Independence Realty Trust, Inc. (“IRT”) (NYSE MKT: IRT) today
announced its third quarter 2016 financial results. All per share
results are reported on a diluted basis.
Results for the Quarter
- Earnings per share (“EPS”) was $0.05
for the quarter ended September 30, 2016 as compared to $0.71 for
the quarter ended September 30, 2015.
- Core Funds from Operations (“CFFO”) per
share increased 5.0% to $0.21 for the quarter ended September 30,
2016 from $0.20 for the quarter ended September 30, 2015.
- Earnings before interest, taxes,
depreciation and amortization and before acquisition expenses
(“Adjusted EBITDA”), increased 56.5% to $18.4 million for the
quarter ended September 30, 2016 from $11.7 million for the quarter
ended September 30, 2015.
Results for the Nine Months
- EPS was $0.66 for the nine months ended
September 30, 2016 as compared to $0.74 for the nine months ended
September 30, 2015.
- CFFO per share increased 10.5% to $0.63
for the nine months ended September 30, 2016 from $0.57 for the
nine months ended September 30, 2015.
- Adjusted EBITDA increased 74.3% to
$56.0 million for the nine months ended September 30, 2016 from
$32.1 million for the nine months ended September 30, 2015.
Management Internalization Transaction
On September 27, 2016, IRT entered an agreement (the
“Internalization Agreement”) with RAIT Financial Trust (“RAIT”) to
repurchase 7,269,719 shares of IRT common stock from RAIT
subsidiaries, representing all of the shares of IRT common stock
owned by RAIT, and for IRT to complete a management internalization
and separation (the “Internalization”) from RAIT and certain of its
affiliates.
On October 5, 2016, IRT paid approximately $62.2 million to RAIT
to repurchase (the “IRT Stock Repurchase”) and retire RAIT’s shares
of IRT common stock at a purchase price of $8.55 per share. This
price was equal to the price to the public in the public offering
described below less underwriting discounts or commissions.
The Internalization consists of two parts: (i) the acquisition
of IRT’s external advisor, which is a subsidiary of RAIT, and (ii)
the acquisition of certain assets and the assumption of certain
liabilities relating to the multifamily property management
business of RAIT, including property management contracts relating
to apartment properties owned by IRT, RAIT and third parties. The
purchase price IRT will pay RAIT for the Internalization is $43.0
million, subject to certain prorations at closing. The
Internalization Agreement provides that the Internalization will
occur, subject to its terms and conditions, no earlier than
December 20, 2016 and IRT expects it to occur by year end.
Upon closing of the Internalization, each of Scott F. Schaeffer,
IRT’s Chief Executive Officer, Farrell Ender, IRT’s President, and
James J. Sebra, IRT’s Chief Financial Officer, are expected to
enter into employment agreements with IRT. Messrs. Schaeffer and
Ender are expected to become employees of IRT upon closing. Mr.
Sebra is expected to remain the CFO of RAIT until the later to
occur of March 31, 2017 or the filing of RAIT’s Form 10-K for the
fiscal year ending December 31, 2016 with the U.S. Securities and
Exchange Commission. In addition, more than 400 current employees
of RAIT and the property manager are expected to become employees
of IRT.
Common Stock Offering
On October 5, 2016, IRT closed an underwritten public offering
of 25,000,000 shares of IRT common stock at a public offering price
of $9.00 per share for total net proceeds of approximately $211.8
million. On October 21, 2016, IRT closed on the underwriters’
option to purchase 3,750,000 additional shares of IRT common stock
at the public offering price, less underwriting discounts and
commissions netting IRT an additional $32.1 million of proceeds. In
the aggregate, IRT received approximately $245.8 million of net
proceeds from this offering, before offering expenses and after
underwriting discounts and commissions. IRT used the net proceeds
from the offering plus available cash as follows: $40.0 million was
used to repay IRT’s $40.0 million senior secured term loan
facility; $43.0 million was reserved for the Internalization; $62.2
million was used for the IRT Stock Repurchase; and $107.3 million
was used to repay outstanding borrowings under IRT’s $325.0 million
senior secured credit facility.
Scott Schaeffer, IRT’s Chairman and CEO said, “During the
quarter, IRT’s portfolio of apartment communities delivered strong
same store operating results and remains well positioned for
further NOI growth. At the end of the quarter we took steps to
strengthen IRT’s market position by entering into an agreement with
RAIT, which owns our external advisor, to internalize IRT’s
management. This milestone transaction delivers continuity of
management and other key benefits which will enhance shareholder
value. The proceeds from the completion of our previously announced
equity offering will be used to pay for the internalization, reduce
debt and repurchase and retire our common stock from RAIT. We are
excited about the market opportunity and look forward to completing
the internalization later this year.”
Same-Store Property Operating Results
Third Quarter 2016 Compared to
Nine Months Ended 9/30/16
Third Quarter 2015(1)
Compared to Nine Months Ended
9/30/15(2)
Rental income 3.4% increase
3.2% increase Total revenues 4.1%
increase 3.5% increase Property level
operating expenses 2.1% increase
2.2% increase Net operating income (“NOI”)
6.0% increase 4.6% increase Portfolio
average occupancy 93.2%, 0.2% decrease
93.4%, no change Portfolio average rental rate
3.5% increase to $867 3.1%
increase to $857 NOI Margin 0.9% increase to
51.7% 0.6% increase to 52.7%
(1)
Same store portfolio for the three months ended September
30, 2016 and 2015 consists of 26 properties with 7,757 apartment
units.
(2)
Same store portfolio for the nine months ended September 30, 2016
and 2015 consists of 26 properties with 7,757 apartment units.
Capital Expenditures
For the three months ended September 30, 2016, our recurring
capital expenditures for the total portfolio was $2.1 million, or
$161 per unit. For the nine months ended September 30, 2016, our
recurring capital expenditures for the total portfolio was $5.6
million, or $420 per unit.
2016 Net Income and CFFO Guidance
IRT is updating prior guidance to reflect impact from the
previously announced internalization transaction, debt reduction,
stock repurchase and common stock offering for full year EPS and
CFFO per share, with EPS now projected to be in a range of
($0.12)-($0.10), a decrease from the prior guidance range of
$0.54-$0.58, due largely from the ($0.78) per common share
internalization expense expected in the fourth quarter. CFFO per
share is now projected to be in the range of $0.77-$0.79 per common
share, a decrease from the prior guidance range of $0.84-$0.88 per
common share. A reconciliation of IRT's projected net income (loss)
allocable to common shares to its projected CFFO per share, a
non-GAAP financial measure, is included below. Also included below
are the primary assumptions underlying this estimate. See Schedule
II to this release for further information regarding how IRT
calculates CFFO and Schedule V to this release for management’s
definition and rationale for the usefulness of CFFO.
2016 Full Year Net Income and
CFFOGuidance (1)
2016 Net Income Guidance (1) Low
High Net income (loss) available
to common shares
$(0.12) -
$(0.10)
2016 CFFO Guidance (1)
Net income (loss) available to common shares $(0.12) - $(0.10)
Adjustments: Depreciation and amortization 0.61 - 0.61 Gains on
asset sales (0.57) - (0.57) Share base compensation 0.02 - 0.02
Internalization 0.78 - 0.78 Amortization of deferred financing fees
and other items
0.05 -
0.05 CORE FFO per
diluted share allocated to common shareholders
$0.77 -
$0.79 (1) This guidance, including the
underlying assumptions, constitutes forward-looking information.
Actual full 2016 CFFO could vary significantly from the projections
presented. Our estimate is based on the following key operating
assumptions: (a) For 2016, a same store pool of 26
properties totaling 7,757 units. (b) Same store NOI growth of 4.5%
to 5.5%, driven by revenue growth of 4% to 5% and property
operating expense growth of 2% to 3%. (c) The portfolio of
properties acquired from TSRE, which is not included in the same
store pool, experiences NOI growth of 6% to 7%, driven by revenue
growth of 4% to 5% and an improved operating margin of 56%, up from
54% in 2015. The improved operating margin is driven through
reduced operating expenses for property insurance. (d) No property
acquisitions in 2016. (e) General and administrative expenses of
approximately $1.8 million to $2.3 million. (f) 55.1 million
weighted average shares outstanding for fiscal year 2016.
Selected Financial Information
See Schedule I to this Release for selected financial
information for IRT.
Non-GAAP Financial Measures and Definitions
IRT discloses the following non-GAAP financial measures in this
release: funds from operations (“FFO”), CFFO, Adjusted EBITDA and
NOI. A reconciliation of IRT’s reported net income (loss) to
its FFO and CFFO is included as Schedule II to this release. A
reconciliation of IRT’s same store NOI to its reported net income
(loss) is included as Schedule III to this release. A
reconciliation of IRT’s Adjusted EBITDA, to net income
(loss) is included as Schedule IV to this release. See
Schedule V to this release for management’s respective definitions
and rationales for the usefulness of each of these non-GAAP
financial measures and other definitions used in this release.
Distributions
On October 12, 2016, IRT’s Board of Directors declared monthly
cash dividends for the fourth quarter of 2016 on IRT’s shares of
common stock in the amount of $0.06 per share per month. The
monthly dividends total $0.18 per share for the fourth quarter. The
month for which each dividend was declared is set forth below, with
the relevant amount per share, record date and payment date set
forth opposite the month:
Month
Amount
Record
Date
Payment
Date
October 2016 $ 0.06 10/31/2016 11/15/2016 November 2016 $ 0.06
11/30/2016 12/15/2016 December 2016 $ 0.06 12/30/2016 01/17/2017
Conference Call
All interested parties can listen to the live conference call
webcast at 9:30 AM ET on Friday, October 28, 2016 from the investor
relations section of the IRT website at www.irtreit.com or by
dialing 1.844.775.2542, access code 96007206. For those who are not
available to listen to the live call, the replay will be available
shortly following the live call on IRT’s website and telephonically
until Friday, November 4, 2016, by dialing 855.859.2056, access
code 96007206.
Supplemental Information
IRT produces supplemental information that includes details
regarding the performance of the portfolio, financial information,
non-GAAP financial measures, same-store information and other
useful information for investors. The supplemental information is
available via the Company's website, www.irtreit.com, through the
"Investor Relations" section.
About Independence Realty Trust, Inc.
Independence Realty Trust, Inc. (‘IRT”) (NYSE MKT: IRT) is a
real estate investment trust that seeks to own well-located
apartment properties in geographic submarkets that it believes
support strong occupancy and the potential for growth in rental
rates. IRT seeks to provide stockholders with attractive
risk-adjusted returns, with an emphasis on distributions and
capital appreciation. While IRT is currently externally advised by
a wholly-owned subsidiary of RAIT Financial Trust (“RAIT”) (NYSE:
RAS), IRT expects to internalize its management by the end of
2016.
Forward-Looking Statements
This press release may contain certain forward-looking
statements within the meaning of Section 27A of the Securities Act
of 1933, as amended, and Section 21E of the Securities Exchange Act
of 1934, as amended. Such forward-looking statements can generally
be identified by our use of forward-looking terminology such as
"may," “trend”, "will," "expect," "intend," "anticipate,"
"estimate," "believe," "continue," “seek,” “outlook,” “in the
process,” “assumption,” “project,” “guidance” or other similar
words. Because such statements include risks, uncertainties and
contingencies, actual results may differ materially from the
expectations, intentions, beliefs, plans or predictions of the
future expressed or implied by such forward-looking statements.
These forward looking statements are based upon the current beliefs
and expectations of IRT’s management and are inherently subject to
significant business, economic and competitive uncertainties and
contingencies, many of which are difficult to predict and generally
not within IRT’s control. In addition, these forward-looking
statements are subject to assumptions with respect to future
business strategies and decisions that are subject to change. These
risks, uncertainties and contingencies include, but are not limited
to whether and when we will be able to complete the
Internalization; whether we can manage the Internalization
effectively or realize its anticipated benefits; whether IRT can
maintain its assumed same store pool in 2016; whether it can
achieve projected same store NOI growth and revenue growth and
limit projected property operating expense growth; whether the TSRE
portfolio of properties achieves projected NOI growth, revenue
growth, improved operating margins and reduced operating expenses
for property insurance; whether IRT will not make any property
acquisitions in 2016; whether general and administrative expenses
can be limited to projected levels ; and whether the weighted
average number of shares outstanding at December 31, 2016 will be
at the assumed levels; and those disclosed in IRT’s filings with
the Securities and Exchange Commission. IRT undertakes no
obligation to update these forward-looking statements to reflect
events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events, except as may be required by
law.
Schedule I
Independence Realty Trust, Inc.
Selected Financial Information
(Dollars in thousands, except share and
per share amounts)
(unaudited)
As of or For the Three-Month Periods Ended
September 30, June 30, March 31,
December 31, September 30, 2016
2016 2016 2015 2015 Operating
Statistics: Net income available to common shares $ 2,267 $
28,987 $ (75 ) $ 4,123 $ 24,015 Earnings (loss) per share --
diluted $ 0.05 $ 0.61 $ - $ 0.09 $ 0.71 Total revenue $ 38,364 $
38,327 $ 38,666 $ 39,709 $ 25,492 Total property operating expenses
$ 17,326 $ 16,852 $ 17,120 $ 17,398 $ 11,945 Net operating income
("NOI") $ 21,038 $ 21,475 $ 21,546 $ 22,311 $ 13,547 NOI margin
54.8 % 56.0 % 55.7 % 56.2 % 53.1 % Adjusted EBITDA $ 18,373 $
18,688 $ 18,924 $ 19,720 $ 11,742 Funds from operations ("FFO") per
share -- diluted $ 0.20 $ 0.18 $ 0.18 $ 0.19 $ 0.86 Core funds from
operations ("CFFO") per
share -- diluted
$ 0.21 $ 0.22 $ 0.21 $ 0.22 $ 0.20 Dividends per share $ 0.18 $
0.18 $ 0.18 $ 0.18 $ 0.18 CORE FFO payout ratio 85.7 % 81.8 % 85.7
% 81.8 % 90.0 %
Portfolio Data: Total gross assets $
1,374,353 $ 1,368,217 $ 1,404,359 $ 1,434,377 $ 1,445,601 Total
number of properties 46 46 48 49 50 Total units 12,982 12,982
13,502 13,724 14,044 Average occupancy 94.1 % 94.4 % 93.5 % 93.6 %
94.0 % Average monthly effective rent, per unit $ 977 $ 961 $ 952 $
947 $ 949 Same store portfolio average occupancy
(a) 93.2 %
93.9 % 92.9 % 92.4 % 93.4 % Same store portfolio average effective
monthly
rent (a)
$ 867 $ 856 $ 848 $ 844 $ 838
Capitalization (c): Total debt
$ 880,581 $ 880,288 $ 940,336 $ 966,611 $ 983,207 Common share
price, period end $ 9.00 $ 8.18 $ 7.12 $ 7.51 $ 7.21 Market equity
capitalization $ 453,823 $ 412,493 $ 358,913 $ 377,194 $ 362,127
Total market capitalization $ 1,334,404 $ 1,292,781 $ 1,299,249 $
1,343,805 $ 1,345,334 Total debt/total gross assets 64.1 % 64.3 %
67.0 % 67.4 % 68.0 % Net debt to adjusted EBITDA 11.6 x 11.4 x 12.1
x 11.8 x 12.2 x
(b) Interest coverage 2.1 x 2.1 x 1.9 x 1.9
x 2.1 x
(b) Common shares and OP Units: Shares
outstanding 47,509,731 47,476,250 47,458,250 47,070,678 47,070,678
OP units outstanding 2,915,008 2,950,816
2,950,816 3,154,936 3,154,936 Common shares and OP
units outstanding 50,424,739 50,427,066 50,409,066 50,225,614
50,225,614 Weighted average common shares and units 50,229,637
50,134,620 50,113,693 50,101,609 35,472,807
(a) Same store includes 26 properties which
represents 7,757 units. (b) Annualized assuming the TSRE merger
which closed September 17, 2015 occurred at the beginning of the
period. (c) On September 29, 2016, IRT priced a $25 million common
share offering at $9.00 per share. The proceeds of this offering
will be used to repay indebtedness, repurchase shares and fund the
internalization payment later in 2016. As a result of this
offering, IRT’s leverage and capitalization have improved.
Schedule II
Independence Realty Trust, Inc. Reconciliation of Net Income (loss)
to Funds From Operations and Core Funds From Operations (Dollars in
thousands, except share and per share amounts) (unaudited)
Three Months Ended Nine Months Ended September
30, September 30,
2016(a)
2015(b)
2016(c)
2015(d)
Amount Amount Amount
Amount
Funds From Operations (FFO): Net Income (loss) $ 2,407 $
25,636 $ 33,151 $ 25,748 Adjustments: Real estate depreciation and
amortization 7,765 4,704 26,927 16,462 Net (gains) losses on sale
of assets 1 — (31,773 ) —
Funds From Operations $ 10,173 $ 30,340 $ 28,305 $
42,210
FFO per share--diluted $ 0.20 $ 0.86 $
0.56 $ 1.25
Core Funds From Operations (CFFO):
Funds From Operations $ 10,173 $ 30,340 $ 28,305 $ 42,210
Adjustments: Stock compensation expense 247 217 832 297
Amortization of deferred financing costs 597 151 2,543 448
Acquisition and integration expenses 19 12,830 37 13,031 (Gains)
losses on extinguishment of debt
—
—
558 — TSRE financing extinguishment and employee separation
expenses 27,508 27,508 (Gains) losses on TSRE merger and property
acquisitions (641 ) (64,012) (732 )
(64,012 ) Core Funds From Operations $ 10,395 $ 7,034 $
31,543 $ 19,482
CFFO per share--diluted $ 0.21
$ 0.20 $ 0.63 $ 0.57 Weighted-average shares
and units outstanding 50,229,637 35,472,807
50,105,147 33,874,170
(a) Based on 50,229,637 weighted-average
shares and units outstanding-diluted for the three-month period
ended September 30, 2016. (b) Based on 35,472,807 weighted-average
shares and units outstanding-diluted for the three-month period
ended September 30, 2015. (c) Based on 50,105,147 weighted-average
shares and units outstanding-diluted for the nine-month period
ended September 30, 2016. (d) Based on 33,874,170 weighted-average
shares and units outstanding-diluted for the nine-month period
ended September 30, 2015.
Schedule III
Independence Realty Trust, Inc.
Reconciliation of Same-Store Net Operating
Income to Net Income (loss)
(Dollars in thousands)
(unaudited)
For the Three Months Ended (a)
September 30, June 30, March 31,
December 31, September 30, 2016
2016 2016 2015 2015
Reconciliation of Same-Store Net
Operating Income to Net Income (loss)
Same-store net operating income
(a) $ 10,450 $ 10,733 $
10,206 $ 10,029 $ 9,858 Non same-store net operating income 10,588
10,742 11,340 12,282 3,689 Asset management fees (1,933 ) (1,863 )
(1,696 ) (1,882 ) (1,259 ) General and administrative expenses (485
) (544 ) (721 ) (511 ) (329 ) Stock compensation expense (247 )
(380 ) (205 ) (198 ) (217 ) Acquisition and integration expenses
(19 ) (8 ) (10 ) (524 ) (12,830 ) Depreciation and amortization
(7,765 ) (7,635 ) (11,527 ) (11,632 ) (4,704 ) Interest expense
(8,820 ) (9,018 ) (9,977 ) (10,160 ) (5,094 ) Other income
(expense) (2 ) — — — 18 Net gains (losses) on sale of assets (1 )
29,321 2,453 6,412 — TSRE financing extinguishment and employee
separation expenses — — — — (27,508 ) Gains (losses) on
extinguishment of debt — (558 ) — — — Gains (losses) on TSRE merger
and property acquisitions 641 —
91 592 64,012
Net income
(loss) $ 2,407 $ 30,790 $ (46 ) $ 4,408 $
25,636 (a) Same store
portfolio includes 26 properties which represents 7,757 units.
Schedule IV
Independence Realty Trust, Inc. Reconciliation of Net Income (Loss)
to Adjusted EBITDA, Before Acquisition Expenses And Interest
Coverage Ratio (Dollars in thousands) (unaudited)
Nine
Months Ended For the Three Months Ended September
30, September 30, June 30, March
31, December 31, September 30,
ADJUSTED EBITDA: 2016 2016 2016
2015 2015 2016 2015 Net income
(loss) $ 2,407 $ 30,790 $ (46 ) $ 4,408 $ 25,636 $ 33,151 $
25,748 Add-Back (Deduct): Depreciation and amortization 7,765 7,635
11,527 11,632 4,704 26,927 16,462 Interest expense 8,820 9,018
9,977 10,160 5,094 27,815 13,393 Other (income) expense 2 — — — (18
) 2 (19 ) Acquisition and integration expenses 19 8 10 524 12,830
37 13,031 Net (gains) losses on sale of assets 1 (29,321 ) (2,453 )
(6,412 ) — (31,773 ) — TSRE financing extinguishment and employee
separation expenses — — — — 27,508 — 27,508 (Gains) losses on
extinguishment of debt — 558 — — — 558 — (Gains) losses on TSRE
merger and property acquisitions (641 ) —
(91 ) (592 ) (64,012 ) (732 )
(64,012 )
Adjusted EBITDA $ 18,373 $ 18,688 $
18,924 $ 19,720 $ 11,742 $ 55,985 $
32,111
INTEREST COST: Interest expense $ 8,820
$ 9,018 $ 9,977 $ 10,160 $ 5,094
$ 27,815 $ 13,393
INTEREST COVERAGE:
2.1x 2.1x 1.9x 1.9x 2.1x
(a) 2.0x 2.1x
(a)
(a)
Annualized assuming the TSRE merger
occurred at the beginning of the period.
Schedule V
Independence Realty Trust, Inc. Definitions
Average Effective Monthly Rent per Unit
Average effective rent per unit represents the average of gross
rent amounts, divided by the average occupancy (in units) for the
period presented. We believe average effective rent is a helpful
measurement in evaluating average pricing. This metric, when
presented, reflects the average effective rent per month.
Average Occupancy
Average occupancy represents the average of the daily physical
occupancy for the period presented.
Adjusted EBITDA
EBITDA is defined as net income before gains or losses on asset
sales, gains or losses on debt extinguishments, depreciation and
amortization expenses, interest expense, income taxes, and
amortization of deferred financing costs. Adjusted EBITDA is EBITDA
before acquisition expenses and gains. EBITDA and Adjusted EBITDA
are each non-GAAP measures. We consider EBITDA and Adjusted EBITDA
to be an appropriate supplemental measure of our performance
because it eliminates depreciation, income taxes, interest and
acquisition expenses and gains relating to IRT’s acquisition of
TSRE, and internalization costs, which permits investors to view
income from operations without non-cash items such as depreciation,
amortization, the cost of debt or items specific to the TSRE
acquisition, and internalization costs. The table is a
reconciliation of net income applicable to common stockholders to
Adjusted EBITDA. IRT’s calculation of Adjusted EBITDA differs from
the methodology used for calculating Adjusted EBITDA by certain
other REITs and, accordingly, IRT’s Adjusted EBITDA may not be
comparable to Adjusted EBITDA reported by other REITs.
Funds From Operations (“FFO”) and Core Funds From Operations
(“CFFO”)
IRT believes that FFO and CFFO, each of which is a non-GAAP
measure, are additional appropriate measures of the operating
performance of a REIT and IRT in particular. IRT computes FFO in
accordance with the standards established by the National
Association of Real Estate Investment Trusts, or NAREIT, as net
income or loss (computed in accordance with GAAP), excluding real
estate-related depreciation and amortization expense, gains or
losses on sales of real estate and the cumulative effect of changes
in accounting principles.
CFFO is a computation made by analysts and investors to measure
a real estate company’s operating performance by removing the
effect of items that do not reflect ongoing property operations,
including acquisition and integration expenses, expensed costs
related to the issuance of shares of our common stock, gains or
losses on real estate transactions and equity-based compensation
expenses, from the determination of FFO. IRT incurs acquisition
expenses in connection with acquisitions of real estate properties
and expenses those costs when incurred in accordance with U.S.
GAAP. As these expenses are one-time and reflective of investing
activities rather than operating performance, IRT adds back these
costs to FFO in determining CFFO. In connection with IRT’s
acquisition of Trade Street Residential Inc., or TSRE, in September
2015, IRT modified the calculation of CFFO to adjust for
amortization of deferred financing costs and TSRE financing
extinguishment and employee separation expenses because these are
non-cash items or reflective of investing activities rather than
operating performance similar to the other CFFO adjustments. The
effect of these modifications on prior periods is reflected in the
reconciliation of IRT’s reported net income (loss) allocable to
common shares to its FFO and CFFO included herein.
IRT’s calculation of CFFO differs from the methodology used for
calculating CFFO by certain other REITs and, accordingly, IRT’s
CFFO may not be comparable to CFFO reported by other REITs. IRT’s
management utilizes FFO and CFFO as measures of IRT’s operating
performance, and believes they are also useful to investors,
because they facilitate an understanding of IRT’s operating
performance after adjustment for certain non-cash items, such as
depreciation and amortization expenses, equity based compensation,
amortization of deferred financing fees, TSRE financing
extinguishment and employee separation expenses, gains (losses) on
TSRE transaction and property acquisitions, and with respect to
CFFO, acquisition and integration expenses, pursuit costs and
internalization costs that are required by GAAP to be expensed but
may not necessarily be indicative of current operating performance
and that may not accurately compare IRT’s operating performance
between periods. Furthermore, although FFO, CFFO and other
supplemental performance measures are defined in various ways
throughout the REIT industry, IRT also believes that FFO and CFFO
may provide IRT and our investors with an additional useful measure
to compare IRT’s financial performance to certain other REITs. IRT
also uses CFFO for purposes of determining the quarterly incentive
fee, if any, payable to our advisor. Neither FFO nor CFFO is
equivalent to net income or cash generated from operating
activities determined in accordance with GAAP. Furthermore, FFO and
CFFO do not represent amounts available for management’s
discretionary use because of needed capital replacement or
expansion, debt service obligations or other commitments or
uncertainties. Neither FFO nor CFFO should be considered as an
alternative to net income as an indicator of IRT’s operating
performance or as an alternative to cash flow from operating
activities as a measure of IRT’s liquidity.
Net Debt
Net debt, a non-GAAP measure, equals total debt less cash and
cash equivalents as these captions are reported on the consolidated
balance sheet. The following table provides a reconciliation of
total debt to net debt.
As of September 30, March 31,
March 31, December 31,
September 30, 2016 2016 2016
2015 2015 Total debt $ 880,581 $ 880,288 $ 940,336 $
966,611 $ 983,207 Less: cash and cash equivalents (29,247 )
(28,051 ) (21,924 ) (38,301 ) (16,939 )
Total net debt $ 851,334 $ 852,237 $ 918,412 $
928,310 $ 966,268
IRT presents net debt because management believes it is a useful
measure of IRT’s credit position and progress toward reducing
leverage. The calculation is limited in that IRT may not always be
able to use cash to repay debt on a dollar for dollar basis.
Net Operating Income
IRT believes that Net Operating Income (“NOI”), a non-GAAP
measure, is a useful measure of its operating performance. IRT
defines NOI as total property revenues less total property
operating expenses, excluding depreciation and amortization, asset
management fees, acquisition expenses and general administrative
expenses. Other REITs may use different methodologies for
calculating NOI, and accordingly, our NOI may not be comparable to
other REITs. We believe that this measure provides an operating
perspective not immediately apparent from GAAP operating income or
net income. We use NOI to evaluate our performance on a same store
and non-same store basis because NOI measures the core operations
of property performance by excluding corporate level expenses and
other items not related to property operating performance and
captures trends in rental housing and property operating expenses.
However, NOI should only be used as an alternative measure of our
financial performance.
Same Store Properties and Same Store Portfolio
IRT reviews its same store properties or portfolio at the
beginning of each calendar year. Properties are added into the same
store portfolio if they were owned at the beginning of the previous
year. Properties that have been sold are excluded from the same
store portfolio.
Total Gross Assets
Total Gross Assets equals total assets plus accumulated
depreciation and accumulated amortization as these captions are
reported on the consolidated balance sheet. The following table
provides a reconciliation of total assets to total gross
assets.
As of September 30, June
30, March 31, December
31, September 30, 2016 2016
2016 2015 2015 Total assets $ 1,306,242 $
1,307,871 $ 1,344,650 $ 1,383,188 $ 1,402,554 Plus: Accumulated
Depreciation 52,824 45,059 44,422 39,638 35,304 Plus: Accumulated
Amortization 15,287 15,287 15,287
11,551 7,743 Total gross assets $ 1,374,353 $ 1,368,217 $
1,404,359 $ 1,434,377 $ 1,445,601
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161028005424/en/
Independence Realty Trust, Inc.Andres Viroslav,
215-207-2100aviroslav@irtreit.com
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