The following is a discussion and analysis of our financial condition and our
historical results of operations. The following should be read in conjunction
with our financial statements and accompanying notes. This discussion contains
forward-looking statements that involve risks and uncertainties. Our actual
results could differ materially from those projected, forecasted, or expected in
these forward-looking statements as a result of various factors, including, but
not limited to, those discussed below and elsewhere in this annual report. See
"Cautionary Statement Regarding Forward-Looking Statements" and "Risk Factors"
in this annual report. Our management believes the assumptions underlying the
Company's financial statements and accompanying notes are reasonable. However,
the Company's financial statements and accompanying notes may not be an
indication of our financial condition and results of operations in the future.

Overview



As of December 31, 2020, our Portfolio consisted of 37 multifamily properties
primarily located in the Southeastern and Southwestern United States
encompassing 14,069 units of apartment space that was approximately 94.1% leased
with a weighted average monthly effective rent per occupied apartment unit of
$1,128. Substantially all of our business is conducted through the OP. We own
the Portfolio through the OP and our TRS. The OP owns approximately 99.9% of the
Portfolio; our TRS owns approximately 0.1% of the Portfolio. The OP GP is the
sole general partner of the OP. As of December 31, 2020, there were 23,819,402
OP Units outstanding, of which 23,746,169, or 99.7%, were owned by us and
73,233, or 0.3%, were owned by an unaffiliated limited partner (see Note 10 to
our consolidated financial statements).

We are primarily focused on directly or indirectly acquiring, owning, and
operating well-located multifamily properties with a value-add component in
large cities and suburban submarkets of large cities, primarily in the
Southeastern and Southwestern United States. We generate revenue primarily by
leasing our multifamily properties. We intend to employ targeted management and
a value-add program at a majority of our properties in an attempt to improve
rental rates and the NOI at our properties and achieve long-term capital
appreciation for our stockholders. We are externally managed by the Adviser
through the Advisory Agreement, by and among the OP, the Adviser and us. The
Advisory Agreement was renewed on February 15, 2021 for a one-year term. The
Adviser is wholly owned by NexPoint Advisors, L.P.

On March 4, 2020, the Company, the OP and the Adviser entered into separate
equity distribution agreements with each of Jefferies, Raymond James, KeyBanc
and Truist, pursuant to which the Company may issue and sell from time to time
shares of the Company's common stock, par value $0.01 per share, having an
aggregate sales price of up to $225,000,000. Sales of shares of common stock, if
any, may be made in transactions that are deemed to be "at the market"
offerings, as defined in Rule 415 under the Securities Act, including, without
limitation, sales made by means of ordinary brokers' transactions on the New
York Stock Exchange, to or through a market maker at market prices prevailing at
the time of sale, at prices related to prevailing market prices or at negotiated
prices based on prevailing market prices. In addition to the issuance and sale
of shares of common stock, the Company may enter into forward sale agreements
with each of Jefferies, KeyBanc, Raymond James, Truist, or their respective
affiliates, through the 2020 ATM Program. During the year ended December 31,
2020, the Company issued 718,306 shares of common stock at an average price of
$43.92 per share for gross proceeds of $31.5 million under the 2020 ATM Program.
The Company paid approximately $0.5 million in fees to the 2020 ATM Sales Agents
with respect to such sales and incurred other issuance costs of approximately
$0.6 million, both of which were netted against the gross proceeds and recorded
in additional paid in capital. The 2020 ATM Program may be terminated by the
Company at any time and expires automatically once aggregate sales under the
2020 ATM Program reach $225,000,000 (see Note 8 to our consolidated financial
statements).

We have elected to be taxed as a REIT under Sections 856 through 860 of the
Code, and expect to continue to qualify as a REIT. To qualify as a REIT, we must
meet a number of organizational and operational requirements, including a
requirement that we distribute at least 90% of our REIT taxable income to our
stockholders. As a REIT, we will be subject to federal income tax on our
undistributed REIT taxable income and net capital gain and to a 4% nondeductible
excise tax on any amount by which distributions we pay with respect to any
calendar year are less than the sum of (1) 85% of our ordinary income, (2) 95%
of our capital gain net income and (3) 100% of our undistributed income from
prior years. We believe we qualify for taxation as a REIT under the Code, and we
intend to continue to operate in such a manner, but no assurance can be given
that we will operate in a manner so as to qualify as a REIT. Taxable income from
certain non-REIT activities is managed through a TRS and is subject to
applicable federal, state, and local income and margin taxes. We had no
significant taxes associated with our TRS for the years ended December 31, 2020,
2019 and 2018.

For information on the effects the COVID-19 pandemic had on our business, see Note 13 "Subsequent Events-COVID-19" to our consolidated financial statements included in this annual report.


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Components of Our Revenues and Expenses

Revenues



Rental income. Our earnings are primarily attributable to the rental revenue
from our multifamily properties. We anticipate that the leases we enter into for
our multifamily properties will typically be for one year or less on average.
Also included are utility reimbursements, late fees, pet fees, and other rental
fees charged to tenants.

Other income. Other income includes ancillary income earned from tenants such as
non-refundable fees, application fees, laundry fees, cable TV income, and other
miscellaneous fees charged to tenants.

Expenses

Property operating expenses. Property operating expenses include property maintenance costs, salary and employee benefit costs, utilities, casualty-related expenses and recoveries and other property operating costs.

Real estate taxes and insurance. Real estate taxes include the property taxes assessed by local and state authorities depending on the location of each property. Insurance includes the cost of commercial, general liability, and other needed insurance for each property.



Property management fees. Property management fees include fees paid to BH, our
property manager, or other third party management companies for managing each
property (see Note 10 to our consolidated financial statements).

Advisory and administrative fees. Advisory and administrative fees include the
fees paid to our Adviser pursuant to the Advisory Agreement (see Note 11 to our
consolidated financial statements).

Corporate general and administrative expenses. Corporate general and
administrative expenses include, but are not limited to, audit fees, legal fees,
listing fees, board of director fees, equity-based compensation expense,
investor relations costs and payments of reimbursements to our Adviser for
operating expenses. Corporate general and administrative expenses and the
advisory and administrative fees paid to our Adviser (including advisory and
administrative fees on properties defined in the Advisory Agreement as New
Assets) will not exceed 1.5% of Average Real Estate Assets per calendar year (or
part thereof that the Advisory Agreement is in effect), calculated in accordance
with the Advisory Agreement, or the Expense Cap. The Expense Cap does not limit
the reimbursement by us of expenses related to securities offerings paid by our
Adviser. The Expense Cap also does not apply to legal, accounting, financial,
due diligence, and other service fees incurred in connection with mergers and
acquisitions, extraordinary litigation, or other events outside our ordinary
course of business or any out-of-pocket acquisition or due diligence expenses
incurred in connection with the acquisition or disposition of real estate
assets. Additionally, in the sole discretion of the Adviser, the Adviser may
elect to waive certain advisory and administrative fees otherwise due. If
advisory and administrative fees are waived in a period, the waived fees for
that period are considered to be waived permanently and the Adviser may not be
reimbursed in the future.

Property general and administrative expenses. Property general and administrative expenses include the costs of marketing, professional fees, general office supplies, and other administrative related costs of each property.



Depreciation and amortization. Depreciation and amortization costs primarily
include depreciation of our multifamily properties and amortization of acquired
in-place leases.

Other Income and Expense

Interest expense. Interest expense primarily includes the cost of interest expense on debt, the amortization of deferred financing costs and the related impact of interest rate derivatives used to manage our interest rate risk.



Loss on extinguishment of debt and modification costs. Loss on extinguishment of
debt and modification costs includes prepayment penalties and defeasance costs,
the write-off of unamortized deferred financing costs and fair market value
adjustments of assumed debt related to the early repayment of debt, costs
incurred in a debt modification that are not capitalized as deferred financing
costs and other costs incurred in a debt extinguishment.

Casualty losses. Casualty losses include expenses resulting from damages from an
unexpected and unusual event such as a natural disaster. Expenses can include
additional payments on insurance premiums, impairment recognized on a property,
and other abnormal expenses arising from the related event.

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Miscellaneous income. Miscellaneous income includes proceeds received from insurance for business interruption involving the loss of rental income at a property that has temporarily suspended operations due to an unexpected and unusual event.



Gain on sales of real estate. Gain on sales of real estate includes the gain
recognized upon sales of properties. Gain on sales of real estate is calculated
by deducting the carrying value of the real estate and costs incurred to sell
the properties from the sales prices of the properties.

Results of Operations for the Years Ended December 31, 2020, 2019 and 2018

The year ended December 31, 2020 as compared to the year ended December 31, 2019

The following table sets forth a summary of our operating results for the years ended December 31, 2020 and 2019 (in thousands):





                                                  For the Year Ended December 31,
                                                    2020                   2019            $ Change
Total revenues                                $        204,800       $        181,066     $    23,734
Total expenses                                        (191,236 )             (166,157 )       (25,079 )
Operating income before gain on sales of
real estate                                             13,564                 14,909          (1,345 )
Gain on sales of real estate                            69,151                127,684         (58,533 )
Operating income                                        82,715                142,593         (59,878 )
Interest expense                                       (44,753 )              (37,385 )        (7,368 )
Loss on extinguishment of debt and
modification costs                                      (1,470 )               (2,869 )         1,399
Casualty gains (losses)                                  5,886                 (3,488 )         9,374
Miscellaneous income                                     1,772                    587           1,185
Net income                                              44,150                 99,438         (55,288 )
Net income attributable to redeemable
noncontrolling interests in the Operating
Partnership                                                132                    298            (166 )
Net income attributable to common
stockholders                                  $         44,018       $         99,140     $   (55,122 )




The change in our net income between the periods primarily relates to a decrease
in gain on sales of real estate of $58.5 million and increases in total property
operating expenses of $4.5 million and depreciation and amortization expense of
$13.3 million, partially offset by an increase in total revenues of $23.7
million. The change in our net income between the periods was also due to our
acquisition and disposition activity in 2019 and 2020 and the timing of the
transactions (we purchased three properties in the first quarter of 2019, one
property in the second quarter of 2019, four properties in the third quarter of
2019, three properties in the fourth quarter of 2019, and disposed of six
properties in the third quarter of 2019; we disposed of three properties in the
first quarter of 2020, one property in the third quarter of 2020, and purchased
one property in the fourth quarter of 2020).

Revenues



Rental income was $199.2 million for the year ended December 31, 2020 compared
to $177.2 million for the year ended December 31, 2019, which was an increase of
approximately $22.0 million. The increase between the periods was primarily due
to our acquisition and disposition activity in 2019 and 2020 and the timing of
the transactions, as described above, and a 2.3% increase in the weighted
average monthly effective rent per occupied apartment unit in our Portfolio to
$1,128 as of December 31, 2020 from $1,103 as of December 31, 2019, primarily
driven by the value-add program that we have implemented and organic growth in
rents in the markets where our properties are located.

Other income. Other income was $5.6 million for the year ended December 31, 2020
compared to $3.9 million for the year ended December 31, 2019, which was an
increase of approximately $1.7 million. The increase between the periods was
primarily due to a $1.9 million increase in cable TV income partially offset by
a $0.1 million decrease in application fees.

Expenses



Property operating expenses. Property operating expenses were $47.2 million for
the year ended December 31, 2020 compared to $42.7 million for the year ended
December 31, 2019, which was an increase of approximately $4.5 million. The
increase between the periods was primarily due to our acquisition and
disposition activity in 2019 and 2020 and the timing of the transactions, as
described above. The increase between periods was also due to a $0.8 million, or
4.0%, increase in payroll expenses.

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Real estate taxes and insurance. Real estate taxes and insurance costs were
$31.7 million for the year ended December 31, 2020 compared to $25.1 million for
the year ended December 31, 2019, which was an increase of approximately $6.6
million. The increase between the periods was primarily due to a $5.1 million,
or 23.1%, increase in property taxes. The increase between the periods was also
due to our acquisition and disposition activity in 2019 and 2020 and the timing
of the transactions, as described above. Property taxes incurred in the first
year of ownership may be significantly less than subsequent years since the
purchase price of the property may trigger a significant increase in assessed
value by the taxing authority in subsequent years, increasing the cost of real
estate taxes.

Property management fees. Property management fees were $6.0 million for the
year ended December 31, 2020 compared to $5.4 million for the year ended
December 31, 2019, which was an increase of approximately $0.6 million. The
increase between the periods was primarily due to an increase in total revenues,
which the fee is primarily based on.

Advisory and administrative fees. Advisory and administrative fees were $7.7
million for the year ended December 31, 2020 compared to $7.5 million for the
year ended December 31, 2019, which was an increase of approximately $0.2
million. For the year ended December 31, 2020, our Adviser elected to
voluntarily waive the advisory and administrative fees incurred on the
properties we acquired subsequent to October 2016, excluding Hollister Place,
Stone Creek at Old Farm and The Heritage, which totaled approximately $15.4
million and are considered to be permanently waived. For the year ended December
31, 2019, our Adviser elected to voluntarily waive the advisory and
administrative fees incurred on the properties we acquired subsequent to October
2016, excluding Hollister Place and Stone Creek at Old Farm, which totaled
approximately $9.1 million and are considered to be permanently waived for the
period. The advisory and administrative fees waived by our Adviser for the years
ended December 31, 2020 and 2019 are considered to be permanently waived for the
periods. Our Adviser is not contractually obligated to waive fees on New Assets
in the future and may cease waiving fees on New Assets at its discretion.
Advisory and administrative fees may increase in future periods as we acquire
additional properties, which will be classified as New Assets.

Corporate general and administrative expenses. Corporate general and
administrative expenses were $10.0 million for the year ended December 31, 2020
compared to $9.6 million for the year ended December 31, 2019, which was an
increase of approximately $0.4 million. The increase was primarily due to an
increase in stock compensation expense of $0.4 million.

Property general and administrative expenses. Property general and
administrative expenses were $6.2 million for the year ended December 31, 2020
compared to $6.8 million for the year ended December 31, 2019, which was a
decrease of approximately $0.6 million. The decrease between the periods was
primarily due to decreases in eviction fees of $0.2 million.

Depreciation and amortization. Depreciation and amortization costs were $82.4
million for the year ended December 31, 2020 compared to $69.1 million for the
year ended December 31, 2019, which was an increase of approximately $13.3
million. The increase between the periods was primarily due to an increase of
depreciation expense of $19.2 million, partially offset by the amortization of
intangible lease assets of $6.8 million related to six properties for the year
ended December 31, 2020 compared to $12.7 million related to fourteen properties
for the year ended December 31, 2019, which was a decrease of approximately $5.9
million.

Other Income and Expense

Interest expense. Interest expense was $44.8 million for the year ended December
31, 2020 compared to $37.4 million for the year ended December 31, 2019, which
was an increase of approximately $7.4 million. The increase between the periods
was primarily due to an increase in interest rate swap expense of approximately
$15.8 million, partially offset by a decrease in interest on debt of $9.2
million. The following table details the various costs included in interest
expense for the years ended December 31, 2020 and 2019 (in thousands):



                                                 For the Year Ended December 31,
                                                   2020                  2019             $ Change
Interest on debt                              $        32,546       $        41,744     $     (9,198 )
Amortization of deferred financing costs                2,837                 2,083              754
Interest rate swaps                                     9,337                (6,472 )         15,809
Interest rate caps expense                                 33                    30                3
Total                                         $        44,753       $        37,385     $      7,368




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Loss on extinguishment of debt and modification costs. Loss on extinguishment of
debt and modification costs was $1.5 million for the year ended December 31,
2020 compared to $2.9 million for the year ended December 31, 2019, which was a
decrease of approximately $1.4 million. The decrease between periods was
primarily due to a decrease in prepayment penalties and defeasance costs of $0.7
million and a decrease in write-offs of deferred financing costs of $0.7
million. The following table details the various costs included in loss on
extinguishment of debt and modification costs for the years ended December 31,
2020 and 2019 (in thousands):



                                                   For the Year Ended December 31,
                                                    2020                     2019             $ Change
Prepayment penalties and defeasance costs     $            711         $          1,449     $       (738 )
Write-off of deferred financing costs                      756                    1,419             (663 )
Write-off of fair market value adjustment
of assumed debt                                              -                        -                -
Debt modification and other extinguishment
costs                                                        3                        1                2
Total                                         $          1,470         $          2,869     $     (1,399 )




Casualty gains (losses). Casualty gains were $5.9 million for the year ended
December 31, 2020 compared to casualty losses of $3.5 million for the year ended
December 31, 2019. The increase between periods was primarily due to significant
damages sustained at Cutter's Point, Venue 8651, and Timber Creek (see Note 5 to
our consolidated financial statements).



Miscellaneous income. Miscellaneous income was $1.8 million for the year ended
December 31, 2020 compared to $0.6 million for the year ended December 31, 2019,
which was an increase of approximately $1.2 million. The increase between the
periods was primarily due to business interruption proceeds received from
insurance for lost rents at Cutter's Point and Venue 8651 (see Note 5 to our
consolidated financial statements).



Gain on sales of real estate. Gain on sales of real estate was $69.2 million for
the year ended December 31, 2020 compared to $127.7 million for the year ended
December 31, 2019, which was a decrease of approximately $58.5 million. During
the year ended December 31, 2020, we sold four properties; during the year ended
December 31, 2019, we sold six properties.

The year ended December 31, 2019 as compared to the year ended December 31, 2018

The following table sets forth a summary of our operating results for the years ended December 31, 2019 and 2018 (in thousands):





                                                  For the Year Ended December 31,
                                                    2019                   2018            $ Change
Total revenues                                $        181,066       $        146,597     $    34,469
Total expenses                                        (166,157 )             (129,805 )       (36,352 )
Operating income                                        14,909                 16,792          (1,883 )
Interest expense                                       (37,385 )              (28,572 )        (8,813 )
Loss on extinguishment of debt and
modification costs                                      (2,869 )               (3,576 )           707
Gain on sales of real estate                           127,684                 13,742         113,942
Casualty losses                                         (3,488 )                    -          (3,488 )
Miscellaneous income                                       587                      -             587
Net income (loss)                                       99,438                 (1,614 )       101,052
Net income (loss) attributable to
redeemable noncontrolling interests in the
Operating Partnership                                      298                     (5 )           303
Net income (loss) attributable to common
stockholders                                  $         99,140       $         (1,609 )   $   100,749




The change in our net income (loss) for the year ended December 31, 2019 as
compared to the year ended December 31, 2018 primarily relates to an increase in
gain on sales of real estate and an increase in total revenues, and was
partially offset by increases in total property operating expenses and
depreciation and amortization expense. The change in our net income (loss)
between the periods was also due to our acquisition and disposition activity in
2018 and 2019 and the timing of the transactions (we acquired three properties
in the third quarter of 2018, and disposed of one property in the first quarter
of 2018; we purchased three properties in the first quarter of 2019, one
property in the second quarter of 2019, four properties in the third quarter of
2019, three properties in the fourth quarter of 2019, and disposed of six
properties in the third quarter of 2019).

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Revenues



Rental income was $177.2 million for the year ended December 31, 2019 compared
to $143.2 million for the year ended December 31, 2018, which was an increase of
approximately $34.0 million. The increase between the periods was primarily due
to our acquisition and disposition activity in 2018 and 2019 and the timing of
the transactions, as described above, and a 12.0% increase in the weighted
average monthly effective rent per occupied apartment unit in our Portfolio to
$1,103 as of December 31, 2019 from $985 as of December 31, 2018, primarily
driven by the value-add program that we have implemented and organic growth in
rents in the markets where our properties are located.

Other income. Other income was $3.9 million for the year ended December 31, 2019
compared to $3.4 million for the year ended December 31, 2018, which was an
increase of approximately $0.5 million. The increase between the periods was
primarily due to a $0.6 million increase in cable TV income.

Expenses



Property operating expenses. Property operating expenses were $42.7 million for
the year ended December 31, 2019 compared to $35.8 million for the year ended
December 31, 2018, which was an increase of approximately $6.9 million. The
increase between the periods was primarily due to our acquisition and
disposition activity in 2018 and 2019 and the timing of the transactions, as
described above. The increase between periods was also due to a $3.1 million, or
16.5%, increase in payroll expenses.

Real estate taxes and insurance. Real estate taxes and insurance costs were
$25.1 million for the year ended December 31, 2019 compared to $20.7 million for
the year ended December 31, 2018, which was an increase of approximately $4.4
million. The increase between the periods was primarily due to a $3.8 million,
or 21.0%, increase in property taxes. Property taxes incurred in the first year
of ownership may be significantly less than subsequent years since the purchase
price of the property may trigger a significant increase in assessed value by
the taxing authority in subsequent years, increasing the cost of real estate
taxes.

Property management fees. Property management fees were $5.4 million for the
year ended December 31, 2019 compared to $4.4 million for the year ended
December 31, 2018, which was an increase of approximately $1.0 million. The
increase between the periods was primarily due to an increase in total revenues,
which the fee is primarily based on.

Advisory and administrative fees. Advisory and administrative fees remained flat
at $7.5 million for the years ended December 31, 2019 and 2018. The amount
incurred during the years ended December 31, 2019 and 2018 represents the
maximum fee allowed on properties defined as Contributed Assets under the
Advisory Agreement plus $2.1 million and $2.1 million, respectively, of advisory
and administrative fees incurred on certain properties defined as New Assets.
For the year ended December 31, 2019, our Adviser elected to voluntarily waive
the advisory and administrative fees incurred on the nineteen properties we
acquired subsequent to October 2016, which totaled approximately $9.1 million
and are considered to be permanently waived. For the year ended December 31,
2018, our Adviser elected to voluntarily waive the advisory and administrative
fees incurred on the eight properties we acquired subsequent to October 2016,
which totaled approximately $4.1 million and are considered to be permanently
waived for the period. The advisory and administrative fees waived by our
Adviser for the years ended December 31, 2019 and 2018 are considered to be
permanently waived for the periods. Our Adviser is not contractually obligated
to waive fees on New Assets in the future and may cease waiving fees on New
Assets at its discretion. Advisory and administrative fees may increase in
future periods as we acquire additional properties, which will be classified as
New Assets.

Corporate general and administrative expenses. Corporate general and
administrative expenses were $9.6 million for the year ended December 31, 2019
compared to $7.8 million for the year ended December 31, 2018, which was an
increase of approximately $1.8 million. The increase between the periods was
primarily due to approximately $5.1 million of equity-based compensation expense
recognized during the year ended December 31, 2019 related to the grants of
restricted stock units to our directors, officers, employees and certain key
employees of our Adviser pursuant to our long-term incentive plan (the "2016
LTIP"), compared to $4.2 million of equity-based compensation expense recognized
during the year ended December 31, 2018 (see Note 8 to our consolidated
financial statements). Subject to the Expense Cap, corporate general and
administrative expenses may increase in future periods as we acquire additional
properties.

Property general and administrative expenses. Property general and
administrative expenses were $6.8 million for the year ended December 31, 2019
compared to $6.1 million for the year ended December 31, 2018, which was an
increase of approximately $0.7 million. The increase between the periods was
primarily due to our acquisition and disposition activity in 2018 and 2019 and
the timing of the transactions, as described above.

Depreciation and amortization. Depreciation and amortization costs were $69.1
million for the year ended December 31, 2019 compared to $47.5 million for the
year ended December 31, 2018, which was an increase of approximately $21.6
million. The increase between the periods was primarily due to the amortization
of intangible lease assets of $12.7 million related to fourteen

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properties for the year ended December 31, 2019 compared to $2.5 million related
to four properties for the year ended December 31, 2018, which was an increase
of approximately $10.3 million. The amortization of intangible lease assets over
a six-month period from the date of acquisition is expected to increase the
amortization expense during the initial year of operations for each property.

Other Income and Expense



Interest expense. Interest expense was $37.4 million for the year ended December
31, 2019 compared to $28.6 million for the year ended December 31, 2018, which
was an increase of approximately $8.8 million. The increase between the periods
was primarily due to an increase in interest on debt of approximately $10.9
million, partially offset by a decrease in interest rate swap expense of $2.2
million. The following table details the various costs included in interest
expense for the years ended December 31, 2019 and 2018 (in thousands):



                                                 For the Year Ended December 31,
                                                   2019                  2018             $ Change
Interest on debt                              $        41,744       $        30,870     $     10,874
Amortization of deferred financing costs                2,083                 1,650              433
Interest rate swaps - effective portion                (6,472 )              (4,224 )         (2,248 )
Interest rate caps expense                                 30                   276             (246 )
Total                                         $        37,385       $        28,572     $      8,813


Loss on extinguishment of debt and modification costs. Loss on extinguishment of
debt and modification costs was $2.9 million for the year ended December 31,
2019 compared to $3.6 million for the year ended December 31, 2018, which was a
decrease of approximately $0.7 million. The decrease between periods was
primarily due to a decrease in debt modification and other extinguishment costs
of $0.5 million. The following table details the various costs included in loss
on extinguishment of debt and modification costs for the years ended December
31, 2019 and 2018 (in thousands):



                                                   For the Year Ended December 31,
                                                    2019                     2018             $ Change

Prepayment penalties and defeasance costs $ 1,449 $

       1,706     $       (257 )
Write-off of deferred financing costs                    1,419                    1,412                7
Write-off of fair market value adjustment
of assumed debt                                              -                      (27 )             27
Debt modification and other extinguishment
costs                                                        1                      485             (484 )
Total                                         $          2,869         $          3,576     $       (707 )




Casualty losses. Casualty losses were $3.5 million for the year ended December
31, 2019; there were no casualty losses for the year ended December 31, 2018.
This is related to significant damages sustained at Cutter's Point due to a
tornado hitting the property (see Note 5 to our consolidated financial
statements).



Miscellaneous income. Miscellaneous income was $0.6 million for the year ended
December 31, 2019; there was no miscellaneous income for the year ended December
31, 2018. This is related to business interruption proceeds received from
insurance for lost rents at Cutter's Point (see Note 5 to our consolidated
financial statements).



Gain on sales of real estate. Gain on sales of real estate was $127.7 million
for the year ended December 31, 2019 compared to $13.7 million for the year
ended December 31, 2018, which was an increase of approximately $114.0 million.
During the year ended December 31, 2019, we sold six properties; during the year
ended December 31, 2018, we sold one property.

Non-GAAP Measurements

Net Operating Income and Same Store Net Operating Income



NOI is a non-GAAP financial measure of performance. NOI is used by investors and
our management to evaluate and compare the performance of our properties to
other comparable properties, to determine trends in earnings and to compute the
fair value of our properties as NOI is not affected by (1) the cost of funds,
(2) acquisition costs, (3) advisory and administrative fees, (4) the impact of
depreciation and amortization expenses as well as gains or losses from the sale
of operating real estate assets that are included in net income computed in
accordance with GAAP, (5) corporate general and administrative expenses, (6)
other gains and losses that are specific to us, (7) casualty-related
expenses/(recoveries) and gains or losses, (8) miscellaneous income derived from
recognition of lost rents covered by insurance, (9) pandemic expenses and (10)
property general and administrative expenses that are not reflective of the
continuing operations of the properties or are incurred on our behalf at the
property for expenses such as legal, professional and franchise tax fees.

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The cost of funds is eliminated from net income (loss) because it is specific to
our particular financing capabilities and constraints. The cost of funds is also
eliminated because it is dependent on historical interest rates and other costs
of capital as well as past decisions made by us regarding the appropriate mix of
capital, which may have changed or may change in the future. Acquisition costs
and non-operating fees to affiliates are eliminated because they do not reflect
continuing operating costs of the property owner. Depreciation and amortization
expenses as well as gains or losses from the sale of operating real estate
assets are eliminated because they may not accurately represent the actual
change in value in our multifamily properties that result from use of the
properties or changes in market conditions. While certain aspects of real
property do decline in value over time in a manner that is reasonably captured
by depreciation and amortization, the value of the properties as a whole have
historically increased or decreased as a result of changes in overall economic
conditions instead of from actual use of the property or the passage of time.
Gains and losses from the sale of real property vary from property to property
and are affected by market conditions at the time of sale, which will usually
change from period to period. Casualty-related expenses and recoveries and gains
and losses are excluded because they do not reflect continuing operating costs
of the property owner. Miscellaneous income is eliminated as the income is
derived from recognition of lost rents covered by insurance. Corporate level
general and administrative expenses are eliminated because they do not reflect
the operating activity performed at the properties. Entity level general and
administrative expenses incurred at the properties and pandemic expenses are
eliminated as they are specific to the way in which we have chosen to hold our
properties and are the result of our ownership structuring. Also, expenses that
are incurred upon acquisition of a property do not reflect continuing operating
costs of the property owner. These gains and losses can create distortions when
comparing one period to another or when comparing our operating results to the
operating results of other real estate companies that have not made similarly
timed purchases or sales. We believe that eliminating these items from net
income is useful because the resulting measure captures the actual ongoing
revenue generated and actual expenses incurred in operating our properties as
well as trends in occupancy rates, rental rates and operating costs.

However, the usefulness of NOI is limited because it excludes corporate general
and administrative expenses, interest expense, loss on extinguishment of debt
and modification costs, acquisition costs, certain fees to affiliates such as
advisory and administrative fees, depreciation and amortization expense and
gains or losses from the sale of properties, pandemic expenses, and other gains
and losses as determined under GAAP, the level of capital expenditures and
leasing costs necessary to maintain the operating performance of our properties,
all of which are significant economic costs. NOI may fail to capture significant
trends in these components of net income, which further limits its usefulness.

NOI is a measure of the operating performance of our properties but does not
measure our performance as a whole. NOI is therefore not a substitute for net
income (loss) as computed in accordance with GAAP. This measure should be
analyzed in conjunction with net income (loss) computed in accordance with GAAP
and discussions elsewhere in "-Results of Operations" regarding the components
of net income (loss) that are eliminated in the calculation of NOI. Other
companies may use different methods for calculating NOI or similarly entitled
measures and, accordingly, our NOI may not be comparable to similarly entitled
measures reported by other companies that do not define the measure exactly as
we do.

We define "Same Store NOI" as NOI for our properties that are comparable between
periods. We view Same Store NOI as an important measure of the operating
performance of our properties because it allows us to compare operating results
of properties owned for the entirety of the current and comparable periods and
therefore eliminates variations caused by acquisitions or dispositions during
the periods.

Net Operating Income for Our 2019-2020 Same Store and Non-Same Store Properties for the Years Ended December 31, 2020 and 2019



There are 24 properties encompassing 9,074 units of apartment space in our same
store pool for the years ended December 31, 2020 and 2019 (our "2019-2020 Same
Store" properties). Our 2019-2020 Same Store properties exclude the following 13
properties in our Portfolio as of December 31, 2020: Bella Vista, The Enclave,
The Heritage, Summers Landing, Residences at Glenview Reserve, Residences at
West Place, Avant at Pembroke Pines, Arbors of Brentwood, Torreyana, Bloom,
Bella Solara, Fairways at San Marcos and Cutter's Point.

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The following table reflects the revenues, property operating expenses and NOI
for the years ended December 31, 2020 and 2019 for our 2019-2020 Same Store and
Non-Same Store properties (dollars in thousands):



                                        For the Year Ended December 31,
                                          2020                   2019           $ Change       % Change
Revenues
Same Store
Rental income                       $        120,109       $        115,588     $   4,521            3.9 %
Other income                                   2,106                  2,331          (225 )         -9.7 %
Same Store revenues                          122,215                117,919         4,296            3.6 %
Non-Same Store
Rental income                                 79,128                 61,574        17,554           28.5 %
Other income                                   3,457                  1,573         1,884          119.8 %
Non-Same Store revenues                       82,585                 63,147        19,438           30.8 %
Total revenues                               204,800                181,066        23,734           13.1 %

Operating expenses
Same Store
Property operating expenses (1)               27,910                 27,484           426            1.5 %
Real estate taxes and insurance               19,301                 17,331         1,970           11.4 %
Property management fees (2)                   3,629                  3,518           111            3.2 %
Property general and
administrative expenses (3)                    3,225                  3,532          (307 )         -8.7 %
Same Store operating expenses                 54,065                 51,865         2,200            4.2 %
Non-Same Store
Property operating expenses (4)               17,991                 15,242         2,749           18.0 %
Real estate taxes and insurance               12,408                  7,782         4,626           59.4 %
Property management fees (2)                   2,342                  1,870           472           25.2 %
Property general and
administrative expenses (5)                    1,902                  1,716           186           10.8 %
Non-Same Store operating expenses             34,643                 26,610         8,033           30.2 %
Total operating expenses                      88,708                 78,475        10,233           13.0 %

NOI
Same Store                                    68,150                 66,054         2,096            3.2 %
Non-Same Store                                47,942                 36,537        11,405           31.2 %
Total NOI                           $        116,092       $        102,591     $  13,501           13.2 %



(1) For the years ended December 31, 2020 and 2019, excludes approximately

$555,000 and $53,000, respectively, of casualty-related recoveries.

(2) Fees incurred to an unaffiliated third party that is an affiliate of the

noncontrolling limited partner of the OP.

(3) For the years ended December 31, 2020 and 2019, excludes approximately

$495,000 and $883,000, respectively, of expenses that are not reflective of

the continuing operations of the properties or are incurred on our behalf at

the property for expenses such as legal, professional and franchise tax fees.

(4) For the years ended December 31, 2020 and 2019, excludes approximately

$344,000 and $19,000, respectively, of casualty-related expenses.

(5) For the years ended December 31, 2020 and 2019, excludes approximately

$617,000 and $634,000, respectively, of expenses that are not reflective of

the continuing operations of the properties or are incurred on our behalf at

the property for expenses such as legal, professional and franchise tax fees.

See reconciliation of net income (loss) to NOI below under "NOI and 2019-2020 Same Store NOI for the Years Ended December 31, 2020 and 2019."

2019-2020 Same Store Results of Operations for the Years Ended December 31, 2020 and 2019



As of December 31, 2020, our 2019-2020 Same Store properties were approximately
94.2% leased with a weighted average monthly effective rent per occupied
apartment unit of $1,047. As of December 31, 2019, our 2019-2020 Same Store
properties were approximately 94.3% leased with a weighted average monthly
effective rent per occupied apartment unit of $1,033. For our 2019-2020 Same
Store properties, we recorded the following operating results for the year ended
December 31, 2020 as compared to the year ended December 31, 2019:

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Revenues



Rental income. Rental income was $120.1 million for the year ended December 31,
2020 compared to $115.6 million for the year ended December 31, 2019, which was
an increase of approximately $4.5 million, or 3.9%. The majority of the increase
is related to a 1.4% increase in the weighted average monthly effective rent per
occupied apartment unit to $1,047 as of December 31, 2020 from $1,033 as of
December 31, 2019.

Other income. Other income was $2.1 million for the year ended December 31, 2020
compared to $2.3 million for the year ended December 31, 2019, which was a
decrease of approximately $0.2 million, or 9.7%. The majority of the decrease is
related to a $0.1 million decrease in miscellaneous income.

Expenses



Property operating expenses. Property operating expenses were $27.9 million for
the year ended December 31, 2020 compared to $27.5 million for the year ended
December 31, 2019, which was an increase of approximately $0.4 million, or 1.5%.
The majority of the increase is related to a $0.2 million, or 1.4%, increase in
payroll expenses.

Real estate taxes and insurance. Real estate taxes and insurance costs were
$19.3 million for the year ended December 31, 2020 compared to $17.3 million for
the year ended December 31, 2019, which was an increase of approximately $2.0
million, or 11.4%. The majority of the increase is related to a $1.7 million, or
11.1%, increase in property taxes and a $0.3 million, or 13.7%, increase in
insurance expense.

Property management fees. Property management fees were $3.6 million for the
year ended December 31, 2020 compared to $3.5 million for the year ended
December 31, 2019, which was an increase of approximately $0.1 million, or 3.2%.
The majority of the increase is related to an increase in total revenues, which
the fee is primarily based on.

Property general and administrative expenses. Property general and
administrative expenses were $3.2 million for the year ended December 31, 2020
compared to $3.5 million for the year ended December 31, 2019, which was a
decrease of approximately $0.3 million, or 8.7%. The majority of the decrease is
related to a $0.2 million, or 17.6%, decrease in marketing costs.

Net Operating Income for Our 2018-2020 Same Store and Non-Same Store Properties for the Years Ended December 31, 2020, 2019 and 2018





There are 21 properties encompassing 7,990 units of apartment space in our same
store pool for the years ended December 31, 2020, 2019 and 2018 (our "2018-2020
Same Store" properties). Our 2018-2020 Same Store properties exclude the
following 16 properties in our Portfolio as of December 31, 2020: Cedar Pointe,
Crestmont Reserve, Brandywine I & II, Bella Vista, The Enclave, The Heritage,
Summers Landing, Residences at Glenview Reserve, Residences at West Place, Avant
at Pembroke Pines, Arbors of Brentwood, Torreyana, Bloom, Bella Solara. Fairways
at San Marcos and Cutter's Point.

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The following table reflects the revenues, property operating expenses and NOI for the years ended December 31, 2020, 2019 and 2018 for our 2018-2020 Same Store and Non-Same Store properties (dollars in thousands):





                               For the Year Ended December 31,              2020 compared to 2019             2020 compared to 2018
                              2020            2019          2018          $ Change          % Change        $ Change          % Change
Revenues
Same Store
Rental income              $   106,490      $ 102,554     $  98,013     $      3,936              3.8 %   $      8,477              8.6 %
Other income                     1,952          2,145         2,576             (193 )           -9.0 %           (624 )          -24.2 %
Same Store revenues            108,442        104,699       100,589            3,743              3.6 %          7,853              7.8 %
Non-Same Store
Rental income                   92,747         74,608        45,145           18,139             24.3 %         47,602            105.4 %
Other income                     3,611          1,759           863            1,852            105.3 %          2,748            318.4 %
Non-Same Store revenues         96,358         76,367        46,008           19,991             26.2 %         50,350            109.4 %
Total revenues                 204,800        181,066       146,597           23,734             13.1 %         58,203             39.7 %

Operating expenses
Same Store
Property operating
expenses (1)                    24,817         24,462        24,059              355              1.5 %            758              3.2 %
Real estate taxes and
insurance                       17,467         15,876        15,832            1,591             10.0 %          1,635             10.3 %
Property management fees
(2)                              3,219          3,122         3,000               97              3.1 %            219              7.3 %
Property general and
administrative expenses
(3)                              2,841          3,119         3,295             (278 )           -8.9 %           (454 )          -13.8 %
Same Store operating
expenses                        48,344         46,579        46,186            1,765              3.8 %          2,158              4.7 %
Non-Same Store
Property operating
expenses (4)                    21,084         18,264        12,428            2,820             15.4 %          8,656             69.6 %
Real estate taxes and
insurance                       14,242          9,237         4,881            5,005             54.2 %          9,361            191.8 %
Property management fees
(2)                              2,752          2,266         1,382              486             21.4 %          1,370             99.1 %
Property general and
administrative expenses
(5)                              2,286          2,129         1,545              157              7.4 %            741             48.0 %
Non-Same Store operating
expenses                        40,364         31,896        20,236            8,468             26.5 %         20,128             99.5 %
Total operating expenses        88,708         78,475        66,422           10,233             13.0 %         22,286             33.6 %

NOI
Same Store                      60,098         58,120        54,403            1,978              3.4 %          5,695             10.5 %
Non-Same Store                  55,994         44,471        25,772           11,523             25.9 %         30,222            117.3 %
Total NOI                  $   116,092      $ 102,591     $  80,175     $     13,501             13.2 %   $     35,917             44.8 %



(1) For the years ended December 31, 2020, 2019 and 2018, excludes approximately

$(609,000), $(58,000) and $95,000, respectively, of casualty-related

expenses/(recoveries).

(2) Fees incurred to an unaffiliated third party that is an affiliate of the

noncontrolling limited partner of the OP.

(3) For the years ended December 31, 2020, 2019 and 2018, excludes approximately

$472,000, $578,000 and $698,000, respectively, of expenses that are not

reflective of the continuing operations of the properties or are incurred on

our behalf at the property for expenses such as legal, professional and

franchise tax fees.

(4) For the years ended December 31, 2020, 2019 and 2018, excludes approximately

$1,910,000, $23,000 and $(758,000), respectively, of casualty-related

expenses/(recoveries).

(5) For the years ended December 31, 2020, 2019 and 2018, excludes approximately

$640,000, $939,000 and $596,000, respectively, of expenses that are not

reflective of the continuing operations of the properties or are incurred on

our behalf at the property for expenses such as legal, professional and

franchise tax fees.

See reconciliation of net income (loss) to NOI below under "NOI and 2018-2020 Same Store NOI for the Years Ended December 31, 2020, 2019 and 2018."


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2018-2020 Same Store Results of Operations for the Years Ended December 31, 2020 and 2019



As of December 31, 2020, our 2018-2020 Same Store properties were approximately
94.0% leased with a weighted average monthly effective rent per occupied
apartment unit of $1,058. As of December 31, 2019, our 2018-2020 Same Store
properties were approximately 94.4% leased with a weighted average monthly
effective rent per occupied apartment unit of $1,040. For our 2018-2020 Same
Store properties, we recorded the following operating results for the year ended
December 31, 2020 as compared to the year ended December 31, 2019:

Revenues



Rental income. Rental income was $106.5 million for the year ended December 31,
2020 compared to $102.6 million for the year ended December 31, 2019, which was
an increase of approximately $3.9 million, or 3.8%. The majority of the increase
is related to a 1.7% increase in the weighted average monthly effective rent per
occupied apartment unit to $1,058 as of December 31, 2020 from $1,040 as
of December 31, 2019, partially offset by a 0.4% decrease in occupancy.

Other income. Other income was $2.0 million for the year ended December 31, 2020
compared to $2.1 million for the year ended December 31, 2019, which was a
decrease of approximately $0.2 million, or 9.0%. The majority of the decrease is
related to a $0.1 million decrease in miscellaneous income.

Expenses



Property operating expenses. Property operating expenses were $24.8 million for
the year ended December 31, 2020 compared to $24.5 million for the year ended
December 31, 2019, which was an increase of approximately $0.3 million, or 1.5%.
The majority of the increase is related to an increase in payroll costs of $0.2
million.

Real estate taxes and insurance. Real estate taxes and insurance costs were
$17.5 million for the year ended December 31, 2020 compared to $15.9 million for
the year ended December 31, 2019, which was an increase of approximately $1.6
million, or 10.0%. The majority of the increase is related to a $1.3 million, or
9.6%, increase in property taxes.

Property management fees. Property management fees were $3.2 million for the
year ended December 31, 2020 compared to $3.1 million for the year ended
December 31, 2019, which was an increase of approximately $0.1 million, or 3.1%.
The majority of the increase is related to an increase in total revenues, which
the fee is primarily based on.

Property general and administrative expenses. Property general and
administrative expenses were $2.8 million for the year ended December 31, 2020
compared to $3.1 million for the year ended December 31, 2019, which was a
decrease of approximately $0.3 million, or 8.9%. The majority of the decrease is
related to a $0.2 million decrease in marketing expenses.

2018-2020 Same Store Results of Operations for the Years Ended December 31, 2020 and 2018



As of December 31, 2020, our 2018-2020 Same Store properties were approximately
94.0% leased with a weighted average monthly effective rent per occupied
apartment unit of $1,058. As of December 31, 2018, our 2018-2020 Same Store
properties were approximately 94.7% leased with a weighted average monthly
effective rent per occupied apartment unit of $1,005. For our 2018-2020 Same
Store properties, we recorded the following operating results for the year end
December 31, 2020 as compared to the year ended December 31, 2018:

Revenues



Rental income. Rental income was $106.5 million for the year ended December 31,
2020 compared to $98.0 million for the year ended December 31, 2018, which was
an increase of approximately $8.5 million, or 8.6%. The majority of the increase
is related to a 5.3% increase in the weighted average monthly effective rent per
occupied apartment unit to $1,058 as of December 31, 2020 from $1,005 as of
December 31, 2018, partially offset by a 0.7% decrease in occupancy.

Other income. Other income was $2.0 million for the year ended December 31, 2020
compared to $2.6 million for the year ended December 31, 2018, which was a
decrease of approximately $0.6 million, or 24.2%. The majority of the decrease
is related to a $0.4 million decrease in non-refundable fees.

Expenses



Property operating expenses. Property operating expenses were $24.8 million for
the year ended December 31, 2020 compared to $24.1 million for the year ended
December 31, 2018, which was an increase of approximately $0.7 million, or 3.2%.
The majority of the increase is related to a $0.6 million, or 5.9%, increase in
payroll expenses.

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Real estate taxes and insurance. Real estate taxes and insurance costs were
$17.5 million for the year ended December 31, 2020 compared to $15.8 million for
the year ended December 31, 2018, which was an increase of approximately $1.7
million, or 10.3%. The majority of the increase is related to a $1.7 million, or
12.2%, increase in property taxes.

Property management fees. Property management fees were $3.2 million for the
year ended December 31, 2020 to $3.0 million for the year ended December 31,
2018, which was an increase of approximately $0.2 million, or 7.3%. The majority
of the increase is related to an increase in total revenues, which the fee is
primarily based on.

Property general and administrative expenses. Property general and
administrative expenses were $2.8 million for the year ended December 31, 2020
compared to $3.3 million for the year ended December 31, 2018, which was a
decrease of approximately $0.5 million, or 13.8%. The majority of the decrease
is related to a $0.3 million, or 26.8%, decrease in marketing expenses.

NOI and 2019-2020 Same Store NOI for the Years Ended December 31, 2020 and 2019



The following table, which has not been adjusted for the effects of
noncontrolling interests, reconciles our NOI and our 2019-2020 Same Store NOI
for the years ended December 31, 2020 and 2019 to net income, the most directly
comparable GAAP financial measure (in thousands):



                                                              For the Year Ended December 31,
                                                               2020                   2019
Net income                                                $        44,150       $          99,438
Adjustments to reconcile net income to NOI:
Advisory and administrative fees                                    7,670                   7,500
Corporate general and administrative expenses                      10,035                   9,613
Casualty-related expenses/(recoveries)                (1)             790                     (34 )
Casualty losses (gains)                                            (5,886 )                 3,488
Miscellaneous income                                               (1,772 )                  (587 )
Pandemic expense                                      (2)             510                       -
Property general and administrative expenses          (3)           1,112                   1,517
Depreciation and amortization                                      82,411                  69,086
Interest expense                                                   44,753                  37,385
Loss on extinguishment of debt and modification costs               1,470                   2,869
Gain on sales of real estate                                      (69,151 )              (127,684 )
NOI                                                       $       116,092       $         102,591
Less Non-Same Store
Revenues                                                          (82,585 )               (63,147 )
Operating expenses                                                 34,643                  26,610
Same Store NOI                                            $        68,150       $          66,054



(1) Adjustment to net income to exclude certain property operating expenses that

are casualty-related expenses/(recoveries).

(2) Represents additional cleaning, disinfecting and other costs incurred at the

properties related to COVID-19.

(3) Adjustment to net income to exclude certain property general and

administrative expenses that are not reflective of the continuing operations

of the properties or are incurred on our behalf at the property for expenses


    such as legal, professional and franchise tax fees.


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NOI and 2018-2020 Same Store NOI for the Years Ended December 31, 2020, 2019 and 2018



The following table, which has not been adjusted for the effects of
noncontrolling interests, reconciles our NOI and our 2018-2020 Same Store NOI
for the years ended December 31, 2020, 2019 and 2018 to net income (loss), the
most directly comparable GAAP financial measure (in thousands):



                                                     For the Year Ended December 31,
                                                   2020            2019            2018
Net income (loss)                              $     44,150     $    99,438     $    (1,614 )
Adjustments to reconcile net income to
NOI:
Advisory and administrative fees                      7,670           7,500 

7,474


Corporate general and administrative
expenses                                             10,035           9,613 

7,808


Casualty-related expenses/(recoveries)     (1)          790             (34 )          (663 )
Casualty losses (gains)                              (5,886 )         3,488               -
Miscellaneous income                                 (1,772 )          (587 )             -
Pandemic expense                           (2)          510               -               -
Property general and administrative
expenses                                   (3)        1,112           1,517 

1,294


Depreciation and amortization                        82,411          69,086 

47,470


Interest expense                                     44,753          37,385 

28,572


Loss on extinguishment of debt and
modification costs                                    1,470           2,869 

3,576


Gain on sales of real estate                        (69,151 )      (127,684 )       (13,742 )
NOI                                            $    116,092     $   102,591     $    80,175
Less Non-Same Store
Revenues                                            (96,358 )       (76,367 )       (46,008 )
Operating expenses                                   40,364          31,896          20,236
Same Store NOI                                 $     60,098     $    58,120     $    54,403

(1) Adjustment to net income (loss) to exclude certain property operating

expenses that are casualty-related expenses/(recoveries).

(2) Represents additional cleaning, disinfecting and other costs incurred at the

properties related to COVID-19.

(3) Adjustment to net income (loss) to exclude certain property general and

administrative expenses that are not reflective of the continuing operations

of the properties or are incurred on our behalf at the property for expenses

such as legal, professional and franchise tax.

FFO, Core FFO and AFFO



We believe that net income, as defined by GAAP, is the most appropriate earnings
measure. We also believe that funds from operations ("FFO"), as defined by the
National Association of Real Estate Investment Trusts ("NAREIT"), core funds
from operations ("Core FFO") and adjusted funds from operations ("AFFO") are
important non-GAAP supplemental measures of operating performance for a REIT.

Since the historical cost accounting convention used for real estate assets
requires depreciation except on land, such accounting presentation implies that
the value of real estate assets diminishes predictably over time. However, since
real estate values have historically risen or fallen with market and other
conditions, presentations of operating results for a REIT that use historical
cost accounting for depreciation could be less informative. Thus, NAREIT created
FFO as a supplemental measure of operating performance for REITs that excludes
historical cost depreciation and amortization, among other items, from net
income, as defined by GAAP. FFO is defined by NAREIT as net income computed in
accordance with GAAP, excluding gains or losses from real estate dispositions,
plus real estate depreciation and amortization. We compute FFO attributable to
common stockholders in accordance with NAREIT's definition. Our presentation
differs slightly in that we begin with net income (loss) before adjusting for
amounts attributable to noncontrolling interests and we show the combined
amounts attributable to such noncontrolling interests as an adjustment to arrive
at FFO attributable to common stockholders.

Core FFO makes certain adjustments to FFO, which are either not likely to occur
on a regular basis or are otherwise not representative of the ongoing operating
performance of our portfolio. Core FFO adjusts FFO to remove items such as
acquisition expenses, losses on extinguishment of debt and modification costs
(including prepayment penalties and defeasance costs incurred on the early
repayment of debt, the write-off of unamortized deferred financing costs and
fair market value adjustments of assumed debt related to the early repayment of
debt, costs incurred in a debt modification that are not capitalized as deferred
financing costs and other costs incurred in a debt extinguishment),
casualty-related expenses and recoveries and gains or losses, pandemic expenses,
the amortization of deferred financing costs incurred in connection with
obtaining short-term debt financing, and the noncontrolling

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interests (as described above) related to these items. We believe Core FFO is
useful to investors as a supplemental gauge of our operating performance and is
useful in comparing our operating performance with other REITs that are not as
involved in the aforementioned activities.

AFFO makes certain adjustments to Core FFO in order to arrive at a more refined
measure of the operating performance of our portfolio. There is no industry
standard definition of AFFO and practice is divergent across the industry. AFFO
adjusts Core FFO to remove items such as equity-based compensation expense and
the amortization of deferred financing costs incurred in connection with
obtaining long-term debt financing, and the noncontrolling interests (as
described above) related to these items. We believe AFFO is useful to investors
as a supplemental gauge of our operating performance and is useful in comparing
our operating performance with other REITs that are not as involved in the
aforementioned activities.

The effect of the conversion of OP Units held by noncontrolling limited partners
is not reflected in the computation of basic and diluted FFO, Core FFO and AFFO
per share, as they are exchangeable for common stock on a one-for-one basis. The
FFO, Core FFO and AFFO allocable to such units is allocated on this same basis
and reflected in the adjustments for noncontrolling interests in the table
below. As such, the assumed conversion of these units would have no net impact
on the determination of diluted FFO, Core FFO and AFFO per share. See Note 10 to
our consolidated financial statements for additional information.

We believe that the use of FFO, Core FFO and AFFO, combined with the required
GAAP presentations, improves the understanding of operating results of REITs
among investors and makes comparisons of operating results among such companies
more meaningful. While FFO, Core FFO and AFFO are relevant and widely used
measures of operating performance of REITs, they do not represent cash flows
from operations or net income (loss) as defined by GAAP and should not be
considered as an alternative or substitute to those measures in evaluating our
liquidity or operating performance. FFO, Core FFO and AFFO do not purport to be
indicative of cash available to fund our future cash requirements. Further, our
computation of FFO, Core FFO and AFFO may not be comparable to FFO, Core FFO and
AFFO reported by other REITs that do not define FFO in accordance with the
current NAREIT definition or that interpret the current NAREIT definition or
define Core FFO or AFFO differently than we do.

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The following table reconciles our calculations of FFO, Core FFO and AFFO to net
income (loss), the most directly comparable GAAP financial measure, for the
years ended December 31, 2020, 2019 and 2018 (in thousands, except per share
amounts):



               `                         For the Year Ended December 31,
                                                                                   % Change
                                                                                    2020 -        % Change
                                        2020            2019          2018           2019        2020 - 2018
Net income (loss)                    $    44,150     $   99,438     $  (1,614 )        -55.6 %           N/M
Depreciation and amortization             82,411         69,086        47,470           19.3 %          73.6 %
Gain on sales of real estate             (69,151 )     (127,684 )     (13,742 )        -45.8 %         403.2 %
Adjustment for noncontrolling
interests                                   (172 )         (122 )         (96 )         41.0 %          79.2 %
FFO attributable to common
stockholders                              57,238         40,718        32,018           40.6 %          78.8 %

FFO per share - basic                $      2.32     $     1.69     $    1.51           37.0 %          53.4 %
FFO per share - diluted              $      2.27     $     1.66     $    1.48           37.0 %          53.5 %

Loss on extinguishment of debt
and modification costs                     1,470          2,869         3,576          -58.9 %         -58.9 %
Casualty-related
expenses/(recoveries)                        790            (34 )        (663 )          N/M          -219.1 %
Casualty losses (gains)                   (5,886 )        3,488             -            N/M             N/M
Pandemic expense                 (1)         510              -             -            N/M             N/M
Amortization of deferred
financing costs - acquisition
term notes                                 1,384            553           159          150.3 %         770.4 %
Adjustment for noncontrolling
interests                                      6            (21 )          (9 )       -128.6 %        -166.7 %
Core FFO attributable to common
stockholders                              55,512         47,573        35,081           16.7 %          58.2 %

Core FFO per share - basic           $      2.25     $     1.97     $    1.66           13.9 %          35.7 %
Core FFO per share - diluted         $      2.20     $     1.93     $    1.62           13.7 %          35.9 %

Amortization of deferred
financing costs - long term debt           1,453          1,530         1,491           -5.0 %          -2.5 %
Equity-based compensation
expense                                    5,504          5,130         4,198            7.3 %          31.1 %
Adjustment for noncontrolling
interests                                    (21 )          (20 )         (17 )          5.0 %          23.5 %
AFFO attributable to common
stockholders                              62,448         54,213        40,753           15.2 %          53.2 %

AFFO per share - basic               $      2.53     $     2.25     $    1.92           12.4 %          31.4 %
AFFO per share - diluted             $      2.47     $     2.20     $    1.88           12.3 %          31.6 %

Weighted average common shares
outstanding - basic                       24,715         24,116        21,189            2.5 %          16.6 %
Weighted average common shares
outstanding - diluted                     25,234         24,593        21,667            2.6 %          16.5 %

Dividends declared per common
share                                $     1.279     $    1.138     $   1.025           12.4 %          24.8 %

FFO Coverage - diluted           (2)       1.77x          1.46x         1.44x           21.9 %          23.0 %
Core FFO Coverage - diluted      (2)       1.72x          1.70x         1.58x            1.2 %           8.9 %
AFFO Coverage - diluted          (2)       1.94x          1.94x         1.84x           -0.1 %           5.5 %



(1) Represents additional cleaning, disinfecting and other costs incurred at the

properties related to COVID-19.

(2) Indicates coverage ratio of FFO/Core FFO/AFFO per common share (diluted) over

dividends declared per common share during the period.

The year ended December 31, 2020 as compared to the year ended December 31, 2019



FFO was $57.2 million for the year ended December 31, 2020 compared to $40.7
million for the year ended December 31, 2019, which was an increase of
approximately $16.5 million. The change in our FFO between the periods primarily
relates to an increase in total revenues of $23.7 million, partially offset by
an increase in total property operating expenses of $11.2 million, interest

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expense of $7.4 million, real estate taxes and insurance expenses of $6.6 million and adjustments for amounts attributable to noncontrolling interests.



Core FFO was $55.5 million for the year ended December 31, 2020 compared to
$47.6 million for the year ended December 31, 2019, which was an increase of
approximately $7.9 million. The change in our Core FFO between the periods
primarily relates to an increase in FFO and an increase in amortization of
deferred financing costs for acquisition term notes of $0.8 million, partially
offset by an increase in casualty gains of $9.4 million and a decrease in loss
on extinguishment of debt and modification costs of $1.4 million.

AFFO was $62.4 million for the year ended December 31, 2020 compared to $54.2
million for the year ended December 31, 2019, which was an increase of
approximately $8.2 million. The change in our AFFO between the periods primarily
relates to increases in Core FFO and equity-based compensation expense of $0.4
million.

The year ended December 31, 2020 as compared to the year ended December 31, 2018



FFO was $57.2 million for the year ended December 31, 2020 compared to $32.0
million for the year ended December 31, 2018, which was an increase of
approximately $25.2 million. The change in our FFO between the periods primarily
relates to an increase in total revenues of $58.2 million, partially offset by
an increase in total property operating expenses of $11.4 million, interest
expense of $16.2 million, and corporate general and administrative expenses of
$2.2 million.

Core FFO was $55.5 million for the year ended December 31, 2020 compared to
$35.1 million for the year ended December 31, 2018, which was an increase of
approximately $20.4 million. The change in our Core FFO between the periods
primarily relates to an increase in FFO and an increase in amortization of
deferred financing costs for acquisition term notes of $1.2 million, partially
offset by an increase in casualty gains of $5.9 million.

AFFO was $62.4 million for the year ended December 31, 2020 compared to $40.8
million for the year ended December 31, 2018, which was an increase of
approximately $21.6 million. The change in our AFFO between the periods
primarily relates to increases in Core FFO and equity-based compensation expense
of $1.3 million.

Liquidity and Capital Resources

Our short-term liquidity requirements consist primarily of funds necessary to pay for debt maturities, operating expenses and other expenditures directly associated with our multifamily properties, including:

• capital expenditures to continue our value-add program and to improve the


        quality and performance of our multifamily properties;


    •   interest expense and scheduled principal payments on outstanding
        indebtedness (see "-Obligations and Commitments" below);

• recurring maintenance necessary to maintain our multifamily properties;




  • distributions necessary to qualify for taxation as a REIT;


  • acquisitions of additional properties;


  • advisory and administrative fees payable to our Adviser;


  • general and administrative expenses;


  • reimbursements to our Adviser; and


  • property management fees payable to BH.


We expect to meet our short-term liquidity requirements generally through net
cash provided by operations and existing cash balances. As of December 31, 2020,
we had approximately $10.6 million of renovation value-add reserves for our
planned capital expenditures to implement our value-add program. Renovation
value-add reserves are not required to be held in escrow by a third party. We
may reallocate these funds, at our discretion, to pursue other investment
opportunities or meet our short-term liquidity requirements. Additionally, we
had $42.0 million of unused capacity on the Corporate Credit Facility as of
December 31, 2020.

Our long-term liquidity requirements consist primarily of funds necessary to pay
for the costs of acquiring additional multifamily properties, renovations and
other capital expenditures to improve our multifamily properties and scheduled
debt payments and distributions. We expect to meet our long-term liquidity
requirements through various sources of capital, which may include a revolving
credit facility and future debt or equity issuances, existing working capital,
net cash provided by operations, long-term mortgage indebtedness and other
secured and unsecured borrowings, and property dispositions. However, there are
a number of factors that may have a material adverse effect on our ability to
access these capital sources, including the state of overall equity and credit
markets, our degree of leverage, our unencumbered asset base and borrowing
restrictions imposed by lenders (including as a

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result of any failure to comply with financial covenants in our existing and
future indebtedness), general market conditions for REITs, our operating
performance and liquidity, market perceptions about us and restrictions on sales
of properties under the Code. The Company continues to monitor the impact on
COVID-19 and its impact on future rent collections, valuation of real estate
investments, impact on cash flow and ability to refinance or repay debt. The
success of our business strategy will depend, in part, on our ability to access
these various capital sources.

In addition to our value-add program, our multifamily properties will require
periodic capital expenditures and renovation to remain competitive. Also,
acquisitions, redevelopments, or expansions of our multifamily properties will
require significant capital outlays. Long-term, we may not be able to fund such
capital improvements solely from net cash provided by operations because we must
distribute annually at least 90% of our REIT taxable income, determined without
regard to the deductions for dividends paid and excluding net capital gains, to
qualify and maintain our qualification as a REIT, and we are subject to tax on
any retained income and gains. As a result, our ability to fund capital
expenditures, acquisitions, or redevelopment through retained earnings long-term
is limited. Consequently, we expect to rely heavily upon the availability of
debt or equity capital for these purposes. If we are unable to obtain the
necessary capital on favorable terms, or at all, our financial condition,
liquidity, results of operations, and prospects could be materially and
adversely affected.

On February 20, 2019, the Company, the OP and the Adviser entered into separate
equity distribution agreements with each of Jefferies, Raymond James and Truist
(collectively, the "2019 ATM Sales Agents"), pursuant to which the Company could
issue and sell from time to time shares of the Company's common stock, par value
$0.01 per share, having an aggregate sales price of up to $100,000,000 (the
"2019 ATM Program"). Sales of shares of common stock, if any, could be made in
transactions that are deemed to be "at the market" offerings, as defined in Rule
415 under the Securities Act, including, without limitation, sales made by means
of ordinary brokers' transactions on the New York Stock Exchange, to or through
a market maker at market prices prevailing at the time of sale, at prices
related to prevailing market prices or at negotiated prices based on prevailing
market prices. In addition to the issuance and sale of shares of common stock,
the Company could enter into forward sale agreements with each of Jefferies and
Raymond James, or their respective affiliates, through the 2019 ATM Program.
During the year ended December 31, 2019, the Company issued 1,565,322 shares of
common stock at an average price of $45.98 per share for gross proceeds of
approximately $72.0 million. The Company paid approximately $1.1 million in fees
to the 2019 ATM Sales Agents with respect to such sales and incurred other
issuance costs of approximately $1.0 million, both of which were netted against
the gross proceeds and recorded in additional paid in capital. During the year
ended December 31, 2020, the Company issued 560,000 shares of common stock at an
average price of $50.00 per share for gross proceeds of $28.0 million under the
2019 ATM Program. The Company paid approximately $0.4 million in fees to the
2019 ATM Sales Agents with respect to such sales and incurred other issuance
costs of approximately $0.4 million, both of which were netted against the gross
proceeds and recorded in additional paid in capital. On February 27, 2020, the
2019 ATM Program reached aggregate sales of $100,000,000 and therefore expired.

On March 4, 2020, the Company, the OP and the Adviser entered into separate
equity distribution agreements with each of Jefferies, Raymond James, KeyBanc
and Truist, pursuant to which the Company may issue and sell from time to time
shares of the Company's common stock, par value $0.01 per share, having an
aggregate sales price of up to $225,000,000. Sales of shares of common stock, if
any, may be made in transactions that are deemed to be "at the market"
offerings, as defined in Rule 415 under the Securities Act, including, without
limitation, sales made by means of ordinary brokers' transactions on the New
York Stock Exchange, to or through a market maker at market prices prevailing at
the time of sale, at prices related to prevailing market prices or at negotiated
prices based on prevailing market prices. In addition to the issuance and sale
of shares of common stock, the Company may enter into forward sale agreements
with each of Jefferies, KeyBanc, Raymond James, Truist, or their respective
affiliates, through the 2020 ATM Program. During the year ended December 31,
2020, the Company issued 718,306 shares of common stock at an average price of
$43.92 per share for gross proceeds of $31.5 million under the 2020 ATM Program.
The Company paid approximately $0.5 million in fees to the 2020 ATM Sales Agents
with respect to such sales and incurred other issuance costs of approximately
$0.6 million, both of which were netted against the gross proceeds and recorded
in additional paid in capital. The 2020 ATM Program may be terminated by the
Company at any time and expires automatically once aggregate sales under the
2020 ATM Program reach $225,000,000 (see Note 8 to our consolidated financial
statements).

We believe that our available cash, expected operating cash flows, and potential
debt or equity financings will provide sufficient funds for our operations,
anticipated scheduled debt service payments and dividend requirements for the
twelve-month period following December 31, 2020.

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Cash Flows



The following table presents selected data from our consolidated statements of
cash flows for the years ended December 31, 2020, 2019 and 2018 (in thousands):



                                                    For the Year Ended December 31,
                                                  2020            2019            2018

Net cash provided by operating activities $ 57,226 $ 51,366

    $    41,743
Net cash provided by (used in) investing
activities                                          11,503        (553,129 )      (135,248 )
Net cash provided by (used in) financing
activities                                         (82,896 )       529,816  

93,386


Net increase (decrease) in cash, cash
equivalents and restricted cash                    (14,167 )        28,053            (119 )
Cash, cash equivalents and restricted cash,
beginning of period                                 71,182          43,129  

43,248


Cash, cash equivalents and restricted cash,
end of period                                 $     57,015     $    71,182     $    43,129

The year ended December 31, 2020 as compared to the year ended December 31, 2019



Cash flows from operating activities. During the year ended December 31, 2020,
net cash provided by operating activities was $57.2 million compared to net cash
provided by operating activities of $51.4 million for the year ended December
31, 2019.

Cash flows from investing activities. During the year ended December 31, 2020,
net cash provided by investing activities was $11.5 million compared to net cash
used in investing activities of $553.1 million for the year ended December 31,
2019. The change in cash flows from investing activities was mainly due to our
acquisition and disposition activity in 2020 and 2019 and the timing of the
transactions.

Cash flows from financing activities. During the year ended December 31, 2020,
net cash used in financing activities was $82.9 million compared to net cash
provided by financing activities of $529.8 million for the year ended December
31, 2019. The change in cash flows from financing activities was mainly due to a
net decrease in debt of approximately $555.8 million between the periods.

The year ended December 31, 2019 as compared to the year ended December 31, 2018



Cash flows from operating activities. During the year ended December 31, 2019,
net cash provided by operating activities was $51.4 million compared to net cash
provided by operating activities of $41.7 million for the year ended December
31, 2018. The change in cash flows from operating activities was mainly due to
an increase in total revenues, partially offset by an increase in total property
operating expenses.

Cash flows from investing activities. During the year ended December 31, 2019,
net cash used in investing activities was $553.1 million compared to net cash
used in investing activities of $135.2 million for the year ended December 31,
2018. The change in cash flows from investing activities was mainly due to an
increase in acquisitions, partially offset by an increase in dispositions. We
sold six properties for net proceeds of approximately $286.5 million and
acquired eleven properties for a combined purchase price of approximately $876.7
million during the period in 2019; we sold one property for net proceeds of
approximately $29.6 million and acquired three properties for a combined
purchase price of approximately $131.0 million during 2018.

Cash flows from financing activities. During the year ended December 31, 2019,
net cash provided by financing activities was $529.8 million compared to net
cash provided by financing activities of $93.4 million for the year ended
December 31, 2018. The change in cash flows from financing activities was mainly
due to a net increase in debt of approximately $450.6 million between the
periods.

Debt, Derivatives and Hedging Activity

Mortgage Debt



As of December 31, 2020, our subsidiaries had aggregate mortgage debt
outstanding to third parties of approximately $1.2 billion at a weighted average
interest rate of 1.83% and an adjusted weighted average interest rate of 3.06%.
For purposes of calculating the adjusted weighted average interest rate of our
mortgage debt outstanding, we have included the weighted average fixed rate of
1.3792% for one-month LIBOR on our combined $1.2 billion notional amount of
interest rate swap agreements, which effectively fix the interest rate on $1.1
billion of our floating rate mortgage debt. See Notes 6 and 7 to our
consolidated financial statements for additional information.

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We have entered into and expect to continue to enter into interest rate swap and
cap agreements with various third parties to fix or cap the floating interest
rates on a majority of our floating rate mortgage debt outstanding. The interest
rate swap agreements generally have a term of four to five years and effectively
establish a fixed interest rate on debt on the underlying notional amounts. The
interest rate swap agreements involve the receipt of variable-rate amounts from
a counterparty in exchange for us making fixed-rate payments over the life of
the agreements without exchange of the underlying notional amount. As of
December 31, 2020, interest rate swap agreements effectively covered 100% of our
$1.1 billion of floating rate mortgage debt outstanding.

The interest rate cap agreements generally have a term of three to four years,
cover the outstanding principal amount of the underlying debt and are generally
required by our lenders. Under the interest rate cap agreements, we pay a fixed
fee in exchange for the counterparty to pay any interest above a maximum rate.
As of December 31, 2020, interest rate cap agreements covered $393.0 million of
our $1.1 billion of floating rate mortgage debt outstanding. These interest rate
cap agreements effectively cap one-month LIBOR on $393.0 million of our floating
rate mortgage debt at a weighted average rate of 5.16%.

We intend to invest in additional multifamily properties as suitable
opportunities arise and adequate sources of equity and debt financing are
available. We expect that future investments in properties, including any
improvements or renovations of current or newly acquired properties, will depend
on and will be financed by, in whole or in part, our existing cash, future
borrowings and the proceeds from additional issuances of common stock or other
securities or property dispositions.

Although we expect to be subject to restrictions on our ability to incur
indebtedness, we expect that we will be able to refinance existing indebtedness
or incur additional indebtedness for acquisitions or other purposes, if needed.
However, there can be no assurance that we will be able to refinance our
indebtedness, incur additional indebtedness or access additional sources of
capital, such as by issuing common stock or other debt or equity securities, on
terms that are acceptable to us or at all.

Furthermore, following the completion of our value-add and capital expenditures
programs and depending on the interest rate environment at the applicable time,
we may seek to refinance our floating rate debt into longer-term fixed rate debt
at lower leverage levels.

Corporate Credit Facility

On January 28, 2019, the Company, through the OP, entered into a $75.0 million
credit facility (the "Corporate Credit Facility") with Truist Bank, as
administrative agent and the lenders party thereto, and immediately drew $52.5
million to fund a portion of the purchase price of Bella Vista, The Enclave, and
The Heritage. The Corporate Credit Facility is a full-term, interest-only
facility with an initial 24-month term, has one 12-month extension at the option
of the Company, and the Company has the right to request an increase in the
facility amount up to $150 million (the "Accordion Feature"). The facility bears
interest at a rate of one-month LIBOR plus a range from 2.00% to 2.50%,
depending on the Company's leverage level as determined under the Corporate
Credit Facility agreement, and is guaranteed by the Company. On June 29, 2019,
the Company, through the OP, exercised its option under the Accordion Feature of
the Corporate Credit Facility and increased the amount of the facility from $75
million to $125 million. In conjunction with the increase in the facility, the
Company incurred costs of $0.5 million in obtaining the additional financing
through the Accordion Feature (see Note 6 for additional information related to
our deferred financing costs). On August 28, 2019, the Company, through the OP,
increased the amount of the Corporate Credit Facility by $25 million, resulting
in aggregate commitments of $150 million as of September 30, 2019. In
conjunction with the increase in the facility, the Company incurred costs of
$0.2 million of deferred financing costs. On November 20, 2019, the Company,
through the OP, increased the amount of the Corporate Credit Facility by $75
million, resulting in aggregate commitments of $225 million as of December 31,
2019. In conjunction with the increase in the facility, the Company incurred
costs of $0.8 million of deferred financing costs. As of December 31, 2020,
there was $183.0 million in aggregate principal outstanding on the Corporate
Credit Facility. On October 13, 2020, the Company extended the maturity date of
the Corporate Credit Facility from January 28, 2021 to January 28, 2022. There
are currently no more extension options available under the existing agreement.

On October 13, 2020, the Company extended the maturity date of the Corporate
Credit Facility from January 28, 2021 to January 28, 2022 (the "Maturity Date"),
which falls within one year of February 19, 2021. During 2020, the Company
repaid $35.0 million in principal on the Corporate Credit Facility and had
sufficient cash flow to fund operations as well as close on a new acquisition
(Fairways at San Marcos) in the fourth quarter of 2020. Management recognizes
that finding an alternative source of funding is necessary to repay the facility
by the Maturity Date. Management is evaluating multiple options to fund the
repayment of the $183.0 million principal balance outstanding, including
recasting the Corporate Credit Facility, securing additional equity or debt
financing, selling a portion of the portfolio, or any combination
thereof. Management believes that there is sufficient time before the Maturity
Date and that the Company has sufficient access to capital to ensure the Company
is able to meet its obligations as they become due.

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The Corporate Credit Facility is a non-recourse obligation and contains
customary events of default, including defaults in the payment of principal or
interest, defaults in compliance with the covenants contained in the document
evidencing the loan, defaults in payments under any other security instrument,
and bankruptcy or other insolvency events. As of December 31, 2020, the Company
believes it is compliant with all provisions.

Interest Rate Swap Agreements



In order to fix a portion of, and mitigate the risk associated with, our
floating rate indebtedness (without incurring substantial prepayment penalties
or defeasance costs typically associated with fixed rate indebtedness when
repaid early or refinanced), we, through the OP, have entered into eleven
interest rate swap transactions with KeyBank and two with Truist Bank
(collectively the "Counterparties") with a combined notional amount of $1.2
billion which are effective as of December 31, 2020. As of December 31, 2020,
the interest rate swaps we have entered into effectively replace the floating
interest rate (one-month LIBOR) with respect to $1.1 billion of our floating
rate mortgage debt outstanding with a weighted average fixed rate of 1.3792%.
During the term of these interest rate swap agreements, we are required to make
monthly fixed rate payments of 1.3792%, on a weighted average basis, on the
notional amounts, while the Counterparties are obligated to make monthly
floating rate payments based on one-month LIBOR to us referencing the same
notional amounts. For purposes of hedge accounting under Financial Accounting
Standards Board ("FASB") Accounting Standards Codification ("ASC")
815, Derivatives and Hedging, we have designated these interest rate swaps as
cash flow hedges of interest rate risk. See Notes 6 and 7 to our consolidated
financial statements for additional information.

The following table contains summary information regarding our outstanding interest rate swaps (dollars in thousands):





 Effective Date     Termination Date    Counterparty    Notional       Fixed Rate (1)
  July 1, 2016        June 1, 2021        KeyBank      $   100,000              1.1055 %
  July 1, 2016        June 1, 2021        KeyBank          100,000              1.0210 %
  July 1, 2016        June 1, 2021        KeyBank          100,000              0.9000 %
September 1, 2016     June 1, 2021        KeyBank          100,000              0.9560 %
  April 1, 2017       April 1, 2022       KeyBank          100,000              1.9570 %
   May 1, 2017        April 1, 2022       KeyBank           50,000              1.9610 %
  July 1, 2017        July 1, 2022        KeyBank          100,000              1.7820 %
  June 1, 2019        June 1, 2024        KeyBank           50,000              2.0020 %
  June 1, 2019        June 1, 2024         Truist           50,000              2.0020 %
September 1, 2019   September 1, 2026     KeyBank          100,000              1.4620 %
September 1, 2019   September 1, 2026     KeyBank          125,000              1.3020 %
 January 3, 2020    September 1, 2026     KeyBank           92,500              1.6090 %
  March 4, 2020       June 1, 2026         Truist          100,000              0.8200 %
                                                       $ 1,167,500              1.3792 % (2)



(1) The floating rate option for the interest rate swaps is one-month LIBOR. As

of December 31, 2020, one-month LIBOR was 0.14388%.

(2) Represents the weighted average fixed rate of the interest rate swaps.

The following table contains summary information regarding our forward interest rate swaps (dollars in thousands):

Effective Date Termination Date Counterparty Notional Amount

Fixed Rate (1)

June 1, 2021 September 1, 2026 KeyBank $ 200,000

             0.8450 %
  June 1, 2021      September 1, 2026      KeyBank                 200,000              0.9530 %
September 1, 2026    January 1, 2027       KeyBank                  92,500              1.7980 %
                                                         $         492,500              1.0678 % (2)



(1) The floating rate option for the interest rate swaps is one-month LIBOR. As

of December 31, 2020, one-month LIBOR was 0.14388%.

(2) Represents the weighted average fixed rate of the interest rate swaps.


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Obligations and Commitments



The following table summarizes our contractual obligations and commitments as of
December 31, 2020 for the next five calendar years subsequent to December 31,
2020. We used one-month LIBOR as of December 31, 2020 to calculate interest
expense due by period on our floating rate debt and net interest expense due by
period on our interest rate swaps.



                                                               Payments Due by Period (in thousands)
                                     Total          2021         2022          2023         2024          2025         Thereafter
Operating Properties
Mortgage Debt
Principal payments                $ 1,168,078     $    896     $   1,509     $ 21,293     $ 395,168     $ 245,780     $    503,432
Interest expense            (1)       155,861       34,200        29,946       28,656        25,558        20,769           16,732
Total                             $ 1,323,939     $ 35,096     $  31,455     $ 49,949     $ 420,726     $ 266,549     $    520,164

Credit Facility
Principal payments                $   183,000     $      -     $ 183,000     $      -     $       -     $       -     $          -
Interest expense                        4,782        4,453           329            -             -             -                -
Total                             $   187,782     $  4,453     $ 183,329     $      -     $       -     $       -     $          -

Total contractual
obligations and commitments       $ 1,511,721     $ 39,549     $ 214,784     $ 49,949     $ 420,726     $ 266,549     $    520,164

(1) Interest expense obligations includes the impact of expected settlements on

interest rate swaps which have been entered into in order to fix the interest


    rate on the hedged portion of our floating rate debt obligations. As of
    December 31, 2020, we had entered into thirteen interest rate swap
    transactions with a combined notional amount of $1.2 billion. We have
    allocated the total impact of expected settlements on the $1.2 billion

notional amount of interest rate swaps to "Operating Properties Mortgage

Debt." We used one-month LIBOR as of December 31, 2020 to determine our

expected settlements through the terms of the interest rate swaps.

Capital Expenditures and Value-Add Program



We anticipate incurring average annual repairs and maintenance expense of $575
to $725 per apartment unit in connection with the ongoing operations of our
business. These expenditures are expensed as incurred. In addition, we reserve,
on average, approximately $250 to $350 per apartment unit for non-recurring
capital expenditures and/or lender required replacement reserves. When incurred,
these expenditures are either capitalized or expensed, in accordance with GAAP,
depending on the type of the expenditure. Although we will continuously monitor
the adequacy of this average, we believe these figures to be sufficient to
maintain the properties at a high level in the markets in which we operate. A
majority of the properties in our Portfolio were underwritten and acquired with
the premise that we would invest $4,000 to $10,000 per unit in the first 36
months of ownership, in an effort to add value to the asset's exterior and
interiors. In many cases, we reserve cash at the closing of each acquisition to
fund these planned capital expenditures and value-add improvements. As of
December 31, 2020, we had approximately $10.6 million of renovation value-add
reserves for our planned capital expenditures and other expenses to implement
our value-add program, which will complete approximately 1,205 planned interior
rehabs. The following table sets forth a summary of our capital expenditures
related to our value-add program for the years ended December 31, 2020, 2019 and
2018 (in thousands):



                                 For the Year Ended December 31,
   Rehab Expenditures           2020             2019          2018
Interior                 (1) $    10,093       $  12,044     $  8,559

Exterior and common area 20,447 11,242 9,133 Total rehab expenditures $ 30,540 $ 23,286 $ 17,692

(1) Includes total capital expenditures during the period on completed and

in-progress interior rehabs. For the years ended December 31, 2020, 2019 and

2018, we completed full and partial interior rehabs on 1,679, 2,516 and 1,432


    units, respectively.


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Freddie Mac Multifamily Green Advantage Program



In order to obtain more favorable pricing on our mortgage debt financing with
Freddie Mac, the Company decided to participate in Freddie Mac's Multifamily
Green Advantage program (the "Green Program"). As of December 31, 2020, the
Company has completed its Green Program improvements on all but one property. We
will complete the green improvements on this property during 2021. We expect to
reduce water/sewer costs at each property where the Green Program is implemented
by at least 15% through the replacement of showerheads, plumbing fixtures and
toilets with modern energy efficient upgrades. Due to changes in Freddie Mac's
requirements to participate in the Green Program, we are not implementing this
on acquisitions going forward.

Income Taxes



We anticipate that we will continue to qualify to be taxed as a REIT for U.S.
federal income tax purposes, and we intend to continue to be organized and to
operate in a manner that will permit us to qualify as a REIT. To qualify as a
REIT, we must meet certain organizational and operational requirements,
including a requirement to distribute at least 90% of our annual REIT taxable
income to stockholders. As a REIT, we will be subject to federal income tax on
our undistributed REIT taxable income and net capital gain and to a 4%
nondeductible excise tax on any amount by which distributions we pay with
respect to any calendar year are less than the sum of (1) 85% of our ordinary
income, (2) 95% of our capital gain net income and (3) 100% of our undistributed
income from prior years. Taxable income from certain non-REIT activities is
managed through a TRS and is subject to applicable federal, state, and local
income and margin taxes. We had no significant taxes associated with our TRS for
the years ended December 31, 2020, 2019 and 2018.

If we fail to qualify as a REIT in any taxable year, we will be subject to U.S.
federal income tax on our taxable income at regular corporate income tax rates,
and dividends paid to our stockholders would not be deductible by us in
computing taxable income. Any resulting corporate liability could be substantial
and could materially and adversely affect our net income and net cash available
for distribution to stockholders. Unless we were entitled to relief under
certain Code provisions, we also would be disqualified from re-electing to be
taxed as a REIT for the four taxable years following the year in which we failed
to qualify to be taxed as a REIT.

We evaluate the accounting and disclosure of tax positions taken or expected to
be taken in the course of preparing our tax returns to determine whether the tax
positions are "more-likely-than-not" (greater than 50 percent probability) of
being sustained by the applicable tax authority. Tax positions not deemed to
meet the more-likely-than-not threshold would be recorded as a tax benefit or
expense in the current year. Our management is required to analyze all open tax
years, as defined by the statute of limitations, for all major jurisdictions,
which include federal and certain states. We have no examinations in progress
and none are expected at this time.

We recognize our tax positions and evaluate them using a two-step process.
First, we determine whether a tax position is more likely than not to be
sustained upon examination, including resolution of any related appeals or
litigation processes, based on the technical merits of the position. Second, we
will determine the amount of benefit to recognize and record the amount that is
more likely than not to be realized upon ultimate settlement.

We had no material unrecognized tax benefit or expense, accrued interest or
penalties as of December 31, 2020. We and our subsidiaries are subject to
federal income tax as well as income tax of various state and local
jurisdictions. The 2019, 2018 and 2017 tax years remain open to examination by
tax jurisdictions to which our subsidiaries and we are subject. When applicable,
we recognize interest and/or penalties related to uncertain tax positions on our
consolidated statements of operations and comprehensive income (loss).

Dividends



We intend to make regular quarterly dividend payments to holders of our common
stock. U.S. federal income tax law generally requires that a REIT distribute
annually at least 90% of its REIT taxable income, without regard to the
deduction for dividends paid and excluding net capital gains. As a REIT, we will
be subject to federal income tax on our undistributed REIT taxable income and
net capital gain and to a 4% nondeductible excise tax on any amount by which
distributions we pay with respect to any calendar year are less than the sum of
(1) 85% of our ordinary income, (2) 95% of our capital gain net income and (3)
100% of our undistributed income from prior years. We intend to make regular
quarterly dividend payments of all or substantially all of our taxable income to
holders of our common stock out of assets legally available for this purpose, if
and to the extent authorized by our Board. Before we make any dividend payments,
whether for U.S. federal income tax purposes or otherwise, we must first meet
both our operating requirements and debt service on our debt payable. If our
cash available for distribution is less than our taxable income, we could be
required to sell assets, borrow funds or raise additional capital to make cash
dividends or we may make a portion of the required dividend in the form of a
taxable distribution of stock or debt securities.

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We will make dividend payments based on our estimate of taxable earnings per
share of common stock, but not earnings calculated pursuant to GAAP. Our
dividends and taxable income and GAAP earnings will typically differ due to
items such as depreciation and amortization, fair value adjustments, differences
in premium amortization and discount accretion, and non-deductible general and
administrative expenses. Our quarterly dividends per share may be substantially
different than our quarterly taxable earnings and GAAP earnings per share. Our
Board declared our fourth quarterly dividend of 2020 of $0.34125 per share on
October 26, 2020, which was paid on December 31, 2020 and funded out of cash
flows from operations.

Off-Balance Sheet Arrangements



As of December 31, 2020 and 2019, we had no off-balance sheet arrangements that
have or are reasonably likely to have a current or future material effect on our
financial condition, changes in financial condition, revenues or expenses,
results of operations, liquidity, capital expenditures or capital resources.

Critical Accounting Policies and Estimates



Management's discussion and analysis of financial condition and results of
operations is based upon our consolidated financial statements, which have been
prepared in accordance with GAAP. The preparation of these financial statements
requires our management to make judgments, assumptions and estimates that affect
the reported amounts of assets, liabilities, revenues and expenses, and related
disclosure of contingent assets and liabilities. We evaluate these judgments,
assumptions and estimates for changes that would affect the reported amounts.
These estimates are based on management's historical industry experience and on
various other judgments and assumptions that are believed to be reasonable under
the circumstances. Actual results may differ from these judgments, assumptions
and estimates. Below is a discussion of the accounting policies that we consider
critical to understanding our financial condition or results of operations where
there is uncertainty or where significant judgment is required. A discussion of
recent accounting pronouncements and our significant accounting policies,
including further discussion of the accounting policies described below, can be
found in Note 2 "Summary of Significant Accounting Policies" to our consolidated
financial statements included in this annual report.

Purchase Price Allocation



Upon acquisition of a property considered to be an asset acquisition, the
purchase price and related acquisition costs ("total consideration") are
allocated to land, buildings, improvements, furniture, fixtures, and equipment,
and intangible lease assets based on relative fair value in accordance with FASB
ASC 805, Business Combinations. Acquisition costs are capitalized in accordance
with FASB ASC 805.

The allocation of total consideration, which is determined using inputs that are
classified within Level 3 of the fair value hierarchy established by FASB ASC
820, Fair Value Measurement and Disclosures (see Note 7 to our consolidated
financial statements), is based on management's estimate of the property's
"as-if" vacant fair value and is calculated by using all available information
such as the replacement cost of such asset, appraisals, property condition
reports, market data and other related information. If any debt is assumed in an
acquisition, the difference between the fair value, which is estimated using
inputs that are classified within Level 2 of the fair value hierarchy, and the
face value of debt is recorded as a premium or discount and amortized as
interest expense over the life of the debt assumed.

Impairment



Real estate assets are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The key inputs into our impairment analysis include, but are not
limited to, the holding period, net operating income, and capitalization rates.
In such cases, we will evaluate the recoverability of such real estate assets
based on estimated future cash flows and the estimated liquidation value of such
real estate assets, and provide for impairment if such undiscounted cash flows
are insufficient to recover the carrying amount of the real estate asset. If
impaired, the real estate asset will be written down to its estimated fair
value. The Company's impairment analysis identifies and evaluates events or
changes in circumstances that indicate the carrying amount of a real estate
investment may not be recoverable, including determining the period the Company
will hold the rental property, net operating income, and the estimated
capitalization rate for each respective real estate investment.

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Inflation



The real estate market has not been affected significantly by inflation in the
past several years due to a relatively low inflation rate. The majority of our
lease terms are for a period of one year or less and reset to market if renewed.
The majority of our leases also contain protection provisions applicable to
reimbursement billings for utilities. Should inflation return, due to the
short-term nature of our leases, we do not believe our results will be
materially affected.

Inflation may also affect the overall cost of debt, as the implied cost of
capital increases. Currently, interest rates are less than historical averages.
However, the Federal Reserve, in response to or in anticipation of continued
inflation concerns, could continue to raise interest rates. We intend to
mitigate these risks through long-term fixed interest rate loans and interest
rate hedges, which to date have included interest rate cap and interest rate
swap agreements.

REIT Tax Election

We have elected to be taxed as a REIT under Sections 856 through 860 of the Code
and expect to continue to qualify as a REIT. To qualify as a REIT, we must meet
a number of organizational and operational requirements, including a requirement
that we distribute at least 90% of our "REIT taxable income," as defined by the
Code, to our stockholders. Taxable income from certain non-REIT activities is
managed through a TRS and is subject to applicable federal, state, and local
income and margin taxes. We had no significant taxes associated with our TRS for
the years ended December 31, 2020, 2019 and 2018. We believe we qualify for
taxation as a REIT under the Code, and we intend to continue to operate in such
a manner, but no assurance can be given that we will operate in a manner so as
to qualify as a REIT.

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