Q4 2021 Independence Realty Trust Inc Earnings Call

Hello, and welcome to Independence Realty Trust fourth quarter 2021 earnings release, My name is Emily and I'll be coordinating the call today. During the presentation you will have the opportunity to ask a question by pressing star followed by one on your telephone keypad I will now hand, the call over to our host Lauren Torres. Please go ahead Lori.

Speaker 1: Hello and welcome to Independence Realty Trust's fourth quarter 2021 earnings release. My name is Emily and I will be coordinating the call today. During the presentation you will have the opportunity to ask a question by pressing start followed by 1 on your cell phone keypads. I will now hand the call over to our host Lauren Torres. Please go ahead Lauren.

Speaker 2: Thank you and good morning everyone. Thank you for joining us to review Independence Realty Trust's fourth quarter and full year 2021 financial results.

Thank you and good morning, everyone. Thank you for joining us to review independence Realty Trust's fourth quarter and full year 2021 financial results on the call with me today are Scott Shafer, Chief Executive Officer, Ellen Kneeland, Chief operating Officer Farrell.

Speaker 2: On the call with me today are Scott Schaefer, Chief Executive Officer, Ellen Nalin, Chief Operating Officer, Farrell Ender, President of IRT, and Jim Sebra, Chief Financial Officer.

<unk> President of IRT, and Jim <unk>, Chief Financial Officer.

Speaker 2: Today's call is being webcast on our website at www.irtliving.com.

Today's call is being webcast on our website at www Dot IRT living dotcom, there will be a replay of the call available via webcast on our Investor Relations website, and Telefonica <unk> beginning at approximately 12 P M Eastern time today.

Speaker 2: There will be a replay of the call available via webcast on our Investor Relations website and telephonically beginning at approximately 12 p.m. Eastern time today.

Before I turn the call over to Scott I'd like to remind everyone that there may be forward looking statements made on this call. These forward looking statements reflect irt's current views with respect to future events financial performance and the merger with steadfast apartment, REIT, which will be referenced here in as star.

Speaker 2: Before I turn the call over to Scott, I'd like to remind everyone that there may be forward-looking statements made on this call. These forward-looking statements reflect IRT's current views with respect to future events, financial performance, and the merger with Steadfast Apartment REIT, which will be referenced herein as STAR. Actual results could differ substantially and materially from what IRT has projected.

Actual results could differ substantially and materially from what IRT has projected such statements are made in good faith pursuant to the safe Harbor provisions of the private Securities Litigation Reform Act of 1995.

Speaker 2: Such statements are made in good faith pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Please refer to IRT's press release, supplemental information, and filing for the SEC for factors that could affect the accuracy of our expectations or cause our future results to differ materially from those expectations. Applicants may discuss non-GAAP financial measures during this call.

Please refer to Irt's press release supplemental information and filings with the SEC for factors that could affect the accuracy of our expectations or cause our future results to differ materially from those expectations participants may discuss non-GAAP financial measures during this call.

A copy of Irt's earnings press release, and supplemental information containing financial information other statistical information and a reconciliation of non-GAAP financial measures to the most direct comparable GAAP financial measure is attached to Irt's current report on the form 8-K available at.

Speaker 2: a copy of IRT's earnings press release, and supplemental information containing financial information, other statistical information, and a reconciliation of non-GAAP financial measures to the most direct comparable GAAP financial measure is attached to IRT's current report on the Form 8-K available at IRT's website under Investor Relations.

Irt's website under Investor Relations.

Irt's other SEC filings are also available through this link IRT does not undertake to update forward looking statements made in this call or with respect to matters described herein, except as may be required by law with that it's my pleasure to turn the call over to Scott Shafer.

Speaker 2: IRT's other SEC filings are also available through this link. IRT does not undertake to update forward-looking statements made in this call, or with respect to matters described herein, except as may be required by law. With that, it's my pleasure to turn the call over to Scott Schaefer. Thank you, Lauren.

Thank you Lauren and thank you all for joining us today two.

2021 was an exceptional year for Iot not only due to our strong results, but also due to the December completion of our merger with steadfast apartment REIT.

Speaker 3: not only due to our strong results, but also due to the December completion of our merger with FedFast Department of Green, or STAR.

Sure.

The combination of IRT and star created a leading multifamily REIT with an equity market capitalization of approximately $5 9 billion and total enterprise value of $8 6 billion at year end. We are incredibly excited about the opportunities that lie ahead and look forward to discussing them with you in more detail on today's call before we do that.

Speaker 3: The combination of IRT and STAR created a leading multifamily REIT with an equity market capitalization of approximately $5.9 billion and total enterprise value of $8.6 billion at year-end. We are incredibly excited about the opportunities that lie ahead and look forward to discussing them with you in more detail on today's call. Before we do that, I'd first like to provide some quarterly and full-year 2021 highlights.

I'd first like to provide some quarterly and full year 2021 highlights.

In the fourth quarter positive trends in performance continued building upon the momentum experienced in the first nine months of 2021.

Speaker 3: In the fourth quarter, positive trends and performance continued, building upon the momentum experienced in the first nine months of 2021. IRT's success has stemmed from our ability to execute a strategic plan, which focuses on non-gateway communities in the Sunbelt region where there is strong resident demand.

<unk> success has stemmed from our ability to execute our strategic plan, which focuses on non gateway community in the Sunbelt region, where there was strong resident demand. This has allowed us to benefit from positive trends, such as population and employment growth as well as new household formation and as we've highlighted on recent calls our selective approach along with the housing shortage in our Mark.

Speaker 3: This has allowed us to benefit from positive trends such as population and employment growth, as well as new household formation. And as we've highlighted on recent calls, our selective approach along with the housing shortage in our markets has led us to achieve high and stable occupancy levels and significant rental rate growth, which was clearly reflected in our fourth quarter and full year results.

<unk> has led us to achieve high and stable occupancy levels and significant rental rate growth, which was clearly reflected in our fourth quarter and full year results. Specifically, we delivered an industry, leading same store NOI growth of 15, 1% in the quarter and 11, 4% for the full year and our quarterly core <unk> improved 58% compared.

Speaker 3: Specifically, we delivered an industry-leading same-store NOI growth of 15.1% in the quarter and 11.4% for the full year. And our quarterly core FFO improved 58% compared to a year ago, while our annual core FFO grew 34% year over year.

A year ago, while our annual core SSO grew 34% year over year.

Speaker 3: Since the merger closed on December 16th, these results include only two weeks of star property operations. The full benefit of the merger will be realized in 2022 and beyond.

Since the merger closed on December 16th. These results include only two weeks of Star property operations. The full benefit of the merger will be realized in 2022 and beyond.

Speaker 3: We are very pleased with our results, particularly in light of the challenges which have impacted our industry during the pandemic. Our team's efforts have enabled us to deliver attractive growth on a same-store basis while realizing additional opportunities through our long-standing value-add program and our more recent joint venture investments in new multifamily development.

We are very pleased with our results, particularly in light of the challenges, which have impacted our industry. During the pandemic. Our team's efforts have enabled us to deliver attractive growth on a same store basis, while realizing additional opportunities through our long standing value add program and our more recent joint venture investments in new multifamily development.

Speaker 3: And now, as a result of our merger with Star, we have doubled our portfolio to 119 communities, increasing our presence in attractive markets like Atlanta and Dallas, and entering new markets like Denver and Nashville. Our exposure to the Sun Belt represents approximately 70% of our NOI, and we expect strong growth fundamentals to persist in this region, with people continuing to migrate to cities with a lower cost of living, a better tax policy, and more economic opportunities.

And now as a result of our merger with Star we have doubled our portfolio to 119 communities, increasing our presence in attractive markets like Atlanta, and Dallas and entering new markets like Denver, and Nashville, our exposure to the sunbelt represents approximately 70% of our NOI and we expect strong growth fundamentals to persist in this region with people continuing to migrate to cities with a.

Lower cost of living a better tax policy and more economic opportunity with our larger footprint in these desired U S markets. We are confident in our ability to implement our strategic initiatives captured incremental growth, particularly through our redevelopment efforts and to strengthen our total company platform with increased economies of scale.

Speaker 3: With our larger footprint in these desired U.S. markets, we are confident in our ability to implement our strategic initiatives, capture incremental growth, particularly through our redevelopment efforts, and to strengthen our total company platform with increased economies of scale.

Speaker 3: One thing that won't change at IRT is our simple capital structure and strong balance sheet. We will maintain our conservative financial and credit policies and further de-lever the balance sheet through organic NOI growth, value-add renovations, non-core asset sales. Our larger portfolio is well-positioned to generate increasing NOI, which will allow us to fund future growth opportunities in markets where we expect to see continued strong residential demand while continuing to improve our net debt to EBITDA ratio.

One thing that won't change at Iot as a simple capital structure and strong balance sheet, we will maintain our conservative financial and credit policies and further delever the balance sheet through organic NOI growth value add renovations noncore asset sales or larger portfolio was well positioned to generate increasing NOI, which will allow us to fund future growth opportunities in markets, where we.

To see continued strong residential demand, while continuing to improve our net debt to EBITDA ratio.

Speaker 3: We finished 2021 with a net debt-to-adjusted EBITDA ratio of 7.7 times, reaching its target a full year earlier than projected due to the strong operating results and the significant value received from our properties recently sold. We have now completed the sale of all nine properties previously identified for sale and with the corresponding debt repayments now have a net debt-to-EBITDA ratio of 7.5 times.

We finished 2021 with a net debt to adjusted EBITDA ratio of seven seven times, reaching this target a full year earlier than projected due to the strong operating results in a significant value received from our properties recently sold we have now completed the sale of all nine properties previously identified for sale and with the corresponding debt repayments now have a net debt to EBITDA ratio of seven five times.

Speaker 3: Overall, we exited 2021 from a position of strength and scale and are excited about the future growth potential of IRT. We are also confident that we have the right team in the right place to execute our strategy.

Overall, we exited 2021 from a position of strength and scale and are excited about the future growth potential of IRT. We're also confident that we have the right team and the right place to execute our strategy and with that said I'd like to turn the call over to our Neyland Irt's Chief operating officer joined US from Star and is an experienced multifamily executives. We welcome her on the <unk>.

Speaker 3: And with that said, I'd like to turn the call over to Ella Naland, IRT's Chief Operating Officer. Ella joined us from STAR and is an experienced multifamily executive. We welcome her and look forward to her valued contribution to our team. Ella? Thanks, Scott. And I'm really excited to be joining my first IRT earnings call.

Forward to her valued contribution to our team Hello, Thanks, Scott and I'm really excited to be joining my first IRT earnings call. Most of my experience has been working with great multifamily companies, including steadfast apartment rates star for the past 10 years.

Speaker 4: Most of my experience has been working with great multi-family companies, including steadfast apartment REIT star for the past 10 years.

The merger of Star and Iot has been an incredible journey.

Speaker 4: The merger of SAR and IRT has been an incredible journey.

Speaker 4: It's very seldom that the combination of two public companies come with the opportunities that this presented to our combined shareholder base and dedicated team members.

Very seldom that the combination of two public companies come with the opportunity that this presented to our combined shareholder base and dedicated team members.

Speaker 4: The investment thesis for both companies was absolutely aligned.

Investment thesis for both companies was absolutely aligned.

Speaker 4: Invest in well-located and well-maintained non-gateway communities and high job growth marks.

<unk>, well located and well maintained non gateway community and high job growth market.

Speaker 4: And, not only is demand continuing to grow for apartment homes, but supply is still lagging demand. The National Multifamily Housing Council estimates that we will need another 4.6 million apartments by 2030 to meet this estimated demand. We believe the future is bright for owning and running multifamily apartments.

And not only is demand continuing to grow for apartment homes, but supply is still lagging demand. The national multifamily housing Council estimate that we will need another $4 6 million apartments by 2030 to meet this estimated demand.

We believe the future is bright for owning and running multifamily apartments.

Speaker 4: supported not just by its supply-demand imbalance, but also by the changing lifestyles and finances of most of America.

<unk> not just by a supply demand imbalance, but also by the changing lifestyles and finances of most of America.

Speaker 4: And so to echo Scott's comments, I'm also incredibly excited about what lies ahead and believe as a combined company, we have a very long runway of growth.

And so to Echo Scott's comments I'm also incredibly excited about what lies ahead and believe that the combined company, we have a very long runway of growth.

Speaker 4: we closed out 2021 with strong operating results. In particular, in the fourth quarter, IRP's same-store occupancy grew 90 basis points to 95.7% from a year ago and improved 230 basis points to 95.7% for the full year.

We closed out 2021 with strong operating results in particular in the fourth quarter IRT same store occupancy grew 90 basis points to 95, 7% from a year ago and improved 230 basis points to 95, 7% for the full year.

Speaker 4: And similarly, when you consider IRT and STAR combined, same store average occupancy was 95.9% during Q4, reflecting the strength of our total combined portfolio in non-gateway markets.

And similarly, when you consider IRT and star combined same store average occupancy was 95, 9% during Q4, reflecting the strength of our total combined portfolio in non gateway markets.

Speaker 4: On a lease-of-release basis for the IRT same-store portfolio, new lease rates increased 22.3% and renewals were up 8% during the fourth quarter, yielding a combined lease-of-release rental rate increase of 15.2%.

On a lease over lease basis for the Iot same store portfolio, new lease rates increased 22, 3% and renewals were up 8% during the fourth quarter, yielding a combined lease over lease rental rate increase of 15, 2%.

Speaker 4: On a combined same-store basis with STAR, we achieved double-digit growth across each metric in the fourth quarter with new lease rates up 18.8% and renewals up 10.2%, delivering 14.2% year-over-year growth on a blended basis.

On a combined same store basis with star, we achieved double digit growth across each metric in the fourth quarter with new lease rates up 18, 8% and renewals up 10, 2% delivering 14, 2% year over year growth on a blended basis.

Strong trends continue in the first quarter to date.

Speaker 4: Strong trends continue in the first quarter to date, with new leases for our combined same-store portfolio having increased 16.4% led by our value-add communities, while renewed leases are up 10.2%, with a blended lease-over-lease rental rate increase of 12.4% for our same-store portfolio.

New leases for our combined same store portfolio, having increased 16, 4% led by our value add communities. While renewed leases are up 10, 2% with a blended lease over lease rental rate increase of 12, 4% for our same store portfolio.

Since the merger was completed in December our team has been identifying opportunities within the combined company, most notably our property management and revenue management system integration is complete and we are on track to deliver $8 million of property management synergies that we've previously disclosed as we implement the best.

Speaker 4: Since the merger was completed in December , our team has been identifying opportunities within the combined company. Most notably, our property management and revenue management system integration is complete, and we are on track to deliver $8 million of property management synergies that we previously disclosed as we implement the best practices those companies brought to the merger.

Practices, both companies brought to the merger.

Speaker 4: So with that said, I'd like to turn the call over to Farrell to provide you with an update on our investment opportunity.

With that said I'd like to turn the call over to Farrell to provide you with an update on our investment opportunities.

Thanks, Alex.

Speaker 4: Thanks, Ellis. A highlight of the past year is the successful execution of our value-add program.

Highlight of the past year is the successful execution of our value add program at <unk>.

We closed out 2021, having completed renovations on 253 units in the fourth quarter and 953 units for the full year delivering a return on investment of nearly 30%.

Speaker 4: We closed out 2021 having completed renovations on 253 units in the fourth quarter and 953 units for the full year, delivering a return on investment of nearly 30%.

Since the inception of our value add program in January 2018, we have completed renovations on 4672 units achieving a return on investment of 18%.

Speaker 4: Since the inception of our value-added program in January 2018, we have completed renovations on 4,672 units, achieving a return on investment of 18% and an average monthly rental rate increase of 19.6%.

And an average monthly rental rate increase of 19, 6%.

Speaker 4: 11 of our communities are currently undergoing renovations, and we've identified five communities that we will be adding to the pipeline in 2022, two of which commence renovations already.

11 of our communities are currently undergoing renovations and we've identified five communities that we will be adding to the pipeline in 2022, two of which commenced renovations already in.

Speaker 4: In addition, we designated eight communities as completed, having renovated on average in excess of 90% of their combined units, and will continue to work towards completing 100% as unrenovated unit leases expire.

In addition, we designated eight communities as completed having renovated on average in excess of 90% of their combined units and we'll continue to work towards completing a 100% as our renovated unit leases expire.

Now that the merger with Starz complete we have a pipeline of approximately 20000 value add units, which includes about 12000 former star units.

Speaker 4: Now that the merger with Star is complete, we have a pipeline of approximately 20,000 value-added units, which includes about 12,000 former Star units.

Speaker 4: This year, we expect to renovate 2,000 units from the combined portfolio and ramp up to 4,000 units per year thereafter.

This year, we expect to renovate 2000 units from the combined portfolio and ramp up to 4000 units per year thereafter.

Speaker 4: Consistent with IRT's prior value-add results, we expect to generate 15% to 20% ROI on renovation.

<unk> with Irt's prior value add results, we expect to generate 15% to 20% ROI on renovations.

Speaker 4: We're also excited about our joint venture relationships, which were established last year, and focus on new multi-family development.

We're also excited about our joint venture relationships, which were established last year and focus on new multifamily development.

To recall, we closed on a joint venture in Nashville during the third quarter of 2021 to develop three communities totaling 504 units with the joint venture development player.

Speaker 4: To recall, we closed on a joint venture in Nashville during the third quarter of 2021 to develop three communities totaling 504 units with a joint venture development partner.

We are committed $14 4 million to this joint venture with a total capitalization of $83 million.

Speaker 4: We've committed $14.4 million to this joint venture with a total capitalization of $83 million.

Similar to our other joint venture transactions, we maintain a right, but not the obligation to purchase the communities upon completion.

Speaker 4: Similar to our other joint venture transactions, we maintain our right, but not the obligation, to purchase a community upon completion.

Speaker 4: The first community will be delivered within the first quarter of 2022 and is expected to provide additional scale on this very desirable mark.

The first community will be delivered within the first quarter of 2022 and is expected to provide additional scale in this very desirable market.

The same holds true for our joint venture in Richmond, Virginia, where we are investing $16 $4 million into a 402 unit community.

Speaker 4: The same holds true for our joint venture in Richmond, Virginia, where we are investing $16.4 million into a 402-unit community.

Speaker 4: This project is expected to be completed in the second quarter of 2023 with the right to purchase this property upon completion.

This project is expected to be completed in the second quarter of 2023 with the right to purchase this property upon completion.

Speaker 4: We are continuing to evaluate additional joint venture opportunities and expect them to provide solid risk-adjusted returns with the added benefit of growing our portfolio.

We are continuing to evaluate additional joint venture opportunities and expect them to provide solid risk adjusted returns with the added benefit of growing our portfolio.

As a result of the merger with Star.

Speaker 4: As a result of the merger with Star, we also inherited three development projects in various days.

Also inherited redevelopment projects in various stages.

Speaker 4: Garrison Station is a recently completed 176-unit community located in Nashville, with occupancy stabilized at 94%.

Garrison station is a recently completed 176 unit community located in Nashville.

Occupancy stabilized at 94%.

Destination Arista located in Denver has broken ground and is expected to begin leasing in mid 2023.

Speaker 4: Destination Arista located in Denver has broken ground and is expected to begin leasing in mid-2023.

Speaker 4: Flatirons, also located in Denver, is in the final planning stages with construction beginning later this year with a mid-2024 delivery date.

Flat Irons also located in Denver is in the final planning stages with construction beginning later this year with a mid 2024 delivery date.

Speaker 4: All three of these developments will be delivered substantially below current market value.

All three of these developments will be delivered substantially below current market values.

Speaker 4: These company-owned projects are attractive and increase our exposure to markets experiencing above-average population and employment growth.

These company owned projects are attractive and increase our exposure to markets experiencing above average population and employment growth.

Speaker 4: Touching on our dispositions, we sold two communities in Atlanta in the fourth quarter and then sold an additional four properties in Indianapolis, Oklahoma City, and Louisville in the first quarter.

Touching on our dispositions, we sold two community in Atlanta in the fourth quarter, and then sold an additional four properties in Indianapolis, Oklahoma City in Louisville, and the first quarter.

Speaker 4: The total combined sale price for these six properties was $297 million. We realized a total gain on disposition of $172 million with a blended economic cap rate

With total combined sale price for the six properties was $297 million, we realized a total gain on disposition of $172 million.

With a blended economic cap rate of three 8%.

In addition in anticipation of the merger Starkel three communities in the fourth quarter for a total sales price of $106 $5 million with a blended economic cap rate of three 7%.

Speaker 4: In addition, in anticipation of the merger, Star sold three communities in the fourth quarter for a total sale price of $106.5 million with a blended economic cap rate of 3.7%.

While these recent dispositions were focused on managing our market concentrations post merger going forward IRT will continue to assess markets, where we see long term growth opportunities and reevaluate those that may not be attractive long term investments now like to turn the call over to Jim.

Speaker 4: While these recent dispositions were focused on managing our market concentrations post-merger, going forward IRT will continue to assess markets where we see long-term growth opportunities and re-evaluate those that may not be attractive long-term investments.

Thanks, Carol and good morning, everyone, beginning with our 2021 performance update for the fourth quarter of 2021 net income available to common shareholders was $28 6 million up from $13 $3 million in the fourth quarter of 2020.

Speaker 3: Thanks, Farrell, and good morning everyone. Beginning with our 2021 performance update, for the fourth quarter of 2021, net income available to common shareholders was $28.6 million up from $13.3 million in the fourth quarter of 2020. For full year 2021, net income available to common shareholders was $44.6 million up from $14.8 million from the full year 2020.

For full year 2021, net income available to common shareholders was $44 6 million up from $14 $8 million from the full year 2020.

Please keep in mind that changes in GAAP net income from year to year are significantly impacted by boutique size and timing of gains on the sale of real estate assets.

Speaker 3: Please keep in mind that changes in gap net income from year to year are significantly impacted by the size and timing of gains on the sale of real estate assets.

During the fourth quarter core <unk> grew 57, 9% to $31 million in core <unk> per share grew 14, 3% to <unk> 24 per share for the full year core <unk> grew 33, 6% to $92 million in core <unk> per share grew 15, 1%.

Speaker 3: During the fourth quarter, Core FFO grew 57.9% to $31 million, and Core FFO per share grew 14.3% to $0.24 per share. For the full year, Core FFO grew 33.6% to $92 million, and Core FFO per share grew 15.1% to $0.84 per share.

To <unk> 84 per share.

As Scott mentioned, we completed our merger with Star on December 16th and we consolidated the results coming off we've provided an additional supplemental disclosure at appendix a of our earnings supplement that depicts the impact of star for those two weeks on both our fourth quarter and full year 2021 results.

Speaker 3: As Scott mentioned, we completed our merger with STAR on December 16th, and we consolidated the results from then on. We provided an additional supplemental disclosure in Appendix A of our earnings supplement that depicts the impact of STAR for those two weeks on both our fourth quarter and full year 2021 results.

From a fourth quarter perspective, just for those two weeks star added <unk> <unk> accretion to our core <unk> per share which is in line with the accretion we've highlighted since we announced the merger.

Speaker 3: From a fourth quarter perspective, just for those two weeks, STAR added one cent decrease to our quarter flow per share, which is in line with the decrease we've highlighted since we announced the merger.

Turning to our same store property operating results, we are going to focus all of our same store results on Irt's historical definition of same store property. This quarter. Therefore, my comments will only reflect irt's properties.

Speaker 3: Turning to our same-store property operating results, we are going to focus all of our same-store results on IRT's historical definition of same-store property this quarter. Therefore, my comments will only reflect IRT's property.

Speaker 3: I'll discuss later how we will intend to report the impact of STAR on our future SAMHSA results.

Ill discuss later, how we will intend to report the impact of star on our future financial results.

<unk> same store NOI growth in the fourth quarter was 15, 1% driven by revenue growth of 10, 2%. This growth was driven by a nine 7% increase in average rental rates and 90 basis points of higher average occupancy. While this NOI growth include value add communities. We did see NOI growth of 10 four per.

Speaker 3: IRT's same-store NLI growth in the fourth quarter was 15.1%, driven by a revenue growth of 10.2%. This growth was driven by a 9.7% increase in average rental rates and 90 basis points of higher average options.

Speaker 3: While this NOI growth includes value-added communities, we did see NOI growth of 10.4% at our same store, non-value-added communities, which reinforces the fundamental strength of our core market.

<unk> at our same store non value add communities, which reinforces the fundamental strength of our core markets.

Again this growth was driven by an eight 4% increase in average rental rates and 80 basis points of incremental occupancy in the fourth quarter, both as compared to last year.

Speaker 3: Again, this growth was driven by an 8.4% increase in our average rental rate and 80 basis points of incremental occupancy in the fourth quarter, both as compared to last year.

For the full year 2021, <unk> same store revenue grew eight 4% driven by a five 9% increase in average rental rate and a 230 basis point increase in average occupancy.

Speaker 3: For the full year 2021, IRT state and state revenue grew 8.4%, driven by the 5.9% increase in average rental rates at a 230 basis point increase in average occupancy.

On the property operating expense side Iot same store operating results grew a modest one 8% in the fourth quarter as non controllable expenses for real estate taxes and insurance declined on a year over year basis. The decline in real estate taxes was due to the finalization of assessments and reductions we've received from appeals.

Speaker 3: On the property operating expense side, IRT same-store operating results grew a modest 1.8% in the fourth quarter as non-controllable expenses for real estate taxes and insurance declined on a year-over-year basis.

Speaker 3: The decline in real estate taxes was due to the finalization of assessments and reductions we received from appeals.

Speaker 3: For the full year, IRT same-store operating expenses grew 3.8 percent, primarily due to an increase in repairs and maintenance costs as compared to 2020, when many projects were delayed due to COVID.

For the full year Iot same store operating expenses grew three 8% primarily due to an increase in repairs and maintenance costs as compared to 2020. When many projects were delayed due to COVID-19 turning to our balance sheet as of December 31, our liquidity position was $282 million, we had approximately $36 million of unrestricted cash 220.

Speaker 3: Turning to our balance sheet, as of December 31st, our liquidity position was $282 million. We had approximately 36 million of unrestricted cash, 223 million of additional capacity through our unsecured credit facility, and 23 million of ATM proceeds available from forward equity sales. In December , we expanded and consolidated our unsecured credit facility, which increased our borrowing capacity to $500 million and extended the maturity date from 2023 to 2026.

$3 million of additional capacity through our unsecured credit facility and $23 million of ATM proceeds available from a forward equity sales in December we expanded and consolidated our unsecured credit facility, which increased our borrowing capacity to $500 million and extended the maturity date from 2023 to 2026.

Speaker 3: We are well-positioned with the financial flexibility to support our increased portfolio.

We are well positioned with the financial flexibility to support our increased portfolio.

As part of the closing of our merger risk our balance sheet now includes $4 $8 billion of assets acquired $1 8 billion of net debt assumed and the issuance of 106 million shares and op units as we highlighted previously we're very focused on delevering, the combined balance sheet, leading up to and after the closing we delever.

Speaker 3: As part of the closing of our merger with Star, our balance sheet now includes $4.8 billion of assets acquired, $1.8 billion of net debt assumed, and the issuance of 106 million shares and OP units.

Speaker 3: As we highlighted previously, we are very focused on de-levering the combined balance sheet. Leading up to and after the closing, we de-levered through a combination of our July forward equity raise of $271 million on 15.1 million shares, the disposition of three-star properties for a total sales price of $107 million, and as Farrell mentioned, our sale of six IRT properties between December 2021 and early February 2022 for a total sales price of $297 million.

Through a combination of our July forward equity raise of $271 million $16 1 million shares the disposition of three star properties for a total sales price of $107 million and as Farrell mentioned, our sale of a 100 ourselves six Iot properties between December 2021 in early February 2022 for a total sales price of two.

$97 million.

Speaker 3: We're extremely excited on the progress made on the deleveraging file. As of today, we own 119 assets and have $2.5 billion of debt outstanding, of which 95% is considered fixed rate or hedged with no maturities until 2024. We ended 2021 at 7.7 times net debt to EBITDA. Once we factor in the impact of our property sales in early 2022 and the related deleveraging, our net debt to EBITDA would be 7.5 times.

We're extremely excited on the progress made on the deleveraging front as of today, we own 119 assets and have $2 $5 billion of debt outstanding of which 95% is considered fixed rate or hedged with no maturities until 2024.

We ended 2021 at seven seven times net debt to EBITDA once we factor in the impact of our property sales in early 'twenty, two and the related deleveraging our net debt to EBITDA would be seven five times.

Before moving onto guidance I would like to address how we will be presenting same store results going forward. Starting in Q1 2022, we will be reporting same store results using both a legacy Iot definition as well as on a combined basis with Starz properties. The newly combined same store results will become the primary measure that we highlight with the legacy Iot.

Speaker 3: Before moving on to guidance, I'd like to address how we will be presenting SAMHSA results going forward. Starting in Q1 2022, we will be reporting SAMHSA results using both a legacy IRT definition, as well as on a combined basis with STARS proxies. The newly combined SAMHSA results will become the primary measure that we highlight, with the legacy IRT SAMHSA results presented as an appendix.

Same store results presented as an appendix. We've added these new definitions of combined same store to our Q4 earnings supplement and we would invite investors to review those definitions.

Speaker 3: We've added these new definitions of combined same store to our Q4 earning supplement, and we would invite investors to review those definitions.

To aid in future modeling. We've also added appendix B, which provides the 2021 quarterly property operating results for the 2022 combined same store portfolio.

Speaker 3: To aid in future modeling, we've also added Appendix B, which provides the 2021 quarterly property operating results for the 2022 combined savings store portfolio.

With respect to our outlook for 2022, our EPS guidance is a range of 32 per share to <unk> 36 per share and for <unk> in the range of $1 to $1 four per share for 2022, we expect NOI at our combined same store portfolio to increase 11% at the midpoint. This guidance reflects.

Speaker 3: With respect to our outlook for 2022, our EPS guidance is a range of $0.32 per share to $0.36 per share.

Speaker 3: And for core FFO, it's a range of $1 to $1.04 per share. For 2022, we expect NOI and our combined same-store portfolio to increase 11% at the midpoint. This guidance reflects expected same-store revenue growth of 8.6% at the midpoint.

As expected same store revenue growth of eight 6% at the midpoint for 2022, we are guiding average occupancy to be 95, 7% at the midpoint with an increase of 10% and our average rental rate.

Speaker 3: For 2022, we are guiding average occupancy to be 95.7% of the midpoint with an increase of 10% in our average rent.

Moving on to expenses, our projected growth in combined same store operating expenses of $4, 75% at the midpoint as a result of our expectation that non controllable expenses for real estate taxes and insurance showed increased seven 5% at the midpoint and our controllable operating expenses should increase 3% at the midpoint clearly we are keeping an eye.

Speaker 3: Moving on to expenses, our projected growth in combined same-store operating expenses of 4.75% at the midpoint is a result of our expectation that non-controllable expenses for real estate taxes and insurance should increase 7.5% at the midpoint, and our controllable operating expenses should increase 3% at the midpoint. Clearly, we're keeping an eye on near-term pressures that are factoring inflationary increases on all our expenses.

I on near term pressures that are factoring in inflationary increases on all our expenses. We expect these increases to be partially offset by a rollout of additional technological efficiencies at 2022.

Speaker 3: We expect these increases to be partially offset by a rollout of additional technological efficiencies in 2022.

Regarding our transaction investment volume expectations. We are currently not assuming any acquisition volume as we integrate star.

Speaker 3: Regarding our transaction and investment volume expectations, we are currently not assuming any acquisition volume as of the integrated start. As for dispositions, we are providing guidance for disposition volume of $157 million.

As for dispositions, we are providing guidance for disposition volume of $157 million.

Speaker 3: This reflects the assets that were sold in early 2022 and these proceeds were used to deliver.

This reflects the assets that were sold in early 2022 of these proceeds were used to delever.

As we formulate further capital recycling opportunities, we expect to reinvest those proceeds into our core markets. We expect these recycling opportunities should they occur will only have a positive impact on our 2022 guidance.

Speaker 3: As we formulate further capital recycling opportunities, we expect to reinvest those proceeds into our core markets. We expect these recycling opportunities, should they occur, will only have a positive impact on our 2022 guidance.

Regarding capex, we expect $20 million of recurring maintenance capex $45 million and value add of nonrecurring spend and $70 million and development Capex in 2022, each at the midpoint of our guided ranges these incremental development and value add capex will be funded primarily through the excess cash flow generated during 2022.

Speaker 3: And regarding CapEx, we expect 20 million in recurring maintenance CapEx, 45 million in value-add and non-recurring spend, and $70 million in development CapEx in 2022, each at the midpoint of our guided ranges. These incremental development and value-add CapEx will be funded primarily through the excess cash flow generated during 2022, which at the midpoint of our guidance is approximately $105 million.

Which at the midpoint of our guidance of approximately $105 million.

Now I'll turn the call back to Scott Scott Thanks, Jim in closing I'd like to highlight the incredible strength of our now expanded portfolio in the high growth Sunbelt markets. We have a clear roadmap ahead that will enable us to continue to deliver exceptional results. Our strategy is focused on completing the <unk> integration and achieving at least $28 million in <unk>.

Speaker 3: Now I'll turn the call back to Scott. Scott? Thanks, Jim. In closing, I'd like to highlight the incredible strength of our now expanded portfolio in the high-growth SunBelt market.

Speaker 4: We have a clear roadmap ahead that will enable us to continue to deliver exceptional results. Our strategy is focused on completing the STAR integration and achieving at least $28 million in annual synergy.

You'll synergies capitalizing on continued macro trends and resident demand to sustain occupancy levels and drive rent growth accelerating our organic growth profile through our value add program, which is now even more robust with the addition of the star properties and lastly, continuing to refine the portfolio and expand our presence in core high growth markets through our capital recycling and <unk>.

Speaker 4: Capitalizing on continued macro trends and resident demand to sustain occupancy levels and drive rent growth. Accelerating our organic growth profile through our value-add program, which is now even more robust with the addition of the star properties. And lastly, continuing to refine the portfolio and expand our presence in core high-growth markets through our capital recycling and JV development initiatives.

<unk> development initiatives, you are confident that the output of the strategy will translate into greater shareholder return, including approximately 21% core <unk> growth at the midpoint for our fiscal 2022 guidance as well as significant cash flow creation that will be used to fuel future growth and maintain an optimal leverage position.

Speaker 4: We are confident that the output of this strategy will translate into greater shareholder return including approximately 21% core FFO growth at the midpoint for our fiscal 2022 guidance as well as significant cash flow creation that will be used to fuel future growth and maintain an optimal leverage position. We thank you for joining us today and we look forward to speaking with many of you at Citi's Global Property Conference in early March. Operator, we would now like to open the call for questions.

We thank you for joining us today, and we look forward to speaking with many of you at cities Global property Conference in early March operator, we would now like to open the call for questions.

Thank you very much if you have a question. Please refer to this now by pressing star followed by one on your telephone keypad. If you change your mind I would like to withdraw your question from the queue. Please press star followed by chain when preparing to ask a question. Please ensure that your device is likely.

Speaker 1: Thank you very much. If you have a question, please register this now by pressing start followed by one on your telephone keypad. If you change your mind and would like to withdraw your question from the queue, please press start followed by two. When preparing to ask your question, please ensure that your device is unmuted locally.

Our first question today comes from Nick Joseph from Citibank, Nick. Please go ahead.

Speaker 1: Our first question today comes from Nick Joseph from Citibank. Nick, please go ahead.

Thank you I was hoping you could talk.

Speaker 3: Thank you. I was hoping you could talk and walk us through the process of transitioning the star assets onto the IRT operating system and how that has gone so far. And I recognize occupancy is still very high, but it looks like it's come down a bit quarter to date. So just where it is today as well.

And walk us through the process of transitioning the star assets onto the Iot operating system and how that has gone so far and I recognize occupancy is still very high but it looks like it's come down a bit quarter to date, So just where it is today as well thanks.

Yes, Nick Thanks This is Jim.

Speaker 5: Yeah, Nick, hey, thanks. This is Jim. Ella may chime in with additional insight. The process for us to migrate from what Starr used to run with Yardi onto our property management system called Entrada, we did half of their portfolio in the last two weeks of December , the other half of the portfolio in the first two weeks of January .

China with this additional insight.

<unk> for us to migrate from what star use of Brian majority onto our property property manage this fiscal quarter and try to we did half of their portfolio in the last two weeks of December or the other half of the portfolio in the first two weeks of January .

Speaker 5: And that migration was also inclusive of moving from their revenue management platform, which was EOSAR, onto our revenue management platform, which was LRO. And it was all done in an effort to make sure it was done ahead of the beginning part of leasing season.

And that migration was also inclusive of moving from their revenue management platform, which was USR onto our revenue management platform, which was <unk> and it was all done in an effort to make sure. It was done ahead of the beginning part of leasing season. So that way you at any of this kind of internal friction that we received from migrating.

Speaker 5: So that way, any of this kind of interim friction that we would see from migrating would be through the system and ready for leasing season where that friction would be gone. From a standpoint of occupancy, as you saw in the release, the star occupancy did trend down slightly here in the first quarter. It's at that level today and it's beginning to build slowly back upward.

Would be through the system and ready for leasing season, where that friction will be gone.

From a standpoint of occupancy as you saw in the release the store occupancy did trend down slightly here in the first quarter.

At that level today is beginning to build slowly back upwards.

It's very short term in our view.

Speaker 5: you know, very short term in our view and nothing to be overly cautious about.

Nothing to be overly cautious about.

Thanks, That's helpful. And then I was wondering if you have.

Sorry go ahead.

That's all right I was going to Echo what Jim said this is <unk> and I will say that that that friction that transition onto those new systems in that timeframe went so smoothly.

Speaker 6: That's all right. I was going to echo what Jim said. This is Ellen Ayland. I will say that that friction, that transition onto those new systems and that time frame went so smoothly because of the experience that IRT had on migrating their systems over to Entrata and the ability to walk us through and have the training associated with it. As Jim mentioned, any impact on occupancy we see as temporary as a result of that transition.

Because of the experience that <unk> had on migrating their systems over to in charter and the ability to walk us through and have the training associated with it and as Jim mentioned any impact on occupancy we see as temporary as a result of that transition.

Thank you and then.

Speaker 3: Thank you. And then I was wondering if you have any insight or color on shareholder turnover since the close of the merger and then on index inclusion as well.

I was wondering if you have any.

Insight or color on shareholder turnover.

The close of the merger and then index inclusion as well.

Yeah, that's great. So.

Speaker 5: Yeah, that's great. So, another great question. We have, you know, there's a variety of indexes that will be beginning to increase positions in IRT, you know, on their rebound states. The three most significant are the S&P 600, the MSCI family of indexes, and some Russell family of indexes.

Great question.

We have theres a variety of indexes that will beginning to increase positions at IRT.

On their rebalanced dates the three most significant are the S&P 600.

MSCI MSCI family of indexes and some Russell family of indexes.

Speaker 5: The S&P index will rebalance in the middle part of March, so I think the date is March 22nd. And the other two will rebalance the middle part of

The S&P index will rebalance in the middle part of March. So I think the date is March 20 <unk>.

And the other two will rebalance the middle part of May we believe based on our estimates that the incremental purchasing demand from those just those three are in the $750 million range again, it's an estimate it's hard to exactly know until they put out their disclosure, but thats what are kind of bankers and our internal estimates compute.

Speaker 5: until they put out their disclosure, but that's what our kind of bankers and our internal estimates compute. As for, you know, the star legacy retail shareholders, you know, selling out, it's been something that we've been obviously focused on and communicating around for quite some time. You know, the intelligence that we have considering how hard it is to see the actual retail trading volume is that the estimate is that somewhere around 15, 16 million incremental retail volume has increased since the merger closing, which would, you know, kind of align with kind of our expectation around, you know, plus or minus, you know, 25 to 30 percent of IRT shareholders will eventually exit. I'm sorry.

As for the Star legacy retail shareholders selling out.

It's something that we've been obviously focus on communicating around for quite some time.

The intelligence that we have considering how hard it is to see the actual retail trading volumes is that the estimated at somewhere around 15 to 16 million incremental retail volume.

<unk> increased.

Speaker 5: Since the merger closing which would you know kind of align with kind of our expectation around you know plus or minus You know 25 to 30 percent of IRT shareholders will eventually exit. I'm sorry star shareholders Will eventually exit so we're you know plus or minus halfway through what we think is the total expectation

Since the merger closing, which would kind of aligned with kind of our expectation around <unk>.

Plus or minus 25% to 30% of Irt's shareholders will eventually exit I'm, sorry star shareholders will eventually exit.

Plus or minus halfway through what we think is the total expectation.

Thank you very much.

Our next question comes from the line of Brad Heffern from RBC capital markets. Brad Your line is open.

Speaker 1: Our next question comes from the line of Brad Heffern from RBC Capital Markets. Brad, your line is open.

Hey, good morning, everyone.

Speaker 7: Hey, good morning everyone. I was just curious if you could talk about the main risks that are still present for the integration.

I was just curious if you could talk about the main risks that are still present for the integration.

Yes, I mean, I think from the for the main parts of the integration are pretty much behind us I think we have one last over kind of integration effort is just combining the two payroll systems, but that'll be happening here in the next few weeks again, not really huge risk issues. One of the last thing is we have to do as part of integration effort, but we think.

Speaker 5: Yeah, I mean, I think from the main parts of the integration are, you know, pretty much behind us. I think, you know, we have one left over, you know, kind of integration effort, that's just combining the two payroll systems, but that'll be happening here the next few weeks. And again, not really a huge risk. It's just one of the last things we have to do as part of the integration effort. But we think largely the major part of the integration, and that's policies, processes, systems, all that's, you know, through the process and moving forward.

Largely the major part of the integration and that policies processes system all of that through the process and moving forward.

Okay.

Speaker 7: OK. And then on the synergies, can you talk about how much of that you've realized on a run rate basis? And is there anything that you've seen, you know, that maybe represent potential sources of upside that weren't in the initial numbers?

And then on the synergies can you talk about how much of that you have realized on a run rate basis and is there anything that you've seen.

Then maybe represent potential sources of upside that weren't in the initial numbers.

Yes, it's a great question as Ellen mentioned of the synergies the original property management expense synergies. We saw originally 8 million, we've already locked in $6 million of the $8 million for all fiscal year 2022, Theres a few left everything that we're just kind of narrowing down, but we fully expect to achieve the $8 million.

Speaker 5: Yeah, it's a great question. As Ella mentioned, of the synergies, you know, the original property management expense synergies, we saw originally $8 million. We've already locked in $6 million of the $8 million for all fiscal year 2022. There's a few leftover things that we're just kind of nailing down, but we, you know, fully expect to achieve the $8 million. There's some additional upside to the $8 million around kind of renter insurance programs that we're beginning to implement.

Some additional upside to the $8 million around kind of kind of renter insurance programs that we're beginning to implement.

Speaker 5: But, you know, that is still, you know, being finalized. On the G&A front, we promised 20 million of G&A synergies, I think we originally told everybody that for 2022 we anticipated that number to be 17 or 18 million as things kind of took hold. We're happy to announce that all 20 million has been locked in already, heading in. And we think there's probably another 2 to 3 million of additional upside as we finalize the remaining aspects of the integration efforts.

But that is still being finalized on the G&A front with <unk>.

Promised 20 million of G&A synergies I think we originally told everybody that for 2022, we anticipate that number to be 17 or $18 million as things kind of took hold.

We're happy to announce that all $20 million has been locked in already heading in and we think theres, probably another $2 million to $3 million of additional upside as.

As we finalize the remaining aspects of the integration efforts.

Okay. Thank you.

Our next question today comes from Neil Malkin from capital One Securities. Please.

Speaker 1: Our next question today comes from Neil Malkin from Capital One Securities. Neil, please go ahead.

Please go ahead.

Okay.

Speaker 8: Thanks. Good morning, guys. Another great quarter. Nice to meet you. Look forward to working with you in the future.

Good morning, guys another great quarter.

Nice to meet you look forward to working with you in the future.

Sure.

Yes, I guess first question.

Speaker 8: Yeah, I guess, first question, you know,

Rates obviously.

That could arise.

The.

The shortening of the curve.

Speaker 8: I'm just, you know, curious, and I know it might be too early, but given the nature of the...

Just curious and I know it might be too early but given the nature of the <unk>.

Speaker 8: people who compete for some of your types of assets, do you think you might see some pressure alleviated or reduced competition as the year progresses, as the short end of the curve moves up and people that sort of leverage, the high leverage, variable rate debt financing becomes a little less accretive? Do you think that's going to be a benefit or is there just too much capital chasing everything in multifamily? Thank you. Thank you.

People, who compete for some of your types of assets do you think.

You might see some pressure alleviated or reduced competition.

As the year progresses, as a shortening of the curve moves up and people.

Leverage at the high leverage variable rate debt financing it becomes a little less accretive do you think that's going to be a benefit or is there just too much capital chasing everything in multifamily.

Thanks, Neil it's Scott.

Speaker 4: Thanks, Neil. It's Scott. You know, our view is that there's a lot of capital chasing multi-family assets, specifically in our location and, you know, our vintage property.

Our view is that there is a lot of capital chasing multifamily assets are specifically in R. R.

Our location and.

Our vintage property.

Speaker 4: We don't see that changing, you know, we all saw what what's happened with Resource and Blue Rock and APTS over the last, you know, probably two months.

So we don't see that changing we all saw what what's happened with <unk>.

Resource and Blue rock in <unk> over the last.

Probably two months.

<unk>.

Speaker 4: This is a space where people want to be invested and they see the long-term benefit for it. So, you know, typically we you know cap rates lag movements and interest rates But there's so much capital chasing this that if there is any any correlation in the cap rate movements with interest rates I think it's going to be some time down the road

This is a space where people want to be invested and they see the long term benefit for it. So typically we cap rates lag movements in interest rates.

But there is so much capital chasing this that if there is any any correlation in the cap rate movements with interest rates I think it's going to be sometime down the road.

Speaker 8: Yeah, it makes sense. Thanks for that. Another one for me is, can you just talk about strategy and priorities in terms of growth, capital allocation, you know, how do things change in your mind with the addition of STAR and the scale you have as well, you know, thinking about

Yes, it makes sense. Thanks for that other one for me is can you just talk about strategy and priority is in terms of.

Growth capital allocation.

How do things change.

In your mind with the addition of Star and the scale you have as well.

Thinking about.

Speaker 8: you know, newer or existing market acquisitions to increase exposure, particularly in some of the newer markets you got from STAR. And then can you also talk about your priorities in terms of the JV, you know, development stuff versus acquisitions versus, you know, preferred you'd mentioned before? If you can just kind of outline that for us, that'd be great.

Newer or existing market acquisitions.

Acquisitions to increase exposure, particularly in some of the newer markets you got from.

Star and then can you also talk about your priorities in terms of the JV development stuff versus acquisitions versus.

Preferred you'd mentioned before if you can just kind of outline that for us that'd be great.

Sure well, we've always been focused capital allocation and trying to make sure that we were.

Speaker 4: Sure. Well, you know, we've always been focused on capital allocation and trying to, you know, make sure that that we were, you know, putting our capital to work in the best possible way to generate shareholder returns. So, you know, the value add is for the last few years has been a big, big component of that and will continue to be. The star merger, you know, as we've reported, added 12,000 units to our value add pipeline, which means that we own within our portfolio, if you will, an inventory of value add.

Putting our capital to work in the best possible way to generate shareholder returns so.

The value add is for the last few years has been a big big component of that and we will continue to be a star merger as we've reported added 12000 units to our value add pipeline.

Which means that we own within our portfolio if you will.

On the inventory of value add.

Speaker 4: units for the next value-added units available for renovation. We have basically a four- to five-year runway now without having to add any more units to the portfolio. So that will continue to be a priority and a big focus.

Units for the next value AD units available for renovation.

We have basically a four to five year runway now without having to add any more.

Gets to the portfolio. So that will continue to be a priority and a big focus secondly, about a year ago. We started the JV program, because we saw the benefit of development.

Speaker 4: Secondly, about a year ago, we started the JV program because we saw the benefit of development. I have been resistant over the years to have IRT jump into development because I felt that our balance sheet was a little too small and a little too highly levered.

Have been resistant.

Over the years to have Iot jump into development, because I felt that our balance sheet was a little too small a little too highly levered.

Speaker 4: You know, those two things have changed, you know, we have a much, much bigger balance sheet and our leverage is, as Jim, you know, referenced, we're down today at 7.5 times EBITDA and declining.

Those two things have changed we have a much much bigger balance sheet and our leverages as Jim referenced were down today is seven five times EBITDA and declining.

So we feel a little bit better about development, we're going to continue with the JV program.

Speaker 4: So, we feel a little bit better about development. We're going to continue with the JV program. We have the three communities, well actually one has been completed, so we have the two communities that we inherited from STAR that are in the development process.

We have the three communities watching one has been completed so we have the two communities that we inherited from star that are in the development process.

Speaker 4: And we're going to look for more opportunities, but we're going to do it in a measured way where we, you know, manage the risk versus any potential benefit.

And we're going to look for for more opportunities, but we're going to do it in a measured way where we.

Managed the risk versus any any potential benefit.

Okay, great. Thanks very much.

Sure.

Yes.

Speaker 1: Our next question comes from Anthony Powell from Barclays. Anthony, please go ahead.

Our next question comes from Anthony Powell from Barclays. Anthony. Please go ahead.

Hi, good morning.

Speaker 7: Hi, good morning. Question on rent growth. That's been very strong, obviously, for you in the fourth quarter and so far this year. How are rent to income ratios trending and throughout your portfolio? And what's your view on the ability of tenants to take further price increases, given the overall inflationary environment we're seeing across the economy?

Question on the rent growth that's been very strong obviously for you in the fourth quarter and so far this year.

Our rent to income ratios trending and it's about your portfolio and what's your view on the ability of tenants to take further price increases given the overall inflationary environment, we're seeing across the economy.

This is ally and actually Thats, one of the great strengths of the IRT investment thesis. It is not just investing in gateway markets, but it's the fact that we target moderate rate income for working America. So when you look at the strength of our residents, especially in an inflationary period our.

Speaker 6: This is Ella, and actually that's one of the great strengths of the IRT investment thesis. It's not just investing in gateway markets, but it's the fact that we target moderate rate income for Working America. So when you look at the strength of our residents, especially in an inflationary period, our rent-to-income across our portfolio is 19 percent. And so what that means is that they have the ability to work through this inflationary environment, and it also gives us the ability to have a big spread on the ability to increase those rents and deliver value to our residents as part of that.

Rent to income across our portfolio of 19% and so what that means is that they have the ability to work through this inflationary environment and it also gives us the ability to have a big spread on the ability to increase those risks and deliver value to our residents as part of that.

Got it. Thanks, another inflation question, obviously, the the returns on the renovations have been pretty strong how are costs trending for your renovations, how does that impact expected ROI and just.

Speaker 7: Got it, thanks. Another inflation question, you know, obviously the returns on the renovations have been pretty strong. How are costs trending for your renovations? How does that impact expected ROI? Just an update there would be super helpful.

An update there would be super helpful.

I mean, we saw some pressure when COVID-19 started with when the supply chain had some issues, we've diversified both our vendor and our <unk>.

Speaker 8: I mean, we saw some pressure when COVID started with, you know, when the supply chain had some issues, we've diversified both our vendor and our supply chain providers.

Supply chain providers.

Speaker 8: So we've seen a little bit of increase in the cost to perform the unit renovations, but it's been offset. As you can see, our returns are growing quarter over quarter as we try to rein in and get more efficient on the renovation side and push rents a little bit more. Our returns are actually improving.

So we've seen a little bit of increase in the cost to perform the unit renovations, but its been offset if you can see our returns are growing.

Quarter over quarter quarter over quarter as we as we try to rein in and get more efficient on the renovation side and push rents a little bit more returns are actually improving.

Alright Thats it from me thank you.

Thank you.

Speaker 1: Our next question comes from the line of Austin Werschmack from Keybank. Austin, your line is open.

Our next question comes from the line of Boston West from Keybanc Austin Your line is open.

Hey, good morning, and thank you I was hoping you could discuss.

Speaker 9: Hey, good morning and thank you. I was hoping you could discuss, you know, you kind of highlighted, you've got no additional dispositions and presumably any equity assumed in guidance. So could you discuss how you plan to fund, I think you've got $150 million commitment remaining for the development projects you acquired from STAR. You've obviously got the ramping redevelopment. And then, you know, you also mentioned, you know, you've got a right of first refusal on the Nashville JV asset. So what are sort of the plans to fund those commitments?

You kind of highlighted <unk> got no additional dispositions and presumably.

Any equity assumed in guidance. So could you discuss how you plan to fund I think you've got $150 million commitment marine remaining for the development projects you acquired from Star You've obviously got the ramping redevelopment and then you also mentioned you've got a right of first refusal on the Nashville JV asset. So what are you.

Sort of the plans to fund those commitments today.

Yes, it's great Great question Austin, obviously, the commitment on the development deals is obviously, a multiyear spend rate as we develop.

Speaker 5: Yeah, it's great. A great question, Austin. Obviously, the commitment on the development deals is obviously a multi-year spend, right, as we develop. We've got one under development today, and the other one will start later this year. At the midpoint of our guidance, and given our current dividend, our operating cash flow is in excess of $100 million. I think it's like $105 million this year.

We've got one under development today and the other one will start later this year.

At the midpoint of our guidance and given our current dividend, where our operating cash flows in excess of $100 million I think is at $105 million this year.

Speaker 5: And, you know, that'll continue to repeat next year. So I think, you know, our anticipated use of Pro-C or funding today is effectively operating cash flow.

And that'll continue to repeat next year. So I think our anticipated use of proceeds funding today is effectively operating cash flow.

Speaker 5: And we're just excited about kind of where the business is and be able to kind of fund all that operating cash flow and not have to increase leverage.

And we're just excited about kind of where the business is and to be able to kind of fund all that add up operating cash flow and not have to increase leverage.

Understood and maybe along similar lines, then how does that change or affect the decision or your recommendation I should say to the board with respect to the dividend and.

Speaker 9: And maybe, you know, along similar lines then, how does that change or affect the decision or your recommendation, I should say, to the board with respect to the dividend and, you know, your target payout?

Your target payout.

Speaker 4: Thanks, Austin. It's Scott. So, you know, obviously, we, we, we discuss this every quarter and the board will ultimately make the decision. We're well aware of, you know, our payout ratio and how it relates to the peer group. And we're also very well aware of that, you know, retained earnings are, you know, the most efficient form of capital. So the board will be weighing all of that and, and, you know, we'll make a decision on dividend down the road.

Thanks, Austin, it's Scott So obviously we.

We discuss this every quarter and the board will ultimately make the decision.

We're well aware of our payout ratio and how it relates to the peer group.

And we're also very well aware of.

And earnings are the most efficient form of capital. So the board will be weighing all of that and we'll make a decision on dividend down the road.

Got it and then just I guess the last one for me star assets are up and running it sounds like the synergies are identified are already achieved.

Speaker 9: it and then just I guess the last one for me you know star assets are up and running it sounds like the synergies are identified or already achieved what's sort of the consideration for you know future large transactions or should we expect that you know from here out you'll stick mostly with sort of the capital recycling and some of the internal

What's sort of the consideration for <unk>.

Future large transactions.

Or should we expect that from here out youll stick, mostly with sort of the capital recycling and some of the internal opportunities.

Well, we're clearly going to stick with the capital recycling and the internal opportunities, but we're always.

Speaker 4: Well, we're clearly going to stick with the capital recycling and the internal opportunities, but we're always looking for opportunities to grow the portfolio through acquisitions, but it has to be something that makes sense.

We're looking for opportunities.

Grow the portfolio through acquisitions, but it has to be something that makes sense, one from a portfolio management.

Speaker 4: One from a portfolio, you know, management point of view, but also, you know, we want to do transactions that are creative.

Point of view, but also we want to do transactions that are accretive.

Speaker 4: You know the star transaction was a perfect fit as Ellen mentioned. It's the same type of assets in the same markets

Though our transaction was a perfect fit as Ellen mentioned, it's the same type of assets in the same markets. The company's culture was the companys each individual company's cultures were very similar so we've made a lot of sense and then you add into there that it is going to be highly accretive from from day one.

Speaker 4: The company's culture was, each individual company's cultures were very similar. So it made a lot of sense. And then you add into there that it's gonna be highly accretive from day one. So if that opportunity presents itself again, we will work very hard to take advantage of it. But we will continue to be open to opportunities, but they have to meet those criteria.

So if that opportunity presents itself again, we will work very hard.

To take advantage of it but we.

We will continue to be open to opportunities, but they have to meet those criteria.

Understood. Thank you.

Our next question comes from John Kim from BMO Capital markets. John Your line is open.

Speaker 1: Our next question comes from Jon Kim from BMO Capital Markets. Jon, your line is open.

Thank you and good morning.

Your guidance this year of 21% <unk> growth at the midpoint is the highest in the sector, but you did mentioned when you announced the star merger it would be 11% accretive to earnings immediately and I think you basically said your synergies.

Speaker 5: Your guidance this year of 21% FFO growth at the midpoint is the highest in the sector.

Speaker 5: But you did mention when you announced the star merger, it would be 11% accretive to earnings immediately. And I think you basically said your synergies.

Speaker 5: are intact. So, you know, that implies 10% growth for the standalone IRT. Is that the right way to look at it or are there other offsetting factors to that accretion? Yeah, it's a good question. I think that's certainly, you know, one way to look at it. I think, you know, there's a variety of factors, but, you know, the rough math you did there is it certainly aligns with, you know, kind of what would be the core of the growth per share, you know, on the legacy IRT.

So that implies 10% growth for the Standalone Iot is that the way the way to look at it or are there other offsetting factors to that our accretion.

Yes, it's a good question I think that's certainly one way to look at it I think.

A variety of factors, but the rough math you did there is certainly aligns with kind of what would be the.

Core <unk> growth per share.

On the legacy <unk> business.

So Jim can you update us on your current loss to lease and what you're expecting as far as market rental growth and how that translated into effectively split this year.

Speaker 8: So, Jim, can you update us on your current lost lease and what you're expecting as far as market rental growth and how that translates into effective lease growth this year?

Yeah sure. So current loss of lease across the portfolio, obviously, its very property specific ranges.

Speaker 3: Yeah, sure. So current loss of lease across the portfolio, obviously, it's very property specific, it ranges, you know, from, you know, kind of a low of 10% to slightly a high of just in the low 20s. Average across the portfolio is about 15%. You know, our modeling for purposes of the midpoint of guidance has an occupancy rate of 95.7%. And midpoint of guidance has a blended throughout the year rental rate increase of about 10%.

From kind of a low of 10% to slightly higher just in the low twenties average across the portfolio of about 15%.

Our modeling for purposes of the midpoint of guidance has an occupancy rate of 95, 7%.

And midpoint of guidance has a blended throughout the year rental rate increase of about 10%.

Speaker 3: And, you know, the way we think about it is that the first half of the year is really, you know, kind of behaving from, you know, consistent with the results you see so far in the first quarter with, you know, cautiousness built into the second half of the year, given the, you know, rent growth that we saw in the second half of 2020.

And the way we think about it is that the first half of the year is really kind of behaving from consistent with the results you see so far in the first quarter.

With.

Cautiousness built into the second half of the year given the rent growth that we saw in the second half of 2021.

Speaker 8: And then also if you could clarify, last quarter you mentioned that the first Nashville project in the JAV would deliver this quarter. You don't have any acquisitions in your guidance, but what is the likelihood that you will acquire that project? And if you can give any indication on pricing or going in yields.

Okay.

And then also if you could clarify last quarter, you mentioned that the Nashville project and the JV delivered this quarter you don't have any acquisitions in your guidance, but what is the likelihood that you will acquire that project and if you can give any indication on pricing or growing in yield.

Speaker 4: Yes, so the first project was in Nashville, a small project, 96 units. It was completed recently, there is a CO, and we're working through the purchase option process with the developer. It's our intention and we're going to take ownership of it.

Yes, so the first project was.

In Nashville.

Mall project 96 units.

It did.

It was completed recently there is a CEO and we're working through the purchase option.

The process with the developer.

It's our intention that we're going to take ownership of it.

And how would pricing we're going to be like a market cap later.

Speaker 4: little bit higher. So yeah, we will pay a market price. However, since we're in the development team or we're part of the development stack, part of that, the profit, the development profit flows back to us. So we'll be buying it effectively at a slightly above the five cap.

Little bit higher so so yes, we will pay.

A market price. However, since we are in the development.

Our team are part of the development stack.

Part of that the profit the development profit flows back to us So we will be buying it.

Effectively at a slightly above five cap.

That's great. Thanks, Scott.

Thank you.

Our next question comes from the line of Derek Johnston from Deutsche Bank, Sir Your line is open.

Speaker 1: My next question comes from the line of Derek Johnston from Deutsche Bank. Derek, your line is open.

Alright. Thank you. This is conor peaks on for Derek Johnston I've I've. One question, Jim I think you touched on in your opening comments.

Speaker 9: I thank you this is carpet on for Derek Johnson I have one question Jim I think you touched on in your opening comments but the control expense growth guidance of two-and-a-half to three-and-a-half any details on the drivers there they're looking for that that bring to that lower end of the guy

The controllable expense growth guidance of two and a half to three and a half any details on the drivers there that youre looking forward that bringing to that lower end of the guidance range.

Yes, I mean, I think the drivers that would help achieve at the low end of the guidance range. It would just be kind of the timing and effectiveness of the technological efficiencies. We plan on rolling out to help kind of offset what other coke.

Speaker 3: Yeah, I mean, I think the driver that will help achieve it at the lower end of the guidance range will just be kind of the timing and effectiveness of the technological efficiencies we plan on rolling out to help, you know, kind of offset what other, you know, inflationary pressures will persist in the portfolio. Obviously, we've taken an inflationary look and, you know, if increased utility costs and contract services for landscaping, blah, blah, blah, as well as, you know, payroll costs.

<unk> pressures will persist in the portfolio, obviously, we've taken.

Inflationary looking at increased utility costs and contract services for Thanksgiving, but with law as well as payroll costs, but.

Speaker 3: But as we roll out the efficiencies with the Entrata platform and merging the two portfolios together and executing on the contracts.

But as we roll out the efficiencies with the <unk> platform and kind of emerging the two portfolios together and kind of executing on the contracts.

Speaker 3: And, you know, the more sizable, more size and scale, you know, help us achieve that lower end of the range.

The more sizable more size and scale helps.

Help us achieve at that lower end of the range.

Thank you.

We have no further questions I'll now hand back to Scott Schaeffer for any concluding remarks.

Speaker 1: We have no further questions, I'll now hand back to Scott Schaefer for any concluding remarks.

Speaker 4: Well, thank you everyone for joining us, we look forward to speaking with you again next quarter.

Well. Thank you everyone for joining us we look forward to speaking with you again next quarter have a nice day.

Thank you everyone joining us today. This concludes our call. Please now disconnect your lines.

Speaker 1: Thank you everyone for joining us today. This concludes our call. Please now disconnect your lines.

Speaker 10: you

Okay.

Okay.

Yes.

Okay.

Yes.

Okay.

Okay.

Yes.

Yes.