Independence Realty Trust, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. Unless noted otherwise, financial amounts below are in U.S. dollars; statement amounts have been converted from thousands to millions.
Business context and reporting period
IRT is a self-managed multifamily REIT focused on non-gateway U.S. markets. At quarter-end it owned and operated 119 apartment properties with 35,498 units, and held interests in three development joint ventures. The December 2021 STAR merger materially expanded the portfolio, making consolidated year-over-year comparisons less representative of underlying performance.
Financial and operating metrics
| Metric | Q1 2022 | Prior comparable period / balance |
|---|---|---|
| Total revenue | $150.4 million | $55.1 million in Q1 2021 |
| Net income | $76.9 million | $1.1 million in Q1 2021 |
| Net income attributable to common shares | $74.6 million; $0.34 per diluted share | $1.1 million; $0.01 per diluted share |
| Operating cash flow | $40.6 million | $20.6 million in Q1 2021 |
| Cash from investing activities | $127.1 million | $(7.3) million in Q1 2021 |
| Cash used in financing activities | $(182.6) million | $(13.9) million in Q1 2021 |
| Cash and cash equivalents | $24.0 million | $36.0 million at December 31, 2021 |
| Restricted cash | $26.8 million | $29.7 million at December 31, 2021 |
| Debt carrying amount | $2.542 billion, including $46.7 million associated with properties held for sale | $2.705 billion at December 31, 2021 |
Combined same-store properties reported revenue of $141.7 million, up 11.0%; NOI of $89.2 million, up 16.2%; and NOI margin of 62.9%, versus 60.1%. Average occupancy was 95.4%, compared with 95.3%, while average effective monthly rent per unit rose 10.4% to $1,373. These measures cover 113 properties and are not the same as consolidated results.
As supplemental non-GAAP measures, FFO was $60.1 million ($0.26 per share and unit) and Core FFO was $57.7 million ($0.25 per share and unit). These are not substitutes for GAAP earnings or cash flow.
Material changes versus the prior comparable period
- Consolidated revenue increased $95.2 million, primarily because the STAR merger added a $81.1 million pre-merger revenue base to the comparison; combined same-store revenue also grew $14.0 million.
- Higher portfolio scale following the merger drove increases in property operating costs, depreciation and amortization, and interest expense. Interest expense rose to $20.5 million from $8.4 million.
- Net income included a $94.7 million gain from four property sales. Excluding this gain, reported net income substantially overstates recurring operating performance.
- Investing cash flow benefited from $155.6 million of net property-sale proceeds and $9.9 million of insurance proceeds. Financing cash outflow included a $176.0 million unsecured revolver repayment.
- Debt carrying amount fell from $2.705 billion to $2.542 billion. The company reported a 3.4% weighted-average debt rate and 5.4-year weighted-average maturity at quarter-end.
Outlook, management commentary, risks and unusual items
- Management said available cash, financing arrangements and operating cash flows should cover liquidity needs for the next 12 months and foreseeable future. No numeric earnings or operating guidance was provided in the filing.
- The unsecured revolver had a $500 million capacity, with $117.5 million outstanding at March 31. IRT reported compliance with all debt covenants.
- Management expected two held-for-sale properties, totaling 650 units, to close in the second half of 2022. The filing also disclosed a subsequent April 6 purchase of a 96-unit Nashville property for $25.4 million.
- Development and joint-venture commitments include a $37.1 million investment commitment to a Huntsville single-family rental project, of which $16.4 million was funded at quarter-end. Other projects have expected completion dates extending into 2023.
- IRT completed renovations on 143 units in the quarter. From the program’s 2018 inception through March 2022, it reported a 21.4% average monthly rent increase on renovated units and an 18.8% return on investment, based on management’s stated methodology.
- Debt includes floating-rate borrowings; interest-rate swaps and collars had $400 million notional value. The company cautioned that actual results may differ from forward-looking statements and identified risks in its 2021 Form 10-K and public filings. It reported no material change in risk factors, no material off-balance-sheet arrangements, and no material adverse effect expected from ordinary-course litigation.
- Unusual period items included $1.9 million of merger and integration costs and $1.4 million of net casualty gains. The quarterly common dividend declared was $0.12 per share.
Important facts for investors to verify
- How much of same-store rent and NOI growth persists, particularly as the merger-driven portfolio expansion distorts consolidated comparisons.
- Whether the $94.7 million property-sale gain, sale proceeds, and planned second-half dispositions affect recurring earnings, leverage and liquidity as expected.
- Progress, costs and funding needs for development projects, joint ventures and the remaining value-add renovation program.
- Debt maturities, floating-rate exposure, hedge coverage and covenant headroom; reported cash includes restricted funds that may not be freely available.
- Settlement and dilution implications of the two forward-sale transactions covering 2.0 million shares, and remaining availability under the ATM program.