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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			March 31, 2021



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

						For the quarterly period ended June 30, 2021

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from



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

						For the transition period from _________ to _________

Commission file number 000-55428

STEADFAST APARTMENT REIT, INC.

(Exact Name of Registrant as Specified in Its Charter)

Maryland						36-4769184
(State or Other Jurisdiction of						(I.R.S. Employer Identification No.)
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)
Incorporation or Organization)

18100 Von Karman Avenue, Suite 200
Irvine,	California	92612
(Address of Principal Executive Offices)		(Zip Code)


18100 Von Karman Avenue, Suite 200
Irvine, California 92612
(Address of Principal Executive Offices) (Zip Code)

(949) 569-9700

(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 of Regulation 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, a non-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” in Rule 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 in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

As of ~~May~~July 719, 2021, there were 110,~~161~~293,~~467~~205 shares of the Registrant’s common stock issued and outstanding.

Table of Contents

STEADFAST APARTMENT REIT, INC.

INDEX

									Page
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements									2
Consolidated Balance Sheets as of March 31, 2021 (unaudited) and December 31, 2020									2
Consolidated Balance Sheets as of June 30, 2021 (unaudited) and December 31, 2020									2
Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020 (unaudited)									3
Consolidated Statements of Operations for the three and six months ended June 30, 2021 and 2020 (unaudited)									3
Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2021 and 2020 (unaudited)									4
Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2021 and 2020 (unaudited)									4
Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020 (unaudited)									6
Consolidated Statements of Cash Flows for the six months ended June 30, 2021 and 2020 (unaudited)									6
Condensed Notes to Consolidated Financial Statements as of March 31, 2021 (unaudited)									8
Condensed Notes to Consolidated Financial Statements as of June 30, 2021 (unaudited)									9
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations									5557
Item 3. Quantitative and Qualitative Disclosures About Market Risk									7985
Item 4. Controls and Procedures									8086
PART II — OTHER INFORMATION
Item 1. Legal Proceedings									8187
Item 1A. Risk Factors									8187
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds									8197
Item 3. Defaults Upon Senior Securities									8198
Item 4. Mine Safety Disclosures									8198
Item 5. Other Information									8298
Item 6. Exhibits									8299
Signatures									84101

Table of Contents

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED BALANCE SHEETS

	March 31, 2021		December 31, 2020
	June 30, 2021		December 31, 2020
	(Unaudited)
ASSETS
Assets:
Real Estate:
Land	$	~~337~~343,~~896~~297,~~051~~680	$	337,322,234
Building and improvements	2,~~877~~984,~~749~~948,~~041~~698		2,882,411,683
Tenant origination and absorption costs	1,~~752~~682,~~793~~900		1,752,793
Total real estate held for investment, cost	3,~~217~~329,~~397~~929,~~885~~278		3,221,486,710
Less accumulated depreciation and amortization	(~~429~~461,~~867~~735,~~083~~477)		(397,744,677)
Total real estate held for investment, net	2,~~787~~868,~~530~~193,~~802~~801		2,823,742,033
Real estate held for development	3930,~~326~~288,~~042~~753		39,891,218
Total real estate, net	2,~~826~~898,~~856~~482,~~844~~554		2,863,633,251
Cash and cash equivalents	~~242~~160,~~291~~949,~~317~~592		258,198,326
Restricted cash	2928,~~333~~399,~~777~~975		38,998,980
Goodwill	125,220,448		125,220,448
Due from affiliates	~~266~~208,~~400~~411		377,218
Rents and other receivables	3228,~~142~~450,~~297~~658		5,385,108
Other assets	64,~~765~~654,~~405~~627		9,925,714
Total assets	$	3,~~262~~246,~~876~~366,~~488~~265	$	3,301,739,045
LIABILITIES AND STOCKHOLDERS’ EQUITY
Liabilities:
Accounts payable and accrued liabilities	$	7585,~~101~~044,~~789~~074	$	81,598,526
Notes Payable, net:
Mortgage notes payable, net	1,~~386~~388,~~853~~596,~~350~~919		1,384,382,785
Credit facilities, net	745,~~072~~285,~~888~~227		744,862,886
Total notes payable, net	2,~~131~~133,~~926~~882,~~238~~146		2,129,245,671
Distributions payable	4,~~953~~797,~~584~~443		8,462,735
Distributions payable to affiliates	~~274~~265,~~474~~620		469,236
Due to affiliates	7774,~~344~~090		337,422
Total liabilities	2,~~212~~224,~~333~~063,~~429~~373		2,220,113,590
Commitments and contingencies (Note 12)
Redeemable common stock	~~712~~294,~~069~~858		—
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; 999,998,000 shares authorized, 110,187,405 and 110,070,572 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively	1,101,874		1,100,706
Common stock, $0.01 par value per share; 999,998,000 shares authorized, 110,228,140 and 110,070,572 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively	1,102,281		1,100,706
Convertible stock, $0.01 par value per share; 1,000 shares authorized, zero shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively	—		—
Convertible stock, $0.01 par value per share; 1,000 shares authorized, zero shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively	—		—
Class A Convertible stock, $0.01 par value per share; 1,000 shares authorized, zero shares issued and outstanding as of March 31, 2021 and December 31, 2020, respectively	—		—
Class A Convertible stock, $0.01 par value per share; 1,000 shares authorized, zero shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively	—		—
Additional paid-in capital	1,~~605~~607,~~912~~145,~~272~~466		1,603,989,130
Cumulative distributions and net losses	(~~659~~687,~~581~~044,~~535~~939)		(627,787,040)
Total Steadfast Apartment REIT, Inc. (“STAR”) stockholders’ equity	~~947~~921,~~432~~202,~~611~~808		977,302,796
Noncontrolling interest	~~102~~100,~~398~~805,~~379~~226		104,322,659
Total equity	1,~~049~~022,~~830~~008,~~990~~034		1,081,625,455
Total liabilities and stockholders’ equity	$	3,~~262~~246,~~876~~366,~~488~~265	$	3,301,739,045

See accompanying notes to consolidated financial statements.

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

	Three Months Ended March 31,
	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenues:
Rental income	$	8284,~~379~~920,~~277~~839	$	5379,~~266~~612,~~672~~668	$	167,300,117	$	132,879,341
Other income	~~778~~703,~~540~~793		~~447~~682,~~267~~926		1,482,333		1,130,193
Total revenues	8385,~~157~~624,~~817~~632		5380,~~713~~295,~~939~~594		168,782,450		134,009,534
Expenses:
Operating, maintenance and management	2021,~~765~~333,~~034~~781		1219,~~496~~719,~~559~~766		42,098,814		32,216,328
Real estate taxes and insurance	1314,~~856~~587,~~893~~524		813,~~743~~667,~~446~~771		28,444,417		22,411,216
Fees to affiliates	4,~~287~~263		813,~~427~~709,~~296~~333		8,550		22,136,629
Depreciation and amortization	33,~~874~~277,~~505~~511		2853,~~575~~455,~~896~~666		67,152,017		82,031,561
Interest expense	1920,~~807~~087,~~678~~353		1419,~~390~~715,~~954~~318		39,895,031		34,106,272
General and administrative expenses	11,~~325~~736,~~410~~380		25,~~430~~272,~~299~~855		23,061,791		7,703,154
Total expenses	99,633,807		75,064,450
Impairment of real estate	—		5,039,937		—		5,039,937
Loss before other income (expenses)	(16,475,990)		(21,350,511)
Total expenses	101,026,812		130,580,646		200,660,620		205,645,097
Other income (expenses):
Loss before other income (expenses)	(15,402,180)		(50,285,052)		(31,878,170)		(71,635,563)
Gain on sale of real estate, net	—		11,384,599
Other income (expense):
Interest income	105,019		253,254
Gain on sale of real estate, net	—		—		—		11,384,599
Insurance proceeds in excess of losses incurred	103,487		66,723
Interest income	98,049		134,262		203,068		387,516
Equity in loss from unconsolidated joint venture	—		(35,193)
Insurance proceeds in excess of losses incurred	31,873		57,689		135,360		124,412
Fees and other income from affiliates	1,457,921		—
Equity in loss from unconsolidated joint venture	—		(2,968,207)		—		(3,003,400)
Total other income	1,666,427		11,669,383
Fees and other income from affiliates	1,571,346		—		3,029,267		—
Net loss	(14,809,563)		(9,681,128)
Total other income (expense)	1,701,268		(2,776,256)		3,367,695		8,893,127
Loss allocated to noncontrolling interest	(778,275)		—
Net loss	(13,700,912)		(53,061,308)		(28,510,475)		(62,742,436)
Net loss attributable to common stockholders	$	(14,031,288)	$	(9,681,128)
(Loss) income allocated to noncontrolling interest	(663,253)		163,314		(1,441,527)		163,314
Loss per common share — basic and diluted	$	(0.13)	$	(0.14)
Net loss attributable to common stockholders	$	(13,037,659)	$	(53,224,622)	$	(27,068,948)	$	(62,905,750)
Weighted average number of common shares outstanding — basic and diluted	109,886,636		68,180,512
Loss per common share — basic and diluted	$	(0.12)	$	(0.49)	$	(0.25)	$	(0.71)
Weighted average number of common shares outstanding — basic and diluted	109,905,923		109,139,963		109,896,333		88,660,741

See accompanying notes to consolidated financial statements.

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED ~~STATEMENT~~STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE AND SIX MONTHS ENDED ~~MARCH~~JUNE 3130, 2021 (Unaudited)

(Unaudited)


	Common Stock			Convertible Stock			Class A Convertible Stock			Additional Paid-In Capital		Cumulative Distributions & Net Losses		Total STAR Stockholders’ Equity		Noncontrolling Interest		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount		Shares	Amount
BALANCE, April 1, 2021	110,187,405	$	1,101,874	—	$	—	—	$	—	$	1,605,912,272	$	(659,581,535)	$	947,432,611	$	102,398,379	$	1,049,830,990
Issuance of common stock	199,903	1,999		—	—		—	—		3,106,490		—		3,108,489		—		3,108,489





Transfers to redeemable common stock	—	—		—	—		—	—		(2,301,562)		—		(2,301,562)		—		(2,301,562)
Repurchase of common stock	(159,168)	(1,592)		—	—		—	—		1,592		—		—		—		—


Distributions declared ($0.131 per share of common stock)	—	—		—	—		—	—		—		(14,425,745)		(14,425,745)		(929,900)		(15,355,645)
Amortization of stock-based compensation	—	—		—	—		—	—		426,674		—		426,674		—		426,674
Net loss	—	—		—	—		—	—		—		(13,037,659)		(13,037,659)		(663,253)		(13,700,912)
BALANCE, June 30, 2021	110,228,140	$	1,102,281	—	$	—	—	$	—	$	1,607,145,466	$	(687,044,939)	$	921,202,808	$	100,805,226	$	1,022,008,034

	Common Stock			Convertible Stock			Class A Convertible Stock			AdditionalPaid-In Capital		Cumulative Distributions & Net Losses			Total STAR Stockholders’ Equity		Noncontrolling Interest		TotalStockholders’ Equity
	Shares	Amount		Shares	Amount		Shares	Amount
BALANCE, January 1, 2021	110,070,572	$	1,100,706	—	$	—	—	$	—	$	1,603,989,130	$	(627,787,040)		$	977,302,796	$	104,322,659	$	1,081,625,455
Issuance of common stock	~~399~~599,~~310~~213	35,~~993~~991		—	—		—	—		47,~~596~~703,~~610~~101		—			47,~~600~~709,~~603~~092		—		47,~~600~~709,~~603~~092
Transfer to redeemable common stock	—	—		—	—		—	—		(3,000,000)		—			(3,000,000)		—		(3,000,000)
Transfers to redeemable common stock	—	—		—	—		—	—		(5,301,563)		—			(5,301,563)		—		(5,301,563)
Repurchase of common stock	(~~282~~441,~~477~~645)	(24,~~825~~416)		—	—		—	—		24,~~825~~416		—			—		—		—
Distributions declared ($0.16 per share of common stock)	—	—		—	—		—	—		—		(17,763,207)			(17,763,207)		(1,146,005)		(18,909,212)
Distributions declared ($0.292 per share of common stock)	—	—		—	—		—	—		—		(32,188,951)			(32,188,951)		(2,075,906)		(34,264,857)
Amortization of stock-based compensation	—	—		—	—		—	—		~~323~~750,~~707~~382		—			~~323~~750,~~707~~382		—		~~323~~750,~~707~~382
Net loss	—	—		—	—		—	—		—		(1427,~~031~~068,~~288~~948)			(1427,~~031~~068,~~288~~948)		(~~778~~1,~~275~~441,527)		(1428,~~809~~510,~~563~~475)
BALANCE, March 31, 2021	110,187,405	$	1,101,874	—	$	—	—	$	—	$	1,605,912,272	$	(659,581,535)	0	$	947,432,611	$	102,398,379	$	1,049,830,990
BALANCE, June 30, 2021	110,228,140	$	1,102,281	—	$	—	—	$	—	$	1,607,145,466	$	(687,044,939)		$	921,202,808	$	100,805,226	$	1,022,008,034

See accompanying notes to consolidated financial statements.

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY
FOR THE THREE MONTHS ENDED MARCH 31, 2020
(Unaudited)
	Common Stock			Convertible Stock			Class A Convertible Stock			AdditionalPaid-In Capital		Cumulative Distributions & Net Losses		Total STAR Stockholders’ Equity
	Shares	Amount		Shares	Amount		Shares	Amount
BALANCE, January 1, 2020	52,607,695	$	526,077	1,000	$	10	—	$	—	$	698,453,981	$	(424,166,210)	$	274,813,858
Issuance of common stock	327,635	3,277		—	—		—	—		5,080,878		—		5,084,155
Issuance of common stock in connection with the SIR Merger	43,775,314	437,753		—	—		—	—		692,963,221		—		693,400,974
Issuance of common stock in connection with the STAR III Merger	12,240,739	122,407		—	—		—	—		193,770,898		—		193,893,305
Exchange of convertible common stock into Class A convertible common stock	—	—		(1,000)	(10)		1,000	10		—		—		—
Transfers to redeemable common stock	—	—		—	—		—	—		(1,383,318)		—		(1,383,318)
Repurchase of common stock	(53,152)	(532)		—	—		—	—		(796,757)		—		(797,289)
Distributions declared ($0.224 per share of common stock)	—	—		—	—		—	—		—		(15,391,533)		(15,391,533)
Amortization of stock-based compensation	—	—		—	—		—	—		42,455		—		42,455
Net loss	—	—		—	—		—	—		—		(9,681,128)		(9,681,128)
BALANCE, March 31, 2020	108,898,231	$	1,088,982	—	$	—	1,000	$	10	$	1,588,131,358	$	(449,238,871)	$	1,139,981,479

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 (Unaudited)


	Common Stock			Convertible Stock			Class A Convertible Stock			Additional Paid-In Capital		Cumulative Distributions & Net Losses		Total STAR Stockholders’ Equity		Noncontrolling Interest		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount		Shares	Amount
BALANCE, April 1, 2020	108,898,231	$	1,088,982	—	$	—	1,000	$	10	$	1,588,131,358	$	(449,238,871)	$	1,139,981,479	$	—	$	1,139,981,479
Issuance of common stock	688,520	6,885		—	—		—	—		10,548,415		—		10,555,300		—		10,555,300


Issuance of OP Units	—	—		—	—		—	—		—		—		—		14,450,000		14,450,000



Repurchase of common stock	(149,049)	(1,490)		—	—		—	—		(2,109,047)		—		(2,110,537)		—		(2,110,537)

Distributions declared ($0.224 per share of common stock)	—	—		—	—		—	—		—		(24,425,094)		(24,425,094)		(163,314)		(24,588,408)
Amortization of stock-based compensation	—	—		—	—		—	—		20,927		—		20,927		—		20,927
Net (loss) income	—	—		—	—		—	—		—		(53,224,622)		(53,224,622)		163,314		(53,061,308)
BALANCE, June 30, 2020	109,437,702	$	1,094,377	—	$	—	1,000	$	10	$	1,596,591,653	$	(526,888,587)	$	1,070,797,453	$	14,450,000	$	1,085,247,453


	Common Stock			Convertible Stock			Class A Convertible Stock			Additional Paid-In Capital		Cumulative Distributions & Net Losses		Total STAR Stockholders’ Equity		Noncontrolling Interest		Total Stockholders’ Equity
	Shares	Amount		Shares	Amount		Shares	Amount
BALANCE, January 1, 2020	52,607,695	$	526,077	1,000	$	10	—	$	—	$	698,453,981	$	(424,166,210)	$	274,813,858	$	—	$	274,813,858
Issuance of common stock	1,016,155	10,162		—	—		—	—		15,629,293		—		15,639,455		—		15,639,455
Issuance of common stock in connection with the SIR Merger	43,775,314	437,753		—	—		—	—		692,963,221		—		693,400,974		—		693,400,974
Issuance of common stock in connection with the STAR III Merger	12,240,739	122,407		—	—		—	—		193,770,898		—		193,893,305		—		193,893,305
Issuance of OP Units	—	—		—	—		—	—		—		—		—		14,450,000		14,450,000
Exchange of convertible common stock into Class A convertible common stock	—	—		(1,000)	(10)		1,000	10		—		—		—		—		—

Transfers to redeemable common stock	—	—		—	—		—	—		(1,383,318)		—		(1,383,318)		—		(1,383,318)
Repurchase of common stock	(202,201)	(2,022)		—	—		—	—		(2,905,805)		—		(2,907,827)		—		(2,907,827)

Distributions declared ($0.448 per share of common stock)	—	—		—	—		—	—		—		(39,816,627)		(39,816,627)		(163,314)		(39,979,941)
Amortization of stock-based compensation	—	—		—	—		—	—		63,383		—		63,383		—		63,383
Net (loss) income	—	—		—	—		—	—		—		(62,905,750)		(62,905,750)		163,314		(62,742,436)
BALANCE, June 30, 2020	109,437,702	$	1,094,377	—	$	—	1,000	$	10	$	1,596,591,653	$	(526,888,587)	$	1,070,797,453	$	14,450,000	$	1,085,247,453

See accompanying notes to consolidated financial statements.

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Three Months Ended March 31,
	Six Months Ended June 30,
	2021		2020
Cash Flows from Operating Activities:
Net loss	$	(1428,~~809~~510,~~563~~475)	$	(962,~~681~~742,~~128~~436)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	3367,~~874~~152,~~505~~017		2882,~~575~~031,~~896~~561
Loss on disposal of buildings and improvements	103,441		68,846
Fees to affiliates paid in common stock	—		6,620,823
Loss on disposal of buildings and improvements from winter storm	15,459,862		—
Loss on disposal of buildings and improvements	326,881		475,176
Amortization of deferred financing costs	548,781		327,470
Loss on disposal of buildings and improvements from winter storm	14,902,551		—
Amortization of stock-based compensation	323,707		42,455
Amortization of deferred financing costs	1,097,565		809,876
Amortization of below market leases	(1,671)		922
Amortization of stock-based compensation	750,382		63,383
Change in fair value of interest rate cap agreements	(10,820)		2,251
Amortization of below market leases	(3,343)		(2,594)
Gain on sale of real estate	—		(11,384,599)
Change in fair value of interest rate cap agreements	(1,203)		27,194
Amortization of loan premiums	(553,764)		(144,457)
Gain on sale of real estate	—		(11,384,599)
Accretion of loan discounts	135,875		29,875
Impairment of real estate	—		5,039,937
Straight line of finance lease right-of-use assets	5,433		—
Amortization of loan premiums	(1,112,825)		(718,264)
Interest on finance lease furnishings	107		—
Accretion of loan discounts	271,776		189,824
Equity in loss from unconsolidated joint venture	—		35,193
Straight-line of office lease	7,699		—
Insurance claim recoveries	(15,656,642)		(228,380)
Interest on finance lease furnishings	193		—
Changes in operating assets and liabilities:
Insurance claim recoveries	(15,259,001)		(581,954)
Rents and other receivables	(11,512,685)		58,590
Equity in loss from unconsolidated joint venture	—		3,003,400
Other assets	2,923,097		818,320
Changes in operating assets and liabilities:
Accounts payable and accrued liabilities	(6,689,495)		(3,927,637)
Rents and other receivables	(8,472,506)		(1,328,708)
Due to affiliates	(210,121)		598,136
Other assets	4,766,732		2,131,230
Due from affiliates	110,818		—
Accounts payable and accrued liabilities	(6,830,008)		6,033,823
Net cash provided by operating activities	4,040,865		5,191,753
Due to affiliates	(212,975)		(3,600,122)
Cash Flows from Investing Activities:
Due from affiliates	168,807		—
Acquisition of real estate investments	—		(69,196,179)
Net cash provided by operating activities	29,042,267		26,067,550
Cash acquired in connection with the Mergers, net of transaction costs	—		98,283,732
Cash Flows from Investing Activities:
Acquisition of real estate held for development	—		(6,287,613)
Acquisition of real estate investments	(75,966,685)		(69,914,948)
Additions to real estate investments	(4,818,069)		(1,221,453)
Cash acquired in connection with the Mergers, net of acquisition costs	—		98,283,732
Additions to real estate held for development	(5,732,099)		(670,071)
Acquisition of real estate held for development	—		(14,270,133)
Escrow deposits for pending real estate acquisitions	—		(2,500,000)
Additions to real estate investments	(17,869,569)		(10,434,613)
Purchase of interest rate cap agreements	(12,200)		—
Additions to real estate held for development	(9,861,232)		(5,324,771)
Net proceeds from sale of real estate investment	—		32,962,285
Escrow deposits for pending real estate acquisitions	(1,500,000)		(1,000,000)
Proceeds from insurance claims	412,138		86,892
Purchase of interest rate cap agreements	(12,200)		(47,000)
Cash distribution from unconsolidated joint venture	—		118,000
Net proceeds from sale of real estate investments	—		32,962,285
Net cash (used in) provided by investing activities	(10,150,230)		51,575,593
Proceeds from insurance claims	665,957		807,033
Cash Flows from Financing Activities:
Cash contribution to unconsolidated joint venture	—		(219,900)
Proceeds from issuance of mortgage notes payable	4,584,641		—
Cash distribution from unconsolidated joint venture	—		360,700
Principal payments on mortgage notes payable	(2,034,966)		(313,032)
Net cash (used in) provided by investing activities	(104,543,729)		31,202,385
Borrowings from credit facilities	—		40,468,000
Payments of commissions on sale of common stock	—		(46,995)
Payment of loan financing deposits	—		(80,000)
Payment of deferred financing costs	—		(4,079,493)

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)


STEADFAST APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
(Unaudited)

	Six Months Ended June 30,
	2021		2020

Cash Flows from Financing Activities:
Proceeds from issuance of mortgage notes payable	8,567,133		—
Principal payments on mortgage notes payable	(4,187,174)		(1,533,980)
Borrowings from credit facilities	—		198,808,000




Payments of commissions on sale of common stock	—		(49,951)


Payment of deferred financing costs	—		(6,753,413)

Distributions to common stockholders	(30,424,673)		(26,030,027)
Repurchase of common stock	(6,301,563)		(2,907,827)

Net cash (used in) provided by financing activities	(32,346,277)		161,532,802
Net (decrease) increase in cash, cash equivalents and restricted cash	(107,847,739)		218,802,737
Cash, cash equivalents and restricted cash, beginning of the period	297,197,306		148,539,671
Cash, cash equivalents and restricted cash, end of the period	$	189,349,567	$	367,342,408

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)

(Unaudited)

	Three Months Ended March 31,
	Six Months Ended June 30,
	2021		2020
Distributions to common stockholders and noncontrolling interests	$	(18,012,522)	$	(6,716,712)
Supplemental Disclosures of Cash Flow Information:
Repurchase of common stock	(4,000,000)		(797,289)
Interest paid, net of amounts capitalized of $560,066 and $262,619 for the six months ended June 30, 2021 and 2020, respectively	$	39,859,759	$	31,366,049
Net cash (used in) provided by financing activities	(19,462,847)		28,434,479
Supplemental Disclosures of Noncash Flow Transactions:
Net (decrease) increase in cash, cash equivalents and restricted cash	(25,572,212)		85,201,825
Distributions payable to non-affiliated shareholders	$	4,797,443	$	8,232,272
Cash, cash equivalents and restricted cash, beginning of the period	297,197,306		148,539,671
Distributions payable to affiliates	$	265,620	$	—
Cash, cash equivalents and restricted cash, end of the period	$	271,625,094	$	233,741,496
Real estate under development placed in service	$	17,703,957	$	—
Accounts payable related to winter storm	$	1,412,017	$	—
Insurance claims receivable related to winter storm	$	23,164,541	$	—
Class A-2 OP Units issued for real estate	$	—	$	14,450,000
Investment management fees payable in shares	$	—	$	1,464,982
Assumption of mortgage notes payable to acquire real estate	$	—	$	81,315,122
Premiums on assumed mortgage notes payable	$	—	$	945,235
Distributions paid to common stockholders through common stock issuances pursuant to the distribution reinvestment plan	$	7,709,092	$	10,483,613
Redeemable common stock	$	294,858	$	—
Redemptions payable	$	2,705,142	$	4,000,000
Accounts payable and accrued liabilities from additions to real estate investments	$	15,321,147	$	119,152
Due to affiliates from additions to real estate investments	$	—	$	65,583
Accounts payable and accrued liabilities from additions to real estate held for development	$	3,129,393	$	2,888,689
Affiliate accounts payable and accrued liabilities from additions to real estate held for development	$	—	$	137,857
Due to affiliates for commissions on sales of common stock	$	—	$	21,337
Operating and finance lease right-of-use assets, net	$	1,566,962	$	136,896
Operating and finance lease liabilities, net	$	1,595,991	$	148,406
Fair value of real estate acquired in the SIR merger	$	—	$	1,100,742,973
Fair value of STAR III real estate acquired in the STAR III merger	$	—	$	479,559,505
Fair value of equity issued to SIR shareholders in the SIR merger	$	—	$	693,400,974
Fair value of equity issued to STAR III shareholders in the STAR III merger	$	—	$	193,893,305
Fair value of SIR debt assumed in the SIR merger	$	—	$	506,023,982
Fair value of STAR III debt assumed in the STAR III merger	$	—	$	289,407,045
Fair value of unconsolidated joint venture assumed in the SIR merger	$	—	$	22,128,691
Assets assumed in the SIR merger	$	—	$	3,553,868
Assets assumed in the STAR III merger	$	—	$	2,060,898
Liabilities assumed in the SIR merger	$	—	$	21,782,302
Liabilities assumed in the STAR III merger	$	—	$	7,334,616
Premiums on assumed mortgage notes payable in the SIR and STAR III mergers	$	—	$	14,899,631
Discount on assumed mortgage note payable in the SIR and STAR III mergers	$	—	$	10,489,075

Supplemental Disclosures of Cash Flow Information:
Interest paid (net of capitalized interest of $315,244 and $69,569, respectively)	$	19,693,688	$	11,429,429
Supplemental Disclosures of Noncash Flow Transactions:
Distributions payable to non-affiliated stockholders	$	4,953,584	$	8,356,638
Distributions payable to affiliates	$	274,474	$	—
Real estate under development placed in service	$	4,678,910	$	—
Accounts payable related to winter storm	$	11,948,789	$	—
Insurance claims receivable related to winter storm	$	27,408,651	$	—
Investment management fees payable in shares	$	—	$	1,187,351
Assumption of mortgage notes payable to acquire real estate	$	—	$	36,515,122
Distributions paid to common stockholders through common stock issuances pursuant to the distribution reinvestment plan	$	4,600,603	$	5,084,155
Redeemable common stock	$	712,069	$	1,889,463
Redemptions payable	$	2,287,931	$	2,110,537
Accounts payable and accrued liabilities from additions to real estate investments	$	5,483,105	$	2,843,487
Due to affiliates from additions to real estate investments	$	—	$	267,567
Accounts payable & accrued liabilities from capitalized acquisition costs related to the mergers with SIR and STAR III	$	—	$	1,548,054
Accounts payable & accrued liabilities from additions to real estate held for development	$	3,270,368	$	1,816,203
Due to affiliates from additions to real estate held for development	$	400	$	93,213
Due to affiliates for commissions on sale of common stock	$	—	$	24,293
Operating and finance lease right-of-use asset, net	$	1,831,866	$	151,336
Operating and finance lease liabilities, net	$	1,859,368	$	163,491
Fair value of real estate acquired in the SIR merger	$	—	$	1,100,742,973
Fair value of real estate acquired in the STAR III merger	$	—	$	479,559,505
Fair value of equity issued to SIR shareholders in the SIR merger	$	—	$	693,400,974
Fair value of equity issued to STAR III shareholders in the STAR III merger	$	—	$	193,893,305
Fair value of debt assumed in the SIR merger	$	—	$	506,023,982
Fair value of debt assumed in the STAR III merger	$	—	$	289,407,045
Fair value of unconsolidated joint venture assumed in the SIR merger	$	—	$	22,128,691
Assets assumed in the SIR merger	$	—	$	3,553,868
Assets assumed in the STAR III merger	$	—	$	2,060,898
Liabilities assumed in the SIR merger	$	—	$	21,782,302
Liabilities assumed in the STAR III merger	$	—	$	7,334,616
Premiums on assumed mortgage notes payable in the SIR and STAR III Mergers	$	—	$	14,899,631
Discount on assumed mortgage notes payable in the SIR and STAR III Mergers	$	—	$	10,489,075

See accompanying notes to consolidated financial statements.

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(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 Company’s former sponsor (“SRI”), at a purchase price of $15.00 per share for an aggregate purchase price of $202,500. SRI is controlled indirectly by Rodney F. Emery, the Company’s Chairman of the board of directors and Chief Executive Officer, through Steadfast REIT Holdings, LLC (“Steadfast Holdings”). Steadfast Apartment Advisor, LLC (the “Former Advisor”), a Delaware limited liability company formed on August 22, 2013, invested $1,000 in the Company in exchange for 1,000 shares of non-participating, non-voting convertible stock (the “Convertible Stock”). In connection with the SIR Merger and STAR III Merger (described below), the Former Advisor exchanged the Convertible Stock for new non-participating, non-voting Class A convertible stock (the “Class A Convertible Stock”). In connection with the Internalization Transaction (described below), the Company repurchased the Class A Convertible Stock for $1,000. See Note 8 (Stockholders’ Equity) for further details.

The Company owns and operates a diverse portfolio of multifamily properties located in targeted markets throughout the United States. As of ~~March~~June 3130, 2021, the Company owned 6970 multifamily properties ~~comprising~~and athree ~~total~~parcels of land held for the development of apartment homes. The Company’s portfolio is comprised of 21,~~591~~936 apartment homes, ~~and~~including ~~three~~95 ~~parcels~~newly constructed apartment homes placed into service at the Garrison Station development project during the six months ended June 30, 2021. The parcel of land held for the development of the Garrison Station apartments had five of nine residential buildings placed into service comprising 95 of 176 apartment homes during the six months ended June 30, 2021. 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 4 (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 Primary Offering on March 24, 2016, but continues to offer shares of common stock pursuant to the DRP. As of the termination of the Primary Offering on March 24, 2016, 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 ~~March~~June 3130, 2021, the Company had issued ~~111~~112,~~967~~167,~~192~~095 shares of common stock for gross offering proceeds of $1,~~722~~725,~~630~~738,~~330~~819, including 8,~~337~~537,~~112~~015 shares of common stock issued pursuant to the DRP for gross offering proceeds of $~~124~~128,~~901~~009,~~172~~661. ~~and~~Additionally, on March 6, 2020, the Company issued 56,016,053 shares of common stock ~~issued~~ in connection with the Mergers described below.

On March 9, 2021, the Company’s board of directors determined an estimated value per share of the Company’s common stock of $15.55 as of December 31, 2020. Additional information on the Company’s estimated value per share can be found in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (“SEC”) on March 12, 2021. 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 $15.55, effective April 1, 2021. 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.

Merger with Steadfast Income REIT, Inc.

On August 5, 2019, the Company, Steadfast Income REIT, Inc. (“SIR”), Steadfast Apartment REIT Operating Partnership, L.P., a wholly-owned subsidiary of the Company (the “STAR Operating Partnership”), Steadfast Income REIT Operating Partnership, L.P., the operating partnership of SIR (“SIR OP”), and SI Subsidiary, LLC, a wholly-owned subsidiary of the Company (“SIR Merger Sub”), entered into an Agreement and Plan of Merger (the “SIR Merger Agreement”). Pursuant to the terms and conditions of the SIR Merger Agreement, on March 6, 2020, SIR merged with and into SIR Merger Sub with SIR

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

Partnership, L.P., the operating partnership of SIR (“SIR OP”), and SI Subsidiary, LLC, a wholly-owned subsidiary of the Company (“SIR Merger Sub”), entered into an Agreement and Plan of Merger (the “SIR Merger Agreement”). Pursuant to the terms and conditions of the SIR Merger Agreement, on March 6, 2020, SIR merged with and into SIR Merger Sub with SIR Merger Sub surviving the merger (the “SIR Merger”). Following the SIR Merger, SIR Merger Sub, as the surviving entity, continued as the Company’s wholly-owned subsidiary. In accordance with the applicable provisions of the Maryland General Corporation Law (“MGCL”), the separate existence of SIR ceased.

At the effective time of the SIR Merger, each issued and outstanding share of SIR common stock (or a fraction thereof), $0.01 par value per share, converted into 0.5934 shares of the Company’s common stock.

Merger with Steadfast Apartment REIT III, Inc.

On August 5, 2019, the Company, Steadfast Apartment REIT III, Inc. (“STAR III”), the STAR Operating Partnership, Steadfast Apartment REIT III Operating Partnership, L.P., the operating partnership of STAR III (the “STAR III OP”), and SIII Subsidiary, LLC, a wholly-owned subsidiary of the Company (“STAR III Merger Sub”), entered into an Agreement and Plan of Merger (the “STAR III Merger Agreement”). Pursuant to the terms and conditions of the STAR III Merger Agreement, on March 6, 2020, STAR III merged with and into STAR III Merger Sub with STAR III Merger Sub surviving the merger (the “STAR III Merger”, and together with the SIR Merger, the “Mergers”). Following the STAR III Merger, STAR III Merger Sub, as the surviving entity, continued as a wholly-owned subsidiary of the Company. In accordance with the applicable provisions of the MGCL, the separate existence of STAR III ceased.

At the effective time of the STAR III Merger, each issued and outstanding share of STAR III common stock (or a fraction thereof), $0.01 par value per share, was converted into 1.430 shares of the Company’s common stock.

Combined Company

Through the Mergers, the Company acquired 36 multifamily properties with 10,166 apartment homes and a 10% interest in one unconsolidated joint venture that owned 20 multifamily properties with a total of 4,584 apartment homes, all of which had a gross real estate value of approximately $1.5 billion. The ~~combined~~Combined ~~company~~Company after the Mergers retained the name “Steadfast Apartment REIT, Inc.” Each merger was intended to qualify as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). For more information on the Mergers, see Note 4 (Real Estate).

Pre-Internalization Operating Partnerships Mergers

On August 28, 2020, pursuant to an Agreement and Plan of Merger (the “SIR OP/STAR OP Merger Agreement”), the STAR Operating Partnership merged with and into the SIR OP (the “SIR OP/STAR OP Merger”). The SIR OP/STAR OP Merger was treated for U.S. federal income tax purposes as a tax-deferred contribution by the Company of all of the assets and liabilities of STAR Operating Partnership to SIR OP under Section 721(a) of the Internal Revenue Code.

Immediately following the consummation of the SIR OP/STAR OP Merger, on August 28, 2020, pursuant to an Agreement and Plan of Merger (the “Operating Partnership Merger Agreement”), STAR III OP merged with and into SIR OP (the “Operating Partnership Merger” and together with the SIR OP/STAR OP Merger, the “Operating Partnership Mergers”). The Operating Partnership Merger was treated as an “asset over partnership merger” governed by Treasury Regulations Section 1.708-1(c)(3)(i), with SIR OP being the “resulting partnership” and STAR III OP terminating.

On August 28, 2020, SIR OP changed its name to “Steadfast Apartment REIT Operating Partnership, L.P.” (the “~~Current~~ Operating Partnership”). In addition, on August 28, 2020, prior to completion of the Operating Partnership Mergers, the Company acquired STAR III Merger Sub. On August 28, 2020, SIR Merger Sub, as the initial general partner of the ~~Current~~ Operating Partnership, transferred all of its general partnership interests to the Company, and the Company was admitted as a substitute general partner of the ~~Current~~ Operating Partnership.

On August 28, 2020, the Company, Steadfast Income Advisor, LLC, the initial limited partner of the ~~Current~~ Operating Partnership (“SIR Advisor”), Steadfast Apartment Advisor III, LLC, a Delaware limited liability company and the special limited partner of the ~~Current~~ Operating Partnership (“STAR III Advisor”), Wellington VVM LLC, a Delaware limited liability company and limited partner of the Current Operating Partnership (“Wellington”), and Copans VVM, LLC, a Delaware limited liability company and limited partner of the Current Operating Partnership (“Copans” and together with “Wellington”, “VV&M”), entered into a Second Amended and Restated Agreement of Limited Partnership of Steadfast Apartment REIT

910

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

partner of the Operating Partnership (“Wellington”), and Copans VVM, LLC, a Delaware limited liability company and limited partner of the Operating Partnership (“Copans” and together with “Wellington”, “VV&M”), entered into a Second Amended and Restated Agreement of Limited Partnership of Steadfast Apartment REIT Operating Partnership, L.P. (the “Second A&R Partnership Agreement”) in order to, among other things, reflect the consummation of the Operating Partnership Mergers. The purpose of the Operating Partnership Mergers was to simplify the Company’s corporate structure so that the Company has a single operating partnership that is a direct subsidiary of the Company.

Internalization Transaction

On August 31, 2020, the ~~Current~~ Operating Partnership and the Company entered into a series of transactions and agreements (such transactions and agreements hereinafter collectively referred to as the “Internalization Transaction”), with SRI, which provided for the internalization of the Company’s external management functions previously provided by the Former Advisor and its affiliates. Prior to the Internalization Closing (as defined herein), which took place contemporaneously with the execution of the Contribution & Purchase Agreement (as defined herein) on August 31, 2020 (the “Internalization Closing”), Steadfast Investment Properties, Inc., a California corporation (“SIP”), Steadfast REIT Services, Inc., a California corporation (“REIT Services”), and their respective affiliates owned and operated all of the assets necessary to operate the Company and its subsidiaries as a self-managed company and employed all the employees necessary to operate as a self-managed company.

Pursuant to a Contribution and Purchase Agreement (the “Contribution & Purchase Agreement”) between the Company, the ~~Current~~ Operating Partnership and SRI, SRI contributed to the ~~Current~~ Operating Partnership all of the membership interests in STAR RS Holdings, LLC, a Delaware limited liability company (“SRSH”), and the assets and rights necessary to operate as a self-managed company in all material respects, and the liabilities associated with such assets and rights in exchange for $124,999,000, which was paid as follows: (1) $31,249,000 in cash and (2) 6,155,613.92 Class B OP units of limited partnership interests in the ~~Current~~ Operating Partnership (the “Class B OP Units”) having the agreed value set forth in the Contribution & Purchase Agreement of $15.23 per Class B OP Unit. In addition, the Company purchased all of the Class A Convertible Stock of the Company held by the Former Advisor for $1,000. As a result of the Internalization Transaction, the Company became self-managed and acquired components of the advisory, investment management and property management operations of the Former Advisor by hiring the Transferring Employees (as defined in the Contribution & Purchase Agreement), who comprise the workforce necessary for the management and day-to-day real estate and accounting operations of the Company and the ~~Current~~ Operating Partnership. The Former Advisor is owned by SRI, the Company’s former sponsor. Mr. Emery, the Company’s Chairman of the board of directors and Chief Executive Officer, owns a 48.6% interest in Steadfast Holdings, the largest owner of SRI.

Concurrently with, and as a condition to the execution and delivery of the Contribution & Purchase Agreement, the Company, through STAR REIT Services, LLC, a Delaware limited liability company and indirect subsidiary of the Company (“SRS”), entered into employment agreements with certain key employees. For more information on the Internalization Transaction, see Note 3 (Internalization Transaction).

On July 16, 2021, the Company received a derivative demand letter addressed to the Board, purportedly sent on behalf of two stockholders, relating to the Internalization Transaction. The letter demanded that the Board appoint a committee to investigate the Internalization Transaction and, among other things, determine whether there exists any basis for the Company to pursue claims relating to that transaction, including for recovery of payments made in the transaction. The Company is considering the request.

The Former Advisor

Prior to the Internalization Transaction, the business of the Company was externally managed by the Former Advisor, pursuant to the Amended and Restated Advisory Agreement effective as of March 6, 2020, by and between the Company and the Former Advisor (as may be amended, the “Advisory Agreement”). On August 31, 2020, prior to the Internalization Closing, the Company, the Former Advisor and the ~~Current~~ Operating Partnership entered into a Joinder Agreement (the “Joinder Agreement”) pursuant to which the ~~Current~~ Operating Partnership became a party to the Advisory Agreement. On August 31, 2020, prior to the Internalization Closing, the Former Advisor and the Company entered into the First Amendment to the Amended and Restated Advisory Agreement in order to remove certain restrictions in the Advisory Agreement related to business combinations and to provide that any amounts accrued to the Former Advisor commencing on September 1, 2020 are paid in cash to the Former Advisor by the Current Operating Partnership (the “First Amendment”). In connection with the Internalization Transaction, SRS assumed the rights and obligations of the Advisory Agreement from the Former Advisor.

~~The Current Operating Partnership~~11

Substantially all of the Company’s business is conducted through the Current Operating Partnership. The Company is the sole general partner of the Current Operating Partnership. The Current Operating Partnership owns, directly or indirectly, all of the properties that the Company has acquired. As of March 31, 2021, the Company owned approximately 94% of the operating partnership units of the Current Operating Partnership (the “OP Units”). As a result of the Internalization Transaction, SRI

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

~~owns~~Advisory ~~approximately~~Agreement 5% of the OP Units of the Current Operating Partnership, including approximately 6,155,613.92 Class B OP Units owned by SRI as of March 31, 2021. The remaining approximate 1% of the OP Units are owned by VV&M, unaffiliated third parties in ~~the~~order ~~form~~to ofremove ~~Class A-2 OP Units (as defined below). The Current Operating Partnership may conduct~~ certain ~~activities~~restrictions ~~through~~in the ~~Company’s~~Advisory ~~taxable~~Agreement ~~REIT~~related ~~subsidiary,~~to ~~which~~business iscombinations anand ~~indirect~~to ~~wholly-owned~~provide ~~subsidiary~~that ofany ~~the~~amounts ~~Current~~accrued ~~Operating Partnership. As a condition~~ to the ~~Internalization~~Former ~~Closing,~~Advisor commencing on ~~August~~September 311, 2020, ~~the~~are ~~Company,~~paid asin ~~the~~cash ~~general~~to ~~partner and parent of~~ the ~~Current~~Former ~~Operating~~Advisor ~~Partnership,~~by ~~SRI and VV&M entered into a Third Amended and Restated Agreement of Limited Partnership of~~ the Operating Partnership (the “~~Operating~~First ~~Partnership Agreement~~Amendment”). toIn ~~restate~~connection with the ~~Second~~Internalization ~~A&R Partnership Agreement in order to~~Transaction, ~~among~~SRS ~~other~~assumed ~~things, remove references to~~ the ~~limited~~rights ~~partner interests previously held by SIR Advisor~~ and ~~STAR~~obligations ~~III Advisor, reflect the consummation~~ of the ~~contribution,~~Advisory ~~and~~Agreement ~~designate~~from ~~Class B OP Units that were issued as consideration pursuant to~~ the ~~Internalization~~Former ~~Transaction~~Advisor.

The Operating Partnership Agreement provides that the Current 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 Current 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 the Current Operating Partnership being taxed as a corporation.

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 Operating Partnership owns, directly or indirectly, all of the properties that the Company has acquired. As of June 30, 2021, the Company owned approximately 94% of the operating partnership units of the Operating Partnership (the “OP Units”). As a result of the Internalization Transaction, SRI owns approximately 5% of the OP Units of the Operating Partnership, including approximately 6,155,613.92 Class B OP Units owned by SRI as of June 30, 2021. The remaining approximate 1% of the OP Units are owned by VV&M, unaffiliated third parties in the form of Class A-2 OP Units (as defined below). The Operating Partnership may conduct certain activities through the Company’s taxable REIT subsidiary, which is an indirect wholly-owned subsidiary of the Operating Partnership. As a condition to the Internalization Closing, on August 31, 2020, the Company, as the general partner and parent of the Operating Partnership, SRI and VV&M entered into a Third Amended and Restated Agreement of Limited Partnership of the Operating Partnership (the “Operating Partnership Agreement”) to restate the Second A&R Partnership Agreement in order to, among other things, remove references to the limited partner interests previously held by SIR Advisor and STAR III Advisor, reflect the consummation of the contribution, and designate Class B OP Units that were issued as consideration pursuant to the Internalization Transaction.

The Operating 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, which classification could result in the Operating Partnership being taxed as a corporation.

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 Form 10-K for the year ended December 31, 2020. 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, 2020, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 12, 2021.

Principles of Consolidation and Basis of Presentation

The consolidated financial statements include the accounts of the Company, the ~~Current~~ Operating Partnership and its wholly-owned subsidiaries. The portion of the entity not wholly-owned by the Company is presented as noncontrolling interest. 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 Form 10-Q and Article 10 of Regulation 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 six months ended ~~March 31~~June 30, 2021, are not necessarily indicative of the results that may be expected for the year ending December 31, 2021. 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 Form 10-K for the year ended December 31, 2020.

~~Noncontrolling interests~~12

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

their fair value or redemption value as of the balance sheet date and reported as liabilities or temporary equity depending on their terms. A noncontrolling interest that fails to qualify as permanent equity will be reclassified as a liability or temporary equity. As of March 31, 2021 and December 31, 2020, the Company’s noncontrolling interests qualified as permanent equity. For more information on the Company’s noncontrolling interest, see Note 9 (Noncontrolling ~~Interest).~~interests

Noncontrolling interests represent the portion of equity that the Company does not own in an entity that is consolidated. The Company’s noncontrolling interests are comprised of Class A-2 operating partnership units (“Class A-2 OP Units”) and Class B OP Units of the Operating Partnership. The Company accounts for noncontrolling interests in accordance with ASC 810, Consolidation (“ASC 810”). In accordance with ASC 810, the Company reports noncontrolling interests in subsidiaries within equity in the consolidated financial statements, but separate from stockholders’ equity. In accordance with ASC 480, Distinguishing Liabilities from Equity (“ASC 480”), noncontrolling interests that are determined to be redeemable are carried at their fair value or redemption value as of the balance sheet date and reported as liabilities or temporary equity depending on their terms. A noncontrolling interest that fails to qualify as permanent equity will be reclassified as a liability or temporary equity. As of June 30, 2021, the Company’s noncontrolling interests qualified as permanent equity. For more information on the Company’s noncontrolling interests, see Note 9 (Noncontrolling Interest).

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.

Casualty loss

The Company carries liability insurance to mitigate its exposure to certain losses, including those relating to property damage and business interruption. The Company records the estimated amount of expected insurance proceeds for property damage and other losses incurred as an asset (typically a receivable from the insurer) and income up to the amount of the losses incurred when receipt of insurance proceeds is deemed probable. Any amount of insurance recovery in excess of the amount of the losses incurred is considered a gain contingency and is recorded in other income when the proceeds are received. During the ~~three~~six months ended ~~March 31~~June 30, 2021, the Company incurred property damage and other losses of $2723,~~408~~164,~~651~~541, which was recorded as general and administrative expenses, with a corresponding insurance ~~recoveries~~recovery income up to the amount of losses incurred (as described above) ~~within~~included in general and administrative expenses in the accompanying consolidated statements of operations. The Company also recorded insurance recoveries of $23,164,541 for the estimated insurance claims proceeds in the amount of total losses incurred (as described above) as an increase in rents and other receivables.

Real Estate Assets

Real Estate Purchase Price Allocation

Upon the acquisition of real estate properties or other entities owning real estate properties, the Company evaluates whether the acquisition is a business combination or an asset acquisition under ASC 805-50, Business Combinations — -Related Issues (“ASC 805”). For both business combinations and asset acquisitions the Company allocates the purchase price of real estate properties to acquired tangible assets, consisting of land, buildings and improvements, and acquired intangible assets and liabilities, consisting of the value of above-market and below-market leases and the value of in-place leases. For asset acquisitions, the Company capitalizes transaction costs and allocates the purchase price using a relative fair value method allocating all accumulated costs. For business combinations, the Company expenses transaction costs incurred and allocates the purchase price based on the estimated fair value of each separately identifiable asset and liability. Acquisition fees and costs associated with transactions determined to be asset acquisitions are capitalized in total real estate, net in the accompanying consolidated balance sheets. ~~There~~For ~~were no real estate property acquisitions during~~ the three and six months ended ~~March 31~~June 30, 2021. ~~For~~and ~~the three months ended March 31,~~ 2020, all of the Company’s acquisitions of real estate properties, including pursuant to the Mergers, were determined to be asset acquisitions.

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 the as-if-vacant fair value of a property using methods similar to those used by independent appraisers. Factors considered by management in performing these analyses include an estimate of carrying costs during the expected lease-up periods considering current market conditions and costs to execute similar leases, including leasing commissions and other related costs. In estimating carrying costs, management includes real estate taxes, insurance, and other operating expenses during the expected lease-up periods based on current market conditions.

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

~~respect~~considering tocurrent ~~a below-~~market ~~lease.~~conditions ~~The above-market~~ and ~~below-market~~costs ~~lease~~to ~~values~~execute ~~are~~similar ~~capitalized as intangible lease assets or liabilities. Above-market lease values are amortized as an adjustment of rental revenue over the remaining terms of the respective~~ leases~~. Below-market leases are amortized as an adjustment of rental revenue over the remaining terms of the respective leases~~, including ~~any~~leasing ~~fixed~~commissions ~~rate~~and ~~bargain~~other ~~renewal~~related ~~periods~~costs. IfIn aestimating ~~lease~~carrying ~~were~~costs, tomanagement beincludes ~~terminated~~real ~~prior~~estate totaxes, ~~its stated expiration~~insurance, ~~all unamortized amounts of above-market~~ and ~~below-market~~other ~~in-place~~operating ~~lease~~expenses ~~values~~during ~~related~~the toexpected ~~that~~ lease-up ~~would~~periods bebased ~~recorded~~on ascurrent anmarket ~~adjustment to rental revenue~~conditions.

The fair values of above-market and below-market in-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 the in-place leases and (ii) an estimate of fair market lease rates for the corresponding in-place leases, measured over a period equal to the remaining non-cancelable term of the lease 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 revenue over the remaining terms of the respective leases. Below-market leases are amortized as an adjustment of rental revenue 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-market in-place lease values related to that lease would be recorded as an adjustment to rental revenue.

The fair values of in-place leases include an estimate of direct costs associated with obtaining a new resident and opportunity costs associated with lost rentals that are avoided by acquiring an in-place lease. Direct costs associated with obtaining a new resident include commissions, resident 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 the in-place leases over a market absorption period for a similar lease. These lease intangibles are amortized to depreciation and amortization expense over the remaining terms of the respective leases. If a lease were to be terminated prior to its stated expiration, all unamortized amounts of in-place lease assets relating to that lease would be expensed.

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 continues to monitor events in connection with the ~~recent~~ outbreak of the novel Coronavirus (“COVID-19”) and evaluates any potential indicators that could suggest that the carrying value of its real estate investments and related intangible assets and liabilities may not be recoverable. No impairment ~~loss~~charge was recorded during the three and six months ended ~~March~~June 3130, 2021. The Company recorded an impairment charge of $5,039,937 related to two of its real estate assets for each of the three and six months ended June 30, 2020.

Goodwill

Goodwill represents the excess of consideration paid over the fair value of underlying identifiable net assets of a business acquired. The Company’s goodwill has an indeterminate life and is not amortized, but is tested for impairment on an annual basis, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company takes a qualitative approach to consider whether an impairment of goodwill exists prior to quantitatively determining the fair value of the reporting unit in step one of the impairment test. The Company performed its annual assessment on October 1, 2020. The Company recorded goodwill during the year ended December 31, 2020, in connection with the Internalization Transaction. No impairment charge was recorded during the three and six months ended June 30, 2021. See Note 3 (Internalization Transaction) for details.

~~Revenue recognition - operating leases~~14

The majority of the Company’s revenue is derived from rental revenue, which is accounted for in accordance with ASC 842, Leases (“ASC 842”). The Company leases apartment homes under operating leases with terms generally of one year or less. Generally, credit investigations are performed for prospective residents and security deposits are obtained. In accordance with ASC 842, the Company recognizes minimum rent, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related leases when collectability is probable and records amounts expected to be received in later years as deferred rent receivable. For lease arrangements when it is not probable that the Company will collect all or substantially all of the remaining lease payments under the term of the lease, rental revenue is limited to the lesser of the rental revenue that would be recognized on a straight-line basis (as applicable) or

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

~~the~~Revenue ~~lease~~Recognition ~~payments that have been collected from the lessee. Differences between rental revenue recognized and amounts contractually due under the lease agreements are credited or charged to straight~~-~~line~~ ~~rent~~Operating receivable or straight-line rent liability, as applicable. Tenant reimbursements for common area maintenance and other recoverable expenses, are recognized when the services are provided and the performance obligations are satisfied. Tenant reimbursements for common area maintenance are accounted for as variable lease payments and are recorded as rental income on the Company’s consolidated statement of operations.Leases

~~Rents~~The majority of the Company’s revenue is derived from rental revenue, which is accounted for in accordance with ASC 842, Leases (“ASC 842”). The Company leases apartment homes under operating leases with terms generally of one year or less. Generally, credit investigations are performed for prospective residents and ~~Other~~security ~~receivables~~deposits are obtained. In accordance with ASC 842, the Company recognizes minimum rent, including rental abatements, lease incentives and contractual fixed increases attributable to operating leases, on a straight-line basis over the term of the related leases when collectability is probable and records amounts expected to be received in later years as deferred rent receivable. For lease arrangements when it is not probable that the Company will collect all or substantially all of the remaining lease payments under the term of the lease, rental revenue is limited to the lesser of the rental revenue that would be recognized on a straight-line basis (as applicable) or the lease payments that have been collected from the lessee. Differences between rental revenue recognized and amounts contractually due under the lease agreements are credited or charged to straight-line rent receivable or straight-line rent liability, as applicable. Tenant reimbursements for common area maintenance and other recoverable expenses, are recognized when the services are provided and the performance obligations are satisfied. Tenant reimbursements for common area maintenance are accounted for as variable lease payments and are recorded as rental income on the Company’s consolidated statement of operations.

Rents and Other Receivables

In accordance with ASC 842, the Company makes a determination of whether the collectability of the lease payments in an operating lease is probable. If the Company determines the lease payments are not probable of collection, the Company would fully reserve for any contractual lease payments, deferred rent receivable, and variable lease payments and would recognize rental income only if cash is received. The Company exercises judgment in establishing these allowances and considers payment history and current credit status of residents 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. Any changes to the Company’s collectability assessment are reflected as an adjustment to rental income.

Residents’ ~~payment~~Payment ~~plans~~Plans ~~due~~Due to COVID-19

In April, 2020, the FASB issued the ASC 842 Q&A to respond to some frequently asked questions about accounting for lease concessions related to the effects of the COVID-19 pandemic. Under ASC 842, modified terms and conditions of a company’s existing lease contracts, such as, changes to lease payments, may affect the economics of the lease for the remainder of the term and are generally accounted for as lease modifications. Some contracts may contain explicit or implicit enforceable rights and obligations that require lease concessions if certain circumstances arise that are beyond the control of the parties to the contract. If a lease contract provides enforceable rights and obligations for concessions in the contract and no changes are made to that contract, the concessions are not considered a ‘lease modification’ pursuant to ASC 842. This means both the lessor and lessee need not remeasure and reallocate the consideration in the lease contract, reassess the lease term or reassess lease classification and lease liability, provided that the concessions are considered to be a separate contract. If concessions granted by lessors are beyond the enforceable rights and obligations in the contract, entities would generally account for those concessions in accordance with the lease modification guidance in ASC 842 as described above.

The FASB staff has been made aware that, given the unprecedented and global nature of the COVID-19 pandemic, it may be exceedingly challenging for entities to determine whether existing contracts provide enforceable rights and obligations for lease concessions and, if so, whether those concessions are consistent with the terms of the contract or are modifications to a contract.

Consequently, for concessions related to the effects of the COVID-19 pandemic, an entity will not have to analyze each contract to determine whether enforceable rights and obligations for concessions exist in the contract and can elect to apply or not apply the lease modification guidance under ASC 842 to those contracts. Entities may make the elections for any lessor-provided concessions related to the effects of the COVID-19 pandemic (e.g., deferrals of lease payments, reduced future lease payments) as long as the concession does not result in a substantial increase in the rights of the lessor or the obligations of the lessee. In addition to that, for concessions that provide a deferral of payments with no substantive changes to the consideration in the original contract, the FASB allows entities to account for the concessions as if no changes to the lease contract were made. Under this method, a lessor would increase its lease receivable and continue to recognize income.

During the fiscal quarter ended June 30, 2020, the Company instituted payment plans for its residents that were experiencing hardship due to COVID-19, which the Company refers to as the “COVID-19 Payment Plan.” Pursuant to the COVID-19 Payment Plan, the Company allowed qualifying residents to defer their rent, which is collected by the Company in monthly installment payments over the duration of the current lease or renewal term (which may not exceed 12 months). Additionally, for the months of May and June 2020, the Company began providing certain qualifying residents with a one-time concession to incentivize their performance under the COVID-19 Payment Plan. If the qualifying resident fails to make payments pursuant to the COVID-19 Payment Plan, the concession is immediately terminated, and the qualifying resident is required to immediately repay the amount of the concession. The Company did not offer residents any other payment plans during the remaining months in fiscal year 2020 due to the reduced demand of such payment plans.15

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

In January 2021, the Company began offering an extension to the COVID-19 Payment Plan (the “Extension Plan”), that allows eligible residents to defer their rent, which is collected by the Company in monthly installment payments over the lesser of the duration of the current lease term or a maximum of three months (with the exception of certain states that allow a maximum of six months deferral). Under the Extension Plan, no concessions are offered for residents with a payment plan duration of two months or less and residents who opted for the COVID-19 Payment Plan are not eligible to participate in the Extension Plan unless they paid off the amounts due under the COVID-19 Payment Plan.

During the three months ended September 30, 2020, the Company initiated a debt forgiveness program for certain qualifying residents that were experiencing hardship due to COVID-19 and who were in default of their lease payments (the “Debt Forgiveness Program”). Pursuant to the Debt Forgiveness Program, the Company offered qualifying residents an opportunity to terminate their lease without being liable for any unpaid rent and penalties. The Company determined that accounts receivable of $2,110,657 related to the Debt Forgiveness Program are not probable of collection and therefore included these accounts in its reserve.

The Company elected not to evaluate whether the COVID-19 Payment Plans, the Debt Forgiveness Program and the Extension Plan are lease modifications and therefore the Company’s policy is to account for the lease contracts with COVID-19 Payment Plans, Debt Forgiveness Program and the Extension Plan as if no lease modifications occurred. Under this accounting method, a lessor with an operating lease may account for the concession (which in this case only applies to the COVID-19 Payment Plans) by continuing to recognize a lease receivable until the rental payment is received from the lessee at the revised payment date. If it is determined that the lease receivable is not collectable, the Company would treat that lease contract on a cash basis as defined in ASC 842. As of ~~March 31~~June 30, 2021 and December 31, 2020, the Company reserved $23,~~728~~080,~~971~~227 and $2,245,067 of accounts receivables, respectively, which are considered not probable ~~for~~of collection.

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 a non-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 Company’s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. There were no transfers between the levels in the fair value hierarchy during the three months ended March 31, 2021 and 2020.16

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(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:

March 31, 2021

June 30, 2021

Fair Value Measurements Using

Level 1

Level 2

Level 3

Assets:

Interest rate cap agreements(1)

—

3021,~~872~~255

—


	December 31, 2020
	Fair Value Measurements Using
	Level 1		Level 2		Level 3

Assets:
Interest rate cap agreements(1)	$	—	$	7,852	$	—

~~_________________~~_______________

(1)See Note 14 (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.

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, due from affiliates, accounts payable and accrued liabilities, distributions payable, distributions payable to affiliates, 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, distributions payable, amounts due from affiliates, amounts due to affiliates and distributions payable to affiliates to approximate the fair value of these financial instruments based on the short duration between origination of the instruments and their expected realization. The Company has determined that its notes payable, net are classified as Level 3 within the fair value hierarchy.17

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

The Company considers the carrying value of ~~the~~cash ~~notes~~and ~~payable~~cash ~~was~~equivalents, $2restricted cash,~~213~~ rents and other receivables,~~714,331~~ accounts payable and $2accrued liabilities,~~246~~ distributions payable,~~242,677,~~ ~~respectively~~amounts due from affiliates, ~~compared~~amounts due to affiliates and distributions payable to affiliates to approximate the ~~carrying~~fair value of ~~$2,131,926,238~~these financial instruments based on the short duration between origination of the instruments and ~~$2,129,245,671,~~their ~~respectively~~expected realization. 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 June 30, 2021 and December 31, 2020, the fair value of the notes payable was $2,265,796,735 and $2,246,242,677, respectively, compared to the carrying value of $2,133,882,146 and $2,129,245,671, respectively.

Restricted Cash

Restricted cash represents those cash accounts for which the use of funds is restricted by loan covenants and a cash account established in connection with a letter of credit to fund future workers compensation claims. As of ~~March~~June 3130, 2021 and December 31, 2020, the Company had a restricted cash balance of $2928,~~333~~399,~~777~~975 and $38,998,980, respectively, which represented 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 as well as an amount set aside in connection with a letter of credit.

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 ~~three~~six months ended ~~March~~June 3130, 2021 and 2020:

March 31,

June 30,

2021

2020

Cash and cash equivalents

~~242~~160,~~291~~949,~~317~~592

~~215~~330,~~105~~674,~~801~~998

Restricted cash

2928,~~333~~399,~~777~~975

1836,~~635~~667,~~695~~410

Total cash, cash equivalents and restricted cash

~~271~~189,~~625~~349,~~094~~567

~~233~~367,~~741~~342,~~496~~408

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 month ended January 31, 2021, were based on daily record dates and calculated at a rate of $0.002466 per share of the Company’s common stock per day during the period from January 1, 2021 through January 31, 2021. On January 12, 2021, the Company’s board of directors determined to reduce the daily distribution ~~payment~~amount to $0.001438 per share commencing on February 1, 2021 and ending February 28, 2021, which was extended for the months of March, April, May, June and ~~June,~~July 2021. As a result, distributions declared during the period from February 1, 2021 through ~~March 31, 2021, and through~~ June 30, 2021, were based on daily record dates and calculated at a rate of $0.001438 per share of the Company’s common stock per day.

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 six months ended ~~March~~June 3130, 2021, the Company declared distributions totaling $0.131 and $0.292 per share of common stock, respectively. During the three and six months ended June 30, 2020, the Company declared distributions totaling $0.~~161~~224 and $0.~~224~~448 per share of common stock, respectively.

~~Lessee Accounting~~18

In February 2016, the FASB issued Accounting Standards Update No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which requires leases with original lease terms of more than 12 months to be recorded on the balance sheet. For leases with terms greater than 12 months, a right-of-use (“ROU”) lease asset and a lease liability are recognized on the balance sheet at commencement date based on the present value of lease payments over the lease term.

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

~~Lease~~Lessee expense is recognized over the lease term based on an effective interest method for finance leases and on a straight-line basis for operating leases. On January 1, 2019, the Company adopted ASU 2016-02 and its related amendments (collectively, “ASC 842”) using the modified retrospective method. The Company elected the package of practical expedients permitted under the transition guidance, which allowed the Company to carry forward its original assessment of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. The Company also elected the practical expedient that allows lessees the option to account for lease and non-lease components together as a single component for all classes of underlying assets. See Note 15 (Leases).Accounting

Lease renewal or termination options are included in the lease asset and lease liability only if it is reasonably certain that the option to extend or to terminate would be exercised. As the implicit rate in most leases are not readily determinable, the Company’s incremental borrowing rate for each lease at commencement date is used to determine the present value of lease payments. Consideration is given to the Company’s recent debt financing transactions, as well as publicly available data for instruments with similar characteristics, adjusted for the respective lease term, when estimating incremental borrowing rates. Lease expense is recognized over the lease term based on an effective interest method for finance leases and on a straight-line basis for operating leases. On January 1, 2019, the Company adopted ASU 2016-02 and its related amendments (collectively, “ASC 842”) using the modified retrospective method. The Company elected the package of practical expedients permitted under the transition guidance, which allowed the Company to carry forward its original assessment of (1) whether contracts are or contain leases, (2) lease classification and (3) initial direct costs. The Company also elected the practical expedient that allows lessees the option to account for lease and non-lease components together as a single component for all classes of underlying assets. See Note 15 (Leases).

Equity-Based Compensation

The Company’s stock-based compensation consists of restricted stock issued to key employees ofand ~~the~~independent ~~Company,~~directors inof ~~addition to~~ the Company~~’s independent directors~~. The Company accounts for equity-based compensation awards using the fair value method, which requires an estimate of fair value of the award at the time of grant and recognized on a straight-line basis over the requisite service period of the awards. The compensation expense is adjusted for actual forfeitures upon occurrence. Equity-based compensation is classified within general and administrative expenses in the consolidated statements of operations.

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 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, residents and products and services, its assets have been aggregated into one reportable segment.

Recent Accounting Pronouncements

In January 2020, the FASB issued ASU 2020-01, Investments-Equity Securities (Topic 321), Investments-Equity Method and Joint Ventures (Topic 323), and Derivatives and Hedging (Topic 815): Clarifying the Interactions between Topic 321, Topic 323, and Topic 815, (“ASU 2020-01”), which clarifies the interaction between the accounting for equity securities under Topic 321, the accounting for equity method investments in Topic 323, and the accounting for certain forward contracts and purchased options in Topic 815. ASU 2020-01 is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. Early adoption is permitted. The amendments in ASU 2020-01 should be applied ~~prospectively. The Company adopted ASU 2020-01 on January 1, 2021. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements.~~

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

or have the potential to replace the IBOR rate that is expected to be discontinued; and (iii) any contemporaneous changes to other terms that change or have the potential to change the amount and timing of contractual cash flows must be related to the replacement of the IBOR rateprospectively. ~~If the contract meets all three criteria, there is no requirement for remeasurement of the contract at the modification date or reassessment of the previous accounting determination.~~ The ~~second~~Company ~~practical~~adopted expedient allows companies to change the reference rate and other critical terms related to the reference rate reform in derivative hedge documentation without having to de-designate the hedging relationship. This allows for companies to continue applying hedge accounting to existing cash flow and net investment hedges. ASU 2020-0401 ~~was effective upon issuance~~ on ~~a prospective basis beginning~~ January 1, ~~2020 and may be elected over time as reference rate reform activities occur. Subsequently, in January~~ 2021~~, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope (“ASU 2021-01”)~~. The ~~amendments~~adoption in ASU 2021-01 clarify that certain optional expedients and exceptions for contract modifications and hedge accounting apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of the discontinuation of the use of LIBOR as a benchmark interest rate due to reference rate reform. ASU 2021-01 is effective immediately for all entities with the option to apply retrospectively as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, and can be applied prospectively to any new contract modifications made on or after January 7, 2021. The ASUs can be adopted no later than December 1, 2022 with early adoption permitted. The relief provided in this guidance isdid temporary and generally cannot be applied to contract modifications that occur after December 31, 2022 or hedging relationships entered into or evaluated after that date. However, the guidance does allow an entity to continue to apply certain optional expedients related to hedge accounting. The Company identified the instruments influenced by LIBOR to be its variable rate mortgage notes payable and interest rate cap agreements and is currently in the process of liaising with its lenders to assess the nature of potential changes to its variable rate mortgage notes payable and interest rate cap agreements and therefore determining whether it could meet the conditions of the practical expedients provided by the FASB and elect to not ~~apply~~have ~~the~~a ~~modification~~material ~~accounting~~impact ~~requirements~~on to its ~~contracts~~consolidated ~~affected~~financial ~~by the reference rate reform within the permitted period of December 31, 2022~~statements.

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting (“ASU 2020-04”). ASU 2020-04 provided practical expedients to address existing guidance on contract modifications and hedge accounting due to the expected market transition from the London Interbank Offered Rate (“LIBOR”) and other interbank offered rates (together “IBORs”) to alternative reference rates, such as the Secured Overnight Financing Rate (“SOFR”). In July 2017, the Financial Conduct Authority announced it intended to stop compelling banks to submit rates for the calculation of LIBOR after 2021. The Company refers to this transition as reference rate reform. The first practical expedient allows companies to elect to not apply certain modification accounting requirements to debt, derivative and lease contracts affected by reference rate reform if certain criteria are met. These criteria include the following: (1) the contract referenced an IBOR rate that is expected to be discontinued; (2) the modified terms directly replace or have the potential to replace the IBOR rate that is expected to be discontinued; and (3) any contemporaneous changes to other terms that change or have the potential to change the amount and timing of contractual cash flows must be related to the replacement of the IBOR rate. If the contract meets all three criteria, there is no requirement for remeasurement of the contract at the modification date or reassessment of the previous accounting determination. The second practical expedient allows companies to change the reference rate and other critical terms related to the reference rate reform in derivative hedge documentation without having to de-designate the hedging relationship. This allows for companies to continue applying hedge accounting to existing cash flow and net investment hedges. ASU 2020-04 was effective upon issuance on a prospective basis beginning January 1, 2020 and may be elected over time as reference rate reform activities occur. Subsequently, in January 2021, the FASB issued ASU 2021-01, Reference Rate Reform (Topic 848): Scope ("ASU 2021-01"). The amendments in ASU 2021-01 clarify that certain optional expedients and exceptions for contract modifications and hedge accounting apply to derivative instruments that use an interest rate for margining, discounting, or contract price alignment that is modified as a result of the discontinuation of the use of LIBOR as a benchmark interest rate due to reference rate reform. ASU 2021-01 is effective immediately for all entities with the option to apply retrospectively as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, and can be applied prospectively to any new contract modifications made on or after January 7, 2021. The ASUs can be adopted no later than December 1, 2022 with early adoption permitted. The relief provided in this guidance is temporary and generally cannot be applied to contract modifications that occur after December 31, 2022 or hedging relationships entered into or evaluated after that date. However, the guidance does allow an entity to continue to apply certain optional expedients related to hedge accounting. The Company identified the instruments influenced by LIBOR to be its variable rate mortgage notes payable and interest rate cap agreements and is currently in the process of liaising with its lenders to assess the nature of potential changes to its variable rate mortgage notes payable and interest rate cap agreements and therefore determining whether it could meet the conditions of the practical expedients provided by the FASB and elect to not apply the modification accounting requirements to its contracts affected by the reference rate reform within the permitted period of December 31, 2022.

In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging— Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in Entity’s Own Equity (“ASU 2020-06”). ASU 2020-06 addresses issues identified as a result of the complexity associated with applying GAAP for certain financial instruments with characteristics of liabilities and equity. For convertible instruments, ASU 2020-06 reduces the number of accounting models for convertible debt instruments and convertible preferred stock. ASU 2020-06 also enhances information transparency by making targeted improvements to the disclosures for convertible instruments and earnings per share guidance. ASU 2020-06 also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity and amends the related earnings per share guidance. ASU 2020-06 is effective for fiscal years beginning after December 15, 2021, and interim periods within those fiscal years. Early adoption is permitted but no earlier than fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The guidance in ASU 2020-06 can be applied through a modified retrospective method of transition or a fully retrospective method of transition. The Company is currently assessing the impact of ASU 2020-06 on its consolidated financial statements and related disclosures from the adoption of ASU 2020-06.

In October 2020, the FASB issued ASU 2020-10, Codification Improvements (“ASU 2020-10”). ASU 2020-10 contains improvements to GAAP by ensuring that all guidance that requires or provides an option for an entity to provide information in the notes to financial statements is codified in the disclosure section of GAAP. ASU 2020-10 also contains codifications that are varied in nature and may affect the application of the guidance in cases in which the original guidance may have been unclear. ASU 2020-10 is effective for fiscal years beginning after December 15, 2020. Early adoption is permitted. The Company adopted ASU 2020-10 on January 1, 2021. The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements. 20

In November 2020, the SEC issued Release No. 33-10890, Amendments to Management's Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information, to simplify, modernize and enhance certain financial disclosure requirements in Regulation S-K. This amendment became effective on February 10, 2021. Early Adoption was permitted. The Company early adopted these modifications in its Annual Report on Form 10-K filed with the SEC on March 12, 2021. The

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

In November 2020, the SEC issued Release No. 33-10890, Amendments to Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information, to simplify, modernize and enhance certain financial disclosure requirements in Regulation S-K. This amendment became effective on February 10, 2021. Early Adoption was permitted. The Company early adopted these modifications in its Annual Report on Form 10-K filed with the SEC on March 12, 2021. The adoption of this guidance did not have a material impact on the consolidated financial statements.

3. Internalization Transaction

On August 31, 2020, the ~~Current~~ Operating Partnership and the Company completed the Internalization Transaction with SRI, which provided for the internalization of the Company’s external management functions provided by the Former Advisor and its affiliates.

Pursuant to the Contribution & Purchase Agreement between the Company, the ~~Current~~ Operating Partnership and SRI, SRI contributed to the ~~Current~~ Operating Partnership all of the membership interests in SRSH, and the assets and rights necessary to operate as a self-managed company in all material respects, and the liabilities associated with such assets and rights in exchange for $124,999,000, which was paid as follows: (1) $31,249,000 in cash consideration and (2) 6,155,613.92 Class B OP Units having the agreed value of $15.23 per Class B OP Unit. The Company also purchased all of the Class A Convertible Stock of the Company held by the Former Advisor for $1,000. As a result of the Internalization Transaction, the Company became self-managed and acquired the advisory, investment management and property management operations of the Former Advisor by hiring the Transferring Employees (as defined in the Contribution & Purchase Agreement), who comprise the workforce necessary for the management and day-to-day real estate and accounting operations of the Company and the ~~Current~~ Operating Partnership.

Fair Value of Consideration Transferred

The Company accounted for the Internalization Transaction as a business combination under the acquisition method of accounting. Pursuant to the terms of the Internalization Transaction, the following consideration was given in exchange for all of the membership interests in SRSH:

	Amount
Cash consideration(1)	$	31,249,000
Cash consideration (1)	$	31,249,000
Class B OP Units issued	6,155,613.92
Fair value per Class B OP Unit	$	15.23
Fair value of OP Unit Consideration	93,750,000
Promote price(2)	1,000
Promote price (2)	1,000
Accounting value of total consideration	$	125,000,000

~~_________________~~21

(1)Represents the contractual cash consideration before adjustments to reflect affiliates assets acquired in the Internalization Transaction of $2,717,634 and affiliates liabilities assumed in the Internalization Transaction of $4,701,436.

(2)Represents the repurchase of Class A Convertible Stock by the Company.

Assets Acquired and Liabilities Assumed

The Internalization Transaction was accounted for as a business combination under the acquisition method of accounting under ASC 805, which requires, among other things, the assets acquired and liabilities assumed to be recognized at their fair values as of the acquisition date.

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

_______________

(2)Represents the repurchase of Class A Convertible Stock by the Company.

Assets Acquired and Liabilities Assumed

During the year ended December 31, 2020, the Company finalized the purchase price allocation of the fair value of consideration transferred (described above) for the Internalization Transaction. The following table summarizes the finalized purchase price allocation as of the date of the Internalization Transaction:


	Amount
Assets:
Accounts receivable from affiliates	$	3,908,946
Finance lease right-of-use asset	20,925
Other assets	49,919
Property management agreements intangibles(1)	815,000
Operating lease right-of-use asset	1,651,415
Repurchase of Class A Convertible Stock	1,000
Goodwill	125,220,448
Total assets acquired	131,667,653
Liabilities:
Accrued personnel costs	(4,995,313)
Finance lease liability	(20,925)
Operating lease liability	(1,651,415)
Total liabilities assumed	(6,667,653)
Net assets acquired	$	125,000,000

~~_________________~~_______________

(1)The intangible assets acquired consist of property management agreements that the Company, acting as advisor and property manager through certain subsidiaries, has with affiliates of SRI (as amended from time to time, the “SRI Property Management Agreements”). The value of the SRI Property Management Agreements was determined based on a discounted cash flow valuation of the projected revenues of the acquired agreements. The SRI Property Management Agreements are subject to an estimated useful life of one year. As of ~~March~~June 3130, 2021, the SRI Property Management Agreements were approximately 5883% amortized.

Goodwill

In connection with the Internalization Transaction, the Company recorded goodwill of $125.2 million as a result of the consideration exceeding the fair value of the net assets acquired. Goodwill represents the estimated future benefits arising from other assets acquired that could not be individually identified and separately recognized. The goodwill recorded represents the Company’s acquired workforce and its ability to generate additional opportunities for revenue and raise additional funds.

~~Pro Forma Financial Information (Unaudited)~~22

The following condensed pro forma operating information is presented as if the Internalization Transaction and Mergers occurred in 2019 and had been included in operations as of January 1, 2019. The operations acquired in the Internalization Transaction earned $96.5 million in revenue in 2019, approximately $93.9 million of which was earned from the Company and will be eliminated in the Company’s consolidated financial statements on a post-acquisition basis, and approximately $2.5 million of which was earned pursuant to the SRI Property Management Agreements and will be recurring revenue to the Company resulting in an immaterial impact on the Company’s net loss of approximately $0.4 million.

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

Pro Forma Financial Information (unaudited)

The pro forma operating information excludes certain nonrecurring adjustments, such as acquisition fees and expenses incurred, to reflect the pro forma impact the acquisition would have on earnings on a continuous basis:


	Year Ended December 31,
	2020		2019
Revenue	$	303,851,813	$	323,258,776
Net income (loss)(1)(2)	$	(109,151,163)	$	29,545,827
Net income (loss) attributable to noncontrolling interests	$	(5,759,798)	$	1,585,124
Net income (loss) attributable to common stockholders(3)	$	(103,391,365)	$	27,960,703
Net income (loss) attributable to common stockholders per share - basic and diluted	$	(1.04)	$	0.26

~~_________________~~_______________

(1)The incremental cost of hiring the existing workforce responsible for the Company’s real estate management and operations of $17,906,923 and $17,742,481, was included in pro forma expenses in arriving at the pro forma net income (loss) for the years ended December 31, 2020 and 2019, respectively. The pro forma impact of the Internalization Transaction on the Company’s historical results of operations based on the historical net income of SRI and its affiliates was $19,083,158 for the year ended December 31, 2019.

(2)Contemporaneously with the Internalization Closing, the Company hired 634 employees, previously employed by SRI and its affiliates, to operate all of the assets necessary to operate the business of the Company.

(3)Amount is net of net income (loss) attributable to noncontrolling interests and distributions to preferred shareholders.

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2021

(unaudited)

4. Real Estate

AsCurrent ofPeriod ~~March 31, 2021, the Company owned 69 multifamily properties comprising a total of 21,591 apartment homes and three parcels of land held for the development of apartment homes.~~Acquisitions

~~The~~During ~~total~~the ~~acquisition~~three ~~price~~and ofsix ~~the~~months ~~Company’s~~ended ~~real~~June 30, ~~estate~~2021, ~~portfolio~~the ~~was~~Company ~~$3,133,589,671,~~acquired ~~excluding~~one multifamily real estate ~~held~~property, ~~for~~which ~~the~~was ~~development~~determined ofto ~~apartment~~be ~~homes~~an ofasset ~~$39,326,042~~acquisition. AsThe offollowing ~~March 31,~~is ~~2021~~a ~~and~~summary ~~December 31,~~of ~~2020,~~ the ~~Company’s~~real ~~portfolio~~estate ~~was~~property ~~approximately~~acquired ~~95.3%~~during ~~and 95.4% occupied and~~ the ~~average~~six ~~monthly~~months ~~rent~~ended ~~was $1~~June 30,~~180~~ ~~and $1,173, respectively.~~2021:

As of March 31, 2021 and December 31, 2020, investments in real estate and accumulated depreciation and amortization related to the Company’s consolidated real estate properties was as follows:


				Purchase Price Allocation
Property Name	Location	Purchase Date	Homes	Land		Buildings and Improvements		Tenant Origination and Absorption Costs		Total Purchase Price
Ballpark Apartments at Town Madison	Huntsville, AL	6/29/2021	274	$	3,773,236	$	72,579,544	$	1,113,905	$	77,466,685

	March 31, 2021
	Assets
	Land		Building and Improvements		Tenant Origination and Absorption Costs		Total Real Estate Held for Investment		Real Estate Under Development
Investments in real estate	$	337,896,051	$	2,877,749,041	$	1,752,793	$	3,217,397,885	$	39,326,042
Less: Accumulated depreciation and amortization	—		(428,928,968)		(938,115)		(429,867,083)		—
Net investments in real estate and related lease intangibles	$	337,896,051	$	2,448,820,073	$	814,678	$	2,787,530,802	$	39,326,042

As of June 30, 2021, the Company owned 70 multifamily properties and three parcels of land held for the development of apartment homes. The Company’s portfolio is comprised of 21,936 apartment homes, including 95 newly constructed apartment homes placed into service at the Garrison Station development project during the six months ended June 30, 2021.

22The total acquisition price of the Company’s multifamily real estate portfolio was $3,224,081,403, excluding land held for the development of apartment homes of $30,288,753. As of June 30, 2021 and December 31, 2020, the Company’s portfolio was approximately 96.2% and 95.4% occupied and the average monthly rent was $1,198 and $1,173, respectively.

As of June 30, 2021 and December 31, 2020, investments in real estate and accumulated depreciation and amortization related to the Company’s consolidated real estate properties was as follows:


	June 30, 2021
	Assets
	Land		Building and Improvements(1)		Tenant Origination and Absorption Costs		Total Real Estate Held for Investment		Real Estate Under Development
Investments in real estate	$	343,297,680	$	2,984,948,698	$	1,682,900	$	3,329,929,278	$	30,288,753
Less: Accumulated depreciation and amortization	—		(461,637,726)		(97,751)		(461,735,477)		—
Net investments in real estate and related lease intangibles	$	343,297,680	$	2,523,310,972	$	1,585,149	$	2,868,193,801	$	30,288,753


	December 31, 2020
	Assets
	Land		Building and Improvements(1)		Tenant Origination and Absorption Costs		Total Real Estate Held for Investment		Real Estate Under Development
Investments in real estate	$	337,322,234	$	2,882,411,683	$	1,752,793	$	3,221,486,710	$	39,891,218
Less: Accumulated depreciation and amortization	—		(397,413,838)		(330,839)		(397,744,677)		—
Net investments in real estate and related lease intangibles	$	337,322,234	$	2,484,997,845	$	1,421,954	$	2,823,742,033	$	39,891,218

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

	December 31, 2020
	Assets
	Land		Building and Improvements		Tenant Origination and Absorption Costs		Total Real Estate Held for Investment		Real Estate Under Development
Investments in real estate	$	337,322,234	$	2,882,411,683	$	1,752,793	$	3,221,486,710	$	39,891,218
Less: Accumulated depreciation and amortization	—		(397,413,838)		(330,839)		(397,744,677)		—
Net investments in real estate and related lease intangibles	$	337,322,234	$	2,484,997,845	$	1,421,954	$	2,823,742,033	$	39,891,218

During the six months ended June 30, 2021 and 2020, the Company wrote off $14,902,551 and $0, respectively, of fixed assets related to the damage caused to the Company’s multifamily properties impacted by the winter storm that took place in February 2021.

~~During~~Total ~~the~~depreciation ~~three months ended March 31, 2021~~ and ~~2020,~~amortization ~~the~~expenses ~~Company~~were ~~wrote off~~ $1533,~~459~~277,~~862~~ 511 and $067,152,017 for ofthe three ~~fixed~~and ~~assets~~six ~~related~~months toended ~~the~~June ~~damage~~30, ~~caused~~2021, torespectively, ~~the~~and $53,455,666 ~~Company’s~~and ~~multifamily~~$82,031,561 ~~properties~~for ~~impacted by~~ the ~~winter~~three ~~storm~~and ~~that~~six ~~took~~months ~~place~~ended inJune 30, ~~February~~2020, ~~2021~~respectively.

~~Total~~Depreciation ~~depreciation~~of ~~and~~the ~~amortization~~Company’s ~~expenses~~buildings ~~were~~and improvements was $3332,~~874~~708,~~505~~712 and $2865,~~575~~752,~~896~~765 for the three and six months ended ~~March~~June 3130, 2021, and $33,315,155 and $56,066,977 for the three and six months ended June 30, 2020, respectively. Depreciation of the Company’s acquired furniture and fixtures in the Internalization Transaction was $15,187 and $28,186 for the three and six months ended June 30, 2021, respectively, and $0 for each of the three and six months ended June 30, 2020, respectively.

~~Depreciation~~Amortization of the Company’s ~~buildings~~intangible ~~and~~assets ~~improvements~~ was $33553,~~044,052~~612 and $221,~~751~~371,~~822~~066 for the three and six months ended ~~March~~June 3130, 2021, ~~and 2020~~respectively, ~~respectively. Depreciation of the Company’s acquired furniture~~ and ~~fixtures in the Internalization Transaction was~~ $1220,~~999~~140,511 and $025,964,584 for the three and six months ended ~~March 31~~June 30, ~~2021, and~~ 2020, respectively.

~~Total~~Amortization ~~amortization~~ of the Company’s ~~intangible~~tenant ~~assets~~origination and absorption costs was $~~817~~343,~~454~~434 and $5950,~~824,074~~710 for the three and six months ended ~~March~~June 3130, 2021, respectively, and $20,138,302 and $25,961,107 for the three and six months ended June 30, 2020, respectively. 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 ~~tenant~~operating ~~origination~~ROU ~~and~~assets ~~absorption costs~~ was $~~607~~3,~~276~~367 and $56,~~822,805~~734 for the three and six months ended ~~March~~June 3130, 2021, respectively, and ~~2020~~ $2,209 ~~respectively.~~and $3,477 ~~Tenant~~for ~~origination~~the three and ~~absorption~~six ~~costs~~months ~~had~~ended aJune 30, ~~weighted-average~~2020, ~~amortization~~respectively. ~~period~~This asrepresents of the ~~date~~amortization of ~~acquisition~~initial indirect costs included in the measurement of ~~less~~the ~~than one~~operating ~~year~~ROU assets.

Amortization of the Company’s ~~operating~~SRI ~~ROU~~Property ~~assets~~Management Agreements was $3206,~~367~~811 and $1413,~~269~~ 622 for the three and six months ended ~~March~~June 3130, 2021, ~~and 2020~~respectively, ~~respectively.~~and ~~This~~$0 ~~represents~~for ~~the~~each ~~amortization~~ of ~~initial direct costs included in~~ the ~~measurement~~three ofand ~~the~~six ~~operating~~months ~~ROU~~ended ~~assets.~~June 30, 2020

Amortization of the Company’s ~~SRI~~other ~~Property~~intangible ~~Management~~assets, ~~Agreements~~which consist of below-market leases, was $~~206~~1,~~811~~671 and $03,342 for the three and six months ended ~~March~~June 3130, 2021 and $1,671 and $2,594 for the three and six months ended June 30, 2020, respectively., ~~This~~and ~~represents~~is included as an increase to rental income in the ~~amortization~~accompanying consolidated condensed statements of ~~the~~operations. ~~SRI~~Other ~~Property~~intangible ~~Management~~assets ~~Agreements~~had ~~acquired~~a inweighted-average amortization period as of the ~~Internalization~~date ~~Transaction~~of acquisition of ten years.

Amortization of the Company’s other intangible assets, which consist of below-market leases, was $1,671 and $922 for the three months ended March 31, 2021 and 2020, respectively, and is included as an increase to rental income in the accompanying consolidated condensed statements of operations. Other intangible assets had a weighted-average amortization period as of the date of acquisition of 10 years.

Operating Leases

As of ~~March~~June 3130, 2021, the Company’s real estate portfolio comprised 21,~~591~~936 residential apartment homes and was 9698.91% leased by a diverse group of residents. For the three and six months ended ~~March~~June 3130, 2021 and 2020, the Company’s real estate portfolio earned in excess of 99% and less than 1% of its rental income from residential tenants and commercial tenants, respectively. The residential tenant lease terms typically consist of lease durations equal to 12 months or less. The commercial tenant leases consist of remaining lease durations varying from six to nine years.

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 residents. Generally, upon the execution of a lease, the Company requires security deposits from residents 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 $9,011,485 and $8,545,977 as of June 30, 2021 and December 31, 2020, respectively.

2325

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

~~terms~~The offuture ~~the~~minimum ~~respective~~rental ~~leases~~receipts ~~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~~Company’s ofproperties ~~its~~under ~~security~~non-cancelable ~~deposit.~~operating ~~Security~~leases ~~deposits~~attributable ~~received in cash related~~ to ~~tenant~~commercial ~~leases~~tenants ~~are included in accounts payables and accrued liabilities in the accompanying consolidated balance sheets and totaled $8,701,518 and $8,545,977~~ as of ~~March~~June 3130, 2021, and ~~December 31,~~thereafter ~~2020,~~is ~~respectively.~~as follows:

The future minimum rental receipts from the Company’s properties under non-cancelable operating leases attributable to commercial tenants as of March 31, 2021, and thereafter is as follows:



July 1 to December 31, 2021	$	149,501
2022	274,149
2023	280,777
2024	288,703
2025	296,860
Thereafter	1,059,469
	$	2,349,459

April 1, through December 31, 2021	$	166,108
2022	244,460
2023	250,196
2024	257,214
2025	264,423
Thereafter	980,059
	$	2,162,460

As of June 30, 2021 and December 31, 2020, 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.

As of March 31, 2021 and December 31, 2020, 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.

Real Estate Under Development

During the three and six months ended ~~March~~June 3130, 2021, the Company owned the following parcels of 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(1)	Murfreesboro, TN	5/30/2019	$	1,895,365	$	19,795,882	$	21,691,247
Garrison Station (1)	Murfreesboro, TN	5/30/2019	$	2,469,183	$	9,879,800	$	12,348,983
Arista at Broomfield	Broomfield, CO	3/13/2020	7,283,803		1,~~447~~666,~~922~~615		8,~~731~~950,~~725~~418
Flatirons	Broomfield, CO	6/19/2020	8,574,704		~~328~~414,~~366~~649		8,~~903~~989,~~070~~353
			$	1718,~~753~~327,~~872~~690	$	2111,~~572~~961,~~170~~064	$	3930,~~326~~288,~~042~~754

(1) The Company is developing Garrison Station, which consists of nine residential buildings comprised of 176 apartment homes. During the three months ended March 31, 2021, one building comprised of 24 apartment homes was placed in service totaling $4,678,909, and is included in total real estate held for investment, net in the accompanying consolidated balance sheets._______________

(1)The Company is developing Garrison Station, which consists of nine residential buildings comprised of 176 apartment homes. During the six months ended June 30, 2021, five buildings comprised of 95 apartment homes were placed in service totaling $17,703,957, and are included in total real estate held for investment, net in the accompanying consolidated balance sheets.

Completion of Mergers

On March 6, 2020, pursuant to the terms and conditions of the SIR Merger Agreement and STAR III Merger Agreement (together the “Merger Agreements”), SIR Merger Sub and STAR III Merger Sub, the surviving entities ~~in the Mergers~~, continued as wholly-owned subsidiaries of the Company. In accordance with the applicable provisions of the MGCL, the separate existence of SIR and STAR III ceased. The ~~combined~~Combined ~~company~~Company retained the name “Steadfast Apartment REIT, Inc.” At the effective time of the Mergers, each issued and outstanding share of SIR and STAR III’s common stock (or a fraction thereof), each $0.01 par value per share, was converted into 0.5934 and 1.430 shares of the Company’s common stock, respectively.

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

The following table summarizes the purchase price of SIR and STAR III as of the date of the Mergers:

	SIR		STAR III
Class A common stock issued and outstanding	—		3,458,807
Class R common stock issued and outstanding	—		475,207
Class T common stock issued and outstanding	—		4,625,943
Common stock issued and outstanding	73,770,330		—
Total common stock issued and outstanding	73,770,330		8,559,957
Exchange ratio	0.5934		1.430
STAR common stock issued as consideration(1)	43,775,314		12,240,739
STAR’s estimated value per share at the time of Mergers	~~15.84~~$	15.84	~~15.84~~$	15.84
Value of STAR’s common stock issued as consideration	$	693,400,974	$	193,893,305

____________________

(1) Represents the number of shares of common stock of SIR and STAR III converted into shares of the Company’s common stock upon consummation of the Mergers.

The following table ~~shows~~presents the purchase price allocation of SIR’s and STAR III’s identifiable assets and liabilities assumed as of the date of the Mergers:


	SIR		STAR III
Assets:
Land	$	114,377,468	$	58,056,275
Buildings and improvements	959,337,747		411,461,858
Acquired intangibles	27,027,759		10,041,373
Other assets	122,688,608		21,438,855
Investment in unconsolidated joint venture	22,128,691		—
Total assets:	$	1,245,560,273	$	500,998,361
Liabilities:
Mortgage notes payable, net	$	(506,023,981)	$	(289,407,045)
Other liabilities	(46,135,318)		(17,698,011)
Total liabilities:	$	(552,159,299)	$	(307,105,056)
Fair value of net assets acquired	$	693,400,974	$	193,893,305

Capitalized Acquisition Costs Related to the Mergers

The SIR Merger and STAR III Merger were each accounted for as an asset acquisition. In accordance with the asset acquisition method of accounting, costs incurred to acquire the asset were capitalized as part of the acquisition price. Upon the execution of the Merger Agreements 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.

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

5. Investment in Unconsolidated Joint Venture

On March 6, 2020, upon consummation of the SIR Merger, the Company acquired a 10% interest in BREIT Steadfast MF JV LP (the “Joint Venture”). On July 16, 2020 (the “JV Disposition Date”), the Company sold its joint venture interest for $19,278,280 to an affiliate of the general partner of the Joint Venture. The Company did not exercise significant influence, nor did it control the Joint Venture and had accounted for its former investment in the Joint Venture under the equity method of accounting. Income, losses, contributions and distributions were generally allocated based on the members’ respective equity interests.

The Company recognized an other-than-temporary impairment (“OTTI”) on its investment in the Joint Venture of $2,442,411 during the three months ended June 30, 2020. The OTTI was a result of the Company receiving an indication of value in connection with negotiating a sale of the Company’s joint venture interest at a disposition price that was less than the carrying value of the Joint Venture. The OTTI was included in equity in loss from unconsolidated joint venture on the Company’s consolidated statements of operations. In determining the fair value of the Joint Venture, the Company considered Level 3 inputs.

As of the JV Disposition Date, the book value of the Company’s investment in the Joint Venture was $18,955,478, which included an accounting outside basis difference of $8,067,010, net and capitalized transaction costs of $594,993, net. The accounting outside basis difference represented the difference between the purchase price the Company paid for its investment in the Joint Venture in connection with the SIR Merger and the book value of the Company’s equity in the Joint Venture as of the JV Disposition Date. The capitalized transaction costs relate to acquiring the interest in the Joint Venture through the consummation of the SIR Merger.

During the ~~year~~three and six months ended ~~December~~June 3130, 2020, $~~490~~425,~~586~~966 and $432,442, respectively, of amortization of the basis difference was included in equity in ~~losses~~loss from unconsolidated joint venture on the accompanying consolidated statements of operations. The Company recorded the gain on sale of the investment in unconsolidated joint venture of $66,802 in equity in ~~losses~~loss from unconsolidated joint venture on the accompanying consolidated statements of operations. ~~During~~The Company received distributions of $0 during each of the ~~year~~three and six months ended ~~December~~June 3130, ~~2020~~2021 and $242,700 and $360,700 during the ~~Company~~three ~~received~~and ~~distributions~~six ofmonths ~~$360~~ended June 30,~~700~~ 2020, related to its investment in the Joint Venture, respectively.

Unaudited financial information for the Joint Venture for the ~~period~~three ~~from~~and ~~March~~six 6,months ~~2020~~ended ~~through~~June ~~March 31~~30, 2020, is summarized below:

					For the Period from March 6, 2020 through March 31, 2020
	Three Months Ended June 30, 2020		Six Months Ended June 30, 2020
Revenues	$	15,900,071	$	20,534,675	$	~~4,634,604~~
Expenses	(17,077,940)		(21,999,716)		~~(4,921,775)~~
Other income	179,573		179,573		—
Net loss	$	(998,296)	$	(1,285,468)	$	~~(287,171)~~
Company’s proportional net loss	$	(99,830)	$	(128,547)	$	~~(28,717)~~
Amortization of outside basis	(425,966)		(432,442)		~~(6,476)~~
Equity in losses of unconsolidated joint venture					$	(35,193)
Impairment of unconsolidated joint venture	(2,442,411)		(2,442,411)
Equity in loss from unconsolidated joint venture	$	(2,968,207)	$	(3,003,400)

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

6. Other Assets

As of ~~March~~June 3130, 2021 and December 31, 2020, other assets consisted of:

	March 31, 2021		December 31, 2020
	June 30, 2021		December 31, 2020
Prepaid expenses	$	31,~~715~~867,~~312~~500	$	6,446,847
SRI Property Management Agreements, net	~~339~~135,~~580~~830		543,332
Interest rate cap agreements (Note 14)	3021,~~872~~255		7,852
Other deposits	~~655~~853,~~888~~917		649,470
Corporate computers, net	~~145~~166,~~979~~622		132,708
Lease right-of-use assets, net (Note 15)(1)	1,~~877~~609,~~774~~503		2,145,505
Other assets	$	64,~~765~~654,~~405~~627	$	9,925,714

~~_________________~~____________________

(1) As of ~~March 31~~June 30, 2021, lease ROU assets, net included a finance lease ROU asset, net of $1310,~~785~~725 and operating ROU assets, net of $1,~~863~~598,~~989~~778. As of December 31, 2020, lease ROU assets, net included a finance lease ROU asset, net of $16,845 and operating ROU assets, net of $2,128,660.

Amortization of the Company’s SRI Property Management Agreements was $206,811 and $0413,622 for the three and six months ended ~~March~~June 3130, 2021, respectively, and ~~2020~~ $0 for each of the three and six months ended June 30, ~~respectively~~2020.

Amortization of the Company’s initial ~~direct~~indirect costs included in the measurement of the operating ROU assets for the three and six months ended June 30, 2021, was $3,367 and $16,~~269~~734, respectively. Amortization of the Company’s initial indirect costs included in the measurement of the operating ROU assets for the three and six months ended ~~March~~June 3130, ~~2021~~2020, was $2,209 and ~~2020~~ $3,477, respectively. See Note 15 (Leases) for details.

7. Debt

Mortgage Notes Payable

The following is a summary of mortgage notes payable, net, secured by individual properties as of ~~March~~June 3130, 2021 and December 31, 2020:.

March 31, 2021

June 30, 2021

Interest Rate Range

Weighted Average Interest Rate

Type

Number of Instruments

Maturity Date Range

Minimum

Maximum

Principal Outstanding

Variable rate(1)

10/16/2022 - 1/1/2027

1-Mo LIBOR + 1.88%

1-Mo LIBOR + 2.31%

2.2322%

~~117~~121,~~670~~210,~~742~~315

Fixed rate

10/1/2022 - 10/1/2056

3.19%

4.66%

3.85%

1,~~272~~270,~~208~~499,~~826~~536

Mortgage notes payable, gross

3.71%

1,~~389~~391,~~879~~709,~~568~~851

Premiums and discount, net(2)

3,391,845

Premiums and discounts, net(2)

2,968,685

Deferred financing costs, net(3)

(6,~~418~~081,~~063~~617)

Mortgage notes payable, net

1,~~386~~388,~~853~~596,~~350~~919

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

	December 31, 2020
			Interest Rate Range				Weighted Average Interest Rate
Type	Number of Instruments	Maturity Date Range	Minimum		Maximum			Principal Outstanding
Variable rate(1)	4	10/16/2022 - 1/1/2027	1-Mo LIBOR + 1.88%		1-Mo LIBOR + 2.31%		2.27%	$	113,452,357
Fixed rate	42	10/1/2022 - 10/1/2056	3.19%	%	4.66%	%	3.85%	1,273,877,535
Mortgage notes payable, gross	46						3.72%	1,387,329,892
Premiums and discount, net(2)								3,809,734
Deferred financing costs, net(3)								(6,756,841)
Mortgage notes payable, net								$	1,384,382,785

~~_________________~~________________

(1) See Note 14 (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) The following table summarizes debt premiums and discounts as of ~~March~~June 3130, 2021 and December 31, 2020, including the unamortized portion included in the principal balance as well as amounts amortized included in interest expense in the accompanying consolidated statements of operations.:

Net Debt Premium (Discount) before Amortization as of March 31, 2021		Amortization of Debt (Premium) Discount During the Three Months Ended March 31, 2021		Unamortized Net Debt Premium (Discount) as of March 31, 2021
Net Debt Premium (Discount) before Amortization as of June 30, 2021		Amortization of Debt (Premium) Discount During the Six Months Ended June 30, 2021		Unamortized Net Debt Premium (Discount) as of June 30, 2021
$	15,375,305	$	(2,~~390~~949,~~339~~400)	$	12,~~984~~425,~~966~~905
(10,179,526)		~~586~~722,~~405~~306		(9,~~593~~457,~~121~~220)
$	5,195,779	$	(12,~~803~~227,~~934~~094)	$	32,~~391~~968,~~845~~685

Net Debt Premium (Discount) before Amortization as of December 31, 2020			Amortization of Debt (Premium) Discount During the Year Ended December 31, 2020		Unamortized Net Debt Premium (Discount) as of December 31, 2020
$	15,375,305		$	(1,836,575)	$	13,538,730
(10,179,526)			450,530		(9,728,996)
$	5,195,779	~~5195779~~	$	(1,386,045)	$	3,809,734

(3) Accumulated amortization related to deferred financing costs as of ~~March~~June 3130, 2021 and December 31, 2020 was $34,~~833~~170,~~961~~407 and $3,495,183, respectively.

Construction ~~Loan~~loan

On October 16, 2019, the Company entered into an agreement with PNC Bank, National Association (“PNC Bank”) for a construction loan related to the ~~development of a multifamily property known as~~ Garrison Station development project in an aggregate principal amount not to exceed $19,800,000 for a 36 month initial term and two 12 month mini-perm extensions. The rate of interest on the construction loan is daily LIBOR plus 2.00%, which then reduces to daily LIBOR plus 1.80% upon achieving completion as defined in the construction loan agreement and at a debt service coverage ratio of 1.15x. The loan includes a 0.4% fee at closing, a 0.1% fee upon exercising the mini-perm and a 0.1% fee upon extending the mini-perm, each payable to PNC Bank. There is an exit fee of 0.1% which will be waived if permanent financing is secured through PNC Bank or one of its affiliates. As of June 30, 2021

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

~~closing, a 0.1% fee upon exercising the mini-perm~~ and a 0.1% fee upon extending the mini-perm, each payable to PNC Bank. There is an exit fee of 1% which will be waived if permanent financing is secured through PNC Bank or one of its affiliates. As of March 31, 2021 and December 31, 2020, the principal outstanding balance on the construction loan was $1014,~~849~~831,~~189~~682 and $6,264,549, respectively, and was included within mortgage notes payable, net on the accompanying consolidated balance sheets.

Credit Facilities

Master Credit Facility

On July 31, 2018, 16 indirect wholly-owned subsidiaries of the Company entered into a Master Credit Facility Agreement (“MCFA”) with Newmark Group, Inc., formerly Berkeley Point Capital, LLC (“Facility Lender”) for an aggregate principal amount of $551,669,000. On February 11, 2020, in connection with the financing of Patina Flats at the Foundry, the Company and the Facility Lender amended the MCFA to substitute Patina Flats at the Foundry and Fielders Creek, the then-unencumbered multifamily property owned by the Company, as substitute collateral for the three multifamily properties disposed of and released from the MCFA. The Company also increased its outstanding borrowings pursuant to the MCFA by $40,468,000, a portion of which was attributable to the acquisition of Patina Flats at the Foundry. The MCFA provides for four 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% per annum; (3) a variable rate loan in the aggregate principal amount of $82,750,350 that accrues interest at the one-month LIBOR plus 1.70% per annum; and (4) a fixed rate loan in the aggregate principal amount of $40,468,000 that accrues interest at 3.34% per annum. The first three tranches have a maturity date of August 1, 2028, and the fourth tranche has a maturity date of March 1, 2030, unless in each case the maturity date is accelerated in accordance with the terms of the loan documents. Interest only payments are payable monthly through August 1, 2025 and April 1, 2027 on the first three tranches and fourth tranche, respectively, with interest and principal payments due monthly thereafter.

PNC Master Credit Facility

On June 17, 2020, the Company, through seven indirect wholly-owned subsidiaries (each, a “Borrower” and collectively, the “Borrowers”), entered into a Master Credit Facility Agreement (the “PNC MCFA,”), a fixed rate Multifamily Note and a variable rate Multifamily Note (collectively, the “Notes”) and the other loan documents for the benefit of PNC Bank. The PNC MCFA provides for two tranches: (1) a fixed rate loan in the aggregate principal amount of $79,170,000 that accrues interest at 2.82% per annum; and (2) a variable rate loan in the aggregate principal amount of $79,170,000 that accrues interest at the one-month LIBOR plus 2.135% per annum. If LIBOR is no longer posted through electronic transmission, is no longer available or, in PNC Bank’s determination, is no longer widely accepted or has been replaced as the index for similar financial instruments, PNC Bank will choose a new index taking into account general comparability to LIBOR and other factors, including any adjustment factor to preserve the relative economic positions of the Borrowers and PNC Bank with respect to any advances made pursuant to the PNC MCFA. The Company paid $633,360 in the aggregate in loan origination fees to PNC Bank in connection with the financings, and paid the Former Advisor a loan coordination fee of $791,700.

Revolving Credit Loan Facility

On June 26, 2020, the Company entered into a revolving credit loan facility (the “Revolver”) with PNC Bank in an amount not to exceed $65,000,000. The Revolver provides for advances (each, a “Revolver Loan”) solely for the purpose of financing 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 Revolver has a maturity date of June 26, 2023, subject to extension. Advances made under the Revolver are secured by the Landings of Brentwood property, as evidenced by the Loan Agreement, the Credit Facility Notes (the “Notes”), the Deed of Trust and a Guaranty from the Company (the “Guaranty,” together with the Loan Agreement and the Notes, the “Loan Documents”).

The Company has the option to select the interest rate in respect of the outstanding unpaid principal amount of each Revolver Loan from the following options: (1) a fluctuating rate per annum equal to the sum of the daily LIBOR rate plus the daily LIBOR rate spread or (2) a fluctuating rate per annum equal to the base rate plus the alternate rate spread. No amounts were outstanding on the Revolver at June 30, 2021 and December 31, 2020.

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

~~daily~~As ~~LIBOR~~of ~~rate~~June 30, ~~spread~~2021 orand ~~(2)~~December 31, a2020, ~~fluctuating~~the ~~rate~~advances ~~per~~obtained ~~annum~~and ~~equal~~certain tofinancing costs incurred under the ~~base~~MCFA, ~~rate~~PNC ~~plus~~MCFA and the ~~alternate~~Revolver, ~~rate~~which ~~spread.~~are Noincluded ~~amounts~~in ~~were~~credit ~~outstanding~~facilities, onnet, in the ~~Revolver~~accompanying atconsolidated ~~March 31~~balance sheets, ~~2021~~are summarized in the following table.

As of March 31, 2021 and December 31, 2020, the advances obtained and certain financing costs incurred under the MCFA, PNC MCFA and the Revolver, which are included in credit facilities, net, in the accompanying consolidated balance sheets, are summarized in the following table.


	Amount of Advance as of
	June 30, 2021		December 31, 2020
Principal balance on MCFA, gross	$	592,137,000	$	592,137,000
Principal balance on PNC MCFA, gross	158,340,000		158,340,000

Deferred financing costs, net on MCFA(1)	(3,202,518)		(3,436,850)
Deferred financing costs, net on PNC MCFA(2)	(1,599,176)		(1,689,935)
Deferred financing costs, net on Revolver(3)	(390,079)		(487,329)
Credit facilities, net	$	745,285,227	$	744,862,886

	Amount of Advance as of
	March 31, 2021		December 31, 2020
Principal balance on MCFA, gross	$	592,137,000	$	592,137,000
Principal balance on PNC MCFA, gross	158,340,000		158,340,000
Deferred financing costs, net on MCFA(1)	(3,320,332)		(3,436,850)
Deferred financing costs, net on PNC MCFA(2)	(1,644,807)		(1,689,935)
Deferred financing costs, net on Revolver(3)	(438,973)		(487,329)
Credit facilities, net	$	745,072,888	$	744,862,886

_______________

~~_________________~~(1) Accumulated amortization related to deferred financing costs in respect of the MCFA as of June 30, 2021 and December 31, 2020, was $1,532,597 and $1,298,265, respectively.

(12) Accumulated amortization related to deferred financing costs in respect of the PNC MCFA as of ~~March~~June 3130, 2021 and December 31, 2020, was $1190,~~414,783~~042 and $199,~~298~~283,~~265,~~ respectively.

(23) Accumulated amortization related to deferred financing costs in respect of the ~~PNC~~Revolver ~~MCFA~~ as of ~~March~~June 3130, 2021 and December 31, 2020, was $~~144~~198,~~412~~799 and $99101,~~283~~549, respectively.

(3)Accumulated amortization related to deferred financing costs in respect of the Revolver as of March 31, 2021 and December 31, 2020, was $149,905 and $101,549, respectively.

Assumed Debt as a Result of the Completion of Mergers

On March 6, 2020, upon consummation of the Mergers, the Company assumed all of SIR’s and STAR III’s obligations under the outstanding mortgage loans secured by 29 properties. The Company recognized the fair value of the assumed notes payable in the Mergers of $795,431,027, which consists of the assumed principal balance of $791,020,471 and a net premium of $4,410,556.

The following is a summary of the terms of the assumed loans on the date of the Mergers:

			Interest Rate Range
Type	Number of Instruments	Maturity Date Range	Minimum	Maximum	Principal Outstanding At Merger Date
Variable rate	2	1/1/2027 - 9/1/2027	1-Mo LIBOR + 2.195%	1-Mo LIBOR + 2.31%	$	64,070,000
Fixed rate	27	10/1/2022 - 10/1/2056	3.19%	4.66%	726,950,471
Assumed Principal Mortgage Notes Payable	29				$	791,020,471

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

Maturity and Interest

The following is a summary of the Company’s aggregate maturities as of ~~March~~June 3130, 2021:

					Maturities During the Years Ending December 31,
Contractual Obligations	Total		Remainder of 2021		2022		2023		2024		2025		Thereafter
Principal payments on outstanding debt (1)	$	2,~~140~~142,~~356~~186,~~568~~851	$	64,~~620~~475,~~798~~904	$	4549,~~703~~688,~~199~~647	$	60,~~658~~661,~~369~~183	$	58,~~176~~178,~~299~~998	$	197,~~607~~591,~~413~~629	$	1,771,590,490

~~_________________~~________________

(1) Scheduled principal payments on outstanding debt obligations are based on the terms of the notes payable agreements. Amounts exclude deferred financing costs, net and debt premiums (discounts), net associated with the notes payable.

The Company’s notes payable contain customary financial and non-financial debt covenants. At ~~March~~June 3130, 2021 ~~and December 31~~, ~~2020,~~ the Company was in compliance with all debt covenants.

For the three and six months ended ~~March~~June 3130, 2021 ~~and 2020~~, the Company incurred interest expense of $1920,~~807~~087,~~678~~353 and $1439,~~390~~895,~~954~~031, respectively. Interest expense for the three and six months ended ~~March~~June 3130, 2021 ~~and 2020~~, includes amortization of deferred financing costs oftotaling $548,~~781~~784 and $~~327~~1,~~470~~097,565, net unrealized loss (~~gains~~gain) ~~losses~~ from the change in fair value of interest rate cap agreements of $~~(10~~9,~~820)~~617 and $2(1,~~251~~203), amortization of net loan premiums and discounts of $~~417~~(423,~~889~~160) and $~~114~~(841,~~582~~049), ~~credit~~capitalized ~~facility~~interest ~~commitment fees~~ of $34244,~~575~~822 and $0560,066, ~~costs~~credit ~~associated~~facility ~~with~~commitment ~~the~~fees ~~refinancing~~ of ~~debt of~~ $031,417 and $3165,~~397~~991, and imputed interest on the finance lease portion of the sublease of $~~107~~86 and $~~0, and capitalized interest of $315,244 and $69,569, respectively~~193. The capitalized interest is included in real estate held for development on the consolidated balance sheets.

For the three and six months ended June 30, 2020, the Company incurred interest expense of $19,715,318 and $34,106,272, respectively. Interest expense for the three and six months ended June 30, 2020, includes amortization of deferred financing costs of $6482,~~800~~406 and $809,~~506~~876, net unrealized loss from the change in fair value of interest rate cap agreements of $24,943 and $627,~~806~~194,~~695~~ ~~was~~amortization ~~payable~~of asnet loan premiums and discounts of ~~March 31~~$(413,858) ~~2021~~and $(528,440) and ~~December 31~~costs associated with the refinance of debt of $11,484 ~~2020~~and $42,881, ~~respectively~~net of capitalized interest of $193,049 and $262,619, respectively. The capitalized interest is included in ~~accounts~~real ~~payable~~estate ~~and~~held ~~accrued~~for ~~liabilities~~development inon the ~~accompanying~~ consolidated balance sheets.

Interest expense of $6,586,461 and $6,806,695 was payable as of June 30, 2021 and December 31, 2020, respectively, and is included in accounts payable and accrued liabilities in the accompanying consolidated balance sheets.

8. Stockholders’ Equity

General

Pursuant to the Company’s Articles of Amendment and Restatement (as supplemented, the “Charter”), the total number of shares of capital stock authorized for issuance is 1,100,000,000 shares, consisting of 999,998,000 shares of common stock with a par value of $0.01 per share, 1,000 shares of Class A non-participating, non-voting convertible stock with a par value of $0.01 per share, 1,000 shares of non-participating, non-voting 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 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 SRI, the Company’s former sponsor, for $202,500. From inception through March 24, 2016, the date of the termination of the Primary 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. The offering costs primarily consisted of selling commissions and dealer manager fees paid in the Primary Offering. Following the termination of the Public Offering, the Company continues to offer shares 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

~~March~~June 3130, 2021

(unaudited)

~~As of March 31, 2021, the Company had~~ issued ~~111~~48,~~967~~625,~~192~~651 shares of common stock in its Public Offering for offering proceeds of $1640,~~637~~012,~~793~~497,~~196,~~ including 81,~~337~~011,~~112~~ 561 shares of common stock issued pursuant to the DRP ~~and 56,016,053 shares of common stock issued in connection with the Mergers (described below),~~ for total proceeds of $~~124~~14,~~901~~414,~~172~~752, 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. OnFollowing ~~March~~the 6,termination ~~2020,~~of the ~~Company~~Public ~~issued 43~~Offering,~~775,314~~ ~~shares~~the ofCompany ~~its~~continues ~~common stock~~ to ~~SIR’s~~offer ~~stockholders and 12,240,739~~ shares ofpursuant ~~its common stock~~ to ~~STAR III’s stockholders in connection with~~ the ~~Mergers~~DRP.

As ~~further~~of ~~discussed~~June 30, in2021, ~~Note~~the 11Company ~~(Incentive~~had ~~Award~~issued ~~Plan and Independent Director Compensation)~~112,167,095 ~~the~~ shares of ~~restricted~~ common stock ~~granted~~for tooffering ~~the~~proceeds ~~Company’s~~of ~~independent~~$1,640,901,685, ~~directors~~including ~~prior to the Internalization Transaction~~8,537,015 ~~vest~~shares ~~and~~of ~~become~~common ~~non-forfeitable~~stock inissued ~~four~~pursuant ~~equal~~to ~~annual installments beginning on~~ the ~~date~~DRP ~~of grant~~ and ~~ending on the third anniversary of the date of grant. On September 15~~56, ~~2020~~016,053 ~~the~~shares ~~Company’s board~~ of ~~directors~~common ~~approved~~stock anissued ~~amendment~~in toconnection with the ~~independent~~Mergers ~~directors’~~(described ~~compensation plan~~below), ~~pursuant~~for tototal ~~which~~DRP ~~each~~proceeds of ~~the~~$128,009,661, ~~Company’s~~net ~~current~~of ~~independent~~offering ~~directors~~costs isof ~~entitled~~$84,837,134. toThe ~~receive~~offering ancosts ~~annual~~primarily ~~retainer~~consisted of ~~$75,000~~selling incommissions ~~cash~~ and ~~$75,000~~dealer inmanager ~~shares~~fees ofpaid ~~restricted~~in ~~common~~the ~~stock~~Primary ~~upon~~Offering. ~~election~~On orMarch ~~re-election~~6, to2020, the Company’s ~~board~~issued of43,775,314 ~~directors. The~~ shares of ~~restricted~~its common stock ~~granted pursuant~~ to ~~the Company~~SIR’s ~~independent~~stockholders ~~directors’ compensation plan generally vest in two equal annual installments beginning on the first anniversary of the date of grant~~ and ~~ending on the second anniversary of the date of grant; provided~~12, ~~however~~240,739 ~~that~~shares ~~the~~of ~~restricted~~its common stock ~~will become fully vested on the earlier~~ to ~~occur~~STAR ~~of: (1) the termination of the independent director~~III’s ~~service~~stockholders ~~as a director due to his or her death or disability, or (2) a change~~ in ~~control~~connection ofwith the ~~Company~~Mergers.

~~The~~As ~~issuance~~further discussed in Note 11 (Incentive Award Plan and ~~vesting~~Independent ~~activity~~Director ~~for~~Compensation), the ~~three~~shares ~~months~~of ~~ended~~restricted ~~March 31,~~common ~~2021~~stock granted to the Company’s independent directors prior to the Internalization Transaction, vest and ~~year~~become ~~ended~~non-forfeitable ~~December 31~~in four equal annual installments beginning on the date of grant and ending on the third anniversary of the date of grant. On September 15, 2020, ~~for~~the Company’s board of directors approved an amendment to the independent directors’ compensation plan, pursuant to which, each of the Company’s current independent directors is entitled to receive an annual retainer of $75,000 in cash and $75,000 in shares of restricted common stock ~~issued~~upon election or re-election to the Company’s board of directors. The shares of restricted common stock granted pursuant to the Company’s independent directors’ ~~were~~compensation asplan ~~follows~~generally vest in two equal annual installments beginning on the first anniversary of the date of grant and ending on the second 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.

	Three Months Ended March 31, 2021	Year Ended December 31, 2020
Nonvested shares at the beginning of the period	33,369	7,497
Granted shares	—	31,288
Vested shares	(1,667)	(5,416)
Nonvested shares at the end of the period	31,702	33,369

The issuance and vesting activity for the six months ended June 30, 2021 and year ended December 31, 2020, for the restricted stock issued to the Company’s independent directors were as follows:

Additionally, the weighted average fair value of restricted common stock issued to the Company’s independent directors for the three months ended March 31, 2021, and year ended December 31, 2020, was as follows:


	Six Months Ended June 30, 2021	Year Ended December 31, 2020
Nonvested shares at the beginning of the period	33,369	7,497
Granted shares	—	31,288
Vested shares	(1,667)	(5,416)

Nonvested shares at the end of the period	31,702	33,369

Additionally, the weighted average fair value of restricted common stock issued to the Company’s independent directors for the six months ended June 30, 2021 and year ended December 31, 2020 was as follows:


Grant Year	Weighted Average Fair Value

2020	$	15.36
2021	N/A

Included in general and administrative expenses is $63,168 and $42126,~~455~~336 for the three and six months ended ~~March~~June 3130, 2021, respectively, and $20,928 and $63,383 for the three and six months ended June 30, 2020, respectively, for compensation expense related to the issuance of restricted common stock. As of ~~March~~June 3130, 2021, the compensation expense related to the issuance of the restricted common stock not yet recognized was $~~402~~339,~~998~~830. The weighted average remaining term of the restricted common stock was approximately 10.29 years as of ~~March~~June 3130, 2021. As of ~~March~~June 3130, 2021, no shares of restricted common stock issued to the independent directors have been forfeited.

~~Issuance of Restricted Stock Awards to Key Employees~~34

2020 Restricted Stock Awards

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

~~reviewing,~~Issuance ~~considering, investigating, evaluating, proposing and negotiating the Mergers (the “Special Committee”). The grants to the key employees~~ of ~~the~~Restricted ~~Company~~Stock ~~were~~Awards ~~made pursuant~~ to aKey restricted stock grant agreement. The grants vest 50% on the second anniversary of the grant date and 50% on the third anniversary of the grant date (collectively, the “2020 Restricted Stock Awards”).Employees

2020 Restricted Stock Awards

In connection with the Internalization Transaction, on September 1, 2020, certain key employees of the Company were issued restricted stock grants under the terms of the Company’s Amended and Restated 2013 Incentive Plan (the “Incentive Award Plan”), which grants had been approved by the board of directors and the special committee formed for the purpose of reviewing, considering, investigating, evaluating, proposing and negotiating the Mergers (the “Special Committee”). The grants to the key employees of the Company were made pursuant to a restricted stock grant agreement. The grants vest 50% on the second anniversary of the grant date and 50% on the third anniversary of the grant date (collectively, the “2020 Restricted Stock Awards”).

The 2020 Restricted Stock Award provides that vesting is subject to the key employee’s continued employment with the Company through each applicable vesting date, except in the event of death or disability, in which case, any unvested portion of the awards will become fully vested. In addition, the Restricted Stock Award provides the key employee with rights as a stockholder in respect of the awards’ vested and unvested shares, including the right to vote and the right to dividends.

In the event of a termination of a key employee’s employment by the Company without cause or by the key employee for good reason within 12 months following a change in control, any unvested portion of the 2020 Restricted Stock Award will become fully vested at the time of such termination, provided that if the 2020 Restricted Stock Award is unvested at the time of a change in control of the Company and is not assumed or substituted for equivalent awards as part of the change in control transaction, the 2020 Restricted Stock Awards will become fully vested at the time of the change in control transaction. The fair value of grants issued was approximately $2,850,000.

2021 Restricted Stock Awards

Pursuant to employment agreements with key employees, on March 15, 2021, the Company granted key employees an award of time-based restricted stock (the “Time-Based 2021 Award”) with a total grant date fair value of $1,512,000 subject to the terms of the Incentive Award Plan. The Time-Based 2021 Awards vest ratably over three years following the grant date, subject to the key employee’s continuous employment through the applicable vesting dates, with certain exceptions.

Total compensation expense related to the 2020 Restricted Stock Awards and the Time-Based 2021 Award for the three and six months ended ~~March~~June 3130, 2021 ~~and 2020, respectively,~~ was $~~260~~363,~~539~~507 and $0624,046, respectively, and was included in general and administrative costs on the accompanying consolidated statements of operations. As of ~~March~~June 3130, 2021, the compensation expense related to the issuance of the restricted common stock to the key employees not yet recognized was $3,~~784~~421,~~785~~278. The weighted average remaining term of the restricted common stock issued to the Company’s key employees was approximately 1.97 years as of ~~March~~June 3130, 2021. As of ~~March~~June 3130, 2021, no shares of restricted common stock issued to the Company’s key employees have been forfeited.

Investment Management Fee Paid to Former Advisor in Shares

Following the completion of the Mergers on March 6, 2020 and until the Internalization Closing, and pursuant to the Advisory Agreement, the Company paid the Former Advisor a monthly investment management fee, payable 50% in cash and 50% in shares of the Company’s common stock at the estimated value per share at the time of issuance. The shares of common stock fully vested and became non-forfeitable upon payment of the monthly investment management fee. The fair value of the vested common stock at the date of issuance, using the then- most recent publicly disclosed estimated value per share, was recorded in stockholders’ equity in the accompanying consolidated balance sheets. ~~Investment~~No investment management fees were incurred in shares, ~~included~~for inthe ~~fees~~three toand ~~affiliates~~six inmonths ~~the~~ended ~~accompanying~~June 30, ~~consolidated~~2021. ~~statements~~Investment ofmanagement ~~operations~~fees ~~were~~of $04,316,774 and $15,~~187~~504,~~351~~125 were incurred in shares for the three and six months ended ~~March 31~~June 30, ~~2021 and~~ 2020, respectively.

Convertible Stock and Class A Convertible Stock

Prior to the completion of the Mergers on March 6, 2020, the Company’s then-outstanding Convertible Stock would have been converted into shares of the Company’s common stock if and when: (A) the Company had made total distributions on the then-outstanding shares of the Company’s 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 listed its common stock for trading on a national securities exchange, or (C) the Company’s Advisory Agreement was terminated or not renewed (other than for “cause” as defined in the Advisory Agreement). In the event of a termination or non-renewal of the Advisory Agreement for cause, all of the shares of the Convertible Stock would have been repurchased by the Company for $1.00. In general, each share of Convertible Stock would convert into a number of shares of common stock equal to 1/1000 of

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

common stock for trading on a national securities exchange, or (C) the Company’s Advisory Agreement was terminated or not renewed (other than for “cause” as defined in the Advisory Agreement). In the event of a termination or non-renewal of the Advisory Agreement for cause, all of the shares of the Convertible Stock would have been repurchased by the Company for $1.00. In general, each share of Convertible Stock would 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 an as-converted basis, in each case calculated as of the date of the conversion.

In connection with the Mergers, the Company and the Former Advisor exchanged the then-outstanding Convertible Stock for new Class A Convertible Stock. The Class A Convertible Stock would have been converted into shares of the Company’s common stock if (1) the Company had made total distributions of money or other property to its stockholders or by SIR and STAR III to their respective holders of common shares (with respect to SIR and STAR III, including in each case distributions paid to SIR and STAR III stockholders prior to the closing of the Mergers), which the Company refers to collectively as the “Class A Distributions,” equal to the sum of the original issue price of the Company’s shares of common stock, shares of common stock of SIR and shares of common stock of STAR III (the “Common Equity”), plus an aggregate 6.0% cumulative, non-compounded, annual return on the original issue price of those shares, (2) the Company listed its common stock for trading on a national securities exchange or entered into a merger whereby holders of the Company’s common stock receive listed securities of another issuer or (3) the Company’s Advisory Agreement was terminated or not renewed (other than for “cause” as defined in the Advisory Agreement), each of the above is referred to as a “Triggering Event.” Upon any of these Triggering Events, each share of Class A Convertible Stock would have been converted into a number of shares of the Company’s common stock equal to 1/1000 of the quotient of (A) 15% of the amount, if any, by which (i) the “Class A Enterprise Value” plus the aggregate value of the Class A Distributions paid to date on the Common Equity exceeded (ii) the aggregate purchase price paid by stockholders for the Common Equity plus an aggregated 6.0% cumulative, non-compounded, annual return on the original issue price of the Common Equity as of the date of the Triggering Event, divided by (B) the Class A Enterprise Value divided by the number of the Company’s outstanding common shares on an as-converted basis as of the date of Triggering Event.

As discussed in Note 1 (Organization and Business), in connection with the Internalization Transaction, the Company purchased all of the Class A Convertible Stock from the Former Advisor for $1,000.

Preferred Stock

The Charter 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 ~~March~~June 3130, 2021 and December 31, 2020, 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 initially was $14.25. On March 9, 2021 and April 17, 2020, the Company’s board of directors approved a price per share for the DRP of $15.55 and $15.23, effective April 1, 2021 and May 1, 2020, 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.36

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

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 10 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.

In connection with the announcement of the then-proposed Mergers, 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 the repurchase dates subsequent to the effective date of the Amended & Restated SRP. Under the Amended & Restated SRP, the Company only repurchased shares of common stock in connection with the death or qualifying disability (as defined in the Amended and Restated SRP) of a stockholder. Repurchases pursuant to the Amended & Restated SRP were limited to $2,000,000 per quarter.

On March 3, 2020, in connection with the closing of the Mergers, the Company’s board of directors amended the Amended & Restated SRP to: (1) allow all stockholders to request repurchases (as opposed to death and disability only), (2) limit the amount of shares repurchased pursuant to the ~~share~~Amended ~~repurchase~~& ~~plan~~Restated SRP each quarter to $4,000,000 and (3) set the repurchase price in all instances (including death and disability) to an amount equal to 93% of the most recent publicly disclosed estimated value per share. The $4,000,000 quarterly limit was first in effect on the repurchase date at April 30, 2020, with respect to repurchases for the three months ended March 31, 2020, but was limited to death and disability only. The Amended & Restated SRP was open to all repurchase requests beginning April 1, 2020.

On January 12, 2021, the board of directors further amended the Amended & Restated SRP. The amendment (1) limits repurchase requests to death and qualifying disability only and (2) sets a $3,000,000 per calendar quarter limit on the amount of repurchases by the Company. The amendment took effect 30 days from January 14, 2021, and was in effect on April 30, 2021, the Repurchase Date (as defined below), with respect to repurchases for the fiscal quarter ending March 31, 2021. Share requests that do not meet the requirements for death and disability were cancelled (including any requests received during the ~~current~~first fiscal quarter of 2021). As of ~~March~~June 3130, 2021, the share repurchase price was $14.46 per share, which represented 93% of the most recently published estimated value per share of $15.55.

Prior to the March 3, 2020 amendments (described above), the share repurchase price was further reduced based on how long the stockholder had 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% 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” equaled 93% of the most recently publicly disclosed estimated value per share determined by the Company’s board of directors.

~~(3)The required one-year holding period did not apply to repurchases requested within two years after the death or disability of a stockholder.~~37

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

(3) The required one year holding period did 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 was 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~~Amended ~~share~~& ~~repurchase~~Restated ~~plan~~SRP 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 (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.

The Company is not obligated to repurchase shares of its common stock under the ~~share~~Amended ~~repurchase~~& ~~plan~~Restated SRP. In no event shall repurchases under the ~~share~~Amended ~~repurchase~~& ~~plan~~Restated SRP exceed 5% of the weighted average number of shares of common stock outstanding during the prior calendar year or the $3,000,000 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~~Amended ~~share~~& ~~repurchase~~Restated ~~plan~~SRP. As of ~~March~~June 3130, 2021 and December 31, 2020, the Company had recorded $2,~~287~~705,~~931~~142 and $4,000,000, respectively, which represents ~~158~~187,~~225~~078 and 282,477 (pursuant to the Amended & Restated SRP) shares of common stock, 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 April 30, 2021 and January 29, 2021 repurchase dates~~.

During the three and six months ended ~~March~~June 3130, 2021, the Company repurchased a total of ~~282~~159,~~477~~168 and 441,645 shares with a total repurchase value of $42,~~000~~301,~~000,~~563 ~~the~~and ~~then quarterly cap~~$6, ~~which was accrued as of December 31~~301, ~~2020~~563, and received requests for repurchases of ~~158~~187,~~225~~078 ~~shares~~and ~~with a total repurchase value of $2~~345,~~287,931.~~303 ~~During the three months ended March 31, 2020, the Company repurchased a total of 53,152~~ shares with a total repurchase value of $~~797~~2,~~289~~705,142 and ~~received requests for the repurchase of 149,049 shares with a total repurchase value of~~ $24,~~110~~993,~~537~~073, respectively.

~~The~~During ~~Company cannot guarantee that~~ the ~~funds~~three ~~set~~and ~~aside~~six ~~for~~months ~~the~~ended ~~share~~June 30, ~~repurchase~~2020, ~~plan will be sufficient to accommodate all repurchase requests made in any quarter. In~~ the ~~event~~Company ~~that~~repurchased ~~the~~a ~~Company~~total ~~does~~of ~~not~~149,049 ~~have~~and ~~sufficient~~202,201 ~~funds~~shares ~~available~~with toa total repurchase ~~all~~value of ~~the~~$2,110,538 ~~shares~~and of$2,907,827, ~~the~~and ~~Company’s~~received ~~common~~requests ~~stock~~ for ~~which~~the repurchase ~~requests~~of ~~have~~2,664,719 ~~been submitted for death~~ and ~~disability~~2,813,768 ~~repurchase~~shares ~~requests~~with ~~will be paid on~~ a ~~pro~~total ~~rata~~repurchase ~~basis~~value upof to$37,732,417 ~~the~~and $339,~~000~~842,~~000~~954, ~~quarterly cap~~respectively.

The Company’s ~~board~~cannot ofguarantee ~~directors~~that ~~may,~~the infunds ~~its~~set ~~sole~~aside ~~discretion,~~for ~~amend, suspend or terminate~~ the ~~share~~Amended ~~repurchase~~& ~~plan~~Restated atSRP ~~any~~will ~~time~~be ~~upon~~sufficient 30to ~~days’~~accommodate ~~notice~~all torepurchase ~~its~~requests ~~stockholders~~made ifin itany ~~determines~~quarter. ~~that~~In the ~~funds~~event ~~available~~that ~~to fund~~ the ~~share~~Company ~~repurchase~~does ~~plan~~not ~~are~~have ~~needed~~sufficient ~~for~~funds ~~other~~available ~~business~~to orrepurchase ~~operational~~all ~~purposes or that amendment, suspension or termination~~ of the ~~share~~shares ~~repurchase plan is in the best interest~~ of the Company’s ~~stockholders.~~common ~~Therefore,~~stock afor ~~stockholder~~which ~~may~~repurchase ~~not~~requests have ~~the~~been ~~opportunity~~submitted tofor ~~make~~death aand ~~repurchase~~disability, ~~request prior to any potential termination or suspension of the Company’s share~~ repurchase ~~plan.~~requests ~~The share repurchase plan~~ will ~~terminate~~be inpaid ~~the~~on ~~event that~~ a ~~secondary~~pro ~~market~~rata ~~develops~~basis ~~for~~up to the ~~Company’s~~$3,000,000 ~~shares~~quarterly ~~of common stock~~cap.

The Company’s board of directors may, in its sole discretion, amend, suspend or terminate the Amended & Restated SRP at any time upon 30 days’ notice to its stockholders if it determines that the funds available to fund the Amended & Restated SRP are needed for other business or operational purposes or that amendment, suspension or termination of the Amended & Restated SRP 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 Amended & Restated SRP. The Amended & Restated SRP will terminate in the event that a secondary market develops for the Company’s shares of common stock.

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. 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.

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

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 and Paid

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 month ended January 31, 2021 ~~and $0.002459 per day for each share of the Company’s common stock during each of the three months ended March 31~~, ~~2020,~~ which, if paid over a 365-day ~~and 366-day~~ period, ~~respectively,~~ is equivalent to $0.90 per share. On January 12, 2021, the Company’s board of directors approved a cash distribution that accrues at a rate of $0.001438 per day for each share of the Company’s common stock for the period commencing on February 1, 2021 and ending on February 28, 2021, which was extended for the months of March, April, May, June and ~~June~~July, 2021, and which, if paid over a 365-day period is equivalent to $0.525 per share. 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.

The following tables reflect distributions declared and paid to common stockholders and Class A-2 and Class B OP Unit holders (the “Noncontrolling Interest OP Unit Holders”) for the three and six months ended ~~March 31~~June 30, 2021 and 2020:

	For the Three Months Ended March 31, 2021
	Three Months Ended June 30, 2021						Six Months Ended June 30, 2021
	Common Stockholders		Noncontrolling Interest OP Unit Holders		Total		~~Total~~Common Stockholders		Noncontrolling Interest OP Unit Holders		Total
DRP distributions declared (in shares)	~~250~~198,~~562~~278		—		198,278		~~250~~448,~~562~~840		—		448,840
DRP distributions declared (value)	$	3,~~816~~083,~~054~~215	$	—	$	3,083,215	$	36,~~816~~899,~~054~~269	$	—	$	6,899,269
Cash distributions declared	1311,~~947~~342,~~153~~530		1929,~~146,005~~900		12,272,430		1525,~~093~~289,~~158~~682		2,075,906		27,365,588
Total distributions declared	$	1714,~~763~~425,~~207~~745	$	1929,~~146,005~~900	$	15,355,645	$	1832,~~909~~188,~~212~~951	$	2,075,906	$	34,264,857
DRP distributions paid (in shares)	~~302~~199,~~075~~903		—		199,903		~~302~~501,~~075~~978		—		501,978
DRP distributions paid (value)	$	43,~~600~~108,~~603~~489	$	—	$	3,108,489	$	47,~~600~~709,~~603~~092	$	—	$	7,709,092
Cash distributions paid	1611,~~641~~472,~~735~~032		1940,~~370,787~~119		12,412,151		1828,~~012~~113,~~522~~767		2,310,906		30,424,673
Total distributions paid	$	2114,~~242~~580,~~338~~521	$	1940,~~370,787~~119	$	15,520,640	$	2235,~~613~~822,~~125~~859	$	2,310,906	$	38,133,765

3739

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

	For the Three Months Ended March 31, 2020
	Three Months Ended June 30, 2020						Six Months Ended June 30, 2020
	Common Stockholders		Noncontrolling Interest OP Unit Holders		Total		~~Total~~Common Stockholders		Noncontrolling Interest OP Unit Holders		Total
DRP distributions declared (in shares)	~~324~~352,~~236~~192		—		352,192		~~324~~676,~~236~~428		—		676,428
DRP distributions declared (value)	$	5,~~135~~363,~~895~~890	$	—	$	5,363,890	$	510,~~135~~499,~~895~~787	$	—	$	10,499,787
Cash distributions declared	1019,~~255~~061,~~638~~204		—163,314		19,224,518		1029,~~255~~316,~~638~~841		163,314		29,480,155
Total distributions declared	$	1524,~~391~~425,~~533~~094	$	—163,314	$	24,588,408	$	1539,~~391~~816,~~533~~628	$	163,314	$	39,979,942
DRP distributions paid (in shares)	~~320~~349,~~969~~989		—		349,989		~~320~~670,~~969~~958		—		670,958
DRP distributions paid (value)	$	5,~~084~~399,~~155~~458	$	—	$	5,399,458	$	510,~~084~~483,~~155~~613	$	—	$	10,483,613
Cash distributions paid	619,~~716~~150,~~712~~001		—163,314		19,313,315		625,~~716~~866,~~712~~713		163,314		26,030,027
Total distributions paid	$	1124,~~800~~549,~~867~~459	$	—163,314	$	24,712,773	$	1136,~~800~~350,~~867~~326	$	163,314	$	36,513,640

As of ~~March~~June 3130, 2021 and December 31, 2020, $5,~~228~~063,~~058~~063 and $8,931,971 of distributions declared were payable, which included $1,~~037~~011,~~032~~758 and $1,821,581, or 6865,~~091~~065 shares and 119,605 shares of common stock, attributable to the DRP, respectively.

As reflected in the table above, for the three and six months ended ~~March 31~~June 30, 2021 and 2020, the Company paid total distributions of $2215,~~613~~520,~~125~~640, $38,133,765, $24,712,773 and $1136,~~800~~513,~~867~~640, respectively.

9. Noncontrolling Interest

Noncontrolling interests represent operating partnership interests in the ~~Current~~ Operating Partnership of which the Company is the general partner.

Class A-2 Operating Partnership Units

Class A-2 OP Units were issued as part of the consideration to purchase VV&M Apartments. STAR III OP, the Company’s then-indirect subsidiary, agreed to acquire the 310- unit multifamily property located in Dallas, Texas known as VV&M Apartments for an aggregate purchase price of $59,250,000, pursuant to the terms of a Contribution Agreement, dated as of March 20, 2020 (the “Contribution Agreement”), by and among STAR III OP, as Purchaser, and VV&M. On April 21, 2020 (the “VV&M Closing Date”), VV&M contributed the VV&M Apartments to STAR III OP, and STAR III OP issued 948,785 Class A-2 OP Units at an estimated value per unit of $15.23, the fair value determined at the date of transaction, or $14,450,000 in the aggregate, to VV&M, all in accordance with the Contribution Agreement.

On the VV&M Closing Date, STAR III OP and VV&M entered into the Second A&R Partnership Agreement. The Second A&R Partnership Agreement allows for VV&M to request STAR III OP to: (1) repurchase the outstanding Class A-2 OP Units after five years from the VV&M Closing Date (the “Put”), or (2) convert the Class A-2 OP Units into shares of common stock of the Company. STAR III OP has the right to repurchase the Class A-2 OP Units after five years from the VV&M Closing Date and can exercise its option to settle the Put in shares of common stock of the Company. The Class A-2 OP Units receive distributions at the same rate paid to holders of the Company’s common stock and are allocated a share of the income or loss on a pro rata basis of the then-three operating partnerships combined. The Company has evaluated the terms of the Second A&R Partnership Agreement and in accordance with ASC 480, determined that the Class A-2 OP Units are properly recognized as permanent equity on the consolidated balance sheets.

38On August 28, 2020, STAR III OP merged with and into the Operating Partnership and VV&M owns the Class A-2 operating partnership units in the Operating Partnership pursuant to the Operating Partnership Agreement on substantially the same terms described above.

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

On August 28, 2020, STAR III OP merged with and into the Current Operating Partnership and VV&M owns the Class A-2 operating partnership units in the Current Operating Partnership pursuant to the Operating Partnership Agreement on substantially the same terms described above.

Class B Operating Partnership Units

Class B OP Units were issued as consideration in the Internalization Transaction as discussed in Note 1 (Organization and Business). The Class B OP Units were valued at $15.23 per unit at the time of the transaction. On August 31, 2020, the date of the Internalization Closing, the Company, VV&M, STAR OP and SRI entered into the Operating Partnership Agreement. The Operating Partnership Agreement includes a provision that allows for SRI to request the repurchase of all outstanding Class B OP Units, one year from the date of the Internalization Closing; however, under the terms of the Contribution & Purchase Agreement, SRI is precluded from redeeming or transferring the Class B OP Units for two years from the date of the Internalization Closing. The Operating Partnership Agreement also includes a provision for the Company to settle the repurchase request in shares of the Company’s common stock rather than in cash, in its sole discretion as the general partner of the ~~Current~~ Operating Partnership. The Class B OP Units receive distributions at the same rate paid to holders of the Company’s common stock and are allocated a share of the ~~Current~~ Operating Partnership and its subsidiaries’ net income or losses on a pro rata basis. The Company has evaluated the terms of the Operating Partnership Agreement and in accordance with ASC 480, determined that the Class B OP Units are properly recognized as permanent equity on the consolidated balance sheets.

As of ~~March~~June 3130, 2021, noncontrolling interests were approximately 6.0605% of total shares and 6.06% of weighted average shares outstanding (both measures assuming Class A-2 OP Units and Class B OP Units were converted to common stock). The changes in the carrying amount of noncontrolling interests consisted of the following for the three and six months ended ~~March~~June 3130, 2021 and 2020:

					Three Months Ended March 31, 2021
	Three Months Ended June 30,				Six Months Ended June 30,
Beginning balance Class A-2 OP Units					$	13,219,354
	2021		2020		2021		2020
Beginning balance Class B OP Units					91,103,305
Beginning balance Class A-2 OP Units	$	12,962,395	$	—	$	13,219,354	$	—
Loss allocated to Class A-2 OP Units					(103,911)
Issuance of Class A-2 OP Units	—		14,450,000		—		14,450,000
Loss allocated to Class B OP Units					(674,364)
(Loss) income allocated to Class A-2 OP Units	(88,555)		163,314		(192,466)		163,314
Distributions to Class A-2 OP Units	(124,187)		(163,314)		(~~153~~277,~~048~~235)		(163,314)
Distributions to Class B OP Units					(992,957)
Beginning balance Class B OP Units	89,435,984		—		91,103,305		—
Noncontrolling interests ending balance					$	102,398,379
Loss allocated to Class B OP Units	(574,698)		—		(1,249,061)		—
Distributions to Class B OP Units	(805,713)		—		(1,798,671)		—
Noncontrolling interests ending balance	$	100,805,226	$	14,450,000	$	100,805,226	$	14,450,000

~~There~~10. Related ~~were~~Party ~~no noncontrolling interests as of March 31, 2020.~~Arrangements

39Prior to the Internalization Closing, on August 31, 2020, the Former Advisor was the Company’s advisor and, as such, supervised and managed the Company’s day-to-day operations and selected the Company’s real property investments and real estate-related assets, subject to oversight by the Company’s board of directors. The Former Advisor also provided marketing, sales and client services on the Company’s behalf. The Former Advisor is owned by SRI, the Company’s former sponsor. Mr. Emery, the Company’s Chairman of the board of directors and Chief Executive Officer, owns a 48.6% interest in Steadfast Holdings, the largest owner of SRI. Ms. del Rio, the Company’s former Secretary and an affiliated director, owns a 6.3% interest in Steadfast Holdings. From 2014 to 2020, Ms. Neyland, the Company’s President, Chief Financial Officer and Treasurer, earned an annual 5% profits interest from Steadfast Holdings. Ms. Neyland’s profits interest was terminated in November 2020.

During the eight months ended August 31, 2020, all of our other officers and directors, other than our independent directors, were officers of our Former Advisor and officers, limited partners and/or members of our former sponsor and other affiliates of our Former Advisor.

Prior to the Internalization Closing, the Company and STAR Operating Partnership operated pursuant to the Advisory Agreement with the Former Advisor. Pursuant to the Advisory Agreement, the Company was obligated to pay the Former Advisor specified fees upon the provision of certain services, the investment of funds in real estate and real estate-related

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

10investments and the management of the Company’s investments and for other services (including, but not limited to, the disposition of investments). ~~Related~~ ~~Party~~Subject ~~Arrangements~~to the limitations described below, the Company was also obligated to reimburse the Former Advisor and its affiliates for organization and offering costs incurred by the Former 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.

~~Prior~~Summarized tobelow ~~the~~are ~~Internalization Closing, on August 31, 2020,~~ the ~~Former~~related ~~Advisor~~party ~~was~~transactions ~~the~~incurred ~~Company’s~~by ~~advisor and, as such, supervised and managed~~ the Company’s ~~day-to-day~~for ~~operations and selected~~ the ~~Company’s~~three ~~real property investments~~ and ~~real~~six ~~estate-related~~months ~~assets,~~ended ~~subject to oversight by the Company’s board of directors. The Former Advisor also provided marketing~~June 30, ~~sales~~2021 and ~~client services on the Company’s behalf. The Former Advisor is owned by SRI~~2020, ~~the Company’s former sponsor. Mr. Emery~~respectively, ~~the~~and ~~Company’s~~any ~~Chairman~~related ofamounts ~~the~~payable ~~board of directors~~ and ~~Chief~~(receivable) ~~Executive~~as ~~Officer, owns a 48.6% interest in Steadfast Holdings, the largest owner~~ of ~~SRI. Ms. del Rio~~June 30, ~~the~~2021 ~~Company’s former Secretary~~ and ~~an affiliated director~~December 31, ~~owns a 6.3% interest in Steadfast Holdings. From 2014 to~~ 2020, Ms. Neyland, the Company’s President, Chief Financial Officer and Treasurer, earned an annual 5% profit interest from Steadfast Holdings. Ms. Neyland’s profits interest was bought out in November 2020.:

Prior to the Internalization Closing, the Company and the STAR Operating Partnership operated pursuant to the Advisory Agreement with the Former Advisor. Pursuant to the Advisory Agreement, the Company was obligated to pay the Former Advisor specified fees upon the provision of certain services, 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 was also obligated to reimburse the Former Advisor and its affiliates for organization and offering costs incurred by the Former 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.

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

Summarized below are the related party transactions incurred by the Company for the three months ended March 31, 2021 and 2020, respectively, and any related amounts payable and (receivable) as of March 31, 2021 and December 31, 2020:


	Incurred (Received) For the				Incurred (Received) For the				Payable (Receivable) as of
	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020		Jun 30, 2021		Dec 31, 2020
Consolidated Statements of Operations:
Expensed

Investment management fees (1)	$	—	$	8,535,093	$	—	$	13,889,530	$	—	$	—

Due diligence costs (2)	4,166		—		37,166		1,111		—		102,301
Loan coordination fees (1)	—		1,116,700		—		1,605,652		—		—
Disposition fees (3)	—		—		—		338,750		—		—
Disposition transaction costs (3)	—		—		—		5,144		—		—
Property management:
Fees (1)	4,263		2,369,487		8,550		3,865,857		1,514		5,585
Reimbursement of onsite personnel (4)	—		7,780,381		—		12,475,428		—		—
Reimbursement of other (1)	—		1,688,053		—		2,775,590		—		—
Reimbursement of property operations (4)	9,096		109,188		9,168		188,199		—		—
Reimbursement of property G&A (2)	—		51,811		—		84,216		—		—
Other operating expenses (2)	417,373		954,292		862,686		1,664,464		68,536		158,723
Reimbursement of personnel benefits and other costs (5)	80,270		—		112,362		—		4,040		20,457
Insurance proceeds (6)	—		(150,000)		—		(150,000)		—		—
Property insurance (2)	—		1,515,016		—		2,439,952		—		—
Earned
Rental revenue (7)	—		(23,282)		—		(41,029)		—		—
Transition services agreement income (6)	(6,353)		—		(14,531)		—		(13,072)		(103,552)
SRI Property management agreement income (6)	(324,550)		—		(562,759)		—		(118,093)		(77,760)
Other reimbursement income under the SRI property management agreements (6)	(120,979)		—		(211,532)		—		—		(21,980)
Reimbursement of onsite personnel income under the SRI property management agreements (6)	(1,099,931)		—		(2,175,540)		—		(74,888)		(173,927)
SRI construction management fee income (6)	(19,533)		—		(64,905)		—		(2,358)		—
Consolidated Balance Sheets:

Sublease security deposit (8)	—		—		—		—		(85,000)		(85,000)
Deferred financing costs (9)	—		49,050		—		49,050		—		—
Capitalized to Real Estate
Capitalized development services fee (10)	—		151,071		—		302,142		—		50,357
Capitalized investment management fees (10)	—		98,454		—		179,668		—		—
Capitalized development costs (10)	—		2,435		1,600		3,030		—		—
Acquisition expenses (11)	—		133,695		—		389,919		—		—
Acquisition fees (11)	—		341,371		—		17,717,639		—		—
Loan coordination fees (11)	—		224,000		—		8,812,071		—		—

Construction management:
Fees (12)	—		259,509		—		382,272		—		—
Reimbursement of labor costs (12)	—		95,692		—		166,239		—		—
Additional paid-in capital



Distributions to Class B OP Unit holders(13)	805,713		—		1,798,671		—		265,620		469,236


	$	(250,465)	$	25,302,016	$	(199,064)	$	67,144,894	$	46,299	$	344,440

	Incurred (Received) for the				Payable (Receivable) as of
	Three Months Ended March 31,
	2021		2020			Mar 31, 2021		Dec 31, 2020
Consolidated Statements of Operations:
Expensed
Investment management fees (1)	$	—	$	5,354,437		$	—	$	—
Due diligence costs (2)	33,000		1,111			—		102,301
Loan coordination fees (1)	—		488,952			—		—
Disposition fees (3)	—		338,750			—		—
Disposition transaction costs (3)	—		5,144			—		—
Property management:
Fees (1)	4,287		1,496,370			1,771		5,585
Reimbursement of onsite personnel (4)	—		4,695,047			—		—
Reimbursement of other (1)	—		1,087,537			—		—
Reimbursement of property operations (4)	72		79,011			—		—
Reimbursement of property G&A (2)	—		32,405			—		—
Other operating expenses (2)	445,313		710,172			60,233		158,723
Reimbursement of personnel benefits (5)	32,092		—			14,940		20,457
Property insurance (2)	—		924,936			—		—
Earned
Rental revenue (6)	—		(17,747)			—		—
Transition services agreement income (7)	(8,178)		—			(22,202)		(103,552)
SRI property management agreement income (7)	(238,209)		—			(85,975)		(77,760)
Other reimbursement income under the SRI property management agreements (7)	(90,553)		—			—		(21,980)
Reimbursement of onsite personnel income under the SRI property management agreements (7)	(1,075,609)		—			(112,851)		(173,927)
SRI construction management fee income (7)	(45,372)		—			(45,372)		—
Consolidated Balance Sheets:
Sublease security deposit (8)	—		—			(85,000)		(85,000)
Capitalized to Real Estate
Capitalized development service fee (9)	—		151,071			—		50,357
Capitalized investment management fees (9)	—		81,214			—		—
Capitalized development costs (9)	1,600		595			400		—
Acquisition expenses (10)	—		256,224			—		—
Acquisition fees (10)	—		17,376,268			—		—
Loan coordination fees (10)	—		8,588,071			—		—
Construction management:
Fees (11)	—		122,763			—		—
Reimbursement of labor costs (11)	—		70,547			—		—
Additional paid-in capital
Distributions to Class B OP Unit holders (12)	992,958		—			274,474		469,236
	$	51,401	$	41,842,878		$	418	$	344,440

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

~~_____________________~~__________________

1)Included in fees to affiliates in the accompanying consolidated statements of operations. Property management fees of $4,~~287~~263 relate to compliance fees incurred under a compliance agreement with the Former Property Manager, as defined below, to follow certain tax compliance procedures with respect to the leasing of apartment homes to qualified residents.

2)Included in general and administrative expenses in the accompanying consolidated statements of operations. Due diligence costs of $334,~~000~~166 represent acquisition expenses related to the Company’s real estate projects that did not come to fruition and which were incurred by an affiliate of SIP on behalf of the Company. Other operating expenses of $~~445~~417,~~313~~373 relate to sublease rental expenses of $~~270~~273,~~676~~846 and $~~174~~143,~~637~~527 of expenses related to information systems costs incurred by SIP on behalf of the Company.

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)Represents reimbursements of miscellaneous employee related costs to SIP for the period when benefits were administered by SIP. The employer benefit cost portion is included in general and administrative expenses in the accompanying consolidated statements of operations.

6)Included in ~~rental~~other income in the accompanying consolidated statements of operations.

7)Included in ~~other~~rental income in the accompanying consolidated statements of operations.

8)Included in other assets in the accompanying consolidated balance sheets.

9)Included in ~~real~~notes ~~estate~~payable, ~~held~~net ~~for development~~ in the accompanying consolidated balance sheets.

10)Included in ~~total~~ real estate, ~~net~~held for development in the accompanying consolidated balance sheets.

11)Included in ~~building~~total ~~and~~real ~~improvements~~estate, net in the accompanying consolidated balance sheets.

12)Included in ~~cumulative~~building ~~distributions~~ and ~~net~~improvements ~~losses~~ in the accompanying consolidated balance sheets.

13)Included in cumulative distributions and net losses in the accompanying consolidated balance sheets.

Investment Management Fee

Prior to the completion of the Mergers on March 6, 2020, the Company paid the Former Advisor a monthly investment management fee equal to one-twelfth of 1.0% 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 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. Following the completion of the Mergers and until the Internalization Closing, the Company paid the Former Advisor a monthly investment management fee, which was calculated on the same basis as described above, and payable 50% in cash and 50% in shares of the Company’s common stock. Investment management fees ~~incurred~~paid in shares, included in fees to affiliates in the accompanying consolidated statements of operations were $0 for each of the three and six months ended June 30, 2021, and $14,~~187~~039,~~351~~148 for each of the three and six months ended ~~March~~June 3130, ~~2021 and~~ 2020, respectively.

Following the Internalization Closing, investment management fees paid by the Company are intercompany transactions and are eliminated in consolidation.

Acquisition Fees and Expenses

Prior to the completion of the Mergers, the Company paid the Former 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

4244

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

acquisition fees, the Company reimbursed the Former Advisor for amounts directly incurred by the Former Advisor and amounts the Former Advisor paid 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 acquired the property or the real estate-related assets. Following the completion of the Mergers and until the Internalization Closing, the Company paid the Former Advisor an acquisition fee of 0.5%, which was calculated on the same basis as above. In connection with the Mergers, the Company paid the Former Advisor an acquisition fee of $16,281,487, which was capitalized to the acquired real estate and investment in unconsolidated joint venture in the accompanying consolidated balance sheets.

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.

Following the Internalization Closing, acquisition fees and expenses paid by the Company are intercompany transactions and are eliminated in consolidation.

Loan Coordination Fee

Prior to the completion of the Mergers, the Company paid the Former Advisor or its affiliate a loan coordination fee equal to 1.0% of the initial amount of 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 debt financing or refinancing (in each case, other than identified at the time of the acquisition of a property or a real estate-related asset), the Company paid the Former 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 Former Advisor agreed to a loan coordination fee of $100,000 per loan refinanced.

Following the completion of the Mergers and until the Internalization Closing, the Company paid the Former Advisor or one of its affiliates, in cash, the loan coordination fee equal to 0.5% of (1) the initial amount of new debt financed or outstanding debt assumed in connection with the acquisition, development, construction, improvement or origination of any type of real estate asset or real estate-related asset acquired directly or (2) the Company’s allocable portion of the purchase price and therefore the related debt in connection with the acquisition or origination of any type of real estate asset or real estate-related asset acquired through a joint venture. In connection with the Mergers, the Company paid the Former Advisor a loan coordination fee of $7,910,205, which was capitalized to the acquired real estate and investment in unconsolidated joint venture in the accompanying consolidated balance sheets.

As compensation for services rendered in connection with any financing or the refinancing of any debt (in each case, other than at the time of the acquisition of a property), the Company also paid the Former Advisor or one of its affiliates, in the form of shares equal to such amount, a loan coordination fee equal to 0.5% of the amount refinanced or the Company’s proportionate share of the amount refinanced in the case of investments made through a joint venture. No loan coordination fee was paid in shares to the Company’s Former Advisor during the three and six months ended ~~March~~June 3130, 2021. Loan coordination fees of $1,116,694 were paid in shares to the Company’s Former Advisor for each of the three and six months ended June 30, 2020.

Following the Internalization Closing, loan coordination fees paid by the Company are intercompany transactions and are eliminated in consolidation.

Property Management Fees and Expenses

Prior to the Internalization Closing, the Company was party to property management agreements (each, as amended from time to time, a “Property Management Agreement”) with Steadfast Management Company, Inc., an affiliate of SRI (the “Former Property Manager”), in connection with the management of each of the Company’s properties. Pursuant to each Property Management Agreement, the Company paid the Former Property Manager a monthly management fee equal to a range from 2.5% to 3.5% of each property’s gross revenues (as defined in the respective Property Management Agreements) for each month, as determined by the Former Advisor and approved by a majority of the Company’s board of directors, including a majority of the independent directors. Each Property Management Agreement had an initial one-year term and continued

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Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

~~majority of the independent directors. Each Property Management Agreement had an initial one-year term and continued~~ thereafter on a month-to-month basis unless either party gave 60- days’ prior notice of its desire to terminate the Property Management Agreement, provided that the Company could terminate the Property Management Agreement at any time upon a determination of gross negligence, willful misconduct or bad acts of the Former Property Manager or its employees or upon an uncured breach of the Property Management Agreement upon 30 days’ prior written notice to the Former Property Manager.

In addition to the property management fee, the Property Management Agreements also specified certain other reimbursements payable to the Former Property Manager for benefit administration, information technology infrastructure, licenses, support and training services and capital expenditures supervision. The Company also reimbursed the Former Property Manager for the salaries and related benefits of on-site property management employees.

In connection with the Internalization Transaction, the Company terminated its existing property-level property management agreements with the Former Property Manager. Following the Internalization Closing, property management fees paid by the Company are intercompany transactions and are eliminated in consolidation.

Construction Management Fees and Expenses

Prior to the Internalization Closing, the Company was party to construction management agreements (each, a “Construction Management Agreement”) with Pacific Coast Land & Construction, Inc., an affiliate of SRI (the “Former Construction Manager”), in connection with capital improvements and renovation or value-enhancement projects for certain properties the Company acquired. The construction management fee payable with respect to each property under the Construction Management Agreements ranged from 6.0% to 12.0% of the costs of the improvements for which the Construction Manager had planning and oversight authority. Generally, each Construction Management Agreement could have been terminated by either party with 30 days’ prior written notice to the other party. Construction management fees were capitalized to the respective real estate properties in the period in which they were 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 also reimbursed the Former Construction Manager for the salaries and related benefits of certain of its employees for time spent working on capital improvements and renovations.

In connection with the Internalization Transaction, the Company terminated its existing Construction Management Agreements with the Former Construction Manager.

Development Services

The Company is a party to a development services agreement (the “Development Services Agreement”) with Steadfast Multifamily Development, Inc., an affiliate of SRI (the “Developer”), in connection with certain development projects, pursuant to which the Developer receives 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, the Arista at Broomfield and the Flatirons development projects that provide for a development fee equal to 4% of the hard and soft costs of the development project (as defined in the applicable Development Services Agreement) as specified in the Development Services Agreement. 75% of the development fee is paid in 14 monthly installments and the remaining 25% is paid upon delivery of a certificate of occupancy by the Developer to the Company.

Property Insurance

Prior to the Internalization Closing, the Company deposited amounts with an affiliate of SRI, the Company’s former 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 of the Company’s former sponsor. Upon filing a major claim, proceeds from the insurance deductible account could be used by the Company or another affiliate of SRI. In addition, the Company deposited amounts with an affiliate of the Company’s former sponsor to cover the cost of property and property related insurance across certain properties of the Company. As a result of the Internalization Transaction, the Company is no longer party to the insurance deductible arrangement with any affiliates of the Former Sponsor.

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Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

Other Operating Expense Reimbursement

In addition to the various fees paid to the Former Advisor, the Company was obligated to pay directly or reimburse all expenses incurred by the Former Advisor in providing services to the Company, including the Company’s allocable share of the Former Advisor’s overhead, such as rent, employee costs, utilities and information technology costs. The Company was not to reimburse the Former Advisor for employee costs in connection with services for which the Former Advisor or its affiliates received acquisition fees or disposition fees or for the salaries the Former Advisor paid 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 was to reimburse the Former Advisor, at the end of each fiscal quarter, for operating expenses incurred by the Former Advisor; provided, however, that the Company did not reimburse the Former Advisor at the end of any fiscal quarter for operating expenses that exceed the 2%/25% Limitation unless the independent directors determined that such excess expenses were justified based on unusual and non-recurring factors. The Former Advisor was obligated to reimburse the Company for the amount by which the Company’s operating expenses for the preceding four fiscal quarters then ended exceeded 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 the 12-month period before deducting depreciation, bad ~~debt~~debts reserves or other non-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 the Former 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 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 ~~March~~June 3130, 2021, the Company’s total operating expenses, as defined above, did not exceed the 2%/25% Limitation.

Disposition Fee

Prior to the completion of the Mergers, if the Former Advisor or its affiliates provided 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 paid the Former Advisor or its affiliates a fee equivalent to one-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. Following the completion of the Mergers and until the Internalization Closing, the disposition fee payable to the Former Advisor was one-half of the brokerage commissions paid, but in no event to exceed 0.5% of the sales price of each property or real estate-related asset sold.

To the extent the disposition fee was paid upon the sale of any assets other than real property, it was included as an operating expense for purposes of the 2%/25% Limitation.

Following the Internalization Closing, disposition fees paid by the Company are intercompany transactions and are eliminated in consolidation.

Class A Convertible Stock

In connection with the Mergers, the Company and the Former Advisor exchanged the then- outstanding Convertible Stock for the new Class A Convertible Stock. The Class A Convertible Stock would convert into shares of the Company’s common stock if (1) the Company had made total Class A Distributions equal to the original issue price of the Common Equity, plus an aggregate 6.0% cumulative, non-compounded, annual return on the original issue price of those shares, (2) the Company listed its common stock for trading on a national securities exchange or entered into a merger whereby holders of the Company’s common stock received listed securities of another issuer or (3) the Company’s Advisory Agreement was terminated or not renewed (other than for “cause” as defined in the Advisory Agreement). Upon any of these Triggering Events, each share of

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Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

common stock received listed securities of another issuer or (3) the Company’s Advisory Agreement was terminated or not renewed (other than for “cause” as defined in the Advisory Agreement). Upon any of these Triggering Events, each share of Class A Convertible Stock would have been converted into a number of shares of the Company’s common stock equal to 1/1000 of the quotient of (A) 15% of the amount, if any, by which (i) the Class A Enterprise Value plus the aggregate value of the Class A Distributions paid to date on the Common Equity exceeds (ii) the aggregate purchase price paid by stockholders for the Common Equity plus an aggregated 6.0% cumulative, non-compounded, annual return on the original issue price of the Common Equity as of the date of the Triggering Event, divided by (B) the Class A Enterprise Value divided by the number of the Company’s outstanding common shares on an as-converted basis as of the date of Triggering Event. In connection with the Internalization Transaction, the Company repurchased the Class A Convertible Stock for $1,000. See Note 8 (Stockholders’ Equity) for details.

Ancillary Internalization Transaction Agreements

Transition Services Agreement

As a condition to ~~the~~ Internalization Closing, on August 31, 2020, the Company and SIP entered into a Transition Services Agreement (the “Transition Services Agreement”), pursuant to which, commencing on August 31, 2020 until March 31, 2021, which was extended through September 30, 2021, unless earlier terminated pursuant to the Transition Services Agreement or extended by mutual consent, SIP will continue to provide certain operational and administrative support at cost plus 15% to the Company, which may include support relating to, without limitation, shared legal, and tax support as set forth in the Transition Services Agreement. Similarly, the Company agreed to provide certain services to SIP and its affiliates at cost plus 15%, which may include acquisition, disposition and financing support, legal support, shared information technology and human resources.

SRI Property Management Agreements

In connection with the Internalization Transaction, the Company terminated its existing property-level property management agreements with the Former Property Manager, an affiliate of SRI. On August 31, 2020, SRS, entered into the SRI Property Management Agreements with an affiliate of SRI to provide property management services in connection with certain properties owned by SIP or its affiliates (each a “Property Owner” and collectively, the “Property Owners”). Pursuant to each SRI Property Management Agreement, SRS ~~receives~~received a monthly management fee equal to 2.0% of each property’s gross collections for such month (“Gross Collections”). On April 23, 2021, SRS entered into amendments to the SRI Property Management Agreements with affiliates of SRI to (1) provide that SRS is responsible for providing accounting services for the properties owned by the Property Owners and (2) increase the property management fee from 2.0% to 3.0% of Gross Collections. Each SRI Property Management Agreement has an initial one-year term and will continue thereafter on a month-to-month basis unless the Property Owner terminates the SRI Property Management Agreement with 60 days’ prior written notice or upon the determination of gross negligence, willful misconduct or bad acts of SRS or its employees with 30 days’ prior written notice to SRS. After the first one-year term, either party may terminate the SRI Property Management Agreement in the event of a material breach that remains uncured for a period of 30 days after written notification of such breach. As of ~~March~~June 3130, 2021, the Company recognized the SRI Property Management Agreements asset, net of $~~339~~135,~~580~~830 within other assets on the accompanying consolidate balance sheets.

In addition to the property management fee earned by SRS, the SRI Property Management Agreements also specify certain other reimbursements payable to SRS for benefit administration, information technology infrastructure, licenses, support and training services. SRS is also reimbursed for the salaries and related benefits of on-site property management employees at certain properties owned by SIP or its affiliates.

SRI Construction Management Agreements

On September 1, 2020, SRS, entered into the SRI construction management agreements with an affiliate of SRI (the “SRI Construction Management Agreements”) to provide construction management services in connection with certain properties owned by SIP or its affiliates. Pursuant to each SRI Construction Management Agreement, SRS will receive a construction management fee equal to 7.5% of the total project costs. In addition, SRS will be reimbursed for all agreed upon costs associated with staffing. Each SRI Construction Management Agreement may be terminated by either party with the delivery of a 30-day written notice to the other party.

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Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

Registration Rights Agreement

As a condition to the Internalization Closing, on August 31, 2020, the Company, the ~~Current~~ Operating Partnership and SRI entered into a registration rights agreement (the “Registration Rights Agreement”). Upon the terms and conditions in the Operating Partnership Agreement, the Class B OP Units are redeemable for shares of the Company’s common stock. Pursuant to the Contribution & Purchase Agreement, SRI (or any successor holder) may not transfer the Class B OP Units until August 31, 2022 (the “Lock-Up Expiration”). Beginning on the fifth anniversary of the Internalization Closing, SRI (or any successor holder) may request the Company to register for resale under the Securities Act of 1933, as amended, shares of the Company’s common stock issued or issuable to such holder. The Company agreed to use commercially reasonable efforts to file a registration statement on Form S-3 within 30 days of such request and within 60 days of such request in the case of a registration statement on Form S-11 or such other appropriate form. The Company ~~will~~has agreed to cause such registration statement to become effective as soon as reasonably practicable thereafter. The Registration Rights Agreement also grants SRI (or any successor holder) certain “piggyback” registration rights after the Lock-Up Expiration.

Non-Competition Agreement

As a condition to the Internalization Closing, on August 31, 2020, the Company entered into a Non-Competition Agreement (the “Non-Competition Agreement”) with Rodney F. Emery, the largest indirect owner of SRI and the Company’s Chairman of the board of directors and Chief Executive Officer, providing that from the date of the Internalization Closing until the date that is 30 months from August 31, 2020 (the “Restricted Period”), in general, Mr. Emery shall not, directly or indirectly, (i) solicit certain employees or service providers of the Company, subject to certain exceptions, or (ii) solicit certain customers, vendors, suppliers, agents, partners or other similar parties with the purpose of causing such parties or their affiliates to cease doing business with the Company or otherwise interfere with the Company’s business relationships with third parties.

During the Restricted Period, Mr. Emery, subject to limited exceptions provided in the Non-Competition Agreement, in general (i) shall not, and shall cause his respective affiliates not to, engage in the business of managing, operating, directing and supervising the operations and administration of multifamily assets of the class and type owned by the Company as of August 31, 2020 (the “Assets”) (such business activities described in this subsection (i) being the “Restricted Business”), (ii) shall, consistent with past practice, present each opportunity and investment fully and accurately to the Company’s board of directors prior to his or his affiliates acquisition of any Assets and only make such investment on behalf of himself or his affiliates if the Company’s board of directors declines the opportunity; and (iii) shall not engage with or otherwise acquire an interest in, directly or indirectly, any business or enterprise that primarily engage in the Restricted Business in an area within a two-mile radius of each Asset owned or managed by the Company as of the Internalization Closing.

Further, each of SRS, the Company and the ~~Current~~ Operating Partnership agreed that, in general, during the Restricted Period, each will not solicit any employee of SRI or its affiliates or attempt to assist any such employee to enter into any other consulting or business relationship with SRS, the Company and the ~~Current~~ Operating Partnership, subject to certain limitations.

Sub-Lease

In connection with the Internalization Transaction, SRS, an indirect subsidiary of the Company, entered into a sub-lease agreement (the “Sub-Lease”) with the Former Property Manager on September 1, 2020, for its headquarters in Irvine, California. The Sub-Lease also includes certain furniture and fixtures, that will become the property of SRS at the end of the lease term. As of ~~March~~June 3130, 2021, the Sub-Lease has a remaining lease term of 1411 months with no option to renew. The monthly sub-lease expense is recognized on a straight line basis over the remaining term of the the Sub-Lease. As of ~~March~~June 3130, 2021 and December 31, 2020, as it pertains to the Sub-Lease of the office space, the Company recorded an operating lease ROU asset, net of $1872,~~107,099~~985 and $1,339,591 and an operating lease liability, net of $1887,~~119,776~~925 and $1,346,835, respectively. As of ~~March~~June 3130, 2021 and December 31, 2020, as it pertains to the Sub-Lease of the furniture and fixtures, the Company recognized a finance lease ROU asset, net of $1310,~~785~~725 and $16,845 and a finance lease liability, net of $1411,~~067~~093 and $17,020, respectively. For the three and six months ended ~~March~~June 3130, 2021, the Sub-Lease expense related to the office space was $241,549 and $483,098, respectively, and for the furniture and fixtures ~~were~~ $~~241~~3,~~549~~146 and $~~107~~6,313, respectively. See Note 15 (Leases) for further details about the Company’s leases.

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Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

Certain Conflict Resolution Procedures

Every transaction that the Company enters into with its affiliates is subject to an inherent conflict of interest. The board of directors may encounter conflicts of interest in enforcing the Company’s rights against any affiliate in the event of a default by or disagreement with an affiliate or in invoking powers, rights or options pursuant to any agreement between the Company and the Company’s 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 the Company and the related party is fair and reasonable to the Company and has terms and conditions no less favorable to the Company than those available from unaffiliated third parties.

11. Incentive Award Plan and Independent Director Compensation

The Company’s Incentive Award Plan 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 of non-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 independent directors’ compensation plan, and subject to such plan’s conditions and restrictions, 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’s re-election to the Company’s board of directors, he or she receives 1,666 shares of restricted common stock. On March 6, 2020, the Company granted 3,333 shares of restricted common stock pursuant to the independent directors’ compensation plan to each of its two newly elected independent directors. One-fourth of the shares of restricted common stock generally vest and become non-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 become non-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.

On ~~September~~March 156, 2020, the Company’s ~~board~~granted 3,333 shares of ~~directors~~restricted ~~approved~~common anstock ~~amendment~~pursuant to the independent directors’ compensation plan, ~~pursuant~~ to ~~which,~~ each of ~~the~~its two ~~Company’s~~newly ~~current~~ elected independent directors. ~~is entitled to receive an annual retainer of $75,000 in cash and $75,000 in shares of restricted common stock upon election or re~~One-~~election~~fourth ~~to the Company’s board~~ of ~~directors. On December 3, 2020,~~ the ~~Company granted 4,924~~ shares of restricted common stock togenerally ~~each~~vest ofand ~~its~~become ~~five independent directors pursuant to the Incentive Award Plan at a fair value of $15.23 per share in connection with their re~~non-~~election~~forfeitable toupon ~~the~~issuance ~~board~~and ~~of directors at~~ the ~~Company’s~~remaining ~~annual~~portion ~~meeting~~will ~~of stockholders. These shares generally~~ vest in ~~two~~three equal annual installments beginning on the ~~first anniversary of the~~ date of grant and ending on the ~~second~~third anniversary of the date of grant; provided, however, that the restricted stock will become fully vested and become non-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~~On September 15, 2020, the Company’s ~~recorded~~board ~~stock-based~~of directors approved an amendment to the independent directors’ compensation ~~expense~~plan, ofwhich ~~$63~~is described in more detail below. On December 3,~~168~~ ~~and~~2020, ~~$42~~the Company granted 4,~~455~~924 ~~for~~shares of restricted common stock to each of its five independent directors pursuant to the ~~three~~Incentive ~~months~~Award ~~ended~~Plan ~~March 31,~~at ~~2021~~a fair value of $15.23 per share in connection with their re-election to the board of directors at the Company’s annual meeting of stockholders. These shares generally vest in two equal annual installments beginning on the first anniversary of the date of grant and ~~2020~~ending on the second anniversary of the date of grant; provided, ~~respectively~~however, ~~related~~that the restricted stock will become fully vested on the earlier to occur of: (1) the termination of the independent ~~directors~~director’s ~~restricted~~service ~~common~~as ~~stock~~a director due to his or her death or disability, or (2) a change in control of the Company.

InThe ~~addition~~Company torecorded ~~the~~a stock-based ~~awards,~~compensation ~~prior~~expense toof ~~September 15~~$63,168 ~~2020,~~and ~~the Company paid each of its independent directors an annual retainer of~~ $55126,~~000,~~336 ~~prorated~~ for ~~any partial term (~~the ~~audit~~three ~~committee~~and ~~chairperson~~six ~~received~~months anended ~~additional~~June 30, ~~$10~~2021,~~000~~ ~~annual retainer~~respectively, ~~prorated~~and ~~for any partial term). The independent directors were also paid for attending meetings as follows: (i)~~ $220,~~500~~928 ~~for~~and ~~each board meeting attended in person, (ii)~~ $163,~~500~~383 for ~~each~~the ~~committee~~three ~~meeting~~and ~~attended~~six inmonths ~~person~~ended inJune 30, ~~such director’s capacity as a committee member~~2020, ~~(iii) $1~~respectively,~~000~~ ~~for~~related ~~each board meeting attended via teleconference (not~~ to ~~exceed $4,000 for any one set of meetings attended on any given day). In connection with meetings of~~ the ~~Special Committee, the~~ independent directors’ restricted common stock.

48In addition to the stock awards, prior to September 15, 2020, the Company paid each of its independent directors an annual retainer of $55,000, prorated for any partial term (the audit committee chairperson received an additional $10,000 annual retainer, prorated for any partial term). The independent directors were 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). In connection with meetings of the special committee, the independent directors received $1,000 for each teleconference meeting and $1,500 for each in-person meeting. All directors also receive

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

~~received $1,000 for each teleconference meeting and $1,500 for each in-person meeting. All directors also receive~~ reimbursement of reasonable out of pocket expenses incurred in connection with attendance at meetings of the board of directors.

Beginning September 15, 2020, the effective date of the amendment to the independent directors’ compensation plan, the Company pays each of its independent directors an annual retainer of $75,000 in cash and $75,000 in shares of restricted common stock, prorated for any partial term (the audit committee chairperson receives an additional $15,000 annual retainer, the compensation committee chairperson receives an additional $10,000 annual retainer, the investment committee chairperson receives an additional $10,000 annual retainer, the nominating and corporate governance committee chairperson receives an additional $10,000 annual retainer, and the lead independent director receives an additional $25,000 annual retainer, prorated for any partial term). The independent directors are also paid $2,000 for each in-person or telephonic board or committee meeting attended (not to exceed $4,000 for any one set of meetings attended on any given day). Further, directors may elect to receive any cash fees in fully-vested shares of common stock of the Company.

Director compensation is an operating expense of the Company that, prior to the Internalization Closing, was subject to the operating expense reimbursement obligation of the Former Advisor discussed in Note 10 (Related Party Arrangements). ~~For~~The Company recorded an operating expense of $217,250 and $486,500 for the three and six months ended ~~March~~June 3130, 2021, respectively, and ~~2020~~$465,250 ~~the~~and ~~Company~~$537,000 ~~recorded~~for anthe ~~operating~~three ~~expense~~and ofsix ~~$269,250~~months ~~and~~ended ~~$68~~June 30,~~750~~ 2020, respectively, related to the independent directors’ annual cash retainer and attending board and committee meetings, which is included in general and administrative expenses in the accompanying consolidated statements of operations. Upon signing the ~~Merger~~merger ~~Agreements~~agreements, merger related acquisition expenses, including $0 for each of the three and six months ended June 30, 2021, respectively, and $3,000 for each of the three and six months ended ~~March~~June 3130, ~~2021 and~~ 2020, respectively, related to attending committee meetings, met the definition of capitalized expenses and were therefore capitalized in the accompanying consolidated balance sheets. As of ~~March~~June 3130, 2021 and December 31, 2020, $~~269~~217,250 and $209,250, respectively, related to the independent directors’ annual retainer paid in cash and board and committee meetings attendance is included in accounts payable and accrued liabilities in the consolidated balance sheets.

12. Commitments and Contingencies

Economic Dependency

Prior to the Internalization Closing, the Company was dependent on the Former 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. As a result of the Internalization Transaction, the Company became self-managed and acquired components of the advisory, asset management and property management ~~business~~operations of the Former Advisor by hiring the Transferring Employees (as defined in the Contribution & Purchase Agreement), who comprise the workforce necessary for the management and day-to-day real estate and accounting operations of the Company and the ~~Current~~ Operating Partnership. The Company’s own employees now provide the services that the Former Advisor provided, as described above.

As of ~~March~~June 3130, 2021, the Company is developing a multifamily property known as Garrison Station consisting of nine residential buildings with 176 apartment homes ~~known as Garrison Station~~ that isare currently in various stages of development with remaining commitments to fund of approximately $64,~~146~~000,~~023~~000 (inclusive of applicable construction loan obligations) and estimated completion dates ranging through August 2021. As of ~~March~~June 3130, 2021, 2495 of the 176 ~~units~~apartment homes were placed in service.

Concentration of Credit Risk

The geographic concentration of the Company’s portfolio makes it particularly susceptible to adverse economic developments in the Atlanta, Georgia and Dallas / Fort Worth, Texas 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.

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Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

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 residents 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~~possible 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.

13. Earnings Per Share

The following table presents a reconciliation of net loss attributable to common stockholders and shares used in calculating basic and diluted loss per share, or EPS, for the three and six months ended ~~March~~June 3130, 2021 and 2020:

	Three Months Ended March 31,
	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net loss attributable to common stockholders	$	(1413,~~031~~037,~~288~~659)	$	(953,~~681~~224,~~128~~622)	$	(27,068,948)	$	(62,905,750)
Less:
Distributions related to unvested restricted stockholders(1)	(50,982)		(3,095)
Distributions declared on Class A-2 OP Units	—		(163,314)		—		(163,314)
Numerator for loss per common share — basic	$	(14,082,270)	$	(9,684,223)
Distributions related to unvested restricted stockholders(1)	(41,370)		(2,796)		(92,353)		(5,667)
Weighted average common shares outstanding — basic and diluted(2)	109,886,636		68,180,512
Numerator for loss per common share — basic	$	(13,079,029)	$	(53,390,732)	$	(27,161,301)	$	(63,074,731)
Loss per common share — basic and diluted	$	(0.13)	$	(0.14)
Weighted average common shares outstanding — basic and diluted(2)	109,905,923		109,139,963		109,896,333		88,660,741
Loss per common share — basic and diluted	$	(0.12)	$	(0.49)	$	(0.25)	$	(0.71)

_____________________

(1) Unvested restricted stockholders that have a right to participate in dividends declared on common stock are accounted for as participating securities and reflected in the calculation of basic and diluted EPS under the two-class method.

(2) The Company excluded all unvested restricted common shares outstanding issued to the Company’s independent directors and certain key employees, the Class A-2 OP Units and the Class B OP Units from the calculation of diluted loss per common share as the effect would have been antidilutive.

14. 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 ~~March~~June 3130, 2021 and December 31, 2020:

March 31, 2021

June 30, 2021

Type

Maturity Date Range

Based on

Number of Instruments

Notional Amount

Variable Rate

Weighted Average Rate Cap

Fair Value

Interest Rate Cap

67/1/2021 - 7/1/2023

One-Month LIBOR

~~352~~334,300,350

0.1110%

3.5657%

3021,~~872~~255

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2021

(unaudited)

December 31, 2020

Type

Maturity Date Range

Based on

Number of Instruments

Notional Amount

Variable Rate

Weighted Average Rate Cap

Fair Value

Interest Rate Cap

1/1/2021 - 7/1/2023

One-Month LIBOR

407,935,350

0.14%

3.41%

7,852

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 six months ended ~~March~~June 3130, 2021 ~~and 2020~~, resulted in an unrealized loss (gain) ~~loss~~ of $9,617 and $(101,~~820~~203), respectively, and for the three and six months ended June 30, 2020, resulted in an unrealized loss of $224,~~251~~943 and $27,194, respectively, which is included in interest expense in the accompanying consolidated statements of operations. During the ~~three~~six months ended ~~March~~June 3130, 2021 and 2020, the Company acquired an interest rate cap ~~agreement~~agreements of $12,200 and $047, ~~and assumed~~000, ~~through the Mergers~~respectively, ~~interest~~and ~~rate~~did ~~cap~~not ~~agreements~~receive ofsettlement ~~$0 and $6,110, respectively~~proceeds. The fair value of the interest rate cap agreements of $3021,~~872~~255 and $7,852 as of ~~March~~June 3130, 2021 and December 31, 2020, respectively, is included in other assets on the accompanying consolidated balance sheets.

15. Leases

Lessee

The Company leases office space, a parking garage, furniture, fixtures and office equipment. The Company has lease agreements with lease and non-lease components, which are generally accounted for ~~separate~~separately from each other. A limited number of leases include options to renew or options to extend the lease term. The exercise of lease renewal options is at the Company’s sole discretion. The depreciable life of lease ROU assets are limited by the expected lease term, unless there is a transfer of title or purchase option reasonably certain of exercise. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.

The components of lease costs were as follows:

		Three Months Ended March 31,
		Three Months Ended June 30,
Lease Cost	Classification	2021		2020
Operating Lease cost(1)	Operating, maintenance and management	$	106,~~044~~469	$	79,~~505~~021
Operating Lease cost(1)	General and administrative	241,549		—
Finance lease cost
Amortization of leased assets	Depreciation and amortization	3,060		—
Accretion of lease liabilities	Interest expense	~~107~~86		—
Total lease cost		$	~~254~~251,~~760~~164	$	79,~~505~~021
		Six Months Ended June 30,
Lease Cost	Classification	2021		2020
Operating Lease cost(1)	Operating, maintenance and management	$	16,513	$	16,526
Operating Lease cost(1)	General and administrative	483,098		—
Finance lease cost
Amortization of leased assets	Depreciation and amortization	6,120		—
Accretion of lease liabilities	Interest expense	193		—
Total lease cost		$	505,924	$	16,526

_____________________

(1) Includes short-term leases and variable lease costs, which are immaterial.

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PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

Other information related to leases was as follows:

Lease Term and Discount Rate	~~March~~June 3130, 2021		December 31, 2020
Weighted average remaining lease term (in years)
Operating leases	3.42		3.4
Finance leases	10.29		1.4
Weighted average discount rate
Operating Leases	3.3	%	3.2	%
Finance Leases	2.9	%	2.9	%

	Three Months Ended March 31,
	Six Months Ended June 30,
Supplemental Disclosure of Cash Flows Information	2021		2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash outflows related to operating leases	$	~~282~~567,~~500~~794	$	3179,~~185~~884
Operating cash outflows related to finance leases	$	36,~~060~~120	$	—
Financing cash outflows related to finance leases	$	—	$	—

Operating Leases

The following table sets forth as of ~~March~~June 3130, 2021, the undiscounted cash flows of the Company’s scheduled lease obligations for future minimum payments for the ~~nine~~six months ending December 31, 2021, and for each of the next four years ending December 31, and thereafter, as well as the reconciliation of those cash flows to operating lease liabilities on the Company’s accompanying consolidated balance sheets:

Year	Amount
Remainder of 2021	$	~~886~~594,~~020~~614
2022	611,239
2023	~~190~~188,~~315~~990
2024	~~120~~122,~~701~~026
2025	94,506
Thereafter	266,910
Total undiscounted operating lease payments	$	21,~~169~~878,~~691~~285
Less: interest	(~~324~~293,~~390~~387)
Present value of operating lease liabilities	$	1,~~845~~584,~~301~~898

~~Finance Leases~~53

The following table sets forth as of March 31, 2021, the undiscounted cash flows of the Company’s scheduled obligations for future minimum payments for the nine months ending December 31, 2021, and for each of the next four years ending December 31, and thereafter, as well as a reconciliation of those cash flows to finance lease liabilities:

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

Year	Amount
Remainder of 2021	$	9,180
2022	5,100
2023	—
2024	—
2025	—
Thereafter	—
Total undiscounted finance lease payments	$	14,280
Less: interest	(213)
Present value of finance lease liabilities	$	14,067

Finance Leases

The following table sets forth as of June 30, 2021, the undiscounted cash flows of the Company’s scheduled obligations for future minimum payments for the six months ending December 31, 2021 and for each of the next four years ending December 31 and thereafter, as well as a reconciliation of those cash flows to finance lease liabilities:


Year	Amount
Remainder of 2021	$	6,120
2022	5,100
2023	—
2024	—
2025	—
Thereafter	—
Total undiscounted finance lease payments	$	11,220
Less: interest	(127)
Present value of finance lease liabilities	$	11,093

16. Subsequent Events

Distributions Paid

On ~~April~~July 1, 2021, the Company paid distributions of $5,~~228~~063,~~058~~063, which related to distributions declared for each day in the period from ~~March~~June 1, 2021, through ~~March~~June 3130, 2021, and consisted of cash distributions paid in the amount of $4,~~191~~051,~~026~~305 and $1,~~037~~011,~~032~~758 in shares issued pursuant to the DRP.

On May 3, 2021, the Company paid distributions of $5,063,937, which related to distributions declared for each day in the period from April 1, 2021 through April 30, 2021 and consisted of cash distributions paid in the amount of $4,043,827 and $1,020,110 in shares issued pursuant to the DRP.

Shares Repurchased

On April 30, 2021, the Company repurchased 158,225 shares of its common stock for a total repurchase value of $2,287,931, or $14.46 per share, pursuant to the Company’s share repurchase plan.

Distributions Declared

On ~~April~~July 2224, 2021, 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 ~~May~~ August 1, 2021 and ending on ~~May~~ August 31, 2021. The distributions will be equal to $0.001438 per share of the Company’s common stock per day. The distributions for each record date in ~~May~~August 2021 will be paid in ~~June~~September 2021. The distributions will be payable to stockholders from legally available funds therefor.

OnGarrison ~~May~~Station ~~11,~~Real ~~2021,~~Estate ~~the~~Placed 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 June 1, 2021 and ending on June 30, 2021. The distributions will be equal to $0.001438 per share of the Company’s common stock per day. The distributions for each record date in ~~June 2021 will be paid in July 2021. The distributions will be payable to stockholders from legally available funds therefor.~~Service

~~Amendment~~Subsequent to June 30, 2021, one additional building comprised of 24 apartment homes was placed in service at the ~~SRI~~Garrison ~~Property~~Station ~~Management~~development ~~Agreements~~project.

OnAgreement April 23, 2021, SRS entered into amendments to the SRI Property Management Agreements with affiliates of SRI to, among other things, (1) provide that SRS is responsible for providing accounting services for the properties owned by the Property Owners and ~~(2)~~Plan ~~increase the property management fee from 2.0%~~ of ~~Gross Collections to 3.0% of Gross Collections.~~Merger

53On July 26, 2021, the Company and the Operating Partnership, entered into an Agreement and Plan of Merger, (the “Merger Agreement”) with Independence Realty Trust, Inc. (“IRT”), IRT’s operating partnership, Independence Realty Operating Partnership, LP (“IRT OP”), and IRSTAR Sub, LLC, a wholly-owned subsidiary of IRT (“ IRT Merger Sub”).

On the terms, and subject to the conditions of, the Merger Agreement, the Company will merge with and into IRT Merger Sub, which is referred to herein as the “Company Merger”, with IRT Merger Sub surviving the Company Merger as a wholly-owned subsidiary of IRT; and immediately thereafter, the Operating Partnership will merge with and into IRT OP (the “Partnership Merger” and together with the Company Merger, the “IRT Mergers”), with IRT OP surviving the Partnership Merger.

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

~~March~~June 3130, 2021

(unaudited)

~~Garrison~~In ~~Station~~the ~~Real~~Company ~~Estate~~Merger, ~~Placed~~each inoutstanding ~~Service~~share of the Company’s common stock, par value $0.01 per share, will be converted automatically into the right to receive 0.905, (the “Exchange Ratio”), of a newly issued share of IRT common stock, par value $0.01 per share, (the “IRT Common Stock”).

~~Subsequent~~In tothe ~~March 31~~Partnership Merger, ~~2021~~each outstanding unit of limited partnership of the Operating Partnership will be converted into the right to receive the Exchange Ratio of a newly issued common unit of limited partnership of IRT OP, ~~two~~(the ~~additional~~“IRT ~~buildings~~Common ~~comprised~~Unit”). Under the agreement of 41limited ~~apartment~~partnership ~~homes~~of ~~were~~IRT ~~placed~~OP, IRT common unitholders may generally tender their IRT Common Units, in ~~service~~whole or in part, to IRT OP for redemption for a cash amount based on the then-market price of an equivalent number of shares of IRT Common Stock, and IRT may thereupon elect, at its option, to satisfy the ~~Garrison~~redemption ~~Station~~by ~~development~~issuing ~~project~~one share of IRT Common Stock for each IRT Common Unit tendered for redemption.

54Pursuant to the IRT Mergers, the Company’s stockholders will receive, in aggregate, in exchange for their shares of common stock, approximately, 99.8 million shares of IRT Common Stock and limited partners in the Operating Partnership will receive, in aggregate, in exchange for their operating partnership units, approximately 6.4 million IRT OP Common Units.

Consummation of the IRT Mergers is subject to customary closing conditions, including, among others, receipt of IRT stockholder approval and approval of the Company’s stockholders, and is expected to occur in the fourth quarter of 2021. For more information on the Mergers, see the Company’s Current Report on Form 8-K filed on July 26, 2021.

Suspension and Contingent Termination of the DRP and the Amended & Restated SRP

In connection with the approval of the IRT Mergers, on July 26, 2021, the Company announced that the Company’s board of directors, including all of the Company's independent directors, voted to terminate the DRP and the Amended & Restated SRP, each termination effective as of the effective time of the Company Merger. The Company’s board of directors, including all of the Company's independent directors, also voted to suspend (1) the DRP, effective as of the 10th day after notice is provided to stockholders and (2) indefinitely suspend the Amended & Restated SRP effective as of the 30th day after notice is provided to stockholders.

As a result of the suspension of the DRP, any distributions paid after the distribution payment date in August 2021 will be paid to the Company’s stockholders in cash. The Company can provide stockholders with assistance on directing cash distribution payments and answering questions. The suspension of the DRP will not affect the payment of distributions to stockholders who previously received their distributions in cash. In addition, as a result of the suspension of the Amended & Restated SRP, the Company will not process or accept any requests for redemption received after July 26, 2021.

Letter Agreement

On July 26, 2021, the Company entered into a letter agreement (the “Letter Agreement”) with Rodney Emery, the Company’s Chief Executive Officer and Chairman of the Company Board, and Steadfast REIT Investments, LLC (“SRI”). Pursuant to the Letter Agreement, SRI agreed to indemnify the Company, STAR OP, their subsidiaries and their successors and assigns (including IRT, IRT OP and IRT Merger Sub and their subsidiaries) (collectively, the “Indemnified Parties”), for 75% of any costs, expenses, judgments, liabilities and payments, including settlement payments and attorneys’ fees, incurred or arising in connection with any direct or derivative claims brought by any stockholder of the Company or its successors and assigns alleging breaches of duties under law or contract, including but not limited to breaches by any current or former directors of the Company, in connection with the Internalization Transaction (the “Internalization Claims”), if and to the extent such costs, expenses, judgments, liabilities and payments, including settlement payments and attorneys’ fees are not paid for by the Company’s insurance provider (subject only to the $1.0 million self-insurance retention amount in the Company’s D&O insurance policies, which retention amount would not be included in the covered costs described above).

SRI’s obligations under the Letter Agreement are capped at the lower of $20.3 million or the value of the Collateral (as defined below) at the time payment is owed under the Letter Agreement and any payments made pursuant to the Letter Agreement must be made solely with the delivery of the Collateral.

As used in the Letter Agreement, “Collateral” means the following, now or later held by or on behalf of SRI: (i) 1,277,778 Class B OP Units, or any interests into which they are exchanged or convert, (ii) distributions (cash or in kind) on any such Class B OP Units (or converted interests), (iii) cash payable or securities issuable, from time to time, upon the redemption, conversion or exchange of any of the foregoing, and (iv) all proceeds of any of the foregoing.

Table of Contents

PART I — FINANCIAL INFORMATION (continued)

Item 1. Financial Statements (continued)

STEADFAST APARTMENT REIT, INC.

CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2021

(unaudited)

In the event litigation is filed challenging the Company Merger that includes Internalization Claims and claims that are not Internalization Claims, then an allocation of costs, expenses, liabilities and payments, including settlement payments and attorneys’ fees (collectively, “Expenses”), shall be made to reflect Expenses that are reasonably attributable to the Company’s internalization transaction and are covered costs under the Letter Agreement, and any Expenses that are not covered costs under the Letter Agreement.

The Letter Agreement would terminate in the event the Merger Agreement terminates without the Merger Agreement having been consummated. SRI and Mr. Emery are relieved of their obligations under the Letter Agreement at such time that all of the Collateral, or Collateral valued at $20.3 million, whichever is first, has been applied in satisfaction of the portion of claims for which SRI is responsible, or when all applicable statute of limitations on Internalization Claims have expired and no Internalization Claims remain pending or unsatisfied.

Table of Contents

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.

Forward-Looking Statements

Certain statements included in this Quarterly Report on Form 10-Q (this “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, 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. One factor that could have a material adverse effect on our operations and future prospects is the adverse effect of COVID-19 and its variants on the financial condition, results of operations, cash flows and performance of us and our tenants, the real estate market and the global economy and financial markets. The extent to which COVID-19 impacts us and our residents will depend on future developments, ~~which are highly uncertain and cannot be predicted with confidence,~~ including the ~~scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, the~~ outbreak of new strains of the virus and the direct and indirect economic effects of the pandemic and containment measures, among others. Moreover, you should interpret many of the risks identified in this report, as well as the risks set forth above, as being heightened as a result of the ongoing and numerous adverse impacts of the COVID-19 pandemic. Additional factors that could have a material adverse effect on our operations and future prospects include, but are not limited to:

Additional 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 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;

•our pending merger with IRT

•our ability to retain our key employees;

•our ability to generate sufficient cash flows to pay distributions to our stockholders;

•the Internalization Transaction (defined herein) may not be financially beneficial to us and our stockholders and our net income and funds from operations may decrease as a result of the Internalization Transaction;

•legislative or regulatory changes (including changes to the laws governing the taxation of real estate investment trusts, or REITs);

•the impact of severe weather events;

•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~~

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Table of Contents

PART I — FINANCIAL INFORMATION (continued)

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 this Quarterly Report and our Annual Report on Form 10-K for the year ended December 31, 2020, filed with the Securities and Exchange Commission, or the SEC, on March 12, 2021.

Overview

We were formed on August 22, 2013, as a Maryland corporation that elected to be taxed as, and qualifies as, a REIT. As of ~~March~~June 3130, 2021, we owned and managed a diverse portfolio of 6970 multifamily properties comprised of 21,~~591~~936 apartment homes and three parcels of land held for the development of apartment homes. We may acquire additional multifamily properties or pursue multifamily development projects in the future.

~~COVID-19~~Agreement ~~Impact~~and Plan of Merger

WeOn ~~are~~July ~~carefully monitoring the ongoing COVID-19 pandemic and its impact on our business. During the quarter ended June 30~~26, ~~2020~~2021, we ~~instituted~~and ~~payment~~Steadfast ~~plans~~Apartment ~~for~~REIT ~~our~~Operating ~~residents that were experiencing hardship due to COVID-19~~Partnership, ~~which we refer to as the “COVID-19 Payment Plan~~L.”P. ~~Pursuant~~our tosubsidiary ~~the~~operating ~~COVID-19 Payment Plan~~partnership, weor ~~allowed~~the ~~qualifying~~Operating ~~residents to defer their rent~~Partnership, ~~which~~entered isinto ~~collected~~an byAgreement usand inPlan ~~monthly installment payments over the duration~~ of ~~the~~Merger, ~~current lease~~ or ~~renewal term (which may not exceed 12 months). Additionally, for~~ the ~~months~~Merger ~~of May and June 2020~~Agreement, ~~we provided certain qualifying residents~~ with aIndependence ~~one-time~~Realty ~~concession~~Trust, ~~to incentivize their performance under the payment plan~~Inc., Ifor ~~the~~IRT, ~~qualifying~~IRT’s ~~resident~~operating ~~failed~~partnership, toIndependence ~~make~~Realty ~~payments~~Operating ~~pursuant~~Partnership, ~~to the COVID-19 Payment Plan~~LP, ~~the~~or ~~concession~~IRT ~~was immediately terminated~~OP, and ~~the~~IRSTAR ~~qualifying resident was required to immediately repay the amount of the concession. Due to reduced demand~~Sub, ~~we did not offer residents any other payment plans during the remaining months of 2020. In the aggregate~~LLC, ~~approximately~~a ~~$2,025,092 in rent billed was subject to the COVID~~wholly-19owned ~~Payment~~subsidiary ~~Plan,~~of ~~with $53~~IRT,~~500~~ ~~still~~or ~~due~~IRT asMerger ~~of March 31, 2021~~Sub.

InOn ~~January~~the ~~2021~~terms, weand ~~began~~subject ~~offering an extension~~ to the ~~COVID-19~~conditions ~~Payment Plan~~of, or the ~~Extension~~Merger ~~Plan~~Agreement, ~~that~~we ~~allows~~will ~~eligible~~merge ~~residents~~with toand ~~defer~~into ~~their~~IRT ~~rent~~Merger Sub, which is ~~collected~~referred byto usherein inas ~~monthly installment payments over~~ the ~~lesser~~“Company ofMerger”, ~~the duration of the current lease term or a maximum of three months (~~with ~~the~~IRT ~~exception~~Merger ofSub ~~certain~~surviving ~~states that allow a maximum of six months deferral). Under~~ the ~~Extension~~Company ~~Plan,~~Merger noas ~~concessions are offered for residents with~~ a ~~payment~~wholly-owned ~~plan~~subsidiary ~~duration~~ of ~~two~~IRT; ~~months or less~~ and ~~residents~~immediately ~~who~~thereafter, ~~opted for~~ the ~~COVID-19~~Operating ~~Payment~~Partnership ~~Plan~~will ~~are~~merge ~~not~~with ~~eligible~~and tointo ~~participate~~IRT inOP, ~~the~~or ~~Extension Plan unless they paid off~~ the ~~amounts~~Partnership ~~due under the COVID-19 Payment Plan. As of May 1~~Merger, ~~2021~~and, ~~the~~together ~~number~~with ofthe ~~qualifying~~Company ~~residents~~Merger, ~~who opted for~~ the ~~Extension~~“IRT ~~Plan were 41 and approximately $43~~Mergers”,~~277~~ inwith ~~rent~~IRT ~~was~~OP ~~subject~~surviving to the ~~Extension~~Partnership ~~Plan~~Merger.

~~During~~In the ~~quarter~~Company ~~ended September 30~~Merger, ~~2020,~~each weoutstanding ~~initiated~~share ~~a debt forgiveness program for certain~~ of our ~~residents~~common ~~that were experiencing hardship due to COVID-19 and who were in default on their lease payments~~stock, ~~which~~par wevalue ~~refer to as the “Debt Forgiveness Program~~$0.”01 ~~Pursuant~~per ~~to the Debt Forgiveness Program~~share, wewill ~~offered~~be ~~qualifying~~converted ~~residents~~automatically aninto ~~opportunity to terminate~~ the ~~lease~~right ~~without being liable for any unpaid rent and penalties. We determined that accounts receivable related~~ to ~~the~~receive ~~Debt Forgiveness Program are not probable of collection and therefore included these accounts in our reserve~~0.905, Inor the ~~aggregate,~~Exchange ~~$298~~Ratio,~~576~~ of ~~rent~~a ~~was~~newly ~~written~~issued ~~off~~share as of ~~March~~IRT ~~31,~~common ~~2021. As of March 31~~stock, ~~2021,~~par ~~approximately~~value 55$0.01 ofper ~~304 residents that qualified for the Debt Forgiveness Program~~share, ~~vacated their apartment homes, terminating their lease resulting in the forgiveness and write off of their debt. We may in the future continue to offer various types of payment plans~~ or ~~rent relief depending on~~ the ~~ongoing~~IRT ~~impact~~common ~~of the COVID-19 pandemic~~stock.

~~During~~In the ~~three~~Partnership ~~months~~Merger, ~~ended~~each ~~March 31,~~outstanding ~~2021,~~unit weof ~~collected~~limited ~~96%~~partnership inof ~~rent~~the ~~due~~Operating ~~pursuant~~Partnership towill ~~our~~be ~~leases.~~converted Weinto ~~collected~~the ~~97%~~right into ~~rent~~receive ~~due~~the ~~pursuant~~Exchange toRatio ~~our~~of ~~leases~~a ~~during~~newly ~~April~~issued ~~2021.~~common Weunit ~~have~~of ~~reserved~~limited ~~approximately~~partnership $2of IRT OP,~~728,971~~ or the IRT common unit. Under the agreement of ~~accounts~~limited ~~receivable~~partnership ~~which~~of weIRT ~~consider~~OP, ~~not~~IRT ~~probable~~common ~~for~~unitholders ~~collection.~~may ~~Although~~generally ~~the~~tender ~~COVID-19~~their ~~pandemic~~IRT ~~has~~common ~~not~~units, ~~materially~~in ~~impacted~~whole ~~our~~or ~~rent~~in ~~collections~~part, to IRT OP for redemption for a cash amount based on the ~~future~~then-market ~~impact~~price of ~~COVID-19~~an isequivalent ~~still~~number ~~unknown.~~of Weshares ~~are~~of ~~currently~~IRT ~~working~~common ~~with~~stock, ~~residents~~and IRT may thereupon elect, at ~~our~~its ~~communities~~option, to ~~obtain~~satisfy ~~rental~~the ~~relief~~redemption ~~assistance~~by ~~pursuant~~issuing toone ~~the~~share ~~Emergency~~of ~~Rental~~IRT ~~Assistance~~common ~~Program~~stock ~~adopted~~for byeach ~~the~~IRT ~~U.S.~~common ~~Department~~unit oftendered ~~Treasury~~for redemption.

WePursuant ~~expect~~to the ~~significance~~IRT ~~of the COVID-19 pandemic~~Mergers, ~~including~~our ~~the~~stockholders ~~extent~~will ofreceive, ~~its~~in ~~effect~~aggregate, onin ~~our~~exchange ~~financial~~for ~~and~~their ~~operational~~shares ~~results,~~of tocommon ~~be dictated by~~stock, ~~among other things~~approximately, ~~its~~99.8 ~~duration,~~million ~~the~~shares ~~success~~ of ~~efforts~~IRT tocommon ~~contain~~stock it and ~~the~~limited ~~impact~~partners ofin ~~actions~~our ~~taken~~Operating inPartnership ~~response.~~will ~~For instance~~receive, ~~recent~~in ~~government~~aggregate, ~~action~~in toexchange ~~provide substantial financial support could provide helpful mitigation~~ for ~~us;~~their ~~its~~operating ~~ultimate~~partnership ~~impact~~units, ~~however,~~approximately is6.4 ~~not~~million ~~yet~~IRT ~~clear.~~OP common units.

56Consummation of the IRT Mergers is subject to customary closing conditions, including, among others, receipt of IRT stockholder approval and approval of our stockholders, and is expected to occur in the fourth quarter of 2021. For more information on the Mergers, see our Current Report on Form 8-K filed on July 26, 2021.

In connection with the approval of the IRT Mergers, on July 26, 2021, we announced that our board of directors, including all of our independent directors, voted to terminate our distribution reinvestment plan and the share repurchase plan, each termination effective as of the effective time of the Company Merger. Our board of directors, including all of our independent directors, also voted to suspend (1) the distribution reinvestment plan, effective as of the 10th day after notice is provided to stockholders and (2) indefinitely suspend the share repurchase plan, effective as of 30th day after notice is provided to stockholders.

As a result of the suspension of the distribution reinvestment plan, any distributions paid after the distribution payment date in August 2021, will be paid to our stockholders in cash. We can provide stockholders with assistance on directing cash distribution payments and answering questions. The suspension of the distribution reinvestment plan will not affect the payment of distributions to stockholders who previously received their distributions in cash. In addition, as a result of the suspension of the share repurchase plan, we will not process or accept any requests for redemption received after July 26, 2021.

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COVID-19 Impact

We are carefully monitoring the ongoing COVID-19 pandemic and its impact on our business. During the quarter ended June 30, 2020, we instituted payment plans for our residents that were experiencing hardship due to COVID-19, which we refer to as the “COVID-19 Payment Plan.” Pursuant to the COVID-19 Payment Plan, we allowed qualifying residents to defer their rent, which is collected by us in monthly installment payments over the duration of the current lease or renewal term (which may not exceed 12 months). Additionally, for the months of May and June 2020, we provided certain qualifying residents with a one-time concession to incentivize their performance under the payment plan. If the qualifying resident failed to make payments pursuant to the COVID-19 Payment Plan, the concession was immediately terminated, and the qualifying resident was required to immediately repay the amount of the concession. Due to reduced demand, we did not offer residents any other payment plans during the remaining months of 2020. In the aggregate, approximately $2,043,200 in rent was subject to the COVID-19 Payment Plan, with $40,542 still due as of June 30, 2021.

In January 2021, we began offering an extension to the COVID-19 Payment Plan, or the Extension Plan, that allows eligible residents to defer their rent, which is collected by us in monthly installment payments over the lesser of the duration of the current lease term or a maximum of three months (with the exception of certain states that allow a maximum of six months deferral). Under the Extension Plan, no concessions are offered for residents with a payment plan duration of two months or less and residents who opted for the COVID-19 Payment Plan are not eligible to participate in the Extension Plan unless they paid off the amounts due under the COVID-19 Payment Plan. As of July 20, 2021, the number of qualifying residents who opted for the Extension Plan were 54 and approximately $47,000 in rent was subject to the Extension Plan.

During the quarter ended September 30, 2020, we initiated a debt forgiveness program for certain of our residents that were experiencing hardship due to COVID-19 and who were in default on their lease payments, which we refer to as the “Debt Forgiveness Program.” Pursuant to the Debt Forgiveness Program, we offered qualifying residents an opportunity to terminate the lease without being liable for any unpaid rent and penalties. We determined that accounts receivable of $2,110,657 related to the Debt Forgiveness Program are not probable of collection and therefore included these accounts in our reserve. In the aggregate, $298,576 of rent was written off as of June 30, 2021. As of June 30, 2021, approximately 55 of 323 residents that qualified for the Debt Forgiveness Program, vacated their apartment homes, terminating their lease resulting in the forgiveness and write-off of their debt. We may in the future continue to offer various types of payment plans or rent relief depending on the ongoing impact of the COVID-19 pandemic.

During the six months ended June 30, 2021, we collected 96% in rent due pursuant to our leases. We collected 95% in rent due pursuant to our leases through July 20, 2021. We have reserved approximately $3,080,227 of accounts receivable which we consider not probable for collection. Although the COVID-19 pandemic has not materially impacted our rent collections, the future impact of COVID-19 is still unknown. We are currently working with residents at our communities to obtain rental relief assistance pursuant to the Emergency Rental Assistance Program adopted by the U.S. Department of Treasury.

Winter Storm

In February 2021, certain regions of the United States experienced winter storms and extreme cold temperatures, including in the states where we own and operate multifamily properties. The ~~impact of the~~ storms and the extreme cold temperatures ~~resulting~~resulted in power outages and freezing water pipes which negatively impacted some of our properties. Our properties are fully insured, and we expect the costs to be fully recoverable by insurance proceeds, less the plan’s deductible. During the ~~three~~six months ended ~~March~~June 3130, 2021, we wrote off $1514,~~459~~902,~~862~~551 of the carrying value of our fixed assets and recorded $118,~~948~~261,~~789~~990 of estimated repair expenses, with a corresponding increase in general and administrative expenses and an increase in our accounts payable and accrued liabilities, of which $6,849,973 has been paid as of June 30, 2021. We also recorded insurance recoveries of $2723,~~407~~164,~~651~~541 for the estimated insurance claims proceeds in the amount of total losses incurred (as described above) as an increase in rents and other receivables with a corresponding decrease to general and administrative expenses. As a result, while our net loss for the ~~three~~six months ended ~~March~~June 3130, 2021, was not impacted, we experienced a decrease in the carrying value of our real estate held for investment, net and increases to rents and other receivables and accounts payable and accrued liabilities in the consolidated balance sheets for ~~three~~six months ended ~~March~~June 3130, 2021.

Public Offering

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 March 31, 2021, we had sold 111,967,192 shares of common stock for gross offering proceeds of $1,722,630,330, including 8,337,112 shares of common stock issued pursuant to our distribution reinvestment plan for gross offering proceeds of $124,901,172 and 56,016,053 shares of common stock issued in connection with the Mergers (as defined below).

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reinvestment plan. As of June 30, 2021, we had sold 112,167,095 shares of common stock for gross offering proceeds of $1,725,738,819, including 8,537,015 shares of common stock issued pursuant to our distribution reinvestment plan for gross offering proceeds of $128,009,661 and 56,016,053 shares of common stock issued in connection with the Mergers (as defined below).

On March 9, 2021, our board of directors determined an estimated value per share of our common stock of $15.55 as of December 31, 2020. 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 $15.55, effective April 1, 2021. 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.

Merger with Steadfast Income REIT, Inc.

On August 5, 2019, we, Steadfast Income REIT, Inc., or SIR, ~~Steadfast Apartment REIT Operating Partnership, L.P.,~~ our ~~wholly-owned subsidiary, or STAR~~ Operating Partnership, Steadfast Income REIT Operating Partnership, L.P., the operating partnership of SIR, or the SIR OP, and SI Subsidiary, LLC, or SIR Merger Sub, entered into an Agreement and Plan of Merger, or the SIR Merger Agreement. Pursuant to the terms and conditions of the SIR Merger Agreement, on March 6, 2020, SIR merged with and into SIR Merger Sub with SIR Merger Sub surviving the merger, or the SIR Merger. Following the SIR Merger, SIR Merger Sub, as the surviving entity, continued as our wholly-owned subsidiary. In accordance with the applicable provisions of the Maryland General Corporation Law, or MGCL, the separate existence of SIR ceased.

At the effective time of the SIR Merger, each issued and outstanding share of SIR common stock (or a fraction thereof), $0.01 par value per share, converted into 0.5934 shares of our common stock.

Merger with Steadfast Apartment REIT III, Inc.

On August 5, 2019, we, Steadfast Apartment REIT III, Inc., or STAR III, ~~STAR~~our Operating Partnership, Steadfast Apartment REIT III Operating Partnership, L.P., the operating partnership of STAR III, or the STAR III OP, and SIII Subsidiary, LLC, or STAR III Merger Sub, entered into an Agreement and Plan of Merger, or the STAR III Merger Agreement. Pursuant to the terms and conditions of the STAR III Merger Agreement, on March 6, 2020, STAR III merged with and into STAR III Merger Sub with STAR III Merger Sub surviving the merger, or the STAR III Merger, and together with the SIR Merger, the “Mergers.” Following the STAR III Merger, STAR III Merger Sub, as the surviving entity, continued as our wholly-owned subsidiary. In accordance with the applicable provisions of the MGCL, the separate existence of STAR III ceased.

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Combined Company

Through the Mergers, we acquired 36 multifamily properties with 10,166 apartment homes and a 10% interest in one unconsolidated joint venture that owned 20 multifamily properties with a total of 4,584 apartment homes, all of which had a gross real estate value of approximately $1.5 billion. The combined company after the Mergers retained the name “Steadfast Apartment REIT, Inc.” Each merger qualified as a “reorganization” under, and within the meaning of, Section 368(a) of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code.

Pre-Internalization Operating Partnerships Merger

On August 28, 2020, pursuant to an Agreement and Plan of Merger, ~~STAR~~our Operating Partnership merged with and into the SIR OP, or the SIR OP/STAR OP Merger. The SIR OP/STAR OP Merger was treated for U.S. federal income tax purposes as a tax-deferred contribution by us of all of the assets and liabilities of STAR Operating Partnership to SIR OP under Section 721(a) of the Internal Revenue Code.

Immediately following the consummation of the SIR OP/STAR OP Merger, on August 28, 2020, pursuant to an Agreement and Plan of Merger, STAR III OP merged with and into SIR OP, or the Operating Partnership Merger, and together with the SIR OP/STAR OP Merger, the “Operating Partnership Mergers,” with SIR OP being the “resulting partnership” and STAR III OP terminating.

On August 28, 2020, SIR OP changed its name to “Steadfast Apartment REIT Operating Partnership, L.P.”, which is referred to herein as the “~~Current~~ Operating Partnership.” In addition, on August 28, 2020, prior to completion of the Operating Partnership Mergers, we acquired STAR III Merger Sub. On August 28, 2020, SIR Merger Sub, as the initial general partner of the ~~Current~~ Operating Partnership, transferred all of its general partnership interests to us, and we were admitted as a substitute general partner of the ~~Current~~ Operating Partnership.

On August 28, 2020, we, Steadfast Income Advisor, LLC, the initial limited partner of the Current Operating Partnership, or SIR Advisor, Steadfast Apartment Advisor III, LLC, a Delaware limited liability company and the special limited partner of the Current Operating Partnership, or STAR III Advisor, Wellington VVM LLC, a Delaware limited liability company and limited partner of the Current Operating Partnership, or Wellington, and Copans VVM, LLC, a Delaware limited liability company and limited partner of the Current Operating Partnership, or Copans, and together with Wellington, “VV&M”, entered into a Second Amended and Restated Agreement of Limited Partnership, or the Second A&R Partnership Agreement, in order to, among other things, reflect the consummation of the Operating Partnership Mergers.60

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PART I — FINANCIAL INFORMATION (continued)

On August 28, 2020, we, Steadfast Income Advisor, LLC, the initial limited partner of the Operating Partnership, or SIR Advisor, Steadfast Apartment Advisor III, LLC, a Delaware limited liability company and the special limited partner of the Operating Partnership, or STAR III Advisor, Wellington VVM LLC, a Delaware limited liability company and limited partner of the Operating Partnership, or Wellington, and Copans VVM, LLC, a Delaware limited liability company and limited partner of the Operating Partnership, or Copans, and together with Wellington, “VV&M”, entered into a Second Amended and Restated Agreement of Limited Partnership, or the Second A&R Partnership Agreement, in order to, among other things, reflect the consummation of the Operating Partnership Mergers.

The purpose of the pre-internalization Operating Partnership Mergers was to simplify our corporate structure so that we had a single operating partnership as our direct subsidiary.

Internalization Transaction

On August 31, 2020, we and the ~~Current~~ Operating Partnership entered into a series of transactions and agreements (such transactions and agreements hereinafter collectively referred to as the “Internalization Transaction”), with Steadfast REIT Investments, LLC, our former sponsor, or SRI, which resulted in the internalization of our external management functions provided by Steadfast Apartment Advisor, LLC, our former external advisor, which we refer to as our “Former Advisor,” and its affiliates. Prior to the ~~closing of the~~ Internalization ~~Transaction~~Closing, which took place contemporaneously with the execution of the Contribution & Purchase Agreement (as defined below) on August 31, 2020, or the Internalization Closing, Steadfast Investment Properties, Inc., a California corporation, or SIP, Steadfast REIT Services, Inc., a California corporation, or Steadfast REIT Services, and their respective affiliates owned and operated all of the assets necessary to operate as a self-managed company, and employed all the employees necessary to operate as a self-managed company.

Pursuant to a Contribution and Purchase Agreement, between us, the ~~Current~~ Operating Partnership and SRI, SRI contributed to the ~~Current~~ Operating Partnership all of the membership interests in STAR RS Holdings, LLC, a Delaware limited liability company, or SRSH, and the assets and rights necessary to operate as a self-managed company in all material respects, and the liabilities associated with such assets and rights, or the Contribution, in exchange for $124,999,000, which was paid as follows: (1) $31,249,000 in cash, or the Cash Consideration, and (2) 6,155,613.92 Class B units of limited partnership interests in the ~~Current~~ Operating Partnership, or the Class B OP Units, having the agreed value set forth in the Contribution and Purchase Agreement, or the OP Unit Consideration. In addition, we purchased all of our Class A Convertible Stock held by the Former Advisor for $1,000. As a result of the Internalization Transaction, we became self-managed and acquired components of the advisory, asset management and property management ~~business~~operations of the Former Advisor and its affiliates by hiring the employees, who comprise the workforce necessary for the management and day-to-day real estate and accounting operations for us and the ~~Current~~ Operating Partnership. Additional information on the Internalization Transaction can be found on our Current Report in Form 8-K filed with the SEC on September 3, 2020. See also Note 3 (Internalization Transaction) to our consolidated financial statements in this Quarterly Report.

58On July 16, 2021, we received a derivative demand letter addressed to our board of directors, purportedly sent on behalf of two stockholders, relating to the Internalization Transaction. The letter demanded that our board of directors appoint a committee to investigate the Internalization Transaction and, among other things, determine whether there exists any basis for us to pursue claims relating to that transaction, including for recovery of payments made in the transaction. We are considering the request.

The Former Advisor

Prior to the Internalization Transaction, our day-to-day operations were externally managed by the Former Advisor, pursuant to the Amended and Restated Advisory Agreement effective as of March 6, 2020, by and between us and the Former Advisor, as amended, the “Advisory Agreement.” On August 31, 2020, prior to the Internalization Closing, we, the Former Advisor and the Operating Partnership entered into a Joinder Agreement pursuant to which the Operating Partnership became a party to the Advisory Agreement. On August 31, 2020, prior to the Internalization Closing, we and the Former Advisor entered into the First Amendment to Amended and Restated Advisory Agreement in order to remove certain restrictions in the Advisory Agreement related to business combinations and to provide that any amounts accrued to the Former Advisor commencing on September 1, 2020 were paid in cash to the Former Advisor by the Operating Partnership. In connection with the Internalization Transaction, STAR REIT Services, LLC, our subsidiary, or SRS, assumed the rights and obligations of the Advisory Agreement from the Former Advisor.

The Operating Partnership

Substantially all of our business is conducted through the Operating Partnership. We are the sole general partner of the Operating Partnership. As a condition to the Internalization Closing, on August 31, 2020, we, as the general partner and parent of the Operating Partnership, SRI and VV&M entered into a Third Amended and Restated Agreement of Limited Partnership of the Operating Partnership, which is referred to herein as the “Operating Partnership Agreement”, to restate the Second A&R Partnership Agreement in order to, among other things, remove references to the limited partner interests previously held by

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onSIR ~~our~~Advisor ~~Current~~and ~~Report~~STAR inIII ~~Form~~Advisor, ~~8-K~~reflect ~~filed with~~ the ~~SEC~~consummation onof ~~September~~the 3Contribution, ~~2020.~~and ~~See~~designate ~~also~~Class ~~Note~~B 3OP ~~(Internalization~~Units ~~Transaction)~~that towere ~~our~~issued ~~consolidated~~as ~~financial~~the ~~statements~~OP inUnit ~~this Quarterly Report~~Consideration.

The ~~Former~~Operating ~~Advisor~~Partnership Agreement provides that the 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 the 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 the Operating Partnership being taxed as a corporation, rather than as a disregarded entity.

Prior to the Internalization Transaction, our day-to-day operations were externally managed by the Former Advisor, pursuant to the Amended and Restated Advisory Agreement effective as of March 6, 2020, by and between us and the Former Advisor, as amended, the “Advisory Agreement”. On August 31, 2020, prior to the Internalization Closing, we, the Former Advisor and the Current Operating Partnership entered into a Joinder Agreement, pursuant to which the Current Operating Partnership became a party to the Advisory Agreement. On August 31, 2020, prior to the Internalization Closing, we and the Former Advisor entered into the First Amendment to Amended and Restated Advisory Agreement in order to remove certain restrictions in the Advisory Agreement related to business combinations and to provide that any amounts accrued to the Former Advisor commencing on September 1, 2020 were paid in cash to the Former Advisor by the Current Operating Partnership. In connection with the Internalization Transaction, STAR REIT Services, LLC, our subsidiary, or SRS, assumed the rights and obligations of the Advisory Agreement from the Former Advisor.

The Current Operating Partnership

Substantially all of our business is conducted through the Current Operating Partnership. We are the sole general partner of the Current Operating Partnership. As a condition to the Internalization Closing, on August 31, 2020, we, as the general partner and parent of the Current Operating Partnership, SRI and VV&M entered into a Third Amended and Restated Agreement of Limited Partnership of the Operating Partnership, which is referred to herein as the “Operating Partnership Agreement,” to restate the Second A&R Partnership Agreement in order to, among other things, remove references to the limited partner interests previously held by SIR Advisor and STAR III Advisor, reflect the consummation of the Contribution, and designate Class B OP Units that were issued as the OP Unit Consideration.

The Operating Partnership Agreement provides that the Current 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 the Current 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 the Current Operating Partnership being taxed as a corporation, rather than as a disregarded entity.

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 global COVID-19 pandemic and resulting ~~shut~~shutdown ~~down~~ of large components of the U.S. economy has created significant uncertainty and enhanced investment risk across many asset classes, including real estate. The degree to which our business is impacted by the COVID-19 pandemic will depend on a number of variables, including access to testing and vaccines, the reimposition of “shelter in place” orders, new strains of the virus and the continuation of new COVID-19 cases throughout the world.

While all property classes have been adversely impacted by ~~the~~last ~~recent~~year’s economic downturn, we believe we are well -positioned to navigate this unprecedented period. We believe multifamily properties have been less adversely impacted than hospitality and retail properties, and our portfolio of moderate-income apartments should outperform other classes of multifamily properties. We also believe that long-run economic and demographic trends should benefit our existing portfolio. Home ownership rates should remain ~~at near all-time lows given the current economic situation~~low. ~~Additionally,~~ Millennials and Baby Boomers, the two largest demographic groups comprising roughly half of the total population in the United States, are expected to continue to increasingly ch

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