IRT

Business Context and Reporting Period

Company: Independence Realty Trust, Inc. (a Maryland corporation and development stage company).

Reporting Period: Quarterly period ended March 31, 2011.

Status: The company has not commenced operations and is in the development stage. It intends to qualify as a Real Estate Investment Trust (REIT) beginning with the taxable year ending December 31, 2011. As of May 12, 2011, there were 20,000 shares of common stock issued and outstanding.

Key Financial Metrics

Liquidity: The company held $151,759 in cash as of March 31, 2011. There were no long-term debt obligations reported on the balance sheet; liabilities consisted primarily of accounts payable and accrued expenses.

Material Changes vs. Prior Period

• Revenue: Revenue dropped to $0 in Q1 2011 compared to $2,639 in Q1 2010. The prior period revenue was derived from interest income on a short-term loan to a former sponsor, which was not present in the current period.
• Expenses: Expenses increased significantly to $63,186 in Q1 2011 from $0 in Q1 2010. Current period expenses included audit and professional fees ($31,634), trustee fees ($25,000), and acquisition expenses ($5,947).
• Profitability: The company reported a net loss of $63,184 in Q1 2011, reversing the net income of $2,514 reported in Q1 2010.
• Cash Flow: Net cash used in operating activities was $57,666 for the three months ended March 31, 2011. There were no financing activities in the current quarter, whereas the prior year included significant financing inflows and outflows related to the initial offering.

Outlook, Risks, and Subsequent Events

Subsequent Events (Post-March 31, 2011):

• Property Acquisition: On April 29, 2011, the company closed on the contribution of six multifamily properties from its sponsor. The contribution value was $103,790,000. The operating partnership assumed $64,575,000 of mortgage indebtedness and issued $39,215,000 of limited partner interests to the sponsor.
• New Offering: On April 8, 2011, the company filed a new Registration Statement on Form S-11 to register a new offering of common stock at $10.00 per share.
• Management Changes: The company terminated its management agreement with Independence Realty Management, LLC and entered into a new agreement with Jupiter Communities, LLC. Advisory and dealer manager agreements were also amended.

Risks and Contingencies:

• Development Stage: The company has no operating history and relies on the successful completion of its public offering to acquire assets.
• REIT Qualification: The company intends to elect REIT status for the 2011 tax year. Failure to qualify would subject the company to federal income taxes at regular corporate rates.
• Related Party Transactions: The company is externally managed by an advisor affiliated with the sponsor. Significant fees and reimbursements are payable to the advisor and its affiliates upon the completion of the offering and acquisition of assets.

Investor Verification Checklist

• Verify the closing details and valuation of the six multifamily properties contributed on April 29, 2011, including the $64.6 million of assumed debt.
• Confirm the status of the new Form S-11 registration statement filed on April 8, 2011, and the timeline for the public offering.
• Review the amended advisory and management agreements to understand the fee structure (selling commissions, asset management fees, and acquisition expenses) payable to the sponsor and affiliates.
• Monitor the company's ability to qualify for REIT tax status for the 2011 tax year to avoid corporate income tax liability.
• Assess the company's cash burn rate ($57,666 used in operations in Q1 2011) relative to its current cash balance ($151,759) prior to the deployment of offering proceeds.