Independence Realty Trust, Inc. (“IRT”) (NYSE: IRT), a
multifamily apartment REIT, today announced its third quarter 2020
financial results.
Third Quarter Highlights
- Net income available to common shares of $1.1 million for the
quarter ended September 30, 2020 compared to $4.9 million for the
quarter ended September 30, 2019.
- Earnings per diluted share of $0.01 for the quarter ended
September 30, 2020 compared to $0.05 for the quarter ended
September 30, 2019.
- Same store net operating income (“NOI”) growth of 0.5% for the
quarter ended September 30, 2020 compared to the quarter ended
September 30, 2019, supported by average occupancy of 94.0%.
- Core Funds from Operations (“CFFO”) of $19.4 million for the
quarter ended September 30, 2020 compared to $17.0 million for the
quarter ended September 30, 2019. CFFO per share was $0.20 for the
third quarter of 2020, as compared to $0.19 for the quarter ended
September 30, 2019.
- Adjusted EBITDA of $27.1 million for the quarter ended
September 30, 2020 compared to $25.7 million for the quarter ended
September 30, 2019.
Included later in this press release are definitions of NOI,
CFFO, Adjusted EBITDA and other Non-GAAP financial measures and
reconciliations of such measures to their most comparable financial
measures as calculated and presented in accordance with GAAP.
Management Commentary
“Our quarter and year-to-date 2020 results reflect the continued
resiliency of our portfolio and dedication of our team.” said Scott
Schaeffer, Chairman and CEO of IRT. “We increased same store
portfolio average occupancy on a quarter-over-quarter and
year-over-year basis and delivered NOI growth of 0.5% in the third
quarter, collecting 98.9% of rents billed and maintaining a
conservative reserve for uncollected rents. We remain confident in
our strategy, as we look to close out 2020 with positive momentum
heading into 2021.”
“IRT is committed to managing our business for long-term
success, as evidenced by recent advancements in our value add and
capital recycling programs. In the third quarter, we progressed
with renovations at 17 of our properties and have taken a proactive
approach to acquiring and divesting properties which will better
position our portfolio. Our actions support continued efforts to
increase our return on investment at existing properties, as well
as rotate capital out of non-core markets that offer limited growth
potential and into core markets that fit our long-term investment
criteria. We are also focused on the strength of our balance sheet,
having approximately $217 million in total liquidity at
quarter-end.”
Same Store Property Operating Results
Third Quarter 2020 Compared to
Third Quarter 2019(1)
Nine Months Ended 9/30/20
Compared to Nine Months Ended 9/30/19 (1)
Rental and other property revenue
3.0% increase
3.0% increase
Property operating expenses
6.8% increase
3.6% increase
Net operating income (“NOI”)
0.5% increase
2.6% increase
Portfolio average occupancy
40 bps increase to 94.0%
40 bps decrease to 93.3%
Portfolio average rental rate
2.2% increase to $1,106
3.7% increase to $1,101
NOI Margin
150 bps decrease to 58.8%
30 bps decrease to 60.2%
(1)
Same store portfolio for the three months ended September
30, 2020 includes 51 properties, which represent 14,189 units.
Same Store Property Operating Results, Excluding Value
Add
The same store portfolio results below exclude 16 communities
that are both part of the same store portfolio and were actively
undergoing Value Add renovations during the three months ended
September 30, 2020.
Third Quarter 2020 Compared to
Third Quarter 2019(1)
Nine Months Ended 9/30/20
Compared to Nine Months Ended 9/30/19 (1)
Rental and other property revenue
1.2% increase
1.9% increase
Property operating expenses
6.2% increase
1.9% increase
Net operating income (“NOI”)
2.1% decrease
1.9% increase
Portfolio average occupancy
40 bps decrease to 94.6%
50 bps decrease to 94.5%
Portfolio average rental rate
0.8% increase to $1,084
1.9% increase to $1,084
NOI Margin
200 bps decrease to 58.3%
No change – 60.5%
(1)
Same store portfolio, excluding value add, for the three
months ended September 30, 2020 includes 35 properties, which
represent 9,193 units.
COVID-19 Metrics (1)(2) (Dollars in thousands, except per
unit data)
Rent collections
3Q 2020
3Q 2019
2Q 2020
Rent collected for the period presented,
as a percentage of rent billed
98.8%
99.1%
98.2%
Deferred payment plans: (3)
Number of deferred payment plans
originated
3
-
260
Amount of monthly rent deferred for period
presented
$55
-
$424
Amount of monthly rent deferred for the
period presented, as a percentage of rent billed
0.1%
0.0%
0.9%
Combined rent collected and rent subject
to deferred payment plans, as a percentage of rent billed
98.9%
99.1%
99.1%
(1)
All metrics presented are for our total portfolio in the
period presented.
(2)
All metrics are based on our internal data, which management
uses to monitor property performance on a daily or weekly basis.
(3)
Deferred payment plans allow residents to defer between 25%
and 75% of their monthly rent for between one and three months.
Residents must provide evidence of hardship and commit to a full
12-month lease term, which allows deferred payments to be repaid
over a longer remaining lease term.
During the third quarter of 2020 and as a result of the COVID-19
pandemic, we recorded a $80,000 provision for bad debts. The table
below presents additional details on the components of bad
debt:
Components of Bad Debt (1)
3Q 2020
3Q 2019
2Q 2020
Amount
Percentage
Amount
Percentage
Amount
Percentage
Charge-offs, net
$260
0.5%
$245
0.5%
$28
0.0%
Provision for bad debt
$80
0.1%
-
-
$723
1.4%
Net bad debt
$340
0.6%
$245
0.5%
$751
1.4%
(1) Dollar amounts are in thousands and percentages are as a
percentage of total rental and other property income. Bad debt is
recorded as a reduction to rental and other property revenue in our
consolidated statements of operations.
Operating statistics
October 2020 (1)
October 2019
3Q 2020
Rent collected for the period presented,
as a percentage of rent billed
96.7%
99.5%
98.8%
Amount of monthly rent deferred for the
period presented, as a percentage of rent billed
0.0%
0.0%
0.1%
Combined rent collected and rent subject
to deferred payment plans, as a percentage of rent billed
96.7%
99.5%
98.9%
Average occupancy, total portfolio
94.9%
92.5%
94.1%
Average effective monthly rent per
unit
$1,120
$1,091
$1,113
Resident retention rate
47.5%
45.8%
56.7%
Traffic (2)
9,147
10,119
45,142 (2)
(1)
October 2020 data is month-to-date through October 27, 2020.
(2)
Traffic represents instances of first contact with potential
residents through email, phone call, office visit, etc. Traffic
during 3Q 2020 was 22.3% higher than 3Q 2019.
Lease-Over-Lease Effective Rent Growth (1)
The table below depicts lease-over-lease effective rent growth
for all new and renewal leases entered into during the respective
periods for the 51-property same store portfolio.
Lease Type
Q3 2020
Q4 2020 (2)
New Leases
1.8%
7.4%
Renewal Leases
0.5%
1.3%
Total
1.1%
3.9%
(1)
Lease-over-lease effective rent growth represents the change
in effective monthly rent, as adjusted for concessions, for each
unit that had a prior lease and current lease that are for a term
of 9-13 months.
(2)
For new leases and renewals commencing during Q4 2020 that
were signed as of October 27, 2020.
Value Add Program
Since the inception of our value add program, we have completed
renovations in 3,489 units, achieving a weighted average return on
investment of 18.4% on interior renovation costs and an average
18.3% rent premium on unrenovated units.
During June and July of 2020, with traffic returning in most of
our markets, we resumed renovation efforts at all five communities
that had been paused in first quarter 2020. As demonstrated by
these actions, we will continue to assess the potential of
identified projects, including those at the six properties where
the start of renovations have been delayed, as market conditions
improve.
Capital Recycling
In third quarter 2020, we reengaged in capital recycling
activity in support of our ongoing initiative to establish and grow
our presence in markets where we see long-term growth opportunities
and reevaluate those that are not attractive long-term
investments.
Completed or Planned Acquisitions:
- Tampa, FL: On July 11, 2020, we acquired a 1.1-acre parcel of
land adjacent to our Vantage on Hillsborough property for $860,000.
The acquisition improves the street frontage of our existing
property and will allow us to add up to 51 units to the existing
348 units, pending final approvals.
- Huntsville, AL: We are under contract to acquire a 421-unit
property in Huntsville, AL. The property was built in two phases in
2014 and 2019 and the gross purchase price is $95 million. This
acquisition will expand our footprint in Huntsville from 178 units
to 599 units, at an average rent per unit above that of our
existing total portfolio effective monthly rent per unit. This
acquisition includes a contiguous land parcel approved for up to
337 additional units. We expect to close this acquisition in late
November using proceeds from the dispositions mentioned below, the
availability under our unsecured line of credit, and a portion of
the remaining availability from our February 2020 forward equity
offering.
Completed or Planned Dispositions:
- Trails at Signal Mountain in Chattanooga, TN: On October 27,
2020, we sold this 172-unit property for $20.0 million and expect
to recognize a $6.3 million gain on sale in fourth quarter
2020.
- Live Oak Trace in Baton Rouge, LA: In early November 2020, we
expect to sell this 264-unit property for $25.4 million and as a
result, exit the Baton Rouge market. We expect to sell the property
at a loss and therefore, we have recognized a $1.8 million
impairment charge in third quarter 2020.
- Lakeshore on the Hill in Chattanooga, TN: In late November
2020, we expect to sell this 123-unit property for $14.3 million
and recognize a $3.6 million gain in fourth quarter 2020. Following
this sale, we will have exited the Chattanooga market.
The three properties that we sold or expect to sell during the
fourth quarter 2020 were classified as held for sale as of
September 30, 2020 and were removed from our same store portfolio
thereby reducing our same store portfolio from 54 properties to 51
properties.
Financial Flexibility
As of September 30, 2020, we had a total liquidity position of
approximately $217 million, which includes unrestricted cash,
additional capacity under our unsecured line of credit, and
proceeds upon the future settlement of the unsettled portion of our
forward equity offering.
Capital Expenditures
For the three months ended September 30, 2020, recurring capital
expenditures for the total portfolio were $1.8 million, or $116 per
unit. For the nine months ended September 30, 2020, recurring
capital expenditures for the total portfolio were $4.5 million, or
$283 per unit.
Distributions
On September 15, 2020, our Board of Directors declared a
quarterly cash dividend of $0.12 per share of our common stock,
which was paid on October 23, 2020 to stockholders of record at the
close of business on October 2, 2020.
2020 EPS and CFFO Guidance
On March 26, 2020, we suspended our fiscal 2020 guidance, given
the uncertainty around the length and depth of the coronavirus
crisis and its impact on our business and the economy. At this
time, we believe it is prudent to keep our guidance suspended and
we anticipate resuming our practice of providing full year guidance
when there is more clarity on economic conditions.
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
We disclose the following non-GAAP financial measures in this
earnings release: FFO, CFFO, NOI and Adjusted EBITDA. Included at
the end of this release are definitions of these non-GAAP financial
measures and a reconciliation of our reported net income to our FFO
and CFFO, a reconciliation of our same store NOI to our reported
net income, a reconciliation of our Adjusted EBITDA to net income,
and management’s rationales for the usefulness of each of these and
other non-GAAP financial measures used in this release.
Conference Call
All interested parties can listen to the live conference call
webcast at 9:00 AM ET on Thursday, October 29, 2020 from the
investor relations section of the IRT website at www.irtliving.com
or by dialing 1.844.775.2542, access code 4646712. 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, November 5, 2020 by dialing 1.855.859.2056, access code
4646712.
Supplemental Information
We produce 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 our website, www.irtliving.com, through the "Investor
Relations" section.
About Independence Realty Trust, Inc.
Independence Realty Trust, Inc. (NYSE: IRT) is a real estate
investment trust that owns and operates multifamily apartment
properties 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 on capital through
distributions and capital appreciation. More information may be
found on IRT’s website at www.irtliving.com.
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
“will,” “strategy,” “expects,” “seeks,” “believes,” “potential,” or
other similar words. These forward-looking statements include,
without limitation, our expectations with respect to capital
allocations, including as to the timing and amount of future
dividends. Because such statements include risks, uncertainties and
contingencies, actual results may differ materially from the
expectations, intentions, beliefs, plans or predictions of the
future expressed or implied by such forward-looking statements.
These forward-looking statements are based upon the current beliefs
and expectations of our management and are inherently subject to
significant business, economic and competitive uncertainties and
contingencies, many of which are difficult to predict and generally
not within our control. In addition, these forward-looking
statements are subject to assumptions with respect to future
business strategies and decisions that are subject to change. Risks
and uncertainties that might cause our actual results and/or future
dividends to differ materially from those expressed or implied by
forward-looking statements include, but are not limited to: risks
related to the impact of COVID-19 and other potential future
outbreaks of infectious diseases on our financial condition,
results of operations, cash flows and performance and those of our
residents as well as on the economy and real estate and financial
markets; changes in market demand for rental apartment homes and
pricing pressures, including from competitors, that could limit our
ability to lease units or increase rents or that could lead to
declines in occupancy and rent levels; uncertainty and volatility
in capital and credit markets, including changes that reduce
availability, and increase costs, of capital; inability of tenants
to meet their rent and other lease obligations and charge-offs in
excess of our allowance for bad debt; legislative restrictions that
may delay or limit collections of past due rents; risks endemic to
real estate and the real estate industry generally; the effects of
natural and other disasters; delays in completing, and cost
overruns incurred in connection with, our value add initiatives and
failure to achieve projected rent increases and occupancy levels on
account of the initiatives; unexpected costs of REIT qualification
compliance; costs and disruptions as the result of a cybersecurity
incident or other technology disruption; and share price
fluctuations. Please refer to the documents filed by us with the
SEC, including specifically the “Risk Factors” sections of our Form
10-K for the year ended December 31, 2019 and our Quarterly Report
on Form 10-Q for the quarter ended March 31, 2020, and our other
filings with the SEC, which identify additional factors that could
cause actual results to differ from those contained in
forward-looking statements. We undertake 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. In addition, the
declaration of dividends on our common stock is subject to the
discretion of our Board of Directors and depends upon a broad range
of factors, including our results of operations, financial
condition, capital requirements, the annual distribution
requirements under the REIT provisions of the Internal Revenue Code
of 1986, as amended, applicable legal requirements and such other
factors as our Board of Directors may from time to time deem
relevant. For these reasons, as well as others, there can be no
assurance that dividends in the future will be equal or similar to
the expected amount of the quarterly dividend described in this
press release.
Schedule I
Independence Realty Trust, Inc.
Selected Financial
Information
(Dollars in thousands, except
share and per share amounts)
(unaudited)
For the Three Months
Ended
September 30,
2020
June 30, 2020
March 31, 2020
December 31,
2019
September 30,
2019
Selected Financial Information:
Operating Statistics:
Net income available to common shares
$1,090
$789
$(372)
$23,784
$4,863
Earnings (loss) per share -- diluted
$0.01
0.01
$0.00
$0.26
$0.05
Rental and other property revenue
$54,001
$52,087
$51,156
$51,250
$51,057
Property operating expenses
$22,129
$20,974
$19,737
$19,064
$20,546
Net operating income
$31,872
$31,113
$31,419
$32,186
$30,511
NOI margin
59.0%
59.7%
61.4%
62.8%
59.8%
Adjusted EBITDA
$27,081
$25,643
$24,081
$27,427
$25,739
CORE FFO per share
$0.20
$0.19
$0.19
$0.20
$0.19
Dividends per share
$0.12
$0.12
$0.18
$0.18
$0.18
CORE FFO payout ratio
60.0%
63.2%
94.7%
90.0%
94.7%
Portfolio Data:
Total gross assets
$1,914,900
$1,916,424
$1,949,494
$1,841,738
$1,821,173
Total number of properties
58
58
58
57
57
Total units
15,805
15,805
15,805
15,554
15,536
Period end occupancy
94.4%
93.5%
92.7%
92.5%
92.8%
Total portfolio average occupancy
94.1%
92.9%
92.5%
92.5%
93.5%
Total portfolio average effective monthly
rent, per unit
$1,113
$1,108
$1,100
$1,088
$1,084
Same store period end occupancy (a)
94.3%
93.4%
93.1%
92.6%
92.9%
Same store portfolio average occupancy
(a)
94.0%
93.1%
92.8%
92.4%
93.6%
Same store portfolio average effective
monthly rent, per unit (a)
$1,106
$1,103
$1,094
$1,089
$1,082
Capitalization:
Total debt
$1,004,237
$1,008,911
$1,049,541
$985,572
$979,330
Common share price, period end
$11.59
$11.45
$8.94
$14.08
$14.31
Market equity capitalization
$1,107,144
$1,093,822
$853,600
$1,294,545
$1,313,311
Total market capitalization
$2,111,381
$2,102,733
$1,903,141
$2,280,117
$2,292,641
Total debt/total gross assets
52.4%
52.6%
53.8%
53.5%
53.8%
Net debt to Adjusted EBITDA (pro forma)
(b)
9.1x
9.2x
9.0x
8.9x
9.0x
Interest coverage
3.0x
2.8x
2.5x
2.8x
2.6x
Common shares and OP Units:
Shares outstanding
94,823,806
94,741,146
94,691,806
91,070,637
90,894,656
OP units outstanding
701,986
789,134
789,134
871,491
881,107
Common shares and OP units outstanding
95,525,792
95,530,279
95,480,939
91,942,128
91,775,763
Weighted average common shares and
units
95,227,176
95,224,855
91,737,113
91,526,726
90,908,646
(a) Same store portfolio consists of 51 properties, which
represent 14,189 units. (b) Reflects pro forma net debt to
Adjusted EBITDA for each period presented, which includes
adjustments for the timing of acquisitions, the full quarter effect
of current value add initiatives, the completion of capital
recycling activities including paydown of associated indebtedness,
and the normalization of items impacting quarterly EBITDA. Actual
net debt to Adjusted EBITDA for the five quarters ended September
30, 2020 was 9.3x, 9.7x, 10.3x, 8.9x, and 9.4x, respectively.
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 Months Ended
September 30,
For the Nine Months Ended
September 30,
2020
2019
2020
2019
Funds From Operations (FFO):
Net Income (loss)
$
1,092
$
4,912
$
1,517
$
22,334
Adjustments:
Real estate depreciation and
amortization
15,155
13,313
45,036
38,306
Net loss on impairment (gain on sale) of
real estate assets excluding debt extinguishment costs
1,840
(5,594
)
1,840
(19,765
)
Funds From Operations
$
18,087
$
12,631
$
48,393
$
40,875
FFO per share
$
0.19
$
0.14
$
0.51
$
0.45
Core Funds From Operations
(CFFO):
Funds From Operations
$
18,087
$
12,631
$
48,393
$
40,875
Adjustments:
Stock compensation expense (a)
901
692
4,761
2,400
Amortization of deferred financing
costs
362
351
1,085
1,052
Other depreciation and amortization
77
121
255
296
Abandoned deal costs
—
—
130
—
Casualty losses
—
—
411
—
Debt extinguishment costs included in net
gains (losses) on sale of assets
—
3,204
—
5,233
Core Funds From Operations
$
19,427
$
16,999
$
55,035
$
49,856
CFFO per share
$
0.20
$
0.19
$
0.59
$
0.55
Weighted-average shares and units
outstanding
95,227,176
90,908,646
94,061,963
87,870,135
(a) Included in the Nine-months ended September 30, 2020 is
$1.7 million of stock compensation expense recorded with respect to
stock awards granted during the period to retirement eligible
employees.
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)
September 30,
2020
June 30, 2020
March 31, 2020
December 31,
2019
September 30,
2019
Reconciliation of same-store net
operating income to net income (loss)
Same-store net operating income
$
28,171
$
28,091
$
28,581
$
28,909
$
28,034
Non same-store net operating income
3,701
3,022
2,838
3,277
2,477
Other revenue
199
181
194
178
242
Property management expenses
(2,078
)
(2,077
)
(2,156
)
(1,950
)
(1,901
)
General and administrative expenses
(2,912
)
(3,574
)
(5,376
)
(2,987
)
(3,113
)
Depreciation and amortization expense
(15,232
)
(15,231
)
(14,828
)
(14,213
)
(13,434
)
Interest expense
(8,917
)
(9,202
)
(9,497
)
(9,873
)
(9,783
)
Abandoned deal costs
—
—
(130
)
—
—
Casualty losses
—
(411
)
—
—
—
Gain on sale (loss on impairment) of real
estate assets, net
(1,840
)
—
—
20,679
2,390
Net income (loss)
$
1,092
$
799
$
(374
)
$
24,020
$
4,912
(a) Same store portfolio includes 51 properties, which
represent 14,189 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:
September 30,
2020
June 30, 2020
March 31, 2020
December 31,
2019
September 30,
2019
Net income (loss)
$
1,092
$
799
$
(374
)
$
24,020
$
4,912
Add-Back (Deduct):
Depreciation and amortization
15,232
15,231
14,828
14,213
13,434
Interest expense
8,917
9,202
9,497
9,873
9,783
Net loss on impairment (gain on sale) of
real estate assets
1,840
—
—
(20,679
)
(2,390
)
Abandoned deal costs
—
—
130
—
—
Casualty losses
—
411
—
—
—
Adjusted EBITDA
$
27,081
$
25,643
$
24,081
$
27,427
$
25,739
INTEREST COST:
Interest expense
$
8,917
$
9,202
$
9,497
$
9,873
$
9,783
INTEREST COVERAGE:
3.0
x
2.8
x
2.5
x
2.8
x
2.6
x
Schedule V Independence 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 occupied units for the
reporting period divided by the average of total units available
for rent for the reporting period.
EBITDA and Adjusted EBITDA
Each of EBITDA and Adjusted EBITDA is a non-GAAP financial
measure. 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 certain other non-cash or non-operating
gains or losses related to items such as asset sales, debt
extinguishments and acquisition related debt extinguishment
expenses, casualty losses, and abandoned deal costs. We consider
each of EBITDA and Adjusted EBITDA to be an appropriate
supplemental measure of performance because it eliminates interest,
income taxes, depreciation and amortization, and other non-cash or
non-operating gains and losses, which permits investors to view
income from operations without these non-cash or non-operating
items. Our calculation of Adjusted EBITDA differs from the
methodology used for calculating Adjusted EBITDA by certain other
REITs and, accordingly, our Adjusted EBITDA may not be comparable
to Adjusted EBITDA reported by other REITs.
Funds From Operations (“FFO”) and Core Funds From Operations
(“CFFO”)
We believe 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. We compute
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 or impairment 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, and other non-cash or non-operating gains or
losses related to items such as casualty losses and abandoned deal
costs.
Our calculation of CFFO differs from the methodology used for
calculating CFFO by certain other REITs and, accordingly, our CFFO
may not be comparable to CFFO reported by other REITs. Our
management utilizes FFO and CFFO as measures of our operating
performance, and believes they are also useful to investors,
because they facilitate an understanding of our 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 our operating performance between
periods. Furthermore, although FFO, CFFO and other supplemental
performance measures are defined in various ways throughout the
REIT industry, we believe that FFO and CFFO provide investors with
additional useful measures 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. Neither FFO nor CFFO should
be considered as an alternative to net income as an indicator of
our operating performance or as an alternative to cash flow from
operating activities as a measure of our liquidity.
Interest Coverage
Interest coverage is a ratio computed by dividing Adjusted
EBITDA by 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).
We present net debt because management believes it is a useful
measure of our credit position and progress toward reducing
leverage. The calculation is limited because we may not always be
able to use cash to repay debt on a dollar for dollar basis.
As of
September 30,
2020
June 30, 2020
March 31, 2020
December 31,
2019
September 30,
2019
Total debt
$
1,004,237
$
1,008,911
$
1,049,541
$
985,572
$
979,330
Less: cash and cash equivalents
(9,891
)
(11,652
)
(57,436
)
(9,888
)
(6,587
)
Total net debt
$
994,346
$
997,259
$
992,105
$
975,684
$
972,743
Net Operating Income
We believe that Net Operating Income (“NOI”), a non-GAAP
financial measure, is a useful supplemental measure of its
operating performance. We define NOI as total property revenues
less total property operating expenses, excluding interest
expenses, depreciation and amortization, 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 insofar as the measure
reflects only operating income and expense at the property level.
We use NOI to evaluate performance on a same store and non-same
store basis because NOI measures the core operations of property
performance by excluding corporate level expenses, financing
expenses, and other items not related to property operating
performance and captures trends in rental housing and property
operating expenses. However, NOI should only be used as an
alternative measure of our financial performance.
Same Store Properties and Same Store Portfolio
We review our 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
September 30,
2020
June 30, 2020
March 31, 2020
December 31,
2019
September 30,
2019
Total assets
$
1,700,428
$
1,708,912
$
1,757,138
$
1,664,106
$
1,653,017
Plus: accumulated depreciation
194,645
187,758
172,789
158,435
148,924
Plus: accumulated amortization
19,827
19,754
19,567
19,197
19,232
Total gross assets
$
1,914,900
$
1,916,424
$
1,949,494
$
1,841,738
$
1,821,173
(IRT – ER)
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version on businesswire.com: https://www.businesswire.com/news/home/20201028006090/en/
Independence Realty Trust, Inc. Edelman Financial
Communications & Capital Markets Ted McHugh and Lauren Torres
917-365-7979 IRT@edelman.com
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