We are publicly offering a minimum 200,000 shares and a maximum of 110,000,000 shares of our common stock on a “best efforts” basis through Resource Securities, Inc., our dealer manager. Because this is a “best efforts” offering, Resource Securities must use only its best efforts to sell the shares and has no firm commitment or
obligation to purchase any of our shares. We are offering up to 100,000,000 shares of common stock in our primary offering at $10 per share, with discounts available for certain categories of purchasers as described below. Our board of directors may adjust the offering price of the primary offering shares during the course of the public offering by no more than 20% of the initial price. Any adjustment to the offering price would be effected by a supplement to this prospectus. We are also offering up to 10,000,000 shares pursuant to our distribution
reinvestment plan at a purchase price initially equal to $9.50 per share. Once we establish an estimated value per share that is not based on the price to acquire a share in the primary offering, shares issued pursuant to our
distribution reinvestment plan will be priced at the estimated value per share of our common stock, as determined by our advisor or another firm chosen for that purpose. We expect to establish an estimated value per share not based on the price to acquire a share in the primary offering after the completion of our offering stage; however, the time frame before which we establish an estimated value per share may be different depending on regulatory
requirements or if necessary to assist broker-dealers who sell shares in this offering. We will consider our offering stage complete when 18 months have passed since our last sale of shares in a public offering of equity securities, whether that last sale was in this initial public offering or a public follow-on offering. (For purposes of this definition, we do not consider “public equity offerings” to include offerings on behalf of selling stockholders or offerings related to any distribution reinvestment plan, employee benefit plan or the redemption of interests in our Operating Partnership.)
We expect to sell the 100,000,000 shares offered in our primary offering over a two-year period. If we have not sold all of the primary offering shares within two years, we may continue this offering until February 6, 2017. Under rules promulgated by the SEC, in some circumstances we could continue our primary offering up to an additional 180 days beyond February 6, 2017. If we decide to continue our primary offering beyond two years from the date of this prospectus, we will provide that information in a prospectus supplement. We may continue to offer shares under our distribution reinvestment plan beyond these dates until we have sold 10,000,000 shares through the reinvestment of distributions. In many states, we will need to renew the registration statement or file a new
registration statement to continue the offering beyond one year from the date of this prospectus. We may terminate this offering at any time.
Our dealer manager, Resource Securities, registered as a broker-dealer with the SEC in April 2005, and this offering will be the eleventh offering conducted by our dealer manager for Resource Real Estate-sponsored
programs. Resource Securities is indirectly owned and controlled by Resource America and its principal business is to sell the securities of programs sponsored by affiliates of Resource America, including Resource Real Estate- sponsored programs. For additional information about our dealer manager, including information related to its affiliation with us and our advisor, see “Management—Other Affiliates—Dealer Manager,” and “Conflicts of Interest—Affiliated Dealer Manager” and “—Certain Conflict Resolution Measures.”
Compensation of Dealer Manager and Participating Broker-Dealers
Except as provided below, Resource Securities will receive selling commissions of 7% of the gross offering proceeds for shares sold in our primary offering. The dealer manager will receive a dealer manager fee of 3% of the gross offering proceeds for shares sold in our primary offering as compensation for acting as the dealer manager, except that a reduced dealer manager fee will be paid with respect to certain volume discount sales. We will not pay any selling commissions or dealer manager fees for shares sold under our distribution reinvestment plan. We will also reimburse the dealer manager or participating broker-dealers for bona fide invoiced due diligence expenses as described below.
We expect the dealer manager to authorize other broker-dealers that are members of FINRA, which we refer to as participating broker-dealers, to sell our shares. Except as provided below, our dealer manager will reallow all of its selling commissions attributable to a participating broker-dealer.
We may sell shares at a discount to the primary offering price of $10.00 per share through the following distribution channels in the event that the investor:
• pays a broker a single fee, e.g., a percentage of assets under management, for investment advisory and broker services, which is frequently referred to as a “wrap fee”;
• has engaged the services of a registered investment adviser with whom the investor has agreed to pay compensation for investment advisory services or other financial or investment advice (other than a registered investment adviser that is also registered as a broker-dealer who does not have a fixed or “wrap fee” feature or other asset fee arrangement with the investor); or
• is investing through a bank acting as trustee or fiduciary.
If an investor purchases shares through one of these channels in our primary offering, we will sell the shares at a 7% discount, or at $9.30 per share, reflecting that selling commissions will not be paid in connection with such
purchases. We will receive substantially the same net proceeds for sales of shares through these channels.
The dealer manager may reallow to any participating broker-dealer 1.0% of the proceeds from shares sold by that participating broker-dealer (based on a $10.00 per share purchase price) as a marketing fee, provided that the dealer manager may adjust the amount of the reallowance, in its sole discretion, based upon a number of factors including the number of shares sold by a participating broker-dealer in this offering, the participating broker-dealer’s level of marketing support and bona fide conference fees incurred, each as compared to those of the other
participating broker-dealers. The marketing fee paid to participating broker-dealers would be paid by the dealer manager out of its dealer manager fee. In addition to selling commissions and marketing fees, and subject to the limits described below, we may reimburse the dealer manager and broker-dealers for bona fide invoiced due diligence expenses. We estimate this reimbursement will be approximately $180,000.
If an investor purchases shares in this primary offering net of commissions through a registered investment advisor that is affiliated with a participating broker-dealer in a transaction in which the registered investment advisor is compensated on a fee-for-service basis by the investor, the dealer manager may reallow to the affiliated
participating broker-dealer a marketing fee in an amount as determined in the paragraph above. The marketing fee paid to participating broker-dealers would be paid by the dealer manager out of its dealer manager fee. If an investor purchases shares in this offering through a registered investment advisor (or bank acting as a trustee or fiduciary) not affiliated with a participating broker-dealer, the dealer manager will not reallow any portion of the dealer manager fee. Neither the dealer manager nor its affiliates will compensate any person engaged as an investment adviser by a potential investor as an inducement for such investment adviser to advise favorably for an investment in us.
The table and the discussion below sets forth the nature and estimated amount of all items viewed as “underwriting compensation” by FINRA, assuming we sell all of the shares offered hereby. To show the maximum amount of dealer manager and participating broker-dealer compensation that we may pay in this offering, this table assumes that all shares are sold through distribution channels associated with the highest possible selling
commissions and dealer manager fees.
Dealer Manager and
Participating Broker-Dealer Compensation
Selling commissions (maximum) $ 70,000,000
Dealer manager fee (maximum) 30,000,000
Under the rules of FINRA, total underwriting compensation in this offering, including selling commissions, the dealer manager fee and any additional expense reimbursements to our dealer manager and participating
broker-dealers (excluding bona fide invoiced due diligence expenses), may not exceed 10% of our gross offering proceeds from our primary offering. In addition to the limits on underwriting compensation, FINRA and many states also limit our total organization and offering expenses to 15% of gross offering proceeds. After the
termination of the offering our advisor has agreed, pursuant to the terms of our advisory agreement, to reimburse us to the extent that organization and offering expenses (other than selling commissions and the dealer manager fee) incurred by us exceed 2.5% of our gross offering proceeds. However, we expect our total organization and offering expenses to be approximately 1.74% of our gross offering proceeds, assuming we raise the maximum offering amount. Organization and offering expenses include only actual expenses incurred on our behalf and paid by us in connection with the offering.
To the extent permitted by law and our charter, we will indemnify the participating broker-dealers and the dealer manager against some civil liabilities, including certain liabilities under the Securities Act and liabilities arising from breaches of our representations and warranties contained in the dealer manager agreement. See “Management — Limited Liability and Indemnification of Directors, Officers, Employees and Other Agents.”
The dealer manager has agreed to sell up to 5% of the shares offered hereby in our primary offering, or up to 5,000,000 shares, to persons to be identified by us at a discount from the public offering price. We intend to use this “friends and family” program to sell shares to our directors, officers, business associates and others to the extent consistent with applicable laws and regulations. The purchase price for such shares will be $9.00 per share,
reflecting that selling commissions in the amount of $0.70 per share and the dealer manager fee in the amount of $0.30 per share will not be payable in connection with such sales. The net proceeds to us from such sales made net of commissions and dealer manages fees will be substantially the same as the net proceeds we receive from other sales of shares.
We may sell shares to participating broker-dealers, their retirement plans, their representatives and the family members, IRAs and the qualified plans of their representatives at a purchase price of $9.30 per share, reflecting that selling commissions in the amount of $0.70 per share will not be payable in consideration of the services rendered by such broker-dealers and representatives in the offering. For purposes of this discount, we consider a family member to be a spouse, parent, child, sibling, mother- or father-in-law, son- or daughter-in law or brother- or sister-in-law. The net proceeds to us from the sales of these shares will be substantially the same as the net proceeds we receive from other sales of shares.
We are offering volume discounts to investors who purchase $1,000,000 or more of shares through the same participating broker-dealer in our primary offering. The net proceeds to us from a sale eligible for a volume discount will be the same, but the selling commissions and dealer manager fees we will pay will be reduced. Because the dealer manager reallows all selling commissions, the amount of commissions participating broker- dealers receive for such sales will be reduced.
The following table shows the discounted price per share and the reduced selling commissions and dealer manager fees payable for volume sales of our shares.
Dollar Volume Shares Purchased
Sales Commissions (Based on $10.00
Price Per Share)
Dealer Manager Fee (Based on $10.00
Price Per Share)
Price Per Share to Investor $ 0 to $ 999,999 7.0% 3.0% $10.00 $ 1,000,000 to $1,999,999 6.0% 3.0% $ 9.90 $ 2,000,000 to $2,999,999 5.0% 3.0% $ 9.80 $ 3,000,000 to $3,999,999 4.0% 2.5% $ 9.65 $ 4,000,000 to $9,999,999 3.0% 2.0% $ 9.50 $10,000,000 and above 2.0% 2.0% $ 9.40
We will apply the reduced selling price, selling commission and dealer manager fee to the entire purchase. All commission rates and dealer manager fees are calculated assuming a price per share of $10.00. For example, a purchase of 250,000 shares in a single transaction would result in a purchase price of $2,450,000 ($9.80 per share), selling commissions of $125,000 and dealer manager fees of $75,000.
To qualify for a volume discount as a result of multiple purchases of our shares you must use the same participating broker-dealer and you must mark the “Additional Investment” space on the subscription agreement. We are not responsible for failing to combine purchases if you fail to mark the “Additional Investment” space. Once you qualify for a volume discount, you will be eligible to receive the benefit of such discount for subsequent purchases of shares in our primary offering through the same participating broker-dealer. If a subsequent purchase entitles an investor to an increased reduction in sales commissions or the dealer manager fee, the volume discount will apply only to the current and future investments.
To the extent purchased through the same participating broker-dealer, the following persons may combine their purchases as a “single purchaser” for the purpose of qualifying for a volume discount:
• an individual, his or her spouse, their children under the age of 21 and all pension or trust funds established by each such individual;
• a corporation, partnership, association, joint-stock company, trust fund or any organized group of persons, whether incorporated or not;
• an employees’ trust, pension, profit-sharing or other employee benefit plan qualified under Section 401(a) of the Internal Revenue Code; and
• all commingled trust funds maintained by a given bank.
In the event a person wishes to have his or her order combined with others as a “single purchaser,” that person must request such treatment in writing at the time of subscription setting forth the basis for the discount and identifying the orders to be combined. Any request will be subject to our verification that the orders to be combined are made by a single purchaser. If the subscription agreements for the combined orders of a single purchaser are submitted at the same time, then the commissions payable and discounted share price will be allocated pro rata among the combined orders on the basis of the respective amounts being combined. Otherwise, the volume discount provisions will apply only to the order that qualifies the single purchaser for the volume discount and the subsequent orders of that single purchaser.
Only shares purchased in our primary offering are eligible for volume discounts. Shares purchased through our distribution reinvestment plan will not be eligible for a volume discount nor will such shares count toward the threshold limits listed above that qualify you for the different discount levels.
Volume discounts for California residents will be available in accordance with the foregoing table of uniform discount levels. However, with respect to California residents, no discounts will be allowed to any group of purchasers and no subscriptions may be aggregated as part of a combined order for purposes of determining the dollar amount of shares purchased.
Subscription Procedures
We will not sell any shares unless we raise a minimum of $2,000,000 by February 6, 2015 from persons who are not affiliated with us or our advisor. Until we have raised this amount, all subscription payments will be placed in an account held by the escrow agent, UMB Bank, NA, in trust for subscribers’ benefit, pending release to us. Once we have raised the applicable minimum offering amount and instructed the escrow agent to disburse the funds in the account, funds representing the gross purchase price for the shares and any interest earned on the subscription payments held in the escrow account will be distributed to us. If we do not raise at least $2,000,000 by February 6, 2015, we will promptly return all funds in the escrow account (including interest), and we will stop selling shares. We will not deduct any fees if we return funds from the escrow account. Different escrow
procedures apply to New York, Ohio, and Pennsylvania investors. Because of the higher minimum offering requirement for New York, Ohio, and Pennsylvania investors, subscription payments made by New York, Ohio and Pennsylvania investors will not count toward the $2,000,000 minimum offering for all other jurisdictions. See “— Special Notice to Pennsylvania Investors” below.
To purchase shares in this offering, you must complete and sign a subscription agreement (in the form attached to this prospectus as Appendix B) for a specific number of shares and pay for the shares at the time of your subscription. Until such time as we have raised the minimum offering amount, you should make your check payable to “UMB Bank, NA, as Escrow Agent for Resource Real Estate Opportunity REIT II, Inc.” Also, until we have raised the minimum offering amount, completed subscription agreements and payments should be sent by your broker-dealer or registered investment advisor, as applicable, to UMB Bank, NA, at the address set forth in the subscription agreement. Once we have raised $2,000,000, you should make your check payable to “Resource Real Estate Opportunity REIT II, Inc.,” except that Pennsylvania investors should follow the instructions below under “—Special Notice to Pennsylvania Investors” and New York and Ohio investors should make their checks made payable to “UMB Bank, NA, as Escrow Agent for Resource Real Estate Opportunity REIT II, Inc.” until we have received aggregate proceeds from this offering of at least $2,500,000 and $20,000,000, respectively, after which time checks may be made payable to “Resource Real Estate Opportunity REIT II, Inc.” Subscriptions will be effective only upon our acceptance, and we reserve the right to reject any subscription in whole or in part. After we have raised the minimum offering amount, subscription payments will be deposited into a special account in our name under the joint authorization of the dealer manager and us until such time as we have accepted or rejected the subscriptions. We will accept or reject subscriptions within 30 days of our receipt of such subscriptions and, if rejected, we will return all funds to the rejected subscribers within 10 business days. If accepted, the funds will be transferred into our general account. You will receive a confirmation of your purchase. We generally admit stockholders on a daily basis.
You are required to represent in the subscription agreement that you have received a copy of the final prospectus. In order to ensure that you have had sufficient time to review the final prospectus, we will not accept