Independence Realty Trust, Inc. — Q2 2022 Form 10-Q
Reporting period: Three and six months ended June 30, 2022. Dollar amounts below are in millions unless stated otherwise. IRT is a multifamily REIT; at quarter-end it owned 120 properties with 35,594 units and interests in four development joint ventures.
Financial results and key metrics
| Metric | Q2 2022 | Q2 2021 | Six months 2022 | Six months 2021 |
|---|---|---|---|---|
| Total revenue | $154.8 | $57.4 | $305.1 | $112.6 |
| Net income (loss) | $(7.4) | $3.4 | $69.5 | $4.5 |
| Net income (loss) per diluted share | $(0.03) | $0.03 | $0.30 | $0.04 |
| FFO per share and unit | $0.29 | $0.20 | $0.54 | $0.37 |
| Core FFO per share and unit | $0.26 | $0.20 | $0.51 | $0.37 |
For the six months, GAAP net income included a $94.7 million gain on four property sales. FFO and Core FFO are non-GAAP measures; the company cautions that they are not substitutes for GAAP income or cash flow.
- Same-store performance: For 113 combined same-store properties, Q2 revenue rose 11.4% and NOI rose 14.4%; average effective rent per unit increased 12.0% to $1,412. NOI margin was 61.9%, up from 60.3%, while average occupancy eased to 95.5% from 96.2%.
- Cash flow: First-half operating cash flow was $111.6 million, versus $43.3 million. Investing activities provided $65.2 million, including $155.6 million of net property-sale proceeds, while financing activities used $200.0 million, including $145.0 million of net revolver paydowns and $44.5 million of distributions to common stockholders and noncontrolling interests. Cash and restricted cash totaled $42.4 million at June 30, including $11.4 million unrestricted cash.
- Balance sheet and debt: Total assets were $6.39 billion and total liabilities $2.70 billion. Debt carrying amount was $2.55 billion, with a 3.6% weighted-average rate and 5.2-year weighted-average maturity. The reported balance-sheet “indebtedness, net” was $2.51 billion, plus $46.6 million associated with property held for sale. Debt includes floating-rate borrowings; IRT reported compliance with all financial covenants.
Changes, notable items, and outlook
- Year-over-year consolidated comparisons are substantially affected by the December 2021 STAR merger, which added 68 communities and 21,394 units. Q2 revenue growth also reflects 12.0% same-store rent growth; management attributed higher property management and corporate costs, depreciation and interest expense primarily to the merger and its acquired properties/debt.
- IRT recorded $5.6 million of Q2 net casualty gains from insurance proceeds exceeding losses, and $1.3 million of merger and integration costs. First-half results also included the $94.7 million property-sale gain and $7.0 million of net casualty gains.
- On July 25, 2022, after quarter-end, IRT refinanced its credit agreement, increasing total borrowing capacity by $100 million to $1.1 billion and adding a $400 million term loan due in 2028. Proceeds retired $300 million of 2024 term loans and reduced revolver borrowings by $100 million; the agreement moved the rate benchmark from LIBOR to SOFR.
- The quarterly dividend increased 17%, from $0.12 to $0.14 per share, declared in May and paid July 22. The board also authorized a $250 million share repurchase program; no shares had been repurchased under it by June 30.
- Management stated that available cash, financing arrangements, and operating cash flow should meet liquidity needs for the next 12 months and foreseeable future. No earnings or operating guidance was provided in the supplied filing text. Two properties were held for sale; management expected the Meadows Apartments sale to close in Q3 2022 and continued marketing Sycamore Terrace. The sales were expected to extinguish about $46.2 million of mortgage debt and incur roughly $0.9 million of debt-extinguishment loss.
- Management said ordinary-course legal matters were not expected to have a material adverse effect and reported no material changes to previously disclosed risk factors or market risks. Interest-rate exposure, property operating conditions, and the execution of property sales and development commitments remain relevant considerations.
Investor verification points
- Verify the post-merger same-store operating trend, particularly rent growth, occupancy, and rising repairs and maintenance costs.
- Review debt exposure to floating rates, hedge coverage, and the effect of the July refinancing and SOFR transition on interest expense and maturities.
- Distinguish GAAP earnings from FFO/Core FFO and assess the effect of the nonrecurring property-sale and casualty gains.
- Track proceeds and debt extinguishment from the held-for-sale properties, remaining development funding commitments, and the timing of the two unsettled forward share sales.
- Assess liquidity and capital allocation alongside the higher dividend and authorized repurchase program; the filing reported no repurchases under that program through June 30.