Initiates Portfolio Optimization and
Deleveraging Strategy
Updates Full Year 2023 Guidance
Independence Realty Trust, Inc. (“IRT”) (NYSE: IRT), a
multifamily apartment REIT, today announced its third quarter 2023
financial results, initiated its portfolio optimization strategy
and updated its full year 2023 guidance.
Third Quarter Highlights
- Net income available to common shares of $3.9 million for the
quarter ended September 30, 2023 compared to $16.2 million for the
quarter ended September 30, 2022.
- Earnings per diluted share of $0.02 for the quarter ended
September 30, 2023 compared to $0.07 for the quarter ended
September 30, 2022.
- Same-store portfolio net operating income (“NOI”) growth of
4.8% for the quarter ended September 30, 2023 compared to the
quarter ended September 30, 2022.
- Core Funds from Operations (“CFFO”) of $69.0 million for the
quarter ended September 30, 2023 compared to $64.3 million for the
quarter ended September 30, 2022. CFFO per share was $0.30 for the
third quarter of 2023, as compared to $0.28 for the third quarter
of 2022.
- Adjusted EBITDA of $94.4 million for the quarter ended
September 30, 2023 compared to $89.3 million for the quarter ended
September 30, 2022, an increase of 5.7%.
- Value add program completed renovations at 709 units during the
quarter ended September 30, 2023, achieving a weighted average
return on investment during the quarter of 14.2%.
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
“For the third quarter of 2023, we delivered growth of 4.8% in
same store NOI and 7.1% in Core FFO per share and we remain focused
on delivering sustainable operational efficiencies. We are updating
our full year 2023 guidance to reflect the impact of the slowing
macroeconomic environment on leasing activity,” said Scott
Schaeffer, Chairman and CEO of IRT. “We are also commencing a
portfolio optimization and deleveraging strategy that will
accelerate non-core asset sales while deleveraging our balance
sheet in the near-term. We expect these initiatives will increase
our financial flexibility and will reduce leverage by almost a full
turn upon completion of all asset sales. We are confident that
these initiatives will strengthen our balance sheet and improve our
presence in the multifamily sector in 2024.”
Same-Store Portfolio(1) Operating Results
Third Quarter 2023
Compared to Third Quarter 2022
Nine Months Ended September
30, 2023 Compared to Nine Months Ended September 30, 2022
Rental and other property revenue
5.4% increase
6.3% increase
Property operating expenses
6.3% increase
6.2% increase
Net operating income (“NOI”)
4.8% increase
6.4% increase
Portfolio average occupancy
40 bps increase to 94.6%
120 bps decrease to 93.9%
Portfolio average rental rate
4.4% increase to $1,549
7.7% increase to $1,536
NOI Margin
40 bps decrease to 62.4%
No change — 62.6%
(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.
3Q 2023
4Q 2023(3)
Same-Store Portfolio(1)
Average Occupancy
94.6 %
94.3 %
(4)
Lease Over Lease Effective Rental Rate
Growth:(2)
New Leases
0.8 %
(2.3) %
Renewal Leases
4.8 %
5.0 %
Blended
3.0 %
2.3 %
Resident retention rate
52.3 %
48.4 %
Same-Store Portfolio excluding Ongoing
Value Add
Average Occupancy
95.0 %
94.7 %
(4)
Lease Over Lease Effective Rental Rate
Growth:(2)
New Leases
0.3 %
(2.5) %
Renewal Leases
4.6 %
4.8 %
Blended
2.7 %
2.1 %
Resident retention rate
52.6 %
47.7 %
Value Add (22 properties with Ongoing
Value Add)
Average Occupancy
92.8 %
92.8 %
(4)
Lease Over Lease Effective Rental Rate
Growth:(2)
New Leases
2.8 %
(1.6) %
Renewal Leases
5.9 %
6.3 %
Blended
4.5 %
3.0 %
Resident retention rate
51.2 %
51.3 %
(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) 4Q 2023 average occupancy and resident retention
rates are through October 28, 2023. 4Q 2023 new lease and renewal
rates are for leases commencing during 4Q 2023 that were signed as
of October 28, 2023. (4) As of October 28, 2023, same-store
portfolio occupancy was 94.6%, same-store portfolio excluding
ongoing value add occupancy was 95.0%, and value add occupancy was
93.1%.
Portfolio Optimization and Deleveraging Strategy
We continuously evaluate opportunities for the potential
disposition of properties in our portfolio by considering a variety
of criteria including, but not limited to, local market conditions
and lease rates, our scale within the markets, our view of market
demographics and growth prospects and potential uses of sales
proceeds. Subsequent to September 30, 2023, our Board of Directors
approved a plan, which we refer to as our Portfolio Optimization
and Deleveraging Strategy, to exit or reduce our presence in
certain markets while also deleveraging our balance sheet. Our
Portfolio Optimization and Deleveraging Strategy targets sales of
approximately 10 properties that are located in seven markets,
including the one property in Chicago, Illinois that was held for
sale as of September 30, 2023. Nine of the 10 properties were
acquired in December 2021 as part of the STAR merger. We currently
expect these asset sales to generate gross sales proceeds of
approximately $521 to $533 million with proceeds used to
immediately delever our balance sheet.
We estimate that these asset sales, if consummated within the
foregoing price range, will enable us to reduce our outstanding
debt by approximately $516 to $528 million (comprised of $284
million of property level debt associated with the ten properties
and $232 to $244 million of additional debt), will reduce our net
debt to adjusted EBITDA ratio by 0.8x to 0.9x, and will be dilutive
to Core FFO per share by $0.02-$0.03. In addition, consummation of
the targeted sales would reduce our market exposures by five single
asset markets and reduce the average age of the properties in our
portfolio by approximately one year.
We expect to recognize an aggregate net loss after completion of
all sales in the range of approximately $39 to $51 million
comprised of an $11.3 million impairment charge recorded during the
three months ended September 30, 2023 related to our property in
Chicago, Illinois that is currently held for sale; an estimated $55
to $63 million impairment charge we expect to recognize during the
fourth quarter of 2023 with respect to certain of the properties
targeted for sale; and estimated gains of approximately $24 to $28
million we expect to realize in the periods of sale of certain of
the properties targeted for sale.
We are in various stages of marketing, negotiations, and buyer
due diligence with respect to the properties targeted for sale.
There can be no assurance that any of the sales will be consummated
at expected pricing levels, within expected time frames, or at all.
The estimates of sale prices discussed above are based on our
assessment of current conditions in the markets where the
properties are located, comparable sales data, characteristics and
operating performance of the properties among other factors and are
subject to numerous assumptions.
Value Add Program
We completed renovations on 709 units during the quarter ended
September 30, 2023, achieving a return on investment of 14.2% (and
approximately 15.3% on the interior portion of such renovation
costs), with an average cost per unit renovated of $17,750, and an
average monthly rent increase per renovated unit of $210. For the
nine months end September 30, 2023, we have completed renovations
on 1,969 units, achieving a return on investment of 16.0% (and
approximately 17.3% on the interior portion of such renovation
costs), with an average cost per unit renovated of $16,947, and an
average monthly rent increase per renovated unit of $224. See the
Value Add Summary page of our supplemental for additional
information on our projects life to date as of September 30,
2023.
Investment Activity
Capital Expenditures
For the three months ended September 30, 2023, recurring capital
expenditures for the total portfolio were $5.3 million, or $153 per
unit. For the nine months ended September 30, 2023, recurring
capital expenditures for the total portfolio were $15.8 million, or
$454 per unit.
Capital Markets
Dividend Distribution
On September 12, 2023, our Board of Directors declared a
quarterly dividend of $0.16 per share of common stock. The third
quarter dividend was paid on October 20, 2023 to stockholders of
record at the close of business on September 29, 2023.
2023 EPS, FFO and CFFO Guidance
We reduced our EPS, FFO, and CFFO per share guidance ranges and
our same store NOI guidance range. Earnings (loss) per diluted
share is now projected to be in the range of ($0.07) to ($0.02). A
reconciliation of IRT's projected net (loss) 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 (loss) per share
$
0.25
$
0.27
$
(0.07)
$
(0.02)
$
(0.305)
Adjustments:
Depreciation and amortization
0.95
0.95
0.94
0.94
(0.01)
(Gain on sale) loss on impairment of real
estate assets(3)
(0.01)
(0.01)
0.32
0.28
0.31
FFO per share
1.19
1.21
1.19
1.20
(0.005)
Loan (premium accretion) discount
amortization, net
(0.05)
(0.05)
(0.05)
(0.05)
—
Core FFO per share
$
1.14
$
1.16
$
1.14
$
1.15
$
(0.005)
(1)
This guidance, including the underlying
assumptions presented in the table below, constitutes
forward-looking information. Actual full year 2023 EPS, FFO, and
CFFO could vary significantly from the projections presented. See
“Forward-Looking Statements” . 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 (loss on
impairment) of real estate assets includes gains (impairments) on
one asset sale that occurred during the first quarter of 2023, one
property identified as held for sale as of September 30, 2023, and
nine other assets targeted for sale as part of our Portfolio
Optimization and Deleveraging Strategy.
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
115 properties / 34,179 units
106 properties / 31,829 units
Property revenue growth
6.1% to 6.6%
5.5% to 5.7%
(0.75)%
Controllable operating expense growth
4.7% to 5.4%
6.0% to 7.0%
1.40%
Real estate tax and insurance expense
7.5% to 8.1%
4.2% to 4.8%
(3.30)%
Total operating expense growth
5.7% to 6.4%
5.5% to 5.9%
(0.35)%
Property NOI growth
6.0% to 7.0%
5.3% to 5.7%
(1.00)%
Corporate Expenses
General and administrative &
Property
management expenses
$50.5 million to $51.5
million
$50.0 million to $51.0
million
$(0.5) million
Interest expense(2)
$102.5 million to $103.5
million
$101.0 million to $102.0
million
$(1.5) million
Transaction/Investment
Volume(3)
Acquisition volume
None
None
—
Disposition volume
$122 million to $127 million
$122 million to $127 million
—
Capital Expenditures
Recurring
$20.0 million to $22.0
million
$20.0 million to $21.0
million
$(0.5) million
Value add & non-recurring
$78.0 million to $82.0
million
$83.0 million to $85.0
million
$4.0 million
Development
$80.0 million to $90.0
million
$75.0 million to $80.0
million
$(7.5) 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” .
(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 September 30, 2023. We expect sales of the other nine
properties included in the Portfolio Optimization and Deleveraging
Strategy to close in 2024. Actual acquisitions and dispositions
could vary significantly from our projections. We undertake no duty
to update these assumptions except as required by law. See
“Forward-Looking Statements”.
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 Tuesday, October 31, 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 Tuesday, November 7, 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 include, but are not
limited to, our earnings guidance and certain actions that we
expect or seek to take in connection with our portfolio
optimization and deleveraging strategy and anticipated enhancements
to our financial results and future growth from this strategy. All
statements in this release that address financial and operating
performance, events or developments that we expect or anticipate
will occur or be achieved in the future are forward-looking
statements.
Our forward-looking statements are not guarantees of future
performance and involve estimates, projections, forecasts and
assumptions, including as to matters that are not within our
control, 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,
failure to realize cost savings, efficiencies and other benefits
that we expect to result from our portfolio optimization and
deleveraging strategy, inability to sell certain assets, including
those assets designated as held for sale, within the time frames or
at the pricing levels expected, failure to achieve expected
benefits from the redeployment of proceeds from asset sales, delays
in completing, and cost overruns incurred in connection with, our
value add initiatives and failure to achieve rent increases and
occupancy levels on account of the value add initiatives,
unexpected impairments or impairments in excess of our estimates,
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, unknown or unexpected
liabilities, including the cost of legal proceedings, 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
Sep 30, 2023
Jun 30, 2023
Mar 31, 2023
Dec 31, 2022
Sep 30, 2022
Selected Financial Information:
Operating Statistics:
Net income available to common shares
$3,930
$10,709
$8,648
$33,631
$16,223
Earnings per share -- diluted
$0.02
$0.05
$0.04
$0.15
$0.07
Rental and other property revenue
$168,375
$163,601
$161,135
$162,493
$160,300
Property operating expenses
$63,300
$62,071
$59,255
$57,450
$59,967
NOI
$105,075
$101,530
$101,880
$105,043
$100,333
NOI margin
62.4%
62.1%
63.2%
64.6%
62.6%
Adjusted EBITDA
$94,415
$89,156
$87,594
$93,017
$89,264
FFO per share
$0.31
$0.28
$0.27
$0.31
$0.30
CORE FFO per share
$0.30
$0.28
$0.27
$0.29
$0.28
Dividends per share
$0.16
$0.16
$0.14
$0.14
$0.14
CORE FFO payout ratio
53.3%
57.1%
51.9%
48.3%
50.0%
Portfolio Data:
Total gross assets
$7,225,447
$7,117,404
$7,045,306
$7,034,902
$7,097,280
Total number of operating properties
(a)
120
119
119
120
122
Total units (a)
35,427
35,249
35,249
35,526
36,176
Portfolio period end occupancy (a)
94.4%
94.6%
94.1%
93.6%
94.6%
Portfolio average occupancy (a)
94.6%
94.1%
93.1%
93.9%
94.2%
Portfolio average effective monthly rent,
per unit (a)
$1,556
$1,538
$1,535
$1,522
$1,484
Same-store portfolio period end occupancy
(b)
94.5%
94.6%
94.1%
93.6%
94.6%
Same-store portfolio average occupancy
(b)
94.6%
94.2%
93.1%
93.9%
94.2%
Same-store portfolio average effective
monthly rent, per unit (b)
$1,549
$1,531
$1,528
$1,517
$1,484
Capitalization:
Total debt (c)
$2,715,710
$2,650,805
$2,628,632
$2,631,645
$2,713,625
Common share price, period end
$14.07
$18.22
$16.03
$16.86
$16.73
Market equity capitalization
$3,245,135
$4,202,342
$3,694,970
$3,880,432
$3,850,365
Total market capitalization
$5,960,845
$6,853,147
$6,323,602
$6,512,077
$6,563,990
Total debt/total gross assets
37.6%
37.2%
37.3%
37.4%
38.2%
Net debt to Adjusted EBITDA (d)
7.0x
7.2x
7.3x
6.9x
7.2x
Interest coverage
4.3x
4.0x
4.0x
4.0x
4.0x
Common shares and OP Units:
Shares outstanding
224,695,566
224,697,889
224,556,870
224,064,940
224,056,179
OP units outstanding
5,946,571
5,946,571
5,946,571
6,091,171
6,091,171
Common shares and OP units outstanding
230,642,137
230,644,460
230,503,441
230,156,111
230,147,350
Weighted average common shares and OP
units
230,444,945
230,369,086
230,186,297
229,994,927
228,051,780
(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 September 30, 2023, net debt to Adjusted EBITDA excluding
adjustments for these items was 7.0x, 7.2x, 7.3x, 6.9x, 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
September 30,
For the Nine Months Ended
September 30,
2023
2022
2023
2022
Funds From Operations (FFO):
Net income
$
3,986
$
16,653
$
23,847
$
86,135
Add-Back (Deduct):
Real estate depreciation and
amortization
55,217
49,347
162,205
199,588
Our share of real estate depreciation and
amortization from
investments in unconsolidated real estate
entities
486
1,388
1,479
1,904
Loss on impairment (gain on sale) of real
estate assets,
net, excluding prepayment gains
11,268
—
10,954
(94,712
)
FFO
$
70,957
$
67,388
$
198,485
$
192,915
FFO per share
$
0.31
$
0.30
$
0.86
$
0.85
CORE Funds From Operations
(CFFO):
FFO
$
70,957
$
67,388
$
198,485
$
192,915
Add-Back (Deduct):
Other depreciation and amortization
329
375
860
1,100
Casualty losses (gains), net
35
(191
)
866
(7,176
)
Loan (premium accretion) discount
amortization, net
(2,747
)
(2,750
)
(8,239
)
(8,245
)
Prepayment (gains) penalties on asset
dispositions
—
—
(670
)
—
Other expense (income), net
429
(765
)
663
(1,438
)
Merger and integration costs
—
275
—
3,477
Restructuring costs
—
—
3,213
—
CFFO
$
69,003
$
64,332
$
195,178
$
180,633
CFFO per share
$
0.30
$
0.28
$
0.85
$
0.79
Weighted-average shares and units
outstanding
230,444,945
228,051,780
230,334,398
227,933,320
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
Sep 30, 2023
Jun 30, 2023
Mar 31, 2023
Dec 31, 2022
Sep 30, 2022
Net income
$
3,986
$
10,988
$
8,872
$
34,524
$
16,653
Other revenue
(232)
(354)
(239)
(306)
(300)
Property management expenses
7,232
6,818
6,371
6,593
5,744
General and administrative expenses
3,660
5,910
8,154
5,739
5,625
Depreciation and amortization expense
55,546
53,984
53,536
52,161
49,722
Casualty losses (gains), net
35
680
151
(1,690)
(191)
Interest expense
22,033
22,227
22,124
23,337
22,093
Loss on impairment (gain on sale) of real
estate assets, net
11,268
—
(985)
(17,044)
—
Other loss (income), net
369
72
(93)
(57)
(765)
Loss (gain) from investments in
unconsolidated real estate entities
1,178
1,205
776
(242)
1,477
Merger and integration costs
—
—
—
2,028
275
Restructuring costs
—
—
3,213
—
—
NOI
$
105,075
$
101,530
$
101,880
$
105,043
$
100,333
Less: Non same-store portfolio NOI
4,063
3,400
3,804
4,866
3,937
Same-store portfolio NOI
$
101,012
$
98,130
$
98,076
$
100,177
$
96,396
(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
Sep 30, 2023
Jun 30, 2023
Mar 31, 2023
Dec 31, 2022
Sep 30, 2022
Net income (loss)
$
3,986
$
10,988
$
8,872
$
34,524
$
16,653
Add-Back (Deduct):
Interest expense
22,033
22,227
22,124
23,337
22,093
Depreciation and amortization
55,546
53,984
53,536
52,161
49,722
Casualty losses (gains), net
35
680
151
(1,690)
(191)
Loss on impairment (gain on sale) of real
estate assets, net
11,268
—
(985)
(17,044)
—
Merger and integration costs
—
—
—
2,028
275
Loss (gain) from investments in
unconsolidated real estate entities
1,178
1,205
776
(242)
1,477
Other loss (income), net
369
72
(93)
(57)
(765)
Restructuring costs
—
—
3,213
—
—
Adjusted EBITDA
$
94,415
$
89,156
$
87,594
$
93,017
$
89,264
INTEREST COST:
Interest expense
$
22,033
$
22,227
$
22,124
$
23,337
$
22,093
INTEREST COVERAGE:
4.3x
4.0x
4.0x
4.0x
4.0x
For the Three Months Ended
September 30,
For the Nine Months Ended
September 30,
2023
2022
2023
2022
Net income (loss)
$
3,986
$
16,653
$
23,847
$
86,135
Add-Back (Deduct):
Interest expense
22,033
22,093
66,383
63,618
Depreciation and amortization
55,546
49,722
163,066
200,688
Casualty losses (gains), net
35
(191)
866
(7,176)
Loss on impairment (gain on sale) of
real estate assets, net
11,268
—
10,284
(94,712)
Merger and integration costs
—
275
—
3,477
Loss (gain) from investments in
unconsolidated real estate entities
1,178
1,477
3,159
2,602
Other loss (income), net
369
(765)
348
(1,501)
Restructuring costs
—
—
3,213
—
Adjusted EBITDA
$
94,415
$
89,264
$
271,166
$
253,131
INTEREST COST:
Interest expense
$
22,033
$
22,093
$
66,383
$
63,618
INTEREST COVERAGE:
4.3x
4.0x
4.1x
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 gains on sales (losses on
impairment) of real estate, 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
Sep 30, 2023
Jun 30, 2023
Mar 31, 2023
Dec 31, 2022
Sep 30, 2022
Total debt
$
2,715,710
$
2,650,805
$
2,628,632
$
2,631,645
$
2,713,625
Less: cash and cash equivalents
(17,216)
(14,349)
(12,448)
(16,084)
(23,753)
Less: loan discounts and premiums, net
(50,772)
(53,520)
(56,256)
(59,937)
(63,340)
Total net debt
$
2,647,722
$
2,582,936
$
2,559,928
$
2,555,624
$
2,626,532
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
Sep 30, 2023
Jun 30, 2023
Mar 31, 2023
Dec 31, 2022
Sep 30, 2022
Total assets
$
6,577,790
$
6,517,400
$
6,493,747
$
6,532,095
$
6,633,533
Plus: accumulated depreciation
(a)
570,966
523,446
475,001
426,097
386,606
Plus: accumulated amortization
76,691
76,558
76,558
76,710
77,141
Total gross assets
$
7,225,447
$
7,117,404
$
7,045,306
$
7,034,902
$
7,097,280
(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/20231030302532/en/
Independence Realty Trust, Inc. Edelman Smithfield Ted McHugh
and Lauren Torres 917-365-7979 IRT@edelman.com
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