424B5 1 irt-424b5.htm 424B5 irt-424b5.htm

 

Filed Pursuant to Rule 424(b)(5)
Registration No. 333-239176

CALCULATION OF REGISTRATION FEE

Title of Each Class of Securities
to be Registered

Amount to be
Registered (1)

Proposed
Maximum
Offering Price
Per Unit

Proposed
Maximum
Aggregate
Offering Price

Amount of
Registration Fee

Common Stock, par value $0.01 per share

16,100,000

$

17.75

$

285,775,000.00

$

31,178.05(2)

(1) Includes 2,100,000 shares that may be purchased by the underwriters pursuant to their option to purchase additional shares.

(2) The filing fee of $31,178.05 is calculated in accordance with Rules 457(o) and 457(r) of the Securities Act of 1933, as amended, or the Act.


 


 

 

Prospectus Supplement
to Prospectus dated June 15, 2020

14,000,000 Shares

Independence Realty Trust, Inc.

Common Stock

This is a public offering of shares of common stock of Independence Realty Trust, Inc. We have entered into a forward sale agreement with Bank of Montreal, an affiliate of one of the underwriters, which we refer to in this capacity as the “forward purchaser.” In connection with such forward sale agreement, the forward purchaser (or its affiliate) is borrowing from third parties and selling to the underwriters an aggregate of 14,000,000 shares of our common stock, par value $0.01 per share (“common stock”) (or an aggregate of 16,100,000 shares of our common stock if the underwriters’ option to purchase additional shares is exercised in full) that will be sold in this offering.

We will not initially receive any proceeds from the sale of shares by the forward purchaser or its affiliate. We expect to physically settle the forward sale agreement and receive proceeds, subject to certain adjustments, from the sale of shares of our common stock that we issue to the forward purchaser upon one or more such physical settlements no later than July 30, 2022. Although we expect to settle the forward sale agreement entirely by the physical delivery of shares of our common stock for cash proceeds, we may also elect to cash or net share settle all or a portion of our obligations under the forward sale agreement, in which case we may receive, or we may owe, cash or shares of our common stock from or to the forward purchaser. See “Underwriting—Forward Sale Agreement” in this prospectus supplement for a description of the forward sale agreement.

If the forward purchaser or its affiliate does not deliver and sell all of the shares of our common stock to be sold by the forward purchaser to the underwriters, we will issue and sell to the underwriters a number of shares of our common stock equal to the number of shares of our common stock that the forward purchaser or its affiliate does not sell and the number of shares underlying the forward sale agreement will be decreased in respect of the number of shares that we issue and sell.

We intend to contribute any cash net proceeds that we receive upon the settlement of the forward sale agreement (and from the sale of any shares of our common stock that we may sell to the underwriters in lieu of the forward purchaser or its affiliate selling our common stock to the underwriters) to our operating partnership, Independence Realty Operating Partnership, LP, or IROP, in exchange for common units in IROP. Through IROP, we intend to use substantially all of such cash net proceeds to repay indebtedness, including, potentially, indebtedness that we will assume upon consummation of our pending mergers with Steadfast Apartment REIT, Inc., or STAR, and its operating partnership subsidiary, Steadfast Apartment REIT Operating Partnership, L.P., or STAR OP, and to use the balance of the net proceeds for general working capital, including to pay fees and expenses that we have incurred and will continue to incur in connection with the pending mergers, as described later in this prospectus supplement under “Use of Proceeds.”  

The closing of this offering will occur prior to, and is not conditioned upon, the consummation of the pending mergers with STAR and STAR OP, and if the pending mergers are not consummated for any reason, we will have broad discretion to use the net proceeds of this offering for general business purposes, including other acquisitions and repayment of indebtedness.  We cannot give you any assurance that the pending mergers will be consummated

 


 

on the terms described herein or at all. See “Summary – The Mergers and the Merger Agreement” elsewhere in this prospectus supplement.

Investing in our common stock involves risks that are described or referred to in the “Risk Factors” section beginning on page S-19 of this prospectus supplement.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus.  Any representation to the contrary is a criminal offense.

 

  

Per Share

 

  

Total(1)

 

Public offering price

  

$

17.75

 

  

$

248,500,000.00

 

Underwriting discounts and commissions(2)

  

$

0.71

 

  

$

9,940,000.00

 

Proceeds, before expenses, to us(3)

  

$

17.04

 

  

$

238,560,000.00

 

(1)Assumes no exercise of the underwriters' option to purchase additional shares as described below.

(2)See “Underwriting” for a description of compensation payable to the Underwriters.

(3)We expect to receive net proceeds from the sale of the shares of our common stock, before estimated fees and expenses, of approximately $238.6 million, upon full physical settlement of the forward sale agreement in one or more settlements, which we expect will occur by July 30, 2022. For the purpose of calculating the estimated aggregate proceeds to us, we have assumed the forward sale agreement will be fully physically settled at the initial forward sale price of $17.04 per share, which is the public offering price less the underwriting discounts shown above. The forward sale price is subject to adjustment pursuant to the forward sale agreement, and the actual proceeds, if any, will be calculated pursuant to the forward sale agreement. Although we expect to settle the forward sale agreement entirely by the full physical delivery of shares of our common stock in exchange for cash proceeds, we may elect cash settlement or net share settlement for all or a portion of our obligations under the forward sale agreement. See "Underwriting — Forward Sale Agreement" for a description of the forward sale agreement.

We have granted the underwriters a 30-day option from the date of this prospectus supplement, exercisable in whole or in part from time to time, to purchase up to an additional 2,100,000 shares of our common stock at the price per share set forth above. Upon any exercise of such option, we may elect that such additional shares of common stock be sold by the forward purchaser or its affiliate to the underwriters, in which case we will enter into an additional forward sale agreement with the forward purchaser in respect of the number of shares that are subject to the exercise of such option. Unless the context requires otherwise, the term “forward sale agreement” as used in this prospectus supplement includes any additional forward sale agreement that we enter into in connection with the exercise, by the underwriters, of their option to purchase additional shares of our common stock. In the event that we enter into an additional forward sale agreement and if the forward purchaser or its affiliate does not deliver and sell all of the shares of our common stock to be sold by it in connection with the exercise of such option, we will issue and sell to the underwriters a number of shares of our common stock equal to the number of shares that the forward purchaser or its affiliate does not deliver and sell, and the number of shares underlying the forward sale agreement will not be increased in respect of the number of shares that we issue and sell.

The underwriters expect to deliver the shares to purchasers on or about July 30, 2021 through the book-entry facilities of The Depository Trust Company.

Joint Book-Running Managers

Barclays

BMO Capital Markets

Citigroup

KeyBanc Capital Markets

Baird

BofA Securities

Capital One Securities

Jefferies

Truist Securities

 

 

 

 

Co-Managers

 

 


 

Regions Securities LLC

Comerica Securities  

Ramirez & Co., Inc.

Compass Point

Ladenburg Thalmann

Bancroft Capital

Prospectus Supplement dated July 27, 2021

 

 


 

 

TABLE OF CONTENTS

Prospectus Supplement

 

 

 

Prospectus

 

 

You should rely only on the information contained or incorporated by reference in this prospectus supplement, the accompanying prospectus and any free writing prospectus prepared by us.  Neither we nor any of the underwriters have authorized anyone to provide you with different information.  If anyone provides you with different or inconsistent information, you should not rely on it.  We are not, and the underwriters are not, making an offer to sell or the solicitation of an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.  You should not assume that the information contained in this prospectus supplement, the accompanying prospectus and any such free writing prospectus is accurate as of any date other than the date of such documents or that the information incorporated by reference in this prospectus supplement and the accompanying prospectus is accurate as of any date other than the date of the document incorporated by reference.  Our business, financial condition, liquidity, results of operations and prospects may have changed since such dates.

 

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ABOUT THIS PROSPECTUS

This document is in two parts.  The first part is this prospectus supplement, which describes the specific terms of this offering and also adds to and updates information in the accompanying prospectus and the documents incorporated by reference therein.  The second part is the accompanying prospectus, which provides more general information, some of which may not apply to this offering.  You should read this entire document, including the prospectus supplement, the accompanying prospectus and the documents incorporated by reference herein and therein, and any “free writing prospectus” we authorize to be delivered to you.  

To the extent the information contained in this prospectus supplement differs or varies from the information contained in the accompanying prospectus or the documents incorporated by reference herein or therein prior to the date of this prospectus supplement, the information in this prospectus supplement will supersede such information.  In addition, any statement in a filing we make with the SEC that adds to, updates or changes information contained in an earlier filing we made with the SEC or in this prospectus supplement or the accompanying prospectus shall be deemed to modify and supersede such information in the earlier filing.

This prospectus supplement and the accompanying prospectus contain, or incorporate by reference, forward-looking statements.  Such forward-looking statements should be considered together with the cautionary statements and important factors included or referred to in this prospectus supplement, the accompanying prospectus and the documents incorporated therein by reference.  Please see “Cautionary Statement Regarding Forward-Looking Statements” in this prospectus supplement and the accompanying prospectus.

The distribution of this prospectus supplement, the accompanying prospectus and any authorized “free writing prospectus” and the offering of the shares of our common stock may be restricted by law.  If you possess this prospectus supplement, the accompanying prospectus or any authorized “free writing prospectus,” you should find out about and observe these restrictions.  

WHERE YOU CAN FIND MORE INFORMATION

We file annual, quarterly and current reports, proxy statements and other information with the SEC.  Our SEC filings are available to the public on the SEC internet site at http://www.sec.gov.  Unless specifically listed under Incorporation of Certain Information by Reference below, the information contained on the SEC website is not intended to be incorporated by reference in this prospectus supplement or the accompanying prospectus and you should not consider that information a part of this prospectus supplement or the accompanying prospectus.

We have filed with the SEC a registration statement on Form S-3 with respect to the securities offered by this prospectus supplement and the accompanying prospectus.  This prospectus supplement and the accompanying prospectus do not contain all the information set forth in the registration statement, parts of which are omitted in accordance with the rules and regulations of the SEC.  For further information with respect to us and IROP and the securities offered hereby, reference is also made to such registration statement.  The information contained on or accessible through our website is not part of or incorporated by reference in this prospectus supplement or the accompanying prospectus, other than the documents that we file with the SEC that are incorporated by reference in this prospectus supplement or the accompanying prospectus.

INCORPORATION OF CERTAIN INFORMATION BY REFERENCE

The SEC allows us to incorporate by reference the information we file with it, which means:

 

incorporated documents are considered part of this prospectus supplement and the accompanying prospectus;

 

we can disclose important information to you by referring you to those documents; and

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information that we file with the SEC after the date of this prospectus supplement will automatically update and supersede the information contained in this prospectus supplement and the accompanying prospectus and incorporated filings.

We incorporate by reference the documents listed below that we filed with the SEC under the Securities Exchange Act of 1934, as amended, or the Exchange Act:

 

our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2021 and June 30, 2021;

 

our Current Reports on Form 8-K filed with the SEC on January 5, 2021, May 17, 2021, May 18, 2021, July 26, 2021, which we refer to below as the “First July 26 Form 8-K”, and July 26, 2021, which we refer to below as the “Second July 26 Form 8-K”;

We also incorporate by reference each of the documents that we file with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act on or after the date of this prospectus supplement and prior to the termination of the offering under this prospectus supplement. We will not, however, incorporate by reference in this prospectus supplement or the accompanying prospectus any documents or portions thereof that are not deemed “filed” with the SEC, including any information furnished pursuant to Item 2.02 or Item 7.01 of our Current Reports on Form 8-K after the date of this prospectus supplement unless, and except to the extent, specified in such Current Reports. Investors should not rely on any documents that are not expressly incorporated by reference herein.

You may request a copy of these filings, at no cost, by writing or telephoning us at the following address:

Independence Realty Trust, Inc.
Attention: James J. Sebra
1835 Market Street, Suite 2601,
Philadelphia, PA 19103
(267) 270-4800

The statements that we make in this prospectus supplement and the accompanying prospectus or in any document incorporated by reference in this prospectus supplement and the accompanying prospectus about the contents of any other documents are not necessarily complete, and are qualified in their entirety by referring you to copies of those documents that are filed as exhibits to the registration statement, of which this prospectus supplement and the accompanying prospectus form a part, or as an exhibit to the documents incorporated by reference.  You can obtain copies of these documents from the SEC or from us, as described above.

DEFINITIONS

Unless otherwise indicated or the context requires otherwise, references in this prospectus supplement and the accompanying prospectus to the “company,” “IRT,” “we,” “us,” and “our” are to Independence Realty Trust, Inc., a Maryland corporation, and our consolidated subsidiaries, including Independence Realty Operating Partnership, LP, the Delaware limited partnership through which we own our assets and conduct our operations and which we refer to in this prospectus supplement as “IROP.”  Unless otherwise indicated or the context requires otherwise, all references in this prospectus supplement to:

 

“Code” are to the Internal Revenue Code of 1986, as amended;

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“combined company” are to IRT and its consolidated subsidiaries after consummation of the pending mergers;

 

“company merger” are to the merger of STAR with and into IRT Merger Sub, with IRT Merger Sub surviving the merger;

 

“IRT Merger Sub” are to IRSTAR Sub LLC, a Maryland limited liability company wholly-owned by IRT;

 

“IRT parties” are to IRT, IROP, and IRT Merger Sub;

 

“Merger Agreement” are to the Agreement and Plan of Merger dated as of July 26, 2021 by and among the IRT parties and STAR parties;

 

“mergers” are to both the company merger and the partnership merger;

 

“partnership merger” are to the merger of STAR OP with and into IROP, with IROP surviving the merger;

 

“STAR” are to Steadfast Apartment REIT, Inc., a Maryland corporation;

 

“STAR common stock” are to shares of common stock of STAR, par value $0.01 per share;

 

“STAR OP” are to Steadfast Apartment REIT Operating Partnership, L.P., a Delaware limited partnership;

 

“STAR OP Units” are to units of limited partnership interest in STAR OP; and

 

“STAR parties” are to both STAR and STAR OP.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

This prospectus supplement, the accompanying prospectus and the documents that we incorporate by reference herein and therein, each contain “forward-looking statements” within the meaning of the safe harbor from civil liability set forth in Section 27A of the Securities Act and Section 21E of the Exchange Act.  You can identify forward-looking statements by the use of words such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “may,” “plans,” “projects,” “seeks,” “should,” “will,” and variations of such words or similar expressions.  Forward-looking statements include, among others, statements about our ability and the ability of the STAR parties to consummate the pending mergers, the anticipated benefits, opportunities, costs and challenges associated with the pending mergers, our financial condition, results of operations and prospects, our business strategy and objectives, including our growth strategy, our value add initiatives, occupancy and leasing rates and trends, and expected liquidity needs and sources (including capital expenditures and the ability to obtain financing or raise capital).  Our forward-looking statements reflect our current views about our plans, intentions, expectations, strategies and prospects, which are based on the information currently available to us and on assumptions we have made.  Although we believe that our plans, intentions, expectations, strategies and prospects as reflected in or suggested by our forward-looking statements are reasonable, we can give no assurance that our plans, intentions, expectations, strategies or prospects will be attained or achieved and you should not place undue reliance on these forward-looking statements.  Furthermore, actual results may differ materially from those described in the forward-looking statements and may be affected by a variety of risks and uncertainties, some of which relate to the pending mergers, some of which relate to our business if the mergers are consummated, and some of which relate to ownership of our common stock whether or not the mergers are consummated.  These risks and uncertainties include, but are not limited to:

S-iv


 

 

adverse effects of the announcement, pendency or potential completion of the pending mergers and uncertainties regarding whether the anticipated benefits or results of the pending mergers, if consummated, will be achieved;

 

non-consummation of the pending mergers as a result of the failure of STAR stockholders to approve the company merger, or as the result of the failure of our stockholders to approve the issuance by us of common stock to the STAR stockholders in the mergers;

 

delay in the consummation of the pending mergers, or non-consummation of the pending mergers because one or more of the closing conditions to the mergers are not satisfied or waived, including failure by STAR to receive lender consents covering an aggregate of approximately $2.13 billion of STAR debt;

 

loss of expected benefits under agreements that include change of control rights if we or STAR are unable to obtain consents of the counterparties under such agreements in connection with the pending mergers;

 

the occurrence of an event that gives rise to termination of the Merger Agreement, including on account of a third-party acquisition proposal that results in the termination of the Merger Agreement and, potentially, payment of a termination fee by either the STAR parties or the IRT parties;

 

our inability to invest the net proceeds of this offering at attractive yields in the event that the pending mergers are not consummated, resulting, potentially, in significant economic dilution to our stockholders;

 

failure to consummate the pending mergers could negatively impact our stock price;

 

the risk that stockholder litigation in connection with the pending mergers may affect the timing or occurrence of the mergers or result in significant costs of defense, indemnification and liability;

 

our incurrence of substantial costs, fees and expenses in connection with the pending mergers, many of which we will be required to pay whether or not the pending mergers are consummated;

 

our inability to realize, or a delay in our realization of, the cost savings, synergies and other benefits expected to result from the pending mergers, including the possibility that the mergers may not be accretive to our pro forma earnings and cash available for distribution to stockholders;

 

our inability to generate cash flows following consummation of the pending mergers sufficient to enable us to continue to fund our debt service requirements and to continue to pay quarterly dividends at the current level of $0.12 per quarter, or at all;

 

our assumption of approximately $2.13 billion of STAR indebtedness upon consummation of the pending mergers, which could decrease our business flexibility, increase our borrowing and other capital costs and increase demands on our cash resources;

 

our inability to comply with financial covenants in our debt agreements and in the debt agreements we will assume upon consummation of the pending mergers;

 

our failure to identify liabilities that we will assume, or our underestimate of the amount or significance of liabilities that we will assume, upon consummation of the pending mergers;

 

limitations on our ability to recover damages we may suffer on account of inaccurate representations and warranties of the STAR parties in the Merger Agreement;

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loss of management personnel and other key employees on account of uncertainties associated with the pending mergers;

 

unexpected costs, delays and difficulties in integrating the operating systems, portfolios, benefit plans and administrative functions of IRT and STAR in connection with the pending mergers;

 

unexpected costs associated with the failure to account for deferred maintenance expenses associated with STAR’s real estate portfolio;

 

risks associated with the geographic concentration of our real estate portfolio following consummation of the pending mergers;

 

lost opportunities associated with management’s devotion of time and resources to consummating the pending mergers and thereafter integrating the operating systems, portfolios, benefit plans and administrative functions of IRT and STAR after the consummation of the pending mergers;

 

risks related to stock-for-stock mergers generally, including the substantial dilution to the ownership percentages of IRT stockholders in the combined company that will result from the consummation of the pending mergers and the potential significant dilution to earnings per share and cash available for distribution to stockholders as a result of our issuance of a substantial number of shares of common stock in the pending mergers;

 

risks and uncertainties surrounding the COVID-19 pandemic, including limitations on our operations and increased costs, and the impact on our employees, residents and prospective residents as well as on general economic conditions and our financial condition, results of operations, cash flows and performance and those of our residents;

 

adverse changes in national, regional and local economic conditions;

 

unfavorable changes in apartment market conditions that could adversely affect our occupancy levels and rental rates;

 

competitive factors that may limit our ability to lease our apartment communities or increase or maintain rental rates;

 

inability of residents to meet their rent and other lease obligations and charge-offs in excess of our allowance for bad debt;

 

legislative restrictions, including on evictions, that may delay or limit collections of past due rents;

 

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;

 

uncertainty and volatility in capital and credit markets, including changes that reduce availability, and increase costs, of capital;

 

changing interest rates, which could increase our borrowing costs and adversely affect the market price of our securities;

 

the imposition of federal taxes if we fail to qualify as a real estate investment trust, or REIT, under the Code in any taxable year;

 

unexpected costs of REIT qualification compliance;

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unexpected liabilities that we will inherit if STAR failed to qualify as a REIT prior to consummation of the pending mergers;

 

failure of recent and future acquisitions to achieve anticipated results;

 

illiquidity of real estate investments, including those assets we will acquire through consummation of the pending mergers, which could make it difficult for us to sell assets at targeted levels and to respond to changing economic or financial conditions or changes in the operating performance of our apartment communities;

 

impairments in the value of our real estate assets and those we will acquire through consummation of the pending mergers;

 

damage from natural disasters, including hurricanes and other weather-related events, which could result in substantial costs to us;

 

adverse impacts on our properties or operations from the effects of climate change;

 

potential liability for environmental contamination;

 

uninsured losses due to insurance deductibles, self-insurance retention, uninsured claims or casualties, or losses in excess of applicable coverage;

 

costs and disruptions from cybersecurity breaches of our information technology systems and the information technology systems of our third party vendors and other third parties;

 

risks related to any forward sale transaction, including substantial dilution to our earnings per share or substantial cash payment or stock delivery obligations;

 

our internal control over financial reporting may not be considered effective which could result in a loss of investor confidence in our financial reports, and in turn have an adverse effect on the market price of our securities;

 

changes in laws and regulations that increase our costs or otherwise adversely affect our business, financial condition or results of operation, including but not limited to changes in income tax laws and rates;

 

other risks inherent in the real estate business;

 

the outcome of any legal proceedings to which we are a party or which may occur in the future;

 

acts of terrorism and war;

 

the risks and uncertainties described and referred to under the caption “Risk Factors” beginning on page S-19 and page 3 of the accompanying prospectus; and

 

risk factors included in our most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q.

The risks and uncertainties listed above are not exhaustive, and investors should be aware that there may be other risks, uncertainties and factors that could adversely affect our business and financial performance.  Moreover, we operate in a very competitive and rapidly changing environment.  Any forward-looking statement speaks only as of the date of this prospectus supplement. New risks and uncertainties arise over time, and it is not possible for us to predict those events or how they may affect us. Except as required by law, we are not obligated to, and do not intend

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to, update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Accordingly, investors should use caution in relying on past forward-looking statements, which were based on results and trends at the time the statements were made, to anticipate future results or trends. For a further discussion of these and other important risks, uncertainties and factors that could impact our future results, performance and prospects, see the section later in this prospectus supplement entitled “Risk Factors” and the section entitled “Risk Factors” on page 3 of the accompanying prospectus and the risks factors incorporated by reference in this prospectus supplement and the accompanying prospectus from our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and from our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2021.

 

 

 

 

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SUMMARY

This summary highlights selected information from this prospectus supplement, the accompanying prospectus and the documents incorporated by reference herein and therein.  It does not contain all of the information that may be important to you.  We encourage you to carefully read this entire prospectus supplement, the accompanying prospectus and the documents incorporated by reference herein and therein, including the financial statements and notes to those financial statements incorporated by reference herein and therein.  Please read the “Risk Factors” section beginning on page S-19 of this prospectus supplement and on page 3 of the accompanying prospectus as well as the information under the caption “Risk Factors” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and in our Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2021, and the documents incorporated by reference herein and therein for more information about risks that you should consider before making a decision to invest in our common stock.

 

Independence Realty Trust, Inc.

We are a self-administered and self-managed REIT focused on the acquisition, ownership, operation, improvement and management of multifamily apartment properties across non-gateway U.S. markets.  As of June 30, 2021, we owned and operated 58 multifamily apartment properties that contain 16,261 units.  Our properties are located in Georgia, North Carolina, Tennessee, Kentucky, Ohio, Oklahoma, Indiana, Texas, Florida, South Carolina, Missouri, and Alabama.

Our primary business objective is to maximize stockholder value through diligent portfolio management, strong operational performance, and a consistent return of capital through distributions and capital appreciation.  Our investment strategy is focused on: (i) gaining scale within key amenity rich submarkets of non-gateway cities that offer good school districts, high-quality retail and major employment centers and are unlikely to experience substantial new apartment construction in the foreseeable future; (ii) increasing cash flows at our existing apartment properties through prudent property management and strategic renovation projects; and (iii) acquiring additional properties that have strong and stable occupancies and support a rise in rental rates or that have the potential for repositioning through capital expenditures or tailored management strategies.

IRT was formed in 2009 as a Maryland corporation and elected to be taxed as a REIT under the Code, commencing with its taxable year ended December 31, 2011.  IRT owns its assets and conducts its business through IROP and its subsidiaries.  IRT controls IROP as its sole general partner and, as of June 30, 2021, IRT owned an approximately 99.5% interest in IROP.

Our executive offices are located at 1835 Market Street, Suite 2601, Philadelphia, Pennsylvania 19103 and our telephone number is (267) 270-4800.

We maintain a website at irtliving.com.  None of the information on, or accessible through, our website is incorporated in or constitutes a part of, this prospectus, and the inclusion of our website address in this prospectus is an inactive textual reference only.

As described below under “The Mergers and Merger Agreement,” on July 26, 2021 we announced our entry into the Merger Agreement with the STAR parties to consummate a stock-for-stock business combination.  STAR is a Maryland REIT that was formed on August 22, 2013 and that elected to be taxed as a REIT for U.S. federal income tax purposes commencing with its taxable year ended December 31, 2014.  As of June 30, 2021, STAR owned and managed a portfolio of 70 multifamily properties comprised of 21,841apartment homes and three parcels of land held for the development of apartment homes throughout the United States. For more information about the STAR real estate portfolio, see our Second July 26 Form 8-K, including the exhibits thereto.

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The Mergers and Merger Agreement

On July 26, 2021, we entered into the Merger Agreement, which provides for our combination, through the mergers, with STAR and STAR OP.  In connection with the mergers, STAR stockholders will receive, in aggregate, in exchange for their shares of STAR common stock, approximately 99.815 million shares of our common stock (reflecting a per share exchange ratio of 0.905 shares of our common stock for each share of common stock of STAR) and limited partners in STAR OP will receive, in aggregate, in exchange for their STAR OP Units, approximately 6.429 million units of limited partnership interest, or IROP Units, in IROP (reflecting a per unit exchange ratio of 0.905 IROP Units for each outstanding unit of limited partnership STAR OP).  Each IROP Unit will be exchangeable on a one-for-one basis into a share of common stock of IRT or, at IRT’s option, for the cash equivalent.  Upon consummation of the mergers, we expect to assume or repay STAR indebtedness in the aggregate amount of approximately $2.13 billion as of June 30, 2021.  The exchange ratio established in the Merger Agreement is fixed, and no change will be made to the exchange ratio if the market price of our shares of common stock or of STAR common stock changes before consummation of the mergers.  For a summary of the material terms of the Merger Agreement, please see our First July 26 Form 8-K.

Based on the number of shares of STAR common stock outstanding on a fully diluted basis on July 26, 2021 (110,293,205 shares) and the number of STAR OP Units outstanding on July 26, 2021 (7,104,399 units), and assuming that we issue 99,815,351 shares of our common stock in this offering, we estimate that, immediately after consummation of the pending mergers, 50% of our then-outstanding shares of common stock, on a fully diluted basis, will be owned by former STAR stockholders and former limited partners in STAR OP.

The parties’ obligations to consummate the pending mergers are conditioned upon approval of the Merger Agreement by the holders of at least a majority of the outstanding shares of STAR common stock, approval of the issuance by us of our shares of common stock in connection with the mergers by at least a majority of the votes cast by holders of our common stock, and other customary closing conditions.  Consummation of the pending mergers is not subject to a financing condition or the consummation of this offering.

Consummation of the pending mergers is expected to occur in the fourth quarter of 2021.  However, consummation and timing of the mergers are not assured, and this offering is not conditioned on consummation of the mergers by a certain date or at all. See “Risk Factors.”  

We have previously filed the Merger Agreement as Exhibit 2.1 to our First July 26 Form 8-K.  For more information regarding the terms of the Merger Agreement, including conditions to consummation of the pending mergers, and other transactions contemplated by the Merger Agreement, see our First July 26 Form 8-K and our Second July 26 Form 8-K, including the exhibits incorporated thereto, both of which are incorporated herein by reference.

The Combined Company

Upon consummation of the pending mergers, IRT will be the parent entity of the combined company, which will retain the name “Independence Realty Trust, Inc.” and will continue to trade on the NYSE under the ticker symbol “IRT.”

The merger will join together two high-quality portfolios with complementary geographic footprints in the highly desirable Sunbelt region of the United States. On a pro forma basis, the combined company will own a portfolio of 131 apartment communities comprising approximately 38,000 units across 16 states in urban and suburban locations in Georgia, North Carolina, Tennessee, Kentucky, Ohio, Oklahoma, Indiana, Texas, Florida, South Carolina, Missouri, Alabama, Colorado, Kansas, Illinois and Virginia. Upon consummation of the merger, the combined company’s ten largest markets by unit count will be Atlanta, Dallas/Ft. Worth, Denver, Oklahoma City, Louisville, Columbus, Indianapolis, Raleigh/Durham, Houston and Memphis.

The business of the combined company will be operated through IROP and its subsidiaries and will be structured as a traditional UPREIT. On a pro forma basis giving effect to the pending mergers, and assuming that we issue 99,815,351 shares of our common stock in this offering, IRT will own approximately 96.7% of the partnership

S-2


 

interests in IROP and, as its sole general partner, IRT will have the full, exclusive and complete responsibility for and discretion in the day-to-day management and control of IROP.

Upon consummation of the Mergers, Scott F. Schaeffer, currently our Chairman of the Board and Chief Executive Officer, will continue in these positions for the combined company; James J. Sebra, currently our Chief Financial Officer, will continue in this position for the combined company; Farrell M. Ender, currently our President, will continue in this position for the combined company; Jessica K. Norman, currently our Executive Vice President and General Counsel, will serve as Chief Legal Officer of the combined company and Ella S. Neyland, currently STAR’s President, Chief Financial Officer and Treasurer, will serve as Chief Operating Officer of the combined company.  In addition, upon consummation of the Mergers, the board of directors of the combined company will be comprised of the following five incumbent directors of our board of directors and the following five incumbent directors of STAR’s board of directors: Scott F. Schaeffer, Richard D. Gebert, Melinda H. McClure, DeForest Blake Soaries Jr. and Lisa Washington; and Stephen R. Bowie, Ned W. Brines, Ana Marie del Rio, Ella S. Neyland and Thomas H. Purcell, respectively.

 

S-3


 

 

The Offering

Issuer

Independence Realty Trust, Inc., a Maryland corporation.

Common stock offered by the forward purchaser or its affiliate

14,000,000 shares (or 16,100,000 shares if the underwriters exercise in full their option to purchase additional shares)(1)(2)

Common stock and common units of IROP to be outstanding immediately after this offering, but excluding settlement of the forward sale agreement

105,665,463 (3)

Common stock and common units of IROP to be outstanding after settlement of the forward sale agreement assuming full physical settlement

119,665,463 shares/units (or 121,765,463 shares/units if the underwriters’ option to purchase additional shares is exercised in full)(2)(3)

Use of Proceeds

We will not initially receive any proceeds from the sale of shares of our common stock by the forward purchaser or its affiliate in this offering.

We estimate that we will receive net proceeds from this offering of approximately $ 236.6 million (or $ 272.4 million if the underwriters’ option to purchase additional shares is exercised in full) (in each case after deducting underwriting discounts and estimated expenses related to the forward sale agreement and this offering), subject to certain adjustments pursuant to the forward sale agreement, upon full physical settlement of the forward sale agreement, which we expect will occur no later than July 30, 2022.(4)

We intend to contribute any cash net proceeds that we receive upon settlement of the forward sale agreement (and from the sale of any shares of our common stock that we may sell to the underwriters in lieu of the forward purchaser or its affiliate selling our common stock to the underwriters) to IROP in exchange for common units in IROP. Through IROP, we intend to use substantially all of such cash net proceeds to repay indebtedness, including, potentially, indebtedness that we will assume upon consummation of our pending mergers with STAR and STAR OP and to use the balance of the net proceeds for general working capital, including to pay fees and expenses that we have incurred and will continue to incur in connection with the pending mergers.  If the pending mergers are not consummated for any reason, we will have broad discretion to use the net proceeds of this offering for general business purposes, including other acquisitions and repayment of indebtedness.  See “Use of Proceeds” and “Risk Factors.”

S-4


 

Accounting Treatment of the Transaction

We expect that prior to physical or net share settlement of the forward sale agreement, the shares issuable upon settlement of the forward sale agreement will be reflected in our diluted earnings per share, return on equity and dividends per share calculations using the treasury stock method. Under this method, the number of shares of our common stock used in calculating diluted earnings per share, return on equity and dividends per share is deemed to be increased by the excess, if any, of the number of shares of our common stock that would be issued upon full physical settlement of the forward sale agreement at the adjusted forward sale price over the number of shares of our common stock that could be purchased by us in the market (based on the average market price of our common stock during the relevant reporting period) using the proceeds receivable upon full physical settlement (based on the adjusted forward sale price at the end of the relevant reporting period).

Consequently, before physical or net share settlement of the forward sale agreement and subject to the occurrence of certain events, we anticipate there will be no dilutive effect on our earnings per share except during periods when the average market price of our common stock is above the adjusted forward sale price, subject to adjustment on a daily basis based on a specified daily rate, less a variable spread based upon the daily borrowing cost incurred by the forward purchaser when borrowing our common stock, and subject to decrease by amounts related to dividends on our common stock during the term of the forward sale agreement. However, if we decide to physically settle or net share settle the forward sale agreement, the delivery by us of shares of our common stock to the forward purchaser on any such physical settlement or net share settlement of such forward purchase agreement would result in an increase in the number of shares outstanding and dilution to our earnings per share, return on equity and dividends per share.

New York Stock Exchange Symbol

IRT

Restrictions on Ownership

To assist us in maintaining our qualification as a REIT, our charter provides that no person or entity may actually own or be deemed to own by virtue of the applicable constructive ownership provisions, more than 9.8% (in value or in number of shares, whichever is more restrictive) of the outstanding shares of each class or series of our stock, or 9.8% in value of the aggregate of the outstanding shares of all classes and series of our stock, with certain exceptions.  See “Description of Capital Stock-Restrictions on Ownership and Transfer” in the accompanying prospectus.

S-5


 

Risk Factors

You should read carefully the “Risk Factors” section beginning on page S-19 of this prospectus supplement and on page 3 of the accompanying prospectus as well as the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2020 and in our Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, all of which are incorporated by reference in this prospectus supplement and in the accompanying prospectus, before making a decision to invest in our common stock.

 

(1)

The forward purchaser has advised us that it or its affiliate intends to acquire shares of our common stock to be sold under this prospectus supplement through borrowings from third-party share lenders. Subject to the occurrence of certain events, we will not be obligated to deliver shares of our common stock, if any, under the forward sale agreement until final settlement of the forward sale agreement, which we expect will occur no later than July 30, 2022. Except in certain circumstances, we have the right to elect cash settlement or net share settlement under the forward sale agreement rather than physical settlement. See “Underwriting—Forward Sale Agreement” in this prospectus supplement for a description of the terms of the forward sale agreement.

(2)

We have granted the underwriters a 30-day option to purchase up to an additional 2,100,000 shares of our common stock. The numbers of shares of common stock offered by the forward purchaser and the number of shares of common stock outstanding assuming full settlement in the summary assume that we have elected to enter into an additional forward sale agreement with respect to the exercise by the underwriters of their option to purchase additional shares.

(3)

Based on 552,360 IROP units outstanding as of the date of this prospectus supplement and held by limited partners, other than us. Subject to limits in the partnership agreement for our operating partnership, IROP units may be exchanged for cash or, at our election, shares of our common stock on a one-for-one basis, subject to adjustment, as provided in the partnership agreement.

(4)

Calculated as of the date of this prospectus supplement, assuming that the forward sale agreement is fully physically settled based on the initial forward sale price of $17.04 per share by the delivery of 14,000,000           shares of our common stock (or 16,100,000 shares if the underwriters’ option to purchase additional shares is exercised in full). The forward sale price is subject to adjustment pursuant to the terms of the forward sale agreement, and any net proceeds to us are subject to settlement of the forward sale agreement. If we elect to cash settle any forward sale agreement, we would expect to receive an amount of proceeds that is significantly lower than the estimate included above, and we may not receive any net proceeds (or may owe cash to the forward purchaser). If we elect to net share settle any forward sale agreement in full, we would not receive any proceeds from the forward purchaser.


S-6


 

 

IRT Summary Consolidated Financial Data

The table below sets forth a summary of our consolidated financial data as of December 31, 2020 and 2019 and for each of the fiscal years ended December 31, 2020 and 2019 and (except for the information under Other Data) have been derived from our audited consolidated financial statements and should be read together with those audited consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Annual Report on Form 10-K for our fiscal year ended December 31, 2020, which is incorporated by reference in this prospectus supplement. The table below also sets forth a summary of our summary consolidated financial data as of June 30, 2021 and for the six month periods ended June 30, 2021 and June 30, 2020, and (except for the information under Other Data, except the common shares outstanding at period end) has been derived from our unaudited condensed consolidated financial statements and should be read together with those unaudited condensed consolidated financial statements and related notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in our Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2021, which is incorporated by reference in this prospectus supplement. Our historical results are not necessarily indicative of results to be expected in any future period.

 

 

For the Years Ended
December 31,

For the Six-Month Periods
Ended June 30,

(Dollars in thousands, except share and per share data)

 

2020

 

2019

 

2021
(unaudited)

 

2020
(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Data:

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

 

$

211,906

 

$

203,223

 

$

112,566

 

$

103,618

Property operating expenses

 

 

82,978

 

 

79,568

 

 

43,136

 

 

40,711

Total expenses

 

 

168,095

 

 

152,854

 

 

91,112

 

 

84,494

Interest expense

 

 

(36,488)

 

 

(39,226)

 

 

(16,944)

 

 

(18,699)

Net income

 

 

14,877

 

 

46,354

 

 

4,500

 

 

425

Net income allocable to common shares

 

 

14,768

 

 

45,896

 

 

4,472

 

 

417

Earnings per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.16

 

$

0.51

 

$

0.04

 

$

0.00

Diluted

 

$

0.16

 

 

0.51

 

 

0.04

 

$

0.00

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Data:

 

 

 

 

 

 

 

 

 

 

 

 

Property portfolio occupancy at period end

 

 

95.3%

 

 

92.5%

 

 

95.6%

 

 

93.5%

Common shares outstanding at period end

 

 

101,803,762

 

 

91,070,637

 

 

105,110,031

 

 

94,741,146

Limited partnership units outstanding at period end (1)

 

 

674,517

 

 

871,491

 

 

552,360

 

 

789,134

Cash distributions declared per common share/unit

 

$

0.5400

 

$

0.7200

 

$

0.24

 

$

0.3000

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Data (as of period end)

 

 

 

 

 

 

 

 

 

 

 

 

Investments in real estate, net

 

$

1,708,152

 

$

1,637,930

 

$

1,803,375

 

$

1,676,424

Total assets

 

 

1,734,897

 

 

1,664,106

 

 

1,874,375

 

 

1,708,912

Total indebtedness, net

 

 

945,686

 

 

985,572

 

 

1,056,463

 

 

1,008,911

Total liabilities

 

 

1,022,126

 

 

1,044,349

 

 

1,127,092

 

 

1,092,526

Total equity

 

 

712,771

 

 

619,757

 

 

747,283

 

 

616,386

(1) Held by persons other than IRT and its subsidiaries.


S-7


 

 

STAR Summary Consolidated Financial Data

The table below sets forth a summary of STAR’s consolidated financial data as of December 31, 2020 and 2019 and for each of the fiscal years ended December 31, 2020 and 2019 and (except for the information under “Other Data”) have been derived from STAR’s audited consolidated financial statements and should be read together with those audited consolidated financial statements and related notes and STAR’s “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, which are incorporated by reference in this prospectus supplement from Exhibits 99.1 and 99.7, respectively, of our Second July 26 Form 8-K. The table below also sets forth a summary of STAR’s summary consolidated financial data as of June 30, 2021 and for the six month periods ended June 30, 2021 and June 30, 2020, and (except for the information under Other Data, except the common shares outstanding at period end) has been derived from STAR’s unaudited condensed consolidated financial statements and should be read together with those unaudited condensed consolidated financial statements and related notes and STAR’s “Management’s Discussion and Analysis of Financial Condition and Results of Operations”, which  are incorporated by reference in this prospectus supplement from Exhibits 99.2 and 99.6, respectively, of our Second July 26 Form 8-K. STAR’s historical results are not necessarily indicative of results to be expected in any future period.

 

 

For the Years Ended
December 31,

For the Six-Month Periods
Ended June 30,

(Dollars in thousands, except share and per share data)

 

2020

 

2019

 

2021
(unaudited)

 

2020
(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Data:

 

 

 

 

 

 

 

 

 

 

 

 

Total Revenue

 

$

300,101

 

$

173,536

 

$

168,782

 

$

134,010

Property operating expenses

 

 

123,415

 

 

68,626

 

 

70,543

 

 

54,627

Total expenses

 

 

354,236

 

 

175,710

 

 

160,766

 

 

171,539

Interest expense

 

 

75,171

 

 

49,274

 

 

38,895

 

 

34,106

Net income (loss)

 

 

(115,528)

 

 

(38,524)

 

 

(28,510)

 

 

(62,742)

Net income (loss) allocable to common shares

 

 

(114,090)

 

 

(38,524)

 

 

(27,069)

 

 

(62,742)

Earnings(loss) per share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

(1.15)

 

$

(0.74)

 

$

(0.25)

 

$

(0.71)

Diluted

 

$

(1.15)

 

 

(0.74)

 

 

(0.25)

 

$

(0.71)

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Data:

 

 

 

 

 

 

 

 

 

 

 

 

Property portfolio occupancy at period end

 

 

95.4%

 

 

94.6%

 

 

96.2%

 

 

94.6%

Common shares outstanding at period end

 

 

110,070,572

 

 

52,607,695

 

 

110,228,140

 

 

110,070,572

Limited partnership units outstanding at period end

 

 

7,104,399

 

 

 

 

7,104,399

 

 

948,745

Cash distributions declared per common share/unit

 

$

0.90

 

$

0.900

 

$

0.292

 

$

0.448

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance Sheet Data (as of period end)

 

 

 

 

 

 

 

 

 

 

 

 

Investments in real estate, net

 

$

2,823,742

 

$

1,270,871

 

$

2,868,194

 

$

2,912,051

Total assets

 

 

3,301,739

 

 

1,426,957

 

 

3,246,366

 

 

3,338,276

Total indebtedness, net

 

 

2,129,246

 

 

1,108,559

 

 

2,133,882

 

 

2,177,052

Total liabilities

 

 

2,220,114

 

 

1,150,941

 

 

2,224,033

 

 

2,253,029

Total equity

 

 

1,081,625

 

 

274,814

 

 

1,022,008

 

 

1,085,247

 

 

 



S-8


 

 

Unaudited Pro Forma Condensed Consolidated Financial Data

The following unaudited pro forma condensed combined financial statements and notes thereto present the unaudited pro forma condensed combined balance sheet as of June 30, 2021 and the unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2021 and the year ended December 31, 2020. The following unaudited pro forma condensed combined financial information was prepared in accordance with Article 11 of Regulation S-X in order to give effect to the mergers and the assumptions and adjustments described below and in the accompanying notes to the unaudited pro forma condensed combined financial statements.

Introduction

On July 26, 2021, we, together with IROP and IRT Merger Sub, entered into the Merger Agreement with STAR and STAR OP.

On the terms, and subject to the conditions of, the Merger Agreement, STAR will merge with and into IRT Merger Sub (the “REIT Merger”), with IRT Merger Sub surviving the REIT Merger as a wholly-owned subsidiary of IRT; and immediately thereafter, STAR OP will merge with and into IRT OP (the “Partnership Merger” and, together with the REIT Merger, the “Mergers”), with IRT OP surviving the Partnership Merger.  

In the REIT Merger, each outstanding share of STAR common stock, par value $0.01 per share (“STAR common stock”) will be converted automatically into the right to receive 0.905 (the “Exchange Ratio”) of a newly issued share of IRT common stock, par value $0.01 per share (“IRT common stock”). In the Partnership Merger, each outstanding unit of limited partnership of STAR OP (each, an “STAR OP common unit”) will be converted into the right to receive the Exchange Ratio of a newly issued common unit of limited partnership of IRT OP (each, an “IRT OP common unit”).  Under the agreement of limited partnership of IRT OP, IRT common unitholders may generally tender their IRT common units, in whole or in part, to IRT OP for redemption for a cash amount based on the then market price of an equivalent number of shares of IRT common stock, and IRT may thereupon elect, at its option, to satisfy the redemption by issuing one share of IRT common stock for each IRT common unit tendered for redemption.

Immediately following the Mergers, the continuing IRT stockholders and continuing IRT OP common unitholders will collectively hold approximately 50% of the sum of the issued and outstanding shares of IRT common stock and IRT OP common units, and former STAR stockholders and former STAR OP common unitholders will hold approximately 50%. 

Consummation of the Mergers is subject to customary closing conditions, including, among others, receipt of IRT stockholder approval and STAR stockholder approval, and is expected to occur in the fourth quarter of 2021.

Pro Forma Information

The following unaudited pro forma condensed combined financial statements have been prepared by applying the acquisition method of accounting, with IRT treated as the acquiror. In applying the acquisition method of accounting specified by generally accepted accounting principles in the United States of America (“GAAP”) it is necessary to identify the accounting acquiror, which may be different from the legal acquiror. Factors considered in identifying an accounting acquiror include, but are not limited to, the relative size of the merging companies, the relative voting interests of the respective stockholders after consummation of a merger and the composition of senior management and the board of directors after consummation of a merger. After consideration of all applicable factors pursuant to GAAP, IRT has been identified as the accounting acquiror of STAR.  Accordingly, the total merger consideration (referred to herein as purchase price) will be allocated to the estimated fair market values of STAR’s assets to be acquired and liabilities to be assumed in the Mergers, with the excess purchase price, if any, allocated to goodwill.

The following unaudited pro forma condensed combined financial statements are based on the historical consolidated financial statements of IRT and the historical consolidated financial statements of STAR as adjusted to give effect to the Mergers. The unaudited pro forma condensed combined balance sheet as of June 30, 2021 gives effect to the Mergers as if they had occurred on June 30, 2021. The unaudited pro forma condensed combined

S-9


 

statements of operations for the six months ended June 30, 2021 and the year ended December 31, 2020 give effect to the Mergers as if they had occurred on January 1, 2020. 

The following unaudited pro forma condensed combined financial statements have been prepared for informational purposes only and are based on assumptions and estimates considered appropriate by IRT’s management. The unaudited pro forma adjustments represent IRT management’s estimates based on information available as of the date of the unaudited pro forma condensed combined financial statements and are subject to change as additional information becomes available and additional analyses are performed. However, IRT’s management believes that the adjustments to the historical financial statements of IRT and STAR are (i) directly attributable to the Mergers, (ii) factually supportable and (iii) expected to have a continuing impact on the combined results; and IRT’s management believes that the pro forma adjustments give appropriate effect to those assumptions and are properly applied in the unaudited pro forma condensed combined financial statements. The unaudited pro forma condensed combined financial statements do not purport to be indicative of what IRT’s financial condition or results of operations actually would have been if the Mergers had been consummated as of the dates indicated, nor do they purport to represent IRT's financial position or results of operations for future periods.

The following unaudited pro forma condensed combined financial statements do not reflect any adjustments not otherwise described herein, including adjustments associated with: (1) IRT or STAR real estate acquisitions and dispositions that may close after June 30, 2021 or the related financing or debt repayments in connection with those acquisitions or dispositions, (2) potential synergies that may be achieved following the Mergers, including potential overall savings in general and administrative expense, or any strategies that IRT’s management may consider in order to continue to efficiently manage IRT’s operations, (4) any integration costs that may be incurred following the consummation of the Mergers, and (5) any integration and other costs which may be necessary to achieve the potential synergies, since the extent of such costs are not reasonably certain. However, such costs could affect the combined results following consummation of the Mergers in the period the costs are incurred or recorded. In addition, the following unaudited pro forma condensed combined financial statements do not give effect to a contemplated underwritten offering of shares of IRT common stock (the “Contemplated Common Stock Offering”) because the number of shares of IRT common stock that ultimately will be offered and sold in the Contemplated Common Stock Offering, and the net proceeds that will be received from the sale of such shares, are not reasonably certain unless and until the Contemplated Common Stock Offering is consummated.


S-10


 

 

 

As of June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

IRT Historical

 

STAR Historical

Reclassifications

STAR Historical, as reclassified

 

Merger Transaction Adjustments

 

 

Consolidated Pro Forma

 

 

 

 

 

NOTE 3

 

 

 

 

 

 

 

ASSETS:

 

 

 

 

 

 

 

 

 

 

 

Investments in real estate at cost

$2,035,988

 

$3,329,929

$(1,683)

$3,328,246

 

$820,296

(A)

 

$6,184,531

 

Accumulated depreciation

(231,866)

 

(461,735)

98

(461,637)

 

461,637

(B)

 

(231,866)

 

Investments in real estate, net

1,804,122

 

2,868,194

(1,585)

2,866,609

 

1,281,934

 

 

5,952,665

 

Real estate held for sale

27,910

 

-

-

-

 

-

 

 

27,910

 

Real estate held for development

-

 

30,289

-

30,289

 

-

 

 

30,289

 

Cash and cash equivalents

7,566

 

160,950

-

160,950

 

-

 

 

168,516

 

Restricted cash

6,441

 

28,399

-

28,399

 

-

 

 

34,840

 

Investments in unconsolidated real estate entities

10,205

 

-

-

-

 

-

 

 

10,205

 

Other assets

17,311

 

33,313

-

33,313

 

-

 

 

50,624

 

Derivative assets

853

 

-

-

-

 

-

 

 

853

 

Goodwill and intangible assets, net

714

 

125,220

1,585

126,805

 

(84,901)

(C)

 

42,618

 

Total Assets

$1,875,122

 

$3,246,365

$-

$3,246,365

 

$1,197,033

 

 

$6,318,520

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY:

 

 

 

 

 

 

 

 

 

 

 

Indebtedness

$1,036,841

 

$2,133,882

$-

$2,133,882

 

$117,915

(D)

 

$3,288,638

 

Indebtedness associated with real estate held for sale

19,622

 

-

-

-

 

$-

 

 

19,622

 

Accounts payable and accrued expenses

30,530

 

85,118

(17,036)

68,082

 

39,710

(E)

 

138,322

 

Accrued interest payable

1,909

 

-

6,586

6,586

 

-

 

 

8,495

 

Dividends payable

12,648

 

5,063

-

5,063

 

-

 

 

17,711

 

Derivative liabilities

19,386

 

-

-

-

 

-

 

 

19,386

 

Other liabilities

6,903

 

-

10,450

10,450

 

-

 

 

17,353

 

Total Liabilities

1,127,839

 

2,224,063

-

2,224,063

 

157,625

 

 

3,509,527

 

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable common stock

-

 

295

-

295

 

(295)

(F)

 

-

 

Equity:

 

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity:

 

 

 

 

 

 

 

 

 

 

 

Preferred stock, $0.01 par value

-

 

-

-

-

 

-

 

 

-

 

Common stock, $0.01 par value

1,051

 

1,102

-

1,102

 

(104)

(F)

 

2,049

 

Additional paid-in capital

963,754

 

1,607,145

-

1,607,145

 

366,038

(F)

 

2,936,937

 

Accumulated other comprehensive income (loss)

(22,011)

 

-

-

-

 

-

 

 

(22,011)

 

Retained earnings (accumulated deficit)

(199,350)

 

(687,045)

-

(687,045)

 

647,335

(F) (E)

 

(239,060)

 

Total stockholders' equity

743,444

 

921,202

-

921,202

 

1,013,268

 

 

2,677,914

 

Non-controlling interests

3,839

 

100,805

-

100,805

 

26,434

(G)

 

131,078

 

Total Equity

747,283

 

1,022,007

-

1,022,007

 

1,039,703

 

 

2,808,993

 

Total Liabilities and equity

$1,875,122

 

$3,246,365

$-

$3,246,365

 

$1,197,033

 

 

$6,318,520

 

 

 

 

S-11


 

 

For the six months ended June 30, 2021

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands, except share or per share amounts)

 

IRT Historical

 

STAR Historical

Reclassifications

STAR Historical, as reclassified

 

Merger Transaction Adjustments

 

Consolidated Pro Forma

 

 

 

 

 

 

NOTE 3

 

 

 

 

 

 

REVENUE:

 

 

 

 

 

 

 

 

 

 

 

Rental and other property income

 

$112,097

 

$167,300

$-

$167,300

 

$-

 

$279,397

 

Other revenue

 

459

 

1,482

3,029

4,511

 

-

 

4,970

 

Total revenue

 

112,556

 

168,782

3,029

171,811

 

-

 

284,367

 

EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

Property operating expenses

 

43,136

 

70,543

453

70,996

 

-

 

114,132

 

Property management expenses

 

4,119

 

-

8,372

8,372

 

-

 

12,491

 

General & administrative expenses

 

10,183

 

23,062

(8,825)

14,237

 

-

 

24,420

 

Depreciation and amortization

 

33,315

 

67,152

-

67,152

 

(20,533)

(H)

79,934

 

Other expenses

 

359

 

(126)

-

(126)

 

-

 

233

 

Total expenses

 

91,112

 

160,631

-

160,631

 

(20,533)

 

231,210

 

Interest expense

 

(16,944)

 

(39,895)

-

(39,895)

 

7,497

(I)

(49,342)

 

Interest income

 

-

 

203

-

203

 

-

 

203

 

Fees and other income from affiliates

 

-

 

3,029

(3,029)

-

 

-

 

-

 

Net income (loss)

 

4,500

 

(28,512)

-

(28,512)

 

28,030

 

4,018

 

(Income) loss allocated to non-controlling interests

 

(28)

 

1,442

 

1,442

 

(924)

(J)

490

 

Net Income (loss) allocable to common shares

 

$4,472

 

$(27,070)

$-

$(27,070)

 

$27,106

 

$4,508

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings Per Share:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$0.04

 

$(0.25)

 

$(0.25)

 

 

 

$0.02

 

Diluted

 

$0.04

 

$(0.25)

 

$(0.25)

 

 

 

$0.02

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-Average Shares:

 

 

 

 

 

 

 

 

 

 

 

Basic

 

101,847,876

 

109,896,333

 

109,896,333

 

(10,440,152)

(K)

201,304,057

 

Diluted

 

102,822,099

 

109,896,333

 

109,896,333

 

(10,440,152)

(K)

202,278,280

 

 

 

 

 

 

 

 

 

 

 

 

 

S-12


 

 

 

For the year ended December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands, except share or per share amounts)

 

IRT Historical

 

STAR Historical

Reclassifications

Pro Forma Adjustments

STAR Historical, as reclassified & adjusted

 

Merger Transaction Adjustments

 

Consolidated Pro Forma

 

 

 

 

 

 

NOTE 3

NOTE 4

 

 

 

 

 

 

REVENUE:

 

 

 

 

 

 

 

 

 

 

 

 

Rental and other property income

 

$211,167

 

$297,566

$-

$26,375

$323,941

 

$-

 

$535,108

 

Other revenue

 

739

 

2,535

1,797

337

4,669

 

-

 

5,408

 

Total revenue

 

211,906

 

300,101

1,797

26,712

328,610

 

-

 

540,516

 

EXPENSES:

 

 

 

 

 

 

 

 

 

 

 

 

Property operating expenses

 

82,978

 

123,415

614

10,698

134,727

 

-

 

217,705

 

Property management expenses

 

8,494

 

-

15,288

-

15,288

 

-

 

23,782

 

General & administrative expenses

 

15,095

 

32,025

(15,902)

14,673

30,796

 

-

 

45,891

 

Fees to affiliates

 

-

 

30,777

-

(30,777)

-

 

-

 

-

 

Depreciation and amortization

 

60,687

 

162,979

-

10,448

173,427

 

(38,285)

(H)

195,829

 

Other expenses

 

841

 

(38)

-

 

(38)

 

-

 

803

 

Total expenses

 

168,095

 

349,158

-

5,041

354,199

 

(38,285)

 

484,009

 

Interest expense

 

(36,488)

 

(75,171)

 

(5,657)

(80,828)

 

14,994

(I)

(102,322)

 

Interest and other income

 

-

 

679

-

307

986

 

-

 

986

 

Equity in loss from unconsolidated joint venture

 

-

 

(3,020)

-

(115)

(3,135)

 

-

 

(3,135)

 

Fees and other income from affiliates

 

-

 

1,797

(1,797)

-

-

 

 

 

-

 

Loss on debt extinguishment

 

-

 

(191)

-

-

(191)

 

-

 

(191)

 

Gain on sale (loss on impairment) of real estate assets, net

 

7,554

 

9,436

-

-

9,436

 

-

 

16,990

 

Net income (loss)

 

14,877

 

(115,527)

-

16,205

(99,322)

 

53,279

 

(31,166)

 

(Income) loss allocated to non-controlling interests

 

(109)

 

1,438

-

(875)

563

 

(1,756)

(J)

(1,302)

 

Net Income (loss) allocable to common shares

 

$14,768

 

$(114,089)

$-

$15,330

$(98,759)

 

$51,523

 

$(32,468)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings Per Share:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$0.16

 

$(1.15)

 

 

$(0.99)

 

 

 

$(0.18)

 

Diluted

 

$0.16

 

$(1.15)

 

 

$(0.99)

 

 

 

$(0.18)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-Average Shares:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

93,660,086

 

99,264,851

 

 

99,264,851

 

(9,430,161)

(K)

183,494,776

 

Diluted

 

94,688,440

 

99,264,851

 

 

99,264,851

 

(9,430,161)

(K)

184,523,130

 

 

 

 

 

 

 

 

 

 

 

 

 

 

NOTE 1: Basis of Presentation

The IRT and STAR historical financial information has been derived from, in the case of IRT, its consolidated financial statements in its Quarterly Report on Form 10-Q for the quarter ended June 30, 2021, and Annual Report on Form 10-K for the year ended December 31, 2020, and, in the case of STAR, its consolidated financial statements included as Exhibits 99.1 and 99.2 to our Second July 26 Form 8-K. Certain of STAR’s historical amounts have been reclassified to conform to IRT’s financial statement presentation, as discussed further in Note 3. The unaudited pro forma condensed combined financial statements should be read in conjunction with IRT’s and STAR’s historical consolidated financial statements and the notes thereto. The unaudited pro forma condensed combined balance sheet gives effect to the Mergers as if they had been completed on June 30, 2021. The unaudited pro forma condensed combined statements of operations for the six months ended June 30, 2021 and for the year ended December 31, 2020 give effect to the Mergers as if they had occurred on January 1, 2020.

S-13


 

The historical financial statements of IRT and STAR have been adjusted in the unaudited pro forma condensed combined financial statements to give pro forma effect to the accounting for the Mergers under GAAP, as described in Note 5, “Merger Adjustments.” Th