FORM 10-Q
(Mark One)
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FORM 10-Q | ||
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
_________
(Exact Name of Registrant as Specified in Its Charter)
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(Exact Name of Registrant as Specified in Its Charter) |
Maryland | 26-4567130 | ||||
(State or Other Jurisdiction of
| (I.R.S. Employer
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1835 Market Street, Suite 2601 Philadelphia, PA | 19103 | ||||
(Address of Principal Executive Offices) | (Zip Code) |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Common stock | IRT | NYSE |
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Large Accelerated filer | x | Accelerated filer | o | ||||||||||||
Non-Accelerated filer | o | Smaller reporting company | o | ||||||||||||
Emerging growth company |
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o
x
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Page | ||||||||||
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| Item 1. Financial Statements |
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| As of June 30, 2021 |
|
| As of December 31, 2020 |
| As of March 31, 2022 | As of December 31, 2021 | |||||||||||
ASSETS: |
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| ASSETS: | ||||||||||
Investments in real estate: |
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| Investments in real estate: | ||||||||||
Investments in real estate, at cost |
| $ | 2,035,988 |
|
| $ | 1,916,770 |
| Investments in real estate, at cost | $ | 6,382,324 | $ | 6,462,355 | ||||||
Accumulated depreciation |
|
| (231,866 | ) |
|
| (208,618 | ) | Accumulated depreciation | (283,666) | (243,475) | ||||||||
Investments in real estate, net |
|
| 1,804,122 |
|
|
| 1,708,152 |
| Investments in real estate, net | 6,098,658 | 6,218,880 | ||||||||
Real estate held for sale |
|
| 27,910 |
|
|
| — |
| Real estate held for sale | 80,992 | 61,560 | ||||||||
Investment in real estate under development | Investment in real estate under development | 48,959 | 41,777 | ||||||||||||||||
Cash and cash equivalents |
|
| 7,566 |
|
|
| 8,751 |
| Cash and cash equivalents | 23,971 | 35,972 | ||||||||
Restricted cash |
|
| 6,441 |
|
|
| 4,864 |
| Restricted cash | 26,789 | 29,699 | ||||||||
Investments in unconsolidated real estate entities |
|
| 10,205 |
|
|
| — |
| Investments in unconsolidated real estate entities | 43,541 | 24,999 | ||||||||
Other assets |
|
| 17,311 |
|
|
| 12,338 |
| Other assets | 27,281 | 38,052 | ||||||||
Derivative assets |
|
| 853 |
|
|
| — |
| Derivative assets | 12,944 | 2,488 | ||||||||
Intangible assets, net of accumulated amortization of $43 and $0, respectively |
|
| 714 |
|
|
| 792 |
| |||||||||||
Intangible assets, net of accumulated amortization of $33,861 and $4,779, respectively | Intangible assets, net of accumulated amortization of $33,861 and $4,779, respectively | 24,187 | 53,269 | ||||||||||||||||
Total Assets |
| $ | 1,875,122 |
|
| $ | 1,734,897 |
| Total Assets | $ | 6,387,322 | $ | 6,506,696 | ||||||
LIABILITIES AND EQUITY: |
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| LIABILITIES AND EQUITY: | ||||||||||
Indebtedness, net of unamortized deferred financing costs of $4,643 and $4,208, respectively |
| $ | 1,036,841 |
|
| $ | 945,686 |
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Indebtedness associated with real estate held for sale, net of unamortized deferred financing costs of $32 and $0, respectively |
|
| 19,622 |
|
|
| — |
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Indebtedness, net | Indebtedness, net | $ | 2,495,410 | $ | 2,705,336 | ||||||||||||||
Indebtedness associated with real estate held for sale | Indebtedness associated with real estate held for sale | 46,678 | — | ||||||||||||||||
Accounts payable and accrued expenses |
|
| 30,530 |
|
|
| 25,416 |
| Accounts payable and accrued expenses | 81,498 | 106,332 | ||||||||
Accrued interest payable |
|
| 1,909 |
|
|
| 1,976 |
| Accrued interest payable | 6,955 | 7,175 | ||||||||
Dividends payable |
|
| 12,648 |
|
|
| 12,257 |
| Dividends payable | 27,345 | 16,792 | ||||||||
Derivative liabilities |
|
| 19,386 |
|
|
| 29,842 |
| Derivative liabilities | 128 | 11,896 | ||||||||
Other liabilities |
|
| 6,903 |
|
|
| 6,949 |
| Other liabilities | 15,921 | 17,089 | ||||||||
Total Liabilities |
|
| 1,127,839 |
|
|
| 1,022,126 |
| Total Liabilities | 2,673,935 | 2,864,620 | ||||||||
Equity: |
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|
|
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|
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| Equity: | ||||||||||
Stockholders’ equity: |
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| Stockholders’ equity: | ||||||||||
Preferred stock, $0.01 par value; 50,000,000 shares authorized, 0 and 0 shares issued and outstanding, respectively |
|
| — |
|
|
| — |
| Preferred stock, $0.01 par value; 50,000,000 shares authorized, 0 and 0 shares issued and outstanding, respectively | — | — | ||||||||
Common stock, $0.01 par value; 300,000,000 shares authorized, 105,109,649 and 101,803,762 shares issued and outstanding, including 258,310 and 339,468 unvested restricted common share awards, respectively |
|
| 1,051 |
|
|
| 1,018 |
| |||||||||||
Common stock, $0.01 par value; 500,000,000 shares authorized, 221,162,658 and 220,753,735 shares issued and outstanding, including 261,538 and 269,622 unvested restricted common share awards, respectively | Common stock, $0.01 par value; 500,000,000 shares authorized, 221,162,658 and 220,753,735 shares issued and outstanding, including 261,538 and 269,622 unvested restricted common share awards, respectively | 2,212 | 2,208 | ||||||||||||||||
Additional paid-in capital |
|
| 963,754 |
|
|
| 919,615 |
| Additional paid-in capital | 3,678,478 | 3,678,903 | ||||||||
Accumulated other comprehensive income (loss) |
|
| (22,011 | ) |
|
| (33,822 | ) | Accumulated other comprehensive income (loss) | 9,958 | (11,940) | ||||||||
Retained earnings (accumulated deficit) |
|
| (199,350 | ) |
|
| (178,751 | ) | Retained earnings (accumulated deficit) | (140,643) | (188,410) | ||||||||
Total stockholders’ equity |
|
| 743,444 |
|
|
| 708,060 |
| Total stockholders’ equity | 3,550,005 | 3,480,761 | ||||||||
Noncontrolling interests |
|
| 3,839 |
|
|
| 4,711 |
| Noncontrolling interests | 163,382 | 161,315 | ||||||||
Total Equity |
|
| 747,283 |
|
|
| 712,771 |
| Total Equity | 3,713,387 | 3,642,076 | ||||||||
Total Liabilities and Equity |
| $ | 1,875,122 |
|
| $ | 1,734,897 |
| Total Liabilities and Equity | $ | 6,387,322 | $ | 6,506,696 |
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| For the Three Months Ended June 30, |
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| For the Six Months Ended June 30, |
| For the Three Months Ended March 31, | ||||||||||||||||||||||||||||||||
|
| 2021 |
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| 2020 |
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| 2021 |
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| 2020 |
| 2022 | 2021 | |||||||||||||||||||||||||
REVENUE: |
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| REVENUE: | ||||||||||||||||||||||
Rental and other property revenue |
| $ | 57,286 |
|
| $ | 52,087 |
|
| $ | 112,097 |
|
| $ | 103,243 |
| Rental and other property revenue | $ | 149,977 | $ | 54,811 | ||||||||||||||||||
Other revenue |
|
| 158 |
|
|
| 181 |
|
|
| 459 |
|
|
| 375 |
| Other revenue | 385 | 301 | ||||||||||||||||||||
Total revenue |
|
| 57,444 |
|
|
| 52,268 |
|
|
| 112,556 |
|
|
| 103,618 |
| Total revenue | 150,362 | 55,112 | ||||||||||||||||||||
EXPENSES: |
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| EXPENSES: | ||||||||||||||||||||||
Property operating expenses |
|
| 22,298 |
|
|
| 20,974 |
|
|
| 43,136 |
|
|
| 40,711 |
| Property operating expenses | 55,883 | 20,838 | ||||||||||||||||||||
Property management expenses |
|
| 2,176 |
|
|
| 2,077 |
|
|
| 4,119 |
|
|
| 4,233 |
| Property management expenses | 5,556 | 1,943 | ||||||||||||||||||||
General and administrative expenses |
|
| 4,241 |
|
|
| 3,574 |
|
|
| 10,183 |
|
|
| 8,950 |
| General and administrative expenses | 7,928 | 5,942 | ||||||||||||||||||||
Depreciation and amortization expense |
|
| 16,763 |
|
|
| 15,231 |
|
|
| 33,315 |
|
|
| 30,059 |
| Depreciation and amortization expense | 78,174 | 16,552 | ||||||||||||||||||||
Abandoned deal costs |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 130 |
| |||||||||||||||||||||||
Casualty losses |
|
| — |
|
|
| 411 |
|
|
| 359 |
|
|
| 411 |
| |||||||||||||||||||||||
Casualty (gains) losses, net | Casualty (gains) losses, net | (1,393) | 359 | ||||||||||||||||||||||||||||||||||||
Total expenses |
|
| 45,478 |
|
|
| 42,267 |
|
|
| 91,112 |
|
|
| 84,494 |
| Total expenses | 146,148 | 45,634 | ||||||||||||||||||||
Other income (expense), net | Other income (expense), net | 380 | — | ||||||||||||||||||||||||||||||||||||
Interest expense |
|
| (8,559 | ) |
|
| (9,202 | ) |
|
| (16,944 | ) |
|
| (18,699 | ) | Interest expense | (20,531) | (8,385) | ||||||||||||||||||||
Gain on sale of real estate assets, net | Gain on sale of real estate assets, net | 94,712 | — | ||||||||||||||||||||||||||||||||||||
Merger and integration costs | Merger and integration costs | (1,895) | — | ||||||||||||||||||||||||||||||||||||
Net income: |
|
| 3,407 |
|
|
| 799 |
|
|
| 4,500 |
|
|
| 425 |
| Net income: | 76,880 | 1,093 | ||||||||||||||||||||
Income allocated to noncontrolling interest |
|
| (21 | ) |
|
| (10 | ) |
|
| (28 | ) |
|
| (8 | ) | Income allocated to noncontrolling interest | (2,280) | (7) | ||||||||||||||||||||
Net income allocable to common shares |
| $ | 3,386 |
|
| $ | 789 |
|
| $ | 4,472 |
|
| $ | 417 |
| Net income allocable to common shares | $ | 74,600 | $ | 1,086 | ||||||||||||||||||
Earnings per share: |
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| Earnings per share: | ||||||||||||||||||||||
Basic |
| $ | 0.03 |
|
| $ | 0.01 |
|
| $ | 0.04 |
|
| $ | 0.00 |
| Basic | $ | 0.34 | $ | 0.01 | ||||||||||||||||||
Diluted |
| $ | 0.03 |
|
| $ | 0.01 |
|
| 0.04 |
|
| $ | 0.00 |
| Diluted | $ | 0.34 | $ | 0.01 | |||||||||||||||||||
Weighted-average shares: |
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|
|
|
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|
|
|
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|
|
|
| Weighted-average shares: | ||||||||||||||||||||||
Basic |
|
| 102,023,204 |
|
|
| 94,435,722 |
|
|
| 101,847,876 |
|
|
| 92,646,891 |
| Basic | 220,798,692 | 101,678,865 | ||||||||||||||||||||
Diluted |
|
| 102,923,924 |
|
|
| 95,092,860 |
|
|
| 102,822,099 |
|
|
| 93,550,425 |
| Diluted | 222,045,286 | 102,763,106 |
|
| For the Three Months Ended June 30, |
|
| For the Six Months Ended June 30, |
| ||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| ||||
Net income |
| $ | 3,407 |
|
| $ | 799 |
|
| $ | 4,500 |
|
| $ | 425 |
|
Other comprehensive income (loss): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value of interest rate hedges |
|
| 364 |
|
|
| (1,973 | ) |
|
| 15,537 |
|
|
| (25,395 | ) |
Realized (losses) gains on interest rate hedges reclassified to earnings |
|
| (1,861 | ) |
|
| (1,405 | ) |
|
| (3,621 | ) |
|
| (1,823 | ) |
Total other comprehensive income (loss) |
|
| (1,497 | ) |
|
| (3,378 | ) |
|
| 11,916 |
|
|
| (27,218 | ) |
Comprehensive income (loss) before allocation to noncontrolling interests |
|
| 1,910 |
|
|
| (2,579 | ) |
|
| 16,416 |
|
|
| (26,793 | ) |
Allocation to noncontrolling interests |
|
| (38 | ) |
|
| 19 |
|
|
| (133 | ) |
|
| 210 |
|
Comprehensive income (loss) |
| $ | 1,872 |
|
| $ | (2,560 | ) |
| $ | 16,283 |
|
| $ | (26,583 | ) |
For the Three Months Ended March 31, | |||||||||||||||||||||||
2022 | 2021 | ||||||||||||||||||||||
Net income | $ | 76,880 | $ | 1,093 | |||||||||||||||||||
Other comprehensive income (loss): | |||||||||||||||||||||||
Change in fair value of interest rate hedges | 24,710 | 15,173 | |||||||||||||||||||||
Realized gains (losses) on interest rate hedges reclassified to earnings | (2,120) | (1,760) | |||||||||||||||||||||
Total other comprehensive income | 22,590 | 13,413 | |||||||||||||||||||||
Comprehensive income before allocation to noncontrolling interests | 99,470 | 14,506 | |||||||||||||||||||||
Allocation to noncontrolling interests | (2,972) | (95) | |||||||||||||||||||||
Comprehensive income | $ | 96,498 | $ | 14,411 |
|
| Common Shares |
|
| Par Value Common Shares |
|
| Additional Paid In Capital |
|
| Accumulated Other Comprehensive Income (loss) |
|
| Retained Earnings (Deficit) |
|
| Total Stockholders’ Equity |
|
| Noncontrolling Interests |
|
| Total Equity |
| ||||||||
Balance, December 31, 2020 |
|
| 101,803,762 |
|
| $ | 1,018 |
|
| $ | 919,615 |
|
| $ | (33,822 | ) |
| $ | (178,751 | ) |
| $ | 708,060 |
|
| $ | 4,711 |
|
| $ | 712,771 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 1,086 |
|
|
| 1,086 |
|
|
| 7 |
|
|
| 1,093 |
|
Other comprehensive income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 13,325 |
|
|
| — |
|
|
| 13,325 |
|
|
| 88 |
|
|
| 13,413 |
|
Stock compensation |
|
| 286,647 |
|
|
| 2 |
|
|
| 3,346 |
|
|
| — |
|
|
| — |
|
|
| 3,348 |
|
|
| — |
|
|
| 3,348 |
|
Issuance of common shares, net |
|
| — |
|
|
| — |
|
|
| (59 | ) |
|
| — |
|
|
| — |
|
|
| (59 | ) |
|
| — |
|
|
| (59 | ) |
Repurchase of shares related to equity award tax withholding |
|
| (56,677 | ) |
|
| (2 | ) |
|
| (2,860 | ) |
|
| — |
|
|
| — |
|
|
| (2,862 | ) |
|
| — |
|
|
| (2,862 | ) |
Common dividends declared ($0.12 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (12,486 | ) |
|
| (12,486 | ) |
|
| — |
|
|
| (12,486 | ) |
Distribution to noncontrolling interest declared ($0.12 per unit) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (80 | ) |
|
| (80 | ) |
Balance, March 31, 2021 |
|
| 102,033,732 |
|
| $ | 1,018 |
|
| $ | 920,042 |
|
| $ | (20,497 | ) |
| $ | (190,151 | ) |
| $ | 710,412 |
|
| $ | 4,726 |
|
| $ | 715,138 |
|
Net income |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| 3,386 |
|
|
| 3,386 |
|
|
| 21 |
|
|
| 3,407 |
|
Other comprehensive income (loss) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (1,514 | ) |
|
| — |
|
|
| (1,514 | ) |
|
| 17 |
|
|
| (1,497 | ) |
Stock compensation expense |
|
| 23,436 |
|
|
| 1 |
|
|
| 1,356 |
|
|
| — |
|
|
| — |
|
|
| 1,357 |
|
|
| — |
|
|
| 1,357 |
|
Repurchase of shares related to equity award tax withholding |
|
| (1,674 | ) |
|
| 1 |
|
|
| (81 | ) |
|
| — |
|
|
| — |
|
|
| (80 | ) |
|
| — |
|
|
| (80 | ) |
Issuance of common shares, net |
|
| 2,932,000 |
|
|
| 30 |
|
|
| 41,580 |
|
|
| — |
|
|
| — |
|
|
| 41,610 |
|
|
| — |
|
|
| 41,610 |
|
Conversion of noncontrolling interest to common shares |
|
| 122,155 |
|
|
| 1 |
|
|
| 857 |
|
|
| — |
|
|
| — |
|
|
| 858 |
|
|
| (858 | ) |
|
| — |
|
Common dividends declared ($0.12 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (12,585 | ) |
|
| (12,585 | ) |
|
| — |
|
|
| (12,585 | ) |
Distribution to noncontrolling interest declared ($0.12 per unit) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (67 | ) |
|
| (67 | ) |
Balance, June 30, 2021 |
|
| 105,109,649 |
|
| $ | 1,051 |
|
| $ | 963,754 |
|
| $ | (22,011 | ) |
| $ | (199,350 | ) |
| $ | 743,444 |
|
| $ | 3,839 |
|
| $ | 747,283 |
|
|
| Common Shares |
|
| Par Value Common Shares |
|
| Additional Paid In Capital |
|
| Accumulated Other Comprehensive Income (loss) |
|
| Retained Earnings (Deficit) |
|
| Total Stockholders’ Equity |
|
| Noncontrolling Interests |
|
| Total Equity |
| ||||||||
Balance, December 31, 2019 |
|
| 91,070,637 |
|
| $ | 911 |
|
| $ | 765,992 |
|
| $ | (12,099 | ) |
| $ | (141,525 | ) |
| $ | 613,279 |
|
| $ | 6,478 |
|
| $ | 619,757 |
|
Net income (loss) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (372 | ) |
|
| (372 | ) |
|
| (2 | ) |
|
| (374 | ) |
Other comprehensive income (loss) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (23,651 | ) |
|
| — |
|
|
| (23,651 | ) |
|
| (189 | ) |
|
| (23,840 | ) |
Stock compensation |
|
| 183,940 |
|
|
| 2 |
|
|
| 2,642 |
|
|
| — |
|
|
| — |
|
|
| 2,644 |
|
|
| — |
|
|
| 2,644 |
|
Issuance of common shares, net |
|
| 3,406,000 |
|
|
| 35 |
|
|
| 49,729 |
|
|
| — |
|
|
| — |
|
|
| 49,764 |
|
|
| — |
|
|
| 49,764 |
|
Repurchase of shares related to equity award tax withholding |
|
| (51,128 | ) |
|
| (1 | ) |
|
| (1,489 | ) |
|
| — |
|
|
| — |
|
|
| (1,490 | ) |
|
| — |
|
|
| (1,490 | ) |
Conversion of noncontrolling interest to common shares |
|
| 82,357 |
|
|
| — |
|
|
| 627 |
|
|
| — |
|
|
| — |
|
|
| 627 |
|
|
| (627 | ) |
|
| — |
|
Common dividends declared ($0.18 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (17,148 | ) |
|
| (17,148 | ) |
|
| — |
|
|
| (17,148 | ) |
Distribution to noncontrolling interest declared ($0.18 per unit) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (142 | ) |
|
| (142 | ) |
Balance, March 31, 2020 |
|
| 94,691,806 |
|
| $ | 947 |
|
| $ | 817,501 |
|
| $ | (35,750 | ) |
| $ | (159,045 | ) |
| $ | 623,653 |
|
| $ | 5,518 |
|
| $ | 629,171 |
|
Net income |
|
| — |
|
|
| — |
|
|
| — |
|
|
| - |
|
|
| 789 |
|
|
| 789 |
|
|
| 10 |
|
|
| 799 |
|
Other comprehensive (loss) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| (3,349 | ) |
|
| — |
|
|
| (3,349 | ) |
|
| (29 | ) |
|
| (3,378 | ) |
Stock compensation expense |
|
| 49,340 |
|
|
| — |
|
|
| 1,250 |
|
|
| — |
|
|
| — |
|
|
| 1,250 |
|
|
| — |
|
|
| 1,250 |
|
Issuance of common shares, net |
|
| — |
|
|
| — |
|
|
| (32 | ) |
|
| — |
|
|
| — |
|
|
| (32 | ) |
|
| — |
|
|
| (32 | ) |
Common dividends declared ($0.12 per share) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (11,329 | ) |
|
| (11,329 | ) |
|
| — |
|
|
| (11,329 | ) |
Distribution to noncontrolling interest declared ($0.12 per unit) |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| (95 | ) |
|
| (95 | ) |
Balance, June 30, 2020 |
|
| 94,741,146 |
|
| $ | 947 |
|
| $ | 818,719 |
|
| $ | (39,099 | ) |
| $ | (169,585 | ) |
| $ | 610,982 |
|
| $ | 5,404 |
|
| $ | 616,386 |
|
Common Shares | Par Value Common Shares | Additional Paid In Capital | Accumulated Other Comprehensive Income (loss) | Retained Earnings (Deficit) | Total Stockholders’ Equity | Noncontrolling Interests | Total Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2021 | 220,753,735 | $ | 2,208 | $ | 3,678,903 | $ | (11,940) | $ | (188,410) | $ | 3,480,761 | $ | 161,315 | $ | 3,642,076 | ||||||||||||||||||||||||||||||||||||||||||||
Net income | — | — | — | — | 74,600 | 74,600 | 2,280 | 76,880 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Common dividends declared ($0.12 per share) | — | — | — | — | (26,833) | (26,833) | — | (26,833) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income | — | — | — | 21,898 | — | 21,898 | 692 | 22,590 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Stock compensation | 395,029 | 3 | 3,535 | — | — | 3,538 | — | 3,538 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of shares related to equity award tax withholding | (48,452) | — | (3,183) | — | — | (3,183) | — | (3,183) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Conversion of noncontrolling interest to common shares | 10,848 | — | 68 | — | — | 68 | (68) | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common shares, net | 51,498 | 1 | (845) | — | — | (844) | — | (844) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Distribution to noncontrolling interest declared ($0.12 per unit) | — | — | — | — | — | — | (837) | (837) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2022 | 221,162,658 | $ | 2,212 | $ | 3,678,478 | $ | 9,958 | $ | (140,643) | $ | 3,550,005 | $ | 163,382 | $ | 3,713,387 | ||||||||||||||||||||||||||||||||||||||||||||
Common Shares | Par Value Common Shares | Additional Paid In Capital | Accumulated Other Comprehensive Income (loss) | Retained Earnings (Deficit) | Total Stockholders’ Equity | Noncontrolling Interests | Total Equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, December 31, 2020 | 101,803,762 | $ | 1,018 | $ | 919,615 | $ | (33,822) | $ | (178,751) | $ | 708,060 | $ | 4,711 | $ | 712,771 | ||||||||||||||||||||||||||||||||||||||||||||
Net income (loss) | — | — | — | — | 1,086 | 1,086 | 7 | 1,093 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Common dividends declared ($0.12 per share) | — | — | — | — | (12,486) | (12,486) | — | (12,486) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income (loss) | — | — | — | 13,325 | — | 13,325 | 88 | 13,413 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Stock compensation | 286,647 | 2 | 3,346 | — | — | 3,348 | — | 3,348 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Repurchase of shares related to equity award tax withholding | (56,677) | (2) | (2,860) | — | — | (2,862) | — | (2,862) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Issuance of common shares, net | — | — | (59) | — | — | (59) | — | (59) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Distribution to noncontrolling interest declared ($0.12 per unit) | — | — | — | — | — | — | (80) | (80) | |||||||||||||||||||||||||||||||||||||||||||||||||||
Balance, March 31, 2021 | 102,033,732 | $ | 1,018 | $ | 920,042 | $ | (20,497) | $ | (190,151) | $ | 710,412 | $ | 4,726 | $ | 715,138 | ||||||||||||||||||||||||||||||||||||||||||||
|
| For the Six Months Ended June 30, |
| For the Three Months Ended March 31, | |||||||||||||||
|
| 2021 |
|
| 2020 |
| 2022 | 2021 | |||||||||||
Cash flows from operating activities: |
|
|
|
|
|
|
|
| Cash flows from operating activities: | ||||||||||
Net income |
| $ | 4,500 |
|
| $ | 425 |
| Net income | $ | 76,880 | $ | 1,093 | ||||||
Adjustments to reconcile net income to cash flow from operating activities: |
|
|
|
|
|
|
|
| Adjustments to reconcile net income to cash flow from operating activities: | ||||||||||
Depreciation and amortization |
|
| 33,315 |
|
|
| 30,059 |
| Depreciation and amortization | 78,174 | 16,552 | ||||||||
Amortization of deferred financing costs |
|
| 738 |
|
|
| 723 |
| |||||||||||
Stock compensation |
|
| 4,646 |
|
|
| 3,859 |
| |||||||||||
Casualty losses |
|
| 359 |
|
|
| 411 |
| |||||||||||
Accretion of loan discounts and premiums, net | Accretion of loan discounts and premiums, net | (2,754) | — | ||||||||||||||||
Amortization of deferred financing costs, net | Amortization of deferred financing costs, net | 919 | 364 | ||||||||||||||||
Stock compensation expense | Stock compensation expense | 3,498 | 3,326 | ||||||||||||||||
Gain on sale of real estate assets, net | Gain on sale of real estate assets, net | (94,712) | — | ||||||||||||||||
Amortization related to derivative instruments |
|
| 608 |
|
|
| 579 |
| Amortization related to derivative instruments | 314 | 302 | ||||||||
Casualty (gains) losses | Casualty (gains) losses | (1,393) | 359 | ||||||||||||||||
Other income (expense), net | Other income (expense), net | (380) | — | ||||||||||||||||
Changes in assets and liabilities: |
|
|
|
|
|
|
|
| Changes in assets and liabilities: | ||||||||||
Other assets |
|
| (4,886 | ) |
|
| (4,348 | ) | Other assets | 4,538 | (90) | ||||||||
Accounts payable and accrued expenses |
|
| 3,985 |
|
|
| 2,812 |
| Accounts payable and accrued expenses | (23,326) | (1,321) | ||||||||
Accrued interest payable |
|
| (67 | ) |
|
| (188 | ) | Accrued interest payable | (220) | (88) | ||||||||
Other liabilities |
|
| 54 |
|
|
| 7 |
| Other liabilities | (958) | 141 | ||||||||
Cash flow provided by operating activities |
|
| 43,252 |
|
|
| 34,339 |
| Cash flow provided by operating activities | 40,580 | 20,638 | ||||||||
Cash flows from investing activities: |
|
|
|
|
|
|
|
| Cash flows from investing activities: | ||||||||||
Acquisition of real estate properties |
|
| (139,231 | ) |
|
| (50,618 | ) | Acquisition of real estate properties | — | (365) | ||||||||
Investments in unconsolidated real estate entities |
|
| (10,205 | ) |
|
| — |
| Investments in unconsolidated real estate entities | (18,605) | — | ||||||||
Disposition of real estate properties, net | Disposition of real estate properties, net | 155,639 | — | ||||||||||||||||
Capital expenditures |
|
| (17,244 | ) |
|
| (17,070 | ) | Capital expenditures | (11,798) | (6,916) | ||||||||
Cash flow used in investing activities |
|
| (166,680 | ) |
|
| (67,688 | ) | |||||||||||
Additions to real estate under development | Additions to real estate under development | (8,040) | — | ||||||||||||||||
Proceeds from insurance claims | Proceeds from insurance claims | 9,870 | — | ||||||||||||||||
Cash flow provided by (used in) investing activities | Cash flow provided by (used in) investing activities | 127,066 | (7,281) | ||||||||||||||||
Cash flows from financing activities: |
|
|
|
|
|
|
|
| Cash flows from financing activities: | ||||||||||
Proceeds (costs) from issuance of common stock | Proceeds (costs) from issuance of common stock | (844) | (59) | ||||||||||||||||
Proceeds from unsecured credit facility and term loans |
|
| 369,500 |
|
|
| 65,501 |
| Proceeds from unsecured credit facility and term loans | 16,500 | 9,500 | ||||||||
Unsecured credit facility repayments |
|
| (234,800 | ) |
|
| (39,000 | ) | Unsecured credit facility repayments | (176,000) | — | ||||||||
Mortgage principal repayments |
|
| (23,456 | ) |
|
| (3,835 | ) | Mortgage principal repayments | (1,864) | (7,918) | ||||||||
Payments for deferred financing costs |
|
| (1,205 | ) |
|
| (50 | ) | Payments for deferred financing costs | (49) | — | ||||||||
Proceeds from issuance of common stock, net |
|
| 41,551 |
|
|
| 49,732 |
| |||||||||||
Distributions on common stock |
|
| (24,666 | ) |
|
| (33,479 | ) | Distributions on common stock | (16,916) | (12,450) | ||||||||
Distributions to noncontrolling interests |
|
| (162 | ) |
|
| (302 | ) | Distributions to noncontrolling interests | (201) | (81) | ||||||||
Repurchase of shares related to equity award tax withholding |
|
| (2,942 | ) |
|
| (1,490 | ) | Repurchase of shares related to equity award tax withholding | (3,183) | (2,862) | ||||||||
Cash flow provided by financing activities |
|
| 123,820 |
|
|
| 37,077 |
| |||||||||||
Cash flow used in financing activities | Cash flow used in financing activities | (182,557) | (13,870) | ||||||||||||||||
Net change in cash and cash equivalents, and restricted cash |
|
| 392 |
|
|
| 3,728 |
| Net change in cash and cash equivalents, and restricted cash | (14,911) | (513) | ||||||||
Cash and cash equivalents, and restricted cash, beginning of period |
|
| 13,615 |
|
|
| 14,433 |
| Cash and cash equivalents, and restricted cash, beginning of period | 65,671 | 13,615 | ||||||||
Cash and cash equivalents, and restricted cash, end of the period |
| $ | 14,007 |
|
| $ | 18,161 |
| Cash and cash equivalents, and restricted cash, end of the period | $ | 50,760 | $ | 13,102 | ||||||
Reconciliation of cash, cash equivalents, and restricted cash to the Consolidated Balance Sheet |
|
|
|
|
|
|
|
| Reconciliation of cash, cash equivalents, and restricted cash to the Consolidated Balance Sheet | ||||||||||
Cash and cash equivalents |
| $ | 7,566 |
|
| $ | 11,652 |
| Cash and cash equivalents | $ | 23,971 | $ | 8,653 | ||||||
Restricted cash |
|
| 6,441 |
|
|
| 6,509 |
| Restricted cash | 26,789 | 4,449 | ||||||||
Total cash, cash equivalents, and restricted cash, end of period |
| $ | 14,007 |
|
| $ | 18,161 |
| Total cash, cash equivalents, and restricted cash, end of period | $ | 50,760 | $ | 13,102 |
.
As of June 30, 2021
f. Investments in Real Estate
The
2022.
Related Costs
g. Investments in unconsolidatedReal Estate Under Development
taxes. At such time as the development is considered substantially complete, the capitalization of certain indirect costs such as real estate taxes, interest costs, and all project-related costs in real estate under development are reclassified to investments in real estate.
h.these losses were recorded in other income (expense), net on the face of our consolidated statements of operations. For more information on our investments in unconsolidated real estate entities, see Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations – Current Developments – Capital Recycling."
Other Property Revenue
Due to the COVID-19 pandemic, some of our residents have experienced difficulty making rent payments and, as a result, our rent receivables have increased compared to historical levels. This caused us to further evaluate collectability and we recorded $78 and $125 provision for bad debts during the three and six months ended June 30, 2021, respectively, to appropriately reflect management’s estimate for uncollectible accounts. The provision for bad debts was recorded as a reduction to rental and other property income in our consolidated statements of operations. The total adjustment to rental and other property income for the three and six months ended June 30, 2021 was $590 and $1,023, respectively. The total adjustment to rental and other property income for the three and six months ended June 30, 2020 was $751 and $1,088, respectively.
To support our residents that were economically impacted and unable to pay their rent in full during 2020, we offered residents deferred rent payment plans whereby the resident could defer between 25% and 75% of their monthly rent for between one and three months. Residents were required to provide evidence of financial hardship and commit to a full 12-month lease term, which provided a longer period over which the deferred rent could be repaid. We accounted for the deferred payment plans as if no change had been made to the original lease agreement and continued to recognize rental income while increasing lease receivables from residents. As of June 30, 2021, deferred rents receivable from residents totaled $12.
Advertising Expenses
For the three and six months ended June 30, 2021, we incurred $636$1,272 and $1,180$544 of advertising expenses, respectively. For the three and six months ended June 30, 2020, we incurred $551 and $1,160 of advertising expenses, respectively.
i.
In accordance with FASB ASC Topic 815, “Derivatives and Hedging”, we measure each derivative instrument at fair value and record such amounts in our consolidated balance sheets as either an asset or liability. For derivatives designated as cash flow hedges, the changes in the fair value of the effective portions of the derivative are reported in other comprehensive income and changes in the fair value of the ineffective portions of cash flow hedges, if any, are recognized in earnings. For derivatives not designated as hedges (or designated as fair value hedges), the changes in fair value of the derivative instrument are recognized in earnings. Any derivatives that we designate in hedge relationships are done so at inception. At inception, we determine whether or not the derivative is highly effective in offsetting changes in the designated interest rate risk associated with the identified indebtedness using regression analysis. At each reporting period, we update our regression analysis and use the hypothetical derivative method to measure any ineffectiveness.
j.
|
|
•Level 1: Valuations are based on unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. The types of assets carried at Level 1 fair value generally are equity securities listed in active markets. As such, valuations of these investments do not entail a significant degree of judgment. |
|
•Level 2: Valuations are based on quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active or for which all significant inputs are observable, either directly or indirectly. |
|
|
| As of June 30, 2021 |
|
| As of December 31, 2020 |
| As of March 31, 2022 | As of December 31, 2021 | ||||||||||||||||||||||||||||||||||
Financial Instrument |
| Carrying Amount |
|
| Estimated Fair Value |
|
| Carrying Amount |
|
| Estimated Fair Value |
| Financial Instrument | Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | |||||||||||||||||||||||||
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Assets | |||||||||||||||||||||||||
Cash and cash equivalents |
| $ | 7,566 |
|
| $ | 7,566 |
|
| $ | 8,751 |
|
| $ | 8,751 |
| Cash and cash equivalents | $ | 23,971 | $ | 23,971 | $ | 35,972 | $ | 35,972 | |||||||||||||||||
Restricted cash |
|
| 6,441 |
|
|
| 6,441 |
|
|
| 4,864 |
|
|
| 4,864 |
| Restricted cash | 26,789 | 26,789 | 29,699 | 29,699 | |||||||||||||||||||||
Derivative assets |
|
| 853 |
|
|
| 853 |
|
|
| — |
|
|
| — |
| Derivative assets | 12,944 | 12,944 | 2,488 | 2,488 | |||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Liabilities | |||||||||||||||||||||||||
Debt: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Debt: | |||||||||||||||||||||||||
Unsecured credit facility |
|
| 118,150 |
|
|
| 119,503 |
|
|
| 183,110 |
|
|
| 184,802 |
| Unsecured credit facility | 114,733 | 114,479 | 274,109 | 274,109 | |||||||||||||||||||||
Unsecured term loans |
|
| 497,752 |
|
|
| 500,000 |
|
|
| 298,759 |
|
|
| 300,000 |
| Unsecured term loans | 498,103 | 498,513 | 497,951 | 497,951 | |||||||||||||||||||||
Secured credit facilities | Secured credit facilities | 663,646 | 631,435 | 664,618 | 668,352 | |||||||||||||||||||||||||||||||||||||
Mortgages (1) |
|
| 440,561 |
|
|
| 454,257 |
|
|
| 463,817 |
|
|
| 479,929 |
| Mortgages(1) | 1,265,606 | 1,213,026 | 1,268,658 | 1,282,495 | |||||||||||||||||||||
Derivative liabilities |
|
| 19,386 |
|
|
| 19,386 |
|
|
| 29,842 |
|
|
| 29,842 |
| Derivative liabilities | 128 | 128 | 11,896 | 11,896 |
(1) | Includes indebtedness associated with real estate held for sale. |
k.
l.
m.
2021.
n. Recent Accounting Pronouncements
Below is a brief description of recent accounting pronouncements that could have a material effect on our financial statements.
Adopted Within these Financial Statements
In March 2020, the FASB issued an accounting standard classified under FASB ASC Topic 848, “Reference Rate Reform.” The amendments in this update contain practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASC 848 is optional and may be elected over time as reference rate reform activities occur. During the first quarter of 2020, we have elected to apply the hedge accounting expedients related to probability and the assessments of effectiveness for future LIBOR-indexed cash flows to assume that the index upon which future hedged transactions will be based matches the index on the corresponding derivatives. Application of these expedients preserves the presentation of derivatives consistent with past presentation. We will continue to evaluate the impact of the guidance and may apply other elections as applicable as additional changes in the market occur.
|
| As of June 30, 2021 |
|
| As of December 31, 2020 |
|
| Depreciable Lives (In years) |
| As of March 31, 2022 | As of December 31, 2021 | Depreciable Lives (In years) | |||||||||||||||||
Land |
| $ | 260,581 |
|
| $ | 251,365 |
|
|
| — |
| Land | $ | 557,926 | $ | 567,507 | — | |||||||||||
Building |
|
| 1,625,329 |
|
|
| 1,527,535 |
|
|
| 40 |
| Building | 5,550,022 | 5,622,492 | 40 | |||||||||||||
Furniture, fixtures and equipment |
|
| 150,078 |
|
|
| 137,870 |
|
| 5-10 |
| Furniture, fixtures and equipment | 274,376 | 272,356 | 5-10 | ||||||||||||||
Total investment in real estate |
| $ | 2,035,988 |
|
| $ | 1,916,770 |
|
|
|
|
| Total investment in real estate | $ | 6,382,324 | $ | 6,462,355 | ||||||||||||
Accumulated depreciation |
|
| (231,866 | ) |
|
| (208,618 | ) |
|
|
|
| Accumulated depreciation | (283,666) | (243,475) | ||||||||||||||
Investments in real estate, net |
| $ | 1,804,122 |
|
| $ | 1,708,152 |
|
|
|
|
| Investments in real estate, net | $ | 6,098,658 | $ | 6,218,880 |
Property Name |
| Location |
| Units |
|
| Net Carrying Value |
| Property Name | Net Carrying Value | Units (unaudited) | ||||||||||||||||
King's Landing |
| St. Louis, MO |
|
| 152 |
|
| $ | 27,910 |
| |||||||||||||||||
Meadows Apartments - Louisville, KY | Meadows Apartments - Louisville, KY | $ | 35,594 | 400 | |||||||||||||||||||||||
Sycamore Terrace - Terra Haute, IN | Sycamore Terrace - Terra Haute, IN | 45,398 | 250 | ||||||||||||||||||||||||
Total |
|
|
|
| 152 |
|
| $ | 27,910 |
| Total | $ | 80,992 | 650 |
In May 2021,
In June 2021, we acquired a 322-unit$25,440. We purchased this property located in McKinney, TX for $73,372.
from one of our unconsolidated joint ventures. See Part I, Item 2 "Management's Discussion and Analysis of Financial Condition and Results of Operations – Current Developments – Capital Recycling."
Description |
| Fair Value of Assets Acquired During the Six Months Ended June 30, 2021 |
| |
Assets acquired: |
|
|
|
|
Investments in real estate (a) |
| $ | 139,336 |
|
Other assets |
|
| 33 |
|
Intangible assets |
|
| 757 |
|
Total assets acquired |
| $ | 140,126 |
|
Liabilities assumed: |
|
|
|
|
Accounts payable and accrued expenses |
| $ | 795 |
|
Other liabilities |
|
| 100 |
|
Total liabilities assumed |
|
| 895 |
|
Estimated fair value of net assets acquired |
| $ | 139,231 |
|
Property Name | Date of Sale | Sale Price | Gain on sale | |||||||||||||||||
Riverchase | 01/18/2022 | $ | 31,000 | $ | 12,901 | |||||||||||||||
Heritage Park | 02/02/2022 | 48,500 | 31,366 | |||||||||||||||||
Raindance | 02/02/2022 | 47,500 | 33,748 | |||||||||||||||||
Haverford | 02/02/2022 | 31,050 | 16,697 | |||||||||||||||||
Total | $ | 158,050 | $ | 94,712 |
|
| ||||
Debt: |
| Outstanding Principal |
|
| Unamortized Debt Issuance Costs |
|
| Carrying Amount |
|
| Type |
| Weighted Average Rate |
|
| Weighted Average Maturity (in years) |
| ||||
Unsecured credit facility (1) |
| $ | 119,503 |
|
| $ | (1,353 | ) |
| $ | 118,150 |
|
| Floating |
| 1.4% |
|
|
| 1.9 |
|
Unsecured term loans |
|
| 500,000 |
|
|
| (2,248 | ) |
|
| 497,752 |
|
| Floating |
| 1.3% |
|
|
| 3.7 |
|
Mortgages (2) |
|
| 441,635 |
|
|
| (1,074 | ) |
|
| 440,561 |
|
| Fixed |
| 3.8% |
|
|
| 2.8 |
|
Total Debt |
| $ | 1,061,138 |
|
| $ | (4,675 | ) |
| $ | 1,056,463 |
|
|
|
| 2.4% |
|
|
| 3.1 |
|
Debt: | Outstanding Principal | Unamortized Debt Issuance Costs | Unamortized Loan (Discount)/Premiums | Carrying Amount | Type | Weighted Average Rate | Weighted Average Maturity (in years) | |||||||||||||||||||||||||||||||||||||
Unsecured revolver(1) | $ | 117,503 | $ | (2,770) | $ | — | $ | 114,733 | Floating | 1.7% | 3.8 | |||||||||||||||||||||||||||||||||
Unsecured term loans | 500,000 | (1,897) | — | 498,103 | Floating | 1.6% | 2.9 | |||||||||||||||||||||||||||||||||||||
Secured credit facilities | 635,128 | (2,660) | 31,178 | 663,646 | Floating/Fixed | 4.0% | 6.7 | |||||||||||||||||||||||||||||||||||||
Mortgages(2) | 1,236,748 | (8,796) | 37,654 | 1,265,606 | Fixed | 3.9% | 5.9 | |||||||||||||||||||||||||||||||||||||
Total Debt | $ | 2,489,379 | $ | (16,123) | $ | 68,832 | $ | 2,542,088 | 3.4% | 5.4 |
(1) | The unsecured |
(2) | Includes indebtedness associated with real estate held for sale. |
On
Scheduled maturities on our indebtedness outstanding as of March 31, 2022 | |||||||||||||||||||||||||||||||||||||||||
Debt: | 2022 | 2023 | 2024 | 2025 | 2026 | Thereafter | |||||||||||||||||||||||||||||||||||
Unsecured revolver | $ | — | $ | — | $ | — | $ | — | $ | 117,503 | $ | — | |||||||||||||||||||||||||||||
Unsecured term loans | — | — | 300,000 | — | 200,000 | — | |||||||||||||||||||||||||||||||||||
Secured credit facilities | — | — | — | 3,525 | 10,493 | 621,110 | |||||||||||||||||||||||||||||||||||
Mortgages(1) | 7,879 | 10,998 | 107,848 | 168,767 | 131,417 | 809,839 | |||||||||||||||||||||||||||||||||||
Total | $ | 7,879 | $ | 10,998 | $ | 407,848 | $ | 172,292 | $ | 459,413 | $ | 1,430,949 |
(1) | Includes indebtedness associated with real estate held for sale. |
On April 5, 2021, we drew down on our unsecured credit facility to extinguish a property mortgage and made partial paydowns on another mortgage totaling $13,666. The property mortgages had a weighted-average rate of 4.2%.
On May 18, 2021, we entered into a Second Amended and Restated Credit Agreement which provided for a $550,000 unsecured credit facility (the “Facility) that consists of a $350,000 revolving line of credit (the “Unsecured Revolving Line of Credit”) and a new $200,000 senior term loan (the “New Unsecured Term Loan”). Additionally, we have the right to increase the aggregate amount of the Facility to up to $600,000, subject to certain terms and conditions. The maturity date on borrowings outstanding under the Unsecured Revolving Line of Credit is May 9, 2023, subject to our option to extend the revolving commitment for two additional 6-month periods under certain circumstances, including a payment of an extension fee. The maturity date on the New Unsecured Term Loan is May 18, 2026. We may prepay the Facility, in whole or in part, at any time without prepayment fee or penalty. At our option, borrowings under the Unsecured Revolving Line of Credit will bear interest at a rate equal to either (i) the 1-month LIBOR rate plus a margin of 125 to 200 basis points, or (ii) a base rate plus a margin of 25 to 100 basis points and borrowings under the New Unsecured Term Loan will bear interest at a rate equal to either (i) the LIBOR rate plus a margin of 120 to 190 basis points, or (ii) a base rate plus a margin of 20 to 90 basis points. The applicable margin is determined based upon our total consolidated leverage ratio. Substantially all of the proceeds of the New Unsecured Term Loan were applied at closing to repay the outstanding balance under the revolving credit facility established under the prior credit agreement. We recognized the refinance of the Unsecured Revolving Line of Credit as a modification of debt. The New Unsecured Term Loan was accounted for as an issuance of new debt. We incurred upfront costs of $1,200 associated with this transaction.
December 31, 2021:
Debt: | Outstanding Principal | Unamortized Debt Issuance Costs | Unamortized Loan (Discount)/Premiums | Carrying Amount | Type | Weighted Average Rate | Weighted Average Maturity (in years) | |||||||||||||||||||||||||||||||||||||
Unsecured revolver(1) | $ | 277,003 | $ | (2,894) | $ | — | $ | 274,109 | Floating | 1.5% | 4.1 | |||||||||||||||||||||||||||||||||
Unsecured term loans | 500,000 | (2,049) | — | 497,951 | Floating | 1.4% | 3.2 | |||||||||||||||||||||||||||||||||||||
Secured credit facilities | 635,128 | (2,840) | 32,330 | 664,618 | Floating/Fixed | 4.0% | 6.9 | |||||||||||||||||||||||||||||||||||||
Mortgages | 1,238,612 | (9,210) | 39,256 | 1,268,658 | Fixed | 3.9% | 6.2 | |||||||||||||||||||||||||||||||||||||
Total Debt | $ | 2,650,743 | $ | (16,993) | $ | 71,586 | $ | 2,705,336 | 3.2% | 5.6 |
(1) | The unsecured revolver's maximum borrowing capacity was $500,000, of which $277,003 was outstanding as of December 31, 2021. |
|
| Scheduled maturities on our indebtedness outstanding as of June 30, 2021 |
| |||||||||||||||||||||
Debt: |
| 2021 |
|
| 2022 |
|
| 2023 |
|
| 2024 |
|
| 2025 |
|
| Thereafter |
| ||||||
Unsecured credit facility |
| $ | — |
|
| $ | — |
|
| $ | 119,503 |
|
| $ | — |
|
| $ | — |
|
| $ | — |
|
Unsecured term loans |
|
| — |
|
|
| — |
|
|
| — |
|
|
| 300,000 |
|
|
| — |
|
|
| 200,000 |
|
Mortgages (1) |
|
| 42,489 |
|
|
| 54,298 |
|
|
| 106,469 |
|
|
| 34,891 |
|
|
| 160,951 |
|
|
| 42,537 |
|
Total |
| $ | 42,489 |
|
| $ | 54,298 |
|
| $ | 225,972 |
|
| $ | 334,891 |
|
| $ | 160,951 |
|
| $ | 242,537 |
|
|
|
The following table contains summary information concerning our indebtedness as of December 31, 2020:
Debt: |
| Outstanding Principal |
|
| Unamortized Debt Issuance Costs |
|
| Carrying Amount |
|
| Type |
| Weighted Average Rate |
|
| Weighted Average Maturity (in years) |
| ||||
Unsecured credit facility (1) |
| $ | 184,802 |
|
| $ | (1,692 | ) |
| $ | 183,110 |
|
| Floating |
| 1.6% |
|
|
| 2.4 |
|
Unsecured term loans |
|
| 300,000 |
|
|
| (1,241 | ) |
|
| 298,759 |
|
| Floating |
| 1.5% |
|
|
| 3.3 |
|
Mortgages |
|
| 465,092 |
|
|
| (1,275 | ) |
|
| 463,817 |
|
| Fixed |
| 3.9% |
|
|
| 3.2 |
|
Total Debt |
| $ | 949,894 |
|
| $ | (4,208 | ) |
| $ | 945,686 |
|
|
|
| 2.7% |
|
|
| 3.1 |
|
|
|
On July 1, 2021, we drew down on our unsecured credit facility to extinguish a property mortgage totaling $18,650. The property mortgage had a weighted-average rate of 3.4%.
|
| As of June 30, 2021 |
|
| As of December 31, 2020 |
| As of March 31, 2022 | As of December 31, 2021 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||
|
| Notional |
|
| Fair Value of Assets |
|
| Fair Value of Liabilities |
|
| Notional |
|
| Fair Value of Assets |
|
| Fair Value of Liabilities |
| Notional | Fair Value of Assets | Fair Value of Liabilities | Notional | Fair Value of Assets | Fair Value of Liabilities | ||||||||||||||||||||||||||||||||||||||
Cash flow hedges: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Cash flow hedges: | |||||||||||||||||||||||||||||||||||||
Interest rate swap |
| $ | 150,000 |
|
| $ | — |
|
|
| 9,624 |
|
| $ | 150,000 |
|
| $ | — |
|
| $ | 694 |
| Interest rate swap | $ | 150,000 | $ | — | — | $ | 150,000 | $ | — | $ | 6,463 | ||||||||||||||||||||||||||
Interest rate collars |
|
| 250,000 |
|
|
| — |
|
|
| 9,762 |
|
|
| 250,000 |
|
|
| — |
|
|
| 13,331 |
| Interest rate collars | 250,000 | — | 128 | 250,000 | — | 5,433 | |||||||||||||||||||||||||||||||
Forward interest rate swaps |
|
| — |
|
|
| 853 |
|
|
| — |
|
|
| — |
|
|
| — |
|
|
| 15,817 |
| Forward interest rate swaps | — | 12,944 | — | — | 2,488 | — | |||||||||||||||||||||||||||||||
Total |
| $ | 400,000 |
|
| $ | 853 |
|
|
| 19,386 |
|
| $ | 400,000 |
|
| $ | — |
|
| $ | 29,842 |
| Total | $ | 400,000 | $ | 12,944 | 128 | $ | 400,000 | $ | 2,488 | $ | 11,896 |
On June 14, 2021, our board of directors declared a dividend of $0.12 per share on our common stock, which was paid on July 23, 2021 to common stockholders of record as of July 2, 2021.
During the three and six months ended June 30, 2021, we also paid $4 and $278, respectively, of dividends on restricted common share awards that vested during the period.
1, 2022.
March 31, 2022.
During the Three Months Ended | Number of Shares Sold | Current Forward Price | Estimated Net Proceeds | Expiration Date of Forward Contract | ||||||||||||||||||||||
December 31, 2021 | 676,500 | $ | 23.59 | $ | 15,956 | December 15, 2022 | ||||||||||||||||||||
December 31, 2021 | 323,500 | 24.19 | 7,827 | December 15, 2022 | ||||||||||||||||||||||
March 31, 2022 | 1,000,000 | 26.45 | 26,455 | March 31, 2023 | ||||||||||||||||||||||
Total | 2,000,000 | $ | 50,238 |
We have submitted Articles of Amendment to the State Department of Assessments and Taxation of Maryland to increase the number of authorized shares of common stock, $0.01 par value, from 300,000,000 to 500,000,000 and expect such Amendment to be effective July 27, 2021.
Noncontrolling Interest
On June 14, 2021, our board of directors declared a dividend of $0.12 per unit, which was paid on July 23, 2021 to IROP LP unitholders of record as of July 2, 2021.
| 2021 |
| 2022 | |||||||||||||||
| Number of Shares |
|
| Weighted Average Grant Date Fair Value Per Share |
| Number of Shares | Weighted Average Grant Date Fair Value Per Share | |||||||||||
Balance, January 1, |
| 406,849 |
|
| $ | 11.68 |
| Balance, January 1, | 404,988 | $ | 13.75 | |||||||
Granted |
| 204,095 |
|
|
| 14.27 |
| Granted | 199,008 | 23.80 | ||||||||
Vested |
| (198,054 | ) |
|
| 11.74 |
| Vested | (167,845) | 12.26 | ||||||||
Forfeited |
| (19,214 | ) |
|
| 12.89 |
| Forfeited | (11,264) | 15.25 | ||||||||
Balance, June 30, (1) |
| 393,676 |
|
| $ | 12.93 |
| |||||||||||
|
|
|
|
|
|
|
| |||||||||||
Balance, March 31, (1) | Balance, March 31, (1) | 424,887 | $ | 19.00 |
(1) | The outstanding award |
As of December 31, 2021, 2019 PSU awards were earned at 150% of target. These units constitute 50% of the earned 2019 PSUs, which generally remain subject to service-based vesting until December 31, 2022. The other 50% of the earned 2019 PSUs were distributable immediately following the end of the performance period.
For the Three Months Ended | |||||||||||||||||||||||||||
|
| For the Three Months Ended June 30, |
|
| For the Six Months Ended June 30, |
| March 31, | ||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| 2021 |
|
| 2020 |
| 2022 | 2021 | |||||||||||||
Net income |
| $ | 3,407 |
|
| $ | 799 |
|
| $ | 4,500 |
|
| $ | 425 |
| Net income | $ | 76,880 | $ | 1,093 | ||||||
Income allocated to noncontrolling interest |
|
| (21 | ) |
|
| (10 | ) |
|
| (28 | ) |
|
| (8 | ) | Income allocated to noncontrolling interest | (2,280) | (7) | ||||||||
Net income allocable to common shares |
|
| 3,386 |
|
|
| 789 |
|
|
| 4,472 |
|
|
| 417 |
| Net income allocable to common shares | $ | 74,600 | $ | 1,086 | ||||||
Weighted-average shares outstanding—Basic |
|
| 102,023,204 |
|
|
| 94,435,722 |
|
|
| 101,847,876 |
|
|
| 92,646,891 |
| Weighted-average shares outstanding—Basic | 220,798,692 | 101,678,865 | ||||||||
Weighted-average shares outstanding—Diluted |
|
| 102,923,924 |
|
|
| 95,092,860 |
|
|
| 102,822,099 |
|
|
| 93,550,425 |
| Weighted-average shares outstanding—Diluted | 222,045,286 | 102,763,106 | ||||||||
Earnings per share—Basic |
| $ | 0.03 |
|
| $ | 0.01 |
|
| $ | 0.04 |
|
| $ | 0.00 |
| Earnings per share—Basic | $ | 0.34 | $ | 0.01 | ||||||
Earnings per share—Diluted |
| $ | 0.03 |
|
| $ | 0.01 |
|
| $ | 0.04 |
|
| $ | 0.00 |
| Earnings per share—Diluted | $ | 0.34 | $ | 0.01 |
Risks and Uncertainties
Currently, one of the most significant risks and uncertainties is the duration and scope of the ongoing COVID-19 pandemic, which has disrupted businesses and slowed economic activity. In response to the COVID-19 pandemic, we have made operational and policy changes to: (1) comply with governmental mandates, including eviction moratoria, on a jurisdiction by jurisdiction basis; (2) protect our employees, residents, and prospective residents; and (3) minimize the adverse financial impact to us. The extent to which the COVID-19 pandemic impacts our business, operations and financial results will depend on numerous evolving factors, many of which are not within management’s control, and that we are unable to predict at this time, including but not limited to: (1) the duration and scope of the pandemic; (2) the pandemic’s impact on current and future economic activity; and (3) the actions of governments, businesses and individuals in response to the COVID-19 pandemic.
NOTE 10: Subsequent Events
On July 26, 2021, we, together with IROP, and IRSTAR Sub, LLC, a wholly-owned subsidiary of IRT (“IRT Merger Sub”), entered into an agreement and plan of merger (the “Merger Agreement”) with Steadfast Apartment REIT, Inc. (“STAR”) and its operating partnership, Steadfast Apartment REIT Operating Partnership, L.P. (“STAR OP”).
On the terms, and subject to the conditions of, the Merger Agreement, STAR will merge with and into IRT Merger Sub (the “REIT Merger”), with IRT Merger Sub surviving the REIT Merger as a wholly-owned subsidiary of IRT; and immediately thereafter,
STAR OP will merge with and into IROP (the “Partnership Merger” and, together with the REIT Merger, the “Mergers”), with IROP surviving the Partnership Merger.
In the REIT Merger, each outstanding share of STAR common stock, par value $0.01 per share (“STAR common stock”) will be converted automatically into the right to receive 0.905 (the “Exchange Ratio”) of a newly issued share of IRT common stock, par value $0.01 per share (“IRT common stock”). In the Partnership Merger, each outstanding unit of limited partnership of STAR OP (each, an “STAR OP common unit”) will be converted into the right to receive the Exchange Ratio of a newly issued common unit of limited partnership of IROP (each, an “IROP common unit”). Under the agreement of limited partnership of IROP, IRT common unitholders may generally tender their IRT common units, in whole or in part, to IROP for redemption for a cash amount based on the then market price of an equivalent number of shares of IRT common stock, and IRT may thereupon elect, at its option, to satisfy the redemption by issuing 1 share of IRT common stock for each IROP common unit tendered for redemption.
Through the Mergers, STAR stockholders will receive, in aggregate, in exchange for their shares of STAR common stock, approximately 99.8 million shares of IRT common stock and limited partners in STAR OP will receive, in aggregate, in exchange for their STAR OP Units, approximately 6.4 million IROP common units.
Consummation of the Mergers is subject to customary closing conditions, including, among others, receipt of IRT stockholder approval and STAR stockholder approval, and is expected to occur in the fourth quarter of 2021.
| Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Factors that might cause actual results to differ materially from
events
operations and our business is not seasonal. Our executive offices are located at 1835 Market Street, Suite 2601, Philadelphia, PA 19103 and our telephone number is (267) 270-4800. We have offices in Philadelphia, Pennsylvania and Chicago, Illinois.
•increasing cash flows at our existing apartment properties through prudent property management and strategic renovation projects; and |
|
•acquiring additional properties that have strong and stable occupancies and support a rise in rental rates or that have the potential for repositioning through capital expenditures or tailored management strategies. |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands, except per unit data) |
| As of June 30, 2021 |
|
| For the Three Months Ended June 30, |
| (Dollars in thousands, except per unit data) | As of March 31, 2022 | For the Three Months Ended March 31, | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Market |
| Number of Properties |
|
| Units |
|
| Gross Real Estate Assets |
|
| Period End Occupancy |
|
| Average Effective Monthly Rent per Unit |
|
| Net Operating Income |
|
| % of NOI |
| Market | Number of Properties | Units | Gross Real Estate Assets | Period End Occupancy | Average Effective Monthly Rent per Unit | Net Operating Income | % of NOI | |||||||||||||||||||||||||||||||||||||||||||
Atlanta, GA |
|
| 6 |
|
|
| 2,020 |
|
| $ | 263,212 |
|
|
| 96.3 | % |
| $ | 1,274 |
|
| $ | 4,961 |
|
|
| 14.1 | % | Atlanta, GA | 13 | 5,180 | $ | 1,048,599 | 94.3 | % | $ | 1,459 | $ | 14,650 | 15.6 | % | |||||||||||||||||||||||||||||||
Dallas, TX | Dallas, TX | 14 | 4,007 | 842,070 | 96.0 | % | 1,609 | 11,333 | 12.1 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Denver, CO | Denver, CO | 9 | 2,292 | 599,241 | 96.3 | % | 1,559 | 7,519 | 8.0 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Columbus, OH | Columbus, OH | 10 | 2,510 | 359,129 | 96.0 | % | 1,236 | 5,855 | 6.3 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Indianapolis, IN | Indianapolis, IN | 8 | 2,256 | 320,547 | 95.6 | % | 1,192 | 5,135 | 5.5 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Oklahoma City, OK | Oklahoma City, OK | 8 | 2,147 | 311,974 | 95.6 | % | 1,057 | 4,631 | 4.9 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Raleigh - Durham, NC |
|
| 6 |
|
|
| 1,690 |
|
|
| 247,616 |
|
|
| 94.5 | % |
|
| 1,212 |
|
|
| 4,212 |
|
|
| 12.0 | % | Raleigh - Durham, NC | 6 | 1,690 | 251,966 | 95.6 | % | 1,322 | 4,298 | 4.6 | % | ||||||||||||||||||||||||||||||||||
Houston, TX | Houston, TX | 7 | 1,932 | 320,307 | 95.1 | % | 1,337 | 4,166 | 4.4 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Nashville, TN | Nashville, TN | 4 | 1,412 | 337,784 | 96.0 | % | 1,456 | 4,157 | 4.4 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Memphis, TN |
|
| 4 |
|
|
| 1,383 |
|
|
| 150,487 |
|
|
| 95.4 | % |
|
| 1,243 |
|
|
| 3,516 |
|
|
| 10.0 | % | Memphis, TN | 4 | 1,383 | 155,310 | 94.1 | % | 1,372 | 3,651 | 3.9 | % | ||||||||||||||||||||||||||||||||||
Louisville, KY |
|
| 6 |
|
|
| 1,710 |
|
|
| 203,104 |
|
|
| 93.0 | % |
|
| 1,035 |
|
|
| 2,998 |
|
|
| 8.5 | % | Louisville, KY | 5 | 1,550 | 191,543 | 94.5 | % | 1,102 | 3,145 | 3.4 | % | ||||||||||||||||||||||||||||||||||
Tampa-St. Petersburg, FL |
|
| 4 |
|
|
| 1,104 |
|
|
| 183,842 |
|
|
| 96.5 | % |
|
| 1,354 |
|
|
| 2,770 |
|
|
| 7.9 | % | Tampa-St. Petersburg, FL | 4 | 1,104 | 188,646 | 94.8 | % | 1,539 | 3,107 | 3.3 | % | ||||||||||||||||||||||||||||||||||
Columbus, OH |
|
| 6 |
|
|
| 1,547 |
|
|
| 158,664 |
|
|
| 95.0 | % |
|
| 1,095 |
|
|
| 2,735 |
|
|
| 7.8 | % | ||||||||||||||||||||||||||||||||||||||||||||
Dallas, TX |
|
| 5 |
|
|
| 1,307 |
|
|
| 213,934 |
|
|
| 95.9 | % |
|
| 1,353 |
|
|
| 2,510 |
|
|
| 7.2 | % | ||||||||||||||||||||||||||||||||||||||||||||
Oklahoma City, OK |
|
| 5 |
|
|
| 1,658 |
|
|
| 80,001 |
|
|
| 97.3 | % |
|
| 712 |
|
|
| 2,219 |
|
|
| 6.3 | % | ||||||||||||||||||||||||||||||||||||||||||||
Indianapolis, IN |
|
| 4 |
|
|
| 916 |
|
|
| 92,201 |
|
|
| 96.6 | % |
|
| 1,097 |
|
|
| 1,851 |
|
|
| 5.3 | % | ||||||||||||||||||||||||||||||||||||||||||||
Birmingham, AL | Birmingham, AL | 2 | 1,074 | 231,035 | 94.9 | % | 1,338 | 2,965 | 3.2 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Huntsville, AL |
|
| 2 |
|
|
| 599 |
|
|
| 110,179 |
|
|
| 98.0 | % |
|
| 1,301 |
|
|
| 1,796 |
|
|
| 5.1 | % | Huntsville, AL | 3 | 873 | 189,757 | 94.6 | % | 1,442 | 2,665 | 2.8 | % | ||||||||||||||||||||||||||||||||||
Lexington, KY | Lexington, KY | 3 | 886 | 159,099 | 96.4 | % | 1,164 | 2,170 | 2.3 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Cincinnati, OH | Cincinnati, OH | 2 | 542 | 121,391 | 96.0 | % | 1,370 | 1,603 | 1.7 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Myrtle Beach, SC - Wilmington, NC |
|
| 3 |
|
|
| 628 |
|
|
| 65,253 |
|
|
| 93.9 | % |
|
| 1,091 |
|
|
| 1,429 |
|
|
| 4.1 | % | Myrtle Beach, SC - Wilmington, NC | 3 | 628 | 66,381 | 95.5 | % | 1,184 | 1,577 | 1.7 | % | ||||||||||||||||||||||||||||||||||
Charlotte, NC | Charlotte, NC | 2 | 480 | 109,233 | 95.2 | % | 1,530 | 1,544 | 1.6 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Greenville, SC | Greenville, SC | 1 | 702 | 122,606 | 97.2 | % | 1,129 | 1,491 | 1.6 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Charleston, SC |
|
| 2 |
|
|
| 518 |
|
|
| 80,303 |
|
|
| 95.3 | % |
|
| 1,330 |
|
|
| 1,219 |
|
|
| 3.5 | % | Charleston, SC | 2 | 518 | 80,793 | 96.3 | % | 1,418 | 1,342 | 1.4 | % | ||||||||||||||||||||||||||||||||||
Charlotte, NC |
|
| 2 |
|
|
| 480 |
|
|
| 108,784 |
|
|
| 93.5 | % |
|
| 1,436 |
|
|
| 944 |
|
|
| 2.7 | % | ||||||||||||||||||||||||||||||||||||||||||||
Chicago, IL | Chicago, IL | 1 | 374 | 89,785 | 95.2 | % | 1,649 | 1,107 | 1.2 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Orlando, FL |
|
| 1 |
|
|
| 297 |
|
|
| 49,378 |
|
|
| 96.3 | % |
|
| 1,459 |
|
|
| 817 |
|
|
| 2.3 | % | Orlando, FL | 1 | 297 | 49,972 | 97.3 | % | 1,539 | 810 | 0.9 | % | ||||||||||||||||||||||||||||||||||
San Antonio, TX | San Antonio, TX | 1 | 306 | 56,955 | 95.8 | % | 1,455 | 828 | 0.9 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Terra Haute, IN | Terra Haute, IN | 1 | 250 | 45,795 | 90.0 | % | 1,390 | 659 | 0.7 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Norfolk, VA | Norfolk, VA | 1 | 183 | 53,876 | 96.2 | % | 1,728 | 670 | 0.7 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Asheville, NC |
|
| 1 |
|
|
| 252 |
|
|
| 29,030 |
|
|
| 96.8 | % |
|
| 1,157 |
|
|
| 617 |
|
|
| 1.8 | % | Asheville, NC | 1 | 252 | 29,123 | 97.2 | % | 1,274 | 705 | 0.8 | % | ||||||||||||||||||||||||||||||||||
St. Louis, MO |
|
| 1 |
|
|
| 152 |
|
|
| 33,728 |
|
|
| 98.0 | % |
|
| 1,457 |
|
|
| 474 |
|
|
| 1.4 | % | ||||||||||||||||||||||||||||||||||||||||||||
Austin, TX | Austin, TX | 1 | 256 | 54,374 | 97.6 | % | 1,569 | 733 | 0.8 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fort Wayne, IN | Fort Wayne, IN | 1 | 222 | 43,920 | 95.5 | % | 1,316 | 613 | 0.7 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Chattanooga, TN | Chattanooga, TN | 1 | 192 | 36,772 | 95.8 | % | 1,338 | 495 | 0.5 | % | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total/Weighted Average |
|
| 58 |
|
|
| 16,261 |
|
| $ | 2,069,716 |
|
|
| 95.6 | % |
| $ | 1,171 |
|
| $ | 35,068 |
|
|
| 100.0 | % | Total/Weighted Average | 119 | 35,498 | $ | 6,467,983 | 95.4 | % | $ | 1,374 | $ | 93,624 | 100.0 | % | |||||||||||||||||||||||||||||||
|
|
|
|
|
|
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|
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|
As
Current Developments
Agreement and Plan of Merger
On July 26, 2021, we, together with IROP, and IRSTAR Sub, LLC, a wholly-owned subsidiary of IRT (“IRT Merger Sub”), entered into an agreement and plan of merger (the “Merger Agreement”) with Steadfast Apartment REIT, Inc. (“STAR”) and its operating partnership, Steadfast Apartment REIT Operating Partnership, L.P. (“STAR OP”).
Onshortly after the terms, and subject to the conditionsclosing of the STAR Merger, Agreement,we delevered our combined balance sheet through a combination of transactions totaling $600 million including the July 2021 underwritten offering, the disposition of three STAR will merge withproperties prior to merger closing, and into IRT Merger Sub (the “REIT Merger”), with IRT Merger Sub surviving the REIT Mergerdisposition of two properties in late 2021 and four properties in Q1 2022 as a wholly-owned subsidiary of IRT; and immediately thereafter, STAR OP will merge with and into IROP (the “Partnership Merger” and, together withdescribed below.
In the REIT Merger, each outstanding share of STAR common stock, par value $0.01 per share (“STAR common stock”) will be converted automatically into the right to receive 0.905 (the “Exchange Ratio”) of a newly issued share of IRT common stock, par value $0.01 per share (“IRT common stock”). In the Partnership Merger, each outstanding unit of limited partnership of STAR OP (each, an “STAR OP common unit”) will be converted into the right to receive the Exchange Ratio of a newly issued common unit of limited partnership of IROP (each, an “IROP common unit”). Under the agreement of limited partnership of IROP, IRT common unitholders may generally tender their IRT common units, in whole or in part, to IROP for redemptionthree months ended March 31, 2022, we sold four communities for a cash amount based on the then marketgross sales price of an equivalent number$158.0 million and recognized a gain on sale of shares of IRT common stock, and IRT may thereupon elect, at its option, to satisfy the redemption by issuing one share of IRT common stock for each IROP common unit tendered for redemption.
Through the Mergers, STAR stockholders will receive, in aggregate, in exchange for their shares of STAR common stock, approximately 99.8 million shares of IRT common stock and limited partners in STAR OP will receive, in aggregate, in exchange for their STAR OP Units, approximately 6.4 million IROP common units.
Consummation of the Mergers is subject to customary closing conditions, including, among others, receipt of IRT stockholder approval and STAR stockholder approval, and is expected to occur in the fourth quarter of 2021.
$94.7 million.
In May 2021, we purchased a 272-unit located in Charlotte, NC for $66.5 million.
In June 2021, we purchased a 322-unit located in McKinney, TX for $73.4 million.
2022.
Unconsolidated Real Estate Entities
Value Add
Value add initiatives, comprised ofopportunity to improve long-term growth through targeted unit renovations and upgrades at selected communities to drive increased rental rates, remain a core component of our longer-term growth strategy. As of June 30, 2021, we had identified 7,076where there is the potential for outsized rent growth.
2023.
New Term Loan
On May 18, 2021, we entered into a Second Amended and Restated Credit Agreement which provided for a $550.0 million unsecured credit facility (the “Facility”) that consists of a $350.0 million revolving line of credit (the “Unsecured Revolving Line of Credit”) and a new $200.0 million senior term loan (“the New Unsecured Term Loan”). Additionally, we have the right to increase the aggregate amount of the Facility to up to $600.0 million, subject to certain terms and conditions. The maturity date on borrowings outstanding under the Unsecured Revolving Line of Credit is May 9, 2023, subject to our option to extend the revolving commitment for two additional 6-month periods under certain circumstances, including a payment of an extension fee. The maturity date on the New Unsecured Term Loan is May 18, 2026. We may prepay the Facility, in whole or in part, at any time without prepayment fee or penalty. At our option, borrowings under the Unsecured Revolving Line of Credit will bear interest at a rate equal to either (i) the 1-month LIBOR rate plus a margin of 125 to 200 basis points, or (ii) a base rate plus a margin of 25 to 100 basis points and borrowings under the New Unsecured Term Loan will bear interest at a rate equal to either (i) the LIBOR rate plus a margin of 120 to 190 basis points, or (ii) a base rate plus a margin of 20 to 90 basis points. The applicable margin is determined based upon our total consolidated leverage ratio. Substantially all of the proceeds of the New Unsecured Term Loan were applied at closing to repay the outstanding balance under the revolving credit facility established under the prior credit agreement. We recognized the refinance of the Unsecured Revolving Line of Credit as a modification of debt. The New Unsecured Term Loan was accounted for as an issuance of new debt. We incurred upfront costs of $1.2 million associated with this transaction.
|
| SAME STORE PROPERTIES |
|
| NON SAME STORE PROPERTIES |
|
| CONSOLIDATED |
| |||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) |
| Three Months Ended June 30, |
|
| Three Months Ended June 30, |
|
| Three Months Ended June 30, |
| |||||||||||||||||||||||||||||||||||||||
|
| 2021 |
|
| 2020 |
|
| Increase (Decrease) |
|
| % Change |
|
| 2021 |
|
| 2020 |
|
| Increase (Decrease) |
|
| % Change |
|
| 2021 |
|
| 2020 |
|
| Increase (Decrease) |
|
| % Change |
| ||||||||||||
Property Data: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of properties |
| 53 |
|
| 53 |
|
|
|
|
|
|
|
|
|
| 5 |
|
| 5 |
|
|
| - |
|
|
| 0.0 | % |
| 58 |
|
| 58 |
|
|
| - |
|
|
| 0.0 | % | ||||||
Number of units |
|
| 14,843 |
|
|
| 14,843 |
|
|
|
|
|
|
|
|
|
|
| 1,418 |
|
|
| 962 |
|
|
| 456 |
|
|
| 47.4 | % |
|
| 16,261 |
|
|
| 15,805 |
|
|
| 456 |
|
|
| 2.9 | % |
Average occupancy |
|
| 96.1 | % |
|
| 93.1 | % |
|
| 3.0 | % |
| n/a |
|
|
| 94.1 | % |
|
| 91.2 | % |
|
| 2.9 | % |
| n/a |
|
|
| 95.9 | % |
|
| 92.9 | % |
|
| 3.0 | % |
| n/a |
| |||
Average effective monthly rent, per unit |
|
| 1,146 |
|
|
| 1,103 |
|
|
| 43 |
|
|
| 3.9 | % |
|
| 1,434 |
|
|
| 1,183 |
|
|
| 251 |
|
|
| 21.2 | % |
|
| 1,171 |
|
|
| 1,108 |
|
|
| 63 |
|
|
| 5.7 | % |
Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Rental and other property revenue |
|
| 52,819 |
|
|
| 48,703 |
|
|
| 4,116 |
|
|
| 8.5 | % |
|
| 4,467 |
|
|
| 3,384 |
|
|
| 1,083 |
|
|
| 32.0 | % |
| $ | 57,286 |
|
| $ | 52,087 |
|
| $ | 5,199 |
|
|
| 10.0 | % |
Expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property operating expenses |
|
| 20,776 |
|
|
| 19,454 |
|
|
| 1,322 |
|
|
| 6.8 | % |
|
| 1,522 |
|
|
| 1,520 |
|
|
| 2 |
|
|
| 0.1 | % |
| $ | 22,298 |
|
| $ | 20,974 |
|
|
| 1,324 |
|
|
| 6.3 | % |
Net Operating Income |
|
| 32,043 |
|
|
| 29,249 |
|
|
| 2,794 |
|
|
| 9.6 | % |
|
| 2,945 |
|
|
| 1,864 |
|
|
| 1,081 |
|
|
| 58.0 | % |
| $ | 34,988 |
|
| $ | 31,113 |
|
| $ | 3,875 |
|
|
| 12.5 | % |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other Revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Other revenue |
|
| $ | 158 |
|
| $ | 181 |
|
| $ | (23 | ) |
|
| -12.7 | % | |||||||||||||||||||||||||||||||
Corporate and other expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Property management expenses |
|
| $ | 2,176 |
|
| $ | 2,077 |
|
|
| 99 |
|
|
| 4.8 | % | |||||||||||||||||||||||||||||||
General and administrative expenses |
|
| $ | 4,241 |
|
| $ | 3,574 |
|
|
| 667 |
|
|
| 18.7 | % | |||||||||||||||||||||||||||||||
Depreciation and amortization expense |
|
| $ | 16,763 |
|
| $ | 15,231 |
|
|
| 1,532 |
|
|
| 10.1 | % | |||||||||||||||||||||||||||||||
Casualty losses |
|
| $ | - |
|
| $ | 411 |
|
|
| (411 | ) |
| nm |
| ||||||||||||||||||||||||||||||||
Total corporate and other expenses |
|
| $ | 23,180 |
|
| $ | 21,293 |
|
|
| 1,887 |
|
|
| 8.9 | % | |||||||||||||||||||||||||||||||
Interest expense |
|
| $ | (8,559 | ) |
| $ | (9,202 | ) |
|
| 643 |
|
|
| 7.0 | % | |||||||||||||||||||||||||||||||
Net income |
|
| $ | 3,407 |
|
| $ | 799 |
|
|
| 2,608 |
|
|
| 326.4 | % | |||||||||||||||||||||||||||||||
Income allocated to noncontrolling interests |
|
| $ | (21 | ) |
| $ | (10 | ) |
|
| (11 | ) |
|
| -110.0 | % | |||||||||||||||||||||||||||||||
Net income available to common shares |
|
| $ | 3,386 |
|
| $ | 789 |
|
| $ | 2,597 |
|
|
| 329.2 | % |
COMBINED SAME-STORE PROPERTIES | COMBINED NON SAME-STORE PROPERTIES | Q1 2021 Pre-Merger STAR Portfolio(1) | CONSOLIDATED | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
(Dollars in thousands) | Three Months Ended March 31, | Three Months Ended March 31, | Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
2022 | 2021 | Increase (Decrease) | % Change | 2022 | 2021 | Increase (Decrease) | % Change | 2022 | 2021 | Increase (Decrease) | % Change | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property Data: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of properties | 113 | 113 | — | —% | 6 | 10 | (4) | (40.0)% | (67) | 119 | 56 | 63 | 112.5% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Number of units | 33,804 | 33,804 | — | —% | 1,694 | 2,831 | (1,137) | (40.2)% | (20,968) | 35,498 | 15,667 | 19,831 | 126.6% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average occupancy | 95.4% | 95.3% | 0.1% | 0.1% | 93.1% | 93.2% | 0.1% | —% | NM | 95.2% | 95.4% | (0.2)% | (0.2)% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Average effective monthly rent, per unit | 1,373 | 1,244 | 129 | 10.4% | 1,397 | 898 | 499 | 55.6% | NM | 1,374 | 1,142 | 232 | 20.3% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Rental and other property revenue | 141,706 | 127,667 | 14,039 | 11.0% | 8,271 | 8,279 | (8) | (0.1)% | $(81,135) | $149,977 | $54,811 | $95,166 | 173.6% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Expenses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property operating expenses | 52,537 | 50,920 | 1,617 | 3.2% | 3,346 | 3,474 | (128) | (3.7)% | (33,556) | 55,883 | 20,838 | 35,045 | 168.2% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net Operating Income | $89,169 | $76,747 | $12,422 | 16.2% | $4,925 | $4,805 | $120 | 2.5% | $(47,579) | $94,094 | $33,973 | $60,121 | 177.0% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other Revenue: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other revenue | $385 | $301 | $84 | 27.9% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Corporate and other expenses: | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Property management expenses | 5,556 | 1,943 | 3,613 | 185.9% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Other (income) expense, net | (380) | — | (380) | 100.0% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
General and administrative expenses | 7,928 | 5,942 | 1,986 | 33.4% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Depreciation and amortization expense | 78,174 | 16,552 | 61,622 | 372.3% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Casualty (gains) losses, net | (1,393) | 359 | (1,752) | (488.0)% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Total corporate and other expenses | $89,885 | $24,796 | $65,089 | 262.5% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Interest expense | (20,531) | (8,385) | (12,146) | 144.9% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Merger and integration costs | (1,895) | — | (1,895) | 100.0% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Gain on sale of real estate assets, net | 94,712 | — | 94,712 | 100.0% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income | $76,880 | $1,093 | $75,787 | 6933.9% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income allocated to noncontrolling interests | (2,280) | (7) | (2,273) | 32471.4% | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income available to common shares | $74,600 | $1,086 | $73,514 | 6769.2% |
Six Months Ended June 30, 2021 compared to the Six Months Ended June 30, 2020
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| SAME STORE PROPERTIES |
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| NON SAME STORE PROPERTIES |
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| CONSOLIDATED |
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(Dollars in thousands) |
| For the Six Months Ended June 30, |
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| For the Six Months Ended June 30, |
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| For the Six Months Ended June 30, |
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| 2021 |
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| 2020 |
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| Increase (Decrease) |
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| % Change |
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| 2021 |
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| 2020 |
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| Increase (Decrease) |
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| % Change |
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| 2021 |
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| 2020 |
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| Increase (Decrease) |
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| % Change |
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Property Data: |
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Number of properties |
| 53 |
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| 53 |
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|
|
|
|
|
| 5 |
|
|
| 5 |
|
|
| - |
|
|
| 0.0 | % |
| 58 |
|
|
| 58 |
|
|
| - |
|
|
| 0.0 | % | ||||
Number of units |
|
| 14,843 |
|
|
| 14,843 |
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|
|
|
|
|
|
|
|
|
| 1,418 |
|
|
| 962 |
|
|
| 456 |
|
|
| 47.4 | % |
|
| 16,261 |
|
|
| 15,805 |
|
|
| 456 |
|
|
| 2.9 | % |
Average occupancy |
|
| 95.7 | % |
|
| 92.9 | % |
|
| 2.8 | % |
| n/a |
|
|
| 95.1 | % |
|
| 92.5 | % |
|
| 2.6 | % |
| n/a |
|
|
| 95.7 | % |
|
| 92.7 | % |
|
| 3.0 | % |
| n/a |
| |||
Average effective monthly rent, per unit |
|
| 1,136 |
|
|
| 1,099 |
|
|
| 37 |
|
|
| 3.4 | % |
|
| 1,440 |
|
|
| 1,190 |
|
|
| 250 |
|
|
| 21.0 | % |
|
| 1,157 |
|
|
| 1,104 |
|
|
| 53 |
|
|
| 4.8 | % |
Revenue: |
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Rental and other property revenue |
| $ | 103,991 |
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| $ | 97,113 |
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| $ | 6,878 |
|
|
| 7.1 | % |
| $ | 8,106 |
|
| $ | 6,130 |
|
| $ | 1,976 |
|
|
| 32.2 | % |
| $ | 112,097 |
|
| $ | 103,243 |
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| $ | 8,854 |
|
|
| 8.6 | % |
Expenses: |
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Property operating expenses |
|
| 40,467 |
|
|
| 37,997 |
|
|
| 2,470 |
|
|
| 6.5 | % |
|
| 2,669 |
|
|
| 2,714 |
|
|
| (45 | ) |
|
| -1.7 | % |
|
| 43,136 |
|
|
| 40,711 |
|
|
| 2,425 |
|
|
| 6.0 | % |
Net Operating Income |
| $ | 63,524 |
|
| $ | 59,116 |
|
| $ | 4,408 |
|
|
| 7.5 | % |
| $ | 5,437 |
|
| $ | 3,416 |
|
| $ | 2,021 |
|
|
| 59.2 | % |
| $ | 68,961 |
|
| $ | 62,532 |
|
| $ | 6,429 |
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|
| 10.3 | % |
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Other Revenue: |
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|
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| |||||||||||||||||||||||||||||||
Other revenue |
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| $ | 459 |
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| $ | 375 |
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| $ | 84 |
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| 22.4 | % | |||||||||||||||||||||||||||||||
Corporate and other expenses: |
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Property management expenses |
|
|
| 4,119 |
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| 4,233 |
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|
| (114 | ) |
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| -2.7 | % | |||||||||||||||||||||||||||||||
General and administrative expenses |
|
|
| 10,183 |
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| 8,950 |
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| 1,233 |
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| 13.8 | % | |||||||||||||||||||||||||||||||
Depreciation and amortization expense |
|
|
| 33,315 |
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| 30,059 |
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| 3,256 |
|
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| 10.8 | % | |||||||||||||||||||||||||||||||
Abandoned deal costs |
|
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| - |
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|
| 130 |
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|
| (130 | ) |
| nm |
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Casualty losses |
|
|
| 359 |
|
|
| 411 |
|
|
| (52 | ) |
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| -12.7 | % | |||||||||||||||||||||||||||||||
Total corporate and other expenses |
|
|
| 47,976 |
|
|
| 43,783 |
|
|
| 4,193 |
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|
| 9.6 | % | |||||||||||||||||||||||||||||||
Interest expense |
|
|
| (16,944 | ) |
|
| (18,699 | ) |
|
| 1,755 |
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|
| 9.4 | % | |||||||||||||||||||||||||||||||
Net income |
|
|
| 4,500 |
|
|
| 425 |
|
|
| 4,075 |
|
|
| 958.8 | % | |||||||||||||||||||||||||||||||
Income allocated to noncontrolling interests |
|
|
| (28 | ) |
|
| (8 | ) |
|
| (20 | ) |
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| -250.0 | % | |||||||||||||||||||||||||||||||
Net income available to common shares |
|
| $ | 4,472 |
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| $ | 417 |
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| $ | 4,055 |
|
|
| 972.4 | % |
Revenue
RentalMarch 31, 2022. These costs primarily consist of payroll and severance costs for transitional employees, IT merger costs, and other property revenue. Revenue from rentalmigration and other property revenueintegration costs.
Expenses
Property operating expenses. Property operating expenses increased $2.4 million to $43.1 million for the six months ended June 30, 2021 from $40.7 million for the six months ended June 30, 2020. The increase was primarily due to a $2.5 million increase in the same store property operating expenses, primarily related to an increase in repairs and maintenance, property insurance, utilities, contract services, and personnel costs during the six months ended June 30, 2021.
Property management expenses. Property management expenses decreased $0.1 million to $4.1 million for the six months ended June 30, 2021 from $4.2 million for the six months ended June 30, 2020.
General and administrative expenses. General and administrative expenses increased $1.2 million to $10.2 million for the six months ended June 30, 2021 from $9.0 million for the six months ended June 30, 2020. This increase was primarily due to a $1.0 million increase in compensation expense, primarily due to higher stock based compensation expense driven by our higher stock price and a higher volatility assumption used in valuing the performance share units awarded during the six months ended June 30, 2021.
Depreciation and amortization expense. Depreciation and amortization expense increased $3.2 million to $33.3 million for the six months ended June 30, 2021 from $30.1 million for the six months ended June 30, 2020. The increase was primarily attributable to a $2.1 million increase in depreciation expense at our value add properties for the six months ended June 30, 2021 compared to the six months ended June 30, 2020 and $1.1 million in depreciation expense for properties acquired since June 30, 2020.
Interest expense. Interest expense decreased $1.8 million to $16.9 million for the six months ended June 30, 2021 from $18.7 million for the six months ended June 30, 2020. The decrease was primarily due to lower interest rates during the six months ended June 30, 2021 compared to the six months ended June 30, 2020.
We updated our definition of CFFO during the three months ended March 31, 2021 to the definition described below. All prior periods have been adjusted to conform to the current CFFO definition.
investors with an additional useful measure to compare our financial performance to certain other REITs. Neither FFO nor CFFO is equivalent to net income or cash generated from operating activities determined in accordance with GAAP. Furthermore, FFO and CFFO do not represent amounts available for management’s discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments or uncertainties. Accordingly, FFO and CFFO do not measure whether cash flow is sufficient to fund all of our cash needs, including principal amortization and capital improvements. Neither FFO nor CFFO should be considered as an alternative to net income or any other GAAP measurement as an indicator of our operating performance or as an alternative to cash flow from operating, investing, and financing activities as a measure of our liquidity.
|
| For the Three Months Ended June 30, 2021 |
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| For the Three Months Ended June 30, 2020 |
| ||||||||||
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| Amount |
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| Per Share (1) |
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| Amount |
|
| Per Share (2) |
| ||||
Funds From Operations (FFO): |
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|
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|
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|
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|
|
|
|
|
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Net income (loss) |
| $ | 3,407 |
|
| $ | 0.03 |
|
| $ | 799 |
|
| $ | 0.01 |
|
Adjustments: |
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|
|
|
|
|
|
|
|
|
|
|
|
|
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Real estate depreciation and amortization |
|
| 16,683 |
|
|
| 0.17 |
|
|
| 15,156 |
|
|
| 0.15 |
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FFO |
| $ | 20,090 |
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| $ | 0.20 |
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| $ | 15,955 |
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| $ | 0.16 |
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Core Funds From Operations (CFFO): |
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FFO |
| $ | 20,090 |
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| $ | 0.20 |
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| $ | 15,955 |
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| $ | 0.16 |
|
Adjustments: |
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|
|
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|
|
|
|
|
|
|
|
|
|
|
|
Other depreciation and amortization |
|
| 80 |
|
|
| — |
|
|
| 75 |
|
|
| — |
|
Casualty losses |
|
| — |
|
|
| — |
|
|
| 411 |
|
|
| 0.01 |
|
CFFO |
| $ | 20,170 |
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| $ | 0.20 |
|
| $ | 16,441 |
|
| $ | 0.17 |
|
|
| For the Six Months Ended June 30, 2021 |
|
| For the Six Months Ended June 30, 2020 |
| ||||||||||
|
| Amount |
|
| Per Share (1) |
|
| Amount |
|
| Per Share (2) |
| ||||
Funds From Operations (FFO): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
| $ | 4,500 |
|
| $ | 0.04 |
|
| $ | 425 |
|
|
| — |
|
Adjustments: |
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|
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|
|
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|
Real estate depreciation and amortization |
|
| 33,155 |
|
|
| 0.33 |
|
| $ | 29,881 |
|
|
| 0.32 |
|
FFO |
| $ | 37,655 |
|
| $ | 0.37 |
|
| $ | 30,306 |
|
| $ | 0.32 |
|
Core Funds From Operations (CFFO): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FFO |
| $ | 37,655 |
|
| $ | 0.37 |
|
| $ | 30,306 |
|
| $ | 0.32 |
|
Adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other depreciation and amortization |
|
| 160 |
|
|
| — |
|
|
| 178 |
|
|
| — |
|
Abandoned deal costs |
|
| — |
|
|
| — |
|
|
| 130 |
|
|
| — |
|
Casualty losses |
|
| 359 |
|
|
| — |
|
|
| 411 |
|
|
| 0.01 |
|
CFFO |
| $ | 38,174 |
|
| $ | 0.37 |
|
| $ | 31,025 |
|
| $ | 0.33 |
|
|
|
For the Three Months Ended March 31, 2022 | For the Three Months Ended March 31, 2021 | ||||||||||||||||||||||||||||
Amount | Per Share (1) | Amount | Per Share (2) | ||||||||||||||||||||||||||
Funds From Operations (FFO): | |||||||||||||||||||||||||||||
Net income | $ | 76,880 | $ | 0.34 | $ | 1,093 | $ | 0.01 | |||||||||||||||||||||
Adjustments: | |||||||||||||||||||||||||||||
Real estate depreciation and amortization | 77,943 | 0.34 | 16,472 | 0.16 | |||||||||||||||||||||||||
Net gain on sale of real estate assets excluding debt extinguishment costs | (94,712) | (0.42) | — | — | |||||||||||||||||||||||||
FFO | $ | 60,111 | $ | 0.26 | $ | 17,565 | $ | 0.17 | |||||||||||||||||||||
Core Funds From Operations (CFFO): | |||||||||||||||||||||||||||||
FFO | $ | 60,111 | $ | 0.26 | $ | 17,565 | $ | 0.17 | |||||||||||||||||||||
Adjustments: | |||||||||||||||||||||||||||||
Other depreciation and amortization | 231 | — | 80 | — | |||||||||||||||||||||||||
Casualty (gains) losses, net | (1,393) | — | 359 | 0.01 | |||||||||||||||||||||||||
Loan (premium accretion) discount amortization, net | (2,754) | (0.01) | — | — | |||||||||||||||||||||||||
Other (income) expense, net | (380) | — | — | — | |||||||||||||||||||||||||
Merger and integration costs | 1,895 | — | — | — | |||||||||||||||||||||||||
CFFO | $ | 57,710 | $ | 0.25 | $ | 18,004 | $ | 0.18 |
|
|
Same Store
Three Months Ended June 30, (a) Six Months Ended June 30, (a) 2021 2020 % change 2021 2020 % change Revenue: Rental and other property revenue $ 52,819 $ 48,703 8.5 % $ 103,991 $ 97,113 7.1 % Property Operating Expenses Real estate taxes 6,502 6,449 0.8 % 12,861 12,377 3.9 % Property insurance 1,214 1,083 12.1 % 2,385 1,983 20.3 % Personnel expenses 4,850 4,675 3.7 % 9,375 9,075 3.3 % Utilities 2,665 2,554 4.3 % 5,557 5,319 4.5 % Repairs and maintenance 2,226 1,680 32.5 % 3,861 3,215 20.1 % Contract services 2,127 2,053 3.6 % 4,136 3,882 6.5 % Advertising expenses 565 482 17.2 % 1,084 1,006 7.8 % Other expenses 627 478 31.2 % 1,208 1,140 6.0 % Total property operating expenses 20,776 19,454 6.8 % 40,467 37,997 6.5 % Net operating income $ 32,043 $ 29,249 9.6 % $ 63,524 $ 59,116 7.5 % NOI Margin 60.7 % 60.1 % 0.6 % 61.1 % 60.9 % 0.2 % Average Occupancy 96.1 % 93.1 % 3.0 % 95.7 % 92.9 % 2.8 % Average effective monthly rent, per unit $ 1,146 $ 1,103 3.9 % $ 1,136 $ 1,099 3.4 % Reconciliation of Same-Store Net Operating Income to Net Income (Loss) Same-store portfolio net operating income (a) $ 32,043 $ 29,249 $ 63,524 59,116 Non same-store net operating income 2,945 1,864 5,437 3,416 Other revenue 158 181 459 375 Property management expenses (2,176 ) (2,077 ) (4,119 ) (4,233 ) General and administrative expenses (4,241 ) (3,574 ) (10,183 ) (8,950 ) Depreciation and amortization (16,763 ) (15,231 ) (33,315 ) (30,059 ) Abandoned deal costs — — — (130 ) Casualty losses — (411 ) (359 ) (411 ) Interest expense (8,559 ) (9,202 ) (16,944 ) (18,699 ) Net income (loss) $ 3,407 $ 799 $ 4,500 $ 425 •make investments to continue our value add initiatives to improve the quality and performance of our properties; •repay our indebtedness; •fund costs necessary to maintain our properties; •pay our operating expenses; and •the use of our cash and cash equivalents of $24.0 million as of March 31, 2022; •existing and future unsecured financing, including advances under our unsecured credit facility, and financing secured directly or indirectly by the apartment properties in our portfolio; •cash generated from operating activities; •net cash proceeds from property sales, including sales undertaken as part of our capital recycling strategy and other sales; and For the Six Months Ended June 30, 2021 2020 Cash flow from operating activities $ 43,252 $ 34,339 Cash flow from investing activities (166,680 ) (67,688 ) Cash flow from financing activities 123,820 37,077 Net change in cash and cash equivalents, and restricted cash 392 3,728 Cash and cash equivalents, and restricted cash, beginning of period 13,615 14,433 Cash and cash equivalents, and restricted cash, end of the period $ 14,007 $ 18,161 Our cash inflows from operating activities during the interests.same storesame-store portfolio at the beginning of each calendar year. Properties are added into the same storesame-store portfolio if they were owned at the beginning of the previous year. Properties that are held-for-sale or have been sold are excluded from the same storesame-store portfolio. Because our portfolio of properties changed significantly as the result of our STAR Merger, which closed on December 16, 2021, we also present, as described below, information on the IRT Same-Store Portfolio, STAR Same-Store Portfolio and Combined Same-Store Portfolio.same storeCombined Same-Store Portfolio net operating income to net income (loss) available to common shares for the three and six months ended June 30,March 31, 2022 and 2021 and 2020 (in thousands, except per unit data): 2022 2021 % change Revenue: Rental and other property revenue $ 141,706 $ 127,667 11.0 % Property Operating Expenses Real estate taxes 18,726 18,132 3.3 % Property insurance 2,784 2,660 4.7 % Personnel expenses 12,052 11,460 5.2 % Utilities 7,308 7,207 1.4 % Repairs and maintenance 4,209 4,250 (1.0) % Contract services 4,722 4,365 8.2 % Advertising expenses 1,180 1,258 (6.2) % Other expenses 1,556 1,588 (2.0) % Total property operating expenses 52,537 50,920 3.2 % Net operating income 89,169 76,747 16.2 % (a)Same store portfolio for the three and six months ended June 30, 2021 and 2020 included 53 properties containing 14,843 units.NOI Margin 62.9 % 60.1 % 2.8 % Average Occupancy 95.4 % 95.3 % 0.1 % Average effective monthly rent, per unit $ 1,373 $ 1,244 10.4 % Reconciliation of Combined Same-Store Net Operating Income to Net
Income (Loss)$ 89,169 $ 76,747 Combined non same-store net operating income 4,925 4,805 — (47,579) Other revenue 385 301 Other income (expense), net 380 — Property management expenses (5,556) (1,943) General and administrative expenses (7,928) (5,942) Depreciation and amortization (78,174) (16,552) Casualty gains (losses), net 1,393 (359) Interest expense (20,531) (8,385) Gain on sale (loss on impairment) of real estate assets, net 94,712 — Merger and integration costs (1,895) — Net income $ 76,880 $ 1,093 •make investments to continue our value add initiatives to improve the quality and performance of our properties;•repay our indebtedness;•fund costs necessary to maintain our properties;•pay our operating expenses; and•distribute a minimum of 90% of our REIT taxable income (determined without regard to the deduction for dividends paid and excluding net capital gain) and to make investments in a manner that enables us to maintain our qualification as a REIT.•the use of our cash and cash equivalents of $7.6 million as of June 30, 2021;•existing and future unsecured financing, including advances under our unsecured credit facility, and financing secured directly or indirectly by the apartment properties in our portfolio;•cash generated from operating activities;•net cash proceeds from property sales, including sales undertaken as part of our capital recycling strategy and other sales; and•proceeds from the sales of our common stock and other equity securities, including common stock that we expect to issue in settlement of our forward sale agreement.June 30,March 31, 2022 and 2021, and 2020, we maintained cash and cash equivalents, and restricted cash of approximately $14.0$50.8 million and $18.2$13.1 million, respectively. Our cash and cash equivalents were generated from the following activities (dollars in thousands):For the Three Months Ended March 31, 2022 2021 Cash flow from operating activities $ 40,580 $ 20,638 Cash flow from investing activities 127,066 (7,281) Cash flow from financing activities (182,557) (13,870) Net change in cash and cash equivalents, and restricted cash (14,911) (513) Cash and cash equivalents, and restricted cash, beginning of period 65,671 13,615 Cash and cash equivalents, and restricted cash, end of the period $ 50,760 $ 13,102 sixthree months ended June 30,March 31, 2022 and 2021 and 2020 were primarily driven by ongoing operations of our properties.sixthree months ended June 30,March 31, 2021 were primarily due to two property acquisitions, our investment in an unconsolidated real estate entity, and capital expenditures. from investing activities during the six months ended June 30, 2020 were primarily due to one property acquisition and capital expenditures.Our cash inflows from financing activities during the sixthree months ended June 30, 2021March 31, 2022 were primarily due to a $176.0 million paydown of the issuance of a $200.0unsecured revolver and $17.1 million unsecured term loan, $169.5 million of draws on our unsecured credit facility, and a $41.6 million settlement on our forward sale agreements, partially offset by $234.8 million of repayments on our unsecured credit facility and the payment of dividends on our common stock and distributions on noncontrolling interests, totaling $24.8 million.partially offset by $16.5 million of new borrowings under our unsecured revolver. Our cash inflowsoutflows from financing activities during the sixthree months ended June 30, 2020March 31, 2021 were primarily due to $65.5 million of draws on our unsecured credit facility and a $50.0 million settlement on our forward sale agreements, partially offset by the paymentpayments of dividends on our common stock and distributions on noncontrolling interests and $39.0 million of repayments on our unsecured credit facility.20202021 Annual Report on Form 10-K includes a table of contractual commitments. There were no material changes to these commitments since the filing of our Annual Report on Form 10-K.sixthree months ended June 30, 2021March 31, 2022 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.20202021 Annual Report on Form 10-K contains a discussion of our critical accounting policies. Management discusses our critical accounting policies and management’s judgments and estimates with the audit committee of our board of directors. There were no material changes to our critical accounting policies since the filing of our Annual Report on form 10-K.Item 3. and Quantitative Disclosure About Market Risk.20202021 Annual Report on Form 10-K contains a discussion of qualitative and quantitative market risks. There have been no material changes in quantitative and qualitative market risks during the sixthree months ended June 30, 2021March 31, 2022 from the disclosures included in our 20202021 Annual Report on Form 10-K.Item 4.
| Item 1. Legal Proceedings. |
| Item 1A. Risk Factors. |
The risks set out below represent
Unless otherwise stated in these risk factors or the context otherwise requires, references in these risk factors to:
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Risks Relating to the Mergers
The Mergers may not beconsummated on the terms or timeline currently contemplated, or at all. Consummation of the Mergers is subject to many conditions and if these conditions are not satisfied or waived, the Mergers will not be consummated, which could adversely affect the businesses of IRT, and, in certain circumstances, result in the requirement that IRT pay a termination fee or certain expense reimbursement.
Consummation of the Mergers is subject to certain conditions, including: (1) the receipt of required approvals from IRT’s common stockholders and from STAR’s common stockholders, (2) the authorization for listing of the shares of IRT common stock to be issued in the Mergers or reserved for issuance in connection therewith on the New York Stock Exchange, (3) the effectiveness of the registration statement on Form S-4 that IRT will file with the SEC, (4) the absence of any order issued by any court of competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Mergers or any law that makes the consummation of the Mergers illegal, (5) the accuracy of each party’s representations and warranties, subject in most cases to materiality or material adverse effect qualifications, (6) material compliance with each party’s covenants (7) the receipt by each of IRT and STAR of an opinion to the effect that the Company Merger will qualify as a “reorganization” within the meaning of Section 368(a) of the Code, and of an opinion as to the qualification of IRT and STAR, respectively, as a REIT under the Code and (8) the receipt of certain lender consents.
IRT cannot provide assurance that the conditions to consummation of the Mergers will be satisfied or waived, and accordingly, that the Mergers will be consummated on the terms or timeline that the parties anticipate, or at all. IRT or STAR may terminate the Merger Agreement under certain circumstances, including, among other reasons, if the Mergers are not consummated by January 31, 2022.
Failure to consummate the Mergers may adversely affect IRT’s results of operations, financial condition and business prospects for many reasons, including, among others:
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The Exchange Ratio is fixed and will not be adjusted in the event of any change in the price of IRT’s common stock or in the relative values of IRT and STAR.
At the effective time of the Company Merger, each issued and outstanding share of STAR common stock will be converted into the right to receive 0.905 newly issued shares of IRT common stock (the “Exchange Ratio”), with cash paid in lieu of fractional shares. At the effective time of the Partnership Merger, each issued and outstanding unit of STAR OP will be converted into the right to receive 0.905 common units of IRT OP. The Exchange Ratio is fixed and will not be adjusted for changes in the market price of IRT common stock or in the relative values of IRT and STAR. The price of IRT common stock at the closing of the Mergers may vary from its price on July 26, 2021, the date the Merger Agreement was executed. Changes in IRT’s common stock price prior to consummation of the Mergers will affect the market value of the merger consideration, which may be more or less than the fair value of STAR’s net assets on the closing date. Changes in IRT’s common stock price may result from a variety of factors (many of which are beyond the control of IRT), including the following factors:
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The pendency of the Mergers could adversely affect the business and operations of IRT and STAR.
In connection with the pending Mergers, current and prospective employees of IRT and STAR may experience uncertainty about their future roles with IRT following the Mergers, which may materially adversely affect the ability of each of IRT and STAR to attract and retain key personnel during the pendency of the Mergers. In addition, due to operating covenants in the Merger Agreement, each of IRT and STAR may be unable (without the other party’s prior written consent), during the pendency of the Mergers, to pursue strategic transactions, undertake significant capital projects, undertake certain significant financing transactions and otherwise pursue other actions, even if such actions would prove beneficial. Similarly some current or prospective operators or vendors of each of IRT and STAR may delay or defer decisions, which could adversely affect the revenues, earnings, funds from operations, cash flows and expenses of IRT and STAR, regardless of whether the Mergers are consummated.
The Mergers and related transactions are subject to certain closing conditions, including approval by stockholders of both IRT and STAR.
In order for the Mergers to be consummated, STAR common stockholders must approve the Company Merger, which requires the affirmative vote of the holders of at least a majority of the outstanding shares of STAR common stock entitled to vote on such proposal. In addition, IRT common stockholders must approve the issuance of IRT common stock in the Mergers by the affirmative vote of the holders of at least a majority of the votes cast on such proposal. This approval by IRT stockholders is required under applicable New York Stock Exchange (“NYSE”) rules.
IRT stockholders will be significantly diluted by the Mergers.
The Mergers will significantly dilute the ownership position of IRT stockholders. Upon consummation of the Mergers, based on the shares of IRT common stock and STAR common stock outstanding as of July 26, 2021, we estimate that legacy IRT stockholders will own approximately 50% of the issued and outstanding shares of IRT common stock (on a fully diluted basis), and legacy STAR stockholders will own approximately 50% of the issued and outstanding shares of IRT common stock (on a fully diluted basis). IRT may also issue additional shares of common stock or preferred stock in the future, which would create further dilution. Consequently, IRT stockholders, as a general matter, will have less influence over the management and policies of IRT after the effective time of the Mergers than they currently exercise over the management and policies of IRT.
The Merger Agreement contains provisions that could discourage a potential competing acquiror of IRT or could result in any competing proposal being at a lower price than it might otherwise be.
The Merger Agreement contains provisions that, subject to limited exceptions, restrict the ability of each of IRT and STAR to initiate, solicit, knowingly encourage or facilitate competing third-party proposals to effect, among other things, a merger, reorganization, share sale, share exchange, asset sale, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving any purchase or sale of 20% or more of the consolidated assets of IRT or STAR. In addition, either IRT or STAR generally has an opportunity to offer to modify the terms of the Merger Agreement in response to any competing “acquisition proposal” that may be made to the other party before the board of directors of such other party may withdraw or modify its recommendation in response to such competing acquisition proposal or may terminate the Merger Agreement to enter into such a competing acquisition proposal. In some circumstances, on termination of the Merger Agreement, one of the parties may be required to pay a substantial termination fee ($74.0 million if the fee is payable by IRT to the STAR parties and $74.0 million if the fee is payable by STAR to the IRT parties) and expense reimbursement of up to $10 million.
These provisions could discourage a potential competing acquiror that might have an interest in acquiring all or a significant part of IRT from considering or proposing such an acquisition, even if it were prepared to pay consideration with a higher value than the value expected to be received by IRT through the Mergers, or might result in a potential competing acquiror proposing to pay a lower price for IRT than it might otherwise have proposed to pay because of the added expense of the termination fee and expense reimbursement that may become payable in certain circumstances under the Merger Agreement.
The Mergers will result in changes to the board of directors and management that may affect the strategy and operations of the combined company.
Upon consummation of the Mergers, Scott F. Schaeffer, currently our Chairman of the Board and Chief Executive Officer, will continue in these positions for the combined company; James J. Sebra, currently our Chief Financial Officer, will continue in this position for the combined company; Farrell M. Ender, currently our President, will continue in this position for the combined company; Jessica K. Norman, currently our Executive Vice President and General Counsel, will serve as Chief Legal Officer of the combined company; and Ella S. Neyland, currently STAR’s President, Chief Financial Officer and Treasurer, will serve as Chief Operating Officer of the combined company. In addition, upon consummation of the Mergers, the board of directors of the combined company will be comprised of the following five incumbent directors of our board of directors and the following five incumbent directors of STAR’s board of directors: Scott F. Schaeffer, Richard D. Gebert, Melinda H. McClure, DeForest Blake Soaries Jr. and Lisa Washington; and Stephen R. Bowie, Ned W. Brines, Ana Marie del Rio, Ella S. Neyland and Thomas H. Purcell, respectively. This new composition of the board of directors and executive management team may affect the combined company’s business strategy and operating decisions following the closing of the Mergers. In addition, there can be no assurances that the new board of directors and executive management team will function effectively as a team and that there will not be any adverse effects on the combined company’s business as a result.
An adverse outcome in any litigation or other legal proceedings relating to the Merger Agreement, or the transactions contemplated thereby, could have a material adverse impact on the businesses of IRT and STAR and their ability to consummate the transactions contemplated by the Merger Agreement.
Transactions similar to the Mergers are frequently the subject of litigation or other legal proceedings, including actions alleging that either parties’ board of directors breached their respective duties to their stockholders or other equity holders by entering into a merger agreement, by failing to obtain a greater value in the transaction for their stockholders or other equity holders or otherwise or any other claims (contractual or otherwise) arising out of a merger or the transactions related thereto. If litigation or other legal proceedings are brought against IRT, STAR and/or their respective boards of directors or subsidiaries in connection with the Merger Agreement, or the transactions contemplated thereby, the respective parties to the proceeding intend to defend against such actions but they may not be successful in doing so. An adverse outcome in such matters, as well as the costs and efforts of a defense, even if successful, could have a material adverse effect on IRT’s or STAR’s ability to consummate the Mergers or their respective business, results of operation or financial position, including through the possible diversion of either company’s resources or distraction of key personnel.
Risks Relating to the Combined Company Following the Mergers
The combined company expects to incur substantial expenses related to the Mergers and the transactions contemplated by the Merger Agreement.
The combined company expects to incur substantial expenses in consummating the Mergers and integrating the business, operations, networks, systems, technologies, policies and procedures of IRT and STAR. There are a large number of systems that must be integrated or separated in connection with the Mergers, and the other transactions contemplated by the Merger Agreement, including
leasing, billing, management information, purchasing, accounting and finance, sales, payroll and benefits, fixed asset, lease administration and regulatory compliance. While IRT and STAR have assumed that a certain level of transaction and integration expenses would be incurred, there are a number of factors beyond their control that could affect the total amount or the timing of their integration expenses. Many of the expenses that will be incurred, by their nature, are difficult to estimate accurately at the present time. The expenses in connection with the Mergers and the transactions contemplated by the Merger Agreement are expected to be significant, although the aggregate amount and timing of such charges are uncertain at present.
Following the Mergers, the combined company may be unable to integrate the business of STAR successfully or realize the anticipated synergies and related benefits of the Mergers and the transactions contemplated by the Merger Agreement or do so within the anticipated time frame.
The Mergers involve the combination of IRT and STAR, two companies which currently operate as independent companies. In addition STAR recently completed a series of transactions to provide for the internalization of its previously externalized management functions. The combined company will be required to devote significant management attention and resources to integrating their business practices and operations. Potential difficulties that IRT and STAR may encounter in the integration process include the following:
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For all these reasons, you should be aware that it is possible that the integration process could result in the distraction of the combined company’s management, the disruption of the combined company’s ongoing business or inconsistencies in the combined company’s services, standards, controls, procedures and policies, any of which could adversely affect the ability of the combined company to maintain relationships with residents, customers, vendors, joint venture partners and employees or to achieve the anticipated benefits of the Mergers, or could otherwise adversely affect the business and financial results of the combined company.
The combined company’s anticipated level of indebtedness will increase substantially upon consummation of the Mergers and may increase the related risks IRT now faces.
Upon consummation of the Mergers, the combined company intends to assume and/or refinance certain indebtedness of STAR and STAR OP and, as a result, IRT’s consolidated indebtedness will increase substantially and it will be subject to increased risks associated with debt financing, including an increased risk that IRT’s cash flows could be insufficient to meet required payments on its indebtedness or to continue to pay dividends on its common stock. On June 30, 2021, IRT had consolidated indebtedness of approximately $1.06 billion. On June 30, 2021, STAR had consolidated indebtedness of approximately $2.13 billion. Taking into account IRT’s consolidated indebtedness as of June 30, 2021, and the assumption, in the Mergers, of STAR’s consolidated indebtedness at fair value as of June 30, 2021, the pro forma total consolidated indebtedness of the combined company, as of June 30, 2021, would have been approximately $3.32 billion if the Mergers had been consummated on June 30, 2021.
The combined company’s increased indebtedness could have important consequences to holders of its common stock, including:
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Additionally, if the combined company defaults under a debt instrument, it will automatically be in default under any other debt instrument that has cross-default provisions and the holders of all such indebtedness may be entitled to demand its immediate repayment. If the combined company defaults under a secured debt instrument, it may lose any property securing that indebtedness.
The combined company may need to incur additional indebtedness in the future.
In connection with executing its business strategy following the Mergers, the combined company expects to evaluate the possibility of acquiring additional properties and making strategic investments, and it may elect to finance these endeavors by incurring additional indebtedness. The amount of such indebtedness could have material adverse consequences for the combined company following the Mergers, including hindering its ability to adjust to changing market, industry or economic conditions; limiting its ability to access the capital markets to refinance maturing debt or to fund acquisitions; limiting the amount of free cash flow available for future operations, acquisitions, dividends, stock repurchases or other uses; making the combined company more vulnerable to economic or industry downturns, including interest rate increases; and placing the combined company at a competitive disadvantage compared to less leveraged competitors.
The combined company will depend on key personnel for its future success, and the loss of key personnel or inability to attract and retain personnel could harm the combined company’s business.
Five members of the current IRT board of directors and all of IRT’s executive officers will continue as members of the board of directors and executive management of the combined company. The future success of the combined company depends in large part on its ability to hire and retain a sufficient number of qualified personnel. The future success of the combined company also depends upon the service of IRT’s executive officers, who each have extensive market knowledge and relationships and will exercise substantial influence over the combined company’s operational, financing, acquisition and disposition activity. Among the reasons that they are important to the combined company’s success is that each has a national or regional industry reputation that is expected to attract business and investment opportunities and assist the combined company in negotiations with lenders, existing and potential residents and industry personnel.
Key employees of IRT or STAR may depart either before or after the Mergers because of issues relating to the uncertainty and difficulty of integration or separation or a desire not to remain with the combined company following the Mergers. Accordingly, no assurance can be given that the combined company, following the Mergers and the transactions contemplated by the Merger Agreement, will be able to retain key employees to the same extent as in the past.
The future results of the combined company will suffer if the combined company does not effectively manage its operations following the Mergers and the transactions contemplated by the Merger Agreement.
Following the Mergers, the combined company may continue to expand its operations through additional acquisitions, development opportunities and other strategic transactions, some of which involve complex challenges. The future success of the combined company will depend, in part, upon the ability of the combined company to manage its expansion opportunities, which poses substantial challenges for the combined company to integrate new operations into its existing business in an efficient and timely manner, to successfully monitor its operations, costs, regulatory compliance and service quality and to maintain other necessary internal controls. IRT cannot assure you that following the Mergers, the combined company’s expansion or acquisition opportunities will be successful, or that the combined company will realize its expected operating efficiencies, cost savings, revenue enhancements, synergies or other benefits.
The trading price of shares of the combined company’s common stock following the Mergers may be affected by factors different from those affecting the price of shares of IRT common stock before the Mergers.
If the Mergers are consummated, then, based on the number of shares of IRT common stock and STAR common stock outstanding as of July 26, 2021, immediately following consummation of the Mergers, legacy IRT stockholders will hold approximately 50% of the
outstanding shares of IRT common stock and legacy STAR stockholders will hold approximately 50% of the outstanding shares of IRT common stock. The results of operations of the combined company, as well as the trading price of IRT common stock, after the Mergers may be affected by factors different from those currently affecting the trading prices of IRT common stock. These different factors include:
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Accordingly, the historical trading prices of IRT common stock and the historical financial results of IRT and STAR may not be indicative of these matters for the combined company after the Mergers.
Holders of certain outstanding indebtedness of STAR may exercise contractual rights under the respective debt agreements in connection with the Mergers.
STAR is a party to debt agreements that give the lenders under such agreements certain rights following a merger or change of control, including the right to demand immediate repayment upon the merger or change of control absent a waiver or consent by the applicable lenders. Loan agreements covering approximately $2.13 billion of STAR indebtedness will require lender waivers or consents for consummation of the Mergers. There is no assurance that any or all of the lenders will provide such waivers or consents and if they do not, then the aggregate amount of indebtedness that would become due and payable upon consummation of the Mergers would be substantial and could result in a material adverse effect on the combined company.
Counterparties to certain agreements with IRT and/or STAR may exercise contractual rights under such agreements in connection with the Mergers.
Each of IRT and STAR is party to certain agreements that may give the counterparty certain rights following a change of control or similar event, including in some cases the right to terminate the agreement. Under some such agreements, the Mergers may constitute a change of control of IRT or STAR, as applicable, or cause certain other triggering events and therefore the counterparty may exercise certain rights under the agreement upon the closing of the Mergers. Any such counterparty may request modifications of its agreement as a condition to granting a waiver or consent under its agreement or it may terminate or seek to terminate its agreement with IRT or STAR, as applicable, as a result of such change of control (if permitted to do so by the applicable agreement). There is no assurance that such counterparties will not exercise their rights under the agreements, including termination rights where available.
Risks Relating to the Status of IRT and STAR as REITs
The combined company may incur adverse tax consequences if IRT or STAR has failed or fails to qualify as a REIT for U.S. federal income tax purposes.
Each of IRT and STAR has operated in a manner that it believes has allowed it to qualify as a REIT for U.S. federal income tax purposes under the Code and intends to continue to do so through the time of the Mergers. The combined company intends to continue operating in such a manner following the Mergers. Neither IRT nor STAR has requested or plans to request a ruling from the IRS that it qualifies as a REIT. Qualification as a REIT involves the application of highly technical and complex Code provisions for which there are only limited judicial and administrative interpretations. The determination of various factual matters and circumstances not entirely within the control of IRT or STAR may affect each company’s ability to qualify as a REIT. In order to qualify as a REIT, each of IRT and STAR must satisfy a number of requirements, including requirements regarding the ownership of its stock and the composition of its gross income and assets. Also, a REIT must make distributions to stockholders aggregating annually at least 90% of its net taxable income, excluding any net capital gains.
The closing of the Mergers is conditioned on receipt by IRT of an opinion from Morrison & Foerster LLP to the effect that, for all taxable years commencing with STAR’s taxable year ended December 31, 2014 and through the Merger Effective Time, STAR has been organized and has operated in conformity with the requirements for qualification and taxation as a REIT under the Code, and receipt by STAR of an opinion from Troutman Pepper Hamilton Sanders LLP to the effect that, for all taxable years commencing with IRT’s taxable year ended December 31, 2011, IRT has been organized and has operated in conformity with the requirements for qualification and taxation as a REIT under the Code, and its proposed method of operation will enable it to continue to meet the requirements for qualification and taxation as a REIT under the Code for its taxable year that includes the Merger Effective Time and future taxable years. The foregoing REIT opinions, however, will be based on the factual representations provided by IRT and STAR
to counsel and limited by the assumptions set forth therein, and are not a guarantee that IRT or STAR, in fact, has qualified, or, in the case of IRT, will continue to qualify as a REIT, nor are such opinions binding on the IRS. Moreover, as noted above, neither IRT nor STAR has requested or plans to request a ruling from the IRS that it qualifies as a REIT.
If the combined company loses its REIT status, or is determined to have lost its REIT status in a prior year, it will face serious tax consequences that would substantially reduce its cash available for distribution, including cash available to pay dividends to its stockholders, because:
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Even if the combined company retains its REIT status, if STAR is determined to have lost its REIT status for a taxable year ending on or before the Mergers, the combined company would be subject to adverse tax consequences. This could substantially reduce the combined company’s cash available for distribution, including cash available to pay dividends to its stockholders, because, assuming that the combined company otherwise maintains its REIT qualification:
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If there is an adjustment to STAR’s taxable income or dividends paid deductions for taxable years ending on or prior to the Mergers, the combined company could elect to use the deficiency dividend procedure in order to maintain STAR’s REIT status for such taxable years. That deficiency dividend procedure could require the combined company to make significant distributions to its stockholders and to pay significant interest to the IRS.
As a result of all these factors, IRT’s or STAR’s failure to qualify as a REIT could impair the combined company’s ability to expand its business and raise capital, and would materially adversely affect the market value of its common stock. In addition, for years in which the combined company does not qualify as a REIT, it would not otherwise be required to make distributions to stockholders.
Risks Relating to an Investment in IRT Common Stock
The market price of IRT common stock may decline as a result of the Mergers and the transactions contemplated by the Merger Agreement.
The market price of IRT common stock may decline as a result of the Mergers and the transactions contemplated by the Merger Agreement if, among other things, the combined company does not achieve the perceived benefits of the Mergers and the transactions contemplated by the Merger Agreement or the effect of the Mergers and the transactions contemplated by the Merger Agreement on the combined company’s results of operations or financial condition is not consistent with the expectations of financial or industry analysts.
In addition, upon consummation of the Mergers and the transactions contemplated by the Merger Agreement, IRT stockholders will own interests in the combined company, which will operate an expanded business with a different mix of properties, risks and liabilities. Stockholders of IRT may not wish to continue to invest in the combined company, or may wish to dispose of some or all of
their shares of IRT common stock. If, following the effective time of the Mergers or while the Mergers are pending, large amounts of IRT common stock are sold, the market price of IRT common stock could decline, perhaps substantially.
Following the Mergers and the transactions contemplated by the Merger Agreement, the combined company may not continue to pay dividends at the rate currently paid by IRT.
Following consummation of the Mergers, the combined company may not pay dividends at the same level at which IRT current pays dividends, or with the same frequency, including because of factors such as the following:
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Stockholders of the combined company will have no contractual or other legal right to dividends that have not been declared by the combined company board of directors.
Other Risks
The unaudited pro forma condensed consolidated financial statements to be filed with the SEC do not purport to be indicative of the combined company’s results after the Mergers and the transactions contemplated by the Merger Agreement, and accordingly, you will have limited financial information on which to evaluate the future performance of the combined company.
The unaudited pro forma condensed consolidated financial statements to be filed with the SEC will be presented for informational purposes only and do not purport to be indicative of the financial position or results of operations that actually would have occurred had the Mergers and the transactions contemplated by the Merger Agreement been consummated as of the dates indicated, nor do they purport to be indicative of the future operating results or financial position of the combined company after the Mergers and the transactions contemplated by the Merger Agreement. The unaudited pro forma condensed consolidated financial statements will reflect adjustments, based upon preliminary estimates, to allocate the purchase price to STAR’s assets and liabilities.
In addition, the unaudited pro forma condensed consolidated financial statements will not reflect other future events that may occur after consummation of the Mergers, including the costs related to the planned integration of IRT and STAR and any future nonrecurring charges resulting from the Mergers and the transactions contemplated by the Merger Agreement, and will not consider potential impacts of current market conditions on revenues or expense efficiencies. The unaudited pro forma condensed consolidated financial statements to be filed with the SEC will be based in part on certain estimates and assumptions (including the estimated purchase price allocation described above) regarding the Mergers and the transactions contemplated by the Merger Agreement that IRT believes are reasonable under the circumstances. IRT cannot assure you that the estimates and assumptions will prove to be accurate.
Following the Mergers, the market price and trading volume of IRT common stock may be volatile.
The United States stock markets, including the NYSE, on which the IRT common stock is and, after the Mergers, will continue to be listed under the symbol “IRT,” have experienced significant price and volume fluctuations. As a result, the market price of shares of IRT common stock is likely to be similarly volatile, and investors in shares of IRT common stock may experience a decrease, which could be substantial, in the value of their shares, including decreases unrelated to IRT’s operating performance or prospects. IRT cannot assure you that the market price of shares of IRT’s common stock will not fluctuate or decline significantly in the future.
In addition to the risks listed elsewhere in these “Risk Factors,” a number of factors could negatively affect IRT’s common stock price or result in fluctuations in the price or trading volume of IRT’s common stock, including:
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In the past, securities class action litigation has often been instituted against companies following periods of volatility in the price of their common stock. This type of litigation could result in substantial costs and divert IRT’s management’s attention and resources,
which could have a material adverse effect on IRT’s cash flows, its ability to execute its business strategy and IRT’s ability to make distributions to its stockholders.
Sales of substantial amounts of IRT common stock in the public markets, or the perception that they might occur, could reduce the price of the IRT common stock.
Upon the completion of the Mergers, a total of approximately 204.9 million shares of IRT common stock will be outstanding. Prior to the Mergers, the STAR common stock was not listed on any national securities exchange and the ability of STAR stockholders to liquidate their investments was limited. As a result, there may be increased demand to sell shares of IRT common stock upon the closing of the Mergers, at which time shares of STAR common stock will be converted into shares of the IRT common stock, which will be listed on the NYSE and freely tradable. A large volume of sales of shares (or short sales) of the IRT common stock could decrease the prevailing market price of the IRT common stock and could impair IRT’s ability to raise additional capital through the sale of equity securities in the future. Even if a substantial number of sales of IRT common stock are not effected, the mere perception of the possibility of these sales could depress the market price of the IRT common stock and have a negative effect on IRT’s ability to raise capital in the future.
IRT faces other risks.
The risks listed above are not exhaustive, and you should be aware that, prior to and following the Mergers and the transactions contemplated by the Merger Agreement, IRT will face various other risks, including those discussed in reports filed by IRT with the SEC.
| Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. |
Period | Total Number of Shares Purchased | Price Paid per Share (1) | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs | ||||||||||||||||||||||
01/01/2022 to 01/31/2022 | 6,139 | $ | 23.28 | N/A | N/A | |||||||||||||||||||||
02/01/2022 to 02/28/2022 | 10,694 | 24.11 | N/A | N/A | ||||||||||||||||||||||
03/01/2022 to 03/31/2022 | 31,619 | 25.99 | N/A | N/A | ||||||||||||||||||||||
Total | 48,452 | $ | 23.28 | — | N/A |
Period |
| Total Number of Shares Purchased |
|
| Price Paid per Share (1) |
|
| Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |
|
| Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs |
| ||||
04/01/2021 to 04/30/2021 |
|
| 1,675 |
|
| $ | 15.58 |
|
|
| — |
|
|
| — |
|
05/01/2021 to 05/31/2021 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
06/01/2021 to 06/30/2021 |
|
| — |
|
|
| — |
|
|
| — |
|
|
| — |
|
Total |
|
| 1,675 |
|
| $ | 15.58 |
|
|
| — |
|
|
| — |
|
|
|
| Item 3. Defaults Upon Senior Securities. |
| Item 4. Mine Safety Disclosures. |
| Item 5. Other Information. |
| Item 6. Exhibits. |
| ||||||
31.1 | ||||||
31.2 | ||||||
32.1 | ||||||
32.2 | ||||||
101 | iXBRL (Inline eXtensible Business Reporting Language). The following materials, formatted in iXBRL: (i) Consolidated Balance Sheets as of | |||||
104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). |
Independence Realty Trust, Inc. | ||||||||||
Date: | By: |
| /s/ | |||||||
Scott F. Schaeffer | ||||||||||
| ||||||||||
(Principal Executive Officer) | ||||||||||
Date: | By: |
| /s/ JAMES J. SEBRA | |||||||
James J. Sebra | ||||||||||
| ||||||||||
Chief Financial Officer and Treasurer | ||||||||||
(Principal Financial Officer) | ||||||||||
Date: | By: |
| /s/ JASON R. DELOZIER | |||||||
Jason R. Delozier | ||||||||||
| ||||||||||
Chief Accounting Officer | ||||||||||
(Principal Accounting Officer) |
40