Company Commences Capital Recycling
Initiative
Independence Realty Trust, Inc. (“IRT”) (NYSE:IRT), a
multifamily apartment REIT, today announced its second quarter 2018
financial results.
Second Quarter Highlights
- Completed the roll out of the value add
program at all five Phase 1 communities and started the rollout for
Phase 2 communities. During Q2, we completed renovations in 464
units, achieving a weighted average return on investment of 20.7%.
(See “Value Add Update and Same Store NOI Guidance Impact” section
below for additional information.)
- Net income allocable to common shares
of $3.5 million for the quarter ended June 30, 2018 as compared to
$18.7 million for the quarter ended June 30, 2017. Earnings per
diluted share of $0.04 for the quarter ended June 30, 2018 as
compared to $0.27 for the quarter ended June 30, 2017.
- Core Funds from Operations (“CFFO”) of
$16.4 million for the quarter ended June 30, 2018 as compared to
$13.4 million for the quarter ended June 30, 2017. CFFO per share
was $0.19 for the second quarter.
- Adjusted EBITDA of $23.7 million for
the quarter ended June 30, 2018 as compared to $19.5 million for
the quarter ended June 30, 2017.
- Reconfirming full year guidance targets
for 2018, including same store property Net Operating Income
(“NOI”) growth of 3.0% to 4.0%.
- Commenced a capital recycling
initiative with planned sales of five communities and announced the
acquisition of two communities in Tampa, FL and Columbus, OH for a
total of $64.2 million.
Included later in this press release are definitions of CFFO,
Adjusted EBITDA and other Non-GAAP financial measures and
reconciliations of such measures to their most comparable financial
measures as calculated and presented under GAAP.
Management Commentary:
“We are extremely pleased with the initial results of our value
add program, which is on track to achieve our targeted returns and
the incremental $9.0 million of annual NOI,” said Scott Schaeffer,
IRT’s Chairman and CEO. “While our second quarter performance was
in-line with our expectations, the quarter reflects a short-term
drag on occupancy and same store NOI growth compared to historical
quarters, due to the additional time needed for unit renovations.
We are confident in the progress made to date and believe we are
well-positioned to achieve 3% to 4% same store NOI growth for 2018.
Management is laser-focused on the long-term benefit of these value
add initiatives that increase the quality of the community in the
marketplace, accelerate long-term NOI growth, and ultimately
optimize the community’s valuation.”
Schaeffer continued, “We have also commenced a capital recycling
initiative that will enable us to refresh our portfolio and support
our long-term operating and balance sheet objectives. We have
identified and commenced the sales process on five communities as
we accelerate our efforts to exit markets that lack scale. We
intend to reinvest proceeds from these sales into expanding IRT’s
portfolio in our targeted markets where we can enhance operating
efficiencies. The aggregate value of the contemplated sales is
projected to be in a range of $170 and $190 million. IRT will use
those proceeds to acquire approximately $160 to $180 million of new
properties, inclusive of our $64 million of recently announced
acquisitions in Tampa and Columbus. We’re excited about the future
at IRT as we execute on our capital recycling and value add
initiatives, including the untapped inventory of properties where
future value add opportunities may exist. Together these
initiatives will grow our earnings and enable us to fully cover our
dividend later this year.”
Same Store Property Operating
Results
Second Quarter 2018Compared to Second
Quarter 2017(1)
Six Months Ended 6/30/18Compared to Six
Months Ended 6/30/17(1)
Rental income 1.3% increase
1.7% increase Total revenues 1.8%
increase 2.1% increase Property level
operating expenses 1.9% increase
1.9% increase Net operating income (“NOI”)
1.7% increase 2.3% increase Portfolio
average occupancy 30 bps decrease to 94.8%
10 bps increase to 94.6% Portfolio average
rental rate 1.9% increase to $1,025
1.8% increase to $1,022 NOI Margin
10 bps decrease to 59.9% 10 bps
increase to 59.8%
(1) Same store portfolio for the three and
six months ended June 30, 2018 includes 37 properties, which
represent 10,329 units.
Same Store Property Operating Results, Excluding Value
Add
The same store portfolio results below exclude
four communities that are part of our Value Add program for the
three and six months ended June 30, 2018. These four properties
started Value Add initiatives in early 2018 and have experienced
short-term disruption in occupancy and NOI growth.
Second Quarter 2018Compared to Second
Quarter 2017,Excluding Value Add (1)
Six Months Ended 6/30/18Compared to Six
Months Ended 6/30/17,Excluding Value Add (1)
Rental income 1.7% increase
1.9% increase Total revenues 2.3%
increase 2.4% increase Property level
operating expenses 2.1% increase
2.8% increase Net operating income (“NOI”)
2.3% increase 2.1% increase Portfolio
average occupancy 30 bps increase to 95.7%
60 bps increase to 95.3% Portfolio average
rental rate 1.4% increase to $1,026
1.4% increase to $1,022 NOI Margin
No change – 59.6% 20 bps decrease to
59.5%
(1) Same store portfolio, excluding value
add includes 33 properties, which represent 8,819 units for the
three and six months ended June 30, 2018.
Capital Recycling Initiative
During the second quarter, IRT commenced a
capital recycling initiative aimed to dispose of assets in markets
that lack scale, in order to invest in attractive non-gateway
markets where scale has been, or can be, achieved. The following
five properties have been identified as held for sale in
conjunction with this capital recycling initiative:
Property
Market Units
Reserve at Eagle Ridge Chicago, IL
370 Carrington Park Little Rock,
AR 202 Arbors at the Reservoir
Jackson, MS 170 Stonebridge at the
Ranch Little Rock, AR 260
The Aventine Greenville Greenville, SC
346
As part of this capital recycling initiative, we identified two
acquisitions in our target markets and completed those acquisitions
in July 2018.
- On July 11, 2018, IRT acquired a
348-unit community in Tampa, FL for $43.0 million. As of July 6,
2018, the community was 94.5% occupied with average rent per unit
of $970.
- On July 26, 2018, IRT acquired a
232-unit community in Columbus, OH for $21.2 million. As of July
25, 2018, the community was 97.0% occupied with average rent per
unit of $850.
IRT closed these acquisitions using proceeds from its line of
credit in advance of completing sales associated with our capital
recycling initiative.
At-the-Market Offering
During the second quarter, IRT issued 61,656 shares of common
stock under our at-the-market sales program at a weighted average
per share price of $10.29, yielding net proceeds of approximately
$0.6 million.
Capital Expenditures
For the three months ended June 30, 2018, recurring capital
expenditures for the total portfolio were $2.0 million, or $133 per
unit. For the six months ended June 30, 2018, recurring capital
expenditures for the total portfolio were $3.1 million, or $213 per
unit.
2018 EPS and CFFO Guidance
Following IRT’s performance for the first six
months of 2018, the expected impact of the value add program, and
the introduction of the capital recycling initiative, the Company
is reiterating its 2018 full year CFFO and same store NOI guidance.
EPS per diluted share is projected to be in a range of $0.48 to
$0.75. CFFO per diluted share, a non-GAAP financial measure, is
projected to be in the range of $0.74 to $0.79. A reconciliation of
IRT's projected net income allocable to common shares to its
projected CFFO per share, is included below. Also included below
are the primary assumptions underlying these estimates. See the
statements and definitions at the end of this release for further
information regarding how IRT calculates CFFO and for management’s
definition and rationale for the usefulness of CFFO.
2018 Full Year EPS and
CFFO Guidance (1)
Low
High
Net income allocable to common shares $0.48
$0.75 Earnings per share
$0.48 $0.75
2018 EPS and CFFO Guidance
Net income
allocable to common shares $0.48
$0.75 Adjustments:
Depreciation and amortization
0.48 0.48 Gains (2)
(0.27) (0.49) Share base compensation
0.03 0.03 Amortization of
deferred financing fees 0.02
0.02 CORE FFO per share allocated to common shareholders
$0.74 $0.79
(1) This guidance, including the
underlying assumptions, constitutesforward-looking information.
Actual full year 2018 EPS and CFFO couldvary significantly from the
projections presented. See “Forward-Looking Statements” below.Our
guidance is based on the following key assumptions for our 2018
performance.(2) Assumes all held for sale properties are sold
during 2018.
Same Store Communities
2018 Outlook
Number of properties/units 37 properties
/10,329 units Property revenue growth 3.0% to
4.0% Controllable property operating expense growth
1.6% to 2.0% Real estate tax and insurance expense increase
4.6% to 5.6% Total real estate operating
expense growth 2.5% to 3.5% Property NOI
growth 3.0% to 4.0%
Corporate Expenses
General and administrative expenses
(excluding stock based compensation)
$8.0 to $9.0 million
Transaction/Investment Volume
Acquisition volume $160 to $180
million Disposition volume $170 to $190
million
Capital
Expenditures Recurring
$7.8 to $8.8 million Value add & non-recurring
$32 to $40 million
Value Add Update and Same Store NOI Guidance Impact
Value add initiatives, comprised of renovations and upgrades at
selected communities to drive increased rental rates, remain a core
component of the IRT’s growth strategy for 2018 and beyond. We
currently have plans to execute on two phases of value add projects
covering 4,317 units across 14 communities. Seven of these 14
communities are part of the same store portfolio. These value add
initiatives have an estimated total investment of approximately
$50.0 million and are expected to unlock an additional $8.0 to $9.0
million in NOI by the end of 2019.
During the second quarter of 2018, IRT
continued its value add program, with redevelopment completed or
underway in 3,258 units across ten communities. The value add
projects at these communities are expected to be completed
throughout 2018 and 2019 and have provided a 20.7% return on
investment to date, based on the $186 per unit per month rent
premium that has been generated. See the “Value Add Summary” within
our Supplemental Information for additional detail. As a result of
the value add program, IRT expects the seven value add communities
within the same store portfolio to deliver outsized NOI growth in
the fourth quarter, supporting the full year same store NOI growth
range guidance of 3% to 4%. Expectations for NOI growth by quarter
for the remainder of 2018 are as follows:
1st Half of 2018
Actual
Q3 2018
Guidance
Q4 2018
Guidance
Full Year 2018
Guidance
Same Store NOI Growth 2.3%
1.5% to 2.0% 5.5% to 6.5%
3.0% to 4.0%
Distributions
On June 13, 2018, IRT’s Board of Directors declared a quarterly
cash dividend, for the second quarter of 2018, of $0.18 per share
of IRT common stock, payable on July 20, 2018 to stockholders of
record on July 6, 2018.
Selected Financial Information
See the schedules at the end of this earnings release for
selected financial information for IRT.
Non-GAAP Financial Measures and Definitions
IRT discloses the following non-GAAP financial measures in this
earnings release: FFO, CFFO, Adjusted EBITDA and NOI. Included at
the end of this release is a reconciliation of IRT’s reported net
income to its FFO and CFFO, a reconciliation of IRT’s same store
NOI to its reported net income, a reconciliation of IRT’s Adjusted
EBITDA to net income, and management’s respective definitions and
rationales for the usefulness of each of these non-GAAP financial
measures and other definitions used in this release.
Conference Call
All interested parties can listen to the live conference call
webcast at 9:30 AM ET on Thursday, August 2, 2018 from the investor
relations section of the IRT website at www.irtliving.com or by
dialing 1.844.775.2542, access code 3798819. For those who are not
available to listen to the live call, the replay will be available
shortly following the live call from the investor relations section
of IRT’s website and telephonically until Thursday, August 9, 2018
by dialing 1.855.859.2056, access code 3798819.
Supplemental Information
IRT produces supplemental information that includes details
regarding the performance of the portfolio, financial information,
non-GAAP financial measures, same store information and other
useful information for investors. The supplemental information is
available via the Company's website, www.irtliving.com, through the
"Investor Relations" section.
About Independence Realty Trust, Inc.
Independence Realty Trust (NYSE:IRT) is a real estate investment
trust that owns and operates 58 multifamily apartment properties,
totaling 15,860 units, across non-gateway U.S. markets, including
Atlanta, Louisville, Memphis, and Raleigh. IRT’s investment
strategy is focused on gaining scale within key amenity rich
submarkets that offer good school districts, high-quality retail
and major employment centers. IRT aims to provide stockholders
attractive risk-adjusted returns through diligent portfolio
management, strong operational performance, and a consistent return
of capital through distributions and capital appreciation.
Forward-Looking Statements
This press release contains certain
forward-looking statements within the meaning of Section 27A of the
Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Such forward-looking
statements can generally be identified by our use of
forward-looking terminology such as “may,” “will,” “expect,”
“intend,” “anticipate,” “estimate,” “believe,” “seek,” “outlook,”
“assumption,” “projected,” “strategy”, “guidance” or other, similar
words. Because such forward-looking statements involve significant
risks, uncertainties and contingencies, many of which are not
within IRT’s control, actual results may differ materially from the
expectations, intentions, beliefs, plans or predictions of the
future expressed or implied by such statements. These
forward-looking statements are based upon the current judgements
and expectations of IRT’s management. Risks and uncertainties that
might cause IRT’s actual results to differ materially from those
expressed or implied by forward-looking statements include, but are
not limited to: adverse changes in national, regional and local
economic climates; changes in market demand for rental apartment
homes and pricing pressures from competitors that could limit our
ability to lease units or increase rents; competition that could
adversely affect our ability to acquire additional properties;
volatility in capital and credit markets, including changes that
reduce availability, and increase costs, of capital; unexpected
changes in the assumptions underlying our 2018 EPS and CFFO
guidance; delays in completing, and cost overruns incurred in
connection with, the value add initiatives and failure to achieve
projected rent increases on account of the initiatives; risks
associated with pursuit of strategic acquisitions, including risks
associated with the need to raise additional capital to fund the
acquisitions and failure of acquisitions to produce expected
returns; unexpected costs of REIT qualification compliance; costs
and disruptions as the result of a cybersecurity incident or other
technology disruption; and share price fluctuations. Additional
risks and uncertainties that could cause our actual results to
differ materially from those expressed or implied by the
forward-looking statements in this press release are discussed in
IRT’s filings with the Securities and Exchange Commission (“SEC”),
including those under the heading “Risk Factors” in IRT’s most
recently filed Annual Report on Form 10-K. Dividends are subject to
the discretion of IRT’s Board of Directors, and will depend on
IRT’s financial condition, results of operations, capital
requirements, compliance with applicable laws and agreements and
any other factors deemed relevant by IRT’s Board. IRT undertakes no
obligation to update these forward-looking statements to reflect
events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events, except as may be required by
law.
Schedule I
Independence Realty Trust, Inc.
Selected Financial Information
(Dollars in thousands, except share and
per share amounts)
(unaudited)
For the Three Months Ended June 30, 2018
March 31,2018
December 31,2017
September30, 2017
June 30, 2017 Selected Financial Information:
Operating Statistics: Net income available to common shares
$ 3,509 $ 3,412 $ 6,293 $ 1,097 $ 18,739 Earnings (loss) per share
-- diluted $ 0.04 $ 0.04 $ 0.08 $ 0.02 $ 0.27 Total property
revenue $ 46,734 $ 45,616 $ 42,307 $ 39,864 $ 39,431 Total property
operating expenses $ 18,703 $ 18,418 $ 16,610 $ 16,196 $ 15,918 Net
operating income $ 28,031 $ 27,198 $ 25,697 $ 23,668 $ 23,513 NOI
margin 60.0 % 59.6 % 60.7 % 59.4 % 59.6 % Adjusted EBITDA $ 23,722
$ 23,012 $ 21,743 $ 20,220 $ 19,493 FFO per share $ 0.17 $ 0.17 $
0.14
$ 0.13 $ 0.12 CORE FFO per share $ 0.19 $ 0.18 $ 0.18 $ 0.19 $ 0.19
Dividends per share $ 0.18 $ 0.18 $ 0.18 $ 0.18 $ 0.18 CORE FFO
payout ratio 94.7 % 100.0 % 100.0 % 94.7 % 94.7 %
Portfolio
Data: Total gross assets $ 1,706,465 $ 1,689,689 $ 1,551,238 $
1,497,546 $ 1,400,864 Total number of properties 56 56 52 50 46
Total units 15,280 15,280 14,017 13,729 12,812 Period end occupancy
93.8 % 93.5 % 94.0 % 94.8 % 94.5 % Total portfolio average
occupancy 94.1 % 93.7 % 94.1 % 94.7 % 94.9 % Total portfolio
average effective monthly rent, per
unit
$ 1,009 $ 1,004 $ 1,003 $ 1,002 $ 1,008 Same store period end
occupancy
(a) 94.3 % 94.2 % 95.1 % 95.0 % 94.7 % Same store
portfolio average occupancy
(a) 94.8 % 94.5 % 94.8 % 94.9 %
95.1 % Same store portfolio average effective monthly rent,
per unit (a)
$ 1,025 $ 1,018 $ 1,015 $ 1,015 $ 1,006
Capitalization:
Total debt $ 911,772 $ 903,286 $ 778,442 $ 731,625 $ 764,521 Common
share price, period end $ 10.31 $ 9.18 $ 10.09 $ 10.17 $ 9.87
Market equity capitalization $ 906,696 $ 806,671 $ 885,094 $
880,257 $ 712,413 Total market capitalization $ 1,818,468 $
1,709,957 $ 1,663,536 $ 1,611,882 $ 1,476,934 Total debt/total
gross assets 53.4 % 53.5 % 50.2 % 48.9 % 54.6 % Net debt to
adjusted EBITDA 9.5 x (b) 9.7 x 8.8 x 8.9 x 9.7 x Interest coverage
2.8 x 2.8 x 3.0 x 2.9 x 2.7 x
Common shares and OP Units:
Shares outstanding 87,044,121 86,973,397 84,708,551 83,518,603
69,143,955 OP units outstanding 899,215 899,215
3,011,351 3,035,654 3,035,654 Common shares
and OP units outstanding 87,943,336 87,872,612 87,719,902
86,554,257 72,179,609 Weighted average common shares and units
87,543,931 87,466,518 86,646,371 75,009,859 71,703,735
(a) Same store portfolio consists of 37
properties, which represent 10,329 units.(b) Net debt to adjusted
EBITDA would be 9.4x if adjusted for the full quarter effect of
current value add initiatives.
Schedule II
Independence Realty Trust, Inc.
Reconciliation of Net Income (loss) to
Funds From Operations and
Core Funds From Operations
(Dollars in thousands, except share and
per share amounts)
(unaudited)
For the Three MonthsEnded June
30,
For the Six Months EndedJune
30,
2018 2017 2018
2017 Funds From Operations (FFO): Net Income (loss) $
3,545 $ 19,521 $ 7,045 $ 23,766 Adjustments: Real estate
depreciation and amortization 11,550 7,987 22,751 15,582 Net
(gains) losses on sale of assets excluding defeasance costs
- (18,798 ) - (18,713 ) Funds From Operations
$ 15,095 $ 8,710 $ 29,796 $ 20,635
FFO per share 0.17
0.12 0.34
0.29
Core Funds From Operations (CFFO): Funds From Operations
15,095 8,710 29,796 20,635 Adjustments: Stock compensation expense
933 738 1,403 1,126 Amortization of deferred financing costs 325
359 769 878 Acquisition and integration expenses - 265 - 387 Other
depreciation and amortization 33 24 56 36 Other expense (income) -
12 (52 ) 12 (Gains) losses on extinguishment of debt - 572 - 572
Defeasance costs included in net gains (losses) on sale of assets
- 2,748 - 2,748 Core Funds From
Operations $ 16,386 $ 13,428 $ 31,972 $ 26,394
CFFO per
share 0.19 0.19 0.37 0.37 Weighted-average shares and units
outstanding 87,543,931 71,703,735 87,506,300
71,680,542
Schedule III
Independence Realty Trust, Inc.
Reconciliation of Same-Store Net Operating
Income to Net Income (loss)
(Dollars in thousands)
(unaudited)
For the Three-Months Ended (a)
June 30, 2018 March 31, 2018
December 31,2017
September 30,2017
June 30, 2017 Reconciliation of same-store net
operating income to net income (loss) Same store $ 19,465 $
19,123 $ 19,296 $ 19,042 $ 19,136 Non same store 8,566 8,075 6,401
4,626 4,377 Property management income 155 139 140 202 130 Property
management expenses (1,592 ) (1,683 ) (1,696 ) (1,328 ) (1,444 )
General and administrative expenses (2,872 ) (2,734 ) (2,398 )
(2,322 ) (2,706 ) Acquisition and integration expenses — — (386 )
(569 ) (265 ) Depreciation and amortization expense (11,583 )
(11,224 ) (9,912 ) (8,671 ) (8,011 ) Interest expense (8,594 )
(8,340 ) (7,129 ) (6,963 ) (7,162 ) Other income (expense) — 144 94
12 (12 ) Net gains (losses) on sale of assets — — 2,952 (92 )
16,050 Gains (losses) on extinguishment on debt — — — — (572 )
Acquisition related debt extinguishment expenses — —
(843 ) (2,781 ) —
Net income (loss) $
3,545 $ 3,500 $ 6,519 $ 1,156 $ 19,521
(a) Same store portfolio includes 37
properties, which represent 10,329 units.
Schedule IV
Independence Realty Trust, Inc.
Reconciliation of Net Income (Loss) to
Adjusted EBITDA
And Interest Coverage Ratio
(Dollars in thousands)
(unaudited)
Three Months Ended ADJUSTED
EBITDA:
June 30,2018
March 31, 2018
December 31,2017
September 30,2017
June 30,2017
Net income (loss) $ 3,545 $ 3,500 $ 6,519 $ 1,156 $ 19,521
Add-Back (Deduct): Depreciation and amortization 11,583 11,224
9,912 8,671 8,011 Interest expense 8,594 8,340 7,129 6,963 7,162
Other (income) expense — (52 ) (94 ) (12 ) 12 Acquisition and
integration expenses — — 386 569 265 Net (gains) losses on sale of
assets — — (2,952 ) 92 (16,050 ) (Gains) losses on extinguishment
of debt — — — — 572 Acquisition related debt extinguishment
expenses — — 843 2,781 —
Adjusted EBITDA $ 23,722 $ 23,012 $ 21,743 $ 20,220 $ 19,493
INTEREST COST: Interest expense $ 8,594 $ 8,340 $
7,129 $ 6,963 $ 7,162
INTEREST COVERAGE: 2.8 x 2.8 x
3.0 x 2.9 x 2.7 x
Three Months Ended June 30, Six Months Ended June
30, ADJUSTED EBITDA: 2018 2017
2018 2017 Net income (loss) $ 3,545 $ 19,521 $
7,045 $ 23,766 Add-Back (Deduct): Depreciation and amortization
11,583 8,011 22,807 15,618 Interest expense 8,594 7,162 16,934
14,610 Other (income) expense — — (52 ) 17 Acquisition and
integration expenses — 265 — 387 Net (gains) losses on sale of
assets — (16,050 ) — (15,965 ) (Gains) losses on extinguishment of
debt — 572 — 572
Adjusted EBITDA
$ 23,722 $ 19,493 $ 46,734 $ 39,005
INTEREST COST:
Interest expense $ 8,594 $ 7,162 $ 16,934 $ 14,610
INTEREST COVERAGE: 2.8 x 2.7 x 2.8 x 2.7 x
Schedule VIndependence Realty Trust,
Inc.Definitions
Average Effective Monthly Rent per Unit
Average effective rent per unit represents the average of gross
rent amounts, divided by the average occupancy (in units) for the
period presented. We believe average effective rent is a helpful
measurement in evaluating average pricing. This metric, when
presented, reflects the average effective rent per month.
Average Occupancy
Average occupancy represents the average of the daily physical
occupancy for the period presented.
EBITDA and Adjusted EBITDA
EBITDA is defined as net income before interest expense
including amortization of deferred financing costs, income tax
expense, and depreciation and amortization expenses. Adjusted
EBITDA is EBITDA before acquisition and integration expenses and
certain other non-operating gains or losses related to items such
as asset sales, debt extinguishments, acquisition related debt
extinguishment expenses, gains on the TSRE merger, and management
internalization expenses. EBITDA and Adjusted EBITDA are each
non-GAAP financial measures. We consider each of EBITDA and
Adjusted EBITDA to be an appropriate supplemental measure of our
performance because each eliminates interest, income taxes,
depreciation and amortization, acquisition and integration expenses
and other non-operating gains and losses, and thereby permits
investors to view income from operations without these non-cash or
non-operating items. IRT’s calculation of Adjusted EBITDA differs
from the methodology used for calculating Adjusted EBITDA by
certain other REITs and, accordingly, IRT’s Adjusted EBITDA may not
be comparable to Adjusted EBITDA reported by other REITs.
Funds From Operations (“FFO”) and Core Funds From Operations
(“CFFO”)
IRT believes that FFO and CFFO, each of which is a non-GAAP
financial measure, are additional appropriate measures of the
operating performance of a REIT and IRT in particular. IRT computes
FFO in accordance with the standards established by the National
Association of Real Estate Investment Trusts, or NAREIT, as net
income or loss (computed in accordance with GAAP), excluding real
estate-related depreciation and amortization expense, gains or
losses on sales of real estate and the cumulative effect of changes
in accounting principles.
CFFO is a computation made by analysts and investors to measure
a real estate company’s operating performance by removing the
effect of items that do not reflect ongoing property operations,
including stock compensation expense, depreciation and amortization
of other items not included in FFO, amortization of deferred
financing costs, acquisition and integration expenses, and other
non-cash or non-operating gains or losses related to items such as
defeasance costs we incur when we sell a property subject to
secured debt, asset sales, debt extinguishments, and acquisition
related debt extinguishment expenses from the determination of
FFO.
IRT’s calculation of CFFO differs from the methodology used for
calculating CFFO by certain other REITs and, accordingly, IRT’s
CFFO may not be comparable to CFFO reported by other REITs. IRT’s
management utilizes FFO and CFFO as measures of IRT’s operating
performance, and believes they are also useful to investors,
because they facilitate an understanding of IRT’s operating
performance after adjustment for certain non-cash or non-operating
items that are required by GAAP to be expensed but may not
necessarily be indicative of current operating performance and that
may not accurately compare IRT’s operating performance between
periods. Furthermore, although FFO, CFFO and other supplemental
performance measures are defined in various ways throughout the
REIT industry, IRT believes that FFO and CFFO provide investors
with additional useful measures to compare IRT’s 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. Neither FFO nor CFFO should be considered as an
alternative to net income as an indicator of IRT’s operating
performance or as an alternative to cash flow from operating
activities as a measure of IRT’s liquidity.
Interest Coverage
Interest coverage is a ratio computed by dividing our Adjusted
EBITDA by our interest expense.
Net Debt
Net debt, a non-GAAP financial measure, equals
total debt less cash and cash equivalents. The following table
provides a reconciliation of total debt to net debt. (Dollars in
thousands).
As of June 30, 2018
March 31,2018
December 31,2017
September 30,2017
June 30, 2017 Total debt $ 911,772 $ 903,286 $
778,442 $ 731,625 $ 764,521 Less: cash and cash equivalents
(10,896 ) (10,399 )
(9,985
) (10,128 ) (6,271 ) Total net debt $ 900,876 $
892,887 $ 768,457 $ 721,497 $ 758,250
IRT presents net debt because management believes it is a useful
measure of IRT’s credit position and progress toward reducing
leverage. The calculation is limited because IRT may not always be
able to use cash to repay debt on a dollar for dollar basis.
Net Operating Income
IRT believes that Net Operating Income (“NOI”), a non-GAAP
financial measure, is a useful measure of its operating
performance. IRT defines NOI as total property revenues less total
property operating expenses, excluding interest expenses,
depreciation and amortization, acquisition expenses, property
management expenses, and general and administrative expenses. Other
REITs may use different methodologies for calculating NOI, and
accordingly, our NOI may not be comparable to other REITs. We
believe that this measure provides an operating perspective not
immediately apparent from GAAP operating income or net income. We
use NOI to evaluate our performance on a same store and non-same
store basis because NOI measures the core operations of property
performance by excluding corporate level expenses, financing
expenses, and other items not related to property operating
performance and captures trends in rental housing and property
operating expenses. However, NOI should only be used as an
alternative measure of our financial performance.
Same Store Properties and Same Store Portfolio
IRT reviews its same store portfolio at the beginning of each
calendar year. Properties are added into the same 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 store portfolio.
Total Gross Assets
Total Gross Assets equals total assets plus
accumulated depreciation and accumulated amortization, including
fully depreciated or amortized real estate and real estate related
assets. The following table provides a reconciliation of total
assets to total gross assets (Dollars in thousands).
As of June 30, 2018
March 31,2018
December 31,2017
September 30,2017
June 30, 2017 Total assets $ 1,583,117
$ 1,577,879 $ 1,450,624 $ 1,405,212 $ 1,317,177 Plus: accumulated
depreciation (a) 104,496 94,001 84,097 76,664 68,433 Plus:
accumulated amortization 18,852 17,809 16,517
15,670 15,254 Total gross assets $ 1,706,465 $
1,689,689 $ 1,551,238 $ 1,497,546 $ 1,400,864
(a) Includes previously recognized
depreciation on properties that are classified as held-for-sale
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version on businesswire.com: https://www.businesswire.com/news/home/20180802005252/en/
Independence Realty Trust, Inc.Edelman Financial
Communications & Capital MarketsTed McHugh and Lauren Tarola,
212.277.4322IRT@edelman.com
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