Increases Midpoint of Full Year 2023 EPS and
Core FFO Guidance Ranges
Independence Realty Trust, Inc. (“IRT”) (NYSE: IRT), a
multifamily apartment REIT, today announced its second quarter 2023
financial results and raised the midpoint of its full year 2023
earnings and Core FFO guidance ranges.
Second Quarter Highlights
- Net income (loss) available to common shares of $10.7 million
for the quarter ended June 30, 2023 compared to $(7.2) million for
the quarter ended June 30, 2022.
- Earnings (loss) per diluted share of $0.05 for the quarter
ended June 30, 2023 compared to $(0.03) for the quarter ended June
30, 2022.
- Same-store portfolio net operating income (“NOI”) growth of
6.3% for the quarter ended June 30, 2023 compared to the quarter
ended June 30, 2022.
- Core Funds from Operations (“CFFO”) of $63.7 million for the
quarter ended June 30, 2023 compared to $58.6 million for the
quarter ended June 30, 2022. CFFO per share was $0.28 for the
second quarter of 2023, as compared to $0.26 for the second quarter
of 2022.
- Adjusted EBITDA of $89.2 million for the quarter ended June 30,
2023 compared to $83.2 million for the quarter ended June 30,
2022.
- Value add program completed renovations at 625 units during the
quarter ended June 30, 2023, achieving a weighted average return on
investment during the quarter of 16.2%.
Included later in this press release are definitions of NOI,
CFFO, Adjusted EBITDA and other Non-GAAP financial measures and
reconciliations of such measures to their most comparable financial
measures as calculated and presented in accordance with GAAP.
Management Commentary
“Our second quarter growth of 6.3% in same store NOI and 7.7% in
Core FFO per share reflects the strength of our portfolio and
ability to successfully deliver operational effectiveness” said
Scott Schaeffer, Chairman and CEO of IRT. “We will remain focused
on continuing to invest in our value add program and unlocking
additional value by leveraging technology and innovation to enhance
our management platform. These ongoing efforts, along with our
year-to-date performance, allow us to reaffirm our full year
operational guidance and increase the midpoint of our Core FFO
guidance.”
Same-Store Portfolio(1) Operating Results
Second Quarter 2023
Compared to
Second Quarter 2022
Six Months Ended June 30, 2023
Compared to
Six Months Ended June 30,
2022
Rental and other property revenue
6.2% increase
6.9% increase
Property operating expenses
5.9% increase
6.2% increase
Net operating income (“NOI”)
6.3% increase
7.3% increase
Portfolio average occupancy
130 bps decrease to 94.2%
180 bps decrease to 93.6%
Portfolio average rental rate
8.0% increase to $1,531
9.4% increase to $1,530
NOI Margin
10 bps increase to 62.1%
20 bps increase to 62.7%
(1)
Same-store portfolio includes 115
properties, which represent 34,197 units.
Operating Metrics
The table below summarizes operating metrics for the same-store
portfolio for the applicable periods.
2Q 2023
3Q 2023(3)
Same-Store Portfolio(1)
Average Occupancy
94.2 %
94.5 %
(4)
Lease Over Lease Effective Rental Rate
Growth:(2)
New Leases
2.8 %
2.7 %
Renewal Leases
2.3 %
4.5 %
Blended
2.5 %
3.9 %
Resident retention rate
54.2 %
54.4 %
Same-Store Portfolio excluding Ongoing
Value Add
Average Occupancy
94.7 %
95.0 %
(4)
Lease Over Lease Effective Rental Rate
Growth:(2)
New Leases
2.4 %
1.9 %
Renewal Leases
2.3 %
4.2 %
Blended
2.3 %
3.5 %
Resident retention rate
53.8 %
54.8 %
Value Add (23 properties with Ongoing
Value Add)
Average Occupancy
92.3 %
92.8 %
(4)
Lease Over Lease Effective Rental Rate
Growth:(2)
New Leases
4.3 %
5.7 %
Renewal Leases
2.3 %
5.5 %
Blended
3.2 %
5.6 %
Resident retention rate
55.5 %
52.9 %
(1)
Same-store portfolio includes 115
properties, which represent 34,197 units.
(2)
Lease-over-lease effective rent growth
represents the change in effective monthly rent, as adjusted for
concessions, for each unit that had a prior lease and current lease
that are for a term of 9-13 months.
(3)
3Q 2023 average occupancy and resident
retention rates are through July 24, 2023. 3Q 2023 new lease and
renewal rates are for leases commencing during 3Q 2023 that were
signed as of July 24, 2023.
(4)
As of July 24, 2023, same-store portfolio
occupancy was 94.8%, same-store portfolio excluding ongoing value
add occupancy was 95.3%, and value add occupancy was 92.9%.
Value Add Program
We completed renovations on 625 units during the quarter ended
June 30, 2023, achieving a return on investment of 16.2%, with an
average cost per unit renovated of $17,601, and average rent
increase per renovated unit of $237. For the six months end June
30, 2023, we have completed renovations on 1,260 units, achieving a
return on investment of 17.0%, with an average cost per unit
renovated of $16,496, and average rent increase per renovated unit
of $232. See the Value Add Summary page of our supplemental for
additional information on our projects life to date as of June 30,
2023.
Investment Activity
Held for Sale
During the three months ended June 30, 2023, in connection with
our ongoing capital recycling program, we classified one property
in Chicago, Illinois, as held for sale. We expect the sale to close
in the second half of 2023 and to apply net proceeds from the sale
to reduce indebtedness. Consummation of the sale is subject to
entry into a definitive agreement and there can be no assurance
that the sale will be consummated on expected terms, or at all.
Capital Expenditures
For the three months ended June 30, 2023, recurring capital
expenditures for the total portfolio were $6.4 million, or $184 per
unit. For the six months ended June 30, 2023, recurring capital
expenditures for the total portfolio were $10.5 million, or $301
per unit.
Capital Markets
Dividend Distribution
On May 10, 2023, our Board of Directors declared a quarterly
cash dividend of $0.16 per share of our common stock, which
represented a 14% increase in the dividend over the prior quarterly
rate of $0.14 per share. This dividend was paid on July 21, 2023 to
stockholders of record at the close of business on June 30,
2023.
2023 EPS and CFFO Guidance
We increased the midpoint of our EPS and CFFO per share guidance
ranges and reaffirmed the midpoint of our same-store NOI guidance.
Earnings per diluted share is projected to be in the range of $0.25
to $0.27. A reconciliation of IRT's projected net income allocable
to common shares to its projected CFFO per share is included below.
See the schedules and definitions at the end of this release for
further information regarding how IRT calculates CFFO and for
management’s definition and rationale for the usefulness of
CFFO.
Previous Guidance
Current Guidance
Change at Midpoint
2023 Full Year EPS and CFFO
Guidance(1)(2)
Low
High
Low
High
Earnings per share
$
0.23
$
0.27
$
0.25
$
0.27
$
0.01
Adjustments:
Depreciation and amortization
0.95
0.95
0.95
0.95
—
Gain on sale of real estate assets(3)
(0.01
)
(0.01
)
(0.01
)
(0.01
)
—
Loan (premium accretion) discount
amortization, net
(0.05
)
(0.05
)
(0.05
)
(0.05
)
—
Core FFO per share
$
1.12
$
1.16
$
1.14
$
1.16
$
0.01
(1)
This guidance, including the underlying
assumptions presented in the table below, constitutes
forward-looking information. Actual full year 2023 EPS and CFFO
could vary significantly from the projections presented. See
“Forward-Looking Statements” below. Our guidance is based on the
key guidance assumptions detailed below.
(2)
Per share guidance is based on 230.4
million weighted average shares and units outstanding.
(3)
Gain on sale of real estate assets
includes one asset sale that occurred during the first quarter of
2023 and one property identified as held for sale as of June 30,
2023.
2023 Guidance Assumptions
Our key guidance assumptions for 2023 are enumerated below. See
definitions at the end of this release for further information
regarding our same-store definitions.
Same-Store Portfolio
Previous 2023 Outlook
Current 2023
Outlook(1)
Change at Midpoint
Number of properties/units
116 properties / 34,571 units
115 properties / 34,179 units
—
Property revenue growth
5.7% to 7.0%
6.1% to 6.6%
—
Controllable operating expense growth
3.3% to 5.4%
4.7% to 5.4%
0.7%
Real estate tax and insurance expense
8.1% to 9.1%
7.5% to 8.1%
(0.8)%
Total operating expense growth
5.2% to 6.9%
5.7% to 6.4%
—
Property NOI growth
5.0% to 8.0%
6.0% to 7.0%
—
Corporate Expenses
General and administrative &
Property
management expenses
$51.5 million to $53.5
million
$50.5 million to $51.5
million
($1.5) million
Interest expense(2)
$104.5 million to $106.5
million
$102.5 million to $103.5
million
($2.5) million
Transaction/Investment
Volume(3)
Acquisition volume
None
None
—
Disposition volume
$35 million to $40 million
$122 million to $127 million
$87 million
Capital Expenditures
Recurring
$19.0 million to $21.0
million
$20.0 million to $22.0
million
$1.0 million
Value add & non-recurring
$78.0 million to $82.0
million
$78.0 million to $82.0
million
—
Development
$80.0 million to $90.0
million
$80.0 million to $90.0
million
—
(1)
This guidance, including the underlying
assumptions, constitutes forward-looking information. Actual
results could vary significantly from the projections presented.
See “Forward-Looking Statements” below.
(2)
Interest expense includes amortization of
deferred financing costs but excludes loan premium accretion, net.
As a result of purchase accounting, we recorded a $72.1 million
loan premium, net, related to STAR debt. This loan premium will be
accreted into and reduce GAAP interest expense over the remaining
term of the associated debt. However, loan premium accretion will
be excluded from CFFO.
(3)
Includes one asset sale that occurred in
the first quarter 2023 and one property identified as held for sale
as of June 30, 2023. We continue to evaluate our portfolio for
capital recycling opportunities so actual acquisitions and
dispositions could vary significantly from our projections. We
undertake no duty to update these assumptions. See “Forward-Looking
Statements” below.
Selected Financial Information
See the schedules at the end of this earnings release for
selected financial information for IRT.
Non-GAAP Financial Measures and Definitions
We disclose the following non-GAAP financial measures in this
earnings release: FFO, CFFO, NOI and Adjusted EBITDA. Included at
the end of this release are definitions of these non-GAAP financial
measures and a reconciliation of our reported net income to our FFO
and CFFO, a reconciliation of our same-store NOI to our reported
net income, a reconciliation of our Adjusted EBITDA to net income,
and management’s rationales for the usefulness of each of these and
other non-GAAP financial measures used in this release.
Conference Call
All interested parties can listen to the live conference call
webcast at 9:00 AM ET on Thursday, July 27, 2023 from the investor
relations section of the IRT website at www.irtliving.com or by
dialing 1.888.440.3307, access code 1963990. For those who are not
available to listen to the live call, the replay will be available
shortly following the live call from the investor relations section
of IRT’s website until the next earnings release. A playback of the
conference call can also be accessed telephonically until Thursday,
August 3, 2023 by dialing 1.800.770.2030, access code 1963990.
Supplemental Information
We produce supplemental information that includes details
regarding the performance of the portfolio, financial information,
non-GAAP financial measures, same-store information and other
useful information for investors. The supplemental information is
available via our website, www.irtliving.com, through the "Investor
Relations" section.
About Independence Realty Trust, Inc.
Independence Realty Trust, Inc. (NYSE: IRT) is a real estate
investment trust that owns and operates multifamily communities,
across non-gateway U.S. markets including Atlanta, GA, Dallas, TX,
Denver, CO, Columbus, OH, Indianapolis, IN, Raleigh-Durham, NC,
Oklahoma City, OK, Nashville, TN, Houston, TX, and Tampa, FL. IRT’s
investment strategy is focused on gaining scale near major
employment centers within key amenity rich submarkets that offer
good school districts and high-quality retail. IRT aims to provide
stockholders attractive risk-adjusted returns through diligent
portfolio management, strong operational performance, and a
consistent return on capital through distributions and capital
appreciation. More information may be found on the Company’s
website www.irtliving.com.
Forward-Looking Statements
This release contains certain forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as
amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Such forward-looking statements can generally be
identified by our use of forward-looking terminology such as
“will,” “strategy,” “expects,” “seeks,” “believes,” “potential,” or
other similar words that predict or indicate future events and
trends and that do not report historical matters.
These forward-looking statements involve estimates, projections,
forecasts and assumptions and are subject to risks and
uncertainties including, without limitation, risks and
uncertainties related to changes in market demand for rental
apartment homes and pricing pressures, including from competitors,
that could lead to declines in occupancy and rent levels,
uncertainty and volatility in capital and credit markets, including
changes that reduce availability, and increase costs, of capital,
unexpected changes in our intention or ability to repay certain
debt prior to maturity, increased costs on account of inflation,
increased competition in the labor market, increased regulations
generally and specifically on the rental housing market including
legislation that may regulate rents or delay or limit our ability
to evict non-paying residents, risks endemic to real estate and the
real estate industry generally, the impact of potential outbreaks
of infectious diseases and measures intended to prevent the spread
or address the effects thereof, the effects of natural and other
disasters, delays in completing, and cost overruns incurred in
connection with, our value add initiatives and failure to achieve
projected rent increases and occupancy levels on account of the
initiatives, unknown or unexpected liabilities including the cost
of legal proceedings, inability to sell certain assets within the
time frames or at the pricing levels expected, costs and
disruptions as the result of a cybersecurity incident or other
technology disruption, unexpected capital needs, inability to
obtain appropriate insurance coverages at reasonable rates, or at
all, or losses from catastrophes in excess of our insurance
coverages, and share price fluctuations. Please refer to the
documents filed by us with the SEC, including specifically the
“Risk Factors” sections of our Annual Report on Form 10-K for the
year ended December 31, 2022, and our other filings with the SEC,
which identify additional factors that could cause actual results
to differ from those contained in forward-looking statements.
These forward-looking statements are based upon the beliefs and
expectations of our management at the time of this release and our
actual results may differ materially from the expectations,
intentions, beliefs, plans or predictions of the future expressed
or implied by such forward-looking statements. We undertake no
obligation to update these forward-looking statements to reflect
events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events, except as may be required by
law.
Schedule I
Independence Realty Trust,
Inc.
Selected Financial
Information
Dollars in thousands, except per
share data (unaudited)
For the Three Months
Ended
Jun 30, 2023
Mar 31, 2023
Dec 31, 2022
Sep 30, 2022
Jun 30, 2022
Selected Financial Information:
Operating Statistics:
Net income (loss) available to common
shares
$
10,709
$
8,648
$
33,631
$
16,223
$
(7,205
)
Earnings (loss) per share -- diluted
$
0.05
$
0.04
$
0.15
$
0.07
$
(0.03
)
Rental and other property revenue
$
163,601
$
161,135
$
162,493
$
160,300
$
154,643
Property operating expenses
$
62,071
$
59,255
$
57,450
$
59,967
$
58,976
NOI
$
101,530
$
101,880
$
105,043
$
100,333
$
95,667
NOI margin
62.1
%
63.2
%
64.6
%
62.6
%
61.9
%
Adjusted EBITDA
$
89,156
$
87,594
$
93,017
$
89,264
$
83,228
FFO per share
$
0.28
$
0.27
$
0.31
$
0.30
$
0.29
CORE FFO per share
$
0.28
$
0.27
$
0.29
$
0.28
$
0.26
Dividends per share
$
0.16
$
0.14
$
0.14
$
0.14
$
0.14
CORE FFO payout ratio
57.1
%
51.9
%
48.3
%
50.0
%
53.8
%
Portfolio Data:
Total gross assets
$
7,117,404
$
7,045,306
$
7,034,902
$
7,097,280
$
6,801,034
Total number of operating properties
119
119
120
122
120
Total units
35,249
35,249
35,526
36,176
35,594
Portfolio period end occupancy (a)
94.6
%
94.1
%
93.6
%
94.6
%
95.7
%
Portfolio average occupancy (a)
94.1
%
93.1
%
93.9
%
94.2
%
95.5
%
Portfolio average effective monthly rent,
per unit (a)
$
1,538
$
1,535
$
1,522
$
1,484
$
1,414
Same-store portfolio period end occupancy
(b)
94.6
%
94.1
%
93.6
%
94.6
%
95.4
%
Same-store portfolio average occupancy
(b)
94.2
%
93.1
%
93.9
%
94.2
%
95.5
%
Same-store portfolio average effective
monthly rent, per unit (b)
$
1,531
$
1,528
$
1,517
$
1,484
$
1,417
Capitalization:
Total debt (c)
$
2,650,805
$
2,628,632
$
2,631,645
$
2,713,625
$
2,552,936
Common share price, period end
$
18.22
$
16.03
$
16.86
$
16.73
$
20.73
Market equity capitalization
$
4,202,342
$
3,694,970
$
3,880,432
$
3,850,365
$
4,729,580
Total market capitalization
$
6,853,147
$
6,323,602
$
6,512,077
$
6,563,990
$
7,282,516
Total debt/total gross assets
37.2
%
37.3
%
37.4
%
38.2
%
37.5
%
Net debt to Adjusted EBITDA (d)
7.2x
7.3x
6.9x
7.2x
7.4x
Interest coverage
4.0x
4.0x
4.0x
4.0x
4.0x
Common shares and OP Units:
Shares outstanding
224,697,889
224,556,870
224,064,940
224,056,179
222,060,280
OP units outstanding
5,946,571
5,946,571
6,091,171
6,091,171
6,091,171
Common shares and OP units outstanding
230,644,460
230,503,441
230,156,111
230,147,350
228,151,451
Weighted average common shares and OP
units
230,369,086
230,186,297
229,994,927
228,051,780
227,964,753
(a)
Excludes our development projects
(Destination at Arista and Flatirons Apartments). See definitions
at the end of this release.
(b)
Same-store portfolio consists of 115
properties, which represent 34,197 units.
(c)
Includes indebtedness associated with real
estate held for sale, as applicable.
(d)
Reflects net debt to Adjusted EBITDA for
each period presented, including adjustments for the timing of
acquisitions and dispositions impacting quarterly EBITDA. For the
five quarters ended June 30, 2023, net debt to Adjusted EBITDA
excluding adjustments for these items was 7.2x, 7.3x, 6.9x, 7.4x,
and 7.4x, respectively.
Schedule II
Independence Realty Trust,
Inc.
Reconciliation of Net Income
(Loss) to Funds from Operations and Core Funds From Operations
(Dollars in thousands, except
share and per share amounts)
(unaudited)
For the Three Months Ended
June 30,
For the Six Months Ended
June 30,
2023
2022
2023
2022
Funds From Operations (FFO):
Net income (loss)
$
10,988
$
(7,399
)
$
19,861
$
69,482
Add-Back (Deduct):
Real estate depreciation and
amortization
53,701
72,298
106,989
150,241
Our share of real estate depreciation and
amortization from
investments in unconsolidated real estate
entities
575
515
994
515
Gain on sale of real estate assets, net,
excluding
prepayment gains
—
—
(314
)
(94,712
)
FFO
$
65,264
$
65,414
$
127,530
$
125,526
FFO per share
$
0.28
$
0.29
$
0.55
$
0.55
CORE Funds From Operations
(CFFO):
FFO
$
65,264
$
65,414
$
127,530
$
125,526
Add-Back (Deduct):
Other depreciation and amortization
283
495
531
725
Casualty losses (gains), net
680
(5,592
)
831
(6,985
)
Loan (premium accretion) discount
amortization, net
(2,737
)
(2,741
)
(5,493
)
(5,495
)
Prepayment (gains) penalties on asset
dispositions
—
—
(670
)
—
Other expense (income), net
192
(294
)
234
(673
)
Merger and integration costs
—
1,307
—
3,202
Restructuring costs
—
—
3,213
—
CFFO
$
63,682
$
58,589
$
126,176
$
116,300
CFFO per share
$
0.28
$
0.26
$
0.55
$
0.51
Weighted-average shares and units
outstanding
230,369,086
227,966,261
230,278,208
227,873,108
(a)
Included in the six months ended June 30,
2023 and 2022 is $2.7 million and $2.4 million, respectively, of
stock compensation expense recorded with respect to stock awards
granted during the respective period to retirement eligible
employees.
Schedule III
Independence Realty Trust
Inc.
Reconciliation from Net Income
(Loss) to Same-Store Net Operating Income (a)
Dollars in thousands
(unaudited)
For the Three Months
Ended
Jun 30, 2023
Mar 31, 2023
Dec 31, 2022
Sep 30, 2022
Jun 30, 2022
Net income (loss)
$
10,988
$
8,872
$
34,524
$
16,653
$
(7,399
)
Other revenue
(354
)
(239
)
(306
)
(300
)
(120
)
Property management expenses
6,818
6,371
6,593
5,744
6,139
General and administrative
expenses
5,910
8,154
5,739
5,625
6,968
Depreciation and amortization
expense
53,984
53,536
52,161
49,722
72,793
Casualty losses (gains), net
680
151
(1,690
)
(191
)
(5,592
)
Interest expense
22,227
22,124
23,337
22,093
20,994
Gain on sale of real estate assets,
net
—
(985
)
(17,044
)
—
—
Other loss (income), net
72
(93
)
(57
)
(765
)
(294
)
Loss (gain) from investments in
unconsolidated real estate entities
1,205
776
(242
)
1,477
871
Merger and integration costs
—
—
2,028
275
1,307
Restructuring costs
—
3,213
—
—
—
NOI
$
101,530
$
101,880
$
105,043
$
100,333
$
95,667
Less: Non same-store portfolio NOI
3,400
3,804
4,866
3,937
3,384
Same-store portfolio NOI
$
98,130
$
98,076
$
100,177
$
96,396
$
92,283
(a)
Same-store portfolio consists of 115
properties, which represent 34,197 units.
Schedule IV
Independence Realty Trust,
Inc.
Reconciliation of Net Income
(Loss) to Adjusted EBITDA and Interest Coverage Ratio
(Dollars in thousands)
(unaudited)
Three Months Ended
ADJUSTED EBITDA:
Jun 30, 2023
Mar 31, 2023
Dec 31, 2022
Sep 30, 2022
Jun 30, 2022
Net income (loss)
$
10,988
$
8,872
$
34,524
$
16,653
$
(7,399
)
Add-Back (Deduct):
Interest expense
22,227
22,124
23,337
22,093
20,994
Depreciation and amortization
53,984
53,536
52,161
49,722
72,793
Casualty losses (gains), net
680
151
(1,690
)
(191
)
(5,592
)
Gain on sale of real estate assets,
net
—
(985
)
(17,044
)
—
—
Merger and integration costs
—
—
2,028
275
1,307
Loss (gain) from investments in
unconsolidated real estate entities
1,205
776
(242
)
1,477
1,125
Other loss (income), net
72
(93
)
(57
)
(765
)
—
Restructuring costs
—
3,213
—
—
—
Adjusted EBITDA
$
89,156
$
87,594
$
93,017
$
89,264
$
83,228
INTEREST COST:
Interest expense
$
22,227
$
22,124
$
23,337
$
22,093
$
20,994
INTEREST COVERAGE:
4.0x
4.0x
4.0x
4.0x
4.0x
For the Three Months Ended
June 30,
For the Six Months Ended June
30,
ADJUSTED EBITDA:
2023
2022
2023
2022
Net income (loss)
$
10,988
$
(7,399
)
$
19,861
$
69,482
Add-Back (Deduct):
Interest expense
22,227
20,994
44,351
41,525
Depreciation and amortization
53,984
72,793
107,520
150,966
Casualty losses (gains), net
680
(5,592
)
831
(6,985
)
Gain on sale of real estate assets,
net
—
—
(985
)
(94,712
)
Merger and integration costs
—
1,307
—
3,202
Loss (gain) from investments in
unconsolidated real estate entities
1,205
1,125
1,981
1,125
Other loss (income), net
72
—
(21
)
—
Restructuring costs
—
—
3,213
—
Adjusted EBITDA
$
89,156
$
83,228
$
176,751
$
164,603
INTEREST COST:
Interest expense
$
22,227
$
20,994
$
44,351
$
41,525
INTEREST COVERAGE:
4.0x
4.0x
4.0x
4.0x
Schedule V
Independence Realty Trust,
Inc.
Definitions
Average Effective Monthly Rent per Unit
Average effective rent per unit represents the average of gross
rent amounts, divided by the average occupancy (in units) for the
period presented. We believe average effective rent is a helpful
measurement in evaluating average pricing. This metric, when
presented, reflects the average effective rent per month.
Average Occupancy
Average occupancy represents the average occupied units for the
reporting period divided by the average of total units available
for rent for the reporting period.
Development Property
A development property is a property that is either currently
under development or is in lease-up prior to reaching overall
occupancy of 90%.
EBITDA and Adjusted EBITDA
Each of EBITDA and Adjusted EBITDA is a non-GAAP financial
measure. EBITDA is defined as net income before interest expense
including amortization of deferred financing costs, income tax
expense, and depreciation and amortization expenses. Adjusted
EBITDA is EBITDA before certain other non-cash or non-operating
gains or losses related to items such as asset sales, debt
extinguishments and acquisition related debt extinguishment
expenses, casualty (gains) losses, merger and integration costs,
income (loss) from investments in unconsolidated real estate
entities, and restructuring costs. We consider each of EBITDA and
Adjusted EBITDA to be an appropriate supplemental measure of
performance because it eliminates interest, income taxes,
depreciation and amortization, and other non-cash or non-operating
gains and losses, which permits investors to view income from
operations without these non-cash or non-operating items. Our
calculation of Adjusted EBITDA differs from the methodology used
for calculating Adjusted EBITDA by certain other REITs and,
accordingly, our Adjusted EBITDA may not be comparable to Adjusted
EBITDA reported by other REITs.
Funds From Operations (“FFO”) and Core Funds From Operations
(“CFFO”)
We believe that FFO and CFFO, each of which is a non-GAAP
financial measure, are additional appropriate measures of the
operating performance of a REIT and us in particular. We compute
FFO in accordance with the standards established by the National
Association of Real Estate Investment Trusts (“NAREIT”), as net
income or loss allocated to common shares (computed in accordance
with GAAP), excluding real estate-related depreciation and
amortization expense, gains or losses on sales of real estate and
the cumulative effect of changes in accounting principles. While
our calculation of FFO is in accordance with NAREIT’s definition,
it may differ from the methodology for calculating FFO utilized by
other REITs and, accordingly, may not be comparable to FFO
computations of such other REITs.
CFFO is a computation made by analysts and investors to measure
a real estate company’s operating performance by removing the
effect of items that do not reflect ongoing property operations,
including depreciation and amortization of other items not included
in FFO, and other non-cash or non-operating gains or losses related
to items such as casualty (gains) losses, loan premium accretion
and discount amortization, debt extinguishment costs, merger and
integration costs, and restructuring costs from the determination
of FFO.
Our calculation of CFFO may differ from the methodology used for
calculating CFFO by other REITs and, accordingly, our CFFO may not
be comparable to CFFO reported by other REITs. Our management
utilizes FFO and CFFO as measures of our operating performance, and
believe they are also useful to investors, because they facilitate
an understanding of our operating performance after adjustment for
certain non-cash or non-recurring items that are required by GAAP
to be expensed but may not necessarily be indicative of current
operating performance and our operating performance between
periods. Furthermore, although FFO, CFFO and other supplemental
performance measures are defined in various ways throughout the
REIT industry, we believe that FFO and CFFO may provide us and our
investors with an additional useful measure to compare our
financial performance to certain other REITs. Neither FFO nor CFFO
is equivalent to net income or cash generated from operating
activities determined in accordance with GAAP. Furthermore, FFO and
CFFO do not represent amounts available for management’s
discretionary use because of needed capital replacement or
expansion, debt service obligations or other commitments or
uncertainties. Accordingly, FFO and CFFO do not measure whether
cash flow is sufficient to fund all of our cash needs, including
principal amortization and capital improvements. Neither FFO nor
CFFO should be considered as an alternative to net income or any
other GAAP measurement as an indicator of our operating performance
or as an alternative to cash flow from operating, investing, and
financing activities as a measure of our liquidity.
Interest Coverage
Interest coverage is a ratio computed by dividing Adjusted
EBITDA by interest expense.
Net Debt
Net debt, a non-GAAP financial measure, equals total
consolidated debt less cash and cash equivalents and loan premiums
and discounts. The following table provides a reconciliation of
total consolidated debt to net debt (Dollars in thousands).
As of
Jun 30, 2023
Mar 31, 2023
Dec 31, 2022
Sep 30, 2022
Jun 30, 2022
Total debt
$
2,650,805
$
2,628,632
$
2,631,645
$
2,713,625
$
2,552,936
Less: cash and cash equivalents
(14,349
)
(12,448
)
(16,084
)
(23,753
)
(11,378
)
Less: loan discounts and premiums, net
(53,520
)
(56,256
)
(59,937
)
(63,340
)
(66,091
)
Total net debt
$
2,582,936
$
2,559,928
$
2,555,624
$
2,626,532
$
2,475,467
We present net debt and net debt to Adjusted EBITDA because
management believes it is a useful measure of our credit position
and progress toward reducing leverage. The calculation is limited
because we may not always be able to use cash to repay debt on a
dollar for dollar basis.
Net Operating Income
We believe that Net Operating Income (“NOI”), a non-GAAP
financial measure, is a useful measure of our operating
performance. We define NOI as total property revenues less total
property operating expenses, excluding interest expense,
depreciation and amortization, casualty related costs and gains,
property management expenses, general and administrative expenses,
net gains on sale of assets, merger and integration costs, and
restructuring costs.
Other REITs may use different methodologies for calculating NOI,
and accordingly, our NOI may not be comparable to other REITs. We
believe that this measure provides an operating perspective not
immediately apparent from GAAP operating income or net income. We
use NOI to evaluate our performance on a same-store and non
same-store basis because NOI measures the core operations of
property performance by excluding corporate level expenses and
other items not related to property operating performance and
captures trends in rental housing and property operating expenses.
However, NOI should only be used as an alternative measure of our
financial performance.
Non Same-Store Properties and Non Same-Store
Portfolio
Properties that did not meet the definition of a same-store
property as of the beginning of the previous year.
Same-Store Properties and Same-Store Portfolio
We review our same-store portfolio at the beginning of each
calendar year. Properties are added into the same-store portfolio
if they were owned and not a development property at the beginning
of the previous year. Properties that are held for sale or have
been sold are excluded from the same-store portfolio.
Total Gross Assets
Total Gross Assets equals total assets plus accumulated
depreciation and accumulated amortization, including fully
depreciated or amortized real estate and real estate related
assets. The following table provides a reconciliation of total
assets to total gross assets (dollars in thousands).
As of
Jun 30, 2023
Mar 31, 2023
Dec 31, 2022
Sep 30, 2022
Jun 30, 2022
Total assets
$
6,517,400
$
6,493,747
$
6,532,095
$
6,633,533
$
6,386,634
Plus: accumulated depreciation
(a)
523,446
475,001
426,097
386,606
337,338
Plus: accumulated amortization
76,558
76,558
76,710
77,141
77,062
Total gross assets
$
7,117,404
$
7,045,306
$
7,034,902
$
7,097,280
$
6,801,034
(a)
Includes accumulated depreciation
associated with real estate held for sale, as applicable.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230726713385/en/
Independence Realty Trust, Inc. Edelman Smithfield Ted McHugh
and Lauren Torres 917-365-7979 IRT@edelman.com
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