FILED PURSUANT TO RULE 424(B)(3)
REGISTRATION STATEMENT NO. 333-207740
RESOURCE APARTMENT REIT III, INC.
SUPPLEMENT NO. 2 DATED MAY 8, 2017
TO THE PROSPECTUS DATED MAY 1, 2017
This document supplements, and should be read in conjunction with, the prospectus of Resource Apartment REIT III, Inc. dated May 1, 2017, as supplemented by Supplement No. 1 dated May 1, 2017. As used herein, the terms “we,” “our” and “us” refer to Resource Apartment REIT III, Inc. and, as required by context, Resource Apartment OP III, LP, which we refer to as our “Operating Partnership” and to their subsidiaries. Capitalized terms used in this supplement have the same meanings as set forth in the prospectus. The purpose of this supplement is to disclose:
| • | updated information regarding the experience of our sponsor and its affiliates buying, improving and selling real estate and real estate-related assets; and |
| • | unaudited pro forma financial information, and the notes thereto, for the year ended December 31, 2016. |
Experience Buying, Improving and Selling Real Estate and Real Estate-Related Debt
The information below replaces the information regarding the sale of the Wind Tree property on page 7 of Supplement No. 1 to this prospectus.
| Selling Price, Net of Closing Costs | ||||||||||||||||||||||||||||||||||||
Property | Location | Selling Entity | Date of Sale | Years Held | Cash Received | Mortgage balance at time of sale(1) | Purchase money taken back by program(2) | Net Selling Price | Total Acquisition Costs(3) | Net Cash(4) | ||||||||||||||||||||||||||
Wind Tree | El Paso, TX | RRE Investors IV, LP | 2016 | 10 | 2,492,860 | 7,140,000 | 2,310,198 | 11,943,058 | 10,988,529 | 954,841 | ||||||||||||||||||||||||||
Pro Forma Financial Information
The information below replaces the unaudited pro forma consolidated statement of comprehensive loss for the six months ended June 30, 2016, and the notes thereto, included in our Current Report on Form 8-K/A filed with the SEC on November 1, 2016, which Current Report on Form 8-K/A is incorporated by reference in this prospectus.
The following unaudited pro forma consolidated statement of operations for the year ended December 31, 2016 is presented as if the Resource Apartment REIT III, Inc. (the “Company”) had acquired Payne Place on January 1, 2015. The footnotes to the pro forma financial statements provide details of the pro forma adjustments. The Company believes that all material adjustments necessary to reflect the effects of the acquisition have been made.
This unaudited pro forma consolidated financial information should be read in conjunction with the historical consolidated financial statements and notes thereto as filed in the Company’s annual report on Form 10-K and quarterly reports on Form 10-Q, and are not necessarily indicative of what the actual financial position or comprehensive loss would have been had the Company completed the transaction as of the beginning of the periods presented, nor is it necessarily indicative of future results.
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Resource Apartment REIT III, Inc.
Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2016
| For the Year Ended December 31, 2016 | Pro Forma Adjustments | For the Year Ended December 31, 2016 | ||||||||||
| (a) | (Pro Forma) | |||||||||||
Revenues: | ||||||||||||
Rental income | $ | 72,119 | $ | 130,506 | (b) | $ | 202,625 | |||||
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| 72,119 | 130,506 | 202,625 | ||||||||||
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Expenses: | ||||||||||||
Rental operating | 22,919 | 82,057 | (b) | 104,976 | ||||||||
Acquisition costs | 128,119 | (128,119 | )(c) | — | ||||||||
Management fees - related parties | 9,844 | 17,055 | (d) | 26,899 | ||||||||
Management fees | 3,123 | 5,873 | (e) | 8,996 | ||||||||
General and administrative | 641,538 | — | 641,538 | |||||||||
Depreciation and amortization expense | 35,502 | 60,351 | (f) | 95,853 | ||||||||
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Total expenses | 841,045 | 37,217 | 878,262 | |||||||||
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Loss (income) before other expense | (768,926 | ) | 93,289 | (675,637 | ) | |||||||
Other income (expense): | ||||||||||||
Interest income | 762 | — | 762 | |||||||||
Interest expense | (8,083 | ) | (43,935 | )(g) | (52,018 | ) | ||||||
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Net (loss) income | $ | (776,247 | ) | $ | 49,354 | $ | (726,893 | ) | ||||
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Class A common stock: | ||||||||||||
Net (loss) income attributable to Class A common stockholders | $ | (709,395 | ) | $ | (664,292 | ) | ||||||
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Net (loss) income per common share, basic and diluted | $ | (4.59 | ) | $ | (4.30 | ) | ||||||
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Weighted-average number of common shares outstanding, basic and diluted | 154,618 | 154,618 | ||||||||||
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Class T common stock: | ||||||||||||
Net (loss) income attributable to Class T common stockholders | $ | (66,852 | ) | $ | (62,601 | ) | ||||||
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Net (loss) income per common share, basic and diluted | $ | (4.42 | ) | $ | (4.14 | ) | ||||||
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Weighted-average number of common shares outstanding, basic and diluted | 15,108 | 15,108 | ||||||||||
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See accompanying notes to unaudited pro forma consolidated financial statements
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Resource Apartment REIT III, Inc.
Notes to Unaudited Pro Forma Consolidated Statement of Operations
For the Year Ended December 31, 2016
| (a) | Reflects the Company’s historical consolidated operations for the year ended December 31, 2016. |
| (b) | Reflects operating activity from January 1, 2016 to August 19, 2016 for the acquisition made during the quarter ended September 30, 2016. |
| (c) | Acquisition expenses are non-recurring and have not been included for the 2016 acquisition. |
| (d) | Reflects the asset management fee associated with the acquisition. The asset is managed by Resource REIT Advisor, LLC, a related party of the Company. The asset management fee is 1% of the asset’s cost for the year ended December 31, 2016. |
| (e) | Reflects the property management fee associated with the acquisition. The property management fee is 4.5% of gross receipts for the year ended December 31, 2016. |
| (f) | Reflects the additional depreciation for the building and improvements incurred as a result of the acquisition. Building depreciation is expensed over the property’s estimated useful life of 27.5 years and improvements are depreciated over their estimated useful lives ranging from three to 15 years. |
| (g) | The Company, through a wholly owned subsidiary, entered into a $1.6 million secured mortgage loan on December 15, 2016. The Company received a short term bridge loan from the Advisor to fund the acquisition of Payne Place, which was repaid on November 1, 2016. The adjustment assumes the mortgage loan was obtained January 1, 2016 and was outstanding for the entire year ended December 31, 2016 and the bridge loan was not in place during the year ended December 31, 2016. |
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