Resource REIT, Inc. - FORM 8-K/A

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 21, 2015

Resource Real Estate Opportunity REIT II, Inc.

(Exact name of registrant as specified in its charter)



Maryland		80-0854717
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification No.)

1845 Walnut Street, 18th Floor, Philadelphia, PA, 19103

(Address of principal executive offices) (Zip code)

(215) 231-7050

(Registrant's telephone number, including area code)

(former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the following obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the securities Act (17CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Pursuant to the requirements of the Securities Exchange Act of 1934, Resource Real Estate Opportunity REIT II, Inc. (which may be referred to as the “Registrant,” “we,” “our,” or “us”) hereby amends our Current Report on Form 8-K filed on August 21,2015 to provide the required financial information relating to our acquisition of a multifamily community located in Homewood, Alabama known as Mayfair Chateau (the “Mayfair Chateau”), as described in such Current Report.

After reasonable inquiry, we are not aware of any material factors relating to Mayfair Chateau that would cause the reported revenues and certain operating expenses relating to it not to be necessarily indicative of future operating results.

Item 9.01. Financial Statement and Exhibits.

a. Financial Statements



		Page
	Independent Auditor's Report	1
	Statements of Revenues and Certain Operating Expenses for the Six Months Ended June 30, 2015 (unaudited) and for the Year Ended December 31, 2014	2
	Notes to Statements of Revenues and Certain Operating Expenses	3

b.	Pro Forma Financial Information
	Unaudited Pro Forma Consolidated Financial Information	4
	Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 2015	5
	Notes to Unaudited Pro Forma Consolidated Balance Sheet as of June 30, 2015	6
	Unaudited Pro Forma Consolidated Statement of Comprehensive Loss for the Six Months Ended June 30, 2015	7
	Notes to Unaudited Pro Forma Consolidated Statement of Comprehensive Loss for the Six Months Ended June 30, 2015	8
	Unaudited Pro Forma Consolidated Statement of Comprehensive Loss for the Year Ended December 31, 2014	9
	Notes to Unaudited Pro Forma Consolidated Statement of Comprehensive Loss for the Year Ended December 31, 2014	10

c.	Not applicable

SIGNATURE

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



		RESOURCE REAL ESTATE OPPORTUNITY REIT II, INC.

October 13, 2015	By:	/s/ Alan F. Feldman
		Alan F. Feldman
		Chief Executive Officer
		(Principal Executive Officer)

Independent Auditor's Report

To the Stockholders of

Resource Real Estate Opportunity REIT II, Inc.

Report on the Statement

We have audited the accompanying statement of revenues and certain operating expenses (the “Statement”) of Mayfair Chateau (the “Property”) for the year ended December 31, 2014, and the related notes to the Statement.

Management’s Responsibility for the Statement

Management is responsible for the preparation and fair presentation of the Statement in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the Statement that is free of material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on the Statement based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the Statement is free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Statement. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the Statement, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the Statement in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the Statement.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the Statement referred to above presents fairly, in all material respects, the revenues and certain operating expenses described in Note 1 to the Statement of the Property for the year ended December 31, 2014, in accordance with accounting principles generally accepted in the United States of America.

Basis of Accounting

As described in Note 1 to the Statement, the accompanying Statement was prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission (for inclusion in the Current Report on Form 8-K/A of Resource Real Estate Opportunity REIT II, Inc.), and is not intended to be a complete presentation of the Property’s revenues and expenses. Our opinion is not modified with respect to this matter.

/s/ McGladrey LLP

Philadelphia, PA

October 13, 2015

Mayfair Chateau

Statements of Revenues and Certain Operating Expenses

For the Six Months Ended June 30, 2015 (unaudited) and for the Year Ended December 31, 2014



	Six Months Ended June 30, 2015		For the Year Ended December 31, 2014
	(unaudited)
Revenues:
Rental Income	$	1,495,346	$	3,025,533
Other Income	154,110		312,327
Total Revenues	1,649,456		3,337,860


Certain Expenses:
Operating expenses	495,922		973,580
Real estate taxes	77,578		156,464
Insurance	49,650		81,442
Management fees	81,602		157,964
Total Certain Operating Expenses	704,752		1,369,450
Revenues in excess of Certain Operating Expenses	$	944,704	$	1,968,410

See accompanying notes.

Notes to Statements of Revenues and Certain Expenses

For the Six Months Ended June 30, 2015 (unaudited) and the Year Ended December 31, 2014

NOTE 1. Basis of Presentation

On August 21, 2015, Resource Real Estate Opportunity REIT II, Inc. (the "Company") purchased Mayfair Chateau, a multifamily community located in Homewood, Alabama, from unaffiliated sellers.

The statements of revenues and certain operating expenses (the “Statements”) have been prepared for the purpose of complying with the provision of Article 3-14 of Regulation S-X promulgated by the U.S. Securities and Exchange Commission (the “SEC”), which requires certain information with respect to real estate operations to be included with certain filings with the SEC. The Statements include the historical revenues and certain operating expenses of the Property, exclusive of interest expense, depreciation and amortization, and corporate expenses. Amounts included in property management fees include routine compensation paid to a third party managing property operations. The apartment complex was purchased for $30.1 million, excluding closing costs.

In the opinion of the Company’s management, all adjustments necessary for a fair presentation of the Statements for the six months ended June 30, 2015 (unaudited) and for the year ended December 31, 2014 have been included. Such adjustments consisted of normal recurring items. Interim results are not necessarily indicative of results for a year.

NOTE 2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of the statements of revenues and certain operating expenses, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of revenues and certain operating expenses during the reporting period. Actual results could differ from those estimates.

Revenue Recognition

Revenue is derived from the rental of residential housing units with lease agreement terms of generally one year or less. The Property recognizes rent as income on a straight line basis over the term of the related lease. Included within other income is tenant reimbursement income consisting of charges billed to tenants for trash removal, utilities, and other income amounts such as administrative, application and late fees, all of which are recognized in income as earned.

NOTE 3. Subsequent Events

The Property's management evaluated all events and transactions that occurred after December 31, 2014 through October 13, 2015, the date the statements of revenues and certain operating expenses were available to be issued. During this period, the Property did not have any material subsequent events other than as disclosed in Note 1.

Unaudited Pro Forma Consolidated Financial Information

On August 21, 2015, Resource Real Estate Opportunity REIT II, Inc. (the “Company”) purchased Mayfair Chateau, a multifamily community, from an unaffiliated seller. The apartment complex was purchased for $30.1 million excluding closing costs, and was funded from the capital of the Company and the assumption of two mortgages on the property.

The following unaudited pro forma consolidated balance sheet as of June 30, 2015 and consolidated statements of comprehensive loss for the six months ended June 30, 2015 and for the year ended December 31, 2014 are presented as if the Company had acquired Mayfair Chateau on January 1, 2014. The footnotes to the pro forma financial statements provide details of the pro forma adjustments. The Company believes that all material adjustments necessary to reflect the effects of the acquisition have been made.

This unaudited pro forma consolidated financial information should be read in conjunction with the historical consolidated financial statements and notes thereto as filed in the Company’s annual report on Form 10-K for the year ended December 31, 2014 and the Company’s quarterly reports on Form 10-Q, and are not necessarily indicative of what the actual financial position or comprehensive loss would have been had the Company completed the transaction as of the beginning of the periods presented, nor is it necessarily indicative of future results.

Resource Real Estate Opportunity REIT II, Inc.

Unaudited Pro Forma Consolidated Balance Sheet

June 30, 2015



	June 30, 2015			Pro Forma Adjustments				June 30, 2015
	(a)							(Pro Forma)
Assets
Investments:
Rental property, net	$	131,675,438		$	30,002,853		(b)	$	161,678,291
Identified intangible assets, net	1,534,205			766,167				2,300,372
	133,209,643			30,769,020				163,978,663

Cash	116,488,300			36,891,592			(b)(c)	153,379,892
Restricted cash	1,669,012			—				1,669,012
Tenant receivables	9,132			—				9,132
Due from related party	218,927			—				218,927
Subscriptions receivable	2,346,339			—				2,346,339
Prepaid expenses and other assets	1,006,737			89,301			(b)	1,096,038
Deferred offering costs	3,460,407			—				3,460,407
Deferred financing costs, net	1,091,107			261,251				1,352,358
Total assets	$	259,499,604		$	68,011,164			$	327,510,768

Liabilities and Stockholders' Equity
Liabilities:
Mortgage note payable	$	58,740,000		$	22,158,321		(b)	$	80,898,321
Accounts payable and accrued expenses	1,936,215			(381,678		)	(b)	1,554,537
Due to related parties	1,438,652			—				1,438,652
Tenant prepayments	97,474			7,258			(b)	104,732
Security deposits	175,133			54,014			(b)	229,147
Distribution payable	3,447,574			—				3,447,574
Total liabilities	65,835,048			21,837,915				87,672,963

Stockholders' equity:
Preferred stock (par value $.01; 10,000,000 shares authorized, none issued and outstanding)	—			—				—
Convertible stock (par value $.01; 50,000 shares authorized, 50,000 shares issued and outstanding)	500			—				500
Common stock (par value $.01; 1,000,000,000 shares authorized, 23,985,818 shares issued and outstanding)	239,859			46,337			(c)	286,196
Additional paid-in-capital	212,620,473			46,126,912			(c)	258,747,385
Accumulated other comprehensive loss	(76,267		)	—				(76,267		)
Accumulated deficit	(19,120,009		)	—				(19,120,009		)
Total stockholders' equity	193,664,556			46,173,249				239,837,805
Total liabilities and stockholders' equity	$	259,499,604		$	68,011,164			$	327,510,768

See accompanying notes to unaudited pro forma consolidated financial statements

Notes to Unaudited Pro Forma Consolidated Balance Sheet

June 30, 2015


a.	Reflects the Company’s historical consolidated balance sheet as of June 30, 2015.


b.	Reflects the increase in assets and liabilities acquired as a result of the acquisition. The Company paid the purchase price with $10.1 million cash and $21.5 million in borrowings, secured by a first and second mortgage, which mature in November 2021.


c.	Reflects the capital raised during the period July 1, 2015 through the date of acquisition, August 21, 2015.

Resource Real Estate Opportunity REIT II, Inc.

Unaudited Pro Forma Consolidated Statement of Comprehensive Loss

For the Six Months Ended June 30, 2015



	For the Six Months Ended June 30, 2015			Pro Forma Adjustments			For the Six Months Ended June 30, 2015
	(a)						(Pro Forma)
Revenues:
Rental income	$	4,431,141		$	1,649,456	(b)	$	6,080,597
Interest income	45,085			—			45,085
	4,476,226			1,649,456			6,125,682

Expenses:
Rental operating	2,187,744			565,287		(b)	2,753,031
Acquisition costs	2,159,232			—		(d)	2,159,232
Management fees - related parties	705,203			271,129		(c)	976,332
General and administrative	1,547,652			57,863		(b)	1,605,515
Loss on disposal of assets	1,011,230			—			1,011,230
Depreciation and amortization expense	2,781,664			472,673		(e)	3,254,337
Total expenses	10,392,725			1,366,952			11,759,677
(Loss) income before other expense	(5,916,499		)	282,504			(5,633,995		)

Other expense:
Interest expense	(452,933		)	—			(452,933		)
Net (loss) income	(6,369,432		)	282,504			(6,086,928		)

Other comprehensive (loss) income:
Designated derivatives, fair value adjustment	(41,799		)	—			(41,799		)
Comprehensive (loss) income	$	(6,411,231	)	$	282,504		$	(6,128,727	)

Weighted average shares outstanding	13,604,605						13,604,605

Basic and diluted loss per common share	$	(0.47	)				$	(0.45	)

See accompanying notes to unaudited pro forma consolidated financial statements

Notes to Unaudited Pro Forma Consolidated Statement of Comprehensive Loss

For the Six Months Ended June 30, 2015


a.	Reflects the Company’s historical consolidated operations for the six months ended June 30, 2015.


b.	Reflects operating activity from January 1, 2015 to June 30, 2015 for the acquisition made during the year ended December 31, 2015.

Reflects the asset management fee associated with the acquisition. The asset is managed by Resource Real Estate Opportunity Advisor II, LLC, a related party of the Company. The asset management fee was six twelfths of 1% of the asset’s cost for the six months ended June 30, 2015. Also, reflects the property management fee associated with the acquisition. The asset is managed by Resource Real Estate Opportunity Manager II, LLC, a related party of the Company. The property management fee is 4.5% of gross receipts for the six months ended June 30, 2015.


d.	Acquisition expenses are non-recurring and have not been included for the 2015 acquisition.


e.	Reflects the additional depreciation for the building and improvements incurred as a result of the acquisition. Building depreciation is expensed over the property’s estimated useful life of 27.5 years and improvements are depreciated over their estimated useful lives ranging from three to 15 years.

Resource Real Estate Opportunity REIT II, Inc.

Unaudited Pro Forma Consolidated Statement of Comprehensive Loss

For the Year Ended December 31, 2014



	For the Year Ended December 31, 2014			Pro Forma Adjustments				For the Year Ended December 31, 2014
	(a)							(Pro Forma)
Revenues:
Rental income	$	991,543		$	3,337,860		(b)	$	4,329,403
Interest income	8,251			—				8,251
	999,794			3,337,860				4,337,654

Expenses:
Rental operating	689,325			1,113,579			(b)	1,802,904
Acquisition costs	1,588,944			—			(d)	1,588,944
Management fees - related parties	127,496			543,545			(c)	671,041
General and administrative	1,472,181			97,907			(b)	1,570,088
Loss on disposal of assets	198,840			—				198,840
Depreciation and amortization expense	531,058			1,711,512			(e)	2,242,570
Total expenses	4,607,844			3,466,543				8,074,387
Loss before other expense	(3,608,050		)	(128,683		)		(3,736,733		)

Other expense:
Interest expense	(158,842		)	—				(158,842		)
Net loss	(3,766,892		)	(128,683		)		(3,895,575		)

Other comprehensive loss:
Designated derivatives, fair value adjustment	(34,468		)	—				(34,468		)
Comprehensive loss	$	(3,801,360	)	$	(128,683	)		$	(3,930,043	)

Weighted average shares outstanding	1,680,062							1,680,062

Basic and diluted loss per common share	$	(2.24	)					$	(2.32	)

See accompanying notes to unaudited pro forma consolidated financial statements

Notes to Unaudited Pro Forma Consolidated Statement of Comprehensive Loss

For the Year Ended December 31, 2014


a.	Reflects the Company’s historical consolidated operations for the year ended December 31, 2014.


b.	Reflects operating activity from January 1, 2014 to December 31, 2014 for the acquisition made during the year ended December 31, 2015.

Reflects the asset management fee associated with the acquisition. The asset is managed by Resource Real Estate Opportunity Advisor II, LLC, a related party of the Company. The asset management fee was 1% of the asset’s cost for the year ended December 31, 2014. Also, reflects the property management fee associated with the acquisition. The asset is managed by Resource Real Estate Opportunity Manager II, LLC, a related party of the Company. The property management fee is 4.5% of gross receipts for the year ended December 31, 2014.


d.	Acquisition expenses are non-recurring and have not been included for the 2015 acquisition.


e.	Reflects the additional depreciation for the building and improvements incurred as a result of the acquisition. Building depreciation is expensed over the property’s estimated useful life of 27.5 years and improvements are depreciated over their estimated useful lives ranging from three to 15 years. In-place leases are amortized over six months.

Resource REIT, Inc. - FORM 8-K/A - October 13, 2015

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