false Q1 0001466085 --12-31 us-gaap:OtherAssets us-gaap:OtherLiabilities P4Y P2Y P3Y P3Y P1Y us-gaap:AssetManagement1Member us-gaap:AssetManagement1Member P40Y P5Y P10Y P2Y1M6D P3Y1M6D P3Y P2Y9M18D P2Y4M24D P3Y3M18D P3Y2M12D P3Y1M6D 0001466085 2021-01-01 2021-03-31 xbrli:shares 0001466085 2021-04-27 iso4217:USD 0001466085 2021-03-31 0001466085 2020-12-31 iso4217:USD xbrli:shares 0001466085 2020-01-01 2020-03-31 0001466085 us-gaap:CommonStockMember 2020-12-31 0001466085 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0001466085 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-12-31 0001466085 us-gaap:RetainedEarningsMember 2020-12-31 0001466085 us-gaap:ParentMember 2020-12-31 0001466085 us-gaap:NoncontrollingInterestMember 2020-12-31 0001466085 us-gaap:RetainedEarningsMember 2021-01-01 2021-03-31 0001466085 us-gaap:ParentMember 2021-01-01 2021-03-31 0001466085 us-gaap:NoncontrollingInterestMember 2021-01-01 2021-03-31 0001466085 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-01-01 2021-03-31 0001466085 us-gaap:CommonStockMember 2021-01-01 2021-03-31 0001466085 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-03-31 0001466085 us-gaap:CommonStockMember 2021-03-31 0001466085 us-gaap:AdditionalPaidInCapitalMember 2021-03-31 0001466085 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-03-31 0001466085 us-gaap:RetainedEarningsMember 2021-03-31 0001466085 us-gaap:ParentMember 2021-03-31 0001466085 us-gaap:NoncontrollingInterestMember 2021-03-31 0001466085 us-gaap:CommonStockMember 2019-12-31 0001466085 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0001466085 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2019-12-31 0001466085 us-gaap:RetainedEarningsMember 2019-12-31 0001466085 us-gaap:ParentMember 2019-12-31 0001466085 us-gaap:NoncontrollingInterestMember 2019-12-31 0001466085 2019-12-31 0001466085 us-gaap:RetainedEarningsMember 2020-01-01 2020-03-31 0001466085 us-gaap:ParentMember 2020-01-01 2020-03-31 0001466085 us-gaap:NoncontrollingInterestMember 2020-01-01 2020-03-31 0001466085 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-01-01 2020-03-31 0001466085 us-gaap:CommonStockMember 2020-01-01 2020-03-31 0001466085 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-03-31 0001466085 us-gaap:CommonStockMember 2020-03-31 0001466085 us-gaap:AdditionalPaidInCapitalMember 2020-03-31 0001466085 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-03-31 0001466085 us-gaap:RetainedEarningsMember 2020-03-31 0001466085 us-gaap:ParentMember 2020-03-31 0001466085 us-gaap:NoncontrollingInterestMember 2020-03-31 0001466085 2020-03-31 irt:Property xbrli:pure 0001466085 irt:IndependenceRealtyOperatingPartnershipLPMember 2021-03-31 0001466085 srt:MaximumMember 2021-01-01 2021-03-31 0001466085 us-gaap:BuildingAndBuildingImprovementsMember 2021-01-01 2021-03-31 0001466085 us-gaap:OtherMachineryAndEquipmentMember srt:MinimumMember 2021-01-01 2021-03-31 0001466085 us-gaap:OtherMachineryAndEquipmentMember srt:MaximumMember 2021-01-01 2021-03-31 0001466085 irt:COVID19Member 2021-01-01 2021-03-31 0001466085 srt:MinimumMember 2021-01-01 2021-03-31 0001466085 us-gaap:NaturalDisastersAndOtherCasualtyEventsMember 2021-01-01 2021-03-31 0001466085 us-gaap:NaturalDisastersAndOtherCasualtyEventsMember 2020-01-01 2020-03-31 0001466085 irt:UnsecuredCreditFacilityMember 2021-03-31 0001466085 irt:UnsecuredCreditFacilityMember 2020-12-31 0001466085 irt:TermLoanFacilityMember 2021-03-31 0001466085 irt:TermLoanFacilityMember 2020-12-31 0001466085 us-gaap:MortgagesMember 2021-03-31 0001466085 us-gaap:MortgagesMember 2020-12-31 0001466085 srt:MaximumMember us-gaap:AccountingStandardsUpdate201602Member 2021-03-31 0001466085 us-gaap:AccountingStandardsUpdate201602Member 2021-03-31 0001466085 us-gaap:AccountingStandardsUpdate201602Member 2021-01-01 2021-03-31 0001466085 us-gaap:FurnitureAndFixturesMember srt:MinimumMember 2021-01-01 2021-03-31 0001466085 us-gaap:FurnitureAndFixturesMember srt:MaximumMember 2021-01-01 2021-03-31 0001466085 us-gaap:BuildingMember 2021-01-01 2021-03-31 0001466085 irt:UnsecuredTermLoanFacilityMember 2021-03-31 0001466085 irt:UnsecuredCreditFacilityMember 2021-01-01 2021-03-31 0001466085 irt:UnsecuredTermLoanFacilityMember 2021-01-01 2021-03-31 0001466085 us-gaap:MortgagesMember 2021-01-01 2021-03-31 0001466085 srt:WeightedAverageMember irt:UnsecuredCreditFacilityMember 2021-01-01 2021-03-31 0001466085 srt:WeightedAverageMember irt:UnsecuredTermLoanFacilityMember 2021-01-01 2021-03-31 0001466085 srt:WeightedAverageMember us-gaap:MortgagesMember 2021-01-01 2021-03-31 0001466085 srt:WeightedAverageMember 2021-01-01 2021-03-31 0001466085 irt:UnsecuredCreditFacilityMember 2021-03-01 2021-03-01 0001466085 us-gaap:MortgagesMember 2021-03-01 0001466085 irt:UnsecuredCreditFacilityMember 2021-04-05 2021-04-05 0001466085 us-gaap:MortgagesMember 2021-04-05 0001466085 irt:UnsecuredTermLoanFacilityMember 2020-12-31 0001466085 irt:UnsecuredCreditFacilityMember 2020-01-01 2020-12-31 0001466085 irt:UnsecuredTermLoanFacilityMember 2020-01-01 2020-12-31 0001466085 us-gaap:MortgagesMember 2020-01-01 2020-12-31 0001466085 srt:WeightedAverageMember irt:UnsecuredCreditFacilityMember 2020-01-01 2020-12-31 0001466085 srt:WeightedAverageMember irt:UnsecuredTermLoanFacilityMember 2020-01-01 2020-12-31 0001466085 srt:WeightedAverageMember us-gaap:MortgagesMember 2020-01-01 2020-12-31 0001466085 srt:WeightedAverageMember 2020-01-01 2020-12-31 0001466085 us-gaap:CashFlowHedgingMember us-gaap:InterestRateSwapMember 2021-03-31 0001466085 us-gaap:CashFlowHedgingMember irt:InterestRateCollarMember 2021-03-31 0001466085 us-gaap:CashFlowHedgingMember 2021-03-31 0001466085 us-gaap:CashFlowHedgingMember irt:ForwardInterestRateSwapMember 2021-03-31 0001466085 us-gaap:CashFlowHedgingMember us-gaap:InterestRateSwapMember 2020-12-31 0001466085 us-gaap:CashFlowHedgingMember irt:InterestRateCollarMember 2020-12-31 0001466085 us-gaap:CashFlowHedgingMember 2020-12-31 0001466085 us-gaap:CashFlowHedgingMember irt:ForwardInterestRateSwapMember 2020-12-31 0001466085 irt:InterestRateSwapAndCollarsMember us-gaap:CashFlowHedgingMember 2021-01-01 2021-03-31 0001466085 us-gaap:DividendDeclaredMember 2021-03-15 2021-03-15 0001466085 2020-11-13 0001466085 irt:AtMarketProgramMember irt:DecemberThirtyFirstTwoThousandTwentyMember 2021-01-01 2021-03-31 0001466085 irt:AtMarketProgramMember irt:MarchThirtyFirstTwoThousandTwentyOneMember 2021-01-01 2021-03-31 0001466085 irt:AtMarketProgramMember 2021-01-01 2021-03-31 0001466085 irt:AtMarketProgramMember irt:DecemberThirtyFirstTwoThousandTwentyMember 2021-03-31 0001466085 irt:AtMarketProgramMember irt:MarchThirtyFirstTwoThousandTwentyOneMember 2021-03-31 0001466085 irt:AtMarketProgramMember 2021-03-31 0001466085 us-gaap:SubsequentEventMember 2021-05-07 2021-05-07 0001466085 us-gaap:DividendDeclaredMember us-gaap:NoncontrollingInterestMember 2021-03-15 2021-03-15 0001466085 2016-05-31 0001466085 irt:LongTermIncentivePlanMember srt:MinimumMember 2016-05-01 2016-05-31 0001466085 irt:LongTermIncentivePlanMember srt:MaximumMember 2016-05-01 2016-05-31 0001466085 irt:RestrictedStockAndRestrictedStockUnitsMember 2020-12-31 0001466085 irt:RestrictedStockAndRestrictedStockUnitsMember 2021-01-01 2021-03-31 0001466085 irt:RestrictedStockAndRestrictedStockUnitsMember 2021-03-31 0001466085 us-gaap:RestrictedStockUnitsRSUMember 2021-03-31 0001466085 us-gaap:RestrictedStockUnitsRSUMember 2020-12-31 0001466085 us-gaap:PerformanceSharesMember srt:ExecutiveOfficerMember 2021-02-18 2021-02-18 0001466085 us-gaap:PerformanceSharesMember 2021-02-18 2021-02-18 0001466085 us-gaap:PerformanceSharesMember srt:MinimumMember 2021-02-18 2021-02-18 0001466085 us-gaap:PerformanceSharesMember srt:MaximumMember 2021-02-18 2021-02-18 0001466085 us-gaap:PerformanceSharesMember irt:LongTermIncentivePlanMember 2021-02-18 2021-02-18 0001466085 irt:RestrictedStockAwardsAndPerformanceShareUnitsMember irt:EmployeeMember 2021-01-01 2021-03-31 0001466085 irt:RestrictedStockAwardsAndPerformanceShareUnitsMember irt:EmployeeMember 2020-01-01 2020-03-31

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission file number 001-36041

 

INDEPENDENCE REALTY TRUST, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Maryland

26-4567130

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

 

 

1835 Market Street, Suite 2601

Philadelphia, PA

19103

(Address of Principal Executive Offices)

(Zip Code)

(267) 270-4800

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Securities registered pursuant to section 12(b) of the Act:

 

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common stock

 

IRT

 

NYSE

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated filer

Accelerated filer

 

 

 

 

 

 

Non-Accelerated filer

Smaller reporting company

 

 

 

 

 

 

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of April 27, 2021 there were 102,147,512 shares of the Registrant’s common stock issued and outstanding.

 

 

 


 

INDEPENDENCE REALTY TRUST, INC.

INDEX

 

 

 

 

 

Page

 

 

 

 

 

PART I—FINANCIAL INFORMATION

 

3

 

 

 

 

 

Item 1.

 

Financial Statements (unaudited)

 

3

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of March 31, 2021 and December 31, 2020

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations for the Three Months ended March 31, 2021 and March 31, 2020

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for the Three Months ended March 31, 2021 and March 31, 2020

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Changes in Equity for the Three Months ended March 31, 2021 and March 31, 2020

 

6

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the Three Months ended March 31, 2021 and March 31, 2020

 

7

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements as of March 31, 2021

 

8

 

 

 

 

 

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

17

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

24

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

24

 

 

 

 

 

PART II—OTHER INFORMATION

 

 

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

24

 

 

 

 

 

Item 1A.

 

Risk Factors

 

24

 

 

 

 

 

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

25

 

 

 

 

 

Item 3.

 

Defaults Upon Senior Securities

 

25

 

 

 

 

 

Item 4.

 

Mine Safety Disclosures

 

25

 

 

 

 

 

Item 5.

 

Other Information

 

25

 

 

 

 

 

Item 6.

 

Exhibits

 

25

 

 

 

 

 

Signatures

 

26

 

 

 


 

PART I—FINANCIAL INFORMATION

Item 1.

Financial Statements (unaudited)

Independence Realty Trust, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

(Unaudited and dollars in thousands, except share and per share data)

 

 

 

As of

March 31, 2021

 

 

As of

December 31, 2020

 

ASSETS:

 

 

 

 

 

 

 

 

Investments in real estate:

 

 

 

 

 

 

 

 

Investments in real estate, at cost

 

$

1,922,071

 

 

$

1,916,770

 

Accumulated depreciation

 

 

(223,187

)

 

 

(208,618

)

Investments in real estate, net

 

 

1,698,884

 

 

 

1,708,152

 

Cash and cash equivalents

 

 

8,653

 

 

 

8,751

 

Restricted cash

 

 

4,449

 

 

 

4,864

 

Other assets

 

 

12,824

 

 

 

12,338

 

Derivative assets

 

 

2,810

 

 

 

 

Intangible assets, net of accumulated amortization of $396 and $0, respectively

 

 

396

 

 

 

792

 

Total Assets

 

$

1,728,016

 

 

$

1,734,897

 

LIABILITIES AND EQUITY:

 

 

 

 

 

 

 

 

Indebtedness, net of unamortized deferred financing costs of $3,844 and $4,208, respectively

 

$

947,631

 

 

$

945,686

 

Accounts payable and accrued expenses

 

 

24,535

 

 

 

25,416

 

Accrued interest payable

 

 

1,888

 

 

 

1,976

 

Dividends payable

 

 

12,293

 

 

 

12,257

 

Derivative liabilities

 

 

19,540

 

 

 

29,842

 

Other liabilities

 

 

6,991

 

 

 

6,949

 

Total Liabilities

 

 

1,012,878

 

 

 

1,022,126

 

Equity:

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

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, 102,033,732 and 101,803,762 shares issued and outstanding, including 267,296 and 339,468 unvested restricted common share awards, respectively

 

 

1,018

 

 

 

1,018

 

Additional paid-in capital

 

 

920,042

 

 

 

919,615

 

Accumulated other comprehensive income (loss)

 

 

(20,497

)

 

 

(33,822

)

Retained earnings (accumulated deficit)

 

 

(190,151

)

 

 

(178,751

)

Total stockholders’ equity

 

 

710,412

 

 

 

708,060

 

Noncontrolling interests

 

 

4,726

 

 

 

4,711

 

Total Equity

 

 

715,138

 

 

 

712,771

 

Total Liabilities and Equity

 

$

1,728,016

 

 

$

1,734,897

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

3


 

Independence Realty Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of Operations

(Unaudited and dollars in thousands, except share and per share data)

 

 

 

For the Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

REVENUE:

 

 

 

 

 

 

 

 

Rental and other property revenue

 

$

54,811

 

 

$

51,156

 

Other revenue

 

 

301

 

 

 

194

 

Total revenue

 

 

55,112

 

 

 

51,350

 

EXPENSES:

 

 

 

 

 

 

 

 

Property operating expenses

 

 

20,838

 

 

 

19,737

 

Property management expenses

 

 

1,943

 

 

 

2,156

 

General and administrative expenses

 

 

5,942

 

 

 

5,376

 

Depreciation and amortization expense

 

 

16,552

 

 

 

14,828

 

Abandoned deal costs

 

 

 

 

 

130

 

Casualty losses

 

 

359

 

 

 

 

Total expenses

 

 

45,634

 

 

 

42,227

 

Interest expense

 

 

(8,385

)

 

 

(9,497

)

Net income (loss):

 

 

1,093

 

 

 

(374

)

(Income) loss allocated to noncontrolling interest

 

 

(7

)

 

 

2

 

Net income (loss) allocable to common shares

 

$

1,086

 

 

$

(372

)

Earnings per share:

 

 

 

 

 

 

 

 

Basic

 

$

0.01

 

 

$             0.00

 

Diluted

 

$

0.01

 

 

$             0.00

 

Weighted-average shares:

 

 

 

 

 

 

 

 

Basic

 

 

101,678,865

 

 

 

90,895,488

 

Diluted

 

 

102,763,106

 

 

 

90,895,488

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

4


 

Independence Realty Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of Comprehensive Income (Loss)

(Unaudited and dollars in thousands)

 

 

 

 

For the Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Net income (loss)

 

$

1,093

 

 

$

(374

)

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

Change in fair value of interest rate hedges

 

 

15,173

 

 

 

(23,422

)

Realized (losses) gains on interest rate hedges reclassified to earnings

 

 

(1,760

)

 

 

(418

)

Total other comprehensive income (loss)

 

 

13,413

 

 

 

(23,840

)

Comprehensive income (loss) before allocation to noncontrolling interests

 

 

14,506

 

 

 

(24,214

)

Allocation to noncontrolling interests

 

 

(95

)

 

 

191

 

Comprehensive income (loss)

 

$

14,411

 

 

$

(24,023

)

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

 

5


 

Independence Realty Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of Changes in Equity

(Unaudited and dollars in thousands, except share information)

 

 

 

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

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

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

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements

 

6


 

Independence Realty Trust, Inc. and Subsidiaries

Condensed Consolidated Statements of Cash Flows

(Unaudited and dollars in thousands)

 

 

 

For the Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net income

 

$

1,093

 

 

$

(374

)

Adjustments to reconcile net income to cash flow from operating activities:

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

16,552

 

 

 

14,828

 

Amortization of deferred financing costs

 

 

364

 

 

 

361

 

Stock compensation

 

 

3,326

 

 

 

2,627

 

Casualty losses

 

 

359

 

 

 

 

Amortization related to derivative instruments

 

 

302

 

 

 

280

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

 

Other assets

 

 

(90

)

 

 

(875

)

Accounts payable and accrued expenses

 

 

(1,321

)

 

 

(5,171

)

Accrued interest payable

 

 

(88

)

 

 

(59

)

Other liabilities

 

 

141

 

 

 

67

 

Cash flow provided by operating activities

 

 

20,638

 

 

 

11,684

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Acquisition of real estate properties

 

 

(365

)

 

 

(50,598

)

Capital expenditures

 

 

(6,916

)

 

 

(8,572

)

Cash flow used in investing activities

 

 

(7,281

)

 

 

(59,170

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from unsecured credit facility and term loans

 

 

9,500

 

 

 

65,501

 

Mortgage principal repayments

 

 

(7,918

)

 

 

(1,843

)

Payments for deferred financing costs

 

 

 

 

 

(50

)

Proceeds from issuance of common stock, net

 

 

(59

)

 

 

49,764

 

Distributions on common stock

 

 

(12,450

)

 

 

(16,493

)

Distributions to noncontrolling interests

 

 

(81

)

 

 

(160

)

Repurchase of shares related to equity award tax withholding

 

 

(2,862

)

 

 

(1,490

)

Cash flow (used in) provided by financing activities

 

 

(13,870

)

 

 

95,229

 

Net change in cash and cash equivalents, and restricted cash

 

 

(513

)

 

 

47,743

 

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

 

$

13,102

 

 

$

62,176

 

Reconciliation of cash, cash equivalents, and restricted cash to the Consolidated Balance Sheet

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,653

 

 

$

57,436

 

Restricted cash

 

 

4,449

 

 

 

4,740

 

Total cash, cash equivalents, and restricted cash, end of period

 

$

13,102

 

 

$

62,176

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

.

 

 

 

7


 

 

Independence Realty Trust, Inc. and Subsidiaries

Notes to Condensed Consolidated Financial Statements

As of March 31, 2021

(Unaudited and dollars in thousands, except share and per share data)

 

 

NOTE 1: Organization

 

Independence Realty Trust, Inc. (“IRT”), is a self-administered and self-managed Maryland real estate investment trust (“REIT”) which was formed on March 26, 2009.  Our primary purposes are to acquire, own, operate, improve and manage multifamily apartment communities in non-gateway markets. As of March 31, 2021, we owned and operated 56 multifamily apartment properties, that contain 15,667 units across non-gateway U.S markets, including Atlanta, Dallas, Louisville, Memphis, and Raleigh. We own all of our assets and conduct substantially all of our operations through Independence Realty Operating Partnership, LP (“IROP”), of which we are the sole general partner. As of March 31, 2021, IRT owned 99.3% interest in IROP. The remaining 0.7% consists of common units of limited partnership interest issued to third parties in exchange for contributions of properties to IROP.  

 

   As used herein, the terms “we,” “our” and “us” refer to Independence Realty Trust, Inc. and, as required by context, IROP and their subsidiaries.

 

NOTE 2: Summary of Significant Accounting Policies

a. Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared by management in accordance with generally accepted accounting principles in the United States (“GAAP”). Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations, although we believe that the included disclosures are adequate to make the information presented not misleading. The unaudited interim consolidated financial statements should be read in conjunction with our audited financial statements as of and for the year ended December 31, 2020 included in our 2020 Annual Report on Form 10-K. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our consolidated financial position and consolidated results of operations and cash flows are included. The results of operations for the interim periods presented are not necessarily indicative of the results for the full year.

b. Principles of Consolidation

The consolidated financial statements reflect our accounts and the accounts of IROP and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.  Pursuant to the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification Topic 810, “Consolidation”, IROP is considered a variable interest entity as to which we are the primary beneficiary.  As IRT’s only material asset is its equity interest in IROP, substantially all of our assets and liabilities represent the assets and liabilities of IROP.

c. Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

d. Cash and Cash Equivalents

Cash and cash equivalents include cash held in banks and highly liquid investments with maturities of three months or less when purchased.  Cash, including amounts restricted, may at times exceed the Federal Deposit Insurance Corporation deposit insurance limit of $250 per institution.  We mitigate credit risk by placing cash and cash equivalents with major financial institutions.  To date, we have not experienced any losses on cash and cash equivalents.

8


 

e. Restricted Cash

Restricted cash includes funds in escrow held by lenders to fund certain expenditures, such as real estate taxes and insurance, or to be released at our discretion upon the occurrence of certain pre-specified events.  As of March 31, 2021 and December 31, 2020, we had $4,449 and $4,864, respectively, of restricted cash.

f. Investments in Real Estate

Investments in real estate are recorded at cost less accumulated depreciation. Costs that both add value and appreciably extend the useful life of an asset are capitalized. Expenditures for repairs and maintenance are expensed as incurred.

Investments in real estate are classified as held for sale in the period in which certain criteria are met including when the sale of the asset is probable and actions required to complete the plan of sale indicate that it is unlikely that significant changes to the plan of sale will be made or the plan of sale will be withdrawn.

Allocation of Purchase Price of Acquired Assets

The properties we acquire are generally accounted for as asset acquisitions. Under asset acquisition accounting, the costs to acquire real estate, including transaction costs related to the acquisition, are accumulated and then allocated to the individual assets and liabilities acquired based upon their relative fair value.  Transaction costs and fees incurred related to the financing of an acquisition are capitalized and amortized over the life of the related financing.

We estimate the fair value of acquired tangible assets (consisting of land, building and improvements), identified intangible assets (consisting of in-place leases), and assumed debt at the date of acquisition, based on the evaluation of information and estimates available at that date.

The aggregate value of in-place leases is determined by evaluating various factors, including the terms of the leases that are in place and assumed lease-up periods. The value assigned to in-place lease assets is amortized over the assumed lease up period, typically six months. During the three months ended March 31, 2021, we did not acquire any in-place leases. For the three months ended March 31, 2021 and 2020, we recorded $396 and $371, respectively, of amortization expense for intangible assets. For the three months ended March 31, 2021 and 2020, we wrote-off fully amortized intangible assets of $0 and $447, respectively. As of March 31, 2021, we expect to record additional amortization expense on current in-place intangible assets of $396 for the remainder of 2021.  

Impairment of Long-Lived Assets

Management evaluates the recoverability of our investment in real estate assets, including related identifiable intangible assets, in accordance with FASB ASC Topic 360, “Property, Plant and Equipment”. This statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that recoverability of the assets is not assured.

Management reviews our long-lived assets on an ongoing basis and evaluates the recoverability of the carrying value when there is an indicator of impairment. An impairment charge is recorded when it is determined that the carrying value of the asset exceeds the fair value. The estimated cash flows used for the impairment analysis and the determination of estimated fair value are based on our plans for the respective assets and our views of market and economic conditions. The estimates consider matters such as current and historical rental rates, occupancies for the respective and/or comparable properties, and recent sales data for comparable properties. Changes in estimated future cash flows due to changes in our plans or views of market and economic conditions could result in recognition of impairment losses, which, under the applicable accounting guidance, could be substantial.

Depreciation Expense

Depreciation expense for real estate assets is computed using a straight-line method based on a life of 40 years for buildings and improvements and five to ten years for equipment and fixtures. For the three months ended March 31, 2021 and 2020, we recorded $16,156 and $14,457 of depreciation expense, respectively. For the three months ended March 31, 2021 and 2020, we wrote-off fully depreciated fixed assets of $1,506 and $0, respectively.

Casualty Loss

Occasionally, we incur losses at our communities from wind storms, floods, fires and similar hazards. A portion of these losses are not covered by our insurance policies due to deductibles. In these cases, we estimate the carrying value of the damaged property and record a casualty loss for the difference between the estimated carrying value and the insurance proceeds. During the three months ended March 31, 2021, we incurred $359 of casualty losses.

9


 

g. Revenue and Expenses

 

Rental and other property revenue

 

We apply FASB ASC Topic 842, “Leases” with respect to our accounting for rental income.  We primarily lease apartment units under operating leases generally with terms of one year or less. Rental payments are generally due monthly and rental revenues are recognized on an accrual basis when earned.  We have elected to account for lease (i.e. fixed payments including base rent) and non-lease components (i.e. tenant reimbursements and certain other service fees) as a single combined operating lease component since (1) the timing and pattern of transfer of the lease and non-lease components is the same, (2) the lease component is the predominant element, and (3) the combined single lease component would be classified as an operating lease.

 

We make ongoing estimates of the collectability of our base rents, tenant reimbursements, and other service fees included within rental and other property revenue.  If collectability is not probable, we adjust rental and other property income for the amount of uncollectible 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 a $47 provision for bad debts during the three months ended March 31, 2021 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 months ended March 31, 2021 and 2020 were $433 and $337, 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 March 31, 2021, deferred rents receivable from residents totaled $41.

For the three months ended March 31, 2021 and 2020, we recognized gains of $23 and $3, respectively, related to recoveries of lost rental revenue due to natural disasters and other insurable events from our insurance providers.

Advertising Expenses

For the three months ended March 31, 2021 and 2020, we incurred $544 and $608 of advertising expenses, respectively.

h. Derivative Instruments

We may use derivative financial instruments to hedge all or a portion of the interest rate risk associated with our borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with our operating and financial structure, as well as to hedge specific anticipated transactions. While these instruments may impact our periodic cash flows, they benefit us by minimizing the risks and/or costs previously described.  The counterparties to these contractual arrangements are major financial institutions with which we and our affiliates may also have other financial relationships. In the event of nonperformance by the counterparties, we are potentially exposed to credit loss. However, because of the high credit ratings of the counterparties, we do not anticipate that any of the counterparties will fail to meet their obligations.

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.

10


 

 

i. Fair Value of Financial Instruments

In accordance with FASB ASC Topic 820, “Fair Value Measurements and Disclosures”, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments’ complexity for disclosure purposes. Assets and liabilities recorded at fair value in our consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their value. Hierarchical levels, as defined in FASB ASC Topic 820, “Fair Value Measurements and Disclosures” and directly related to the amount of subjectivity associated with the inputs to fair valuations of these assets and liabilities, are as follows:

 

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.

 

Level 3: Inputs are unobservable for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

The availability of observable inputs can vary depending on the financial asset or liability and is affected by a wide variety of factors, including, for example, the type of investment, whether the investment is new, whether the investment is traded on an active exchange or in the secondary market, and the current market condition. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by us in determining fair value is greatest for instruments categorized in Level 3.

Fair value is a market-based measure considered from the perspective of a market participant who holds the asset or owes the liability rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, our own assumptions are set to reflect those that management believes market participants would use in pricing the asset or liability at the measurement date. We use prices and inputs that management believes are current as of the measurement date, including during periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This condition could cause an instrument to be transferred from Level 1 to Level 2 or Level 2 to Level 3.

Fair value for certain of our Level 3 financial instruments is derived using internal valuation models. These internal valuation models include discounted cash flow analyses developed by management using current interest rates, estimates of the term of the particular instrument, specific issuer information and other market data for securities without an active market. In accordance with FASB ASC Topic 820, “Fair Value Measurements and Disclosures”, the impact of our own credit spreads is also considered when measuring the fair value of financial assets or liabilities, including derivative contracts. Where appropriate, valuation adjustments are made to account for various factors, including bid-ask spreads, credit quality and market liquidity. These adjustments are applied on a consistent basis and are based on observable inputs where available. Management’s estimate of fair value requires significant management judgment and is subject to a high degree of variability based upon market conditions, the availability of specific issuer information and management’s assumptions.

11


 

FASB ASC Topic 825, “Financial Instruments” requires disclosure of the fair value of financial instruments for which it is practicable to estimate that value. Given that cash and cash equivalents and restricted cash are short term in nature with limited fair value volatility, the carrying amount is deemed to be a reasonable approximation of fair value and the fair value input is classified as a Level 1 fair value measurement. The fair value input for the derivatives is classified as a Level 2 fair value measurement within the fair value hierarchy. The fair value inputs for our unsecured credit facility and term loans are classified as Level 2 fair value measurements within the fair value hierarchy. The fair value of mortgage indebtedness is based on a discounted cash flows valuation technique. As this technique utilizes current credit spreads, which are generally unobservable, this is classified as a Level 3 fair value measurement within the fair value hierarchy.  We determine appropriate credit spreads based on the type of debt and its maturity. There were no transfers between levels in the fair value hierarchy for the three months ended March 31, 2021. The following table summarizes the carrying amount and the fair value of our financial instruments as of the periods indicated:

 

 

 

As of March 31, 2021

 

 

As of December 31, 2020

 

Financial Instrument

 

Carrying

Amount

 

 

Estimated

Fair Value

 

 

Carrying

Amount

 

 

Estimated

Fair Value

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

8,653

 

 

$

8,653

 

 

$

8,751

 

 

$

8,751

 

Restricted cash

 

 

4,449

 

 

 

4,449

 

 

 

4,864

 

 

 

4,864

 

Derivative assets

 

 

2,810

 

 

 

2,810

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Debt:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unsecured credit facility

 

 

192,782

 

 

 

194,302

 

 

 

183,110

 

 

 

184,802

 

Term loans

 

 

298,846

 

 

 

300,000

 

 

 

298,759

 

 

 

300,000

 

Mortgages

 

 

456,003

 

 

 

470,234

 

 

 

463,817

 

 

 

479,929

 

Derivative liabilities

 

 

19,540

 

 

 

19,540

 

 

 

29,842

 

 

 

29,842

 

 

j. Deferred Financing Costs

Costs incurred in connection with debt financing are deferred and classified within indebtedness and charged to interest expense over the terms of the related debt agreements, under the effective interest method.

k. Office Leases

In accordance with FASB ASC Topic 842, “Leases”, lessees are required to recognize a right-of-use asset and a lease liability on the balance sheet at the lease commencement date for all leases, except those leases with terms of less than a year.  We lease corporate office space under leases with terms of up to 10 years and that may include extension options, but that do not include any residual value guarantees or restrictive covenants. As of March 31, 2021, we have $2,553 of operating lease right-of-use assets and $2,903 of operating lease liabilities related to our corporate office leases. The operating lease right-of-use assets are presented within other assets and the operating lease liabilities are presented within other liabilities in our consolidated balance sheet. We recorded $172 of total operating lease expense during the three months ended March 31, 2021, which is recorded within property management expense and general and administrative expenses in our consolidated statements of operations.    

l. Income Taxes

We have elected to be taxed as a REIT.  Accordingly, we recorded no income tax expense for the three months ended March 31, 2021 and 2020.

To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our ordinary taxable income to stockholders.  As a REIT, we generally are not subject to federal income tax on taxable income that we distribute to our stockholders.  If we fail to qualify as a REIT in any taxable year, we will be subject to federal income taxes on our taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost unless the Internal Revenue Service grants us relief under certain statutory provisions.  Such an event could materially adversely affect our net income and net cash available for distribution to stockholders; however, we believe that we are organized and operate in such a manner as to qualify and maintain treatment as a REIT and intend to operate in such a manner so that we will remain qualified as a REIT for federal income tax purposes.  

12


 

m. 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.

 

NOTE 3: Investments in Real Estate

As of March 31, 2021, our investments in real estate consisted of 56 apartment properties that contain 15,667 units.  The following table summarizes our investments in real estate:   

 

 

As of March 31, 2021

 

 

As of

December 31, 2020

 

 

Depreciable Lives

(In years)

 

Land

 

$

251,425

 

 

$

251,365

 

 

 

 

Building

 

 

1,527,535

 

 

 

1,527,535

 

 

 

40

 

Furniture, fixtures and equipment

 

 

143,111

 

 

 

137,870

 

 

5-10

 

Total investment in real estate

 

$

1,922,071

 

 

$

1,916,770

 

 

 

 

 

Accumulated depreciation

 

 

(223,187

)

 

 

(208,618

)

 

 

 

 

Investments in real estate, net

 

$

1,698,884

 

 

$

1,708,152