Q4 2022 Independence Realty Trust Inc Earnings Call
Thank you for standing by and welcome to the Independence Realty Trust, Inc. Q4 earnings Conference call. My name is Sam and I will be your moderator for today's call all lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end if you'd like to ask a question. Please press star.
<unk> followed by one on your telephone keypad.
I'll now turn the call over to Lauren Torres Martin. Please go ahead. Thank you and good morning, everyone. Thank you for joining us to review independence Realty Trust's fourth quarter and full year 2022 financial results.
The call with me today are Scott Shafer, Chief Executive Officer, Mike Daly EVP of operations and people sterile Ender President of IRT and Jim <unk>, Chief Financial Officer, today's call is being webcast on our website at IR T 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 PM 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 at start.
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. Please.
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.
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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 other SEC filings are also available through this link.
IRT does not undertake to update forward looking statements on 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.
Thank you Lauren and thank you all for joining us this morning.
22 was a strong year for Iot as we integrated historic portfolio and exceeded our initial synergies in full year operating guidance during a challenging macroeconomic environment, our ability to deliver nearly 30% core <unk> per share growth. In 2022 was the result of the strategic positioning of our extended portfolio concentrated in March.
Gateway markets within the Sunbelt region, where we continue to benefit from positive supply and demand dynamics. Our team delivered another year of robust performance, which was reflected in our fourth quarter and full year results specifically, our average rental rate increased 12% in 2022 supporting a double digit increase in revenue.
Our same store NOI increased 13% in the fourth quarter and 13, 7% for the full year compared to last year.
And we continue to effectively reduce our leverage from seven seven times EBITDA a year ago to six nine times at year end 2022 ahead of our low <unk> target.
We also made meaningful progress on our value add program as we renovated 656 units in the fourth quarter and 1451 units for the full year, while achieving an annual return on investment of more than 24%. This positions us well to deliver the 2500 to 3000 units that we've previously guided for in 2023.
We remain confident about the potential of our value add program and continue to assess the economic landscape as we determine the pace and scope of renovations are properties in selected markets.
We're coming off a strong year. If we recognize there is more work to be done to drive sustainable occupancy gains across the entire portfolio and can assure you that this is a top priority for us in 2023.
We are focused on working with our regional leaders and frontline leasing teams to improve all aspects of our leasing and sales process. As we mentioned previously our target occupancy is 95% for non value add communities and we will continue to drive rent growth where appropriate.
Looking ahead, we are factoring in a mild recession, which we expect to be more pronounced in the second half of this year. Despite these uncertain conditions being well positioned we are in all points of market cycle due to our portfolio footprint across key sunbelt markets that continue to see significant migration and job growth.
And we expect to build upon our solid foundation and continued to deliver outsized growth rates as shown in our 2023 guidance, which includes a six 5% NOI growth at the midpoint of our guided range. This was on top of NOI growth of 11, 4% in 2021 and 13, 7% in 2022.
Our 2023 guidance.
Also includes five 6% core <unk> per share growth at the midpoint.
We are off to a good start this year I remain very excited about the growth opportunities for Iot and optimistic about our future as real estate fundamentals remained strong and our resilient growth markets.
I'd now like to introduce you to Mike Daley, our EVP of operations and people like as a core member of the IRT team overseeing all aspects of our day to day operations, Mike has been with IHG since 2019 and successfully guided us through the pandemic with consistently strong operational performance. He is a seasoned executive and returned to lead the operations in December 2022.
With that introduction I'd like to hand, the call over to Mike.
Yeah.
Thanks, Scott I'm Happy you joined today's call for the first time in the share in greater detail. While we are excited about our portfolio and its ability to provide stable growth through different economic cycles, our strong fourth quarter and year end results were driven by double digit rent growth with markets like Tampa Myrtle Beach Memphis Atlanta.
And while the Europe , achieving mid to high teen average rent increases for the full year.
We continue to see strong migration trends into our southern markets. This was recently confirmed by the U S Census Bureau, which reported a Florida, Texas, North and South Carolina.
Honestly in Georgia, where the states with highest net domestic migration gains in 2022.
These six states represent over 60% of Irt's NOI and does not only well situated in the attractive Sunbelt region, but also have experienced a robust job market recovery after the pandemic, averaging 5% job growth since March 2020.
As Scott mentioned, we are laser focused on driving improved occupancy in the fourth quarter average occupancy at our total same store portfolio was 93, 8% down 40 basis points from Q3 2022, driven in part by seasonality.
As we've previously indicated the startup renovations at our value add communities within our same store portfolio also impacts occupancy as every unit comes offline for approximately 30 days. We started renovations of 10 communities during the second half of 2022 through today.
We also recognize that the average occupancy of our same store non value add communities. During the fourth quarter was 94, 6% below our previously stated target of 95%.
Proving our leasing and sales process is a priority for the entire operating team and we are confident our occupancy will increase to our targeted levels during the leasing season.
We are pleased to note that we are seeing positive momentum as we begin 2023.
Blended basis, we have achieved four 8% lease over lease rental rate growth through February 13th with a four 6% increase in new leases and a four 9% increase in renewals for our combined same store portfolio.
We have a four 9% earn in that will contribute to 2023 revenue growth and our loss to lease across the portfolio is 6%.
Now I'd like to turn the policy to provide you with an update on our investment opportunities.
Thanks, Mike starting with our value add program, we completed renovations on 656 units in the fourth quarter and as a result of these four properties from our ongoing renovation was completed under the program.
For the full year, we completed renovations on 1451 units achieving a return on investment of 24, 1%.
This was done with an average cost per renovated unit of $13659 and an average rent increase of $270 on renovated comps as Scott mentioned, we expect to Randy between 2500 3000 units in 2023.
Currently we have 18 properties in 10 markets included in our ongoing value add program.
Over the course of 2023, and we plan to add another nine properties, comprising 2654 units and expect to achieve an average.
Our material cost of 22% at these new projects.
In connection with our ongoing capital recycling program. We sold two previously held for sale properties in the fourth quarter.
<unk> apartments in Louisville, Kentucky, and Sycamore tariffs in Terre Haute, Indiana.
The aggregate sale price was $99 million.
And we recognized 17 million net gain on sales of these two communities.
The blended economic cap rate on these dispositions was four 5%.
We also moved one property to held for sale status of 277 unit community in Indianapolis.
Property was built in 1976 and requires a high level of annual Capex spend relative to our other communities located in the same market.
We expect the sale of this property to close at the end of this month with proceeds from the dispositions will be used to reduce debt.
The deal is complete the buyer's deposit as hard in the rate lock on that they're using to finance the purchase.
The economic cap rate on this disposition is four 8%.
Regarding new supply deliveries are expected to increase in 2023 the decline in the years following.
Costar has projected new deliveries in our Submarkets based on a weighted average exposure at two 8% of existing inventory dropping to two 4% in 2024 and potentially declining further as many private snacks already have been put on hold due to several factors, including elevated cost of construction and increased <unk>.
Interest rates.
While select Submarkets in Atlanta, Dallas, Tampa, and Nashville will have elevated new deliveries in 2023, we expect that this will have limited impact on our primarily class b communities with monthly rents substantially lower than comparable new construction.
Longer term supply demand imbalance is expected to continue in our markets, where construction will not meet the overall housing needs.
Lastly, I would like to share with you one of our larger capital projects for 2023.
In anticipation of the continued growth of electric vehicles over the next decade, we're committed $2 million on our first phase of our EV charging station program.
The first step of installing 192 charging stations at 32 communities will be used to better understand resident demand and usage of this amenity.
We believe that these charging stations will be well received and expect to continue rollout in the following years throughout the portfolio.
I'd now like to turn the call over to Jim.
Thanks, Darryl and good morning, everyone, beginning with our 2022 performance update for the fourth quarter of 2022 net income available to common shareholders was $33 6 million.
Up from $28 6 million in the fourth quarter of 2021.
Full year 2022, net income available to common shareholders was $117 2 million up from $44 6 million in the full year 2021.
In the fourth quarter core <unk> more than doubled to $66 8 million from 31 point.
<unk> million dollars, a year ago and core <unk> per share grew 28% to 29 per share.
For the full year core <unk> grew to $247 4 million from $92 million in core <unk> per share grew 26% to $1 <unk> per share on a year over year basis. This growth reflects the earnings accretion associated with our merger with <unk> as well as the sizeable organic rent and NOI growth.
We experienced throughout the combined portfolio during 2022.
Same store NOI growth in the fourth quarter was 13% driven by revenue growth of nine 8%. This growth was led by a 12, 2% increase in our average rental rates.
For the full year Iot same store NOI growth increased 13, 7% supported by revenue growth of 10, 7% with rental rates increasing by 12%.
On the property operating expense side Iot same store operating expenses increased four 6% in the fourth quarter led by higher real estate taxes, and utility expenses, while repairs and maintenance costs and advertising expenses declined compared to a year ago.
For the full year Iot same store operating expenses grew five 9%, mostly reflecting increases in property insurance real estate taxes and contract services, while inflation continues to drive higher cost for products and services, we are continuing toward efficiencies using technology and procurement efforts to help reduce the inflation.
Burton.
Turning to our balance sheet as of December 31, our liquidity position with $350 million, we had approximately $16 million of unrestricted cash and $334 million of additional capacity through our unsecured credit facility.
Regarding the ongoing topic of leverage we are excited to announce that we continue to make significant progress since last year. We ended 2022 is six nine times net debt to EBITDA down from seven seven times, a year ago and came in ahead of our year end target of about seven <unk>.
Al mentioned earlier, the proceeds from our upcoming property sale in Indianapolis will be used to repay outstanding indebtedness and puts us in good footing to achieve our leverage target of mid <unk> by year end 'twenty excellent this year.
While we do anticipate some macroeconomic uncertainty in the coming months I wanted to reiterate that we have no debt maturities in 2023, and only $70 million of maturities in 2024, we have and will continue to maintain sufficient liquidity to address these maturities using our unsecured credit facility.
We also have adequate hedges that has effectively converted floating rate debt to fixed rate debt such that our floating rate debt exposure as of year end is only 10% of our outstanding debt.
With respect to our outlook for 2023.
Our EPS guidance is a range of 23 to <unk> 27 per diluted share and for <unk> in the range of $1 12 to $1 16 per share.
For 2023 at the midpoint of our guidance, we expect NOI at our same store portfolio increased six 5%. This guidance reflects same store revenue growth of six 4%, which is comprised of an average occupancy of 94, 5%.
An earn in of four 9%.
Blended rental rate increase of 3% for all leases signed in 2023, and a bad debt expense of one 5% of revenue.
Moving on to expenses, our projected growth in same store operating expenses of six 1% at the midpoint as a result of our expectation that non controllable expenses for real estate taxes and insurance will increase eight 6%.
And our controllable operating expenses increased four 4%. This is primarily the result of inflationary increases and we will continue to implement various strategies, including automation and centralization to improve our efficiencies.
Throughout 2023.
As it relates to our general and administrative and property management expenses, we are guiding to $52 $5 million at the midpoint or an increase of four 3%.
For interest expense, we're guiding to a midpoint of $105 5 million, excluding the effects of amortization of the debt premium adjustment related to our star merger that we add back for core flow purposes. This is an increase of 7% over 2022 and is entirely driven by the expected increase in floating rates during 2023.
For example, the current 2023 yield curve for software as an average.
One, 9% as compared to one 5% for 2022 remember 90% of our debt is either fixed or hedged, thereby mitigating the effect of this increase.
Regarding our transaction and investment expectations. We are currently not assuming any acquisition volume, but are providing guidance for disposition volume of $35 million to $40 million, reflecting the asset held for sale in Indianapolis, which we expect to close later this month.
And lastly regarding Capex, we expect $20 million in recurring maintenance, capex $80 million and value add and nonrecurring expense and $85 million and development Capex in 2023, each at the midpoint of our guided ranges these incremental development and value add capex will be funded primarily through our excess cash flow of one.
<unk> hundred $33 million generated during 2023.
After paying our current dividend of <unk> 14 per quarter.
Now I'll turn the call back to Scott Scott. Thank you Jim as.
As we move ahead in 2023, we remain well positioned for continued growth as we execute our strategy and invest in our portfolio our confidence stems from irt's ability to build a leading presence in attractive markets with solid renter demand fundamentals, which has been able to withstand the backdrop of macroeconomic uncertainty we are fully committed to enhancing shareholder value at <unk>.
Returning capital to our shareholders, we look forward to another year of achieving our targets and strengthening our presence in the multifamily sector.
Thank you for joining us today and look forward to speaking with you again, operator, you can now open the call for questions.
Absolutely we will now begin the Q&A session, if you'd like to ask a question you May press star followed by one on your telephone keypad if for any reason that you'd like to remove your question you May press star followed by two.
A reminder, if you are using a speaker phone. Please remember to pick up your handset before asking your question.
Our first question today comes from the line of Austin, where Schmidt with Keybanc often your line is now open.
Thanks, and good morning, everybody.
Scott and Mike I appreciate all your comments around the focus on ramping and stabilizing occupancy, but im curious do you feel like you have the right personnel in place on the operations team.
Have there been any other recent changes to the team that are worth highlighting and do you feel that the team really has kind of a handle on quickly reacting to changing market conditions in order to keep occupancy within a tighter band.
Moving forward, particularly.
Within that non value add pool.
Thanks, Austin good good question.
Scott as you know.
I think the best way to answer your question as to start with a little bit of how we got to where we are so.
As I've said in the past I wasn't happy with our occupancy trends in the fourth quarter.
We pushed rents little too hard, which had a negative effect on our resident retention and our ability to sign new leases.
The market was changing and frankly, we were our team was slow to adapt.
On the good side of this is we had one of the highest increases in lease rates of all the multifamily Reits.
But I have always stressed the importance of balancing rent increases with occupancy so that we can deliver the highest possible revenue.
And frankly, we got away from that Formula and this happened at the same time that we were increasing the number of properties going through the value add program.
Which we said in the in the corn previously.
That adding properties to the value add program has a significant negative impact on our occupancy.
The 656 units that we completed in the fourth quarter reduced overall occupancy from 50 to 60 basis points. So it really does have an effect.
So we decided to make some changes in our operations team in the fourth quarter, including adding additional senior leaders with approved with proven track records in multifamily operations.
We just brought on Janus Richards, who heads our.
Operating platform <unk>.
16 years of experience with with Camden and.
We really look forward to her being and having her voice.
In charge of operations.
We made these changes I wanted to make these changes during the slowest period in leasing the <unk>.
Fourth quarter, leading into the first quarter of 2023.
And also so that we were prepared as we headed into an uncertain 2023.
And as you can see from our 2023 guidance, we're confident that we've made.
We're confident in these changes I mean, our guidance is I think pretty strong.
To list out some of the changes that we've made we've improved the flow of information from the communities.
On our pricing to our pricing team relative to market rents. So that we will not be behind the curve going forward as the market changes.
We've opened a 24 seven call center to make sure we're capturing all the phone leasing leads.
That's new to US we had started that process.
Right before the store merger and that it was put on hold because we were focused on the integration of <unk>.
Expanded our sales training.
We brought on special sales coaches.
The leasing professionals at the properties, where we have the highest turnover and I think thats the same for all multifamily Reits.
So you constantly have to continue to train them and now we're making sure. We thought we were making for before but now we are making sure that they are coached and they are appropriately ready.
To do the leasing and we are improving our technology to streamline how our teams.
Work our leads so that we can maximize that lead to lease convert conversion ratio.
This is a focus for us we will have occupancy back.
So that 95% level and non value add communities.
And we want to get we wanted to make sure I wanted to make sure that we had all of these changes done.
Again during the slowest leasing time.
Period, and then again as we head into leasing season here in 2023.
So I hope that answers your question.
Yeah, No I appreciate all the detail that you provided there I guess can you share how you were interacting or overriding sort of the revenue management system previously.
How much I guess the impact of the frictional vacancy redevelopment you highlighted but maybe how thats impacting pricing to some extent.
Well I don't I'm not sure that overriding was the right. There is the right description.
The pricing team I believe was not getting real time market information in the market changed dramatically last year I mean, if you think about it.
All of our all of the Reits were getting 12, 15, even up to 20% or more rent increases and it changed in the third quarter going into the fourth quarter and our team was a little bit slow to react and we send out our renewal letters 90 days in advance to our tenants as leases are expiring.
So that's slow to react had a has a forward effect as well because here in January we're renewing leases.
Or January explorations.
Received letters back in October November or lease renewals were.
We frankly were pricing above the market. So people left and that had a negative impact on occupancy we saw it.
I made the changes and.
Going forward, we're in a much better position.
Just last one for me I'm, just curious if you alluded to getting back to that 90 595 plus percent level, maybe Jim can you provide a little bit of additional detail on your occupancy assumption and kind of.
The milestones or cadence through the year, how we should expect that to ramp.
Yes.
Occupancy the average occupancy assumption in guidance at the midpoint is 94, 5%.
That is that's expected to kind of ramp up similar to like some of the seasonal kind of gains that we saw last year through the summer months, and then kind of tail off in the back half of the year back to the seasonal kind of norm I think we saw pre COVID-19.
October November December , but the average for the year is 94, 5%.
Okay. Thanks, everybody.
Thanks, Thank you.
The next question comes from the line of Brad Heffern with RBC Brad.
Yes. Thank you so on the new 6% loss to lease quote I think thats down a decent amount from the last quarter can you talk about what contributed to that change and what gives you confidence in the new number against the backdrop of declining occupancy.
Yes, Great question, Brad This is Jim.
Our loss to lease is based off of a comparison of our of our asking rents at all of our communities versus.
Our average in place rents basically, suggesting if we were to release based on our asking rents how much redwood kind of robot.
There is a little bit of seasonality to rental rates in the fourth quarter that causes a slight decline, but at the same time as Scott mentioned.
We began to try to drive that occupancy in the fourth quarter and certainly the early part of this year.
Such that the asking rents came down a little bit to try to do so.
Okay got it and then on the revenue growth guide is there an underlying assumption for market rent growth in that I think the 3% blend just seems like it's half of the current loss to lease I am not sure if theres anything thats being added on top of that.
There is a little bit of assumption on market rent growth, we talk about market rent growth in that kind of the low single digits, 123% in terms of the guide.
So our loss of these typically we've always said it takes us to kind of 12 to 18 months to capture it but.
But there is a little bit of a market rent growth assumption, but again, we're being we're looking at 2023, 8% with a relatively conservative.
Okay. Thank you.
Thank you.
Next question comes from the line of John Kim with BMO John .
Okay. Thank you I just wanted to follow up on that question I didn't really.
Quite get that so your blended lease growth assumption for the year, 3% loss to lease of six youre expecting market rental growth this year and on top of that value add program stepping up.
So I'm wondering how you get to that 3% lease growth rate assumption.
David I think the 3% these growth. It's just again the conservative estimate around kind of what the leasing cadence would be to continue to drive that occupancy the value add is certainly supporting a lot of the value add picks up in the <unk>.
Summer months, when the leasing lease explorations are the highest.
But I think ultimately it just comes down to a level of conservatism around what will happen in mid December with respect to any kind of macroeconomic uncertainty.
Okay.
The loss in occupancy you had this quarter.
Just that your customers that maybe a little bit more price sensitive.
But you are getting the 20% uplift plus on rents on the value add.
And I'm, just wondering with this occupancy loss and the uplift you're getting how do we how do we interpret that is it just that you're getting a different demographic on the value add customers or is it taking longer to complete.
Complete the renovations I'm just wondering.
How do we marry these two.
Characteristics of the company.
It's a different demographic.
Our value add program.
<unk>.
Improves our properties so that we compete directly with newer class a construction.
But at a price that's still below that class a new rent.
So.
The premiums that we're receiving is because we're basically changing.
The resident profile and it's a resident who is willing to pay a higher rent for a better product.
And they are choosing the value add communities are value add community over a newer construction because our rent even with these premiums and with these returns is $3 to $400 below what a comparable new property strength would be so so that's what's driving that.
You add premium.
And Scott I think you said last quarter that you were going to moderate the value add this year and it looks like youre doubling it.
I just wanted to understand that no.
The moderation is because we had originally targeted 4000 units for 2023 and now we're now we're targeting 2000 503000.
Okay. Thank you.
Thank you.
The next question comes from the line of Nick Joseph with Citi Nick.
Thanks, maybe just on that market rent growth understand the macroeconomic uncertainty, but how much of a range of variance was there between markets.
Expected and if you can talk I know you touched on supply a bit.
Top and bottom performing expectations for markets.
Yes, I think there's some markets that are expected to have good rent growth from a market standpoint.
Thank the probably the top end of the ranges.
Three 4% in the bottom end is.
One ish percent I mean, I think it's.
It's fairly tight when you look at some of the perspective that a real patient others just put out in terms of some some data sources.
Thanks, so much.
Those are three and four versus one.
So I think the general view is if you look at some of the markets like Tampa will continue to see strong market rent growth.
Again, I think theres a lot of the data sources suggest so continuing to kind of be relatively conservative when it comes to.
Macroeconomic uncertainties.
Thanks, and then just on the India asset where is it in the sales process.
If you can.
Talk about anything from a pricing or demand side, what you've experienced with that on the market.
So.
The property, we have under contract will close in the next couple of weeks.
Through contingency they have.
Hard deposit in their financing lined up.
Very confident then I'll close.
In regards to.
Overall transaction volume is down considerably I think theres still a significant disconnect between the bid ask we are seeing.
Some transactions occur for specific reasons, whether it would be $2 31, our debt maturities.
Neither pricing in the high fours low fives cap range, but theres still a lot of people, including ourselves waiting to see where the market settles in a lot of this is.
Due to treasuries and that caused some people don't know where they are so we need some stability in interest rates before it becomes more and more transactions.
Thank you very much.
Thanks, Nick.
Next question is from Anthony Powell with Barclays Anthony.
Hi, good morning, just.
Question on I guess occupancy.
Occupancy and turnover and move outs.
When people are moving out of your of your buildings at night and due to high rent where are they going to other class b apartments capacity.
How is the kind of the competitive landscape.
Changing.
Well obviously this is this is Mike we're dependent on the feedback from the exiting resident to tell us why they're leaving and where they're going so.
I think we are seeing people going to a different class of community because of the affordability of those relative to what they are currently paying we have kind of a normal excuse me a normal level of.
Relocations. There is there is some moderation in people buying a new house.
Which obviously is reflecting mortgage rates.
But by and large it is an affordability issue, we see some folks moving in.
With a roommate situations some folks a younger demographic moving back home.
Really it's a mix of reasons that people are leaving but the common theme is affordability and looking for somebody with some place to live with a lower total cost we have about a 22% or so kind of.
Rent to income ratio, which is affordable relative to most of the options that people have.
But we do see that pressure, so I think that that is.
Probably not.
The only reason, but definitely influences the reasons that people are leaving.
I would add however, though that that ratio has or those those reasons have not changed dramatically from prior years, So moving out to buy a home is still the number one reason.
Moving to as the job locate job relocation is still the number two reason and the third reason.
Is.
To move to a single family.
Rental.
<unk>.
Pricing has always been an issue in class B apartments, and we'll always continue to be.
Okay, and I guess on the other side you talked a lot about kind of.
The class a class b kind of migration.
Tougher economic times over the years is that something that we expect to start being a.
Tailwind this year in a macro environment or are those class a.
Apartment is starting to be more price.
Accommodating so it may not be as big of a tailwind as it may have been in the past.
No I think it is it is going to be a tailwind it is going to be a benefit for us I think you will see that.
If you look at.
The multifamily peers with a.
A larger.
Portfolio of class a assets, you'll see that there is still continuing to increase the rents.
So I don't think that the class a assets are in a rent reduction mode. So we do expect to see.
Further demand from people moving from class a.
<unk>.
Down specifically into our value add communities.
Because they are getting they're getting.
Again, I believe they are getting a class a product.
At a b.
B plus a minus rent.
Got it maybe a quick one on guidance.
You've talked about a mild recession being kind of the base case.
For both the high and low end of guidance and let's say, we have a soft landing whats the potential upsides to rent and occupancy.
Are you seeing.
Yes, I would say that as a base case in both scenarios.
Thank you.
If there isn't a a soft landing I think.
The ultimate question will be just how to kind of how much the market rents begin to reaccelerate.
And the effect that Hasnt been I think that will also continue to drive occupancy up a little bit I don't think.
Soft landing necessary drive changes the expenses too too much on less maybe like insurance expenses come down a little bit but that's more.
Non macroeconomic type of drivers and the insurance category.
Alright, thank you.
Okay.
Thank you.
Next question is from missing Gill with Baird Mason.
Yeah.
Hey, good morning, everyone. Thanks for taking my question just one for me.
We noticed that the fourth quarter dispositions came in at $99 million, but you mentioned expecting a $103 million for these dispositions. After the third quarter. Just wondering if this 99 was a net number or if the buyer had traded at a lower price for these assets.
The yes, the market changed interest rates went up and they came back at a price reduction we actually went through a couple of iterations with different buyers and we determined that it was.
A good.
Time to sell the asset.
That was the sycamore tariffs asset in Terre Haute and we made the decision since it was a one off asset for us in a market, where we had no interest in growing.
That we would continue and dispose of the asset even though we did get re traded I would tell you I don't like being reiterated.
But I didn't like this asset either so.
A decision to move forward and just be done with it.
Thanks for that that's all for me.
Thank you. Thank you.
Thank you. Our next question is from the line Linda Tsai with Jefferies Linda.
Good morning, Linda.
Linda please ensure you're not on mute.
Okay.
Sorry about that.
Thanks for taking my question just one quick one for me.
What would your expectation be for retention ratio by year end.
Yes, we've always talked targeted a retention ratio to be in that $50 to $5 $50 to 55% range. So I think a target of call. It 53 ish would be kind of our expectation for the year.
Toby baked into guidance.
Got it thank you.
Thank you we have no further questions waiting at this time, so as a final reminder to ask a question. It is star one more policy you very briefly.
Seeing none I'd like to hand, the call back over to the management team for any closing remarks.
Thanks, everyone and we look forward to speaking with you again next quarter.
That concludes the Independence Realty Trust, Inc. Q4 earnings Conference call. Thank you all for your participation you may now disconnect your lines.
Yeah.