INDEPENDENCE REALTY TRUST INC

Previous wording

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act. Such forward-looking statements include, but are not limited to, 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 Quarterly Report on Form 10-Q 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.

Current wording

This Quarterly Report on Form 10-Q contains certain forward-looking statements within the meaning of Section 27A of the Securities Act, and Section 21E of the Securities Exchange Act. Such forward-looking statements include, but are not limited to, anticipated enhancements to our financial results and future growth from our Portfolio Optimization and Deleveraging Strategy. All statements in this Quarterly Report on Form 10-Q 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.

Previous wording

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, 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, 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, 2023, 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.

Current wording

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, 2023, 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.

Previous wording

111 multifamily apartment properties (including one owned through a consolidated joint venture) that contain an aggregate of 32,877 units. Our properties are located in Alabama, Colorado, Florida, Georgia, Indiana, Kentucky, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee and Texas. In addition, as of March 31, 2024, we owned and consolidated two investments in real estate under development in Colorado that will, upon completion, contain an aggregate of 621 units. As of March 31, 2024, we also owned interests in four unconsolidated joint ventures, two that own and operate multifamily apartment communities that contain an aggregate of 810 units and two that are developing multifamily apartment communities that will contain, upon completion, an aggregate of 653 units. We do not have any foreign operations and our business is not seasonal.

Current wording

We are a self-administered and self-managed Maryland corporation that has elected to be taxed as a real estate investment trust (“REIT”). We are primarily engaged in the ownership, operation, management, improvement, and acquisition of multifamily apartment communities in non-gateway markets. As of June 30, 2024, we owned and operated 110 multifamily apartment properties (including one owned through a consolidated joint venture) that contain an aggregate of 32,685 units. Our properties are located in Alabama, Colorado, Florida, Georgia, Indiana, Kentucky, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee and Texas. In addition, as of June 30, 2024, we owned and consolidated two investments in real estate under development in Colorado that will, upon completion, contain an aggregate of 621 units. As of June 30, 2024, we also owned interests in four unconsolidated joint ventures, two that own and operate multifamily apartment communities that contain an aggregate of 810 units and two that are developing multifamily apartment communities that will contain, upon completion, an aggregate of 653 units. We do not have any foreign operations and our business is not seasonal.

Previous wording

As of March 31, 2024, we owned and consolidated 111 multifamily apartment properties, totaling 32,877 units. Below is a summary of our consolidated property portfolio by market.

Current wording

As of June 30, 2024, we owned and consolidated 110 multifamily apartment properties, totaling 32,685 units. Below is a summary of our consolidated property portfolio by market.

Previous wording

(4)Includes one property with 354 units that was held for sale as of March 31, 2024.

Current wording

(3)Includes one property with 354 units that was held for sale as of June 30, 2024.

Previous wording

As part of our merger with Steadfast Apartment REIT, Inc. (the “STAR Merger”), we acquired two land parcels in Denver, Colorado that are being developed into multifamily properties that will contain 621 units, in the aggregate, upon completion. As of March 31, 2024 and December 31, 2023, we had investments in real estate under development of $109,338 and $98,365, respectively, net of $77,520 and $77,520 placed in service, respectively.

Current wording

As part of our merger with Steadfast Apartment REIT, Inc. (the “STAR Merger”), we acquired two land parcels in Denver, Colorado that are being developed into multifamily properties that will contain 621 units, in the aggregate, upon completion. As of June 30, 2024 and December 31, 2023, we had investments in real estate under development of $115.2 million and $98.4 million, respectively, net of $87.1 million and $77.5 million placed in service, respectively.

Previous wording

We completed renovations on 320 units during the three months ended March 31, 2024. From inception of our value add program in January 2018 through March 31, 2024, we completed renovations on 8,091 of the 13,281 units currently in our value add program, achieving a return on investment of 17.5% (and approximately 19.3% on the interior portion of such renovation costs). We compute return on cost by using the rent premium per unit per month, multiplied by 12, divided by the applicable renovation costs per unit and we compute the rent premium as the difference between the rental rate on the renovated unit (excluding the impact of concessions) and the market rent for a comparable unrenovated unit as of the date presented, as determined by management consistent with its customary rent-setting and evaluation procedures.

Current wording

We completed renovations on 378 units during the three months ended June 30, 2024. From inception of our value add program in January 2018 through June 30, 2024, we completed renovations on 8,469 of the 13,281 units currently in our value add program, achieving a return on investment of 17.1% (and approximately 19.1% on the interior portion of such renovation costs). We compute return on cost by using the rent premium per unit per month, multiplied by 12, divided by the applicable renovation costs per unit and we compute the rent premium as the difference between the rental rate on the renovated unit (excluding the impact of concessions) and the market rent for a comparable unrenovated unit as of the date presented, as determined by management consistent with its customary rent-setting and evaluation procedures.

Previous wording

On June 14, 2023, we replaced our previous shelf registration statement with our new shelf registration statement. On July 28, 2023, we entered into an equity distribution agreement pursuant to which we may from time to time offer and sell shares of our common stock under our shelf registration statement having an aggregate offering price of up to $450,000 (the “ATM Program”) in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act. Under the ATM Program, we may also enter into one or more forward sale transactions for the sale of shares of our common stock on a forward basis. There were no forward sale transactions as of March 31, 2024, and no shares of our common stock were sold under the ATM Program during the three months ended March 31, 2024.

Current wording

On June 14, 2023, we replaced our previous shelf registration statement with our new shelf registration statement. On July 28, 2023, we entered into an equity distribution agreement pursuant to which we may from time to time offer and sell shares of our common stock under our shelf registration statement having an aggregate offering price of up to $450,000 (the “ATM Program”) in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act. Under the ATM Program, we may also enter into one or more forward sale transactions for the sale of shares of our common stock on a forward basis. There were no forward sale transactions as of June 30, 2024, and no shares of our common stock were sold under the ATM Program during the three and six months ended June 30, 2024.

Previous wording

As of March 31, 2024, we owned and consolidated 111 multifamily apartment properties, of which 108 comprised the Same-Store Portfolio.

Current wording

As of June 30, 2024, we owned and consolidated 110 multifamily apartment properties, of which 108 comprised the Same-Store Portfolio.

Previous wording

Property operating expenses. Property operating expenses increased $0.7 million to $60.0 million for the three months ended March 31, 2024 from $59.3 million for the three months ended March 31, 2023. The increase was due to a $2.7 million increase in same-store property operating expense, driven by insurance premiums, personnel expenses, and advertising expenses, partially offset by a $2.0 million decrease in property operating expenses due to the sale of four properties under our Portfolio Optimization and Deleveraging Strategy.

Current wording

Property operating expenses. Property operating expenses decreased $1.2 million to $60.9 million for the three months ended June 30, 2024 from $62.1 million for the three months ended June 30, 2023. The decrease was due to a $4.0 million decrease in property operating expenses due to the sale of ten properties under our Portfolio Optimization and Deleveraging Strategy partially offset by a $2.8 million increase in same-store property operating expense, driven by an increase in repairs and maintenance, advertising expenses, personnel expenses and property insurance.

Previous wording

Property management expenses. Property management expenses increased $1.1 million to $7.5 million for the three months ended March 31, 2024 from $6.4 million for the three months ended March 31, 2023 primarily due to higher personnel costs and software subscriptions, compared to the prior year.

Current wording

Property management expenses. Property management expenses increased $0.9 million to $7.7 million for the three months ended June 30, 2024 from $6.8 million for the three months ended June 30, 2023 primarily due to higher personnel costs driven by $0.2 million of employee retention credit benefits realized in the prior year period.

Previous wording

General and administrative expenses. General and administrative expenses increased $0.2 million to $8.4 million for the three months ended March 31, 2024 from $8.2 million for the three months ended March 31, 2023. The increase was primarily due to higher legal fees compared to the same prior year period.

Current wording

General and administrative expenses. General and administrative expenses increased $0.3 million to $6.2 million for the three months ended June 30, 2024 from $5.9 million for the three months ended June 30, 2023. The increase was primarily due to higher personnel costs compared to the prior year period.

Previous wording

Depreciation and amortization expense. Depreciation and amortization expense increased $0.2 million to $53.7 million for the three months ended March 31, 2024 from $53.5 million for the three months ended March 31, 2023. The increase was primarily due to depreciation expenses driven by capital expenditures related to our value add program partially offset by lower depreciation from sold properties.

Current wording

Depreciation and amortization expense. Depreciation and amortization expense increased $0.1 million to $54.1 million for the three months ended June 30, 2024 from $54.0 million for the three months ended June 30, 2023. The increase was primarily due to depreciation expenses driven by capital expenditures related to our value add program partially offset by lower depreciation from sold properties.

Previous wording

Casualty losses. During the three months ended March 31, 2024, we incurred $2.3 million in net casualty loses primarily due to winter storm damage and fire at various properties where the carrying value of the damage exceeded insurance proceeds due to policy deductible levels.

Current wording

Casualty losses. During the three months ended June 30, 2024, we incurred $0.5 million in net casualty losses primarily due to fire damage at two properties where the carrying value of the damage exceeded insurance proceeds due to policy deductibles. During the three months ended June 30, 2023, we incurred $0.7 million in casualty losses due to fires at two properties where the carrying value of the damage exceeded insurance proceeds due to policy deductibles.

Previous wording

Interest expense. Interest expense decreased $1.5 million to $20.6 million for the three months ended March 31, 2024 from $22.1 million for the three months ended March 31, 2023. The decrease was primarily driven by the sale of nine properties under the Portfolio Optimization and Deleveraging Strategy.

Current wording

Interest expense. Interest expense decreased $4.7 million to $17.5 million for the three months ended June 30, 2024 from $22.2 million for the three months ended June 30, 2023. The decrease was primarily driven by the reduction of debt associated with the sale of ten properties under the Portfolio Optimization and Deleveraging Strategy.

Previous wording

Rental and other property revenue. Revenue from rental and other property revenue of the consolidated portfolio decreased $0.8 million to $160.3 million for the three months ended March 31, 2024 from $161.1 million for the three months ended March 31, 2023. The decrease was primarily attributable to a $5.7 million decrease in non same-store rental and other property revenue driven by the sale of nine properties under the Portfolio Optimization and Deleveraging Strategy, compared to the sale of one property during the three months ended March 31, 2023. The decrease in rental and other property revenue was partially offset by an increase in same-store rental and other property revenue of $4.9 million as a result of a 1.5% increase in average effective monthly rents and 1.2% increase in average occupancy compared to the prior year period.

Current wording

Rental and other property revenue. Revenue from rental and other property revenue of the consolidated portfolio decreased $6.3 million to $318.4 million for the six months ended June 30, 2024 from $324.7 million for the six months ended June 30, 2023. The decrease was primarily attributable to a $16.5 million decrease in non same-store rental and other property revenue driven by the sale of ten properties under the Portfolio Optimization and Deleveraging Strategy. This decrease in non same-store rental and other property revenue was partially offset by an increase in same-store rental and other property revenue of $10.2 million driven by a 1.6% increase in average effective monthly rents and a 1.2% increase in average occupancy compared to the prior year period.

Previous wording

Gain on sale (loss on impairment) of real estate assets, net. During the three months ended March 31, 2024, we sold five multifamily properties under our Portfolio Optimization and Deleveraging Strategy resulting in gains of $25.6 million. In addition, we recorded a loss on impairment of $15.1 million for one property held for sale as a result of the carrying value of the real estate exceeding the expected sales price less transaction costs.

Current wording

Gain on sale of real estate assets, net. During the six months ended June 30, 2024, we sold six multi-family properties and recognized a gain on sale of real estate, net of $10.4 million comprised of a $25.5 million gain on sale of real estate, net, partially offset by a loss on impairment of $15.1 million for one property held for sale as of June 30, 2024, as a result of the carrying value of the real estate exceeding the expected sales price less transaction costs. During the six months ended June 30, 2023, we sold one multi-family property resulting in a gain on sale of real estate, net of $1.0 million.

Previous wording

Restructuring costs. During the three months ended March 31, 2023, we incurred approximately $3.2 million of

Current wording

Restructuring costs. During the six months ended June 30, 204, we incurred no restructuring costs. During the six months ended June 30, 2023, we incurred approximately $3.2 million of severance costs related to the reorganization of certain departments that impacted a limited number of employees.

Previous wording

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.

Current wording

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, and restructuring costs from the determination of FFO.

Previous wording

Set forth below is a reconciliation of net income to FFO and CFFO for the three months ended March 31, 2024 and 2023 (in thousands, except share and per share information):

Current wording

Set forth below is a reconciliation of net income to FFO and CFFO for the three and six months ended June 30, 2024 and 2023 (in thousands, except share and per share information):

Previous wording

(1)Based on 230,570,752 weighted-average shares and units outstanding for the three months ended March 31, 2024.

Current wording

(1)Based on 230,734,872 and 230,652,876 weighted-average shares and units outstanding for the three and six months ended June 30, 2024, respectively.

Previous wording

(2)Based on 230,186,297 weighted-average shares and units outstanding for the three months ended March 31, 2023.

Current wording

(2)Based on 230,369,086 and 230,278,208 weighted-average shares and units outstanding for the three and six months ended June 30, 2023, respectively.

Previous wording

We believe that Net Operating Income (“NOI”), a non-GAAP financial measure, is a useful supplemental measure of our operating performance. We define NOI as total property revenues less total property operating expenses, excluding interest expenses, depreciation and amortization, casualty related costs and gains, property management expenses, general and administrative expense, 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 insofar as the measure reflects only operating income and expense at the property level. We use NOI to evaluate performance on a same-store and non same-store basis because NOI measures the core operations of property performance by excluding corporate level expenses, financing 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.

Current wording

We believe that Net Operating Income (“NOI”), a non-GAAP financial measure, is a useful supplemental measure of our operating performance. We define NOI as total property revenues less total property operating expenses, excluding interest expenses, depreciation and amortization, casualty related costs and gains, property management expenses, general and administrative expense, net gains on sale of assets, 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 insofar as the measure reflects only operating income and expense at the property level. We use NOI to evaluate performance on a same-store and non same-store basis because NOI measures the core operations of property performance by excluding corporate level expenses, financing 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.

Previous wording

Set forth below is a reconciliation of GAAP net income to Same-Store Portfolio NOI for the three months ended March 31, 2024 and 2023 (in thousands):

Current wording

Set forth below is a reconciliation of GAAP net income to Same-Store Portfolio NOI for the three and six months ended June 30, 2024 and 2023 (in thousands):

Previous wording

(a)Same-Store Portfolio for the three months ended March 31, 2024 and 2023 included 108 properties containing 32,153 units.

Current wording

(a)Same-Store Portfolio for the three and six months ended June 30, 2024 and 2023 included 108 properties containing 32,153 units.

Previous wording

Set forth below is Same-Store Portfolio(a) NOI for the three months ended March 31, 2024 and 2023 (in thousands, except per unit data):

Current wording

Set forth below is Same-Store Portfolio(a) NOI for the three and six months ended June 30, 2024 and 2023 (in thousands, except per unit data):

Previous wording

(a)Same-Store Portfolio for the three months ended March 31, 2024 and 2023 included 108 properties containing 32,153 units.

Current wording

(a)Same-Store Portfolio for the three and six months ended June 30, 2024 and 2023 included 108 properties containing 32,153 units.

Previous wording

•the use of our cash and cash equivalents of $21.3 million as of March 31, 2024;

Current wording

•the use of our cash and cash equivalents of $21.0 million as of June 30, 2024;

Previous wording

As of March 31, 2024 and 2023, we maintained cash and cash equivalents, and restricted cash of approximately $41.9 million and $34.8 million, respectively. Our cash and cash equivalents were generated from the following activities (dollars in thousands):

Current wording

As of June 30, 2024 and 2023, we maintained cash and cash equivalents, and restricted cash of approximately $47.4 million and $42.5 million, respectively. Our cash and cash equivalents were generated from the following activities (dollars in thousands):

Previous wording

Our cash inflows from operating activities during the three months ended March 31, 2024 and 2023 were primarily driven by ongoing operations of our properties.

Current wording

Our cash inflows from operating activities during the six months ended June 30, 2024 and 2023 were primarily driven by ongoing operations of our properties.

Previous wording

Our cash inflows from investing activities during the three months ended March 31, 2024 were primarily due to $292.7 million of proceeds from the disposition of five properties under our Portfolio Optimization and Deleveraing Strategy and $2.7 million of proceeds from insurance claims, partially offset by $24.6 million of capital expenditures, $1.3 million of investments in unconsolidated real estate entities, and $14.1 million of investments in real estate under development. Our cash outflows from investing activities during the three months ended March 31, 2023 were primarily due to $29.0 million of capital expenditures, $13.4 million of investments in unconsolidated real estate entities, and $12.7 million of investments in real estate under development, partially offset by $35.6 million of proceeds from one property disposition.

Current wording

Our cash inflows from investing activities during the six months ended June 30, 2024 were primarily due to $320.6 million of proceeds from the disposition of six properties under our Portfolio Optimization and Deleveraging Strategy and $3.5 million of proceeds from insurance claims, partially offset by $55.7 million of capital expenditures, $26.9 million of investments in real estate under development and $3.0 million of investments in unconsolidated real estate entities. Our cash outflows from investing activities during the six months ended June 30, 2023 were primarily due to $67.2 million of capital expenditures, $21.7 million of investments in unconsolidated real estate entities, and $30.6 million of investments in real estate under development, partially offset by $35.6 million of proceeds from one property disposition.

Previous wording

Our cash outflows from financing activities during the three months ended March 31, 2024 were primarily due to credit facility and mortgage principal repayments of $362.7 million, payment of dividends on our common stock and noncontrolling interests of $37.1 million, partially offset by $94.0 million of draws on our unsecured revolver. Our cash outflows from financing activities during the three months ended March 31, 2023 were primarily due to payment of dividends on our common stock and noncontrolling interests of $32.5 million.

Current wording

Our cash outflows from financing activities during the six months ended June 30, 2024 were primarily due to unsecured credit facility and mortgage principal repayments of $422.3 million, payment of dividends on our common stock and noncontrolling interests of $74.0 million, partially offset by $131.0 million of draws on our unsecured revolver. Our cash outflows from financing activities during the six months ended June 30, 2023 were primarily due to payment of dividends on our common stock and noncontrolling interests of $64.7 million partially offset by $27.5 million of net draws on our unsecured revolver.

Previous wording

There were no off-balance sheet arrangements during the three months ended March 31, 2024 that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our interests.

Current wording

There were no off-balance sheet arrangements during the six months ended June 30, 2024 that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our interests.