Independence Realty Trust, Inc. · NYSE:IRT
Independence Realty Trust — Investor Presentation (March 2023)
53 slides from Independence Realty Trust's investor presentation, Mar 3, 2023
Slide 1: Investor Presentation March 2023
INVESTOR PRESENTATION March 2023 Monticello by the Vineyard Euless, TX
Slide 2: Table of Contents
1 Table of Contents Overview and Performance 2 – 3 Recent Operating Metrics and 2023 Guidance 4 – 7 Our Competitive Advantage 8 – 15 Our Strategic Investment Opportunities 16 – 22 Capitalization and Leverage 23 – 25 Our Path to Long-Term Growth 26 Appendix Track Record of Value Creation 28 Market St
Slide 3: IRT Overview
2 IRT Overview OWN AND OPERATE Sunbelt Exposure 71% of NOI 120 Communities (2) 35,526 Units (2) 12% Full Year 2022 Average Rental Rate Growth PORTFOLIO SUMMARY (1) SAME STORE HIGHLIGHTS FY 2022 (5) • Revenue growth: +10.7% Y-o-Y • NOI growth: 13.7% Y-o-Y • NOI margin: +170bps to 63.1% UPSIDE FROM VA
Slide 4: IRT is Delivering Industry Leading Operating Performance
3 Source: Company reports; coastal peer group includes AVB, EQR, ESS, and UDR; non-gateway peer group includes CPT, CSR, MAA, and NXRT. Same store NOI growth and CFFO per share metrics are based on the definitions used by the peer group companies and may not be comparable. IRT is Delivering Industry
Slide 5: Recent Operating Metrics and 2023 Guidance
4 Recent Operating Metrics and 2023 Guidance Cyan Craig Ranch McKinney, TX
Slide 6: Strong Performance Across Key Operating Metrics
5 Strong Performance Across Key Operating Metrics Same Store Excluding Value Add All notations throughout this presentation appear as “End Notes” on pages 47-48. Same Store Total (2)Same Store Value Add O c c u p a n c y L e a s e o v e r L e a s e R e n t G ro w th (1 ) 95.4% 95.7% 94.6% 94.7% 93.8
Slide 7: Driving an Improvement in Operating Performance
6 Driving an Improvement in Operating Performance Focused on achieving sustainable occupancy gains across the entire portfolio Targeting occupancy of 95% for our non-value add communities, while continuing to drive rent growth where appropriate; currently leased at 95.1% Key Initiatives to Improve O
Slide 8: 2023 Full Year EPS and CFFO Guidance
7 2023 Full Year EPS and CFFO Guidance (1)(2) Low High Earnings per share $0.23 $0.27 Adjustments: Depreciation and amortization 0.95 0.95 Gain on sale of real estate assets (3) (0.01) (0.01) Loan (premium accretion) discount amortization, net (0.05) (0.05) CORE FFO per share $1.12 $1.16 CORE FFO ($
Slide 9: Our Competitive Advantage
8 Our Competitive Advantage Talison Row Charleston, SC
Slide 10: Our Portfolio is Focused On the High Growth Sunbelt Region
9 Top 10 Markets Our Portfolio is Focused On the High Growth Sunbelt Region PORTFOLIO SUMMARY Geographic Distribution IRT is present in 120 communities across resilient, high growth markets i i t i ti Independence Realty Trust Communities Expanded IRT’s presence in high growth metros including Cha
Slide 11: IRT's Markets Have Strong Fundamentals
10 IRT's Markets Have Strong Fundamentals Population and employment growth is fueling more resident demand for apartments in IRT’s markets than the national and gateway market average Outsized Population Growth Employment Change vs. 2019 National Average 20’ vs. 19’ 21’ vs. 19’ 22’ vs. 19’ 20’ vs. 1
Slide 12: The Impact of New Supply on IRT Will Not Be Significant
11 The Impact of New Supply on IRT Will Not Be Significant New apartment deliveries for 2023 and 2024 in IRT's markets, as a percentage of existing apartment inventory, are expected to be broadly consistent with recent history IRT's Class B communities do not directly compete with new Class A develo
Slide 13: IRT Continues to Benefit from Positive Migration Trends
12 IRT Continues to Benefit from Positive Migration Trends IRT’s exposure to the six states mentioned above represent ~60% of total company NOI; These states experienced a robust job market recovery after the pandemic, averaging 5% job growth since March 2020 Inbound Move Rate in 2022 (for areas wit
Slide 14: IRT's Resident Demographic Trends Are Favorable
13 IRT’s Resident Demographic Trends Are Favorable Recent residents in IRT’s top 10 markets are in their mid-30s and make an average annual income of ~$86,000, resulting in a ~22% rent to income(1) Top 10 IRT Markets Average community age (2) 22 years 130 Communities 37,828Units $6.2B In gross asset
Slide 15: Well-Positioned in Affordable, Highly Defensive Middle Market Communities
14 Well-Positioned in Affordable, Highly Defensive Middle Market Communities A B C ◼ Higher income residents move down in a recession ◼ Renters move down to Class B as rent increases outstrip income growth ◼ Capture households moving down in a recession ◼ Capture seniors who sell homes to fund retir
Slide 16: Attractive Portfolio Has Led to a Stable Cash Flow Profile
15 -10.0% -8.0% -6.0% -4.0% -2.0% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% 16.0% 18.0% 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 USA Gateway Class A Class B WAV IRT Markets Attractive Portfolio Has Led to a Stable Cash Flow Profile Source: Costar Q4 2022 Data
Slide 17: Our Strategic Investment Opportunities
16 Our Strategic Investment Opportunities Garrison Station Murfreesboro, TN
Slide 18: Driving Accretive Growth with Multiple Investment Levers
17 Driving Accretive Growth with Multiple Investment Levers Value Add Renovations Acquisitions / Capital Recycling Preferred Equity Investments and Joint Ventures Renovate existing communities/units where there is the potential for outsized rent growth Expand presence in markets where we see attract
Slide 19: Improved Long-Term Growth Profile through Value Add Program
18 In-Place Program 2023 Starts Future Pipeline Total Units to Renovate 9,929 2,654 12,000 24,583 Units Renovated-to-Date (5,316) - - (5,316) Remaining Units to Renovate 4,613 2,654 12,000 19,267 Remaining Renovation Costs (3) $62 - $67 $36 - $38 $161 - $174 $260 - $279 Incremental NOI (4) $12 - $13
Slide 20: Continue to Invest in Our Long-Standing Value Add Program
19 Continue to Invest in Our Long-Standing Value Add Program—— IRT’s value add program generated a 24.1% return on investment in 2022 Pipeline of ~19,000 value add units to be renovated 2023e Units to Be Renovated* Total Units 1Q23e 2Q23e 3Q23e 4Q23e *All quarterly & FY23 units to be renovated are e
Slide 21: Joint Venture Development Program
20 Engaging in Attractive Investment Opportunities with Our Joint Venture Development Program Focused on joint ventures in new multifamily development in core non-gateway markets • Invested $16.4 million in a horizontal multifamily joint venture consisting of 178 homes in March 2022 • As of March 20
Slide 22: Continuing Our Efforts in Technology
21 Continuing Our Efforts in Technology Our Focus Our Goals A More Favorable Resident Experience Higher Revenue and Lower Operating Expenses Greater Profitability and Margin Expansion Improved Sustainability and Social Responsibility More Engaged and Productive Staff Automation & Big Data IRT is inv
Slide 23: Focusing on Our ESG Initiatives
22 Focusing on Our ESG Initiatives We believe that operating multifamily real estate can be conducted with a conscious regard for the environment and wider society Find out more on the Sustainability page of IRT’s Investor Relations website at http://investors.irtliving.com. Diversity, Equity and In
Slide 24: Capitalization and Leverage
23 Capitalization and Leverage Creekstone at RTP Durham, NC
Slide 25: Maintain a Simple Capital Structure
24 59.6% 40.4% Maintain a Simple Capital Structure $6.5bn Common Equity Debt Simple capital structure consisting of secured and unsecured debt Maintain conservative financial and credit policies and expect to further delever the balance sheet through organic NOI & EBITDA growth and excess cash f
Slide 26: Leverage: Where We Are and Where We Are Going
25 Leverage: Where We Are and Where We Are Going We are focused on continuing to improve the company’s leverage profile 7.2x 6.9x Mid-6’s Progressing Towards Our Mid-Term Target of Mid-6’s through the Following Drivers: Organic NOI growth from stabilized portfolio consistent with long-term histori
Slide 27: Compelling Investment Opportunity With a Path to Long-Term Growth
26 Compelling Investment Opportunity With a Path to Long-Term Growth The Residences on McGinnis Ferry Suwanee, GA Leading Multifamily REIT, Well-Positioned in Class B Communities, Focused on the High-Growth U.S. Sunbelt Region with a Stable Cash Flow Profile Strong Long-Term Growth Profile Supported
Slide 28: Appendix & Definitions
Appendix & Definitions Canyon Resort at Great Hills, Austin, TX
Slide 29: Track Record of Value Creation
28 -25% 0% 20% 80% -31% -3% 31% 134% -18% 25% 57% 171% -33% 33% 112% 263% -50% 0% 50% 100% 150% 200% 250% 300% RMS Multifamily Index S&P 500 IRT Source: S&P Global, FactSet. Market data as of December 31, 2022. Note: Represents compound total return, with dividends reinvested. Track Record of Value
Slide 30: Assets Demonstrate Attractive Apartment Industry Dynamics
29 Assets Demonstrate Attractive Apartment Industry Dynamics Low Homeownership Limited New Supply ◼ The national Class B vacancy rate remains resilient to supply and demand shocks with 2023 projected spreads in vacancy rates between Class A & B, with Class B at 7.0% and Class A at 10.4% o The majori
Slide 31: IRT Value Add Summary
30 IRT Value Add Summary Project Life to Date as of December 31, 2022 Renovation Costs per Unit (2) Market Total Properties Total Units To Be Renovated Units Complete Units Leased Rent Premium (1) % Rent Increase Interior Exterior Total ROI - Interior Costs(3) ROI - Total Costs (4) Ongoing Tampa-St.
Slide 32: Our Markets | Atlanta
31 Community Map Differentiators Job Growth Population Growth Supply Growth 2 2023 Job Growth: National Average -0.26% Gateway Markets 0.88% 2023 Population Growth: National Average 0.44% Gateway Markets 1.08% 0.39% 4.51% -0.01% • Communities located within 5 min. of major highways • Communities loc
Slide 33: Our Markets | Dallas
32 Community Map Differentiators Job Growth Population Growth Supply Growth 2 2023 Job Growth: National Average -0.26% Gateway Markets 0.88% 2023 Population Growth: National Average 0.44% Gateway Markets 1.08% 2.91% 5.26% -0.13% • 9th largest city in the U.S. by population 4 • The Dallas MSA has had
Slide 34: Our Markets | Denver
33 Community Map Differentiators Job Growth Population Growth Supply Growth 2 2023 Job Growth: National Average -0.26% Gateway Markets 0.88% 2023 Population Growth: National Average 0.44% Gateway Markets 1.08% -0.59% 2.94% 0.57% • Population growth in the metro area is expected to exceed 5.5% over t
Slide 35: Our Markets | Columbus
34 Community Map Differentiators Job Growth Population Growth Supply Growth 2 2023 Job Growth: National Average -0.26% Gateway Markets 0.88% 2023 Population Growth: National Average 0.44% Gateway Markets 1.08% -1.31% 2.67% 0.04% • 14th largest city in the U.S. by population4 • Strong accessibility t
Slide 36: Our Markets | Louisville
35 Community Map Differentiators Job Growth Population Growth Supply Growth 2 2023 Job Growth: National Average -0.26% Gateway Markets 0.88% 2023 Population Growth: National Average 0.44% Gateway Markets 1.08% -1.48% 2.95% 0.08% • Located within 5 min. of major highways • Benefiting from the proximi
Slide 37: Our Markets | Indianapolis
36 Community Map Differentiators Job Growth Population Growth Supply Growth 2 2023 Job Growth: National Average -0.26% Gateway Markets 0.88% 2023 Population Growth: National Average 0.44% Gateway Markets 1.08% 0.46% 2.11% 0.13% 2021 2022 2023 • 15th largest city in the U.S. by population • Communiti
Slide 38: Our Markets | Raleigh – Durham
37 Community Map Differentiators Job Growth Population Growth Supply Growth 2 2023 Job Growth: National Average -0.26% Gateway Markets 0.88% 2023 Population Growth: National Average 0.44% Gateway Markets 1.08% 2.76% 4.57% 0.17% 2021 2022 2023 • Communities located within 5 min. of major throughways
Slide 39: Our Markets | Oklahoma City
38 Community Map Differentiators Job Growth Population Growth Supply Growth 2 2023 Job Growth: National Average -0.26% Gateway Markets 0.88% 2023 Population Growth: National Average 0.44% Gateway Markets 1.08% -2.12% 3.60% -0.14% • The metro’s population grew 0.5% this year, which was above the 0.2%
Slide 40: Our Markets | Houston
39 Community Map Differentiators Job Growth Population Growth Supply Growth 2 2023 Job Growth: National Average -0.26% Gateway Markets 0.88% 2023 Population Growth: National Average 0.44% Gateway Markets 1.08% -1.40% 5.19% -0.12% • Job growth is expected to be 2.7% annually through 2025, compared to
Slide 41: Our Markets | Tampa
40 Community Map Differentiators Job Growth Population Growth Supply Growth 2 2023 Job Growth: National Average -0.26% Gateway Markets 0.88% 2023 Population Growth: National Average 0.44% Gateway Markets 1.08% 2.09% 3.93% -0.36% • $3 billion Water Street mixed-use investment backed by Jeff Vinik and
Slide 42: Our Markets | Nashville
41 Community Map Differentiators Job Growth Population Growth Supply Growth 2 2023 Job Growth: National Average -0.26% Gateway Markets 0.88% 2023 Population Growth: National Average 0.44% Gateway Markets 1.08% 2.44% 4.58% 0.32% 2021 2022 2023 • Metro area job growth expected to outpace the national
Slide 43: Our Markets | Memphis
42 Community Map Differentiators Job Growth Population Growth Supply Growth 2 2023 Job Growth: National Average -0.26% Gateway Markets 0.88% 2023 Population Growth: National Average 0.44% Gateway Markets 1.08% -0.01% 0.10% 0.17% -0.47% 3.19% -0.03% • Memphis has all the amenities of a large city wit
Slide 44: Our Markets | Huntsville
43 Community Map Differentiators Job Growth Population Growth Supply Growth 2 2023 Job Growth: National Average -0.26% Gateway Markets 0.88% 2023 Population Growth: National Average 0.44% Gateway Markets 1.08% 2.16% 2.75% 0.05% 2021 2022 2023 • Metro area ranked 1st in 2020 projected rent growth of
Slide 45: Our Markets | Charlotte
44 Community Map Differentiators Job Growth Population Growth Supply Growth 2 2023 Job Growth: National Average -0.26% Gateway Markets 0.88% 2023 Population Growth: National Average 0.44% Gateway Markets 1.08% 0.89% 5.34% 0.65% 2021 2022 2023 • 16th largest city in the U.S. by population4 • Long-ter
Slide 46: Our Markets | Orlando
45 Community Map Differentiators Job Growth Population Growth Supply Growth 2 2023 Job Growth: National Average -0.26% Gateway Markets 0.88% 2023 Population Growth: National Average 0.44% Gateway Markets 1.08% -1.27% 4.46% 0.30% • Established tourism hub • Centrally located in FL, easily accessible
Slide 47: IRT Resident Demographics at a Glance
46 IRT Resident Demographics at a Glance (1) All notations throughout this presentation appear as “End Notes” on pages 47-48. 47% 53% Gender Breakdown 80% 20% Marital Status 37 Average Resident Age Young, growing resident population benefiting from amenity-rich communities without overextending on r
Slide 48: End Notes
47 End Notes Slide 2 (1) For the total portfolio as of December 31, 2022 or for 4Q 2022, as applicable; including portfolio average rental rate growth for the IRT same store portfolio for the twelve months ended December 31, 2022. (2) Communities and units as of December 31, 2022. (3) IRT also has a
Slide 49: End Notes (continued)
48 End Notes (continued) Slide 11 (1) New deliveries as a % of existing inventory are from CoStar’s Q4 2022 data release and are specific to IRT’s submarkets. (2) IRT’s average asking rent vs. new construction for one and two-bedroom apartments. Slide 13 (1) All resident demographic data is self-rep
Slide 50: Definitions and Non-GAAP Financial Measure Reconciliations
49 Definitions and Non-GAAP Financial Measure Reconciliations This presentation may contain non-U.S. generally accepted accounting principals (“GAAP”) financial measures. A reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures is included in this
Slide 51: Definitions and Non-GAAP Financial Measure Reconciliations
50 Definitions and Non-GAAP Financial Measure Reconciliations Net Operating Income We believe that Net Operating Income (“NOI”), a non-GAAP financial measure, is a useful supplemental measure of its operating performance. We define NOI as total property revenues less total property operating expense
Slide 52: Definitions and Non-GAAP Financial Measure Reconciliations
51 Definitions and Non-GAAP Financial Measure Reconciliations December 31, 2022 September 30, 2022 June 30, 2022 March 31, 2022 December 31, 2021 Reconciliation of same-store net operating income to net income (loss) Same-store net operating income 97,774$ 94,566$ 90,735$ 89,169$ 87,014$ Non same-st
Slide 53: Forward-Looking Statement
52 Forward-Looking Statement This presentation contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Such forward looking statements can generally be identified by o
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