable intangible assets and assumed liabilities require the Company to make significant assumptions to estimate market lease rates, property-operating expenses, carrying costs duringlease-up periods, discount rates, market absorption periods, and the number of years the property will be held for investment. The use of inappropriate assumptions could result in an incorrect valuation of acquired tangible assets, identifiable intangible assets and assumed liabilities, which could impact the amount of the Company’s net income (loss).

Sale of Real Estate Assets

The Company records property sales or dispositions when title transfers to unrelated third parties, contingencies have been removed and sufficient cash consideration has been received by the Company. Upon disposition, the related costs and accumulated depreciation are removed from the respective accounts. Any gain or loss on sale is recognized in accordance with GAAP.

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Gains and losses on the sale of real estate are recognized pursuant to ASC Topic610-20, Gains and Losses from the Derecognition of Nonfinancial Assets. The Company recognizes a gain (loss) on sale of real estate when the criteria for an asset to be derecognized are met, which include when: (i) a contract exists, (ii) the buyer obtains control of the asset, and (iii) it is probable that the Company will receive substantially all of the consideration to which it is entitled. These criteria are generally satisfied at the time of sale. For partial sale of real estate resulting in transfer of control, the Company measures any noncontrolling interest retained at fair value and recognize a gain or loss on the difference between fair value and the carrying amount of the real estate assets retained. The Company classifies real estate assets as real estate held for sale once the criteria, as defined by GAAP, have been met.

Impairment of Real Estate Assets

The Company accounts for its real estate assets in accordance with ASC 360—Property, Plant and Equipment (“ASC 360”). ASC 360 requires the Company to continually monitor events and changes in circumstances that could indicate that the carrying amounts of the Company’s real estate and related intangible assets may not be recoverable. When indicators of potential impairment suggest that the carrying value of real estate and related intangible assets and liabilities may not be recoverable, the Company assesses the recoverability of the assets by estimating whether the Company will recover the carrying value of the asset through its undiscounted future cash flows and its eventual disposition. Based on this analysis, if the Company does not believe that it will be able to recover the carrying value of the real estate and related intangible assets and liabilities, the Company records an impairment loss to the extent that the carrying value exceeds the estimated fair value of the real estate and related intangible assets and liabilities. If any assumptions, projections or estimates regarding an asset changes in the future, the Company may have to record an impairment to reduce the net book value of such individual asset. The Company did not record any impairment loss on its real estate assets during the years ended December 31, 2018, 2017 and 2016.

Investments in Unconsolidated Joint Ventures

The Company accounts for investments in unconsolidated joint venture entities in which it may exercise significant influence over, but does not control, using the equity method of accounting. Under the equity method, the investment is initially recorded at cost and subsequently adjusted to reflect additional contributions or distributions and the Company’s proportionate share of equity in the joint venture’s income (loss). The Company recognizes its proportionate share of the ongoing income or loss of the unconsolidated joint venture as equity in income (loss) of unconsolidated joint venture on the consolidated statements of operations. On a quarterly basis, the Company evaluates its investment in an unconsolidated joint venture for other-than-temporary impairments.

Rents and Other Receivables

The Company will periodically evaluate the collectability of amounts due from tenants and maintain an allowance for doubtful accounts for estimated losses resulting from the inability of tenants to make required payments under lease agreements. The Company exercises judgment in establishing these allowances and considers payment history and current credit status of tenants in developing these estimates. Due to the short-term nature of the operating leases, the Company does not maintain a deferred rent receivable related to the straight-lining of rents.

Revenue Recognition

On January 1, 2018, the Company adopted ASC 606,Revenue from Contracts with Customers, (“ASC 606”), which establishes a single comprehensive model for entities to use in accounting for revenue arising from

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contracts with customers and supersedes most of the existing revenue recognition guidance. This standard requires the Company to recognize, for certain of its revenue sources, the transfer of promised goods or services to customers in an amount that reflects the consideration the Company is entitled to in exchange for those goods or services. The Company selected the modified retrospective transition method but had no cumulative effect adjustment to recognize as of the date of adoption on January 1, 2018.

The Company’s revenue consists of rental revenues and tenant reimbursements and other. There was no impact to the Company’s recognition of rental revenue from leasing arrangements as this was specifically excluded from ASC 606. The company identified limited sources of revenues fromnon-lease components but did not experience a material impact on its revenue recognition in the consolidated financial statements upon adoption. The Company leases apartment and condominium units under operating leases with terms generally of one one year or less. Generally, credit investigations are performed for prospective residents and security deposits are obtained. The Company will recognize minimum rent, including rental abatements, concessions and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of thenon-cancellable term of the related lease and amounts expected to be received in later years will be recorded as 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 in accordance with ASC 840,Leases.

Cash and Cash Equivalents

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents may include cash and short-term investments. Short-term investments are stated at cost, which approximates fair value. As of December 31, 2018 and 2017, the Company had amounts in excess of federally insured limits in deposit accounts with a financial institution. The Company limits such deposits to financial institutions with high credit standing.

Restricted Cash

Restricted cash represents those cash accounts for which the use of funds is restricted by loan covenants and cash placed with a qualified intermediary for reinvestment under Section 1031 of the Internal Revenue Code. As of December 31, 2018 and December 31, 2017, the Company had a restricted cash balance of $12,114,277 and $28,959,004, respectively, which represents $0 and $17,197,810 of cash proceeds from property sales that were being held by qualified intermediaries as of December 31, 2018 and 2017, respectively, and $12,114,277 and $11,761,194 set aside as impounds for future property tax payments, property insurance payments and tenant improvement payments as required by agreements with the Company’s lenders as of December 31, 2018 and 2017, respectively.

The following table represents the components of the cash, cash equivalents and restricted cash presented on the accompanying consolidated statements of cash flows for the years ended December 31, 2018, 2017 and 2016:

	December 31,
	2018		2017		2016
Cash and cash equivalents	$	142,078,166	$	171,228,485	$	66,224,027
Restricted cash		12,114,277		33,867,523		27,553,851
Total cash, cash equivalents and restricted cash	$	154,192,443	$	205,096,008	$	93,777,878

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The beginning of period restricted cash balance for the years ended December 31, 2018, 2017 and 2016, includes $4,908,519, $12,086,960 and $0 that is included in assets related to real estate held for sale as of December 31, 2017, 2016 and 2015, respectively, on the accompanying consolidated balance sheets. All such amounts were disposed of in conjunction with the property sales during the years ended December 31, 2018 and 2017.

Deferred Financing Costs

The Company capitalizes deferred financing costs such as commitment fees, legal fees and other third party costs associated with obtaining commitments for financing that result in a closing of such financing, as a contra liability against the respective outstanding debt balances. The Company amortizes these costs over the terms of the respective financing agreements using the effective interest method. The Company expenses unamortized deferred financing costs when the associated debt is refinanced or repaid before maturity unless specific rules are met that would allow for the carryover of such costs to the refinanced debt. Costs incurred in seeking financing transactions that do not close are expensed in the period in which it is determined that the financing will not close.

Derivative Financial Instruments

The Company accounts for its derivative financial instruments in accordance with ASC 815—Derivatives and Hedging. The Company’s objective in using derivatives is to add stability to interest expense and to manage the Company’s exposure to interest rate movements or other identified risks. To accomplish these objectives, the Company may use various types of derivative instruments to manage fluctuations in cash flows resulting from interest rate risk attributable to changes in the benchmark interest rate of LIBOR or other applicable benchmark rates.

The Company measures its derivative instruments and hedging activities at fair value and records them as an asset or liability, depending on its rights or obligations under the applicable derivative contract. For derivatives designated as fair value hedges, the changes in the fair value of both the derivative instrument and the hedged items are recorded in earnings. Derivatives used to hedge the exposure to variability in expected future cash flows, or other types of forecasted transactions, are considered cash flow hedges. For derivatives designated as cash flow hedges, the effective portions of changes in fair value of the derivatives are reported in other comprehensive income (loss) and are subsequently reclassified into earnings when the hedged item affects earnings. Changes in fair value of derivative instruments not designated as hedges and ineffective portions of hedges are recognized in earnings in the affected period. The Company assesses the effectiveness of each hedging relationship by comparing the changes in fair value or cash flows of the derivative hedging instrument with the changes in fair value or cash flows of the designated hedged item or transaction.

As of December 31, 2018, the Company did not have any derivatives designated as cash flow or fair value hedges, nor are derivatives being used for trading or speculative purposes.

Fair Value Measurements

Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other assets and liabilities at fair value on anon-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction

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between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:

• Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

• Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

• Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.

When available, the Company utilizes quoted market prices from an independent third-party source to determine fair value and will classify such items in Level 1 or Level 2. In instances where the market is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require the Company to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When the Company determines the market for a financial instrument owned by the Company to be illiquid or when market transactions for similar instruments do not appear orderly, the Company uses several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and will establish a fair value by assigning weights to the various valuation sources.

The following describes the valuation methodologies used by the Company to measure fair value, including an indication of the level in the fair value hierarchy in which each asset or liability is generally classified.

Interest rate cap agreements - The Company has entered into certain interest rate cap agreements. These derivatives are recorded at fair value. Fair value was based on a model-driven valuation using the associated variable rate curve and an implied market volatility, both of which were observable at commonly quoted intervals for the full term of the interest rate cap agreements. Therefore, the Company’s interest rate cap agreements were classified within Level 2 of the fair value hierarchy and are included in other assets in the accompanying consolidated balance sheets. Changes in the fair value of the interest rate cap agreements are recorded as interest expense in the accompanying consolidated statements of operations.

The following table reflects the Company’s assets required to be measured at fair value on a recurring basis on the consolidated balance sheets:

	December 31, 2018
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements	$	—	$	117,678	$	—

	December 31, 2017
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements	$	—	$	51,646	$	—

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Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument.

Fair Value of Financial Instruments

The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities, distributions payable, due to affiliates and notes payable.

The Company considers the carrying value of cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities and distributions payable to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. The fair value of amounts due to affiliates is not determinable due to the related party nature of such amounts.

The fair value of the notes payable is estimated using a discounted cash flow analysis using borrowing rates available to the Company for debt instruments with similar terms and maturities. As of December 31, 2018 and 2017, the fair value of the notes payable was $681,095,544 and $878,004,294, respectively, compared to the carrying value of $693,501,574 and $875,785,938, respectively. The Company has determined that its notes payable are classified as Level 3 within the fair value hierarchy.

Accounting for Stock-Based Compensation

The Company amortizes the fair value of stock-based compensation awards to expense over the vesting period and records any dividend equivalents earned as dividends for financial reporting purposes. Stock-based compensation awards to independent directors are valued at the fair value on the date of grant and amortized as an expense over the vesting period. Awards tonon-employees are remeasured at fair value each reporting period and amortized as an expense over the vesting period.

Distribution Policy

The Company has elected to be taxed as, and qualifies as, a REIT commencing with the taxable year ended December 31, 2010. To continue to qualify as a REIT, the Company intends to make distributions each taxable year equal to at least 90% of its REIT taxable income (which is determined without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). Distributions during the three months ended March 31, 2018, and during the year ended December 31, 2017, were based on daily record dates and calculated at a rate of $0.001964 per share per day. Distributions during the three months ended June 30, 2018, were based on daily record dates and calculated at a rate of $0.001683 per share per day. Distributions during the six months ended December 31, 2018, were based on daily record dates and calculated at a rate of $0.001519 per share per day. Each day during the twelve months ended December 31, 2018 and 2017, was a distribution record date.

Distributions to stockholders are determined by the board of directors of the Company and are dependent upon a number of factors relating to the Company, including funds available for the payment of distributions, financial condition, the timing of property acquisitions, capital expenditure requirements and annual distribution requirements in order for the Company to maintain its qualification as a REIT under the Internal Revenue Code. During the year ended December 31, 2018, the Company declared aggregate distributions of $1.610 per common

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share including a special distribution the Company’s board of directors declared in the amount $1.00 per share of common stock to stockholders of record as of the close of business on April 20, 2018. During the year ended December 31, 2017, the Company declared distributions of $0.718 per common share.

Operating Expenses

Pursuant to the Advisory Agreement, the Company is limited in the amount of certain operating expenses it may record on a rolling four-quarter basis to the greater of 2% of average invested assets and 25% of net income. Operating expenses include all costs and expenses incurred by the Company, as determined under GAAP, that in any way are related to the operation of the Company, excluding expenses of raising capital, interest payments, taxes, property operating expenses,non-cash expenditures, incentive fees, acquisition fees and expenses and investment management fees. During the four quarters ended December 31, 2018, the Company recorded operating expenses of $4,717,463, which amount was not in excess of the 2%/25% Limitation as described in Note 9 (Related Party Arrangements), and are included in general and administrative expenses in the accompanying consolidated statements of operations. Operating expenses of $115,212 remain payable and are included in due to affiliates in the accompanying consolidated balance sheet as of December 31, 2018.

Income Taxes

The Company elected to be taxed as, and currently qualifies as, a REIT under the Internal Revenue Code commencing with the taxable year ended December 31, 2010. To continue to qualify as a REIT, the Company must continue to meet certain organizational and operational requirements, including the requirement to distribute at least 90% of the Company’s annual REIT taxable income to stockholders (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, the Company generally would not be subject to federal income tax to the extent it distributes qualifying dividends to its stockholders. If the Company fails to qualify as a REIT in any taxable year, it would be subject to federal income tax on its taxable income at regular corporate income tax rates and generally would not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification is lost, unless the Internal Revenue Service grants the Company relief under certain statutory provisions. Such an event could materially adversely affect the Company’s net income and net cash available for distribution to stockholders. However, the Company believes it is organized and operates in such a manner as to qualify for treatment as a REIT.

The Company follows the Income Taxes Topic of the ASC to recognize, measure, present and disclose in its accompanying consolidated financial statements uncertain tax positions that the Company has taken or expects to take on a tax return. As of December 31, 2018 and 2017, the Company had no liabilities for uncertain tax positions that it believes should be recognized in its accompanying consolidated financial statements. Due to uncertainty regarding the realization of certain deferred tax assets, the Company has established valuation allowances, primarily in connection with the net operating loss carryforward related to the Company. The Company has not been assessed material interest or penalties by any major tax jurisdictions. The Company’s evaluation was performed for the tax years ended December 31, 2017, 2016 and 2015. As of December 31, 2018, the Company’s tax returns for the tax years ended December 31, 2017, 2016 and 2015 remain subject to examination by major tax jurisdictions.

Per Share Data

Basic earnings (loss) per share attributable to common stockholders for all periods presented are computed by dividing net income (loss) by the weighted average number of shares of the Company’s common stock outstanding during the period.

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Diluted earnings (loss) per share is computed based on the weighted average number of shares of the Company’s common stock and all potentially dilutive securities, if any. Distributions declared per common share assume each share was issued and outstanding each day during the period. Nonvested shares of the Company’s restricted common stock give rise to potentially dilutive shares of the Company’s common stock.

In accordance with FASB ASC Topic260-10-45,Earnings Per Share, the Company uses thetwo-class method to calculate earnings (loss) per share. Basic earnings (loss) 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 (loss) remaining after deduction of dividends declared during the period. The undistributed earnings (loss) are allocated to all outstanding common shares based on the relative percentage of each class of shares. The Company does not have any participating securities outstanding other than the shares of common stock and the unvested restricted common stock during the periods presented. Earnings (loss) attributable to the unvested restricted common stock are deducted from earnings (loss) in the computation of per share amounts where applicable.

Reclassifications

Certain amounts in the Company’s prior period condensed consolidated financial statements were reclassified to conform to the current period presentation. These reclassifications did not change the results of operations of prior periods. On January 1, 2018, the Company adopted ASU2016-18, as further described below. As a result, the Company no longer presents transfers between cash and restricted cash in the consolidated statements of cash flows. Instead, restricted cash is included with cash and cash equivalents when reconciling the beginning of the period and end of the period total amounts shown on the consolidated statements of cash flows.

Segment Disclosure

The Company has determined that it has one reportable segment with activities related to investing in multifamily properties. The Company’s investments in real estate are in different geographic regions, and management evaluates operating performance on an individual asset level. However, as each of the Company’s assets has similar economic characteristics, tenants and products and services, its assets have been aggregated into one reportable segment.

Recent Accounting Pronouncements

In May 2014, the FASB issued ASU2014-09, Revenue from Contracts with Customers (Topic 606 ) (“ASU2014-09”). ASU2014-09 requires an entity to recognize the revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods and services. ASU2014-09 supersedes the revenue requirements in Revenue Recognition (Topic 605 ) and most industry-specific guidance throughout the Industry Topics of the Codification. ASU2014-09 does not apply to lease contracts within the scope of Leases (Topic 840 ). In August 2015, the FASB issued ASU2015-14,Revenue from Contracts with Customers (Topic 606), which delayed the effective date of ASU2014-09 by one year, which resulted in ASU2014-09 being effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and is to be applied retrospectively. Early adoption is permitted, but can be no earlier than the original public entity effective date of fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company selected the modified retrospective transition method but had no cumulative effect adjustment to recognize as of the date of adoption of ASU2014-09 on January 1, 2018. The Company identified limited sources of revenues fromnon-lease components, and the Company did not experience a material impact on its revenue recognition in the consolidated financial statements upon adoption. Additionally, there was no impact to the Company’s recognition of rental revenue, as rental revenue from leasing arrangements was specifically excluded from ASU2014-09.

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In February 2016, the FASB issued ASU2016-02,Leases, (“ASU2016-02”), amending the existing accounting standards for lease accounting, including requiring lessees to recognize most leases on their balance sheets and making targeted changes to lessor accounting. ASU2016-02 requires a modified retrospective transition approach. ASU2016-02 will be effective in the first quarter of 2019 and allows for early adoption. The Company has selected the modified retrospective transition method with a cumulative effect recognized as of the date of adoption and adopted the new standard effective January 1, 2019. The Company evaluated the impact of ASU2016-02 on its leases both as it relates to the Company acting as a lessor and as a lessee.

Based on its evaluation, as it relates to the former, the Company did not experience a material impact on the recognition of leases in the consolidated financial statements because under ASU2016-02, lessors will continue to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, direct financing leases, and operating leases. As it relates to the latter, the Company did not experience a material impact on the recognition of leases in the consolidated financial statements because the quantity of leased equipment by the Company is limited and immaterial to the consolidated financial statements.

In July 2018, the FASB issued ASU2018-11,Leases (Topic 842): Targeted Improvements (“ASU2018-11”). The FASB issued ASU2018-11 to clarify ASU2016-02. The amendments in ASU2018-11 provide entities with an additional (and optional) transition method to adopt the new leases standard. Under this new transition method, an entity initially applies ASU2016-02 at the adoption date and recognizes a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. ASU2018-11 also provides lessors with a practical expedient, by class of underlying asset, to not separate nonlease components from the associated lease component and, instead, to account for those components as a single component if the nonlease components otherwise would be accounted for under the new revenue guidance (Topic 606) and both of the following are met: (1) the timing and pattern of transfer of the nonlease components and associated lease component are the same, and (2) the lease component, if accounted for separately, would be classified as an operating lease. If the nonlease components associated with the lease component are the predominant component of the combined component, an entity is required to account for the combined component in accordance with Topic 606. Otherwise, the entity must account for the combined component as an operating lease in accordance with Topic 842. For entities that have not adopted Topic 842 before the issuance of ASU2018-11, the effective date and transition requirements for ASU2018-11 related to separating components of a contract are the same as the effective date and transition requirements in ASU2016-02. In its capacity as a lessee, the Company elected to adopt the new transition method offered by ASU2018-11 and initially applied ASU2016-02 on January 1, 2019 and recognized a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. In its capacity as a lessor and based on its evaluation of the components of its lease contracts, the Company elected to use the practical expedient provided by ASU2018-11 and did not separate nonlease components from the associated lease components and will instead account for those components as a single component.

In December 2018, the FASB issued ASU2018-20,Leases (Topic 842), Narrow-scope Improvements for Lessors (“ASU2018-20”). The FASB issued ASU2018-20 to allow lessors to make an accounting policy election not to evaluate whether sales taxes and other similar taxes imposed by a governmental authority on a specific lease revenue-producing transaction are the primary obligation of the lessor as the owner of the underlying leased asset. The amendments also clarify that when lessors allocate variable payments to lease andnon-lease components they are required to follow the recognition guidance in ASU2016-02 for the lease component and other applicable guidance, such as the new revenue standard, for thenon-lease component. The amendments have the same effective date and transition requirements as ASU2016-02 for entities that have not yet adopted ASU2016-02. The amendments may be applied either retrospectively or prospectively. The Company is currently evaluating the impact of ASU2018-20 will have on its consolidated financial statements and related disclosures and does not expect a material impact on its consolidated financial statements and related disclosures from its adoption.

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DECEMBER 31, 2018

In June 2016, the FASB issued ASU2016-13, Financial Instruments-Credit Losses (“ ASU2016-13”). ASU2016-13 requires more timely recording of credit losses on loans and other financial instruments that are not accounted for at fair value through net income (loss), including loans held for investment,held-to-maturity debt securities, trade and other receivables, net investment in leases and other such commitments. ASU2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The amendments in ASU2016-13 require the Company to measure all expected credit losses based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets and eliminates the “incurred loss” methodology in current GAAP. In November 2018, the FASB issued ASU2018-19,Codification Improvements to Topic 326, Financial Instruments—Credit Losses (“ASU2018-19”), which clarifies that operating lease receivables accounted for under ASC 842Leases, are not in the scope of the new credit losses guidance. The effective date and transition requirements for this guidance are the same as for ASU2016-13. ASU2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and related disclosures and does not expect a material impact on its consolidated financial statements and related disclosures from its adoption.

In November 2016, the FASB issued ASU2016-18, Statement of Cash Flows (Topic 230): Restricted Cash (“ASU2016-18”). ASU2016-18 requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, restricted cash and restricted cash equivalents. Therefore, amounts generally described as restricted cash should be included with cash and cash equivalents when reconciling the beginning of period and end of period total amounts shown on the statement of cash flows. ASU2016-18 is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted this guidance January 1, 2018, and applied it retrospectively. As a result of adopting ASU2016-18, the Company began presenting restricted cash along with cash and cash equivalents in its consolidated statements of cash flows.

In February 2017, the FASB issued ASU2017-05, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets (“Subtopic610-20”): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets (“ASU2017-05”), that clarifies that a financial asset is within the scope of Subtopic610-20 if it meets the definition of an in substance nonfinancial asset and defines the term in substance nonfinancial asset. ASU2017-05 also clarifies that nonfinancial assets within the scope of Subtopic610-20 may include nonfinancial assets transferred within a legal entity to a counterparty. Subtopic610-20, which was issued in May 2014 as part of ASU2014-09 (discussed above), provides guidance for recognizing gains and losses from the transfer of nonfinancial assets in contracts with noncustomers. An entity is required to apply amendments in ASU2017-05 at the same time it applies the amendments in ASU2014-09 (discussed above). ASU2017-05 requires modified retrospective application and is effective for fiscal years beginning after December 15, 2017, including interim reporting periods within those fiscal years. Early adoption is permitted. The Company adopted ASU2014-09 and ASU2017-05 on January 1, 2018, and experienced an impact on the gain recognized related to the sale of the Second Closing Properties (as defined in Note 3 (Real Estate)). The sale of the Second Closing Properties is considered a partial sale and the Company no longer controlled the Second Closing Properties after the sale. The retained noncontrolling interest was recognized at fair value and a full gain on the sale was recognized under ASU2014-09.

In May 2017, the FASB issued ASU2017-09,Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting (“ASU2017-09”). The FASB issued ASU2017-09 to provide clarity and reduce both

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2018

(1) diversity in practice and (2) cost and complexity when applying the guidance in Topic 718,Compensation—Stock Compensation, to a change to the terms or conditions of a share-based payment award. The amendments in ASU2017-09 provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU2017-09 requires prospective application and is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is permitted. Upon adoption of ASU2017-09 on January 1, 2018, the Company did not experience a material impact.

In August 2018, the FASB issued ASU2018-13,Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU2018-13”). The FASB issued ASU2018-13 to improve the effectiveness of fair value measurement disclosures by adding, eliminating, and modifying certain disclosure requirements. The amendments in ASU2018-13 modify the disclosure requirements on fair value measurements inTopic 820, Fair Value Measurement, based on the concepts in FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements, including the consideration of costs and benefits. ASU2018-13 requires prospective and retrospective application depending on the amendment and is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of ASU2018-13 will have on its consolidated financial statements and related disclosures and believes that certain disclosures of interest rate cap agreements in its consolidated financial statements may be impacted by the adoption of ASU2018-13.

3. Real Estate

Property Acquisitions

During the year ended December 31, 2018, the Company acquired each of the following two properties through Section 1031 exchanges under the Internal Revenue Code:

							Purchase Price Allocation
Property Name	Location		Purchase Date		Units		Land		Buildings and Improvements		Tenant Origination and Absorption Costs		Total Purchase Price
Double Creek Flats		Plainfield, IN		5/7/2018		240	$	1,306,880	$	30,081,288	$	463,911	$	31,852,079
Jefferson at Perimeter Apartments		Dunwoody, GA		6/11/2018		504		17,763,296		84,567,694		1,302,993		103,633,983
						744	$	19,070,176	$	114,648,982	$	1,766,904	$	135,486,062

As of December 31, 2018, the Company owned 35 multifamily properties, encompassing in the aggregate 9,442 apartment homes and an additional 21,130 square feet of rentable commercial space at two properties. The total purchase price of the Company’s real estate portfolio was $1,017,661,219. As of December 31, 2018 and 2017, the Company’s portfolio was approximately 94.3% and 93.8% occupied and the average monthly rent was $1,068 and $1,037, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2018

As of December 31, 2018 and 2017, accumulated depreciation and amortization related to the Company’s consolidated real estate properties and related intangibles were as follows:

	December 31, 2018
	Assets
	Land		Building and Improvements			Other Intangible Assets			Total Real Estate Held for Investment			Real Estate Held for Sale
Investments in real estate	$	105,754,646	$	942,484,745		$	2,644,263		$	1,050,883,654		$	—
Less: Accumulated depreciation and amortization		—		(203,141,450	)		(852,367	)		(203,993,817	)		—
Net investments in real estate and related lease intangibles	$	105,754,646	$	739,343,295		$	1,791,896		$	846,889,837		$	—
	December 31, 2017
	Assets
	Land		Building and Improvements			Other Intangible Assets			Total Real Estate Held for Investment			Real Estate Held for Sale
Investments in real estate	$	86,684,470	$	819,267,249		$	2,644,263		$	908,595,982		$	339,701,002
Less: Accumulated depreciation and amortization		—		(163,349,022	)		(699,199	)		(164,048,221	)		(57,533,433	)
Net investments in real estate and related lease intangibles	$	86,684,470	$	655,918,227		$	1,945,064		$	744,547,761		$	282,167,569

Depreciation and amortization expenses were $46,109,794, $67,755,152 and $69,513,484 for the years ended December 31, 2018, 2017 and 2016, respectively.

Depreciation of the Company’s buildings and improvements was $44,189,723, $67,601,984 and $69,360,316 for the years ended December 31, 2018, 2017 and 2016, respectively.

Amortization of the Company’s tenant origination and absorption costs was $1,766,904 for the year ended December 31, 2018. There was no amortization of the Company’s tenant origination and absorption costs for the years ended December 31, 2017 and 2016. Tenant origination and absorption costs had a weighted-average amortization period as of the date of acquisition of less than one year.

Amortization of the Company’s other intangible assets was $153,167, $153,168 and $153,168 for the years ended December 31, 2018, 2017 and 2016, respectively. Other intangible assets had a weighted-average amortization period as of the date of acquisition of 18.17 years.

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DECEMBER 31, 2018

The future amortization of the Company’s acquired other intangible assets as of December 31, 2018, and thereafter is as follows:

2019	$	153,168
2020		153,168
2021		153,168
2022		153,168
2023		153,168
Thereafter		1,026,056
	$	1,791,896

Operating Leases

As of December 31, 2018, the Company’s real estate portfolio comprised 9,442 residential apartment homes and was 95.5% leased by a diverse group of residents. For the years ended December 31, 2018 and 2017, the Company’s real estate portfolio earned in excess of 99% and less than 1% of its rental income from residential tenants and commercial office tenants, respectively. The residential tenant lease terms consist of lease durations equal to 12 months or less. The commercial office tenant leases consist of remaining lease durations varying from 0.41 to 6.25 years.

Some residential and commercial leases contain provisions to extend the lease agreements, options for early termination after paying a specified penalty and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires security deposits from tenants in the form of a cash deposit and/or a letter of credit for commercial tenants. Amounts required as security deposits vary depending upon the terms of the respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets and totaled $2,868,600 and $3,339,602 as of December 31, 2018 and 2017, respectively.

The future minimum rental receipts from the Company’s properties undernon-cancelable operating leases attributable to commercial office tenants as of December 31, 2018, and thereafter is as follows:

2019	$	264,858
2020		218,313
2021		220,535
2022		138,844
2023		81,202
Thereafter		104,299
	$	1,028,051

As of December 31, 2018 and 2017, no tenant represented over 10% of the Company’s annualized base rent and there were no significant industry concentrations with respect to its commercial leases.

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DECEMBER 31, 2018

Joint Venture Arrangement with Blackstone Real Estate Income Trust, Inc.

On November 10, 2017, the Company, BREIT Steadfast MF JV LP (the “Joint Venture”), BREIT Steadfast MF Parent LLC (“BREIT LP”) and BREIT Steadfast MF GP LLC (“BREIT GP”, and together with BREIT LP, “BREIT”), executed a Contribution Agreement (the “Contribution Agreement”) whereby the Company agreed to contribute a portfolio of 20 properties owned by the Company to the Joint Venture in exchange for a combination of cash and a 10% ownership interest in the Joint Venture (the “Transaction”). BREIT LP owns a 90% interest in the Joint Venture and BREIT GP serves as the general partner of the Joint Venture. Each of BREIT LP and BREIT GP is a wholly-owned subsidiary of Blackstone Real Estate Income Trust, Inc. SIR LANDS Holdings, LLC, a wholly-owned subsidiary of the Company, holds the Company’s 10% interest in the Joint Venture.

The 20 properties contributed by the Company to the Joint Venture consist of properties located in Austin, Dallas and San Antonio, Texas, Nashville, Tennessee and Louisville, Kentucky (the “LANDS Portfolio”). On November 15, 2017 (the “First Closing Date”), the Company, through certain indirect wholly-owned subsidiaries, contributed 12 apartment communities (the “First Closing Properties”) to indirect, wholly-owned subsidiaries of the Joint Venture. On January 31, 2018 (the “Second Closing Date”), the Company, through certain indirect wholly-owned subsidiaries, contributed eight apartment communities (the “Second Closing Properties”) to indirect, wholly-owned subsidiaries of the Joint Venture. For additional information on the Transaction, see “Note 4 (Investment in Unconsolidated Joint Venture).”

The aggregate purchase price of the First Closing Properties was $318,576,792, exclusive of closing costs. On the First Closing Date, the Company sold a 90% interest in the First Closing Properties for $335,430,000, resulting in a gain of $76,135,530, which includes reductions to the net book value of the properties due to historical depreciation and amortization expense. The aggregate purchase price of the Second Closing Properties was $117,240,032, exclusive of closing costs. On the Second Closing Date, the Company sold a 90% interest in the Second Closing Properties for $125,370,000, resulting in a gain of $38,523,427, which includes reductions to the net book value of the properties due to historical depreciation and amortization expense. The purchaser of the First Closing Properties and Second Closing Properties was the Joint Venture.

2018 Property Dispositions

The Moorings Apartments

On November 30, 2012, the Company, through an indirect wholly-owned subsidiary, acquired The Moorings Apartments, a multifamily property located in Roselle, Illinois, containing 216 apartment homes. The purchase price of The Moorings Apartments was $20,250,000, exclusive of closing costs. On January 5, 2018, the Company sold The Moorings Apartments for $28,100,000, resulting in a gain of $9,658,823, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of The Moorings Apartments was not affiliated with the Company or the Advisor.

Arrowhead Apartment Homes

On November 30, 2012, the Company, through an indirect wholly-owned subsidiary, acquired Arrowhead Apartment Homes, a multifamily property located in Palatine, Illinois, containing 200 apartment homes. The purchase price of the Arrowhead Apartment Homes was $16,750,000, exclusive of closing costs. On January 31, 2018, the Company sold the Arrowhead Apartment Homes for $23,600,000, resulting in a gain of $8,928,691, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of the Arrowhead Apartment Homes was not affiliated with the Company or the Advisor.

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DECEMBER 31, 2018

Willow Crossing Apartments

On November 20, 2013, the Company, through an indirect wholly-owned subsidiary, acquired Willow Crossing Apartments, a multifamily property located in Elk Grove, Illinois, containing 579 apartment homes. The purchase price of the Willow Crossing Apartments was $58,000,000, exclusive of closing costs. On February 28, 2018, the Company sold the Willow Crossing Apartments for $79,000,000, resulting in a gain of $24,136,113, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of the Willow Crossing Apartments was not affiliated with the Company or the Advisor.

Mapleshade Park

On March 31, 2014, the Company, through an indirect wholly-owned subsidiary, acquired Mapleshade Park, a multifamily property located in Dallas, Texas, containing 148 apartment homes. The purchase price of Mapleshade Park was $23,325,000, exclusive of closing costs. On November 30, 2018, the Company sold Mapleshade Park for $30,750,000, resulting in a gain of $9,628,549, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Mapleshade Park was not affiliated with the Company or the Advisor.

Echo at Katy Ranch

On December 19, 2013, the Company, through an indirect wholly-owned subsidiary, acquired Echo at Katy Ranch, a multifamily property located in Katy, Texas, containing 260 apartment homes. The purchase price of Echo at Katy Ranch was $35,100,000, exclusive of closing costs. On December 12, 2018, the Company sold Echo at Katy Ranch for $35,100,000, resulting in a gain of $5,072,584, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Echo at Katy Ranch was not affiliated with the Company or the Advisor.

Heights at 2121

On September 30, 2013, the Company, through an indirect wholly-owned subsidiary, acquired Heights at 2121, a multifamily property located in Houston, Texas, containing 504 apartment homes. The purchase price of Heights at 2121 was $37,000,000, exclusive of closing costs. On December 21, 2018, the Company sold Heights at 2121 for $47,000,000, resulting in a gain of $14,394,129, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Heights at 2121 was not affiliated with the Company or the Advisor.

Lodge at Trails Edge

On June 18, 2013, the Company, through an indirect wholly-owned subsidiary, acquired Lodge at Trails Edge, a multifamily property located in Indianapolis, Indiana, containing 268 apartment homes. The purchase price of Lodge at Trails Edge was $18,400,000, exclusive of closing costs. On December 21, 2018, the Company sold Lodge at Trails Edge for $24,000,000, resulting in a gain of $7,873,302, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Lodge at Trails Edge was not affiliated with the Company or the Advisor.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2018

The results of operations for the years ended December 31, 2018, 2017 and 2016, for the disposed properties, including the properties contributed to the Joint Venture, were included in continuing operations on the Company’s consolidated statements of operations and are as follows:

	For the Year Ended December 31,
	2018		2017		2016
Revenues:
Rental income	$	15,419,070	$	86,308,663	$	90,745,815
Tenant reimbursements and other		2,387,947		12,181,764		12,559,674
Total revenues		17,807,017		98,490,427		103,305,489
Expenses:
Operating, maintenance and management		6,071,075		28,762,439		28,943,711
Real estate taxes and insurance		3,085,761		17,266,260		18,011,156
Fees to affiliates		755,971		3,832,896		3,950,983
Depreciation and amortization		4,391,426		30,106,602		32,827,001
Interest expense		3,731,580		19,344,126		18,120,461
Loss on debt extinguishment		3,346,271		2,387,552		1,569,888
General and administrative expenses		584,621		1,217,005		1,168,334
Total expenses	$	21,966,705	$	102,916,880	$	104,591,534

4. Investment in Unconsolidated Joint Venture

On November 10, 2017, the Company, the Joint Venture, BREIT LP and BREIT GP executed the Contribution Agreement whereby the Company agreed to contribute the LANDS portfolio to the Joint Venture in exchange for a combination of cash and a 10% ownership interest in the Joint Venture. BREIT LP owns a 90% interest in the Joint Venture and BREIT GP serves as the general partner of the Joint Venture. Each of BREIT LP and BREIT GP is a wholly-owned subsidiary of Blackstone Real Estate Income Trust, Inc. SIR LANDS Holdings, LLC holds the Company’s 10% interest in the Joint Venture.

The Company exercises significant influence, but does not control the Joint Venture. Accordingly, as of the First Closing Date and the Second Closing Date, the Company deconsolidated the First Closing Properties and Second Closing Properties and has accounted for its investment in the Joint Venture under the equity method of accounting. Income, losses, contributions and distributions are generally allocated based on the members’ respective equity interests.

As of December 31, 2018 and 2017, the book value of the Company’s investment in the Joint Venture was $14,085,399 and $8,133,156, respectively, which includes $7,640,166 and $5,515,754 of outside basis difference. The outside basis difference represents the Company’s transaction costs related to entering into the Joint Venture. During the years ended December 31, 2018 and 2017, $594,886 and $106,519, respectively, of amortization of this basis difference was included in equity in loss from unconsolidated joint venture on the accompanying consolidated statements of operations. During the year ended December 31, 2018, the Company received distributions of $530,100 related to its investment in the Joint Venture. No distributions were received during the year ended December 31, 2017.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2018

Unaudited financial information for the Joint Venture as of December 31, 2018 and 2017, and for the year ended December 31, 2018 and for the period from November 15, 2017 to December 31, 2017, is summarized below:

Summarized financial information for the Joint Venture is:

	December 31,
	2018		2017
Assets:
Real estate assets, net	$	493,776,142	$	374,277,205
Other assets		24,091,229		15,328,440
Total assets	$	517,867,371	$	389,605,645
Liabilities and equity:
Notes payable, net	$	340,840,505	$	264,558,057
Other liabilities		21,501,680		11,525,292
Company’s capital		15,552,513		11,352,230
Other partner’s capital		139,972,673		102,170,066
Total liabilities and equity	$	517,867,371	$	389,605,645

	For the Year Ended December 31, 2018			For the Period from November 15, 2017 to December 31, 2017
Revenues	$	60,210,288		$	5,756,455
Expenses		87,653,451			11,330,228
Net loss	$	(27,443,163	)	$	(5,573,773	)
Company’s proportional net loss	$	(2,744,316	)	$	(557,377	)
Amortization of outside basis		(594,886	)		(106,519	)
Equity in loss of unconsolidated joint venture	$	(3,339,202	)	$	(663,896	)

5. Other Assets

As of December 31, 2018 and 2017, other assets consisted of:

	December 31,
	2018		2017
Prepaid expenses	$	1,866,024	$	2,132,212
Interest rate cap agreements (Note 12)		117,678		51,646
Deposits		714,736		1,074,726
Other assets	$	2,698,438	$	3,258,584

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DECEMBER 31, 2018

6. Debt

Mortgage Notes Payable

The following is a summary of mortgage notes payable, net secured by real property as of December 31, 2018 and 2017:

	December 31, 2018
	Number of Instruments		Maturity Date Range	Interest Rate Range		Weighted Average Interest Rate			Principal Outstanding
Type				Minimum	Maximum
Mortgage notes payable - fixed		20	5/1/2019 - 10/1/2056	3.19%	5.48%		3.95	%	$	361,723,899
Mortgage notes payable - variable(1)		10	7/1/2023 - 11/1/2027	1-Mo LIBOR + 1.77%	1-Mo LIBOR + 2.38%		4.69	%		283,046,390
Total mortgage notes payable, gross		30					4.27	%		644,770,289
Premium, net(2)										302,530
Deferred financing costs, net(3)										(3,934,705	)
Total mortgage notes payable, net									$	641,138,114

	December 31, 2017
	Number of Instruments		Maturity Date Range	Interest Rate Range		Weighted Average Interest Rate			Principal Outstanding
Type				Minimum	Maximum
Mortgage notes payable - fixed		32	4/1/2018 - 10/1/2056	3.19%	5.75%		3.89	%	$	416,673,854
Mortgage notes payable - variable(1)		14	10/1/2018 - 1/1/2026	1-Mo LIBOR +2.02%	1-Mo LIBOR + 2.50%		3.86	%		372,481,000
Total mortgage notes payable, gross		46					3.87	%		789,154,854
Premium, net(2)										673,653
Deferred financing costs, net(3)										(4,264,667	)
Total mortgage notes payable, net									$	785,563,840

(1) See Note 12 for a discussion of the interest rate cap agreements used to manage the exposure to interest rate movement on the Company’s variable rate loans.

(2) Accumulated amortization related to debt premiums as of December 31, 2018 and 2017 was $960,519 and $2,468,041, respectively.

(3) Accumulated amortization related to deferred financing costs as of December 31, 2018 and 2017 was $2,929,134 and $3,951,049, respectively.

Refinancing Transactions

On June 29, 2016 and June 30, 2016, 14 wholly-owned subsidiaries of the Company terminated the existing mortgage loans with their respective lenders for an aggregate principal amount of $283,313,677 and entered into new loan agreements (each a “Loan Agreement”) with, as applicable, PNC Bank, National Association (“PNC Bank”), and Newmark Knight Frank (formerly known as Berkeley Point Capital LLC) (“Newmark”) for an aggregate principal amount of $358,002,000 (the “June Refinancing Transactions”). On July 29, 2016, nine

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wholly-owned subsidiaries of the Company also entered into a credit agreement (the “Credit Agreement”) with PNC Bank in connection with the refinancing of certain additional mortgage loans as further detailed below. Further, on August 30, 2016 and September 29, 2016, three wholly-owned subsidiaries of the Company terminated the existing mortgage loans with an aggregate principal amount of $61,575,025 and entered into new mortgage notes for an aggregate principal amount of $63,620,600 (together with the June Refinancing Transactions, the “Refinancing Transactions”).

In the June Refinancing Transactions, each Loan Agreement was made pursuant to the Freddie Mac Capital Markets Execution Program (“CME”), as evidenced by a multifamily note. Pursuant to the CME, the applicable Lender originates the mortgage loan and then transfers the loan to the Federal Home Loan Mortgage Association. Each Loan Agreement provides for a term loan with a maturity date of July 1, 2023, unless the maturity date is accelerated in accordance with the terms of the loan. Each loan accrues interest at theone-month London Interbank Offered Rate (“LIBOR”) plus 2.31%. Interest and principal payments on the loans are payable monthly in arrears on specified dates as set forth in each Loan Agreement. Monthly payments are due and payable on the first day of each month, commencing August 1, 2016.

Revolving Credit Facility

The Company entered into a revolving credit facility with PNC Bank to borrow up to $20,000,000. On July 18, 2014, the Company and PNC Bank amended the revolving credit facility to, among other things, increase the potential borrowing limit from $20,000,000 to $35,000,000. The amended and restated credit facility consisted of a Tranche A and a Tranche B, and provided certain security for borrowings under the amended and restated credit facility. The maximum amounts that could be borrowed under Tranche A and Tranche B were $20,000,000 and $15,000,000, respectively. For each advance under the amended and restated revolving credit facility, the Company had the option to select the interest rate from the following options: (1) Base Rate Option (as defined in the amended and restated credit facility) plus (i) with respect to Tranche A, 0.75% and (ii) with respect to Tranche B, 2.0%; or (2) LIBOR Option, which was a rate per annum fixed for the LIBOR Interest Period (as defined in the amended and restated credit facility) equal to the sum of LIBOR plus (i) with respect to Tranche A, 1.6% and (ii) with respect to Tranche B, 3.0%. The Company elected for each draw the LIBOR Option. Additionally, the Company incurred a commitment fee equal to 0.25% of the average daily difference between the $35,000,000 maximum available balance and the aggregate outstanding principal balance. The amended and restated revolving credit facility had a maturity date of July 17, 2016, subject to extension. On June 30, 2016, the Company repaid all outstanding amounts due and terminated the amended and restated revolving credit facility.

Credit Facility

On July 29, 2016, nine wholly-owned subsidiaries of the Company entered into the Credit Agreement and a multifamily note with PNC Bank (the Credit Agreement, multifamily note, loan and security agreements, mortgages and guaranty entered into in connection with the credit facility are collectively referred to herein as the “Loan Documents”) that provide for a new credit facility in an amount not to exceed $350,000,000 to refinance certain of the Company’s existing mortgage loans. The credit facility has a maturity date of August 1, 2021, subject to extension, as further described in the Credit Agreement. Advances made under the credit facility are secured by the properties set out in the schedule below (each, a “Collateral Pool Property” and collectively, the “Collateral Pool Properties”), pursuant to a mortgage deed of trust with the nine wholly-owned subsidiaries of the Company in favor of PNC Bank.

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The credit facility accrues interest at theone-month LIBOR plus (1) the servicing spread of 0.05% and (2) the net spread, based on the debt service coverage ratio, of between 1.73% and 1.93%, as further described in the Credit Agreement. Interest only payments on the credit facility are payable monthly in arrears and are due and payable on the first day of each month, commencing September 1, 2016. The entire outstanding principal balance and any accrued and unpaid interest on the credit facility are due on the maturity date. The Company’s nine wholly-owned subsidiaries may voluntarily prepay all or a portion of the amounts advanced under the Loan Documents. Notwithstanding the foregoing, in the event a Collateral Pool Property is released or the Credit Agreement is terminated, a termination fee is due and payable by the Company’s nine wholly-owned subsidiaries. In certain instances of a breach of the Credit Agreement, the Company guarantees to PNC Bank the full and prompt payment and performance when due of all amounts for which the Company’s nine wholly-owned subsidiaries are personally liable under the Loan Documents, in addition to all costs and expenses incurred by PNC Bank in enforcing such guaranty. Between November 15, 2017 and May 31, 2018, seven of the Collateral Pool Properties were either disposed or refinanced, with the advances made to each of the seven Collateral Pool Properties being repaid in full.

As of December 31, 2018 and 2017, the advances obtained under the credit facility on July 29, 2016, are summarized in the following table:

	Amount of Advance as of December 31,
Collateralized Property(1)	2018			2017
Carrington Park at Huffmeister	$	—		$	20,430,500
Carrington Place		27,535,500			27,535,500
Carrington at Champion Forest		25,121,250			25,121,250
Oak Crossing		—			17,980,000
		52,656,750			91,067,250
Deferred financing costs, net on credit facility (2)		(293,290	)		(845,152	)
Credit facility, net	$	52,363,460		$	90,222,098

(1) Each property is pledged as collateral for repayment of all amounts advanced under the credit facility.

(2) Accumulated amortization related to deferred financing costs for the credit facility as of December 31, 2018 and 2017, was $294,250 and $390,241, respectively.

Maturity and Interest

The following is a summary of the Company’s aggregate maturities as of December 31, 2018:

	Total		Maturities During the Years Ending December 31,										Thereafter
Contractual Obligation			2019		2020		2021		2022		2023
Principal payments on outstanding debt obligations (1)	$	697,427,039	$	51,047,863	$	41,811,837	$	70,095,167	$	31,701,112	$	216,630,812	$	286,140,248

(1) Projected principal payments on outstanding debt obligations are based on the terms of the notes payable agreements. Amounts exclude the amortization of the deferred financing costs and debt premiums associated with certain notes payable.

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The Company’s notes payable contain customary financial andnon-financial debt covenants. As of December 31, 2018 and 2017, the Company was in compliance with all financial andnon-financial debt covenants.

For the years ended December 31, 2018, 2017 and 2016, the Company incurred interest of $33,158,759, $44,114,130 and $40,631,593, respectively. Interest expense for the years ended December 31, 2018, 2017 and 2016, includes amortization of deferred financing costs of $1,056,249, $1,839,952 and $1,723,186, amortization of loan premiums and discounts of $270,792, $1,129,960 and $1,243,385, net unrealized loss ( gain ) from the change in fair value of interest rate cap agreements of $157,268, $604,545 and $(61,698), capitalized interest of $0, $0 and $80,166 and costs associated with the refinancing of debt of $398,781, $0 and $1,221,254, respectively. The capitalized interest was included in real estate on the consolidated balance sheets.

Interest expense of $2,520,324 and $2,766,036 was payable as of December 31, 2018 and 2017, respectively, and is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.

7. Stockholders’ Equity

General

Under the Company’s Third Articles of Amendment and Restatement (the “Charter”), the total number of shares of capital stock authorized for issuance is 1,100,000,000 shares, consisting of 999,999,000 shares of common stock with a par value of $0.01 per share, 1,000 shares of convertible stock with a par value of $0.01 per share and 100,000,000 shares designated as preferred stock with a par value of $0.01 per share.

Common Stock

The shares of the Company’s common stock entitle the holders to one vote per share on all matters upon which stockholders are entitled to vote, to receive dividends and other distributions as authorized by the Company’s board of directors in accordance with the Maryland General Corporation Law and to all rights of a stockholder pursuant to the Maryland General Corporation Law. The common stock has no preferences or preemptive, conversion or exchange rights.

During 2009, the Company issued 22,223 shares of common stock to the Sponsor for $200,007. From inception to December 31, 2018, the Company had issued 76,732,395 shares of common stock in its Private Offering and Public Offering for aggregate offering proceeds of $679,572,220, net of offering costs of $95,845,468, including 4,073,759 shares of common stock pursuant to the DRP, for total offering proceeds of $39,580,847. Offering costs primarily consisted of selling commissions and dealer manager fees. The Company terminated its Public Offering on December 20, 2013, but continued to offer shares pursuant to the DRP through November 30, 2014.

The issuance and vesting activity for the years ended December 31, 2018, 2017 and 2016, for the restricted stock issued to the Company’s independent directors as compensation for services in connection with theirre-election to the board of directors at the Company’s annual meeting is as follows:

	2018			2017			2016
Nonvested shares at the beginning of the year		11,875			11,875			11,250
Granted shares		7,500			7,500			7,500
Vested shares		(8,125	)		(7,500	)		(6,875	)
Nonvested shares at the end of the year		11,250			11,875			11,875

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The weighted average fair value of restricted stock issued to the Company’s independent directors for the years ended December 31, 2018, 2017 and 2016 is as follows:

Grant Year	Weighted Average Fair Value
2016	$	11.44
2017		11.65
2018		9.84

The shares of restricted common stock vest and becomenon-forfeitable in four equal annual installments beginning on the date of grant and ending on the third anniversary of the date of grant and will become fully vested and becomenon-forfeitable on the earlier to occur of (1) the termination of the independent director’s service as a director due to death or disability or (2) a change in control of the Company and as otherwise provided in the Incentive Award Plan, (as defined below).

Included in general and administrative expenses is $84,866, $85,486 and $76,285 for the years ended December 31, 2018, 2017 and 2016, respectively, for compensation expense related to the issuance of restricted common stock. The weighted average remaining term of the restricted common stock is 1.61 years as of December 31, 2018. As of December 31, 2018, the compensation expense related to the issuance of the restricted common stock not vested was $95,955.

On June 11, 2014, the Company entered into a restricted stock agreement with the Advisor whereby the Company issued to the Advisor 488,281.25 restricted shares of the Company’s common stock at a fair market value of $10.24 per share in satisfaction of certain deferred fees due to the Advisor in the aggregate amount of $5,000,000. Pursuant to the restricted stock agreement, the shares of restricted stock vested and becamenon-forfeitable 50% at December 31, 2015 and 50% at December 31, 2016. The fair value of the vested common stock as of December 31, 2018 and 2017 of $5,637,207, respectively, was recorded in stockholders’ equity in the accompanying consolidated balance sheets. Included in general and administrative expenses on the accompanying consolidated statements of operations is $0, $0 and $312,353 for the years ended December 31, 2018, 2017 and 2016 for the change in value of restricted common stock issued to the Advisor.

Convertible Stock

During 2009, the Company issued 1,000 shares of Convertible Stock to the Advisor for $1,000. The Convertible Stock will convert into shares of the Company’s common stock if and when: (A) the Company has made total distributions on the then outstanding shares of common stock equal to the original issue price of those shares plus an 8.0% cumulative,non-compounded, annual return on the original issue price of those shares, (B) subject to specified conditions, the Company lists the common stock for trading on a national securities exchange or (C) the Advisory Agreement is terminated or not renewed by the Company (other than for “cause” as defined in the Advisory Agreement). A “listing” will also be deemed to have occurred on the effective date of any merger of the Company in which the consideration received by the holders of the Company’s common stock is the securities of another issuer that are listed on a national securities exchange. Upon conversion, each share of Convertible Stock will convert into a number of shares of common stock equal to 1/1000 of the quotient of (A) 10% of the amount, if any, by which (1) the Company’s “enterprise value” (as defined in the Charter) plus the aggregate value of distributions paid to date on the outstanding shares of common stock exceeds (2) the aggregate purchase price paid by the stockholders for those shares plus an 8.0% cumulative,non-compounded, annual return on the original issue price of those shares, divided by (B) the Company’s enterprise value divided

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by the number of outstanding shares of common stock, in each case calculated as of the date of the conversion. In the event of a termination ornon-renewal of the Advisory Agreement by the Company for cause, the Convertible Stock will be redeemed by the Company for $1.00.

Preferred Stock

The Charter also provides the Company’s board of directors with the authority to issue one or more classes or series of preferred stock, and prior to the issuance of such shares of preferred stock, the board of directors shall have the power from time to time to classify or reclassify, in one or more series, any unissued shares and designate the preferences, rights and privileges of such shares of preferred stock. The Company’s board of directors is authorized to amend the Charter, without the approval of the stockholders, to increase the aggregate number of authorized shares of capital stock or the number of shares of any class or series that the Company has authority to issue. As of December 31, 2018 and 2017, no shares of the Company’s preferred stock were issued and outstanding.

Distribution Reinvestment Plan

The Company’s board of directors had approved the DRP through which common stockholders could elect to reinvest an amount equal to the distributions declared on their shares of common stock in additional shares of the Company’s common stock in lieu of receiving cash distributions. The initial purchase price per share under the DRP was $9.50. Effective September 10, 2012, shares of the Company’s common stock were issued pursuant to the DRP at a price of $9.73 per share. Effective with distributions earned beginning on December 1, 2014, the Company’s board of directors elected to suspend the DRP. As a result, all distributions are paid in cash and not reinvested in shares of the Company’s common stock. The Company’s board of directors may, in its sole discretion, from time to time, reinstate the DRP, although there is no assurance as to if or when this will happen, and change the DRP price based upon changes in the Company’s estimated value per share and other factors that the Company’s board of directors deems relevant.

No sales commissions or dealer manager fees were payable on shares sold through the DRP.

Share Repurchase Program and Redeemable Common Stock

The Company’s share repurchase program may provide an opportunity for stockholders to have their shares of common stock repurchased by the Company, subject to certain restrictions and limitations. No shares can be repurchased under the Company’s share repurchase program until after the first anniversary of the date of purchase of such shares; provided, however, that this holding period does not apply to repurchases requested within two years after the death or disability of a stockholder.

The repurchase price for shares repurchased under the Company’s share repurchase program prior to April 28, 2018, was as follows:

Share Purchase Anniversary	Repurchase Price on Repurchase Date(1)
Less than 1 year	No Repurchase Allowed
1 year	92.5% of Estimated Value per Share(2)
2 years	95.0% of Estimated Value per Share(2)
3 years	97.5% of Estimated Value per Share(2)
4 years	100.0% of Estimated Value per Share(2)
In the event of a stockholder’s death or disability(3)	Average Issue Price for Shares(4)

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The Company’s board of directors elected to suspend the Company’s share repurchase program, effective April 28, 2018. The board of directors of the Company subsequently determined to reinstate and amend the terms of the Company’s share repurchase program, effective May 20, 2018. Pursuant to the amended and reinstated share repurchase program, the revised repurchase price is equal to 93% of the most recently publicly disclosed estimated value per share. From May 20, 2018 to December 31, 2018, the share repurchase price was $9.15 per share, which represents 93% of the estimated value per share of $9.84, as determined by the Company’s board of directors. The share repurchase price is further reduced based on how long the stockholder has held the shares as follows:

Share Purchase Anniversary	Repurchase Price on Repurchase Date(1)
Less than 1 year	No Repurchase Allowed
1 year	92.5% of the Share Repurchase Price(2)
2 years	95.0% of the Share Repurchase Price(2)
3 years	97.5% of the Share Repurchase Price(2)
4 years	100.0% of the Share Repurchase Price(2)
In the event of a stockholder’s death or disability(3)	Average Issue Price for Shares(4)

(1) As adjusted for any stock dividends, combinations, splits, recapitalizations or any similar transaction with respect to the shares of common stock.

(2) The “Share Repurchase Price” shall equal 93% of the Estimated Value per Share. The “Estimated Value per Share” equals the most recently determined estimated value per share determined by the Company’s board of directors.

(3) The required one -year holding period to be eligible to repurchase shares under the Company’s share repurchase program does not apply in the event of death or disability of a stockholder.

(4) The purchase price per share for shares repurchased upon the death or disability of a stockholder will be equal to the average issue price per share for all of the stockholder’s shares.

The purchase price per share for shares repurchased pursuant to the share repurchase program is further reduced by the aggregate amount of net proceeds per share, if any, distributed to the Company’s stockholders prior to the repurchase date as a result of the sale of one or more of the Company’s assets that constitutes a return of capital distribution as a result of such sales.

Repurchases of shares of the Company’s common stock are made quarterly upon written request to the Company at least 15 days prior to the end of the applicable quarter during which the share repurchase program is in effect. Repurchase requests are honored approximately 30 days following the end of the applicable quarter (the “Repurchase Date”). Stockholders may withdraw their repurchase request at any time up to three business days prior to the end of the applicable quarter.

During the year ended December 31, 2018, the Company repurchased a total of 836,770 shares with a total repurchase value of $8,000,000 and received net requests for the repurchase of 2,786,995 shares with a total net repurchase value of $24,955,829. During the year ended December 31, 2017, the Company repurchased a total of 730,953 shares with a total repurchase value of $8,000,000 and received net requests for the repurchase of 2,521,337 shares with a total net repurchase value of $28,904,491. As of December 31, 2018 and 2017, the Company’s total outstanding repurchase requests received that were subject to the Company’s limitations on repurchases (discussed below) were 5,050,946 shares and 3,100,720 shares, respectively, with a total net repurchase value of $46,417,038 and $36,198,922, respectively.

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The Company cannot guarantee that the funds set aside for the share repurchase program will be sufficient to accommodate all repurchase requests made in any quarter. To the extent that the repurchase requests exceed the Company’s limitations on repurchases or the Company does not have sufficient funds available to repurchase all of the shares of the Company’s common stock for which repurchase requests have been submitted in any quarter, priority is given to repurchase requests in the case of the death or disability of a stockholder. If the Company repurchases less than all of the shares subject to a repurchase request in any quarter, with respect to any shares which have not been repurchased, the requesting stockholder could (1) withdraw the request for repurchase or (2) ask that the Company honor the request in a future quarter, if any, when such repurchases may be made pursuant to the limitations of the share repurchase program and when sufficient funds were available. Such pending requests are honored among all requests for repurchases in any given repurchase period as follows: first, pro rata as to repurchases sought upon a stockholder’s death or disability; and, next, pro rata as to other repurchase requests.

The Company is not obligated to repurchase shares of the Company’s common stock under the share repurchase program. In no event shall repurchases under the share repurchase program exceed 5% of the weighted average number of shares of the Company’s common stock outstanding during the prior calendar year or the $2,000,000 limit for any quarter put in place by the Company’s board of directors. There is no fee in connection with a repurchase of shares of the Company’s common stock. As of December 31, 2018, the Company has recognized repurchases payable of $2,000,000, which is included in accounts payable and accrued liabilities on the accompanying consolidated balance sheets.

The Company’s board of directors may, in its sole discretion, amend, suspend, or terminate the share repurchase program at any time upon 30 days’ notice to the Company’s stockholders if it determines that the funds available to fund the share repurchase program are needed for other business or operational purposes or that amendment, suspension or termination of the share repurchase program is in the best interest of the Company’s stockholders. Therefore, stockholders may not have the opportunity to make a repurchase request prior to any potential termination of the Company’s share repurchase program.

Distributions Declared

Distributions declared (1) accrued daily to stockholders of record as of the close of business on each day, (2) were payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month and (3) were calculated at a rate of $0.001519 per share per day during the six months ended December 31, 2018, which if paid each day over a365-day period is equivalent to a 6.0% annualized distribution rate based on a purchase price of $9.24 per share of common stock, were calculated at a rate of $0.001683 per share per day during the three months ended June 30, 2018, which if paid each day over a365-day period, is equivalent to a 6.0% annualized distribution rate based on a purchase price of $10.24 per share of common stock and were calculated at a rate of $0.001964 per share per day during the three months ended March 31, 2018, which if paid each day over a365-day period, is equivalent to a 7.0% annualized distribution rate based on a purchase price of $10.24 per share of common stock. Additionally, on April 16, 2018, the Company’s board of directors declared a special distribution in the amount of $1.00 per share, or $75,298,163 in the aggregate, to stockholders of record as of the close of business on April 20, 2018.

Distributions declared for the years ended December 31, 2018 and 2017, were $121,054,857 and $54,339,823, all of which were attributable to cash distributions.

As of December 31, 2018 and 2017, $3,515,310 and $4,595,301 distributions declared were payable.

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DECEMBER 31, 2018

Distributions Paid

For the year ended December 31, 2018, the Company paid cash distributions of $122,134,848, which related to distributions declared for each day in the period from December 1, 2017 through November 30, 2018, inclusive of the special distribution in the amount of $75,298,163 paid on May 2, 2018, to stockholders of record as of the close of business on April 20, 2018. All such distributions were paid in cash.

For the year ended December 31, 2017, the Company paid cash distributions of $54,369,877, which related to distributions declared for each day in the period from December 1, 2016 through November 30, 2017. All such distributions were paid in cash.

8. Earnings (Loss) Per Share

The following table presents a reconciliation of net income (loss) attributable to common stockholders and shares used in calculating basic and diluted earnings (loss) per share (“EPS”) for the years ended December 31, 2018, 2017 and 2016:

	Years Ended December 31,
	2018		2017		2016
Net income (loss) attributable to the Company	$	89,083,552	$	72,473,867	$	(25,579,651	)
Less: dividends declared on participating securities		7,548		9,323		183,805
Net income (loss) attributable to common stockholders		89,076,004		72,464,544		(25,763,456	)
Weighted average common shares outstanding — basic		75,049,667		75,794,705		76,195,083
Weighted average common shares outstanding — diluted		75,062,053		75,807,710		76,195,083
Earnings (loss) per common share — basic and diluted	$	1.19	$	0.96	$	(0.34	)

For the year ended December 31, 2016, the Company excluded all unvested restricted common shares outstanding issued to the Advisor and the Company’s independent directors from the calculation of diluted loss per common share as the effect would have been antidilutive.

9. Related Party Arrangements

The Company has entered into the Advisory Agreement with the Advisor. Pursuant to the Advisory Agreement, the Company is obligated to pay the Advisor specified fees upon the provision of certain services related to the investment of funds in real estate and real estate-related investments, the management of the Company’s investments and for other services (including, but not limited to, the disposition of investments). Subject to the limitations described below, the Company is also obligated to reimburse the Advisor and its affiliates for organization and offering costs incurred by the Advisor and its affiliates on behalf of the Company, and the Company is obligated to reimburse the Advisor and its affiliates for acquisition and origination expenses and certain operating expenses incurred on behalf of the Company or incurred in connection with providing services to the Company.

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Amounts attributable to the Advisor and its affiliates incurred (earned) for the years ended December 31, 2018, 2017 and 2016 are as follows:

	Incurred (Earned) For the Year Ended December 31,
	2018			2017			2016
Consolidated Statements of Operations:
Expensed
Investment management fees(1)	$	9,799,335		$	13,823,000		$	14,075,818
Acquisition fees(1)		—			—			960
Acquisition expenses(2)		444,475			—			—
Property management:
Fees(1)		4,059,216			6,278,850			6,406,479
Reimbursement of onsite personnel(3)		12,857,437			18,716,284			18,751,492
Other fees(1)		1,598,991			1,771,620			1,673,724
Other fees - property operations(3)		138,235			170,067			—
Other fees - G&A(2)		86,542			133,419			168,037
Other operating expenses(2)		988,367			1,244,264			1,232,493
Disposition fees(4)		5,893,800			6,706,200			—
Disposition transaction costs(4)		84,222			56,922			—
Loan coordination fee(1)		422,160			86,675			3,283,737
Property insurance(5)		1,597,712			1,285,490			311,794
Insurance proceeds(6)		(75,000	)		(102,147	)		(113,853	)
Consolidated Balance Sheets:
Capitalized
Construction management:
Fees(7)		209,829			526,866			1,493,999
Reimbursement of labor costs(7)		95,631			239,015			367,204
Capital expenditures(7)		39,680			74,709			17,654
Deferred financing costs(8)		—			12,930			139,229
Capitalized costs on investment in unconsolidated joint venture(9)		58,386			65,113			—
Acquisition expenses(10)		245,048			3,226			—
Acquisition fees(10)		705,722			—			—
	$	39,249,788		$	51,092,503		$	47,808,767

(1) Included in fees to affiliates in the accompanying consolidated statements of operations.

(2) Included in general and administrative expenses in the accompanying consolidated statements of operations. Reflects acquisition expenses that did not meet the capitalization criteria under ASU2017-01.

(3) Included in operating, maintenance and management in the accompanying consolidated statements of operations.

(4) Included in gain on sales of real estate, net in the accompanying consolidated statements of operations.

(5) Property related insurance expense and the amortization of the prepaid insurance deductible account are included in general and administrative expenses in the accompanying consolidated statements of operations. The amortization of the prepaid property insurance is included in operating, maintenance and management expenses in the accompanying consolidated statements of operations. The prepaid insurance is included in other assets in the accompanying consolidated balance sheets upon payment.

(6) Included in tenant reimbursements and other in the accompanying consolidated statements of operations.

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(7) Included in building and improvements in the accompanying consolidated balance sheets.

(8) Included in mortgage notes payable, net in the accompanying consolidated balance sheets.

(9) Included in investment in unconsolidated joint venture in the accompanying consolidated balance sheets.

(10) Included in total real estate, cost in the accompanying consolidated balance sheets. Reflects acquisition expenses that did meet the capitalization criteria under ASU2017-01.

Amounts attributable to the Advisor and its affiliates paid (received) for the years ended December 31, 2018, 2017 and 2016 are as follows:

	Paid (Received) For the Year Ended December 31,
	2018		2017			2016
Consolidated Statements of Operations:
Expensed
Investment management fees	$	8,158,850	$	15,008,001		$	14,060,587
Acquisition fees		—		—			960
Acquisition expenses		233,287		—			—
Property management:
Fees		4,126,954		6,410,591			6,392,550
Reimbursement of onsite personnel		13,040,470		18,748,974			18,650,009
Other fees		1,604,623		1,781,318			1,671,282
Other fees - property operations		138,235		170,067			—
Other fees - G&A		86,542		133,419			168,037
Other operating expenses		960,376		1,341,997			1,098,568
Disposition fees		4,407,675		6,139,575			—
Disposition transaction costs		84,222		56,922			—
Loan coordination fee		508,835		—			3,283,737
Property insurance		1,555,825		1,322,247			361,490
Insurance proceeds		—		(102,147	)		(113,853	)
Consolidated Balance Sheets:
Capitalized
Construction management:
Fees		213,652		536,866			1,548,701
Reimbursement of labor costs		95,730		245,889			474,155
Capital expenditures		39,680		74,709			17,654
Deferred financing costs		—		12,930			139,229
Capitalized costs on investment in unconsolidated joint venture		58,386		65,113			—
Acquisition expenses		245,048		3,226			—
Acquisition fees		705,722		—			—
	$	36,264,112	$	51,949,697		$	47,753,106

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Amounts attributable to the Advisor and its affiliates that are payable (prepaid/receivable) as of December 31, 2018 and 2017 are as follows:

	Payable (Prepaid/Receivable) as of December 31,
	2018			2017
Consolidated Statements of Operations:
Expensed
Investment management fees	$	1,640,485		$	—
Acquisition expenses		211,188			—
Property management:
Fees		334,577			402,315
Reimbursement of onsite personnel		589,551			772,584
Other fees		39,349			44,981
Other operating expenses		115,212			87,221
Disposition fees		2,052,750			566,625
Loan coordination fee		—			86,675
Property insurance		(119,055	)		(160,942	)
Insurance proceeds		(75,000	)		—
Consolidated Balance Sheets:
Capitalized
Construction management:
Fees		2,608			6,431
Reimbursement of labor costs		198			297
	$	4,791,863		$	1,806,187

Investment Management Fee

The Company pays the Advisor a monthly investment management fee equal toone-twelfth of 0.80% of (1) the cost of real properties and real estate-related assets acquired directly by the Company or (2) the Company’s allocable cost of each real property or real estate-related asset acquired through a joint venture. The investment management fee is calculated including acquisition fees, acquisition expenses, cost of development, construction or improvement and any debt attributable to such investments, or the Company’s proportionate share thereof in the case of investments made through joint ventures. The cost of real properties and real estate-related assets that have been sold by the Company during the applicable month is excluded from the fee.

Acquisition Fees and Expenses

The Company pays the Advisor an acquisition fee equal to 2.0% of (1) the cost of investment, as defined in the Advisory Agreement, in connection with the investigation, selection and acquisition (by purchase, investment or exchange) of any type of real property or real estate-related asset; provided, however, that the total acquisition fee payable by the Company to the Advisor or its affiliates shall equal 0.5% of the cost of investment in the event that proceeds from a prior sale of an investment are used to fund the acquisition of an investment, or (2) the Company’s allocable cost of a real property or real estate-related asset acquired in a joint venture, in each case including purchase price, acquisition expenses and any debt attributable to such investments.

In addition to acquisition fees, the Company reimburses the Advisor for amounts directly incurred by the Advisor or its affiliates, including personnel-related costs for acquisition due diligence, legal andnon-recurring

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management services, and amounts the Advisor pays to third parties in connection with the selection, acquisition or development of a property or acquisition of real estate-related assets, whether or not the Company ultimately acquires the property or the real estate-related assets.

The Charter limits the Company’s ability to pay acquisition fees if the total of all acquisition fees and expenses relating to the purchase would exceed 6.0% of the contract purchase price. Under the Charter, a majority of the Company’s board of directors, including a majority of the independent directors, is required to approve any acquisition fees (or portion thereof) that would cause the total of all acquisition fees and expenses relating to an acquisition to exceed 6.0% of the contract purchase price. In connection with the purchase of securities, the acquisition fee may be paid to an affiliate of the Advisor that is registered as a FINRA member broker-dealer if applicable FINRA rules would prohibit the payment of the acquisition fee to a firm that is not a registered broker-dealer.

Property Management Fees and Expenses

The Company has entered into Property Management Agreements (as amended from time to time, each a “Property Management Agreement”) with Steadfast Management Company, Inc., an affiliate of the Sponsor (the ”Property Manager”), in connection with the acquisition of each of the Company’s properties (other than EBT Lofts, Library Lofts and Stuart Hall Lofts, which are managed by an unaffiliated third-party management company). As of December 31, 2018, the property management fee payable with respect to each property under each Property Management Agreement ranged from 2.50% to 3.50% of the annual gross revenue collected, which is usual and customary for comparable property management services rendered to similar properties in similar geographic markets, as determined by the Advisor and approved by a majority of the members of the Company’s board of directors, including a majority of the independent directors. The Property Manager also receives an oversight fee of 1% of gross revenues at certain of the properties at which it does not serve as a property manager. Generally, each Property Management Agreement has an initial one year term and will continue thereafter on amonth-to-month basis unless either party gives 60 days’ prior notice of its desire to terminate the Property Management Agreement, provided that the Company may terminate the Property Management Agreement at any time upon a determination of gross negligence, willful misconduct or bad acts of the Property Manager or its employees or upon an uncured breach of the Property Management Agreement upon 30 days’ prior written notice to the Property Manager.

In addition to the property management fee, the Property Management Agreements also specify certain other fees payable to the Property Manager or its affiliates, including fees for benefit administration, information technology infrastructure, licenses, support and training services and capital expenditures. The Company also reimburses the Property Manager for the salaries and related benefits ofon-site property management employees.

Upon entering into the Joint Venture with BREIT, the Property Manager entered into Property Management Agreements with each wholly-owned subsidiary of the Joint Venture that directly owned a property in the LANDS Portfolio. Effective December 10, 2018, the Joint Venture terminated the Property Management Agreements with the Property Manager. The property management fee payable by the Joint Venture is a component of equity in loss of unconsolidated joint venture in the consolidated statements of operations.

Construction Management

The Company has entered into Construction Management Agreements with Pacific Coast Land and Construction, Inc., an affiliate of the Sponsor (the “Construction Manager”), in connection with the planned capital improvements and renovation for certain of the Company’s properties. As of December 31, 2018, the

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construction management fee payable with respect to each property pursuant to the Construction Management Agreements (each a “Construction Management Agreement”) ranged from 6.0% to 12.0% of the costs of the improvements for which the Construction Manager has planning and oversight authority. Generally, each Construction Management Agreement can be terminated by either party with 30 days’ prior written notice to the other party. Construction management fees are capitalized to the respective real estate properties in the period in which they are incurred, as such costs relate to capital improvements and renovations for units taken out of service while they undergo the planned renovation.

The Company may also reimburse the Construction Manager for the salaries and related benefits of certain of its employees for time spent working on capital improvements and renovations at its properties.

Property Insurance

The Company deposits amounts with an affiliate of the Sponsor to fund a prepaid insurance deductible account to cover the cost of required insurance deductibles across all properties of the Company and other affiliated entities. Upon filing a major claim, proceeds from the insurance deductible account may be used by the Company or another affiliate of the Sponsor. In addition, the Company deposits amounts with an affiliate of the Sponsor to cover the cost of property insurance across certain properties of the Company.

Other Operating Expense Reimbursement

In addition to the various fees paid to the Advisor, the Company is obligated to pay directly or reimburse all expenses incurred by the Advisor in providing services to the Company, including the Company’s allocable share of the Advisor’s overhead, such as rent, employee costs, utilities and information technology costs. The Company will not reimburse the Advisor for employee costs in connection with services for which the Advisor or its affiliates receive acquisition fees or disposition fees or for the salaries the Advisor pays to the Company’s executive officers.

The Charter limits the Company’s total operating expenses during any four fiscal quarters to the greater of 2% of the Company’s average invested assets or 25% of the Company’s net income for the same period (the“ 2% / 25% Limitation”). The Company may reimburse the Advisor, at the end of each fiscal quarter, for operating expenses incurred by the Advisor; provided, however, that the Company shall not reimburse the Advisor at the end of any fiscal quarter for operating expenses that exceed the 2%/25% Limitation unless the independent directors have determined that such excess expenses were justified based on unusual andnon-recurring factors. The Advisor must reimburse the Company for the amount by which the Company’s operating expenses for the preceding four fiscal quarters then ended exceed the 2% / 25% Limitation unless the independent directors have determined that such excess expenses were justified. For purposes of determining the 2% / 25% Limitation, “average invested assets” means the average monthly book value of the Company’s assets invested directly or indirectly in equity interests and loans secured by real estate during the 12 -month period before deducting depreciation, bad debts or othernon-cash reserves. “Total operating expenses” means all expenses paid or incurred by the Company that are in any way related to the Company’s operation, including the Company’s allocable share of Advisor overhead, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, listing and registration of shares of the Company’s common stock; (b) interest payments; (c) taxes;(d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based on the gain in the sale of the Company’s assets; (f) acquisition fees and acquisition expenses (including expenses relating to potential acquisitions that the Company does not close) and investment management fees; (g) real

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DECEMBER 31, 2018

estate commissions on the resale of investments; and (h) other expenses connected with the acquisition, disposition, management and ownership of investments (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of real property).

For the year ended December 31, 2018, the Advisor and its affiliates incurred $988,367 of the Company’s operating expenses, including the allocable share of the Advisor’s overhead expenses of $896,144, none of which were in excess of the 2%/25% Limitation and are included in the $6,269,238 of general and administrative expenses recognized by the Company. As of December 31, 2018, the Company’s total operating expenses were 0.1% of its average invested assets and 1.1% of its net income.

For the year ended December 31, 2017, the Advisor and its affiliates incurred $1,244,264 of the Company’s operating expenses, including the allocable share of the Advisor’s overhead expenses of $1,045,532, none of which were in excess of the 2%/25% Limitation and are included in the $6,732,330 of general and administrative expenses recognized by the Company.

For the year ended December 31, 2016, the Advisor and its affiliates incurred $1,232,493 of the Company’s operating expenses, including the allocable share of the Advisor’s overhead expenses of $772,576, none of which were in excess of the 2%/25% Limitation, and are included in the $9,039,171 of general and administrative expenses recognized by the Company.

Disposition Fee

The Company pays the Advisor a disposition fee in connection with a sale of a property or real estate-related asset and in the event of the sale of the entire Company (a “Final Liquidity Event”), in either case when the Advisor or its affiliates provides a substantial amount of services as determined by a majority of the Company’s independent directors. With respect to a sale of a property or real estate-related asset, the Company pays the Advisor a disposition fee equal to 1.5% of the contract sales price of the investment sold. With respect to a Final Liquidity Event, the Company will pay the Advisor a disposition fee equal to (i) 0.5% of the total consideration paid in a Final Liquidity Event if the price per share paid to stockholders is less than or equal to $9.00 ; (ii) 0.75% of the total consideration paid in a Final Liquidity Event if the price per share paid to stockholders is between $9.01 and $10.24 ; (iii) 1.00% of the total consideration paid in a Final Liquidity Event if the price per share paid to stockholders is between $10.25 and $11.24 ; (iv) 1.25% of the total consideration paid in a Final Liquidity Event if the price per share paid to stockholders is between $11.25 and $12.00 ; and (v) 1.50% of the total consideration paid in a Final Liquidity Event if the price per share paid to stockholders is greater than or equal to $12.01 ; provided, however, that the price per share paid to stockholders as listed in each of clauses (i) through (v) above shall be adjusted for any special distributions, stock splits, combinations, recapitalizations or any similar transaction with respect to our shares. To the extent the disposition fee is paid upon the sale of any assets other than real property, it will be included as an operating expense for purposes of the 2% / 25% Limitation. In connection with the sale of securities, the disposition fee may be paid to an affiliate of the Advisor that is registered as a FINRA member broker-dealer if applicable FINRA rules would prohibit the payment of the disposition fee to a firm that is not a registered broker-dealer. The Charter limits the maximum amount of the disposition fees payable to the Advisor for the sale of any real property to the lesser ofone-half of the brokerage commission paid or 3% of the contract sales price, but in no event shall the total real estate commissions paid, including any disposition fees payable to the Advisor, exceed 6% of the contract sales price. With respect to a property held in a joint venture, the foregoing commission will be reduced to a percentage of such amounts reflecting the Company’s economic interest in the joint venture.

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DECEMBER 31, 2018

Loan Coordination Fee

The Company pays the Advisor a loan coordination fee equal to 0.50% of the amount of debt financed or refinanced (in each case, other than at the time of the acquisition of a property or a real estate-related asset), or the Company’s proportionate share of the initial amount of new debt financed or refinanced or the amount of any debt refinanced in the case of investments made through a joint venture.

Restricted Stock Agreement

On June 11, 2014, the Company entered into a restricted stock agreement with the Advisor whereby the Company issued to the Advisor 488,281.25 restricted shares of the Company’s common stock at a fair market value of $10.24 per share in satisfaction of certain deferred fees due to the Advisor in the aggregate amount of $5,000,000. Pursuant to the terms of the restricted stock agreement, the shares of restricted stock vested and becamenon-forfeitable 50% at December 31, 2015 and 50% at December 31, 2016.

Contribution, Settlement and Release Agreements

Certain of the Company’s subsidiaries and the Property Manager were named as defendants in two Texas class action lawsuits alleging violations of the Texas Water Code (collectively, the “Actions”). The Company’s subsidiaries and the Property Manager disputed plaintiffs’ claims in the Actions; however, to avoid the time and expense associated with defending the Actions, the Company’s subsidiaries and other affiliated Steadfast entities (collectively, the “Steadfast Parties”) entered into Settlement Agreements with the plaintiffs that provided for a settlement payment to the class members and a release of claims by plaintiffs and class members against the Steadfast Parties. In connection with the settlement agreements, on April 17, 2017, the Steadfast Parties entered into a contribution, settlement and release agreement whereby all agreed to an allocation of all costs related to the actions and their settlements and a release of all claims a Steadfast Party may have against any other Steadfast Party. The Company’s proportionate share of the settlements was $378,405, which consisted of funds used to pay a portion of (1) the settlement payments to the plaintiffs and class members in the actions and (2) legal costs, less insurance proceeds. During the year ended December 31, 2018, the Company had recorded $305,000 as reimbursement for funds spent by the Company in excess of its proportionate share, all of which was collected from other Steadfast Parties as of December 31, 2018.

10. Incentive Award Plan and Independent Director Compensation

The Company has adopted an incentive plan (the “Incentive Award Plan”) that provides for the grant of equity awards to its employees, directors and consultants and those of the Company’s affiliates. The Incentive Award Plan authorizes the grant ofnon-qualified and incentive stock options, restricted stock awards, restricted stock units, stock appreciation rights, dividend equivalents and other stock-based awards or cash-based awards. No awards have been granted under the Incentive Award Plan as of December 31, 2018, except those awards granted to the independent directors as described below.

Under the Company’s independent directors’ compensation plan, which is asub-plan of the Incentive Award Plan, each of the Company’s then independent directors was entitled to receive 5,000 shares of restricted common stock in connection with the initial meeting of the Company’s full board of directors. The Company’s initial board of directors and each of the independent directors, agreed to delay the initial grant of restricted stock until the Company raised $2,000,000 in gross offering proceeds in the Private Offering. Each subsequent independent director, if any, that joins the Company’s board of directors would receive 5,000 shares of restricted common stock upon election to the Company’s board of directors. In addition, on the date following an

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independent director’sre-election to the Company’s board of directors, he or she receives 2,500 shares of restricted common stock.One-fourth of the shares of restricted common stock generally vest and becomenon-forfeitable upon issuance and the remaining portion will vest in three equal annual installments beginning on the first anniversary of the date of grant and ending on the third anniversary of the date of grant; provided, however, that the restricted stock will become fully vested and becomenon-forfeitable on the earlier to occur of (1) the termination of the independent director’s service as a director due to his or her death or disability, or (2) a change in control of the Company and as otherwise provided in the Incentive Award Plan.

On August 9, 2016, the Company granted 2,500 shares of restricted common stock to each of its three independent directors upon theirre-election to the Company’s board of directors at the 2016 annual meeting of stockholders. On August 8, 2017, the Company granted 2,500 shares of restricted common stock to each of its three independent directors upon theirre-election to the Company’s board of directors at the 2017 annual meeting of stockholders. On August 9, 2018, the Company granted 2,500 shares of restricted common stock to each of its three independent directors upon theirre-election to the Company’s board of directors at the 2018 annual meeting of stockholders. The Company recorded stock-based compensation expense of $84,866, $85,486 and $76,285 for the years ended December 31, 2018, 2017 and 2016 respectively.

11. Commitments and Contingencies

Economic Dependency

The Company is dependent on the Advisor and its affiliates for certain services that are essential to the Company, including the identification, evaluation, negotiation, purchase and disposition of real estate and real estate-related investments; management of the daily operations of the Company’s real estate and real estate-related investment portfolio; and other general and administrative responsibilities. In the event that these companies are unable to provide the respective services, the Company will be required to obtain such services from other sources.

Concentration of Credit Risk

The geographic concentration of the Company’s portfolio makes it particularly susceptible to adverse economic developments in the Houston, Texas, Oklahoma City, Oklahoma, Columbus, Ohio and Atlanta, Georgia apartment markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, relocations of businesses, increased competition from other apartment communities, decrease in demand for apartments or any other changes, could adversely affect the Company’s operating results and its ability to make distributions to stockholders.

Environmental

As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. The Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s properties, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the properties could result in future environmental liabilities.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)

DECEMBER 31, 2018

Legal Matters

From time to time, the Company is subject, or party, to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on the Company’s results of operations or financial condition nor is the Company aware of any such legal proceedings contemplated by government agencies.

12. Derivative Financial Instruments

The Company uses interest rate derivatives with the objective of managing exposure to interest rate movements thereby minimizing the effect of interest rate changes and the effect they could have on future cash flows. Interest rate cap agreements are used to accomplish this objective. The following table provides the terms of the Company’s interest rate derivative instruments that were in effect at December 31, 2018 and 2017:

December 31, 2018
Type	Maturity Date Range		Based on		Number of Instruments		Notional Amount		Variable Rate			Weighted Average Rate Cap			Fair Value
Interest rate cap		6/1/2019 - 7/1/2021		One-Month LIBOR		10	$	283,654,000		2.52	%		2.81	%	$	117,678

December 31, 2017
Type	Maturity Date Range		Based on		Number of Instruments		Notional Amount		Variable Rate			Weighted Average Rate Cap			Fair Value
Interest rate cap		1/1/2018 - 10/1/2019		One-Month LIBOR		18	$	458,655,000		1.56	%		2.89	%	$	51,646

The interest rate cap agreements are not designated as cash flow hedges. Accordingly, the Company records any changes in the fair value of the interest rate cap agreements as interest expense. The change in the fair value of the interest rate cap agreements for the years ended December 31, 2018, 2017 and 2016 resulted in an unrealized loss ( gain) of $157,268, $604,545 and $( 61,698 ), respectively, which is included in interest expense in the accompanying consolidated statements of operations. During the years ended December 31, 2018 and 2017, the Company acquired interest rate cap agreements of $223,300 and $37,350. The fair value of interest rate cap agreements of $117,678 and $51,646 are included in other assets on the accompanying consolidated balance sheets.

13. Selected Quarterly Results (unaudited)

Presented below is a summary of the Company’s unaudited quarterly financial information for the years ended December 31, 2018 and 2017:

	First Quarter		Second Quarter			Third Quarter			Fourth Quarter		Total
2018
Revenues	$	35,454,927	$	34,057,008		$	36,241,718		$	36,235,206	$	141,988,859
Net income (loss)		73,280,028		(7,965,511	)		(6,456,722	)		30,225,757		89,083,552
Income (loss) per common share, basic and diluted		0.97		(0.11	)		(0.09	)		0.42		1.19
Distributions declared per common share		0.177		1.153			0.140			0.140		1.610

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DECEMBER 31, 2018

	First Quarter			Second Quarter			Third Quarter			Fourth Quarter		Total
2017
Revenues	$	54,280,265		$	55,118,406		$	55,592,107		$	47,978,462	$	212,969,240
Net (loss) income		(5,644,875	)		(5,656,573	)		(2,326,578	)		86,101,893		72,473,867
(Loss) income per common share, basic and diluted		(0.07	)		(0.07	)		(0.03	)		1.14		0.96
Distributions declared per common share		0.177			0.179			0.181			0.181		0.718

14. Subsequent Events

The Company has evaluated all subsequent event activity through the date these consolidated financial statements were available to be issued.

Distributions Paid

On January 2, 2019, the Company paid distributions of $3,515,310, which related to distributions declared for each day in the period from December 1, 2018 through December 31, 2018. All such distributions were paid in cash.

On February 1, 2019, the Company paid distributions of $3,514,980, which related to distributions declared for each day in the period from January 1, 2019 through January 31, 2019. All such distributions were paid in cash.

On March 1, 2019, the Company paid distributions of $3,165,776, which related to distributions declared for each day in the period from February 1, 2019 through February 28, 2019. All such distributions were paid in cash.

Repayment of Credit Facility

On January 29, 2019, the Company made a principal payment in the amount of $3,089,477 on the credit facility with PNC Bank.

Shares Repurchased

On January 31, 2019, the Company repurchased 219,696 shares of its common stock for a total repurchase value of $2,000,000, or $9.10 per share, pursuant to the Company’s share repurchase program.

Estimated Value per Share

On March 13, 2019, the Company’s board of directors determined an estimated value per share of the Company’s common stock of $9.40 as of December 31, 2018.

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Distribution Declared

On March 13, 2018, the Company’s board of directors approved and authorized a daily distribution to stockholders of record as of the close of business on each day for the period commencing on April 1, 2019, and ending on June 30, 2019. The distributions will be equal to $0.001519 per share of the Company’s common stock per day, which if paid each day over a365-day period is equivalent to a 6.0% annualized distribution rate based on a purchase price of $9.24 per share of common stock. The distributions for each record date in April 2019, May 2019 and June 2019 will be paid in May 2019, June 2019 and July 2019, respectively. The distributions will be payable to stockholders from legally available funds therefor.

Sale of Dawntree Apartments

On March 8, 2019, the Company, through SIR Dawntree, LLC (“SIR Dawntree”), an indirect, wholly-owned subsidiary of the Company, sold its fee simple interest in Dawntree Apartments, a 400 -unit residential property located in Carrollton, Texas, to an unaffiliated third-party buyer. SIR Dawntree sold Dawntree Apartments for an aggregate sales price of $46,200,000, excluding closing costs.

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SCHEDULE III

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION AND AMORTIZATION

DECEMBER 31, 2018

Description	Location	Owner- ship Percent			Encumbrances (1)		Initial Cost of Company						Cost Capitalized Subsequent to Acquisition		Gross Amount at which Carried at Close of Period						Accumulated Depreciation and Amortization			Original Date of Construction		Date Acquired
							Land		Building and Improvements (2)		Total				Land		Building and Improvements (2)		Total (3)
Clarion Park Apartments	Olathe, KS		100	%	$	11,930,339	$	1,470,991	$	9,744,009	$	11,215,000	$	988,626	$	1,470,991	$	10,450,720	$	11,921,711	$	(3,224,329	)		1994		6/28/11
Truman Farm Villas	Grandview, MO		100	%		—		842,987		8,257,013		9,100,000		1,232,186		842,987		9,248,570		10,091,557		(2,953,604	)		2008		12/22/11
EBT Lofts	Kansas City, MO		100	%		—		460,362		8,114,638		8,575,000		770,709		460,362		8,543,029		9,003,391		(2,561,371	)		1899		12/30/11
Spring Creek of Edmond	Edmond, OK		100	%		17,113,376		2,346,503		17,602,343		19,948,846		1,187,564		2,346,503		18,384,515		20,731,018		(5,204,981	)		1974		3/9/12
Montclair Parc Apartments	Oklahoma City, OK		100	%		21,719,269		3,325,556		32,424,444		35,750,000		2,104,988		3,325,556		33,343,837		36,669,393		(8,840,527	)		1999		4/26/12
Sonoma Grande Apartments	Tulsa, OK		100	%		20,451,101		2,737,794		29,462,206		32,200,000		1,166,391		2,737,794		30,078,984		32,816,778		(8,015,610	)		2009		5/24/12
Estancia Apartments	Tulsa, OK		100	%		—		2,544,634		27,240,628		29,785,262		1,005,697		2,544,634		27,724,761		30,269,395		(7,239,095	)		2006		6/29/12
Hilliard Park Apartments	Hilliard, OH		100	%		12,390,229		1,413,437		18,484,692		19,898,129		1,037,955		1,413,437		19,117,326		20,530,763		(4,837,983	)		2000		9/11/12
Sycamore Terrace Apartments	Terre Haute, IN		100	%		17,847,045		1,321,194		21,852,963		23,174,157		471,708		1,321,194		21,879,086		23,200,280		(5,253,317	)		2011/2013		9/20/12, 3/5/14
Hilliard Summit Apartments	Hilliard, OH		100	%		15,027,104		1,536,795		22,639,028		24,175,823		572,011		1,536,795		22,762,387		24,299,182		(5,529,077	)		2012		9/28/12
Forty-57 Apartments	Lexington, KY		100	%		35,563,625		3,055,614		49,444,386		52,500,000		1,409,158		3,055,614		50,091,659		53,147,273		(12,032,326	)		2008		12/20/12
Riverford Crossing Apartments	Frankfort, KY		100	%		20,229,093		2,595,387		27,404,613		30,000,000		911,816		2,595,387		27,774,395		30,369,782		(6,842,412	)		2011		12/28/12
Montecito Apartments	Austin, TX		100	%		12,823,790		3,081,522		15,918,478		19,000,000		2,914,296		3,081,522		18,398,578		21,480,100		(5,151,505	)		1984		12/31/12
Hilliard Grand Apartments	Dublin, OH		100	%		28,392,107		2,657,734		38,012,528		40,670,262		701,519		2,657,734		37,897,380		40,555,114		(8,766,861	)		2010		12/31/12
Library Lofts East	Kansas City, MO		100	%		8,166,247		1,669,405		11,080,595		12,750,000		540,378		1,669,405		11,415,006		13,084,411		(2,743,641	)		1906/1923		2/28/13
Deep Deuce at Bricktown	Oklahoma City, OK		100	%		32,069,379		2,529,318		37,266,648		39,795,966		6,197,411		2,580,318		42,737,983		45,318,301		(12,398,000	)		2001		3/28/13
Retreat at Quail North	Oklahoma City, OK		100	%		16,268,147		1,700,810		24,025,543		25,726,353		556,897		1,700,810		24,093,797		25,794,607		(5,539,869	)		2012		6/12/13
Waterford on the Meadow	Plano, TX		100	%		15,175,716		2,625,024		20,849,131		23,474,155		3,702,083		2,625,024		23,986,048		26,611,072		(6,140,697	)		1984		7/3/13
Tapestry Park Apartments	Birmingham, AL		100	%		43,712,670		3,277,884		47,118,797		50,396,681		420,292		3,277,884		46,900,625		50,178,509		(10,572,417	)		2012/2014		8/13/13, 12/1/14
Dawntree Apartments	Carrollton, TX		100	%		14,450,118		3,135,425		21,753,469		24,888,894		2,360,472		3,135,425		23,511,480		26,646,905		(5,864,112	)		1982		8/15/13
Stuart Hall Lofts	Kansas City, MO		100	%		16,045,948		1,585,035		15,264,965		16,850,000		259,800		1,585,035		15,240,006		16,825,041		(3,363,616	)		1910		8/27/13
BriceGrove Park Apartments	Canal Winchester, OH		100	%		17,133,615		1,596,212		18,503,788		20,100,000		868,554		1,596,212		18,921,522		20,517,734		(4,348,152	)		2002		8/29/13
Retreat at Hamburg Place	Lexington, KY		100	%		12,072,255		1,605,839		14,694,161		16,300,000		400,090		1,605,839		14,766,336		16,372,175		(3,359,740	)		2013		9/5/13
Villas at Huffmeister	Houston, TX		100	%		27,058,201		5,858,663		31,741,337		37,600,000		1,943,132		5,858,663		32,964,053		38,822,716		(7,702,859	)		2007		10/10/13
Villas at Kingwood	Kingwood, TX		100	%		35,156,654		6,512,468		33,637,532		40,150,000		2,333,431		6,512,468		35,182,141		41,694,609		(8,339,936	)		2008		10/10/13
Waterford Place at Riata Ranch	Cypress, TX		100	%		—		3,184,857		20,215,143		23,400,000		1,098,339		3,184,857		20,813,492		23,998,349		(4,944,919	)		2008		10/10/13
Carrington Place	Houston, TX		100	%		27,384,768		5,450,417		27,449,583		32,900,000		1,937,311		5,450,417		28,692,733		34,143,150		(6,646,264	)		2004		11/7/13
Carrington Champion Forest	Houston, TX		100	%		24,978,692		3,760,329		29,239,671		33,000,000		1,496,724		3,760,329		30,120,500		33,880,829		(6,893,137	)		2008		11/7/13
Carrington Park at Huffmeister	Houston, TX		100	%		19,440,839		3,241,747		21,908,253		25,150,000		1,205,865		3,241,747		22,589,773		25,831,520		(5,300,183	)		2008		11/7/13

H-158

STEADFAST INCOME REIT, INC.

SCHEDULE III

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION AND AMORTIZATION (CONTINUED)

DECEMBER 31, 2018

Description	Location	Owner- ship Percent			Encumbrances (1)		Initial Cost of Company						Cost Capitalized Subsequent to Acquisition		Gross Amount at which Carried at Close of Period						Accumulated Depreciation and Amortization			Original Date of Construction		Date Acquired
							Land		Building and Improvements (2)		Total				Land		Building and Improvements (2)		Total (3)
Heritage Grand at Sienna Plantation	Missouri City, TX		100	%	$	16,822,121	$	3,776,547	$	22,762,411	$	26,538,958	$	499,424	$	3,776,547	$	22,715,694	$	26,492,241	$	(4,979,819	)		2012		12/20/13
Mallard Crossing	Loveland, OH		100	%		33,367,682		2,383,256		37,416,744		39,800,000		1,866,149		2,383,256		38,612,320		40,995,576		(7,861,158	)		1997		12/27/13
Reserve at Creekside	Chattanooga, TN		100	%		14,241,494		1,344,233		17,530,767		18,875,000		1,242,125		1,344,233		18,420,868		19,765,101		(3,627,475	)		2004		3/28/14
Oak Crossing	Fort Wayne, IN		100	%		20,204,961		2,005,491		22,224,509		24,230,000		495,102		2,005,491		22,303,140		24,308,631		(4,171,773	)		2012-13		6/3/14
Double Creek Flats	Plainfield, IN		100	%		21,877,897		1,306,880		30,545,199		31,852,079		85,220		1,306,880		30,166,508		31,473,388		(866,844	)		2016		5/7/18
Jefferson at the Perimeter	Dunwoody, GA		100	%		64,387,092		17,763,296		85,870,687		103,633,983		712,061		17,763,296		85,279,756		103,043,052		(1,876,207	)		1996		6/11/18
					$	693,501,574	$	105,703,646	$	917,700,902	$	1,023,404,548	$	46,695,484	$	105,754,646	$	945,129,008	$	1,050,883,654	$	(203,993,817	)

(1) Encumbrances include the unamortized portion of loan premiums on assumed debt allocated to individual assets in the aggregate amount of $0.3 million and net deferred financing costs of $4,227,995 as of December 31, 2018.

(2) Building and improvements include tenant origination and absorption costs and other intangible assets.

(3) The aggregate cost of real estate for federal income tax purposes was $1.07 billion (unaudited) as of December 31, 2018.

H-159

STEADFAST INCOME REIT, INC.

SCHEDULE III

REAL ESTATE ASSETS AND ACCUMULATED DEPRECIATION AND AMORTIZATION (CONTINUED)

DECEMBER 31, 2018

Below is a summary of activity for real estate and accumulated depreciation for the years ended December 31, 2018, 2017 and 2016:

	2018			2017			2016
Real estate:
Balance at the beginning of the year	$	1,248,296,985		$	1,694,278,958		$	1,666,901,082
Acquisitions		135,486,062			—			—
Improvements		9,906,890			15,621,609			28,485,659
Cost of real estate sold		(341,007,619	)		(461,332,750	)		—
Write-off of disposed and fully depreciated and fully amortized assets		(1,798,664	)		(270,832	)		(1,107,783	)
Balance at the end of the year	$	1,050,883,654		$	1,248,296,985		$	1,694,278,958
Accumulated depreciation and amortization:
Balance at the beginning of the year	$	221,581,654		$	232,744,083		$	163,445,987
Depreciation and amortization expense		46,109,794			67,755,152			69,513,484
Write-off of accumulated depreciation and amortization of real estate assets sold		(63,671,739	)		(78,793,834	)		—
Write-off of disposed and fully depreciated and fully amortized assets		(25,892	)		(123,747	)		(215,388	)
Balance at the end of the year	$	203,993,817		$	221,581,654		$	232,744,083

H-160

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Irvine, State of California, on March 15, 2019.

Steadfast Income REIT, Inc.
By:	/s/ Rodney F. Emery
	Rodney F. Emery
	Chief Executive Officer and Chairman of the Board

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name	Title	Date
/s/ Rodney F. Emery	Chief Executive Officer and Chairman of the Board (principal executive officer)
Rodney F. Emery		March 15, 2019
/s/ Kevin J. Keating	Chief Financial Officer and Treasurer (principal financial officer and principal accounting officer)
Kevin J. Keating		March 15, 2019
/s/ Ella S. Neyland
Ella S. Neyland	President and Director	March 15, 2019
/s/ Scot B. Barker
Scot B. Barker	Director	March 15, 2019
/s/ Ned W. Brines
Ned W. Brines	Director	March 15, 2019
/s/ Don B. Saulic
Don B. Saulic	Director	March 15, 2019

Annex I

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2019

OR

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

For the transition period from                    to                    

Commission file number000-54674

STEADFAST INCOME REIT, INC.

(Exact Name of Registrant as Specified in Its Charter)

Maryland	27-0351641
(State or Other Jurisdiction of	(I.R.S. Employer
Incorporation or Organization)	Identification No.)
18100 Von Karman Avenue, Suite 500
Irvine, California	92612
(Address of Principal Executive Offices)	(Zip Code)

(949) 852-0700

(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act: None

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
N/A	N/A	N/A

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 ofRegulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☒    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” inRule 12b-2 of the Exchange Act.

Large Accelerated filer	☐	Accelerated filer	☐
Non-Accelerated filer	☒	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.   ☐

Indicate by check mark whether the registrant is a shell company (as defined inRule 12b-2 of the Exchange Act).    Yes  ☐    No  ☒

As of November 1, 2019, there were 73,905,170 shares of the Registrant’s common stock issued and outstanding.

STEADFAST INCOME REIT, INC.

INDEX

	Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements		I-2
Consolidated Balance Sheets as of September  30, 2019 (unaudited) and December 31, 2018		I-2
Consolidated Statements of Operations for the three and nine months ended September 30, 2019 and 2018 (unaudited)		I-3
Consolidated Statements of Stockholders’ Equity for the three and nine months ended September 30, 2019 and 2018 (unaudited)		I-4
Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 (unaudited)		I-6
Condensed Notes to Consolidated Financial Statements as of September  30, 2019 (unaudited)		I-8
Item  2. Management’s Discussion and Analysis of Financial Condition and Results of Operations		I-42
Item 3. Quantitative and Qualitative Disclosures About Market Risk		I-69
Item 4. Controls and Procedures		I-70
PART II — OTHER INFORMATION
Item 1. Legal Proceedings		I-71
Item 1A. Risk Factors		I-71
Item  2. Unregistered Sales of Equity Securities and Use of Proceeds		I-71
Item 3. Defaults Upon Senior Securities		I-73
Item 4. Mine Safety Disclosures		I-73
Item 5. Other Information		I-74
Item 6. Exhibits		I-74
Signatures		I-77

I-1

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

STEADFAST INCOME REIT, INC.

CONSOLIDATED BALANCE SHEETS

	September 30, 2019			December 31, 2018
	(Unaudited)
ASSETS
Assets:
Real Estate:
Land	$	89,822,014		$	90,153,980
Building and improvements		804,194,436			795,383,423
Total real estate held for investment, cost		894,016,450			885,537,403
Less accumulated depreciation and amortization		(190,527,296	)		(165,112,070	)
Total real estate held for investment, net		703,489,154			720,425,333
Real estate held for sale, net		—			126,464,504
Total real estate, net		703,489,154			846,889,837
Cash and cash equivalents		120,202,920			142,078,166
Restricted cash		9,362,825			11,265,317
Investment in unconsolidated joint venture		13,316,283			14,085,399
Rents and other receivables		2,501,546			1,791,881
Assets related to real estate held for sale		—			848,960
Other assets		2,496,144			2,698,438
Total assets	$	851,368,872		$	1,019,657,998
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued liabilities	$	20,356,476		$	23,899,595
Notes payable:
Mortgage notes payable, net		498,426,493			566,900,461
Credit facility, net		—			52,363,460
Mortgage notes payable related to real estate held for sale, net		—			74,237,653
Total notes payable, net		498,426,493			693,501,574
Distributions payable		3,371,492			3,515,310
Due to affiliates		1,645,472			4,985,918
Liabilities related to real estate held for sale		—			2,994,267
Total liabilities		523,799,933			728,896,664
Commitments and contingencies (Note 10)
Redeemable common stock		1,289,113			—
Stockholders’ Equity:
Preferred stock, $0.01 par value per share; 100,000,000 shares authorized, no shares issued and outstanding		—			—
Common stock, $0.01 par value per share; 999,999,000 shares authorized, 73,983,866 and 74,650,139 shares issued and outstanding at September 30, 2019 and December 31, 2018, respectively		739,839			746,502
Convertible stock, $0.01 par value per share; 1,000 shares authorized, issued and outstanding as of September 30, 2019 and December 31, 2018, respectively		10			10
Additionalpaid-in capital		650,253,927			656,204,073
Cumulative distributions and net income		(324,713,950	)		(366,189,251	)
Total stockholders’ equity		326,279,826			290,761,334
Total liabilities and stockholders’ equity	$	851,368,872		$	1,019,657,998

See accompanying condensed notes to consolidated financial statements.

I-2

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2019			2018			2019			2018
Revenues:
Rental income	$	26,857,176		$	35,421,095		$	84,948,693		$	102,999,303
Other income		966,375			820,623			3,218,233			2,754,349
Total revenues		27,823,551			36,241,718			88,166,926			105,753,652
Expenses:
Operating, maintenance and management		6,871,764			10,457,331			21,720,715			28,936,191
Real estate taxes and insurance		4,031,558			5,657,098			13,376,128			18,329,576
Fees to affiliates		3,934,709			4,113,139			11,083,920			11,854,429
Depreciation and amortization		8,520,813			12,579,032			25,961,590			34,781,722
Interest expense		6,044,495			8,496,658			20,505,685			24,408,327
Loss on debt extinguishment		597,681			—			3,432,058			2,282,247
General and administrative expenses		3,063,653			1,107,644			6,181,745			4,448,377
Total expenses		33,064,673			42,410,902			102,261,841			125,040,869
Loss before other income (expense)		(5,241,122	)		(6,169,184	)		(14,094,915	)		(19,287,217	)
Other income (expense):
Equity in loss from unconsolidated joint venture		(228,667	)		(287,540	)		(427,816	)		(3,102,044	)
(Loss) gain on sales of real estate, net		(88,137	)		—			86,800,659			81,247,054
Total other (expense) income		(316,804	)		(287,540	)		86,372,843			78,145,010
											��
Net (loss) income	$	(5,557,926	)	$	(6,456,724	)	$	72,277,928		$	58,857,793
(Loss) income per common share — basic and diluted	$	(0.08	)	$	(0.09	)	$	0.97		$	0.78
Weighted average number of common shares outstanding — basic		74,051,096			74,928,285			74,273,151			75,164,006
Weighted average number of common shares outstanding — diluted		74,056,721			74,940,350			74,278,776			75,176,774

See accompanying condensed notes to consolidated financial statements.

I-3

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 (Unaudited)

	Common Stock						Convertible Stock				Additional Paid- In Capital			Cumulative Distributions & Net Income			Total Stockholders’ Equity
	Shares			Amount			Shares		Amount
BALANCE, July 1, 2019		74,206,848		$	742,069			1,000	$	10	$	652,239,394		$	(308,806,598	)	$	344,174,875
Repurchase of common stock		(222,982	)		(2,230	)		—		—		(1,997,770	)		—			(2,000,000	)
Distributions declared ($0.140 per share of common stock)		—			—			—		—		—			(10,349,426	)		(10,349,426	)
Amortization of stock-based compensation		—			—			—		—		12,303			—			12,303
Net loss for the three months ended September 30, 2019		—			—			—		—		—			(5,557,926	)		(5,557,926	)
BALANCE, September 30, 2019		73,983,866		$	739,839			1,000	$	10	$	650,253,927		$	(324,713,950	)	$	326,279,826
	Common Stock						Convertible Stock				Additional Paid- In Capital			Cumulative Distributions & Net Income			Total Stockholders’ Equity
	Shares			Amount			Shares		Amount
BALANCE, January 1, 2019		74,650,139		$	746,502			1,000	$	10	$	656,204,073		$	(366,189,251	)	$	290,761,334
Repurchase of common stock		(666,273	)		(6,663	)		—		—		(5,993,337	)		—			(6,000,000	)
Distributions declared ($0.415 per share of common stock)		—			—			—		—		—			(30,802,627	)		(30,802,627	)
Amortization of stock-based compensation		—			—			—		—		43,191			—			43,191
Net income for the nine months ended September 30, 2019		—			—			—		—		—			72,277,928			72,277,928
BALANCE, September 30, 2019		73,983,866		$	739,839			1,000	$	10	$	650,253,927		$	(324,713,950	)	$	326,279,826

See accompanying condensed notes to consolidated financial statements.

I-4

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2018 (Unaudited)

	Common Stock						Convertible Stock				Additional Paid- In Capital			Cumulative Distributions & Net Losses			Total Stockholders’ Equity
	Shares			Amount			Shares		Amount
BALANCE, July 1, 2018		75,079,994		$	750,800			1,000	$	10	$	660,149,499		$	(369,043,111	)	$	291,857,198
Issuance of common stock		7,500			75			—		—		(75	)		—			—
Repurchase of common stock		(218,555	)		(2,185	)		—		—		(1,997,815	)		—			(2,000,000	)
Distributions declared ($0.140 per share of common stock)		—			—			—		—		—			(10,472,649	)		(10,472,649	)
Amortization of stock-based compensation		—			—			—		—		34,832			—			34,832
Net loss for the three months ended September 30, 2018		—			—			—		—		—			(6,456,724	)		(6,456,724	)
BALANCE, September 30, 2018		74,868,939		$	748,690			1,000	$	10	$	658,186,441		$	(385,972,484	)	$	272,962,657
	Common Stock						Convertible Stock				Additional Paid- In Capital			Cumulative Distributions & Net Losses			Total Stockholders’ Equity
	Shares			Amount			Shares		Amount
BALANCE, January 1, 2018		75,479,409		$	754,794			1,000	$	10	$	664,110,915		$	(334,217,946	)	$	330,647,773
Issuance of common stock		7,500			75			—		—		(75	)		—			—
Repurchase of common stock		(617,970	)		(6,179	)		—		—		(5,993,821	)		—			(6,000,000	)
Distributions declared ($1.470 per share of common stock)		—			—			—		—		—			(110,612,331	)		(110,612,331	)
Amortization of stock-based compensation		—			—			—		—		69,422			—			69,422
Net income for the nine months ended September 30, 2018		—			—			—		—		—			58,857,793			58,857,793
BALANCE, September 30, 2018		74,868,939		$	748,690			1,000	$	10	$	658,186,441		$	(385,972,484	)	$	272,962,657

I-5

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended September 30,
	2019			2018
Cash Flows from Operating Activities:
Net income	$	72,277,928		$	58,857,793
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		25,961,590			34,781,722
Amortization of deferred financing costs		729,401			799,989
Amortization of stock-based compensation		43,191			69,422
Amortization of loan premiums		(48,562	)		(222,466	)
Change in fair value of interest rate cap agreements		163,363			(103,506	)
Gain on sales of real estate		(86,800,659	)		(81,247,054	)
Loss on debt extinguishment		3,432,058			2,282,247
Insurance claim recoveries		(86,190	)		(1,005	)
Loss on disposal of building and improvements		53,207			427
Equity in loss from unconsolidated joint venture		427,816			3,102,044
Changes in operating assets and liabilities:
Rents and other receivables		(921,795	)		457,299
Other assets		(35,407	)		1,244,119
Accounts payable and accrued liabilities		(3,490,110	)		358,873
Due to affiliates		(3,357,984	)		(427,837	)
Net cash provided by operating activities		8,347,847			19,952,067
Cash Flows from Investing Activities:
Cash contribution to unconsolidated joint venture		(548,800	)		(2,931,578	)
Cash distribution from unconsolidated joint venture		890,100			530,100
Acquisition of real estate investments		—			(67,886,062	)
Additions to real estate investments		(9,423,100	)		(6,754,330	)
Escrow deposits for pending real estate acquisitions		—			(2,600,000	)
Purchase of interest rate cap agreements		(47,000	)		(203,300	)
Proceeds from sales of real estate, net		211,990,358			178,277,349
Proceeds from insurance claims		298,320			1,005
Net cash provided by investing activities		203,159,878			98,433,184
Cash Flows from Financing Activities:
Proceeds from issuance of mortgage notes payable		222,934,000			106,482,000
Principal payments on mortgage notes payable		(365,119,705	)		(158,021,981	)
Principal payments on credit facility		(52,656,750	)		(38,410,500	)
Payment of deferred financing costs		(1,356,539	)		(1,323,128	)
Payment of debt extinguishment costs		(2,988,984	)		(1,526,431	)
Distributions to common stockholders		(30,946,445	)		(111,795,742	)
Repurchases of common stock		(6,000,000	)		(6,000,000	)
Net cash used in financing activities		(236,134,423	)		(210,595,782	)
Net decrease in cash, cash equivalents and restricted cash		(24,626,698	)		(92,210,531	)
Cash, cash equivalents and restricted cash, beginning of period		154,192,443			205,096,008
Cash, cash equivalents and restricted cash, end of period	$	129,565,745		$	112,885,477

I-6

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited)

	Nine Months Ended September 30,
	2019		2018
Supplemental Disclosures of Cash Flow Information:
Interest paid	$	21,272,206	$	24,026,631
Supplemental Disclosure of Noncash Transactions:
Distributions payable	$	3,371,492	$	3,411,890
Assumption of mortgage notes payable to acquire real estate	$	—	$	65,000,000
Application of escrow deposits to acquire real estate	$	—	$	2,600,000
Redeemable common stock	$	1,289,113	$	—
Mortgage notes payable assumed by buyer in connection with property sales	$	—	$	(67,140,194	)
Assets and liabilities deconsolidated in connection with the Second Closing Properties:
Real estate, net	$	—	$	(98,350,076	)
Notes payable, net	$	—	$	76,336,778
Restricted cash	$	—	$	(913,408	)
Accounts payable and accrued liabilities	$	—	$	674,912
Accounts payable and accrued liabilities from additions to real estate investments	$	362,179	$	81,950
Due to affiliates from additions to real estate investments	$	22,180	$	6,613
Repurchases payable	$	710,887	$	2,000,000
Operating leaseright-of-use asset, net	$	107,080	$	—
Operating lease liabilities, net	$	114,332	$	—

See accompanying condensed notes to consolidated financial statements.

I-7

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

1. Organization and Business

Steadfast Income REIT, Inc. (the “Company”) was formed on May 4, 2009, as a Maryland corporation that elected to be taxed as, and currently qualifies as, a real estate investment trust (“REIT”). On June 12, 2009, the Company was initially capitalized pursuant to the sale of 22,223 shares of common stock to Steadfast REIT Investments, LLC (the “Sponsor”) at a purchase price of $9.00 per share for an aggregate purchase price of $200,007. On July 10, 2009, Steadfast Income Advisor, LLC (the “Advisor”), a Delaware limited liability company formed on May 1, 2009, invested $1,000 in the Company in exchange for 1,000 shares of convertible stock (the “Convertible Stock”) as described in Note 7 (Stockholders’ Equity).

The Company owns a diverse portfolio of real estate investments, primarily in the multifamily sector, located throughout the United States. As of September 30, 2019, the Company owned 27 multifamily properties comprising a total of 7,527 apartment homes and a 10% interest in one unconsolidated joint venture that owned 20 multifamily properties with a total of 4,584 apartment homes. On March 13, 2019, the Company’s board of directors approved an estimated value per share of the Company’s common stock of $9.40 as of December 31, 2018.

Public Offering

On July 19, 2010, the Company commenced its initial public offering of up to a maximum of 150,000,000 shares of common stock for sale to the public at an initial price of $10.00 per share (with discounts available for certain categories of purchasers) (the “Primary Offering”). The Company also offered up to 15,789,474 shares of common stock for sale pursuant to the Company’s distribution reinvestment plan (the “DRP,” and together with the Primary Offering, the “Public Offering”) at an initial price of $9.50 per share.

The Company terminated its Public Offering on December 20, 2013. Following termination of the Public Offering, the Company continued to offer shares of common stock pursuant to the DRP until the Company’s board of directors suspended the DRP effective beginning with distributions earned on December 1, 2014. Through December 1, 2014, the Company issued 76,095,116 shares of common stock in the Public Offering for gross offering proceeds of $769,573,363, including 4,073,759 shares of common stock pursuant to the DRP for gross offering proceeds of $39,580,847.

The business of the Company is externally managed by the Advisor, pursuant to the Advisory Agreement by and among the Company, Steadfast Income REIT Operating Partnership, L.P., a Delaware limited partnership formed on July 6, 2009 (the “Operating Partnership”) and the Advisor (as amended, the “Advisory Agreement”), which is subject to annual renewal by the Company’s board of directors. The current term of the Advisory Agreement expires on November 15, 2020. Subject to certain restrictions and limitations, the Advisor manages the Company’sday-to-day operations, manages the Company’s portfolio of properties and real estate-related assets, sources and presents investment opportunities to the Company’s board of directors and provides investment management services on the Company’s behalf. Stira Capital Markets Group, LLC (formerly known as Steadfast Capital Markets Group, LLC) (the “Dealer Manager”), an affiliate of the Advisor, served as the dealer manager for the Public Offering. The Advisor, along with the Dealer Manager, also provides marketing, investor relations and other administrative services on the Company’s behalf.

I-8

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Substantially all of the Company’s business is conducted through the Operating Partnership. The Company is the sole general partner of the Operating Partnership. The Company and Advisor entered into an Amended and Restated Limited Partnership Agreement of the Operating Partnership (the “Partnership Agreement”) on September 28, 2009. The Partnership Agreement provides that the Operating Partnership is operated in a manner that will enable the Company to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that the Operating Partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), which classification could result in the Operating Partnership being taxed as a corporation, rather than as a partnership. In addition to the administrative and operating costs and expenses incurred by the Operating Partnership in acquiring and operating real properties, the Operating Partnership will pay all of the Company’s administrative costs and expenses, and such expenses will be treated as expenses of the Operating Partnership.

Pending Merger with Steadfast Apartment REIT, Inc.

On August 5, 2019, the Company, Steadfast Apartment REIT, Inc. (“STAR”), a publicnon-traded REIT sponsored by the Sponsor, Steadfast Apartment REIT Operating Partnership, L.P., STAR’s operating partnership (“STAR Operating Partnership”), the Operating Partnership, and SI Subsidiary, LLC, a wholly-owned subsidiary of STAR (“SIR Merger Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”). Subject to the terms and conditions of the Merger Agreement, the Company will merge with and into SIR Merger Sub (the “Merger”), with SIR Merger Sub surviving the Merger, such that following the Merger, the surviving entity will continue as a wholly-owned subsidiary of STAR. In accordance with the applicable provisions of the Maryland General Corporation Law (the “MGCL”), the separate existence of the Company shall cease.

At the effective time of the Merger and subject to the terms and conditions of the Merger Agreement, each issued and outstanding share of the Company’s common stock (or a fraction thereof), $0.01 par value per share, will be converted into the right to receive 0.5934 shares of STAR’s common stock, $0.01 par value per share.

The obligation of each party to consummate the Merger is subject to a number of conditions, including receipt of the approval of the Merger and of an amendment to the Company’s Third Articles of Amendment and Restatement (the “Charter”) to delete certain provisions regardingroll-up transactions by the holders of a majority of the outstanding shares of SIR Common Stock (the “SIR Stockholder Approval”).

The Company (with the prior approval of the special committee of its board of directors) may terminate the Merger Agreement in order to enter into an “Alternative Acquisition Agreement” with respect to a “Superior Proposal” (each as defined in the Merger Agreement) at any time prior to receipt by the Company of the SIR Stockholder Approval pursuant to the terms of the Merger Agreement. STAR may terminate the Merger Agreement at any time prior to the receipt of the SIR Stockholder Approval, in certain limited circumstances, including upon an “Adverse Recommendation Change” (as defined in the Merger Agreement).

If the Merger Agreement is terminated in connection with the Company’s acceptance of a Superior Proposal or making an Adverse Recommendation Change, then the Company must pay to STAR a termination fee of $20,866,122 and up to $2,000,000 as reimbursement for STAR’s Expenses (as defined in the Merger Agreement).

I-9

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

On August 5, 2019, STAR, Steadfast Apartment REIT III Inc., a publicnon-traded REIT sponsored by the Sponsor, (“STAR III”), STAR Operating Partnership, Steadfast Apartment REIT III Operating Partnership, L.P., the operating partnership of STAR III, and SIII Subsidiary, LLC, a wholly-owned subsidiary of STAR (“STAR III Merger Sub”), entered into an Agreement and Plan of Merger (the “STAR III Merger Agreement”). Subject to the terms and conditions of the STAR III Merger Agreement, STAR III will merge with and into STAR III Merger Sub (the “STAR III Merger”), with STAR III Merger Sub surviving the STAR III Merger, such that following the STAR III Merger, the surviving entity will continue as a wholly-owned subsidiary of STAR. In accordance with the applicable provisions of the MGCL, the separate existence of STAR III shall cease.

The consummation of the Company’s merger with STAR is not contingent upon the completion of the merger between STAR and STAR III, and the consummation of the merger between STAR and STAR III is not contingent upon the completion of the Company’s merger with STAR.

The combined company after the planned mergers will retain the name “Steadfast Apartment REIT, Inc.” Each merger is intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code.

Concurrently with the entry into the SIR Merger Agreement, the Company and the Advisor entered into a termination letter agreement (the “Termination Agreement”), effective as of August 5, 2019. Pursuant to the Termination Agreement, the Advisory Agreement will be terminated at the effective time of the SIR Merger. Also pursuant to the Termination Agreement, the Advisor agreed to waive any disposition fee it otherwise would be entitled to pursuant to the Advisory Agreement related to the SIR Merger.

2. Summary of Significant Accounting Policies

There have been no significant changes to the Company’s accounting policies since it filed its audited financial statements in its Annual Report on Form10-K for the year ended December 31, 2018, other than Accounting Standards Update (“ASU”)2016-02 and the Securities and Exchange Commission’s (“SEC”) Disclosure Update and Simplification rule (Release33-10532), as further described below. For further information about the Company’s accounting policies, refer to the Company’s consolidated financial statements and notes thereto for the year ended December 31, 2018, included in the Company’s Annual Report on Form10-K filed with the SEC on March 15, 2019.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company, the consolidated variable interest entity (“VIE”) that the Company controls and of which the Company is the primary beneficiary, and the Operating Partnership’s subsidiaries. All significant intercompany balances and transactions are eliminated in consolidation. The financial statements of the Company’s subsidiaries are prepared using accounting policies consistent with those of the Company. The Operating Partnership is a VIE as the limited partner lacks substantivekick-out rights and substantive participating rights. The Company is the primary beneficiary of, and consolidates, the Operating Partnership.

The accompanying unaudited consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information as contained within the

I-10

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Financial Accounting Standards Board (“FASB”), Accounting Standards Codification (“ASC”) and the rules and regulations of the SEC, including the instructions to Form10-Q and Article 10 ofRegulation S-X. Accordingly, the unaudited consolidated financial statements do not include all of the information and footnotes required by GAAP for audited financial statements. In the opinion of management, the financial statements for the unaudited interim periods presented include all adjustments that are of a normal and recurring nature and necessary for a fair and consistent presentation of the results of such periods. Operating results for the three and nine months ended September 30, 2019, are not necessarily indicative of the results that may be expected for the year ending December 31, 2019. The unaudited consolidated financial statements herein should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form10-K for the year ended December 31, 2018.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires the Company to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could materially differ from those estimates.

Fair Value Measurements

Under GAAP, the Company is required to measure certain financial instruments at fair value on a recurring basis. In addition, the Company is required to measure other assets and liabilities at fair value on anon-recurring basis (e.g., carrying value of impaired real estate loans receivable and long-lived assets). Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The GAAP fair value framework uses a three-tiered approach. Fair value measurements are classified and disclosed in one of the following three categories:

• Level 1: unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets or liabilities;

• Level 2: quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-derived valuations in which significant inputs and significant value drivers are observable in active markets; and

• Level 3: prices or valuation techniques where little or no market data is available that requires inputs that are both significant to the fair value measurement and unobservable.

When available, the Company utilizes quoted market prices from an independent third-party source to determine fair value and will classify such items in Level 1 or Level 2. In instances where the market is not active, regardless of the availability of a nonbinding quoted market price, observable inputs might not be relevant and could require the Company to make a significant adjustment to derive a fair value measurement. Additionally, in an inactive market, a market price quoted from an independent third party may rely more on models with inputs based on information available only to that independent third party. When the Company determines the market for a financial instrument owned by the Company to be illiquid or when market transactions for similar instruments do not appear orderly, the Company uses several valuation sources (including internal valuations, discounted cash flow analysis and quoted market prices) and will establish a fair value by assigning weights to the various valuation sources.

I-11

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

The following describes the valuation methodologies used by the Company to measure fair value, including an indication of the level in the fair value hierarchy in which each asset or liability is generally classified.

Interest rate cap agreements- The Company has entered into certain interest rate cap agreements. These derivatives are recorded at fair value. Fair value was based on a model-driven valuation using the associated variable rate curve and an implied market volatility, both of which were observable at commonly quoted intervals for the full term of the interest rate cap agreements. Therefore, the Company’s interest rate cap agreements were classified within Level 2 of the fair value hierarchy and are included in other assets in the accompanying consolidated balance sheets. Changes in the fair value of the interest rate cap agreements are recorded as interest expense in the accompanying unaudited consolidated statements of operations.

The following table reflects the Company’s assets required to be measured at fair value on a recurring basis on the consolidated balance sheets:

	September 30, 2019
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements	$	—	$	1,315	$	—
	December 31, 2018
	Fair Value Measurements Using
	Level 1		Level 2		Level 3
Assets:
Interest rate cap agreements	$	—	$	117,678	$	—

Changes in assumptions or estimation methodologies can have a material effect on these estimated fair values. In this regard, the derived fair value estimates cannot be substantiated by comparison to independent markets and, in many cases, may not be realized in an immediate settlement of the instrument.

Fair Value of Financial Instruments

The accompanying consolidated balance sheets include the following financial instruments: cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities, distributions payable, due to affiliates and notes payable.

The Company considers the carrying value of cash and cash equivalents, restricted cash, rents and other receivables, accounts payable and accrued liabilities and distributions payable to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. The fair value of amounts due to affiliates is not determinable due to the related party nature of such amounts.

The fair value of the notes payable is estimated using a discounted cash flow analysis using borrowing rates available to the Company for debt instruments with similar terms and maturities. As of September 30, 2019 and December 31, 2018, the fair value of the notes payable was $498,323,633 and $681,095,544, respectively,

I-12

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

compared to the carrying value of $498,426,493 and $693,501,574, respectively. The Company has determined that its notes payable are classified as Level 3 within the fair value hierarchy.

Restricted Cash

Restricted cash represents those cash accounts for which the use of funds is restricted by loan covenants. As of September 30, 2019 and December 31, 2018, the Company had a restricted cash balance of $9,362,825 and $11,265,317, respectively, which represents impounds for future property tax payments, property insurance payments and tenant improvement payments as required by agreements with the Company’s lenders as of September 30, 2019 and December 31, 2018, respectively.

The following table represents the components of the cash, cash equivalents and restricted cash presented on the accompanying consolidated statements of cash flows for the nine months ended September 30, 2019 and 2018:

	September 30,
	2019		2018
Cash and cash equivalents	$	120,202,920	$	97,309,038
Restricted cash		9,362,825		15,576,439
Total cash, cash equivalents and restricted cash	$	129,565,745	$	112,885,477

The beginning of period cash, cash equivalents and restricted cash balance for the nine months ended September 30, 2019, includes $142,078,166 of cash and cash equivalents, $11,265,317 of restricted cash and $848,960 of restricted cash related to real estate held for sale as of December 31, 2018, on the accompanying consolidated balance sheet. In conjunction with property sales during the nine months ended September 30, 2019, $848,960 of restricted cash related to real estate held for sale was disposed of during the period.

Investments in Unconsolidated Joint Ventures

The Company accounts for investments in unconsolidated joint venture entities in which it may exercise significant influence over, but does not control, using the equity method of accounting. Under the equity method, the investment is initially recorded at cost and subsequently adjusted to reflect additional contributions or distributions and the Company’s proportionate share of equity in the joint venture’s earnings (loss). The Company recognizes its proportionate share of the ongoing income or loss of the unconsolidated joint venture as equity in earnings (loss) of unconsolidated joint venture on the consolidated statements of operations. On a quarterly basis, the Company evaluates its investment in an unconsolidated joint venture for other-than-temporary impairments. The Company has elected the cumulative earnings approach to classify cash receipts from the unconsolidated joint venture on the accompanying consolidated statements of cash flows.

Distribution Policy

The Company has elected to be taxed as, and qualifies as, a REIT commencing with the taxable year ended December 31, 2010. To continue to qualify as a REIT, the Company intends to make distributions each taxable

I-13

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

year equal to at least 90% of its REIT taxable income (which is determined without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). Distributions declared during the three and nine months ended September 30, 2019 were based on daily record dates and calculated at a rate of $0.001519 per share per day. Distributions were based on daily record dates and calculated at a rate of $0.001964 per share per day, $0.001683 per share per day and $0.001519 per share per day during the three months ended March 31, 2018, June 30, 2018 and September 30, 2018, respectively.

Distributions to stockholders are determined by the board of directors of the Company and are dependent upon a number of factors relating to the Company, including funds available for the payment of distributions, financial condition, the timing of property acquisitions, capital expenditure requirements and annual distribution requirements in order for the Company to qualify as a REIT under the Internal Revenue Code. During the three and nine months ended September 30, 2019, the Company declared aggregate distributions of $0.140 and $0.415 per common share, respectively. During the three and nine months ended September 30, 2018, the Company declared aggregate distributions of $0.140 and $1.470 per common share, respectively, including a special distribution the Company’s board of directors declared in the amount $1.00 per share of common stock to stockholders of record as of the close of business on April 20, 2018.

Per Share Data

Basic earnings (loss) per share attributable to common stockholders for all periods presented are computed by dividing net income by the weighted average number of shares of the Company’s common stock outstanding during the period. Diluted earnings (loss) per share is computed based on the weighted average number of shares of the Company’s common stock and all potentially dilutive securities, if any. Distributions declared per common share assume each share was issued and outstanding each day during the period. Nonvested shares of the Company’s restricted common stock give rise to potentially dilutive shares of the Company’s common stock.

In accordance with FASB ASC Topic260-10-45,Earnings Per Share, the Company uses thetwo-class method to calculate earnings (loss) per share. Basic earnings (loss) 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 (loss) remaining after deduction of dividends declared during the period. The undistributed earnings (loss) are allocated to all outstanding common shares based on the relative percentage of each class of shares. The Company does not have any participating securities outstanding other than the shares of common stock and the unvested restricted common stock during the periods presented. Earnings (loss) attributable to the unvested restricted common stock are deducted from earnings (loss) in the computation of per share amounts where applicable.

Reclassifications

Certain amounts in the Company’s prior period consolidated financial statements were reclassified to conform to the current period presentation. These reclassifications did not change the results of operations of those prior periods. On January 1, 2019, the Company adopted ASU2016-02, as further described below. As a result, all income earned pursuant to tenant leases is reflected asone-line item, “Rental Income,” in the consolidated statements of operations. To facilitate comparability, the Company has reclassified prior period’s lease andnon-lease income consistently with the current year.

I-14

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

The table below provides a reconciliation of the prior period presentation of the income statement line items that were reclassified in our consolidated statements of operations to conform to the current period presentation, pursuant to the adoption of the new lease accounting standard and election of the single component practical expedient:

	Three Months Ended September 30, 2018		Nine Months Ended September 30, 2018
Rental income (presentation prior to January 1, 2019)	$	31,892,448	$	93,133,369
Tenant reimbursements(1)(presentation prior to January 1, 2019)		3,528,647		9,865,934
Rental income (presentation effective January 1, 2019)	$	35,421,095	$	102,999,303

(1) Tenants reimbursements include reimbursements for recoverable costs.

Segment Disclosure

The Company has determined that it has one reportable segment with activities related to investing in multifamily properties. The Company’s investments in real estate are in different geographic regions, and management evaluates operating performance on an individual asset level. However, as each of the Company’s assets has similar economic characteristics, tenants and products and services, its assets have been aggregated into one reportable segment.

Recent Accounting Pronouncements

In February 2016, the FASB established ASC Topic 842,Leases (“ASC 842”), by issuing ASU2016-02, which requires lessees to recognizeright-of-use assets and lease liabilities for operating leases on the balance sheet and disclose key information about leasing arrangements. ASC 842 also makes targeted changes to lessor accounting. ASC 842 was subsequently amended by ASU2018-01,Land Easement Practical Expedient for Transition to Topic 842 (“ASU2018-01”), ASU2018-10,Codification Improvements to Topic 842(“ASU2018-10”), ASU2018-11,Targeted Improvements (“ASU2018-11”) and ASU2018-20,Leases (Topic 842), Narrow-scope Improvements for Lessors(“ASU2018-20”). ASC 842 requires a modified retrospective transition approach and was effective in the first quarter of 2019 and allowed for early adoption. The Company elected an optional transition method that allows entities to initially apply ASC 842 at the adoption date (January 1, 2019) and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. The Company evaluated the impact of ASC 842 on its leases both as it relates to the Company acting as a lessee and as a lessor. Based on its evaluation, as it relates to the former, the Company elected to apply each of the practical expedients described in ASC842-10-65-1(f) that allowed the Company, among other things, to not reassess lease classification conclusions or initial direct cost accounting as of December 31, 2018, therefore these leases continue to be accounted for as operating leases. The Company also elected the practical expedient described in ASC842-20-25-2 not to apply the recognition requirements in ASC 842 to short-term leases and instead, to recognize lease payments in the consolidated statement of operations on a straight-line basis over the lease term. The Company did not experience a material impact on the recognition of leases in the consolidated financial statements because the quantity of leased equipment by the Company is limited and immaterial to the consolidated financial statements. Upon adoption, the Company recognized an initial operating leaseright-of-use asset, net, of $94,742 and an operating lease liability, net, of $87,862.

I-15

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

As it relates to the Company as lessor, the Company did not experience a material impact on the recognition of leases in the consolidated financial statements because under ASC 842, lessors continue to account for leases using an approach that is substantially equivalent to historical guidance for sales-type leases, direct financing leases, and operating leases. The Company elected a practical expedient which allows lessors to not separatenon-lease components from the lease component when the timing and pattern of transfer for the lease components andnon-lease components are the same and if the lease component is classified as an operating lease. As a result, on January 1, 2019, the Company began presenting all rentals and reimbursements from tenants as a single line item rental income within the consolidated statements of operations. As of January 1, 2019, the Company implemented changes to its business processes and controls related to accounting for and the presentation and disclosure of leases, including the reclassification of tenant reimbursements, previously disclosed as part of tenant reimbursements and other, to rental income, in the consolidated statements of operations.

Under ASC 842, beginning on January 1, 2019, changes in the probability of collecting tenant rental income could result in direct adjustments of rental income and tenant receivables. The Company did not experience a material impact on its rental income and tenant receivables as of the adoption date.

The Company’s rental income consists of fixed rental payments from tenants under operating leases and is recognized on a straight-line basis over the respective operating lease terms. The Company recognizes minimum rent, including rental abatements, concessions and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of thenon-cancelable term of the related lease. The Company’s rental income that relates to variable lease payments consists of tenant reimbursements and includes reimbursements for recoverable costs, which are recognized as revenue in the period during which the applicable expenses are incurred and the tenant’s obligation to reimburse the Company arises.

The Company recognized $26,857,176 and $84,948,693 of rental income related to operating lease payments of which $2,709,239 and $8,017,862 was for variable lease payments for the three and nine months ended September 30, 2019, respectively.

In June 2016, the FASB issued ASU2016-13, Financial Instruments-Credit Losses(“ASU2016-13”). ASU2016-13 requires more timely recording of credit losses on loans and other financial instruments that are not accounted for at fair value through net income (loss), including loans held for investment,held-to-maturity debt securities, trade and other receivables, net investment in leases and other such commitments. ASU2016-13 requires that financial assets measured at amortized cost be presented at the net amount expected to be collected, through an allowance for credit losses that is deducted from the amortized cost basis. The amendments in ASU2016-13 require the Company to measure all expected credit losses based upon historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the financial assets and eliminates the “incurred loss” methodology in current GAAP. In November 2018, the FASB issued ASU2018-19,Codification Improvements to Topic 326, Financial Instruments—Credit Losses(“ASU2018-19”), which clarifies that operating lease receivables accounted for under ASC 842Leases, are not in the scope of the new credit losses guidance. The effective date and transition requirements for this guidance are the same as for ASU2016-13. ASU2016-13 is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted for annual periods beginning after

I-16

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

December 15, 2018, including interim periods within those fiscal years. The Company is currently evaluating the impact this guidance will have on its consolidated financial statements and related disclosures and does not expect a material impact on its consolidated financial statements and related disclosures from its adoption.

In August 2018, the FASB issued ASU2018-13,Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement(“ASU2018-13”). The FASB issued ASU2018-13 to improve the effectiveness of fair value measurement disclosures by adding, eliminating, and modifying certain disclosure requirements. The issuance of ASU2018-13 is part of a disclosure framework project. The disclosure framework project’s objective and primary focus are to improve the effectiveness of disclosures in the notes to financial statements by facilitating clear communication of the information required by GAAP that is most important to users of each entity’s financial statements. Achieving the objective of improving the effectiveness of the notes to financial statements includes: (1) the development of a framework that promotes consistent decisions by the FASB board about disclosure requirements and (2) the appropriate exercise of discretion by reporting entities. The amendments in ASU2018-13 modify the disclosure requirements on fair value measurements inTopic 820, Fair Value Measurement, based on the concepts in FASB Concepts Statement, Conceptual Framework for Financial Reporting—Chapter 8: Notes to Financial Statements, including the consideration of costs and benefit. ASU2018-13 removed certain disclosure requirements under Topic 820 such as the disclosure requirements of the valuation process for level 3 fair value measurements and modified and added certain of the disclosure requirements in Topic 820. ASU2018-13 requires prospective and retrospective application depending on the amendment and is effective for annual periods beginning after December 15, 2019, including interim periods within those fiscal years. Early adoption is permitted. The Company is currently evaluating the impact of ASU2018-13 will have on its consolidated financial statements and related disclosures and believes that certain disclosures of interest rate cap agreements in its consolidated financial statements may be impacted by the adoption of ASU2018-13.

The SEC’s Disclosure Update and Simplification rule (Release33-10532) amends the interim financial statement requirements to require a reconciliation of changes in stockholder’ equity in the notes or as a separate statement. This analysis should reconcile the beginning balance to the ending balance of each caption in stockholders’ equity for each period for which an income statement is required to be filed and comply with the remaining content requirements of Rule3-04 of Regulation S- X. As a result, registrants will have to provide the reconciliation for both theyear-to-date and quarterly periods and comparable periods in Form10-Q but only for theyear-to-date periods in registration statements. The rule does not prescribe the format of the presentation as long as the appropriate periods are provided. Per a Compliance and Disclosure Interpretation (Q 105.09, Exchange Act Forms,10-Q), “The amendments are effective for all filings made on or after November 5, 2018. In light of the timing of effectiveness of the amendments and proximity of effectiveness to the filing date for most filers’ quarterly reports, the staff would not object if the filer’s first presentation of the changes in the shareholders’ equity is included in its Form10-Q for the quarter that begins after the effective date of the amendments.” This allows the Company to adopt the amendment for the Company’s first quarter 2019 filing. The Company has adopted this guidance in the nine months ended September 30, 2019 by presenting a reconciliation of changes in stockholders’ equity for the current and prior period as a separate statement.

I-17

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

3. Real Estate

As of September 30, 2019, the Company owned 27 multifamily properties encompassing in the aggregate 7,527 residential apartment homes. The total purchase price of the Company’s real estate portfolio was $862,854,253. As of September 30, 2019 and December 31, 2018, the Company’s portfolio was approximately 95.8% and 94.3% occupied and the average monthly rent was $1,123 and $1,068, respectively.

As of September 30, 2019 and December 31, 2018, accumulated depreciation and amortization related to the Company’s consolidated real estate properties and related intangibles were as follows:

	September 30, 2019
	Assets
	Land		Building and Improvements			Total Real Estate Held for Investment			Real Estate Held for Sale
Investments in real estate	$	89,822,014	$	804,194,436		$	894,016,450		$	—
Less: Accumulated depreciation and amortization		—		(190,527,296	)		(190,527,296	)		—
Net investments in real estate and related lease intangibles	$	89,822,014	$	613,667,140		$	703,489,154		$	—

	December 31, 2018
	Assets
	Land		Building and Improvements			Total Real Estate Held for Investment			Real Estate Held for Sale
Investments in real estate	$	90,153,980	$	795,383,423		$	885,537,403		$	165,346,251
Less: Accumulated depreciation and amortization		—		(165,112,070	)		(165,112,070	)		(38,881,747	)
Net investments in real estate and related lease intangibles	$	90,153,980	$	630,271,353		$	720,425,333		$	126,464,504

Total depreciation and amortization expenses were $8,520,813 and $25,961,590 for the three and nine months ended September 30, 2019, and $12,579,032 and $34,781,722 for the three and nine months ended September 30, 2018, respectively.

Depreciation of the Company’s buildings and improvements was $8,519,728 and $25,945,678 for the three and nine months ended September 30, 2019, and $11,657,288 and $33,498,945 for the three and nine months ended September 30, 2018, respectively.

Amortization of the Company’s other intangible assets was $0 and $12,764 for the three and nine months ended September 30, 2019, and $38,292 and $114,876 for the three and nine months ended September 30, 2018, respectively.

I-18

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Operating Leases

As of September 30, 2019, the Company’s real estate portfolio comprised 7,527 residential apartment homes and was 97.5% leased by a diverse group of residents. For each of the three and nine months ended September 30, 2019 and 2018, the Company’s real estate portfolio earned in excess of 99% and less than 1% of its rental income from residential tenants and commercial office tenants, respectively. The residential tenant lease terms consist of lease durations equal to 12 months or less.

Some residential leases contain provisions to extend the lease agreements, options for early termination after paying a specified penalty and other terms and conditions as negotiated. The Company retains substantially all of the risks and benefits of ownership of the real estate assets leased to tenants. Generally, upon the execution of a lease, the Company requires security deposits from tenants in the form of a cash deposit. Amounts required as security deposits vary depending upon the terms of the respective leases and the creditworthiness of the tenant, but generally are not significant amounts. Therefore, exposure to credit risk exists to the extent that a receivable from a tenant exceeds the amount of its security deposit. Security deposits received in cash related to tenant leases are included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets and totaled $2,340,759 and $2,868,600 as of September 30, 2019 and December 31, 2018, respectively. As of September 30, 2019 and December 31, 2018, no tenant represented over 10% of the Company’s annualized base rent.

Joint Venture Arrangement with Blackstone Real Estate Income Trust, Inc.

On November 10, 2017, the Company, BREIT Steadfast MF JV LP (the “Joint Venture”), BREIT Steadfast MF Parent LLC (“BREIT LP”) and BREIT Steadfast MF GP LLC (“BREIT GP”, and together with BREIT LP, “BREIT”), executed a Contribution Agreement (the “Contribution Agreement”) whereby the Company agreed to contribute a portfolio of 20 properties owned by the Company to the Joint Venture in exchange for a combination of cash and a 10% ownership interest in the Joint Venture (the “Transaction”). BREIT LP owns a 90% interest in the Joint Venture and BREIT GP serves as the general partner of the Joint Venture. Each of BREIT LP and BREIT GP is a wholly-owned subsidiary of Blackstone Real Estate Income Trust, Inc. SIR LANDS Holdings, LLC, a wholly-owned subsidiary of the Company, holds the Company’s 10% interest in the Joint Venture.

The 20 properties contributed by the Company to the Joint Venture consist of properties located in Austin, Dallas and San Antonio, Texas, Nashville, Tennessee and Louisville, Kentucky (the “LANDS Portfolio”). On November 15, 2017 (the “First Closing Date”), the Company, through certain indirect wholly-owned subsidiaries, contributed 12 apartment communities (the “First Closing Properties”) to indirect, wholly-owned subsidiaries of the Joint Venture. On January 31, 2018 (the “Second Closing Date”), the Company, through certain indirect wholly-owned subsidiaries, contributed eight apartment communities (the “Second Closing Properties”) to indirect, wholly-owned subsidiaries of the Joint Venture. For additional information on the Transaction, see Note 4 (Investment in Unconsolidated Joint Venture).

The aggregate purchase price of the First Closing Properties was $318,576,792, exclusive of closing costs. On the First Closing Date, the Company sold a 90% interest in the First Closing Properties for $335,430,000, resulting in a gain of $76,135,530, which includes reductions to the net book value of the properties due to historical depreciation and amortization expense. The aggregate purchase price of the Second Closing Properties

I-19

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

was $117,240,032, exclusive of closing costs. On the Second Closing Date, the Company sold a 90% interest in the Second Closing Properties for $125,370,000, resulting in a gain of $38,523,427, which includes reductions to the net book value of the properties due to historical depreciation and amortization expense. The purchaser of the First Closing Properties and Second Closing Properties was the Joint Venture.

2019 Property Dispositions

Dawntree Apartments

On August 15, 2013, the Company, through an indirect wholly-owned subsidiary, acquired Dawntree Apartments, a multifamily property located in Carrollton, Texas, containing 400 apartment homes. The purchase price of Dawntree Apartments was $24,000,000, exclusive of closing costs. On March 8, 2019, the Company sold Dawntree Apartments for $46,200,000, resulting in a gain of $24,141,403, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Dawntree Apartments was not affiliated with the Company or the Advisor.

In connection with the disposition of Dawntree Apartments, the Company, through an indirect wholly-owned subsidiary, entered into an agreement to defease the remaining outstanding principal balance of $14,201,657 under the note payable. As a result of this agreement, the Company made a $903,564 defeasance payment (excluding expenses), the collateral was released, and the Company was released from all primary debtor obligations associated with the note payable. The Company recognized a $811,084 loss associated with the defeasance, which is included in loss on debt extinguishment on the consolidated statement of income.

Estancia Apartments

On June 29, 2012, the Company, through a wholly-owned subsidiary of the Operating Partnership, acquired Estancia Apartments, a multifamily property located in Tulsa, Oklahoma, containing 294 apartment homes. The purchase price of Estancia Apartments was $27,900,000, exclusive of closing costs. On March 22, 2019, the Company sold Estancia Apartments for $30,683,000, resulting in a gain of $6,892,244, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Estancia Apartments was not affiliated with the Company or the Advisor.

Sonoma Grande Apartments

On May 24, 2012, the Company, through a wholly-owned subsidiary of the Operating Partnership, acquired Sonoma Grande Apartments, a multifamily property located in Tulsa, Oklahoma, containing 336 apartment homes. The purchase price of Sonoma Grande Apartments was $32,200,000, exclusive of closing costs. On March 22, 2019, the Company sold Sonoma Grande Apartments for $35,067,000, resulting in a gain of $9,367,938, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Sonoma Grande Apartments was not affiliated with the Company or the Advisor.

EBT Lofts, Library Lofts East and Stuart Hall Lofts

On December 30, 2011, February 28, 2013 and August 27, 2013, the Company, through wholly-owned subsidiaries of the Operating Partnership, acquired EBT Lofts, Library Lofts East and Stuart Hall Lofts,

I-20

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

respectively, multifamily properties located in Kansas City, Missouri, collectively containing 335 apartment homes. The combined purchase price of EBT Lofts, Library Lofts East and Stuart Hall Lofts was $38,175,000, exclusive of closing costs. On April 26, 2019, the Company sold EBT Lofts, Library Lofts East and Stuart Hall Lofts for $50,685,000, resulting in a gain of $19,120,514, which includes reductions to the net book value of the properties due to historical depreciation and amortization expense. The purchaser of EBT Lofts, Library Lofts East and Stuart Hall Lofts was not affiliated with the Company or the Advisor.

In connection with the disposition of Library Lofts East, the Company, through an indirect wholly-owned subsidiary, entered into an agreement to defease the remaining outstanding principal balance of $8,120,272 under the note payable. As a result of this agreement, the Company made a $95,417 defeasance payment (excluding expenses), the collateral was released, and the Company was released from all primary debtor obligations associated with the note payable. The Company recognized a $160,080 loss associated with the defeasance, which is included in loss on debt extinguishment on the consolidated statement of income.

Waterford on the Meadow

On July 3, 2013, the Company, through a wholly-owned subsidiary of the Operating Partnership, acquired Waterford on the Meadow, a multifamily property located in Plano, Texas, containing 350 apartment homes. The purchase price of Waterford on the Meadow was $23,100,000, exclusive of closing costs. On May 14, 2019, the Company sold Waterford on the Meadow for $42,000,000, resulting in a gain of $20,315,545, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Waterford on the Meadow was not affiliated with the Company or the Advisor.

In connection with the disposition of Waterford on the Meadow, the Company, through an indirect wholly-owned subsidiary, entered into an agreement to defease the remaining outstanding principal balance of $12,484,478 under the note payable. As a result of this agreement, the Company made a $449,231 defeasance payment (excluding expenses), the collateral was released, and the Company was released from all primary debtor obligations associated with the note payable. The Company recognized a $517,294 loss associated with the defeasance, which is included in loss on debt extinguishment on the consolidated statement of income.

Truman Farm Villas

On December 22, 2011, the Company, through a wholly-owned subsidiary of the Operating Partnership, acquired Truman Farm Villas, a multifamily property located in Grandview, Missouri, containing 200 apartment homes. The purchase price of Truman Farm Villas was $9,100,000, exclusive of closing costs. On May 15, 2019, the Company sold Truman Farm Villas for $14,650,000, resulting in a gain of $7,051,452, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Truman Farm Villas was not affiliated with the Company or the Advisor.

I-21

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

The results of operations for the three and nine months ended September 30, 2019 and 2018, through the date of sale for all properties disposed of through September 30, 2019, including the properties contributed to the Joint Venture on the Second Closing Date, were included in continuing operations on the Company’s consolidated statements of operations and are as follows:

	For the Three Months Ended September 30,					For the Nine Months Ended September 30,
	2019			2018		2019		2018
Revenues:
Rental income	$	—		$	9,736,098	$	6,436,219	$	31,835,371
Tenant reimbursements and other		—			115,260		193,397		497,245
Total revenues		—			9,851,358		6,629,616		32,332,616
Expenses:
Operating, maintenance and management		(37,765	)		3,490,991		2,535,242		10,342,146
Real estate taxes and insurance		(41,310	)		1,374,515		421,347		5,019,372
Fees to affiliates		3			396,267		299,468		1,234,699
Depreciation and amortization		—			2,956,533		531,447		9,160,479
Interest expense		—			1,719,077		954,160		6,039,544
Loss on debt extinguishment		—			—		1,796,532		2,011,282
General and administrative expenses		—			79,728		38,587		222,989
Total expenses	$	(79,072	)	$	10,017,111	$	6,576,783	$	34,030,511

4. Investment in Unconsolidated Joint Venture

On November 10, 2017, the Company, the Joint Venture, BREIT LP and BREIT GP executed the Contribution Agreement whereby the Company agreed to contribute the LANDS Portfolio to the Joint Venture in exchange for a combination of cash and a 10% ownership interest in the Joint Venture. BREIT LP owns a 90% interest in the Joint Venture and BREIT GP serves as the general partner of the Joint Venture. Each of BREIT LP and BREIT GP is a wholly-owned subsidiary of Blackstone Real Estate Income Trust, Inc. SIR LANDS Holdings, LLC, a wholly-owned subsidiary of the Operating Partnership, holds the Company’s 10% interest in the Joint Venture.

The Company does not exercise significant influence nor does it control the Joint Venture. Accordingly, as of the First Closing Date and Second Closing Date, the Company deconsolidated the First Closing Properties and Second Closing Properties and has accounted for its investment in the Joint Venture under the equity method of accounting. Income, losses, contributions and distributions are generally allocated based on the members’ respective equity interests.

As of September 30, 2019 and December 31, 2018, the book value of the Company’s investment in the Joint Venture was $13,316,283 and $14,085,399, respectively, which includes $7,640,166 and $7,640,166 of outside basis difference, respectively. The outside basis difference represents the Company’s transaction costs related to entering into the Joint Venture. During the three and nine months ended September 30, 2019 and 2018, $60,294 and $180,882, and $60,294 and $534,592, respectively, of amortization of this basis difference was included in

I-22

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

equity in losses from unconsolidated joint venture on the accompanying consolidated statements of operations. During the three and nine months ended September 30, 2019 and 2018, the Company received distributions of $580,700 and $890,100 and $0 and $530,100, respectively, related to its investment in the Joint Venture.

Unaudited financial information for the Joint Venture as of September 30, 2019 and December 31, 2018, and for the three and nine months ended September 30, 2019, is summarized below:

	September 30, 2019		December 31, 2018
Assets:
Real estate assets, net	$	491,510,283	$	493,776,142
Other assets		17,446,734		24,091,229
Total assets	$	508,957,017	$	517,867,371
Liabilities and equity:
Notes payable, net	$	340,252,366	$	340,840,505
Other liabilities		19,061,703		21,501,680
Company’s capital		14,964,279		15,552,513
Other partner’s capital		134,678,669		139,972,673
Total liabilities and equity	$	508,957,017	$	517,867,371

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
Revenues	$	15,849,829		$	15,571,241		$	48,303,658		$	44,783,429
Expenses		17,533,557			17,843,699			50,772,998			70,457,945
Net loss	$	(1,683,728	)	$	(2,272,458	)	$	(2,469,340	)	$	(25,674,516	)
Company’s proportional net loss	$	(168,373	)	$	(227,246	)	$	(246,934	)	$	(2,567,452	)
Amortization of outside basis		(60,294	)		(60,294	)		(180,882	)		(534,592	)
Equity in losses of unconsolidated joint venture	$	(228,667	)	$	(287,540	)	$	(427,816	)	$	(3,102,044	)

5. Other Assets

As of September 30, 2019 and December 31, 2018, other assets consisted of:

	September 30, 2019		December 31, 2018
Prepaid expenses	$	1,484,154	$	1,866,024
Interest rate cap agreements (Note 11)		1,315		117,678
Deposits		885,043		714,736
Operating leaseright-of-use assets, net		125,632		—
Other assets	$	2,496,144	$	2,698,438

I-23

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Amortization of the Company’s operating leaseright-of-use assets for the three and nine months ended September 30, 2019 were $1,085 and $3,148, respectively. Amortization of the Company’s operating leaseright-of-use assets for the three and nine months ended September 30, 2018 were $0 and $0, respectively.

6. Debt

Mortgage Notes Payable

The following is a summary of mortgage notes payable secured by real property as of September 30, 2019 and December 31, 2018:

	September 30, 2019
					Interest Rate Range						Weighted Average Interest Rate
Type	Number of Instruments		Maturity Date Range		Minimum			Maximum						Principal Outstanding
Mortgage notes payable - fixed		20		1/1/2020 - 10/1/2056		3.19	%		4.63	%		3.75	%	$	502,584,586
Mortgage notes payable - variable(1)		—		—		—			—			—			—
Total mortgage notes payable, gross		20										3.75	%		502,584,586
Premium, net(2)															—
Deferred financing costs, net(3)															(4,158,093	)
Total mortgage notes payable, net														$	498,426,493
	December 31, 2018
					Interest Rate Range						Weighted Average Interest Rate
Type	Number of Instruments		Maturity Date Range		Minimum			Maximum						Principal Outstanding
Mortgage notes payable - fixed		20		5/1/2019 - 10/1/2056		3.19	%		5.48	%		3.95	%	$	361,723,899
Mortgage notes payable - variable(1)		10		7/1/2023 - 11/1/2027		1-Mo LIBOR + 1.77	%		1-Mo LIBOR + 2.38	%		4.69	%		283,046,390
Total mortgage notes payable, gross		30										4.27	%		644,770,289
Premium, net(2)															302,530
Deferred financing costs, net(3)															(3,934,705	)
Total mortgage notes payable, net														$	641,138,114

(1) See Note 11 (Derivative Financial Instruments) for a discussion of the interest rate cap agreements used to manage the exposure to interest rate movement on the Company’s variable rate loans.

(2) Accumulated amortization related to debt premiums as of September 30, 2019 and December 31, 2018 was $0 and $960,519, respectively.

(3) Accumulated amortization related to deferred financing costs as of September 30, 2019 and December 31, 2018 was $2,241,230 and $2,929,134, respectively.

I-24

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Refinancing Transactions

On the closing dates set out in the table below, the Company, through its indirect wholly-owned subsidiaries (each a “Borrower” and collectively, the “Borrowers”), refinanced $203,010,610 of existing variable rate loans with its existing lenders, Jones Lang LaSalle Multifamily, LLC (“JLL”), Berkadia Commercial Mortgage LLC (“Berkadia”), PNC Bank, National Association (“PNC Bank”) and Newmark Knight Frank (“NKF”) (collectively, the “Lenders”) with new fixed rate Freddie Mac loans and a fixed rate Fannie Mae loan in an aggregate principal amount of $222,934,000. Each of the loans has a maturity date of October 1, 2029. Interest only payments are payable monthly through October 1, 2025, with interest and principal payments due monthly thereafter. The Borrowers paid $1,016,689 in the aggregate in loan origination fees to the Lenders in connection with the refinancings, and the Advisor earned loan coordination fees of $600,000. The Refinancing Transactions are treated as loan modifications in accordance with ASC 470Debt, with lender direct expenses capitalized as deferred financing costs in mortgage notes payable in the accompanying consolidated balance sheets and third-party loan fees expensed in interest expense in the accompanying consolidated statements of operations.

The following is a summary of the refinancing of mortgage notes payable secured by real property during the three months ended September 30, 2019:

Secured Property	Closing Dates		Lender		Interest Rate			Principal Loan Amount
Jefferson at Perimeter Apartments		9/20/2019		JLL		3.48	%	$	73,800,000
Reserve at Creekside		9/20/2019		Berkadia		3.57	%		15,000,000
Tapestry Park Apartments		9/26/2019		NKF		3.66	%		48,750,000
Sycamore Terrace Apartments		9/26/2019		NKF		3.62	%		23,067,000
Villas at Huffmeister		9/27/2019		PNC Bank		3.56	%		27,440,000
Villas of Kingwood		9/27/2019		PNC Bank		3.56	%		34,877,000
								$	222,934,000

Credit Facility

On July 29, 2016, nine wholly-owned subsidiaries of the Company entered into a credit agreement and a multifamily note with PNC Bank (as amended, the credit agreement, multifamily note, loan and security agreements, mortgages and guaranty are collectively referred to herein as the “Loan Documents”) that provided for a new credit facility (the “Credit Facility”) in an amount not to exceed $350,000,000 to refinance certain of the Company’s then-existing mortgage loans. The Credit Facility had a maturity date of August 1, 2021, subject to extension, as further described in the credit agreement. Advances made under the Credit Facility were secured by the subsidiaries’ properties (the “Collateral Pool Property”), pursuant to a mortgage deed of trust with the Company’s subsidiaries party to the Credit Facility in favor of PNC Bank.

The Credit Facility accrued interest at theone-month London Inter-bank Offered Rate (“LIBOR”) plus (1) the servicing spread of 0.05% and (2) the net spread, based on the debt service coverage ratio, of between 1.73% and 1.93%, as further described in the credit agreement. Interest only payments on the Credit Facility were payable monthly in arrears and were due and payable on the first day of each month. The entire outstanding principal balance and any accrued and unpaid interest on the Credit Facility were due on the maturity date. The

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Company’s subsidiaries could voluntarily prepay all or a portion of the amounts advanced under the Loan Documents. Notwithstanding the foregoing, in the event a Collateral Pool Property was released or the credit agreement was terminated, a termination fee would be due and payable by the Company’s subsidiaries (as applicable). In certain instances of a breach of the credit agreement, the Company guaranteed to PNC Bank the full and prompt payment and performance when due of all amounts for which the Company’s nine wholly-owned subsidiaries were personally liable under the Loan Documents, in addition to all costs and expenses incurred by PNC Bank in enforcing such guaranty. Between November 15, 2017 and May 31, 2018, seven of the Collateral Pool Properties were either disposed of or refinanced, with the advances made to each of the seven Collateral Pool Properties being repaid in full. On July 29, 2019, the Company made a final remaining principal payment of $10,000,000 and terminated the Credit Facility. The Company incurred $597,681 in debt extinguishment costs related to the extinguishment of the Credit Facility.

Maturity and Interest

The following is a summary of the Company’s aggregate maturities as of September 30, 2019:

	Total		Remainder of 2019		Maturities During the Years Ending December 31,
Contractual Obligation					2020		2021		2022		2023		Thereafter
Principal payments on outstanding debt obligations(1)	$	502,584,586	$	787,141	$	15,663,605	$	3,295,375	$	28,056,772	$	52,688,373	$	402,093,320

(1) Scheduled principal payments on outstanding debt obligations are based on the terms of the notes payable agreements. Amounts exclude the amortization of the deferred financing costs associated with the notes payable.

The Company’s notes payable contain customary financial andnon-financial debt covenants. At September 30, 2019 and December 31, 2018, the Company was in compliance with all financial andnon-financial debt covenants.

For the three and nine months ended September 30, 2019, the Company incurred interest expense of $6,044,495 and $20,505,685, respectively. Interest expense for the three and nine months ended September 30, 2019, includes amortization of deferred financing costs of $130,114 and $729,401, amortization of loan premiums of $0 and $48,562, loan fees associated with mortgage notes refinancing of $587,615 and $595,040 and net unrealized loss from the change in fair value of interest rate cap agreements of $2,066 and $163,363, respectively.

For the three and nine months ended September 30, 2018, the Company incurred interest expense of $8,496,658 and $24,408,327, respectively. Interest expense for the three and nine months ended September 30, 2018 includes amortization of deferred financing costs of $263,009 and $799,989, amortization of loan premiums of $48,326 and $222,466, loan fees associated with mortgage notes refinancing of $43,696 and $386,931 and net unrealized gain from the change in fair value of interest rate cap agreements of $18,199 and $103,506, respectively.

I-26

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Interest expense of $909,601 and $2,520,324 was payable as of September 30, 2019 and December 31, 2018, respectively, and is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.

7. Stockholders’ Equity

General

Under the Company’s Third Articles of Amendment and Restatement (the “Charter”), the total number of shares of capital stock authorized for issuance is 1,100,000,000 shares, consisting of 999,999,000 shares of common stock with a par value of $0.01 per share, 1,000 shares of convertible stock with a par value of $0.01 per share and 100,000,000 shares of preferred stock with a par value of $0.01 per share.

Common Stock

The shares of the Company’s common stock entitle the holders to one vote per share on all matters upon which stockholders are entitled to vote, to receive dividends and other distributions as authorized by the Company’s board of directors in accordance with the MGCL and to all rights of a stockholder pursuant to the MGCL. The Company’s common stock has no preferences or preemptive, conversion or exchange rights.

During 2009, the Company issued 22,223 shares of common stock to the Sponsor for $200,007. From inception to September 30, 2019, the Company had issued 76,732,395 shares of common stock in a private offering and the Public Offering for aggregate offering proceeds of $679,572,220, net of offering costs of $95,845,468, including 4,073,759 shares of common stock pursuant to the DRP, for total offering proceeds of $39,580,847. Offering costs primarily consisted of selling commissions and dealer manager fees. The Company terminated its Public Offering on December 20, 2013, but continued to offer shares pursuant to the DRP through November 30, 2014.

The issuance and vesting activity for the nine months ended September 30, 2019, and for the year ended December 31, 2018, for the restricted stock issued to the Company’s independent directors were as follows:

	For the Nine Months Ended September 30, 2019			For the Year Ended December 31, 2018
Nonvested shares at the beginning of the period		11,250			11,875
Granted shares		—			7,500
Vested shares		(5,625	)		(8,125	)
Nonvested shares at the end of the period		5,625			11,250

I-27

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

The weighted average fair value of restricted stock issued to the Company’s independent directors for the nine months ended September 30, 2019 and for the year ended December 31, 2018 is as follows:

Grant Year	Weighted Average Fair Value
2018	$	9.84
2019		n/a

The shares of restricted common stock vest and becomenon-forfeitable in four equal annual installments beginning on the date of grant and ending on the third anniversary of the date of grant and will become fully vested and becomenon-forfeitable on the earlier to occur of (1) the termination of the independent director’s service as a director due to death or disability or (2) a change in control of the Company and as otherwise provided in the Incentive Award Plan (as defined below).

Included in general and administrative expenses is $12,303 and $43,191 for the three and nine months ended September 30, 2019, and $34,832 and $69,422 for the three and nine months ended September 30, 2018, respectively, for compensation expense related to the issuance of restricted common stock. The weighted average remaining term of the Company’s restricted common stock is 1.36 years as of September 30, 2019. As of September 30, 2019, the compensation expense related to the issuance of the Company’s restricted common stock not vested was $42,713.

Convertible Stock

During 2009, the Company issued 1,000 shares of Convertible Stock to the Advisor for $1,000. The Convertible Stock will convert into shares of the Company’s common stock if and when: (A) the Company has made total distributions on the then outstanding shares of common stock equal to the original issue price of those shares plus an 8.0% cumulative,non-compounded, annual return on the original issue price of those shares, (B) subject to specified conditions, the Company lists the common stock for trading on a national securities exchange or (C) the Advisory Agreement is terminated or not renewed by the Company (other than for “cause” as defined in the Advisory Agreement). A “listing” will also be deemed to have occurred on the effective date of any merger of the Company in which the consideration received by the holders of the Company’s common stock is the securities of another issuer that are listed on a national securities exchange. Upon conversion, each share of Convertible Stock will convert into a number of shares of common stock equal to 1/1000 of the quotient of (A) 10% of the amount, if any, by which (1) the Company’s “enterprise value” (as defined in the Charter) plus the aggregate value of distributions paid to date on the outstanding shares of common stock exceeds (2) the aggregate purchase price paid by the stockholders for those shares plus an 8.0% cumulative,non-compounded, annual return on the original issue price of those shares, divided by (B) the Company’s enterprise value divided by the number of outstanding shares of common stock, in each case calculated as of the date of the conversion. In the event of a termination ornon-renewal of the Advisory Agreement by the Company for cause, all of the shares of Convertible Stock will be redeemed by the Company for $1.00.

Preferred Stock

The Charter also provides the Company’s board of directors with the authority to issue one or more classes or series of preferred stock, and prior to the issuance of such shares of preferred stock, the board of directors shall

I-28

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

have the power from time to time to classify or reclassify, in one or more series, any unissued shares and designate the preferences, rights and privileges of such shares of preferred stock. The Company’s board of directors is authorized to amend the Charter, without the approval of the stockholders, to increase the aggregate number of authorized shares of capital stock or the number of shares of any class or series that the Company has authority to issue. As of September 30, 2019 and December 31, 2018, no shares of the Company’s preferred stock were issued and outstanding.

Distribution Reinvestment Plan

The Company’s board of directors approved the DRP through which common stockholders could elect to reinvest an amount equal to the distributions declared on their shares of common stock in additional shares of the Company’s common stock in lieu of receiving cash distributions. The initial purchase price per share under the DRP was $9.50. Effective September 10, 2012, shares of the Company’s common stock were issued pursuant to the DRP at a price of $9.73 per share. Effective with distributions earned beginning on December 1, 2014, the Company’s board of directors elected to suspend the DRP. As a result, all distributions are paid in cash. The Company’s board of directors may, in its sole discretion, from time to time, reinstate the DRP, although there is no assurance as to if or when this will happen, and change the DRP price based upon changes in the Company’s estimated value per share and other factors that the Company’s board of directors deems relevant.

No selling commissions or dealer manager fees were payable on shares sold through the DRP.

Share Repurchase Program and Redeemable Common Stock

The Company’s share repurchase program may provide an opportunity for stockholders to have their shares of common stock repurchased by the Company, subject to certain restrictions and limitations. No shares can be repurchased under the Company’s share repurchase program until after the first anniversary of the date of purchase of such shares; provided, however, that this holding period does not apply to repurchases requested within two years after the death or disability of a stockholder.

The repurchase price for shares repurchased under the Company’s share repurchase program prior to April 28, 2018, was as follows:

Share Purchase Anniversary	Repurchase Price on Repurchase Date(1)
Less than 1 year	No Repurchase Allowed
1 year	92.5% of Estimated Value per Share(2)
2 years	95.0% of Estimated Value per Share(2)
3 years	97.5% of Estimated Value per Share(2)
4 years	100.0% of Estimated Value per Share(2)
In the event of a stockholder’s death or disability(3)	Average Issue Price for Shares(4)

(1) As adjusted for any stock dividends, combinations, splits, recapitalizations or any similar transaction with respect to the shares of common stock.

(2) The “Estimated Value per Share” equals the most recently determined estimated value per share determined by the Company’s board of directors.

I-29

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

(3) The requiredone-year holding period to be eligible to repurchase shares under the Company’s share repurchase program does not apply in the event of death or disability of a stockholder.

(4) The purchase price per share for shares repurchased upon the death or disability of a stockholder will be equal to the average issue price per share for all of the stockholder’s shares.

The Company’s board of directors elected to suspend the Company’s share repurchase program, effective April 28, 2018. The board of directors of the Company subsequently determined to reinstate and amend the terms of the Company’s share repurchase program, effective May 20, 2018. Pursuant to the amended and reinstated share repurchase program, the revised repurchase price is equal to 93% of the most recently publicly disclosed estimated value per share. The current share repurchase price is $8.74 per share, which represents 93% of the estimated value per share of $9.40, as approved by the Company’s board of directors. The share repurchase price is further reduced based on how long the stockholder has held the shares as follows:

Share Purchase Anniversary	Repurchase Price on Repurchase Date(1)
Less than 1 year	No Repurchase Allowed
1 year	92.5% of the Share Repurchase Price(2)
2 years	95.0% of the Share Repurchase Price(2)
3 years	97.5% of the Share Repurchase Price(2)
4 years	100.0% of the Share Repurchase Price(2)
In the event of a stockholder’s death or disability(3)	Average Issue Price for Shares(4)

(1) As adjusted for any stock dividends, combinations, splits, recapitalizations or any similar transaction with respect to the shares of common stock.

(2) The “Share Repurchase Price” shall equal 93% of the Estimated Value per Share.

(3) The requiredone-year holding period to be eligible to repurchase shares under the Company’s share repurchase program does not apply in the event of death or disability of a stockholder.

(4) The purchase price per share for shares repurchased upon the death or disability of a stockholder will be equal to the average issue price per share for all of the stockholder’s shares.

The purchase price per share for shares repurchased pursuant to the share repurchase program is further reduced by the aggregate amount of net proceeds per share, if any, distributed to the Company’s stockholders prior to the repurchase date as a result of the sale of one or more of the Company’s assets that constitutes a return of capital distribution as a result of such sales.

Repurchases of shares of the Company’s common stock are made quarterly upon written request to the Company at least 15 days prior to the end of the applicable quarter during which the share repurchase program is in effect. Repurchase requests are honored approximately 30 days following the end of the applicable quarter (the “Repurchase Date”). Stockholders may withdraw their repurchase request at any time up to three business days prior to the end of the applicable quarter.

In connection with the proposed SIR Merger, on August 5, 2019, the Company’s board of directors approved the Amended and Restated Share Repurchase Plan (the “Amended & Restated SRP”), which became effective September 5, 2019, and applied with repurchases made on Repurchase Dates (as defined in the Amended & Restated SRP) subsequent to the effective date of the Amended & Restated SRP. Under the

I-30

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Amended & Restated SRP, the Company will only repurchase shares of common stock in connection with the death or qualifying disability (as determined by the Company’s board in its sole discretion) of a stockholder, subject to certain terms and conditions specified in the Amended & Restated SRP. Repurchases pursuant to the Amended and Restated SRP will continue to be limited to $2,000,000 per quarter (as explained below).

The Company is not obligated to repurchase shares of the Company’s common stock under the share repurchase program. In no event shall repurchases under the share repurchase program exceed 5% of the weighted average number of shares of the Company’s common stock outstanding during the prior calendar year or the $2,000,000 limit for any quarter put in place by the Company’s board of directors. There is no fee in connection with a repurchase of shares of the Company’s common stock. As of September 30, 2019 and 2018, the Company had outstanding and unfulfilled repurchase requests of 77,453 (pursuant to the Amended & Restated SRP) and 218,800 shares of common stock and recorded $710,887 and $2,000,000 in accounts payable and accrued liabilities on the accompanying consolidated balance sheets related to these unfulfilled repurchase requests, all of which were repurchased on the October 31, 2019 and 2018 repurchase dates, respectively.

During the three and nine months ended September 30, 2019, the Company repurchased a total of 222,982 and 666,273 shares with a total repurchase value of $2,000,000 and $6,000,000, respectively, and received requests for the repurchase of 78,845 and 2,062,474 shares with a total repurchase value of $723,786 and $18,155,528, respectively. During the three and nine months ended September 30, 2018, the Company repurchased a total of 218,555 and 617,970 shares with a total repurchase value of $2,000,000 and $6,000,000, respectively, and received requests for the repurchase of 540,098 and 2,111,753 shares with a total net repurchase value of $4,927,921 and $18,790,955.

The Company cannot guarantee that the funds set aside for the share repurchase program will be sufficient to accommodate all repurchase requests made in any quarter. To the extent that the repurchase requests exceed the Company’s limitations on repurchases or the Company does not have sufficient funds available to repurchase all of the shares of the Company’s common stock for which repurchase requests have been submitted in any quarter, priority is given to repurchase requests in the case of the death or disability of a stockholder. If the Company repurchases less than all of the shares subject to a repurchase request in any quarter, with respect to any shares which have not been repurchased, the requesting stockholder could (1) withdraw the request for repurchase or (2) ask that the Company honor the request in a future quarter, if any, when such repurchases may be made pursuant to the limitations of the share repurchase program and when sufficient funds were available. Such pending requests are honored among all requests for repurchases in any given repurchase period as follows: first, pro rata as to repurchases sought upon a stockholder’s death or disability; and, next, pro rata as to other repurchase requests.

The Company’s board of directors may, in its sole discretion, amend, suspend or terminate the share repurchase program at any time upon 30 days’ notice to the Company’s stockholders if it determines that the funds available to fund the share repurchase program are needed for other business or operational purposes or that amendment, suspension or termination of the share repurchase program is in the best interest of the Company’s stockholders. Therefore, stockholders may not have the opportunity to make a repurchase request prior to any potential termination of the Company’s share repurchase program.

For the three and nine months ended September 30, 2019, the Company reclassified $1,289,113, net, pursuant to the share repurchase program from accounts payable and accrued liabilities to temporary equity. For

I-31

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

the three and nine months ended September 30, 2018, the Company had no amounts to reclassify from accounts payable and accrued liabilities to temporary equity.

Distributions Declared

Distributions declared (1) accrued daily to stockholders of record as of the close of business on each day, (2) were payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month and (3) were calculated at a rate of $0.001519 per share per day during the nine months ended September 30, 2019, which if paid each day over a365-day period, is equivalent to a 6.0% annualized distribution rate based on a purchase price of $9.24 per share of common stock. Distributions were calculated at a rate of $0.001519 per share per day during the three months ended September 30, 2018, which if paid each day over a365-day period, is equivalent to a 6.0% annualized distribution rate based on a purchase price of $9.24 per share of common stock, were calculated at a rate of $0.001683 per share per day during the three months ended June 30, 2018, which if paid each day over a365-day period, is equivalent to a 6.0% annualized distribution rate based on a purchase price of $10.24 per share of common stock and were calculated at a rate of $0.001964 per share per day during the three months ended March 31, 2018, which if paid each day over a365-day period, is equivalent to a 7.0% annualized distribution rate based on a purchase price of $10.24 per share of common stock. On April 16, 2018, the Company’s board of directors authorized a special distribution in the amount of $1.00 per share, or $75,298,163 in the aggregate, to stockholders of record as of the close of business on April 20, 2018.

Distributions declared for the three and nine months ended September 30, 2019, were $10,349,426 and $30,802,627, respectively, all of which were attributable to cash distributions. Distributions declared for the three and nine months ended September 30, 2018, were $10,472,649 and $110,612,331, all of which were attributable to cash distributions.

As of September 30, 2019 and December 31, 2018, $3,371,492 and $3,515,310 in distributions declared were payable.

Distributions Paid

For the three and nine months ended September 30, 2019, the Company paid cash distributions of $10,359,596 and $30,946,445, which related to distributions declared for each day in the period from June 1, 2019 through August 31, 2019, and December 1, 2018 through August 31, 2019, respectively. All such distributions were paid in cash.

For the three and nine months ended September 30, 2018, the Company paid cash distributions of $10,851,615 and $111,795,742, which related to distributions declared for each day in the period from June 1, 2018 through August 31, 2018, and December 1, 2017 through August 31, 2018, respectively, inclusive of the special distribution in the amount of $75,298,163 paid on May 2, 2018, to stockholders of record as of the close of business on April 20, 2018. All such distributions were paid in cash.

8. Related Party Arrangements

Pursuant to the Company’s Advisory Agreement with the Advisor, the Company is obligated to pay the Advisor specified fees upon the provision of certain services related to the investment of funds in real estate and

I-32

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

real estate-related investments, the management of the Company’s investments and for other services (including, but not limited to, the disposition of investments). Subject to the limitations described below, the Company is obligated to reimburse the Advisor and its affiliates for acquisition and origination expenses and certain operating expenses incurred on behalf of the Company or incurred in connection with providing services to the Company.

Amounts attributable to the Advisor and its affiliates incurred for the three and nine months ended September 30, 2019 and 2018, and amounts that are payable (prepaid) to the Advisor and its affiliates as of September 30, 2019 and December 31, 2018, are as follows:

	Incurred (Received) For the Three Months Ended September 30,				Incurred (Received) For the Nine Months Ended September 30,				Payable (Prepaid) as of
	2019		2018		2019		2018		September 30, 2019			December 31, 2018
Consolidated Statements of Operations:
Expensed
Investment management fees(1)	$	1,973,063	$	2,543,225	$	6,276,766	$	7,309,666	$	—		$	1,640,485
Due diligence costs(2)		—		7,415		—		230,732		—			211,188
Property management:
Fees(1)		796,493		1,035,326		2,522,318		3,038,678		266,966			334,577
Reimbursement of onsite personnel(3)		2,407,875		3,383,288		7,870,440		9,469,655		747,564			589,551
Reimbursements - other(1)		565,153		474,588		1,684,836		1,083,925		27,214			39,349
Reimbursements - property operations(3)		17,625		27,993		56,228		70,386		—			—
Reimbursements - G&A(2)		22,362		37,028		79,011		71,754		—			—
Other operating expenses(2)		379,446		129,426		1,226,048		805,175		181,548			115,212
Disposition fees(4)		—		—		3,289,275		3,841,050		—			2,052,750
Disposition transaction costs(4)		—		—		39,483		67,464		—			—
Loan coordination fee(1)		600,000		60,000		600,000		422,160		400,000			—
Property insurance(5)		452,566		503,734		1,303,149		1,131,915		(268,596	)		(119,055	)
Insurance proceeds(6)		—		—		—		—		—			(75,000	)
Rental Revenue(7)		4,491		—		8,283		—		—			—
Consolidated Balance Sheets:
Capitalized
Construction management:
Fees(8)		215,696		43,739		371,098		109,212		16,601			2,608
Reimbursement of labor costs(8)		50,099		29,392		104,316		64,829		5,579			198
Capital expenditures(8)		—		1,500		—		39,680		—			—
Capitalized costs on investment in unconsolidated joint venture(9)		—		—		—		58,386		—			—
Acquisition expenses(10)		—		—		—		245,048		—			—
Acquisition fees(10)		—		—		—		705,722		—			—
	$	7,484,869	$	8,276,654	$	25,431,251	$	28,765,437	$	1,376,876		$	4,791,863

(1) Included in fees to affiliates in the accompanying consolidated statements of operations.

I-33

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

(2) Included in general and administrative expenses in the accompanying consolidated statements of operations.

(3) Included in operating, maintenance and management in the accompanying consolidated statements of operations.

(4) Included in gain on sales of real estate, net in the accompanying consolidated statements of operations.

(5) Property related insurance expense and the amortization of the prepaid insurance deductible account are included in general and administrative expenses in the accompanying consolidated statements of operations. The amortization of the prepaid property insurance is included in operating, maintenance and management expenses in the accompanying consolidated statements of operations. The prepaid insurance is included in other assets in the accompanying consolidated balance sheets upon payment.

(6) Included in other income in the accompanying consolidated statements of operations.

(7) Included in rental income in the accompanying consolidated statements of operations.

(8) Included in building and improvements in the accompanying consolidated balance sheets.

(9) Included in investment in unconsolidated joint venture in the accompanying consolidated balance sheets.

(10) Included in total real estate, cost in the accompanying consolidated balance sheets.

Investment Management Fee

The Company pays the Advisor a monthly investment management fee equal toone-twelfth of 0.80% of (1) the cost of real properties and real estate-related assets acquired directly by the Company or (2) the Company’s allocable cost of each real property or real estate-related asset acquired through a joint venture. The investment management fee is calculated including acquisition fees, acquisition expenses, cost of development, construction or improvement and any debt attributable to such investments, or the Company’s proportionate share thereof in the case of investments made through joint ventures. The cost of real properties and real estate-related assets that have been sold by the Company during the applicable month is excluded from the fee.

Acquisition Fees and Expenses

The Company pays the Advisor an acquisition fee equal to 2.0% of (1) the cost of investment, as defined in the Advisory Agreement, in connection with the investigation, selection and acquisition (by purchase, investment or exchange) of any type of real property or real estate-related asset; provided, however, that the total acquisition fee payable by the Company to the Advisor or its affiliates shall equal 0.5% of the cost of investment in the event that proceeds from a prior sale of an investment are used to fund the acquisition of an investment, or (2) the Company’s allocable cost of a real property or real estate-related asset acquired in a joint venture, in each case including purchase price, acquisition expenses and any debt attributable to such investments.

In addition to acquisition fees, the Company reimburses the Advisor for amounts directly incurred by the Advisor or its affiliates, including personnel-related costs for acquisition due diligence, legal andnon-recurring management services, and amounts the Advisor pays to third parties in connection with the selection, acquisition or development of a property or acquisition of real estate-related assets, whether or not the Company ultimately acquires the property or the real estate-related assets.

The Charter limits the Company’s ability to pay acquisition fees if the total of all acquisition fees and expenses relating to the purchase would exceed 6.0% of the contract purchase price. Under the Charter, a majority of the Company’s board of directors, including a majority of the independent directors, is required to approve any acquisition fees (or portion thereof) that would cause the total of all acquisition fees and expenses relating to an acquisition to exceed 6.0% of the contract purchase price. In connection with the purchase of securities, the acquisition fee may be paid to an affiliate of the Advisor that is registered as a Financial Industry

I-34

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Regulatory Authority, Inc. (“FINRA”) member broker-dealer if applicable FINRA rules would prohibit the payment of the acquisition fee to a firm that is not a registered broker-dealer.

Property Management Fees and Expenses

The Company entered into Property Management Agreements (as amended from time to time, each a “Property Management Agreement”) with Steadfast Management Company, Inc., an affiliate of the Sponsor (the “Property Manager”), in connection with the acquisition of each of the Company’s properties (other than EBT Lofts, Library Lofts and Stuart Hall Lofts, which were managed by an unaffiliated third-party management company). As of September 30, 2019, the property management fee payable with respect to each property under each Property Management Agreement, ranged from 2.50% to 3.50% of the annual gross revenue collected, which is usual and customary for comparable property management services rendered to similar properties in similar geographic markets, as determined by the Advisor and approved by a majority of the members of the Company’s board of directors, including a majority of the independent directors. The Property Manager also received an oversight fee of 1% of gross revenues at certain of the properties at which it did not serve as a property manager. Generally, each Property Management Agreement has an initial one year term and will continue thereafter on amonth-to-month basis unless either party gives60-days’ prior notice of its desire to terminate the Property Management Agreement, provided that the Company may terminate the Property Management Agreement at any time upon a determination of gross negligence, willful misconduct or bad acts of the Property Manager or its employees or upon an uncured breach of the Property Management Agreement upon 30 days’ prior written notice to the Property Manager.

In addition to the property management fee, the Property Management Agreements also specify certain other reimbursements payable to the Property Manager or its affiliates, including reimbursements for benefit administration, information technology infrastructure, licenses, support and training services and capital expenditures. The Company also reimburses the Property Manager for the salaries and related benefits ofon-site property management employees.

Construction Management

The Company entered into Construction Management Agreements with Pacific Coast Land and Construction, Inc., an affiliate of the Sponsor (the “Construction Manager”), in connection with the planned capital improvements and renovation for certain of the Company’s properties. As of September 30, 2019, the construction management fee payable with respect to each property pursuant to the Construction Management Agreements (each, a “Construction Management Agreement”) ranged from 6.0% to 12.0% of the costs of the improvements for which the Construction Manager has planning and oversight authority. Generally, each Construction Management Agreement can be terminated by either party with 30 days’ prior written notice to the other party. Construction management fees are capitalized to the respective real estate properties in the period in which they are incurred, as such costs relate to capital improvements and renovations for units taken out of service while they undergo the planned renovation.

The Company may also reimburse the Construction Manager for the salaries and related benefits of certain of its employees for time spent working on capital improvements and renovations at its properties.

I-35

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Property Insurance

The Company deposits amounts with an affiliate of the Sponsor to fund a prepaid insurance deductible account to cover the cost of required insurance deductibles across all properties of the Company and other affiliated entities. Upon filing a major claim, proceeds from the insurance deductible account may be used by the Company or another affiliate of the Sponsor. In addition, the Company deposits amounts with an affiliate of the Sponsor to cover the cost of property insurance across certain properties of the Company.

Other Operating Expense Reimbursement

In addition to the various fees paid to the Advisor, the Company is obligated to pay directly or reimburse all expenses incurred by the Advisor in providing services to the Company, including the Company’s allocable share of the Advisor’s overhead, such as rent, employee costs, utilities and information technology costs. The Company will not reimburse the Advisor for employee costs in connection with services for which the Advisor or its affiliates receive acquisition fees or disposition fees or for the salaries the Advisor pays to the Company’s executive officers.

The Charter limits the Company’s total operating expenses during any four fiscal quarters to the greater of 2% of the Company’s average invested assets or 25% of the Company’s net income for the same period (the “2%/25% Limitation”). The Company may reimburse the Advisor, at the end of each fiscal quarter, for operating expenses incurred by the Advisor; provided, however, that the Company shall not reimburse the Advisor at the end of any fiscal quarter for operating expenses that exceed the 2%/25% Limitation unless the independent directors have determined that such excess expenses were justified based on unusual andnon-recurring factors. The Advisor must reimburse the Company for the amount by which the Company’s operating expenses for the preceding four fiscal quarters then ended exceed the 2%/25% Limitation unless the independent directors have determined that such excess expenses were justified. For purposes of determining the 2%/25% Limitation, “average invested assets” means the average monthly book value of the Company’s assets invested directly or indirectly in equity interests and loans secured by real estate during the12-month period before deducting depreciation, bad debts or othernon-cash reserves. “Total operating expenses” means all expenses paid or incurred by the Company that are in any way related to the Company’s operation, including the Company’s allocable share of Advisor overhead, but excluding (a) the expenses of raising capital such as organization and offering expenses, legal, audit, accounting, underwriting, brokerage, listing, registration and other fees, printing and other such expenses and taxes incurred in connection with the issuance, distribution, transfer, listing and registration of shares of the Company’s common stock; (b) interest payments; (c) taxes;(d) non-cash expenditures such as depreciation, amortization and bad debt reserves; (e) reasonable incentive fees based on the gain in the sale of the Company’s assets; (f) acquisition fees and acquisition expenses (including expenses relating to potential acquisitions that the Company does not close) and investment management fees; (g) real estate commissions on the resale of investments; and (h) other expenses connected with the acquisition, disposition, management and ownership of investments (including the costs of foreclosure, insurance premiums, legal services, maintenance, repair and improvement of real property).

At September 30, 2019, the Company’s total operating expenses, as defined above, did not exceed the 2%/25% Limitation.

I-36

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Disposition Fee

The Company pays the Advisor a disposition fee in connection with a sale of a property or real estate-related asset and in the event of the sale of the entire Company (a “Final Liquidity Event”), in either case when the Advisor or its affiliates provides a substantial amount of services as determined by a majority of the Company’s independent directors. With respect to a sale of a property or real estate-related asset, the Company pays the Advisor a disposition fee equal to 1.5% of the contract sales price of the investment sold. With respect to a Final Liquidity Event, the Company will pay the Advisor a disposition fee equal to (i) 0.5% of the total consideration paid in a Final Liquidity Event if the price per share paid to stockholders is less than or equal to $9.00; (ii) 0.75% of the total consideration paid in a Final Liquidity Event if the price per share paid to stockholders is between $9.01 and $10.24; (iii) 1.00% of the total consideration paid in a Final Liquidity Event if the price per share paid to stockholders is between $10.25 and $11.24; (iv) 1.25% of the total consideration paid in a Final Liquidity Event if the price per share paid to stockholders is between $11.25 and $12.00; and (v) 1.50% of the total consideration paid in a Final Liquidity Event if the price per share paid to stockholders is greater than or equal to $12.01; provided, however, that the price per share paid to stockholders as listed in each of clauses (i) through (v) above shall be adjusted for any special distributions, stock splits, combinations, recapitalizations or any similar transaction with respect to our shares. To the extent the disposition fee is paid upon the sale of any assets other than real property, it will be included as an operating expense for purposes of the 2%/25% Limitation. In connection with the sale of securities, the disposition fee may be paid to an affiliate of the Advisor that is registered as a FINRA member broker-dealer if applicable FINRA rules would prohibit the payment of the disposition fee to a firm that is not a registered broker-dealer. The Charter limits the maximum amount of the disposition fees payable to the Advisor for the sale of any real property to the lesser ofone-half of the brokerage commission paid or 3.0% of the contract sales price, but in no event shall the total real estate commissions paid, including any disposition fees payable to the Advisor, exceed 6.0% of the contract sales price.

Loan Coordination Fee

The Company pays the Advisor a loan coordination fee equal to 0.50% of the amount of debt financed or refinanced (in each case, other than at the time of the acquisition of a property or a real estate-related asset), or the Company’s proportionate share of the initial amount of new debt financed or refinanced or the amount of any debt refinanced in the case of investments made through a joint venture. In some instances, the Company and the Advisor have agreed to a loan coordination fee of $100,000 per loan refinanced.

Pending Merger with STAR

Termination Agreement

Concurrently with the entry into the Merger Agreement, the Company and Advisor entered into a termination letter agreement (the “Termination Agreement”), effective as of August 5, 2019. Pursuant to the Termination Agreement, the current Advisory Agreement will be terminated at the effective time of the Merger. Also pursuant to the Termination Agreement, the Advisor waived any disposition fee it otherwise would be entitled to pursuant to the Advisory Agreement related to the SIR Merger

The Termination Agreement also provides that upon approval of the special committee of the Company’s board of directors, the Company shall consent (which consent shall not be unreasonably withheld, delayed or

I-37

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

conditioned) and shall take all necessary actions (including amending the Merger Agreement) to provide for the Exchange (as defined below) if, pursuant to the Merger Agreement, prior to consummation of the Merger, STAR Advisor (as defined herein) requests that, in lieu of the Subordinated Incentive Listing Fee, Subordinated Share of Net Sales Proceeds and Performance Fee provided for and defined in the Amended and Restated Advisory Agreement between STAR and Steadfast Apartment Advisor, LLC, its external advisor (“STAR Advisor”), STAR issue, at the closing of the Merger, convertible stock in exchange for the convertible stock currently owned by STAR Advisor.

9. Incentive Award Plan and Independent Director Compensation

The Company has adopted an incentive plan (the “Incentive Award Plan”) that provides for the grant of equity awards to its employees, directors and consultants and those of the Company’s affiliates. The Incentive Award Plan authorizes the grant ofnon-qualified and incentive stock options, restricted stock awards, restricted stock units, stock appreciation rights, dividend equivalents and other stock-based awards or cash-based awards. No awards have been granted under the Incentive Award Plan as of September 30, 2019 and December 31, 2018, except those awards granted to the independent directors as described below.

Under the Company’s independent directors’ compensation plan, which is asub-plan of the Incentive Award Plan, each of the Company’s then independent directors was entitled to receive 5,000 shares of restricted common stock in connection with the initial meeting of the Company’s full board of directors. The Company’s initial board of directors, and each of the independent directors, agreed to delay the initial grant of restricted stock until the Company raised $2,000,000 in gross offering proceeds in a private offering that preceded the Public Offering. Each subsequent independent director that joins the Company’s board of directors would receive 5,000 shares of restricted common stock upon election to the Company’s board of directors. In addition, on the date following an independent director’sre-election to the Company’s board of directors, he or she receives 2,500 shares of restricted common stock.One-fourth of the shares of restricted common stock generally vest and becomenon-forfeitable upon issuance and the remaining portion will vest in three equal annual installments beginning on the first anniversary of the date of grant and ending on the third anniversary of the date of grant; provided, however, that the restricted stock will become fully vested and becomenon-forfeitable on the earlier to occur of (1) the termination of the independent director’s service as a director due to his or her death or disability or (2) a change in control of the Company and as otherwise provided in the Incentive Award Plan. These restricted stock awards entitle the holders to participate in distributions even if the shares are not fully vested.

The Company recorded stock-based compensation expense of $12,303 and $43,191 for the three and nine months ended September 30, 2019, respectively, and $34,832 and $69,422 for the three and nine months ended September 30, 2018, respectively.

10. Commitments and Contingencies

Economic Dependency

The Company is dependent on the Advisor and its affiliates for certain services that are essential to the Company, including the identification, evaluation, negotiation, purchase and disposition of real estate and real estate-related investments; management of the daily operations of the Company’s real estate and real estate-

I-38

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

related investment portfolio; and other general and administrative responsibilities. In the event that these companies are unable to provide the respective services, the Company will be required to obtain such services from other sources.

Concentration of Credit Risk

The geographic concentration of the Company’s portfolio makes it particularly susceptible to adverse economic developments in the Houston, Texas, Oklahoma City, Oklahoma, Columbus, Ohio, Atlanta, Georgia and Lexington, Kentucky apartment markets. Any adverse economic or real estate developments in these markets, such as business layoffs or downsizing, relocations of businesses, increased competition from other apartment communities, decrease in demand for apartments or any other changes, could adversely affect the Company’s operating results and its ability to make distributions to stockholders.

Environmental

As an owner of real estate, the Company is subject to various environmental laws of federal, state and local governments. The Company is not aware of any environmental liability that could have a material adverse effect on its financial condition or results of operations. However, changes in applicable environmental laws and regulations, the uses and conditions of properties in the vicinity of the Company’s properties, the activities of its tenants and other environmental conditions of which the Company is unaware with respect to the properties could result in future environmental liabilities.

Legal Matters

From time to time, the Company is subject, or party, to legal proceedings that arise in the ordinary course of its business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on the Company’s results of operations or financial condition nor is the Company aware of any such legal proceedings contemplated by government agencies.

11. Derivative Financial Instruments

The Company uses interest rate derivatives with the objective of managing exposure to interest rate movements thereby minimizing the effect of interest rate changes and the effect they could have on future cash flows. Interest rate cap agreements are used to accomplish this objective. The following table provides the terms of the Company’s interest rate derivative instruments that were in effect at September 30, 2019 and December 31, 2018:

September 30, 2019
Type	Maturity Date Range		Based on		Number of Instruments		Notional Amount		Variable Rate			Weighted Average Rate Cap			Fair Value
Interest rate cap		1/1/2020 - 7/1/2021		One-Month LIBOR		6	$	203,266,995		2.02	%		3.49	%	$	1,315

December 31, 2018
Type	Maturity Date Range		Based on		Number of Instruments		Notional Amount		Variable Rate			Weighted Average Rate Cap			Fair Value
Interest rate cap		6/1/2019 - 7/1/2021		One-Month LIBOR		10	$	283,654,000		2.52	%		2.81	%	$	117,678

I-39

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

The interest rate cap agreements are not designated as cash flow hedges. Accordingly, the Company records any changes in the fair value of the interest rate cap agreements as interest expense. The change in the fair value of the interest rate cap agreements for the three and nine months ended September 30, 2019, resulted in an unrealized loss of $2,066 and $163,363, respectively, which is included in interest expense in the accompanying consolidated statements of operations. During the three and nine months ended September 30, 2019 and 2018, the Company acquired interest rate cap agreements of $0 and $47,000 and $0 and $203,300, respectively. The fair value of the interest rate cap agreements of $1,315 and $117,678 as of September 30, 2019 and December 31, 2018, respectively, is included in other assets on the accompanying consolidated balance sheets.

12. Subsequent Events

Distributions Paid

On October 1, 2019, the Company paid distributions of $3,371,492, which related to distributions declared for each day in the period from September 1, 2019 through September 30, 2019. All such distributions were paid in cash.

On November 1, 2019, the Company paid distributions of $3,483,761, which related to distributions declared for each day in the period from October 1, 2019 through October 31, 2019. All such distributions were paid in cash.

Shares Repurchased

On October 31, 2019, the Company repurchased 78,845 shares of its common stock for a total repurchase value of $723,786, or $9.18 per share, pursuant to the Company’s share repurchase program.

Refinancing of the Montecito Apartments

On October 31, 2019, the Company, through its indirect wholly-owned subsidiary, refinanced $12,572,626 of existing variable rate loan with PNC Bank with a new fixed rate Fannie Mae loan in an aggregate principal amount of $18,900,000. The loan has aten-year term, with interest only payments for the entire term of the loan. The Company paid $151,200 in the aggregate in loan origination fees to PNC Bank in connection with the refinancing, and the Advisor earned a loan coordination fee of $94,500.

Distributions Declared

On November 6, 2019, the Company’s board of directors approved and authorized a daily distribution to stockholders of record as of the close of business on each day of the period commencing on January 1, 2020 and ending on March 31, 2020. The distributions will be equal to $0.001515 per share of the Company’s common stock. The distributions for each record date in January 2020, February 2020 and March 2020 will be paid in February 2020, March 2020 and April 2020, respectively. The distributions will be payable to stockholders from legally available funds therefor.

I-40

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST INCOME REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2019

(unaudited)

Advisory Agreement

On November 6, 2019, the Company entered into Amendment No. 12 (the “Amendment”) to the Advisory Agreement. The Amendment renews the Advisory Agreement for aone-year term beginning on November 15, 2019, and ending on November 15, 2020.

Restricted Stock Grant

On November 7, 2019, the Company granted 2,500 shares of restricted common stock to each of its three independent directors upon theirre-election to the Company’s board of directors at the 2019 annual meeting of stockholders.

I-41

PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the accompanying financial statements of Steadfast Income REIT, Inc. and the notes thereto. As used herein, the terms “we,” “our” and “us” refer to Steadfast Income REIT, Inc., a Maryland corporation, and, as required by context, Steadfast Income REIT Operating Partnership, L.P., a Delaware limited partnership, which we refer to as our “operating partnership,” and to their subsidiaries. References to “our advisor” are to Steadfast Income Advisor, LLC, our external advisor.

Certain statements regarding future estimates and expectations may not be applicable to the extent the Merger (as defined herein) is completed.

Forward-Looking Statements

Certain statements included in this Quarterly Report on Form10-Q that are not historical facts (including any statements concerning investment objectives, other plans and objectives of management for future operations or economic performance, or assumptions or forecasts related thereto) are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. These statements are only predictions. We caution that forward-looking statements are not guarantees. Actual events or our investments and results of operations could differ materially from those expressed or implied in any forward-looking statements. Forward-looking statements are typically identified by the use of terms such as “may,” “should,” “expect,” “could,” “intend,” “plan,” “anticipate,” “estimate,” “believe,” “continue,” “predict,” “potential” or the negative of such terms and other comparable terminology.

The forward-looking statements included herein are based upon our current expectations, plans, estimates, assumptions and beliefs, which involve numerous risks and uncertainties. Assumptions relating to the foregoing involve judgments with respect to, among other things, future economic, competitive and market conditions and future business decisions, all of which are difficult or impossible to predict accurately and many of which are beyond our control. Although we believe that the expectations reflected in such forward-looking statements are based on reasonable assumptions, our actual results and performance could differ materially from those set forth in the forward-looking statements. Factors which could have a material adverse effect on our operations and future prospects include, but are not limited to:

• changes in economic conditions generally and the real estate and debt markets specifically;

• risks inherent in the real estate business, including tenant defaults, tenant vacancies, potential liability relating to environmental matters and liquidity of real estate investments;

• our ability to secure resident leases at favorable rental rates;

• our ability to execute on our value-enhancement strategy;

• risks related to owning investments with joint venture partners;

• our ability to identify and acquire multifamily properties;

• changes to our share repurchase program, distribution rate and other decisions;

• the fact we pay fees and expenses to our advisor and its affiliates that were not negotiated on an arm’s length basis and the payment of these fees and expenses increases the risk that our stockholders will not earn a profit on their investment in us;

• our ability to retain our executive officers and other key personnel of our advisor, our property manager and our affiliates;

I-42

PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

• completion of the Merger is subject to many conditions and if these conditions are not satisfied or waived, the Merger will not be completed, which could result in the expenditure of significant unrecoverable transaction costs;

• failure to complete the Merger could negatively impact our future business and financial results;

• the pendency of the Merger, including as a result of the restrictions on the operation of our business during the period between signing the related merger agreement and the completion of the Merger, could adversely affect our business and operations;

• legislative or regulatory changes (including changes to the laws governing the taxation of real estate investment trusts, or REITs);

• our ability to generate sufficient cash flows to pay distributions to our stockholders;

• the availability of capital;

• changes in interest rates; and

• changes to generally accepted accounting principles, or GAAP.

Any of the assumptions underlying the forward-looking statements included herein could be inaccurate, and undue reliance should not be placed on any forward-looking statements included herein. All forward-looking statements are made as of the date this quarterly report is filed with the Securities and Exchange Commission, or SEC, and the risk that actual results will differ materially from the expectations expressed herein will increase with the passage of time. Except as otherwise required by the federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements made herein, whether as a result of new information, future events, changed circumstances or any other reason. In light of the significant uncertainties inherent in the forward-looking statements included in this quarterly report, the inclusion of such forward-looking statements should not be regarded as a representation by us or any other person that the objectives and plans set forth in this quarterly report will be achieved.

All forward-looking statements included herein should be read in light of the factors identified in the “Risk Factors” section of our Annual Report on Form10-K for the year ended December 31, 2018, filed with the SEC on March 15, 2019.

Overview

We were formed on May 4, 2009, as a Maryland corporation that elected to be taxed as, and currently qualifies as, a real estate investment trust, or REIT. We own and manage a diverse portfolio of real estate investments, primarily in the multifamily sector, located throughout the United States. As of September 30, 2019, we owned (1) 27 multifamily properties located within the greater Midwest and southern geographic regions of the United States that comprised a total of 7,527 apartment homes and (2) a 10% interest in one unconsolidated joint venture that owned 20 multifamily properties with a total of 4,584 apartment homes. The total purchase price of our real estate portfolio was $862,854,253. At September 30, 2019, our portfolio was approximately 97.5% leased.

On July 19, 2010, we commenced our initial public offering of up to a maximum of 150,000,000 shares of common stock and up to 15,789,474 shares of common stock pursuant to our distribution reinvestment plan. Upon termination of our public offering on December 1, 2014, we had sold 76,095,116 shares of common stock for gross offering proceeds of $769,573,363, including 4,073,759 shares of common stock issued pursuant to our distribution reinvestment plan for gross offering proceeds of $39,580,847. Following the termination of our

I-43

PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

initial public offering, we continued to offer shares of our common stock pursuant to our distribution reinvestment plan until our board of directors determined to suspend our distribution reinvestment plan effective with distributions earned beginning on December 1, 2014. Our board of directors may, in its sole discretion, reinstate the distribution reinvestment plan and change the price at which we offer shares of common stock to our stockholders pursuant to the distribution reinvestment plan based upon changes in the estimated value per share and other factors our board of directors deems relevant. On March 13, 2019, our board of directors approved an estimated value per share of our common stock of $9.40 as of December 31, 2018.

Steadfast Income Advisor, LLC is our advisor. Subject to certain restrictions and limitations, our advisor manages ourday-to-day operations and our portfolio of properties and real estate-related assets. Our advisor sources and presents investment opportunities to our board of directors. Our advisor also provides investment management, marketing, investor relations and other administrative services on our behalf.

Substantially all of our business is conducted through Steadfast Income REIT Operating Partnership, L.P., our operating partnership. We are the sole general partner of our operating partnership. The initial limited partner of our operating partnership is our advisor. The limited partnership agreement of our operating partnership provides that our operating partnership will be operated in a manner that will enable us to (1) satisfy the requirements for being classified as a REIT for tax purposes, (2) avoid any federal income or excise tax liability and (3) ensure that our operating partnership will not be classified as a “publicly traded partnership” for purposes of Section 7704 of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, which classification could result in our operating partnership being taxed as a corporation, rather than as a partnership. In addition to the administrative and operating costs and expenses incurred by our operating partnership in acquiring and operating real properties, our operating partnership will pay all of our administrative costs and expenses, and such expenses will be treated as expenses of our operating partnership.

We elected to be taxed as a REIT under the Internal Revenue Code commencing with the taxable year ended December 31, 2010. As a REIT, we generally will not be subject to federal income tax on income that we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax on our taxable income at regular corporate rates and would not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year in which qualification is denied. Failing to qualify as a REIT could materially and adversely affect our net income.

Market Outlook

We believe economic and demographic trends will benefit our existing portfolio and that we have unique future investment opportunities in the multifamily sector. Home ownership rates are nearall-time lows. Demographic and economic factors favor the flexibility of rental housing and discourage the potential financial burden associated with home ownership. Additionally, Millennials and Baby Boomers, the two largest demographic groups comprising roughly half of the total population in the United States, are increasingly choosing rental housing over home ownership. Demographic studies suggest that Baby Boomers are downsizing their suburban homes and relocating to multifamily apartments. Millennials are renting multifamily apartments due to high levels of student debt and increased credit standards in order to qualify for a home mortgage. According to the Federal Reserve Bank of New York, aggregate student debt has surpassed automotive, home equity lines of credit and credit card debt. Millennials are also getting married and having children later and are choosing to live in apartment communities until theirmid-30s. Today, approximately 30% of Millennials are still living with their parents or are still in school. When they are employed, Millennials will likely rent moderate income apartments based upon an average income of $45,000 - $65,000. Our plan is to provide rental housing for these generational groups as they age. We believe these factors will continue to contribute to the demand for multifamily housing.

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Pending Merger with Steadfast Apartment REIT, Inc.

On August 5, 2019, we, Steadfast Apartment REIT, Inc., or STAR, Steadfast Apartment REIT Operating Partnership, L.P., STAR’s operating partnership, our operating partnership, and SI Subsidiary, LLC, a wholly-owned subsidiary of STAR, or Merger Sub, entered into an Agreement and Plan of Merger, or the Merger Agreement.

Subject to the terms and conditions of the Merger Agreement, we will merge with and into Merger Sub with Merger Sub surviving the merger, or the Merger, such that following the Merger, the surviving entity will continue as a wholly-owned subsidiary of STAR. In accordance with the applicable provisions of the Maryland General Corporation Law, our separate existence shall cease.

At the effective time of the Merger and subject to the terms and conditions of the Merger Agreement, each issued and outstanding share of our common stock (or a fraction thereof), $0.01 par value per share, will be converted into the right to receive 0.5934 shares of STAR’s common stock, $0.01 par value per share.

The obligation of each party to consummate the Merger is subject to a number of conditions, including receipt of the approval of the Merger and an amendment to our Charter to delete certain provisions regardingroll-up transactions by the holders of a majority of the outstanding shares of our common stock, or the SIR Stockholder Approval.

We (with the prior approval of the special committee of our board of directors) may terminate the Merger Agreement in order to enter into an “Alternative Acquisition Agreement” with respect to a “Superior Proposal” (each as defined in the Merger Agreement) at any time prior to our receipt of the SIR Stockholder Approval pursuant to the terms of the Merger Agreement. STAR may terminate the Merger Agreement at any time prior to the receipt of the SIR Stockholder Approval, in certain limited circumstances, including upon an “Adverse Recommendation Change” (as defined in the Merger Agreement).

If the Merger Agreement is terminated in connection with our acceptance of a Superior Proposal or making an Adverse Recommendation Change, then we must pay to STAR a termination fee of $20,866,122 and up to $2,000,000 as reimbursement for STAR’s Expenses (as defined in the Merger Agreement).

On August 5, 2019, STAR also entered into an Agreement and Plan of Merger to acquire Steadfast Apartment REIT III, Inc., or STAR III. STAR’s proposed merger with STAR III is also astock-for-stock transaction whereby STAR III will be merged into a wholly-owned subsidiary of STAR. The consummation of STAR’s merger with us is not contingent upon the completion of STAR’s merger with STAR III, and the consummation of STAR’s merger with STAR III is not contingent upon the completion of STAR’s merger with us.

The combined company after the mergers will retain the name “Steadfast Apartment REIT, Inc.” Each merger is intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code.

For additional information on the Merger, see our Current Report on Form8-K filed with the SEC on August 6, 2019.

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Our Real Estate Portfolio

As of September 30, 2019, we owned the 27 multifamily properties listed below:

					Number of Units		Total Purchase Price		Mortgage Debt Outstanding at September 30, 2019		Average Occupancy(1) as of						Average Monthly Rent(2) as of
Property Name		Location	Purchase Date								Sep 30, 2019			Dec 31, 2018			Sep 30, 2019		Dec 31, 2018
1	Clarion Park Apartments	Olathe, KS		6/28/2011		220	$	11,215,000	$	11,936,941		95.7	%		96.4	%	$	872	$	841
2	Spring Creek Apartments	Edmond, OK		3/9/2012		252		19,350,000		17,145,073		97.4	%		94.0	%		873		848
3	Montclair Parc Apartment Homes	Oklahoma City, OK		4/26/2012		360		35,750,000		—		96.8	%		94.4	%		891		857
4	Hilliard Park Apartments	Columbus, OH		9/11/2012		201		19,800,000		12,173,887		96.2	%		94.5	%		1,140		1,120
5	Sycamore Terrace Apartments	Terre Haute, IN		9/20/2012 & 3/5/2014		250		23,174,157		22,728,173		93.1	%		94.0	%		1,171		1,138
6	Hilliard Summit Apartments	Columbus, OH		9/28/2012		208		24,100,000		14,757,094		95.3	%		95.7	%		1,236		1,217
7	Forty 57 Apartments	Lexington, KY		12/20/2012		436		52,500,000		34,982,843		96.3	%		93.1	%		970		912
8	Riverford Crossing Apartments	Frankfort, KY		12/28/2012		300		30,000,000		19,904,276		96.9	%		97.3	%		978		933
9	Montecito Apartments	Austin, TX		12/31/2012		268		19,000,000		12,596,576		96.7	%		95.1	%		1,039		1,008
10	Hilliard Grand Apartments	Dublin, OH		12/31/2012		314		40,500,000		28,108,786		96.1	%		96.5	%		1,317		1,290
11	Deep Deuce at Bricktown	Oklahoma City, OK		3/28/2013		294		38,271,000		32,087,170		94.6	%		93.9	%		1,284		1,235
12	Retreat at Quail North	Oklahoma City, OK		6/12/2013		240		25,250,000		16,103,751		94.4	%		92.9	%		978		954
13	Tapestry Park Apartments	Birmingham, AL		8/13/2013 & 12/1/2014		354		50,285,000		48,223,343		95.6	%		92.9	%		1,376		1,311
14	BriceGrove Park Apartments	Canal Winchester, OH		8/29/2013		240		20,100,000		—		95.6	%		95.8	%		911		879
15	Retreat at Hamburg Place	Lexington, KY		9/5/2013		150		16,300,000		—		97.0	%		96.0	%		1,038		897
16	Villas at Huffmeister	Houston, TX		10/10/2013		294		37,600,000		27,213,547		95.4	%		93.9	%		1,228		1,209
17	Villas of Kingwood	Kingwood, TX		10/10/2013		330		40,150,000		34,598,132		96.9	%		94.8	%		1,246		1,282
18	Waterford Place at Riata Ranch	Cypress, TX		10/10/2013		228		23,400,000		—		96.3	%		93.9	%		1,149		1,104
19	Carrington Place	Houston, TX		11/7/2013		324		32,568,034		—		94.3	%		91.7	%		1,117		1,076
20	Carrington at Champion Forest	Houston, TX		11/7/2013		284		33,000,000		—		95.6	%		94.0	%		1,147		1,106
21	Carrington Park at Huffmeister	Cypress, TX		11/7/2013		232		25,150,000		19,472,583		95.3	%		94.4	%		1,170		1,198
22	Heritage Grand at Sienna Plantation	Missouri City, TX		12/20/2013		240		27,000,000		16,654,527		93.4	%		95.8	%		1,160		1,147
23	Mallard Crossing Apartments	Loveland, OH		12/27/2013		350		39,800,000		—		96.1	%		93.7	%		1,142		1,095
24	Reserve at Creekside	Chattanooga, TN		3/28/2014		192		18,875,000		14,701,227		97.2	%		96.4	%		1,055		1,040
25	Oak Crossing Apartments	Fort Wayne, IN		6/3/2014		222		24,230,000		20,235,203		97.2	%		95.9	%		1,024		1,002
26	Double Creek Flats	Plainfield, IN		5/7/2018		240		31,852,079		21,893,600		96.3	%		93.8	%		1,050		1,063
27	Jefferson at Perimeter Apartments	Dunwoody, GA		6/11/2018		504		103,633,983		72,909,761		94.6	%		89.3	%		1,413		1,331
						7,527	$	862,854,253	$	498,426,493		95.8	%		94.3	%	$	1,123	$	1,068

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

(1) At September 30, 2019 and December 31, 2018, our portfolio was approximately 97.5% and 95.5% leased, respectively.

(2) Average monthly rent is based upon the effective rental income after considering the effect of vacancies, concessions and write-offs.

Joint Venture Arrangement with Blackstone Real Estate Income Trust, Inc.

On November 10, 2017, we, BREIT Steadfast MF JV LP, or the joint venture, BREIT Steadfast MF Parent LLC, or BREIT LP, and BREIT Steadfast MF GP LLC, or BREIT GP, executed a Contribution Agreement whereby we agreed to contribute a portfolio of 20 properties owned by us to the joint venture in exchange for a combination of cash and a 10% ownership interest in the joint venture. BREIT LP owns a 90% interest in the joint venture and BREIT GP serves as the general partner of the joint venture. Each of BREIT LP and BREIT GP is a wholly-owned subsidiary of Blackstone Real Estate Income Trust, Inc. SIR LANDS Holdings, LLC, or SIR LP, a wholly-owned subsidiary, holds our 10% interest in the joint venture.

The transaction closed in two stages. The first closing occurred November 15, 2017, and included those properties for which the existing debt was prepaid at closing. The second closing occurred January 31, 2018, and included those properties for which the joint venture assumed the existing loans.

2019 Property Dispositions

Dawntree Apartments

On August 15, 2013, we, through a wholly-owned subsidiary of the Operating Partnership, acquired Dawntree Apartments, a multifamily property located in Carrollton, Texas, containing 400 apartment homes. The purchase price of Dawntree Apartments was $24,000,000, exclusive of closing costs. On March 8, 2019, we sold Dawntree Apartments for $46,200,000, resulting in a gain of $24,141,403, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Dawntree Apartments was not affiliated with us or our advisor.

Estancia Apartments

On June 29, 2012, we, through a wholly-owned subsidiary of the Operating Partnership, acquired Estancia Apartments, a multifamily property located in Tulsa, Oklahoma, containing 294 apartment homes. The purchase price of Estancia Apartments was $27,900,000, exclusive of closing costs. On March 22, 2019, we sold Estancia Apartments for $30,683,000, resulting in a gain of $6,892,244, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Estancia Apartments was not affiliated with us or our advisor.

Sonoma Grande Apartments

On May 24, 2012, we, through a wholly-owned subsidiary of the Operating Partnership, acquired Sonoma Grande Apartments, a multifamily property located in Tulsa, Oklahoma, containing 336 apartment homes. The purchase price of Sonoma Grande Apartments was $32,200,000, exclusive of closing costs. On March 22, 2019, we sold Sonoma Grande Apartments for $35,067,000, resulting in a gain of $9,367,938, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Sonoma Grande Apartments was not affiliated with us or our advisor.

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

EBT Lofts, Library Lofts East and Stuart Hall Lofts

On December 30, 2011, February 28, 2013 and August 27, 2013, we, through wholly-owned subsidiaries of the Operating Partnership, acquired EBT Lofts, Library Lofts East and Stuart Hall Lofts, respectively, multifamily properties located in Kansas City, Missouri, collectively containing 335 apartment homes. The combined purchase price of EBT Lofts, Library Lofts East and Stuart Hall Lofts was $38,175,000, exclusive of closing costs. On April 26, 2019, we sold EBT Lofts, Library Lofts East and Stuart Hall Lofts for $50,685,000, resulting in a gain of $19,120,514, which includes reductions to the net book value of the properties due to historical depreciation and amortization expense. The purchaser of EBT Lofts, Library Lofts East and Stuart Hall Lofts was not affiliated with us or our advisor.

Waterford on the Meadow

On July 3, 2013, we, through a wholly-owned subsidiary of the Operating Partnership, acquired Waterford on the Meadow, a multifamily property located in Plano, Texas, containing 350 apartment homes. The purchase price of Waterford on the Meadow was $23,100,000, exclusive of closing costs. On May 14, 2019, we sold Waterford on the Meadow for $42,000,000, resulting in a gain of $20,315,545, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Waterford on the Meadow was not affiliated with us or our advisor.

Truman Farm Villas

On December 22, 2011, we, through a wholly-owned subsidiary of the Operating Partnership, acquired Truman Farm Villas, a multifamily property located in Grandview, Missouri, containing 200 apartment homes. The purchase price of Truman Farm Villas was $9,100,000, exclusive of closing costs. On May 15, 2019, we sold Truman Farm Villas for $14,650,000, resulting in a gain of $7,051,452, which includes reductions to the net book value of the property due to historical depreciation and amortization expense. The purchaser of Truman Farm Villas was not affiliated with us or our advisor.

Critical Accounting Policies

The preparation of our financial statements requires significant management judgments, assumptions and estimates about matters that are inherently uncertain. These judgments affect the reported amounts of assets and liabilities and our disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. With different estimates or assumptions, materially different amounts could be reported in our financial statements. Additionally, other companies may utilize different estimates that may impact the comparability of our results of operations to those of companies in similar businesses. A discussion of the accounting policies that management considers critical in that they involve significant management judgments, assumptions and estimates is included in our Annual Report on Form10-K for the year ended December 31, 2018. There have been no significant changes to our accounting policies during the period covered by this report other than described in Note 2 (Summary of Significant Accounting Policies) to our condensed consolidated unaudited financial statements in this Quarterly Report on Form10-Q.

Income Taxes

We elected to be taxed as, and currently qualify as, a REIT under the Internal Revenue Code and have operated as such commencing with the taxable year ended December 31, 2010. To continue to qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our annual REIT taxable income to stockholders (which is computed without regard to the dividends paid

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP). As a REIT, we generally will not be subject to federal income tax to the extent we distribute qualifying dividends to our stockholders. If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax on our taxable income at regular corporate income tax rates and generally would not be permitted to qualify for treatment as a REIT for federal income tax purposes for the four taxable years following the year during which qualification was lost, unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to our stockholders. However, we believe we are organized and operate in such a manner as to qualify for treatment as a REIT.

We follow the income tax guidance under GAAP to recognize, measure, present and disclose in our consolidated financial statements uncertain tax positions that we have taken or expect to take on a tax return. As of September 30, 2019 and December 31, 2018, we did not have any liabilities for uncertain tax positions that we believe should be recognized in our consolidated financial statements. Due to uncertainty regarding the realization of certain deferred tax assets, we have established valuation allowances, primarily in connection with the net operating loss carryforward related to the REIT. We have not been assessed material interest or penalties by any major tax jurisdictions. Our evaluation was performed for all open tax years through December 31, 2018.

Distributions

Our board of directors has historically declared daily distributions that are paid on a monthly basis. We expect to continue paying monthly distributions unless our results of operations, our general financial condition, general economic conditions or other factors prohibit us from doing so. We have and may continue to declare distributions in excess of our cash flow from operations. As a result, our distribution rate and payment frequency may vary from time to time. However, to qualify as a REIT for tax purposes, we must make distributions equal to at least 90% of our “REIT taxable income” each year.

Distributions declared (1) accrue daily to our stockholders of record as of the close of business on each day, (2) are payable in cumulative amounts on or before the third day of each calendar month with respect to the prior month and (3) are calculated at a rate of $0.001519 per share per day during the nine months ended September 30, 2019.

The distributions declared and paid during the first and second quarters of 2019 were as follows:

Period	Distributions Declared(1)		Distributions Declared Per Share(1)(2)		Distributions Paid(3)		Sources of Distributions Paid				Net Cash (Used in) Provided By Operating Activities
							Cash Flow From Operations		Cash and Cash Equivalents
First Quarter 2019	$	10,186,657	$	0.137	$	10,196,066	$	—	$	10,196,066	$	(2,306,329	)
Second Quarter 2019		10,266,544		0.138		10,390,783		5,792,413		4,598,370		5,792,413
Third Quarter 2019		10,349,426		0.140		10,359,596		4,861,763		5,497,833		4,861,763
	$	30,802,627	$	0.415	$	30,946,445	$	10,654,176	$	20,292,269	$	8,347,847

(1) Distributions are based on daily record dates and calculated at a rate of $0.001519 per share per day during the three and nine months ended September 30, 2019.

(2) Assumes each share was issued and outstanding each day during the periods presented.

(3) Distributions are paid on a monthly basis. Distributions for all record dates of a given month are paid approximately three days following month end. All distributions were paid in cash.

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

For the three and nine months ended September 30, 2019, we paid aggregate distributions of $10,359,596 and $30,946,445, respectively. All such distributions were paid in cash. For the three and nine months ended September 30, 2019, our net (loss) income was $(5,557,926) and $72,277,928, we had funds from operations, or FFO, of $3,695,333 and $13,190,454 and net cash provided by operating activities of $4,861,763 and $8,347,847, respectively. For the three and nine months ended September 30, 2019, of the $10,359,596 and $30,946,445 in total distributions paid, all of which were paid in cash, we funded $4,861,763 and $10,654,176, or 47% and 34%, of distributions paid with net cash provided by operating activities and $5,497,833 and $20,292,269, or 53% and 66%, with existing cash and cash equivalents, respectively. Since inception, of the $406,180,132 in total distributions paid through September 30, 2019, including shares issued pursuant to our distribution reinvestment plan, 58% of such amounts were funded from cash flow from operations, 19% of such amounts were funded from the sales of real estate investments, 9% of such amounts were funded from offering proceeds, 2% of such amounts were funded from credit facilities and 12% of such amounts were funded from cash and cash equivalents. For information on how we calculate FFO and the reconciliation of FFO to net income (loss), see “—Funds from Operations and Modified Funds from Operations.”

Over the long-term, we expect that our distributions will be paid from cash flow from operations (except with respect to distributions related to sales of our real estate and real estate-related investments). However, our operating performance cannot be accurately predicted and may deteriorate in the future due to numerous factors, including those discussed under “Forward-Looking Statements,” and “Results of Operations” herein. In the event our cash flow from operations decreases in the future, the level of our distributions may also decrease.

Inflation

Substantially all of our multifamily property leases will be for a term of one year or less. In an inflationary environment, this may allow us to realize increased rents upon renewal of existing leases or the beginning of new leases. Short-term leases generally will minimize our risk from the adverse effects of inflation, although these leases generally permit tenants to leave at the end of the lease term and therefore will expose us to the effects of a decline in market rents. In a deflationary rent environment, we may be exposed to declining rents more quickly under these shorter term leases.

As of September 30, 2019, we had not entered into any material leases as a lessee.

REIT Compliance

To qualify as a REIT for tax purposes, we are required to distribute at least 90% of our REIT taxable income (which is computed without regard to the dividends paid deduction or net capital gain and which does not necessarily equal net income as calculated in accordance with GAAP) to our stockholders. We must also meet certain asset and income tests, as well as other requirements. We will monitor the business and transactions that may potentially impact our REIT status. If we fail to qualify as a REIT in any taxable year, we would be subject to federal income tax (including any applicable alternative minimum tax) on our taxable income at regular corporate rates.

Liquidity and Capital Resources

We use secured borrowings, and intend to use in the future secured and unsecured borrowings. At September 30, 2019, our debt was approximately 50% of the value of our properties, as determined by the most recent valuations performed by an independent third-party appraiser as of December 31, 2018. Going forward, we expect that our borrowings will be approximately 65% of the value of our properties, as determined by an independent third-party appraiser or qualified independent valuation expert. Under our Third Articles of Amendment and Restatement, or our charter, we have a limitation on borrowing in excess of 300% of the value

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

of our net assets, which generally approximates to 75% of the aggregate cost of our assets, though we may exceed this limit under certain circumstances. As of September 30, 2019, our aggregate borrowings were not in excess of 300% of the value of our net assets.

Our principal demand for funds will be to acquire investments in accordance with our investment strategy, fund value-enhancement and other capital improvement projects at our properties, pay operating expenses and interest on our outstanding indebtedness and to make distributions to our stockholders. In addition to making investments in accordance with our investment objectives, we expect to use our capital resources to make certain payments to our advisor in connection with the acquisition and disposal of investments, the management of our assets and costs incurred by our advisor in providing services to us.

We intend to generally fund our cash needs for items, other than asset acquisitions, from operations. Otherwise, we expect that our principal sources of working capital will include:

• current unrestricted cash balances, which was $120,202,920 as of September 30, 2019;

• various forms of secured and unsecured financing, including the financing of our unencumbered properties; and

• equity capital from joint venture partners.

Over the short term, we believe that our sources of capital, specifically our cash balances, cash flow from operations, our ability to raise equity capital from joint venture partners and our ability to obtain various forms of secured and unsecured financing will be adequate to meet our liquidity requirements and capital commitments.

Over the longer term, in addition to the sources of capital noted above, which we will rely on to meet our short term liquidity requirements, we may also utilize proceeds from the sale of our properties. We may also conduct additional public or private securities offerings. We expect these resources to be adequate to fund our operating activities, debt service and distributions, and will be sufficient to fund our ongoing operating activities as well as providing capital for investment in future development and other joint ventures.

Refinancing Transactions

On the closing dates set out in the table below, we, through our indirect wholly-owned subsidiaries, refinanced $203,010,610 of existing variable rate loans with our existing lenders, Jones Lang LaSalle Multifamily, LLC, or JLL, Berkadia Commercial Mortgage LLC, or Berkadia, PNC Bank, National Association, or PNC Bank, and Newmark Knight Frank, or NKF, or collectively, the Lenders, with new fixed rate Freddie Mac loans and a fixed rate Fannie Mae loan in an aggregate principal amount of $222,934,000. Each of the loans has a maturity date of October 1, 2029. Interest only payments are payable monthly through October 1, 2025, with interest and principal payments due monthly thereafter. The borrowers paid $1,016,689 in the aggregate in loan origination fees to the Lenders in connection with the refinancings, and the Advisor earned loan coordination fees of $600,000.

Secured Property	Closing Dates		Lender		Interest Rate			Principal Loan Amount
Jefferson at Perimeter Apartments		9/20/2019		JLL		3.48	%	$	73,800,000
Reserve at Creekside		9/20/2019		Berkadia		3.57	%		15,000,000
Tapestry Park Apartments		9/26/2019		NKF		3.66	%		48,750,000
Sycamore Terrace Apartments		9/26/2019		NKF		3.62	%		23,067,000
Villas at Huffmeister		9/27/2019		PNC Bank		3.56	%		27,440,000
Villas of Kingwood		9/27/2019		PNC Bank		3.56	%		34,877,000
								$	222,934,000

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Credit Facility

On July 29, 2016, we entered into a credit agreement and a multifamily note with PNC Bank, that provided for a credit facility in an amount not to exceed $350,000,000 to refinance certain of our then-existing mortgage loans. The credit facility had a maturity date of August 1, 2021, subject to extension. During 2017 and 2018, seven of the collateralized properties, were either disposed or refinanced, with the advances made to each of the collateralized properties being repaid in full. On July 29, 2019, we made a final remaining principal payment and terminated the credit facility.

Cash Flows Provided by Operating Activities

During the nine months ended September 30, 2019, net cash provided by operating activities was $8,347,847, compared to net cash provided by operating activities of $19,952,067 for the nine months ended September 30, 2018. The decrease in net cash provided by operating activities was primarily due to the disposition of 12 multifamily properties subsequent to September 30, 2018 in addition to changes in net income, investment in unconsolidated joint venture, other assets, accounts payable and accrued liabilities and due to affiliates compared to the nine months ended September 30, 2018.

Cash Flows Provided by Investing Activities

During the nine months ended September 30, 2019, net cash provided by investing activities was $203,159,878, compared to $98,433,184 during the nine months ended September 30, 2018. The increase in net cash provided by investing activities was primarily due to the disposition of eight multifamily properties during the nine months ended September 30, 2019 compared to disposition of 11 multifamily properties including the contribution of eight multifamily properties to the joint venture in exchange for cash and a 10% interest in the joint venture, partially offset by the acquisition of two multifamily properties during the nine months ended September 30, 2018. Net cash provided by investing activities during the nine months ended September 30, 2019, consisted of the following:

• $341,300 of cash provided by the investment in an unconsolidated joint venture, net of contributions paid to the unconsolidated joint venture of $548,800;

• $9,423,100 of cash used for improvements to real estate investments;

• $47,000 of cash used for the purchase of interest rate cap agreements;

• $211,990,358 of cash provided by the sales of real estate investments; and

• $298,320 of cash provided by insurance claims.

Cash Flows Used in Financing Activities

During the nine months ended September 30, 2019, net cash used in financing activities was $236,134,423, compared to $210,595,782 during the nine months ended September 30, 2018. The increase in cash flows used in financing activities is due primarily to the increase in principal repayments on mortgage notes payable, the increase in principal repayments on our credit facility and the payment of debt extinguishment costs, partially offset by the increase in proceeds from the issuance of notes payable and the reduction in the amount of cash distributions paid to our stockholders. Net cash used in financing activities during the nine months ended September 30, 2019, consisted of the following:

• $143,542,244 of net cash used for mortgage notes payable, comprised of $365,119,705 of cash used for principal repayments, $222,934,000 of proceeds from mortgage notes payable and the payment of deferred financing costs of $1,356,539;

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• $52,656,750 of cash used for principal payments of the credit facility;

• $2,988,984 of cash paid for the extinguishment of debt;

• $30,946,445 of cash distributions; and

• $6,000,000 of cash paid for the repurchase of common stock.

Contractual Commitments and Contingencies

We use secured borrowings, and intend to use secured and unsecured borrowings in the future. We believe that the careful use of borrowings will help us achieve our diversification goals and potentially enhance the returns on our investments. At September 30, 2019, our debt was approximately 50% of the value of our properties, as determined by the most recent valuations performed by an independent third-party appraiser as of December 31, 2018. Going forward, we expect that our borrowings will be approximately 65% of the value of our properties. Under our charter, we are prohibited from borrowing in excess of 300% of our net assets, which generally approximates to 75% of the aggregate cost of our assets. We may borrow in excess of this amount if such excess is approved by a majority of our independent directors and disclosed to stockholders in our next quarterly report, along with a justification for such excess. In such event, we will monitor our debt levels and take action to reduce any such excess as practicable. Our aggregate borrowings are reviewed by our board of directors at least quarterly. As of September 30, 2019, our aggregate borrowings were not in excess of 300% of the value of our net assets.

In addition to using our capital resources for investing purposes and meeting our debt obligations, we expect to use our capital resources to make certain payments to our advisor or its affiliates in connection with the selection and origination or purchase of real estate and real estate-related investments, the management of our assets, the management of the development or improvement of our assets and costs incurred by our advisor in providing services to us.

As of September 30, 2019, we had indebtedness totaling $498,426,493, comprised of an aggregate principal amount of $502,584,586, and net deferred financing costs of $4,158,093. For more information on our outstanding indebtedness, see Note 6 (Debt) to the unaudited consolidated financial statements.

The following is a summary of our contractual obligations as of September 30, 2019:

			Payments due by period
Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Interest payments on outstanding debt obligations(1)	$	178,690,201	$	4,096,894	$	37,107,319	$	33,761,132	$	103,724,856
Principal payments on outstanding debt obligations(2)		502,584,586		787,141		18,958,980		80,745,145		402,093,320
Total	$	681,274,787	$	4,884,035	$	56,066,299	$	114,506,277	$	505,818,176

(1) Projected interest payments on outstanding debt obligations are based on the outstanding principal amounts and interest rates in effect at September 30, 2019. We incurred interest expense of $6,044,495 and $20,505,685 during the three and nine months ended September 30, 2019, including amortization of deferred financing costs totaling $130,114 and $729,401, amortization of loan premiums of $0 and $48,562, loan fees associated with mortgage notes refinancing of $587,615 and $595,040 and net unrealized losses from the change in fair value of interest rate cap agreements of $2,066 and $163,363, respectively.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

(2) Projected principal payments on outstanding debt obligations are based on the terms of the notes payable agreements. Amounts exclude the amortization of the deferred financing costs associated with the notes payable.

Our debt obligations contain customary financial ornon-financial debt covenants. As of September 30, 2019 and December 31, 2018 we were in compliance with all of our financial andnon-financial debt covenants.

Results of Operations

Overview

The discussion that follows is based on our consolidated results of operations for the three and nine months ended September 30, 2019 and 2018. The ability to compare one period to another is affected by the acquisitions and dispositions made during those periods and our value-enhancement strategy. The number of multifamily properties wholly owned by us decreased to 27 as of September 30, 2019, from 39 as of September 30, 2018. Our results of operations were primarily affected by (1) the disposition of three multifamily properties and the contribution of eight multifamily properties to the joint venture in exchange for cash and a proportionate 10% interest in the joint venture during the nine months ended September 30, 2018, (2) the acquisition of two multifamily properties during the nine months ended September 30, 2018, (3) the disposition of 12 multifamily properties subsequent to September 30, 2018 and (4) our value-enhancement activity completed through September 30, 2019, as further discussed below.

Throughout this “Results of Operations” discussion, for the nine months ended September 30, 2018, references to the disposition of 11 multifamily properties includes the contribution of eight multifamily properties to the joint venture.

Our results of operations for the three and nine months ended September 30, 2019, are not indicative of those expected in future periods. In general, we expect that our income and expenses related to our portfolio will increase in future periods as a result of organic rent increases and, to a lesser extent, anticipated value-enhancement projects.

To provide additional insight into our operating results, we are also providing a detailed analysis of same-store versusnon-same-store net operating income, or NOI. For more information on NOI and a reconciliation of NOI (anon-GAAP measure) to net income (loss), see “—Net Operating Income.”

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Consolidated Results of Operations for the Three Months Ended September 30, 2019 and 2018

The following table summarizes the consolidated results of operations for the three months ended September 30, 2019 and 2018:

	For the Three Months Ended September 30,												$ Change Due to Dispositions(1)			$ Change Due to Properties Held Throughout Both Periods(2)
	2019			2018			Change $			Change%
Total revenues	$	27,823,551		$	36,241,718		$	(8,418,167	)		(23	)%	$	(9,851,358	)	$	1,433,191
Operating, maintenance and management		(6,871,764	)		(10,457,331	)		3,585,567			34	%		3,528,756			56,811
Real estate taxes and insurance		(4,031,558	)		(5,657,098	)		1,625,540			29	%		1,415,825			209,715
Fees to affiliates		(3,934,709	)		(4,113,139	)		178,430			4	%		985,540			(807,110	)
Depreciation and amortization		(8,520,813	)		(12,579,032	)		4,058,219			32	%		2,956,533			1,101,686
Interest expense		(6,044,495	)		(8,496,658	)		2,452,163			29	%		1,719,077			733,086
Loss on debt extinguishment		(597,681	)		—			(597,681	)		(100	)%		—			(597,681	)
General and administrative expenses		(3,063,653	)		(1,107,644	)		(1,956,009	)		(177	)%		79,728			(2,035,737	)
Equity in loss from unconsolidated joint venture		(228,667	)		(287,540	)		58,873			20	%		58,873			—
Loss on sale of real estate, net		(88,137	)		—			(88,137	)		(100	)%		(88,137	)		—
Net loss	$	(5,557,926	)	$	(6,456,724	)	$	898,798			14	%
NOI(3)	$	15,772,474		$	18,940,482		$	(3,168,008	)		(17	)%
FFO(4)	$	3,695,333		$	6,770,832		$	(3,075,499	)		(45	)%
MFFO(4)	$	4,295,080		$	6,766,274		$	(2,471,194	)		(37	)%

(1) Represents the favorable (unfavorable) dollar amount change for the three months ended September 30, 2019, compared to the three months ended September 30, 2018, related to multifamily properties acquired or disposed of on or after July 1, 2018.

(2) Represents the favorable (unfavorable) dollar amount change for the three months ended September 30, 2019, compared to the three months ended September 30, 2018, related to multifamily properties owned by us throughout both periods presented.

(3) NOI is anon-GAAP financial measure used by investors and our management to evaluate and compare the performance of our properties and to determine trends in earnings. However, the usefulness of NOI is limited because it excludes general and administrative costs, interest expense, interest income and other expense, acquisition costs, certain fees to affiliates, depreciation and amortization expense and gains or losses from the sale of our properties and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs, all of which are significant economic costs. For additional information on how we calculate NOI and a reconciliation of NOI to net income (loss), see “—Net Operating Income.”

(4) GAAP basis accounting for real estate assets utilizes historical cost accounting and assumes real estate book values diminish over time. In an effort to overcome the difference between real estate values and historical cost accounting for real estate assets, the Board of Governors of the National Association of Real Estate

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Investment Trusts, or NAREIT, established the measurement tool of FFO. Since its introduction, FFO has become a widely usednon-GAAP financial measure among REITs. Additionally, we use modified funds from operations, or MFFO, as defined by the Institute for Portfolio Alternatives (formerly known as the Investment Program Association), or the IPA, as a supplemental measure to evaluate our operating performance. MFFO is based on FFO but includes certain adjustments we believe are necessary due to changes in accounting and reporting under GAAP since the establishment of FFO. Neither FFO nor MFFO should be considered as alternatives to net income (loss) or other measurements under GAAP as indicators of our operating performance, nor should they be considered as alternatives to cash flow from operating activities or other measurements under GAAP as indicators of liquidity. For additional information on how we calculate FFO and MFFO and a reconciliation of FFO and MFFO to net income (loss), see “—Funds From Operations and Modified Funds From Operations.”

Net loss

For the three months ended September 30, 2019, we had a net loss of $5,557,926, compared to a net loss of $6,456,724 for the three months ended September 30, 2018. The decrease in net loss of $898,798 over the comparable prior year period was primarily due to the decrease in operating, maintenance and management expenses of $3,585,567, the decrease in real estate taxes and insurance of $1,625,540, the decrease in fees to affiliates of $178,430, the decrease in depreciation and amortization expense of $4,058,219, the decrease in interest expense of $2,452,163 and the decrease in equity in losses of unconsolidated joint venture of $58,873, partially offset by the decrease in total revenues of $8,418,167, the increase in loss on debt extinguishment of $597,681, the increase in general and administrative expenses of $1,956,009 and the increase in loss on sales of real estate, net of $88,137. Our results of operations were primarily impacted by the disposition of 12 multifamily properties since September 30, 2018.

Total revenues

Rental income and other income for the three months ended September 30, 2019, were $27,823,551 compared to $36,241,718 for the three months ended September 30, 2018. The decrease of $8,418,167 was primarily due to our total number of units decreasing by 3,095 from 10,622 at September 30, 2018, to 7,527 at September 30, 2019, as a result of the disposition of 12 multifamily properties, partially offset by the average occupancy increasing from 94.2% at September 30, 2018 to 95.8% at September 30, 2019, and the average monthly rent increasing from $1,058 at September 30, 2018 to $1,123 at September 30, 2019. We expect rental income and tenant reimbursements to increase in future periods as a result of ordinary monthly rent increases and any value-enhancement projects.

Operating, maintenance and management expenses

Operating, maintenance and management expenses for the three months ended September 30, 2019, were $6,871,764 compared to $10,457,331 for the three months ended September 30, 2018. The decrease of $3,585,567 was primarily due to the decrease in the number of properties in our portfolio subsequent to September 30, 2018, in addition to a decrease of $56,811 in operating, maintenance and management expenses at the multifamily properties held throughout both periods. We expect that these amounts will decrease as a percentage of total revenues as we continue to implement operational efficiencies at our multifamily properties.

Real estate taxes and insurance

Real estate taxes and insurance expenses for the three months ended September 30, 2019, were $4,031,558 compared to $5,657,098 for the three months ended September 30, 2018. The decrease of $1,625,540 was due primarily to a decrease of $1,415,825 as a result of the decrease in the number of properties in our portfolio

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

subsequent to September 30, 2018, in addition to the decrease of $209,715 at the properties held throughout both periods as a result of successful challenges to assessed real estate tax values. These amounts may increase in future periods as a result of municipal property tax rate increases and/or increases in the assessed value of our properties.

Fees to affiliates

Fees to affiliates for the three months ended September 30, 2019, were $3,934,709 compared to $4,113,139, for the three months ended September 30, 2018. The decrease of $178,430 was primarily due to the decrease of investment management fees and property management fees as a result of the decrease in the number of properties in our portfolio subsequent to September 30, 2018, partially offset by the increase in loan coordination fees payable to our advisor of $600,000 as a result of the refinancing of six multifamily properties during the three months ended September 30, 2019. We expect fees to affiliates to decrease in future periods as a result of continued lower property management fees and investment management fees incurred on a smaller portfolio.

Depreciation and amortization

Depreciation and amortization expenses for the three months ended September 30, 2019, were $8,520,813 compared to $12,579,032 for the three months ended September 30, 2018. The decrease of $4,058,219 was primarily due to the decrease in the number of properties in our portfolio subsequent to September 30, 2018. The decrease of $1,101,686 at the properties held throughout both periods was primarily due to the decrease in amortization of tenant origination and absorption costs. We expect these amounts to increase in future periods as a result of anticipated capital expenditures to our real estate portfolio.

Interest expense

Interest expense for the three months ended September 30, 2019, was $6,044,495, compared to $8,496,658 for the three months ended September 30, 2018. The decrease of $2,452,163 was primarily due to a net decrease of $275,824,567 in our total notes payable balance as a result of the decrease in the number of properties in our portfolio subsequent to September 30, 2018, the repayment of notes payable related to two properties we still own during the three months ended September 30, 2019 and the repayment of notes payable related to six properties we still own subsequent to September 30, 2018, partially offset by loan fees incurred in connection with the refinancing of six multifamily properties during the three months ended September 30, 2019. Our interest expense in future periods will vary based on our level of borrowings, which will depend on the availability and cost of debt financing, the opportunity to acquire real estate and real estate-related investments meeting our investment objectives and the opportunity to sell real estate properties and real estate-related investments.

Loss on debt extinguishment

Loss on debt extinguishment for the three months ended September 30, 2019, was $597,681 compared to $0 for the three months ended September 30, 2018. These expenses consisted of prepayment penalties and the expense of the unamortized deferred financing costs related to the repayment and extinguishment of the debt at two multifamily properties during the three months ended September 30, 2019. The loss on debt extinguishment will vary in future periods if we repay the remaining outstanding principal prior to the scheduled maturity dates of the mortgage notes payable.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

General and administrative expenses

General and administrative expenses for the three months ended September 30, 2019, were $3,063,653 compared to $1,107,644 for the three months ended September 30, 2018. These general and administrative costs consisted primarily of legal fees, insurance premiums, audit fees, other professional fees, independent director compensation and certain state taxes. The net increase of $1,956,009 was primarily due to an increase in legal fees and expenses related to the proposed Merger and the increase in director meeting fees as a result of an increase in the number of meetings compared to the prior year period. We expect general and administrative expenses to decrease as a percentage of total revenues in future periods.

Equity in loss from unconsolidated joint venture

Equity in loss from unconsolidated joint venture for the three months ended September 30, 2019, was $228,667 compared to $287,540 for the three months ended September 30, 2018. Our investment in the joint venture has been accounted for as an unconsolidated joint venture under the equity method of accounting. The decrease in equity in loss from unconsolidated joint venture of $58,873 primarily was due to the decrease in amortization of tenant origination and absorption costs. Equity in loss from unconsolidated joint venture will vary in the future based on the operating results of the joint venture.

Loss on sales of real estate

Loss on sales of real estate for the three months ended September 30, 2019, was $88,137 compared to $0 for the three months ended September 30, 2018. The increase in loss on sales of real estate of $88,137 was due to a land condemnation related to one of our held properties during the three months ended September 30, 2019. Our loss (gain) on sales of real estate in future periods will vary based on the opportunity to sell real properties and real estate-related investments.

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Consolidated Results of Operations for the Nine Months Ended September 30, 2019 and 2018

The following table summarizes the consolidated results of operations for the nine months ended September 30, 2019 and 2018:

	For the Nine Months Ended September 30,												$ Change Due to Acquisitions and Dispositions(1)			$ Change Due to Properties Held Throughout Both Periods(2)
	2019			2018			Change $			Change%
Total revenues	$	88,166,926		$	105,753,652		$	(17,586,726	)		(17	)%	$	(20,617,422	)	$	3,030,696
Operating, maintenance and management		(21,720,715	)		(28,936,191	)		7,215,476			25	%		6,981,145			234,331
Real estate taxes and insurance		(13,376,128	)		(18,329,576	)		4,953,448			27	%		3,433,557			1,519,891
Fees to affiliates		(11,083,920	)		(11,854,429	)		770,509			6	%		1,785,471			(1,014,962	)
Depreciation and amortization		(25,961,590	)		(34,781,722	)		8,820,132			25	%		7,626,480			1,193,652
Interest expense		(20,505,685	)		(24,408,327	)		3,902,642			16	%		3,215,014			687,628
Loss on debt extinguishment		(3,432,058	)		(2,282,247	)		(1,149,811	)		(50	)%		214,750			(1,364,561	)
General and administrative expenses		(6,181,745	)		(4,448,377	)		(1,733,368	)		(39	)%		134,981			(1,868,349	)
Equity in loss from unconsolidated joint venture		(427,816	)		(3,102,044	)		2,674,228			86	%		2,674,228			—
Gain on sales of real estate, net		86,800,659			81,247,054			5,553,605			7	%		5,553,605			—
Net income	$	72,277,928		$	58,857,793		$	13,420,135			23	%
NOI(3)	$	49,192,594		$	55,238,480		$	(6,045,886	)		(11	)%
FFO(4)	$	13,190,454		$	16,607,689		$	(3,417,235	)		(21	)%
MFFO(4)	$	16,785,875		$	19,101,204		$	(2,315,329	)		(12	)%

(1) Represents the favorable (unfavorable) dollar amount change for the nine months ended September 30, 2019, compared to the nine months ended September 30, 2018, related to multifamily properties acquired or disposed of on or after January 1, 2018.

(2) Represents the favorable (unfavorable) dollar amount change for the nine months ended September 30, 2019, compared to the nine months ended September 30, 2018, related to multifamily properties owned by us throughout both periods presented.

(3) See “—Net Operating Income” below for a reconciliation of NOI to net income.

(4) See “—Funds From Operations and Modified Funds From Operations” below for a reconciliation FFO and MFFO to net income (loss).

Net income

For the nine months ended September 30, 2019, we had net income of $72,277,928 compared to a net income of $58,857,793 for the nine months ended September 30, 2018. The increase in net income of $13,420,135 over the comparable prior year period was primarily due to the increase in gain on sales of real

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

estate, net of $5,553,605, the decrease in operating, maintenance and management expenses of $7,215,476, the decrease in real estate taxes and insurance of $4,953,448, the decrease in fees to affiliates of $770,509, the decrease in depreciation and amortization expense of $8,820,132, the decrease in interest expense of $3,902,642 and the decrease in equity in loss of unconsolidated joint venture of $2,674,228, partially offset by the decrease in total revenues of $17,586,726, the increase in loss on debt extinguishment of $1,149,811 and the increase in general and administrative expenses of $1,733,368. Our results of operations were primarily impacted by the disposition of 12 multifamily properties since September 30, 2018.

Total revenues

Rental income and other income for the nine months ended September 30, 2019, were $88,166,926 compared to $105,753,652 for the nine months ended September 30, 2018. The decrease of $17,586,726 was primarily due to our total number of units decreasing by 3,095 from 10,622 at September 30, 2018, to 7,527 at September 30, 2019, as a result of the disposition of 12 multifamily properties, partially offset by the average occupancy increasing from 94.2% at September 30, 2018 to 95.8% at September 30, 2019, and the average monthly rent increasing from $1,058 at September 30, 2018 to $1,123 at September 30, 2019. We expect rental income and tenant reimbursements to increase in future periods as a result of ordinary monthly rent increases and any value-enhancement projects.

Operating, maintenance and management expenses

Operating, maintenance and management expenses for the nine months ended September 30, 2019, were $21,720,715 compared to $28,936,191 for the nine months ended September 30, 2018. The decrease of $7,215,476 was primarily due to a net decrease of $6,981,145 as a result of the decrease in the number of properties in our portfolio subsequent to September 30, 2018, in addition to a decrease of $234,331 at the multifamily properties held throughout both periods. We expect that these amounts will decrease as a percentage of total revenues as we continue to implement operational efficiencies at our multifamily properties.

Real estate taxes and insurance

Real estate taxes and insurance expenses for the nine months ended September 30, 2019, were $13,376,128 compared to $18,329,576 for the nine months ended September 30, 2018. The decrease of $4,953,448 was primarily due to a decrease of $3,433,557 related to the decrease in the number of properties in our portfolio subsequent to September 30, 2018, in addition to the decrease of $1,519,891 at the properties held throughout both periods as a result of successful challenges to assessed real estate tax values. These amounts may increase in future periods as a result of municipal property tax rate increases and/or increases in the assessed value of our properties.

Fees to affiliates

Fees to affiliates for the nine months ended September 30, 2019, were $11,083,920 compared to $11,854,429 for the nine months ended September 30, 2018. The net decrease of $770,509 was primarily due to the decrease of investment management fees and property management fees as a result of the decrease in the number of properties in our portfolio subsequent to September 30, 2018, partially offset by the increase in loan coordination fees payable to our advisor of $600,000 as a result of the refinancing of six multifamily properties during the nine months ended September 30, 2019. We expect fees to affiliates to increase in future periods as a result of higher property management fees from anticipated increases in future rental income.

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Depreciation and amortization

Depreciation and amortization expenses for the nine months ended September 30, 2019, were $25,961,590 compared to $34,781,722 for the nine months ended September 30, 2018. The decrease of $8,820,132 was primarily due to the decrease in the number of properties in our portfolio subsequent to September 30, 2018. The decrease of $1,193,652 at the properties held throughout both periods was primarily due to the decrease in amortization of tenant origination and absorption costs. We expect these amounts to increase in future periods as a result of anticipated capital expenditures to our real estate portfolio.

Interest expense

Interest expense for the nine months ended September 30, 2019, was $20,505,685 compared to $24,408,327 for the nine months ended September 30, 2018. The decrease of $3,902,642 was primarily due to a net decrease of $275,824,567 in our total notes payable balance as a result of the decrease in the number of properties in our portfolio subsequent to September 30, 2018, the repayment of notes payable related to six properties we still own during the nine months ended September 30, 2019 and the repayment of notes payable related to two properties we still own subsequent to September 30, 2018, partially offset by loan fees incurred in connection with the refinancing of six multifamily properties during the nine months ended September 30, 2019. Our interest expense in future periods will vary based on our level of borrowings, which will depend on the availability and cost of debt financing, the opportunity to acquire real estate and real estate-related investments meeting our investment objectives and the opportunity to sell real estate properties and real estate-related investments.

Loss on debt extinguishment

Loss on debt extinguishment for the nine months ended September 30, 2019, was $3,432,058 compared to $2,282,247 for the nine months ended September 30, 2018. These expenses consisted of prepayment penalties and the expense of the deferred financing costs, net related to the repayment and extinguishment of the debt in conjunction with the sale of five multifamily properties and repayment of notes payable at six multifamily properties during the nine months ended September 30, 2019, compared to the prepayment penalties and the expense of the deferred financing costs, net related to the repayment and extinguishment of the debt in conjunction with the sale of ten multifamily properties, the refinancing of four multifamily properties and the repayment of notes payable at two multifamily properties during the nine months ended September 30, 2018. The loss on debt extinguishment will vary in future periods if we repay the remaining outstanding principal prior to the scheduled maturity dates of the mortgage notes payable.

General and administrative expenses

General and administrative expenses for the nine months ended September 30, 2019, were $6,181,745 compared to $4,448,377 for the nine months ended September 30, 2018. These general and administrative costs consisted primarily of legal fees, insurance premiums, audit fees, other professional fees, independent director compensation and certain state taxes. The net increase of $1,733,368 primarily was due to an increase in legal fees and expenses related to the proposed Merger and the increase in director meeting fees as a result of an increase in the number of meetings compared to the prior year period. We expect general and administrative expenses incurred by our advisor to decrease as a percentage of total revenue.

Equity in loss from unconsolidated joint venture

Equity in loss from unconsolidated joint venture for the nine months ended September 30, 2019, was $427,816 compared to $3,102,044 for the nine months ended September 30, 2018. Our investment in the joint

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

venture has been accounted for as an unconsolidated joint venture under the equity method of accounting. The decrease in equity in loss from unconsolidated joint venture of $2,674,228 primarily was due to the eight multifamily properties contributed to the joint venture in January 2018 experiencing a full period of operations during the nine months ended September 30, 2019, a reduction of amortization expense related to tenant origination and absorption costs that were fully amortized prior to the nine months ended September 30, 2019, andnon-recurring insurance proceeds recognized during the nine months ended September 30, 2019. Equity in loss from unconsolidated joint venture will vary in the future based on the operating results of the joint venture.

Gain on sales of real estate

Gain on sales of real estate for the nine months ended September 30, 2019, was $86,800,659, compared to $81,247,054 for the nine months ended September 30, 2018. The increase in gain on sales of real estate of $5,553,605 is due to the gain recognized on the disposition of eight multifamily properties during the nine months ended September 30, 2019, compared to the disposition of 11 multifamily properties during the nine months ended September 30, 2018. Our gain on sales of real estate in future periods will vary based on the opportunity to sell real properties and real estate-related investments.

Property Operations for the Three Months Ended September 30, 2019 Compared to the Three Months Ended September 30, 2018

For purposes of evaluating comparative operating performance, we categorize properties as “same-store” or“non-same-store.” A “same-store” property is a property that was owned at July 1, 2018 and September 30, 2019. A“non-same-store” property is a property that was acquired, placed into service or disposed of after July 1, 2018 and properties accounted for under the equity method. As of September 30, 2019, 27 properties were categorized as same-store properties.

The following table presents the same-store andnon-same-store results from operations for the three months ended September 30, 2019 and 2018:

	For the Three Months Ended September 30,
	2019		2018		Change $			Change %
Same-store properties:
Revenues	$	27,255,745	$	26,015,519	$	1,240,226			4.8	%
Operating expenses		12,344,040		12,362,568		(18,528	)		(0.1	)%
NOI		14,911,705		13,652,951		1,258,754			9.2	%
Non-same-store properties:
NOI		860,769		5,287,531		(4,426,762	)
Total NOI(1)	$	15,772,474	$	18,940,482	$	(3,168,008	)

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

Net Operating Income

Same-store net operating income for the three months ended September 30, 2019, was $14,911,705 compared to $13,652,951 for the three months ended September 30, 2018. The 9.2% increase in same-store net operating income was primarily due to a 4.8% increase in same-store rental revenues in addition to a 0.1% decrease in same-store operating expenses over the comparable prior year period.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Revenues

Same-store revenues for the three months ended September 30, 2019, were $27,255,745 compared to $26,015,519 for the three months ended September 30, 2018. The 4.8% increase in same-store revenues was primarily due to the average rent increases at the same-store properties from $1,083 as of September 30, 2018, to $1,123 as of September 30, 2019, primarily attributable to ordinary monthly rent increases and an increase in occupancy at the same-store properties from 94.2% as of September 30, 2018, to 95.8% as of September 30, 2019.

Operating Expenses

Same-store operating expenses for the three months ended September 30, 2019, were $12,344,040 compared to $12,362,568 for the three months ended September 30, 2018. The decrease related to same-store operating expenses did not indicate a meaningful change during the three months ended September 30, 2019, relative to the comparable prior year period.

Net Operating Income

NOI is anon-GAAP financial measure of performance. NOI is used by investors and our management to evaluate and compare the performance of our properties and to determine trends in earnings and to compute the fair value of our properties as it is not affected by (1) the cost of funds, (2) acquisition costs,(3) non-operating fees to affiliates, (4) the impact of depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets that are included in net income computed in accordance with GAAP or (5) general and administrative expenses and other gains and losses that are specific to us. The cost of funds is eliminated from net income because it is specific to our particular financing capabilities and constraints. The cost of funds is also eliminated because it is dependent on historical interest rates and other costs of capital as well as past decisions made by us regarding the appropriate mix of capital which may have changed or may change in the future. Acquisition costs (those that did not meet the criteria for capitalization under ASU2017-01, Business Combinations (Topic 805): Clarifying the definition of business, or ASU2017-01) andnon-operating fees to affiliates are eliminated because they do not reflect continuing operating costs of the property owner. ASU2017-01 now forms part of ASC 805,Business Combinations, or ASC 805.

Depreciation and amortization expenses as well as gains or losses from the sale of operating real estate assets are eliminated because they may not accurately represent the actual change in value in our multifamily properties that result from use of the properties or changes in market conditions. While certain aspects of real property do decline in value over time in a manner that is reasonably captured by depreciation and amortization, the value of the properties as a whole have historically increased or decreased as a result of changes in overall economic conditions instead of from actual use of the property or the passage of time. Gains and losses from the sale of real property vary from property to property and are affected by market conditions at the time of sale which will usually change from period to period. These gains and losses can create distortions when comparing one period to another or when comparing our operating results to the operating results of other real estate companies that have not made similarly timed purchases or sales. We believe that eliminating these costs from net income is useful because the resulting measure captures the actual revenue generated and actual expenses incurred in operating our properties as well as trends in occupancy rates, rental rates and operating costs.

The usefulness of NOI is limited because it excludes general and administrative costs, interest expense, interest income and other expense, acquisition costs (those that did not meet the criteria for capitalization under ASC 805), certain fees to affiliates, depreciation and amortization expense and gains or losses from the sale of properties, and other gains and losses as stipulated by GAAP, the level of capital expenditures and leasing costs necessary to maintain the operating performance of our properties, all of which are significant economic costs. NOI may fail to capture significant trends in these components of net income which further limits its usefulness.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

NOI is a measure of the operating performance of our properties but does not measure our performance as a whole. NOI is therefore not a substitute for net income as computed in accordance with GAAP. This measure should be analyzed in conjunction with net income computed in accordance with GAAP and discussions elsewhere in “—Results of Operations” regarding the components of net income that are eliminated in the calculation of NOI. Other companies may use different methods for calculating NOI or similarly entitled measures and, accordingly, our NOI may not be comparable to similarly entitled measures reported by other companies that do not define the measure exactly as we do.

The following is a reconciliation of our NOI to net income (loss) for the three and nine months ended September 30, 2019 and 2018, computed in accordance with GAAP:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
Net (loss) income	$	(5,557,926	)	$	(6,456,724	)	$	72,277,928		$	58,857,793
Fees to affiliates(1)		2,573,063			2,603,225			6,876,766			7,731,826
Depreciation and amortization		8,520,813			12,579,032			25,961,590			34,781,722
Interest expense		6,044,495			8,496,658			20,505,685			24,408,327
Loss on debt extinguishment		597,681			—			3,432,058			2,282,247
General and administrative expenses		3,063,653			1,107,644			6,181,745			4,448,377
Loss (gain) on sales of real estate, net		88,137			—			(86,800,659	)		(81,247,054	)
Adjustments for investment in unconsolidated joint venture(2)		1,010,364			1,001,590			2,673,741			5,236,092
Other gains(3)		(567,806	)		(390,943	)		(1,916,260	)		(1,260,850	)
Net operating income	$	15,772,474		$	18,940,482		$	49,192,594		$	55,238,480

(1) Fees to affiliates for the three and nine months ended September 30, 2019, exclude property management fees of $796,493 and $2,522,318 and other reimbursements of $565,153 and $1,684,836, respectively, that are included in NOI. Fees to affiliates for the three and nine months ended September 30, 2018, exclude property management fees of $1,035,326 and $3,038,678 and other reimbursements of $474,588 and $1,083,925, respectively, that are included in NOI.

(2) Reflects adjustments to add back our noncontrolling interest share of the adjustments to reconcile our net income attributable to common stockholders to NOI for our equity investment in the unconsolidated joint venture, which principally consists of depreciation, amortization and interest expense incurred by the joint venture.

(3) Other gains for the three and nine months ended September 30, 2019 and 2018 includenon-recurring insurance proceeds and interest income that are not included in NOI.

Funds from Operations and Modified Funds from Operations

Due to certain unique operating characteristics of real estate companies, as discussed below, NAREIT, an industry trade group, has promulgated the measure of FFO which we believe to be an appropriate supplemental measure to reflect the operating performance of a real estate investment trust, or REIT. The use of FFO is recommended by the REIT industry as a supplemental performance measure. FFO is not equivalent to our net income as determined under GAAP.

We define FFO, anon-GAAP financial measure, consistent with the standards established by the White Paper on FFO approved by the Board of Governors of NAREIT, as revised in December 2018, or the White Paper. The White Paper defines FFO as net income computed in accordance with GAAP, excluding gains or

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

losses from sales of property andnon-cash impairment charges of real estate related investments, plus real estate related depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. In particular, we believe it is appropriate to disregard impairment charges, as this is a fair value adjustment that is largely based on market fluctuations and assessments regarding general market conditions which can change over time. An asset will only be evaluated for impairment if certain impairment indications exist and if the carrying, or book value, exceeds the total estimated undiscounted future cash flows (including net rental and lease revenues, net proceeds on the sale of the property, and any other ancillary cash flows at a property or group level under GAAP) from such asset. Investors should note, however, that determinations of whether impairment charges have been incurred are based partly on anticipated operating performance, because estimated undiscounted future cash flows from a property, including estimated future net rental and lease revenues, net proceeds on the sale of the property, and certain other ancillary cash flows, are taken into account in determining whether an impairment charge has been incurred. While impairment charges are excluded from the calculation of FFO as described above, investors are cautioned that due to the fact that impairments are based on estimated future undiscounted cash flows and the relatively limited term of our operations, it could be difficult to recover any impairment charges. Our FFO calculation complies with NAREIT’s policy described above.

The historical accounting convention used for real estate assets requires straight-line depreciation of buildings and improvements, which implies that the value of real estate assets diminishes predictably over time, especially if such assets are not adequately maintained or repaired and renovated as required by relevant circumstances and/or as requested or required by lessees for operational purposes in order to maintain the value disclosed. We believe that since real estate values historically rise and fall with market conditions, including inflation, interest rates, the business cycle, unemployment and consumer spending, presentations of operating results for a REIT using historical accounting for depreciation may be less informative. Historical accounting for real estate involves the use of GAAP. Any other method of accounting for real estate such as the fair value method cannot be construed to be any more accurate or relevant than the comparable methodologies of real estate valuation found in GAAP. Nevertheless, we believe that the use of FFO, which excludes the impact of real estate related depreciation and amortization, provides a more complete understanding of our performance to investors and to management, and when compared year over year, reflects the impact on our operations from trends in occupancy rates, rental rates, operating costs, general and administrative expenses, and interest costs, which may not be immediately apparent from net income. We adopted ASU2016-02,Leases, or ASU2016-02 on January 1, 2019, which requires us, as a lessee, to recognize a liability for obligations under a lease contract and aright-of-use asset. The carrying amount of theright-of-use asset is amortized over the term of the lease. Because we have no ownership rights (current or residual) in the underlying asset, NAREIT concluded that the amortization of theright-of-use asset should not be added back to GAAP net income (loss) in calculating FFO. This amortization expense is included in FFO. However, FFO, and MFFO as described below, should not be construed to be more relevant or accurate than the current GAAP methodology in calculating net income or in its applicability in evaluating our operating performance. The method utilized to evaluate the value and performance of real estate under GAAP should be construed as a more relevant measure of operational performance and considered more prominently than thenon-GAAP FFO and MFFO measures and the adjustments to GAAP in calculating FFO and MFFO.

Changes in the accounting and reporting promulgations under GAAP (for acquisition fees and expenses from a capitalization/depreciation model to anexpensed-as-incurred model) that were put into effect in 2009 and other changes to GAAP accounting for real estate subsequent to the establishment of NAREIT’s definition of FFO have prompted an increase in cash-settled expenses, specifically acquisition fees and expenses for all industries as items that are expensed under GAAP, that are typically accounted for as operating expenses. Management believes these fees and expenses do not affect our overall long-term operating performance. Publicly registered,non-listed REITs typically have a significant amount of acquisition activity and are

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

substantially more dynamic during their initial years of investment and operation. While otherstart-up entities may also experience significant acquisition activity during their initial years, we believe that public,non-listed REITs, like us, are unique in that they have a limited life with targeted exit strategies within a relatively limited time frame after acquisition activity ceases.

Due to the above factors and other unique features of publicly registered,non-listed REITs, the IPA, an industry trade group, has standardized a measure known as MFFO, which the IPA has recommended as a supplemental measure for publicly registerednon-listed REITs and which we believe to be another appropriate supplemental measure to reflect the operating performance of a public,non-listed REIT having the characteristics described above. MFFO is not equivalent to our net income or loss as determined under GAAP, and MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate with a limited life and targeted exit strategy, as currently intended. We believe that, because MFFO excludes costs that we consider more reflective of investing activities and othernon-operating items included in FFO and also excludes acquisition fees and expenses that are not capitalized, as discussed below, and affect our operations only in periods in which properties are acquired, MFFO can provide, on a going forward basis, an indication of the sustainability (that is, the capacity to continue to be maintained) of our operating performance after the period in which we are acquiring our properties and once our portfolio is in place. By providing MFFO, we believe we are presenting useful information that assists investors and analysts to better assess the sustainability of our operating performance after our offering has been completed and our properties have been acquired. We also believe that MFFO is a recognized measure of sustainable operating performance by thenon-listed REIT industry. Further, we believe MFFO is useful in comparing the sustainability of our operating performance after our offering and acquisitions are completed with the sustainability of the operating performance of other real estate companies that are not as involved in acquisition activities. Investors are cautioned that MFFO should only be used to assess the sustainability of our operating performance after our offering has been completed and properties have been acquired, as it excludes acquisition costs that have a negative effect on our operating performance during the periods in which properties are acquired.

We define MFFO, anon-GAAP financial measure, consistent with the IPA’s Guideline2010-01,Supplemental Performance Measure for Publicly Registered,Non-Listed REITs: Modified Funds from Operations, or the Practice Guideline, issued by the IPA in November 2010. The Practice Guideline defines MFFO as FFO further adjusted for the following items, as applicable, included in the determination of GAAP net income: acquisition fees and expenses; amounts relating to deferred rent receivables and amortization of above and below market leases and liabilities (which are adjusted in order to reflect such payments from a GAAP accrual basis to a cash basis of disclosing the rent and lease payments); accretion of discounts and amortization of premiums on debt investments;mark-to-market adjustments included in net income; nonrecurring gains or losses included in net income from the extinguishment or sale of debt, hedges, foreign exchange, derivatives or securities holdings where trading of such holdings is not a fundamental attribute of the business plan, unrealized gains or losses resulting from consolidation from, or deconsolidation to, equity accounting, and after adjustments for consolidated and unconsolidated partnerships and joint ventures, with such adjustments calculated to reflect MFFO on the same basis. The accretion of discounts and amortization of premiums on debt investments, nonrecurring unrealized gains and losses on hedges, foreign exchange, derivatives or securities holdings, unrealized gains and losses resulting from consolidations, as well as other listed cash flow adjustments are adjustments made to net income in calculating the cash flows provided by operating activities and, in some cases, reflect gains or losses which are unrealized and may not ultimately be realized. While we rely on our advisor for managing interest rate, hedge and foreign exchange risk, we do not retain an outside consultant to review all our hedging agreements. Inasmuch as interest rate hedges are not a fundamental part of our operations, we believe it is appropriate to exclude suchnon-recurring gains and losses in calculating MFFO, as such gains and losses are not reflective ofon-going operations.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Our MFFO calculation complies with the IPA’s Practice Guideline described above, except with respect to certain acquisition fees and expenses as discussed below. In calculating MFFO, we exclude acquisition related expenses that are not capitalized, amortization of above and below market leases, fair value adjustments of derivative financial instruments, deferred rent receivables and the adjustments of such items related to noncontrolling interests. Historically, under GAAP, acquisition fees and expenses were characterized as operating expenses in determining operating net income. However, following the publication of ASU2017-01, which now forms part of ASC 805, acquisition fees and expenses are capitalized and depreciated under certain conditions. These expenses are paid in cash by us. All paid and accrued acquisition fees and expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of other properties are generated to cover the purchase price of the property, these fees and expenses and other costs related to such property. In the event that operational earnings and cash flow are not available to fund our reimbursement of acquisition fees and expenses incurred by our advisor, such fees and expenses will need to be reimbursed to our advisor from other sources, including debt, net proceeds from the sale of properties, or from ancillary cash flows. The acquisition of properties, and the corresponding acquisition fees and expenses, is the key operational feature of our business plan to generate operational income and cash flow to fund distributions to our stockholders. Further, under GAAP, certain contemplatednon-cash fair value and othernon-cash adjustments are considered operatingnon-cash adjustments to net income in determining cash flow from operating activities. In addition, we view fair value adjustments of derivatives and gains and losses from dispositions of assets asnon-recurring items or items which are unrealized and may not ultimately be realized, and which are not reflective ofon-going operations and are therefore typically adjusted for when assessing operating performance.

Our management uses MFFO and the adjustments used to calculate MFFO in order to evaluate our performance against other public,non-listed REITs which have limited lives with short and defined acquisition periods and targeted exit strategies shortly thereafter. As noted above, MFFO may not be a useful measure of the impact of long-term operating performance on value if we do not continue to operate in this manner. We believe that our use of MFFO and the adjustments used to calculate MFFO allow us to present our performance in a manner that reflects certain characteristics that are unique to public,non-listed REITs, such as their limited life, limited and defined acquisition period and targeted exit strategy, and hence that the use of such measures is useful to investors. By excluding expensed acquisition costs that are not capitalized, the use of MFFO provides information consistent with management’s analysis of the operating performance of the properties. Additionally, fair value adjustments, which are based on the impact of current market fluctuations and underlying assessments of general market conditions, but can also result from operational factors such as rental and occupancy rates, may not be directly related or attributable to our current operating performance. By excluding such changes that may reflect anticipated and unrealized gains or losses, we believe MFFO provides useful supplemental information.

Presentation of this information is intended to provide useful information to investors as they compare the operating performance to that of other public,non-listed REITs, although it should be noted that not all public,non-listed REITs calculate FFO and MFFO the same way, so comparisons with other public,non-listed REITs may not be meaningful. Furthermore, FFO and MFFO are not necessarily indicative of cash flow available to fund cash needs and should not be considered as an alternative to net income or income from continuing operations as an indication of our performance, as an alternative to cash flows from operations as an indication of our liquidity, or indicative of funds available to fund our cash needs, including our ability to make distributions to our stockholders. FFO and MFFO should be reviewed in conjunction with GAAP measurements as an indication of our performance. MFFO is useful in assisting management and investors in assessing the sustainability of operating performance in future operating periods, and in particular, after the offering and acquisition stages are complete and net asset value is disclosed. MFFO is not a useful measure in evaluating net asset value because impairments are taken into account in determining net asset value but not in determining MFFO.

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PART I — FINANCIAL INFORMATION (continued)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

Neither the SEC, NAREIT nor any other regulatory body has passed judgment on the acceptability of the adjustments that we use to calculate FFO or MFFO. In the future, the SEC, NAREIT or another regulatory body may decide to standardize the allowable adjustments across thenon-listed REIT industry and in response to such standardization we may have to adjust our calculation and characterization of FFO or MFFO accordingly.

Our calculation of FFO and MFFO is presented in the following table for the three and nine months ended September 30, 2019 and 2018:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2019			2018			2019			2018
Reconciliation of net (loss) income to MFFO:
Net (loss) income	$	(5,557,926	)	$	(6,456,724	)	$	72,277,928		$	58,857,793
Depreciation of real estate assets		8,519,728			11,657,288			25,945,678			33,498,945
Amortization of lease-related costs(1)		—			921,744			12,764			1,282,777
Loss (gain) on sales of real estate, net		88,137			—			(86,800,659	)		(81,247,054	)
Adjustments for investment in unconsolidated joint venture(2)		645,394			648,524			1,754,743			4,215,228
FFO		3,695,333			6,770,832			13,190,454			16,607,689
Acquisition expenses(3)(4)		—			13,641			—			314,774
Unrealized loss (gain) on derivative instruments		2,066			(18,199	)		163,363			(103,506	)
Loss on debt extinguishment		597,681			—			3,432,058			2,282,247
MFFO	$	4,295,080		$	6,766,274		$	16,785,875		$	19,101,204

(1) Amortization of lease-related costs for the three and nine months ended September 30, 2019, excludes amortization of operating leaseright-of-use assets of $1,085 and $3,148 that are included in FFO, respectively. There was no amortization of operating leaseright-of-use assets during the three and nine months ended September 30, 2018.

(2) Reflects adjustments to add back our noncontrolling interest share of the adjustments to reconcile our net income attributable to common stockholders to FFO for our equity investment in the unconsolidated joint venture, which principally consists of depreciation and amortization incurred by the joint venture.

(3) By excluding acquisition expenses, management believes MFFO provides useful supplemental information that is comparable for each type of real estate investment and is consistent with management’s analysis of the investing and operating performance of our properties. Acquisition expenses include payments to our advisor or third parties. Historically, acquisition expenses under GAAP were considered operating expenses and as expenses included in the determination of net income and income from continuing operations, both of which are performance measures under GAAP. Following the publication of ASU2017-01, which now forms part of ASC 805, acquisition expenses are capitalized and depreciated under certain conditions. All paid and accrued acquisition expenses will have negative effects on returns to investors, the potential for future distributions, and cash flows generated by us, unless earnings from operations or net sales proceeds from the disposition of properties are generated to cover the purchase price of the property, these expenses and other costs related to the property. In the event that operational earnings and cash flow are not available to fund our reimbursement of acquisition expenses incurred by our advisor, such expenses will need to be reimbursed to the advisor from other sources, including debt, operational earnings or cash flow, net proceeds from the sale of properties, or from ancillary cash flows.

(4) No acquisition expenses were incurred for each of the three and nine months ended September 30, 2019. Acquisition expenses for the three and nine months ended September 30, 2018 of $13,641 and $314,774,

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations (continued)

respectively, that related to dead deal costs, did not meet the criteria for capitalization under ASC 805 and were recorded in general and administrative expenses in the accompanying condensed consolidated unaudited statements of operations.

FFO and MFFO may be used to fund all or a portion of certain capitalizable items that are excluded from FFO and MFFO, such as tenant improvements, building improvements and deferred leasing costs.

Off-Balance Sheet Arrangements

As of September 30, 2019, we had nooff-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.

Related-Party Transactions and Agreements

We have entered into agreements with our advisor and its affiliates whereby we have paid, and may continue to pay, certain fees to, or reimburse certain expenses of, our advisor or its affiliates for acquisition and advisory fees and expenses, financing coordination fees, organization and offering costs, asset and property management fees and expenses, leasing fees and reimbursement of certain operating costs. Refer to Note 8 (Related Party Arrangements) to our condensed consolidated unaudited financial statements included in this Quarterly Report on Form10-Q for a discussion of the various related-party transactions, agreements and fees.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We may be exposed to the effects of interest rate changes as a result of borrowings used to maintain liquidity and to fund the acquisition, expansion and refinancing of our real estate investment portfolio and operations. We may be also exposed to the effects of changes in interest rates as a result of the acquisition and origination of mortgage, mezzanine, bridge and other loans. Our profitability and the value of our investment portfolio may be adversely affected during any period as a result of interest rate changes. Our interest rate risk management objectives are to limit the impact of interest rate changes on earnings, prepayment penalties and cash flows and to lower overall borrowing costs. We have managed and will continue to manage interest rate risk by maintaining a ratio of fixed rate, long-term debt such that floating rate exposure is kept at an acceptable level. In addition, we have, and may in the future, utilize a variety of financial instruments, including interest rate caps, floors and swap agreements, in order to limit the effects of changes in interest rates on our operations. When we use these types of derivatives to hedge the risk of interest-earning assets or interest-bearing liabilities, we may be subject to certain risks, including the risk that losses on a hedge position will reduce the funds available for payments to holders of our common stock and that the losses may exceed the amount we invested in the instruments.

We borrow funds at fixed rates and intend in the future to borrow funds and make investments at a combination of fixed and variable rates. Interest rate fluctuations will generally not affect our future earnings or cash flows on our fixed rate debt unless such instruments mature or are otherwise terminated. However, interest rate changes will affect the fair value of our fixed rate instruments. At September 30, 2019, the fair value of our fixed rate debt was $498,323,633 and the carrying value of our fixed rate debt was $498,426,493. The fair value estimate of our fixed rate debt was estimated using a discounted cash flow analysis utilizing rates we would expect to pay for debt of a similar type and remaining maturity if the loans were originated at September 30, 2019. As we expect to hold our fixed rate instruments to maturity and the amounts due under such instruments would be limited to the outstanding principal balance and any accrued and unpaid interest, we do not expect that fluctuations in interest rates, and the resulting change in fair value of our fixed rate instruments, would have a significant impact on our operations.

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PART I — FINANCIAL INFORMATION (continued)

Item 3. Quantitative and Qualitative Disclosures About Market Risk (continued)

Conversely, movements in interest rates on our variable rate debt would change our future earnings and cash flows, but not significantly affect the fair value of those instruments. However, changes in required risk premiums would result in changes in the fair value of floating rate instruments. As of September 30, 2019, we had no outstanding variable rate debt instruments and therefore were not subject to interest rate risk related to variable debt instruments.

At September 30, 2019, the weighted-average interest rate of our fixed rate debt was 3.75%. The weighted-average interest rate represents the actual interest rate in effect at September 30, 2019 (consisting of the contractual interest rate), using interest rate indices as of September 30, 2019 where applicable.

We will also be exposed to credit risk. Credit risk is the failure of the counterparty to perform under the terms of a derivative contract. If the fair value of a derivative contract is positive, the counterparty will owe us, which creates credit risk for us. If the fair value of a derivative contract is negative, we will owe the counterparty and, therefore, do not have credit risk. We will seek to minimize the credit risk in derivative instruments by entering into transactions with high-quality counterparties. As of September 30, 2019, we did not have counterparty risk on our interest rate cap agreements as the underlying variable rates for each of our interest rate cap agreements as of September 30, 2019 were not in excess of the capped rates. See also Note 11 (Derivative Financial Instruments) to our condensed consolidated unaudited financial statements included in this Quarterly Report on Form10-Q.

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 reports under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms, and that such information is accumulated and communicated to us, including our chief executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, we recognize that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, as ours are designed to do, and we necessarily are required to apply our judgment in evaluating whether the benefits of the controls and procedures that we adopt outweigh their costs.

As required by Rules13a-15(b) and15d-15(b) of the Exchange Act, an evaluation as of September 30, 2019, was conducted under the supervision and with the participation of our management, including our chief executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules13a-15(e) and15d-15(e) under the Exchange Act). Based on this evaluation, our chief executive officer and principal financial officer concluded that our disclosure controls and procedures, as of September 30, 2019, were effective at the reasonable assurance level.

Internal Control Over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2019 that have materially affected, or are 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 are party to legal proceedings that arise in the ordinary course of our business. Management is not aware of any legal proceedings of which the outcome is reasonably likely to have a material adverse effect on our results of operations or financial condition, nor are we aware of any such legal proceedings contemplated by government agencies.

Item 1A. Risk Factors

There have been no material changes to the risk factors contained in Part 1, Item 1A set forth in our Annual Report on Form10-K filed with the SEC on March 15, 2019 and in our Quarterly Report on Form10-Q filed with the SEC on August 13, 2019.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

During the three months ended September 30, 2019, we did not sell any equity securities that were not registered under the Securities Act of 1933, as amended.

During the three months ended September 30, 2019, we fulfilled repurchase requests and repurchased shares of our common stock pursuant to our share repurchase program as follows:

	Total Number of Shares Requested to be Repurchased(1)		Total Number of Shares Repurchased(2)		Average Price Paid per Share(3)(4)		Approximate Dollar Value of Shares Available That May Yet Be / Repurchased Under the Program
July 2019		28,429		222,982	$	8.97		(5)
August 2019		21,546		—		—		(5)
September 2019		28,870		—		—		(5)
		78,845		222,982		8.97

(1) We generally repurchase shares on the last business day of the month following the end of each fiscal quarter in which requests were received. At September 30, 2019, we had $710,887, representing 77,453 shares of outstanding and unfulfilled repurchase requests, all of which were fulfilled on October 31, 2019.

(2) We are not obligated to repurchase shares under the share repurchase program.

(3) Pursuant to the program, as amended, we currently repurchase shares at prices determined as follows:

• 92.5% of the share repurchase price for stockholders who have held their shares for at least one year;

• 95.0% of the share repurchase price for stockholders who have held their shares for at least two years;

• 97.5% of the share repurchase price for stockholders who have held their shares for at least three years; and

• 100.0% of the share repurchase price for stockholders who have held their shares for at least four years.

The “share repurchase price” is equal to 93% of the estimated value per share less reductions due to the holding period for shares and other events specified in the share repurchase program. Notwithstanding the above, the repurchase price for repurchases sought upon a stockholder’s death or qualifying disability (as determined by our board of directors in its sole discretion) will be equal to the average issue price per share for all of the stockholder’s shares purchased from us.

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PART II—OTHER INFORMATION (continued)

(4) For the three months ended September 30, 2019, the sources of the cash used to repurchase shares were 100% from existing cash and cash equivalents.

(5) The number of shares that may be repurchased pursuant to the share repurchase program during any calendar year is limited to 5% of the weighted-average number of shares outstanding during the prior calendar year and the dollar value of the shares repurchased shall not exceed $2,000,000 in any quarter. In connection with the proposed SIR Merger, on August 5, 2019, our board of directors approved the Amended and Restated Share Repurchase Plan (the “Amended & Restated SRP”), which became effective September 5, 2019, and applied beginning with repurchases made on the repurchase dates (as defined in the Amended & Restated SRP) subsequent to the effective date of the Amended & Restated SRP. Under the Amended & Restated SRP, we will only repurchase shares of common stock in connection with the death or qualifying disability (as determined by our board in its sole discretion) of a stockholder, subject to certain terms and conditions specified in the Amended & Restated SRP. Repurchases pursuant to the Amended & Restated SRP continue to be limited to $2,000,000 per quarter.

I-72

PART II—OTHER INFORMATION (continued)

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

Not applicable.

I-73

PART II—OTHER INFORMATION (continued)

Item 5. Other Information

None.

Item 6. Exhibits

Effective February 1, 2010, Steadfast Secure Income REIT, Inc., Steadfast Secure Income Advisor, LLC and Steadfast Secure Income REIT Operating Partnership, L.P. changed their names to Steadfast Income REIT, Inc., Steadfast Income Advisor, LLC and Steadfast Income REIT Operating Partnership, L.P., respectively. With respect to documents executed prior to the name change, the following Exhibit Index refers to the entity names used prior to the name changes in order to accurately reflect the names of the entities that appear on such documents.

The following exhibits are included, or incorporated by reference, in this Quarterly Report on Form10-Q for the three months ended September 30, 2019 (and are numbered in accordance with Item 601 of RegulationS-K).

2.1	Agreement and Plan of Merger, dated as of August 5, 2019, by and among Steadfast Apartment REIT, Inc., Steadfast Apartment REIT Operating Partnership, L.P., SI Subsidiary, LLC, Steadfast Income REIT, Inc. and Steadfast Income REIT Operating Partnership, L.P. (included as Exhibit 2.1 to the Company’s Current Report on Form 8-K (File No. 000-54674) filed with the SEC on August 6, 2019, and incorporated herein by reference).
3.1	Third Articles of Amendment and Restatement of Steadfast Income REIT, Inc. (included as Exhibit 3.1 to the Company’s Current Report on Form 8-K filed August 6, 2014 and incorporated herein by reference).
3.2	Bylaws of Steadfast Income REIT, Inc. (included as Exhibit 3.2 to the Company’s Registration Statement on Form S-11 (File No. 333-160748) filed July 23, 2009 and incorporated herein by reference).
3.3	Amendment No. 1 to Bylaws of Steadfast Income REIT, Inc. (included as Exhibit 3.1 to the Company’s Current Report on Form 8-K (File No. 000-54674) filed with the SEC on August 9, 2019, and incorporated herein by reference).
4.1	Form of Subscription Agreement (incorporated by reference to Appendix B to the prospectus, dated July 9, 2010 of the Registrant).
10.1	Termination Agreement, dated as of August 5, 2019, by and between Steadfast Income REIT, Inc. and Steadfast Income Advisor, LLC (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 000-54674) filed with the SEC on August 6, 2019, and incorporated herein by reference).
10.2	Multifamily Loan and Security Agreement, made as of September 20, 2019, by and between SIR Jefferson, LLC and Jones Lang LaSalle Multifamily, LLC (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 000-54674) filed September 25, 2019 and incorporated herein by reference).
10.3	Multifamily Deed to Secure Debt, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of September 20, 2019, by and between SIR Jefferson, LLC and Jones Lang LaSalle Multifamily, LLC (included as Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No. 000-54674) filed with the SEC on September 25, 2019, and incorporated herein by reference).

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PART II—OTHER INFORMATION (continued)

10.4	Assignment of Management Agreement, dated as of September 20, 2019, by and among SIR Jefferson, LLC, Jones Lang LaSalle Multifamily, LLC and Steadfast Management Company, Inc. (included as Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No. 000-54674) filed with the SEC on September 25, 2019, and incorporated herein by reference).
10.5	Guaranty of Non-Recourse Obligations, dated as of September 20, 2019, by Steadfast Income REIT, Inc. for the benefit of Jones Lang LaSalle Multifamily, LLC (included as Exhibit 10.4 to the Company’s Current Report on Form 8-K (File No. 000-54674) filed with the SEC on September 25, 2019, and incorporated herein by reference).
10.6	Multifamily Note, made as of September 20, 2019, by SIR Jefferson, LLC, in favor of Jones Lang LaSalle Multifamily, LLC (included as Exhibit 10.5 to the Company’s Current Report onForm 8-K (File No. 000-54674) filed with the SEC on September 25, 2019, and incorporated herein by reference).
10.7	Multifamily Loan and Security Agreement, made as of September 26, 2019, by and between SIR Tapestry Park, LLC and Berkeley Point Capital, LLC, d/b/a Newmark Knight Frank (included as Exhibit 10.1 to the Company’s Current Report on Form 8-K (File No. 000-54674) filed with the SEC on September 30, 2019, and incorporated herein by reference).
10.8	Multifamily Mortgage, Assignment of Rents, and Security Agreement, dated as of September 26, 2019, by and between SIR Tapestry Park, LLC and Berkeley Point Capital, LLC, d/b/a Newmark Knight Frank (included as Exhibit 10.2 to the Company’s Current Report on Form 8-K (File No.000-54674) filed with the SEC on September 30, 2019, and incorporated herein by reference).
10.9	Assignment of Management Agreement and Subordination of Management Fees, dated as of September 26, 2019, by and among SIR Tapestry Park, LLC, Berkeley Point Capital, LLC, d/b/a Newmark Knight Frank and Steadfast Management Company, Inc. (included as Exhibit 10.3 to the Company’s Current Report on Form 8-K (File No. 000-54674) filed with the SEC on September 30, 2019, and incorporated herein by reference).
10.10	Guaranty, dated as of September 26, 2019, by Steadfast Income REIT, Inc. for the benefit of Berkeley Point Capital, LLC, d/b/a Newmark Knight Frank (included as Exhibit 10.4 to the Company’s Current Report on Form 8-K (File No. 000-54674) filed with the SEC on September 30, 2019, and incorporated herein by reference).
10.11	Multifamily Note, made as of September 26, 2019, by SIR Tapestry Park, LLC, in favor of Berkeley Point Capital, LLC, d/b/a Newmark Knight Frank (included as Exhibit 10.5 to the Company’s Current Report on Form 8-K (File No. 000-54674) filed with the SEC on September 30, 2019, and incorporated herein by reference).
99.1	Amended and Restated Share Repurchase Program (included as Exhibit 99.3 to the Company’s Current Report on Form 8-K (SEC File No. 000-54674) filed with the SEC on August 6, 2019, and incorporated herein by reference).
31.1*	Certification of the Principal Executive Officer pursuant to Exchange Act Rule 13a-14(a) or15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of the Principal Financial Officer pursuant to Exchange Act Rule 13a-14(a) or15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1**	Certification of the Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2**	Certification of the Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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PART II—OTHER INFORMATION (continued)

101.INS*	XBRL Instance Document.
101.SCH*	XBRL Taxonomy Extension Schema Document.
101.CAL*	XBRL Taxonomy Extension Calculation Linkbase Document.
101.LAB*	XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE*	XBRL Taxonomy Extension Presentation Linkbase Document.
101.DEF*	XBRL Taxonomy Extension Definition Linkbase Document.

* Filed herewith.

** In accordance with Item 601(b)(32) of RegulationS-K, this Exhibit is not deemed “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act, except to the extent that the registrant specifically incorporates it by reference.

I-76

SIGNATURES

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

	Steadfast Income REIT, Inc.
Date: November 8, 2019	By:	/s/ Rodney F. Emery
		Rodney F. Emery
		Chief Executive Officer and Chairman of the Board (Principal Executive Officer)
Date: November 8, 2019	By:	/s/ Kevin J. Keating
		Kevin J. Keating
		Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer)

L PXY-SP STARIII-V3 Scan code for mobile voting JOHN Q SAMPLE 123 MAIN STREET ANYTOWN, USA XXXXX-XXXX P.O. BOX 8035, CARY, NC 27512-9916 PLEASE BE SURE TO SIGN AND DATE THIS CARD AND MARK ON THE REVERSE SIDE Please fold here so address on reverse will show through the window in the Business Reply Envelope—Do not separate STEADFAST APARTMENT REIT III, INC. SPECIAL MEETING OF STOCKHOLDERS TO BE HELD ON MARCH 2, 2020 Proxy is Solicited by the Board of Directors Please Vote by March 1, 2020 The undersigned stockholder of Steadfast Apartment REIT III, Inc., a Maryland corporation, hereby appoints Rodney F. Emery and Ana Marie del Rio, and each of them, as proxies for the undersigned with full power of substitution in each of them, to attend the Special Meeting of Stockholders of Steadfast Apartment REIT III, Inc. to be held on Monday, March 2, 2020 at 3:30 p.m. local time, at 18100 Von Karman Avenue, Suite 500, Irvine, California 92612, and any and all adjournments and postponements thereof, to cast, on behalf of the undersigned, all votes that the undersigned is entitled to cast, and otherwise to represent the undersigned, at such meeting and all adjournments and postponements thereof, with all power possessed by the undersigned as if personally present and to vote in their discretion on such other matters as may properly come before the meeting. The undersigned hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and the accompanying proxy statement, which are incorporated by reference, and revokes any proxy heretofore given with respect to such meeting. This proxy is solicited on behalf of the Steadfast Apartment REIT III, Inc.’s board of directors (the “Board”). In their discretion, the proxies are authorized to vote upon such other business as may properly come before the Special Meeting of Stockholders or any adjournments or postponements thereof in accordance with the recommendations of the Board or in the absence of a recommendation, in their discretion. When shares are held by joint tenants or tenants in common, the signature of one shall bind all unless the Secretary of the Company is given written notice to the contrary and furnished with a copy of the instrument or order which so provides. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by an authorized officer. If a partnership, please sign in partnership name by an authorized person. Signature and Title, if applicable Additional signature (if held jointly) Date INTERNET Go To: www.proxypush.com/STARIII Cast your vote online. Have your Proxy Card ready. Follow the simple instructions to record your vote. PHONE Call 1-866-858-9527 Use any touch-tone telephone. Have your Proxy Card ready. Follow the simple recorded instructions. MAIL Mark, sign and date your Proxy Card. Fold and return your Proxy Card in the postage-paid envelope provided with the address below showing through the window. CONTROL NUMBER

EVERY STOCKHOLDER’S VOTE IS IMPORTANT! This communication presents only an overview of the more complete proxy materials that are available to you in this packet and on the Internet. We encourage you to access and review all of the important information contained in the proxy materials before voting. The Proxy Statement is available at: www.proxypush.com/STARIII PLEASE AUTHORIZE YOUR PROXY TODAY! PLEASE MARK, SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” PROPOSAL 1, PROPOSAL 2, AND PROPOSAL 3. IF NO SPECIFICATIONS ARE MADE, SUCH PROXY WILL BE VOTED “FOR” ALL PROPOSALS LISTED. TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK. EXAMPLE: 1. A proposal to approve the merger of Steadfast Apartment REIT III, Inc. with and into SIII Subsidiary, LLC, a wholly owned subsidiary of Steadfast Apartment REIT, Inc., pursuant to the Agreement and Plan of Merger, dated as of August 5, 2019, by and among Steadfast Apartment REIT III, Inc., Steadfast Apartment REIT, Inc. and their respective subsidiaries, which we refer to as the “STAR III Merger Proposal.” Please fold here—Do not separate PROXY TABULATOR PO BOX 8035 CARY, NC 27512-9916 ** BE SURE TO HAVE THE BELOW ADDRESS SHOW THROUGH THE WINDOW OF THE ENCLOSED BUSINESS REPLY ENVELOPE ** PLEASE BE SURE TO SIGN AND DATE THIS CARD ON THE REVERSE SIDE L PXY-SP STARIII-V3 FOR AGAINST ABSTAIN 2. A proposal to approve the amendment of the charter of STAR III to remove the provision related to “Roll-Up Transactions” in connection with the STAR III Merger, which we refer to as the “STAR III Charter Amendment Proposal.” 3. A proposal to adjourn the STAR III Special Meeting to solicit additional proxies in favor of the STAR III Merger Proposal and/or the STAR III Charter Amendment if there are not sufficient votes to approve the STAR III Merger Proposal and/or STAR III Charter Amendment Proposal, if necessary and as determined by the chair of the STAR III Special Meeting.