Independence Realty Trust, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021. IRT is a self-managed REIT focused on multifamily apartments in non-gateway U.S. markets. At quarter-end, it owned 56 properties with 15,667 units.
Financial performance
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Total revenue | $55.1 million | $51.4 million | +7.3% |
| Net income (loss) | $1.1 million | $(0.4) million | Improved by $1.5 million |
| Diluted earnings per share | $0.01 | $0.00 | — |
| Net operating income (NOI), consolidated | $34.0 million | $31.4 million | +8.1% |
| Same-store NOI | $31.9 million | $30.3 million | +5.3% |
| Same-store NOI margin | 61.5% | 61.7% | Down 0.2 percentage points |
| Operating cash flow | $20.6 million | $11.7 million | +$9.0 million |
- Same-store average occupancy increased to 95.3% from 92.7%; average effective monthly rent per unit rose 2.9% to $1,129.
- Core FFO was $18.0 million, or $0.18 per share and unit, versus $14.6 million, or $0.16, in Q1 2020. FFO was $17.6 million versus $14.4 million. These are non-GAAP measures, not substitutes for GAAP income or cash flow.
- Property operating expenses rose 5.6%, mainly from higher real estate taxes and insurance. Depreciation and amortization increased 11.6%. Interest expense fell 11.7% to $8.4 million, primarily due to lower interest rates.
Financial position and liquidity
- At March 31, 2021, total assets were $1.728 billion and total liabilities were $1.013 billion. Cash and cash equivalents were $8.7 million; restricted cash was $4.4 million.
- Debt principal was $951.5 million, compared with $949.9 million at year-end 2020; reported debt carrying value, net of financing costs, was $947.6 million. Weighted average debt rate was 2.6%, and weighted average maturity was 2.8 years.
- Debt included $194.3 million drawn on a $350 million unsecured credit facility, $300 million of floating-rate term loans, and $457.2 million of fixed-rate mortgages. The company reported compliance with all debt covenants.
- Cash from operations was $20.6 million; investing activities used $7.3 million, including $6.9 million of capital expenditures; financing activities used $13.9 million, primarily due to dividends. Ending cash, cash equivalents, and restricted cash totaled $13.1 million, versus $62.2 million a year earlier.
- Management said available cash, financing arrangements, and operating cash flows should meet liquidity needs for the next 12 months and foreseeable future. The quarterly common dividend declared was $0.12 per share.
Material changes and management commentary
- Revenue growth reflected improved same-store occupancy and rents, plus higher revenue from the non-same-store portfolio. Same-store NOI increased despite higher property expenses.
- IRT reported $1.1 million of net income versus a loss in the prior-year quarter. The comparison also reflects lower interest expense and the absence of prior-year abandoned deal costs, partly offset by higher depreciation and a $0.4 million casualty loss.
- The company had 278 resident rent-deferral plans, mostly initiated in 2020. As of March 31, 104 remained active. The filing reports deferred rent receivables of $41,000 in a note and approximately $0.1 million in MD&A.
- Value-add renovations covered 7,076 identified units across 23 properties. IRT had spent $13.0 million on renovations at 3,861 units and reported a 16.1% return on total renovation costs for those units. It expected to complete remaining projects during 2021 and 2022.
- Under its ATM program, IRT reported forward sales covering 2.9 million shares and $41.2 million in net proceeds since program inception; the filing lists contract expiration dates through March 2022.
Outlook, risks, and contingencies
- The filing provides no specific earnings or operating guidance. Management’s stated liquidity outlook is based on current expectations and is subject to uncertainty.
- COVID-19 remains a key risk. Eviction moratoria, resident payment difficulties, economic conditions, and the duration and scope of the pandemic may affect collections, occupancy, and results. Q1 bad-debt provision was $47,000; total adjustments to rental and other property income were $433,000.
- Management cited risks from interest-rate exposure, property operations, and potential impairment estimates. Derivative instruments hedge interest-rate risk; their quarter-end fair values included $2.8 million of assets and $19.5 million of liabilities.
- IRT reported ordinary-course legal proceedings and claims, which it believed would not materially adversely affect its financial position, results, or cash flows. It reported no material changes to previously disclosed risk factors or contractual commitments.
Important facts for investors to verify
- Whether rent collections, bad debts, and deferred rent receivables continue to improve as pandemic-related support and restrictions change.
- Whether occupancy, rent growth, and same-store NOI trends persist, and how property tax and insurance cost increases affect margins.
- Debt refinancing and maturity exposure, including floating-rate borrowings, upcoming mortgage maturities, and remaining credit-facility availability.
- Actual renovation spending, completion timing, and realized returns compared with the reported value-add program estimates.
- Potential dilution and cash proceeds from ATM forward-sale agreements, as well as the reconciliation of deferred-rent figures reported at different levels of precision.