Q4 2023 Independence Realty Trust Inc Earnings Call
Operator: Ladies and gentlemen, good morning. My name is Abby, and I will be your conference operator today. At this time, I would like to welcome everyone to the Independence Realty Trust fourth-quarter earnings conference call. Today's conference is being recorded, and all lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press the star key followed by the number one on your telephone keypad.
Ladies and gentlemen, good morning, My name is Abby and I will be your conference operator today.
At this time I would like to welcome everyone to the Independence Realty Trust fourth quarter earnings Conference call.
Today's conference is being recorded and all lines have been placed on mute to prevent any background noise.
After the Speakers' remarks, there will be a question and answer session.
If you would like to ask a question during that time simply press the star key followed by the number one on your telephone keypad.
Operator: If you would like to withdraw your question, press star 1 a second time. Thank you. And I want to turn the conference over to Lauren Torres. You may begin. Thank you and good morning, everyone.
If you'd like to withdraw your question Press Star one a second time.
Thank you and I will now turn the conference over to Lauren Torres you may begin.
Thank you and good morning, everyone. Thank you for joining us to review independence Realty Trust's fourth quarter and full year 2023 financial results on.
Lauren Torres: Thank you for joining us to review Independence Realty Trust's fourth quarter and full year 2023 financial results. On the call with me today are Scott Schaefer, Chief Executive Officer, Mike Daly, EVP of Operations, and People, Jim Sebra, Chief Financial Officer, and Janice Richards, SVP of Operations. Today's call is being webcast on our website at IRTLiving.com. 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.
On the call with me today are Scott Shafer, Chief Executive Officer, Mike Daly EVP of operations and people didn't see brush Chief Financial Officer, and Janice Richards SVP of operations.
Today's call is being webcast on our website at IR to 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.
Lauren Torres: 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 and financial performance, and actual results could differ substantially and materially from what IRT has projected.
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 and financial performance.
Actual results could differ substantially and materially from what IRT has projected.
Lauren Torres: 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 filings with the SEC for factors that could affect the accuracy of our expectations or cause our future results to differ materially from those expected. 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 8K, available on IRT's website under Investor Relations. IRT's other SEC filings are also available through this link.
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 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.
Irt's website under Investor Relations.
<unk> 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 Schaeffer.
Scott Schaefer: 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 Schaefer. Thank you, Lauren, and thank you all for joining us this morning.
Thank you Lauren and thank you all for joining us this morning.
Scott Schaefer: 2023 was a notable year for IRT as we achieved our operating targets under challenging market conditions. We continue to execute on our strategic initiatives, which included supporting occupancy, delivering on our plan value-add improvements, and reducing our leverage. I'm proud of the results the IRT team achieved in the fourth quarter and full year of 2023.
123 was a notable year for Iot as we achieved our operating targets under challenging market conditions, we continued to execute on our strategic initiatives, which included supporting occupancy delivering on our planned value add improvements and reducing our leverage.
I am proud of the results the IRT team achieved in the fourth quarter and full year of 2023. The reorganization implemented last year has paid off as evidenced by our year over year growth of five 7% and full year same store portfolio NOI and six 5% of core <unk> per share the latter of which came in at the high end of.
Scott Schaefer: The reorganization implemented last year has paid off, as evidenced by our year-over-year growth of 5.7% in full-year same-store portfolio NOI and 6.5% of core FFO per share, the latter of which came in at the high end of our guidance range. For the fourth quarter, our same-store portfolio NOI grew 3.3% year over year, supported by a 70 basis point increase in average occupancy to 94.5% and a These results reflect our ongoing efforts to achieve sustainable operating gains across our entire portfolio. During the past year, we continued working with our regional leaders and frontline leasing teams to improve all aspects of our leasing and sales process. This enabled us to move more quickly and adapt to evolving market conditions, improving occupancy and maximizing rent growth.
Our guidance range.
For the fourth quarter, our same store portfolio NOI grew three 3% year over year supported by a 70 basis point increase in average occupancy to 94, 5% and a two 4% increase in rental rates.
These results reflected our ongoing efforts to achieve sustainable operating gains across our entire portfolio over the past year. We continued working with our regional leaders and frontline leasing teams to improve all aspects of our leasing and sales process.
It's enabled us to move more quickly and adapt to an evolving market conditions, improving occupancy and maximizing rent growth in particular, we enhance the speed of our local market pricing feedback from our communities to the revenue management team fully established our $24 seven call center significantly expanded our sales training program and continued to maximize leads.
Scott Schaefer: In particular, we enhanced the speed of our local market pricing feedback from our communities to the revenue management team, fully established our 24-7 call center, significantly expanded our sales training program, and continued to maximize lead-to-lease conversion. These efforts are positively impacting our results, as evidenced by our 94.9% average occupancy at our non-value-add communities in the fourth quarter of 2023. We will continue to enhance and streamline our operations to further maximize our performance and efficiency. In addition to our operational efforts, we have also put into action our portfolio optimization and deleveraging strategy. Our stated goal was to sell 10 properties, reducing our presence in non-core markets, while also significantly deleveraging our balance. Since this announcement, we have made meaningful progress on this initiative. In December, we closed on the sale of four properties in four separate markets, and we recently closed on two additional properties, bringing us to six property sales. The remaining four assets are under contract through due diligence and have barred non-refundable deposits.
Lease conversion.
These efforts are positively impacting our results as evidenced by our 94, 9% average occupancy at our non value add communities in the fourth quarter of 2023, we will continue to enhance and streamline our operations to further maximize our performance and efficiency.
In addition to our operational efforts, we also put into action our portfolio optimization and deleveraging strategy.
Our stated goal was to sell 10 properties, reducing our presence in non core markets. While also significantly deleveraging our balance sheet. Since this announcement, we have made meaningful progress on this initiative in December we closed on the sale of four properties in four separate markets and we recently closed on two additional properties, bringing us to six property sales the remaining four assets are under.
Our contract through due diligence and have hard nonrefundable deposits.
Scott Schaefer: We expect the sales of these remaining four properties to close by the end of the first quarter. The blended economic cap rate for the entire Portfolio Optimization Plan is 5.9% on total sale values, which is consistent with our initial expectations. Importantly, our portfolio optimization strategy will fundamentally reset our leverage profile as we expect to reduce our net debt to adjusted EBITDA ratio by approximately a full turn by the end of this year. Looking ahead through 2024, we expect the operating environment to remain challenging, with elevated new supplies still being delivered, and inflationary cost pressure persists. As a result, and as Jim will discuss shortly, our guidance for 2024 assumes market rent growth of 0 to 1% this year, with new supply continuing to be a head.
We expect the sales of these remaining four properties to close by the end of the first quarter the blended economic cap rate for the entire portfolio optimization plan is five 9% on total sale values, which is consistent with our initial expectations.
Importantly, our portfolio optimization strategy, we will fundamentally reset our leverage profile as we expect to reduce our net debt to adjusted EBITDA ratio by approximately a full turn by the end of this year.
Looking ahead through 2024, we expect the operating environment to remain challenging with elevated new supply still being delivered and inflationary cost pressure persisting as a result, and as Jim will discuss shortly our guidance for 2024 assumes market rent growth of zero to 1% this year with new supply continuing to be a headwind.
Scott Schaefer: To provide more color on deliveries, the Sunbelt region has seen unprecedented levels of new supply, and while our mainly Class B portfolio is somewhat insulated, it is not immune. Certain markets such as Nashville, Orlando, Dallas, and Atlanta are forecasted to experience elevated deliveries, while Midwest markets such as Columbus, Indianapolis, and Louisville will be better balanced on supply and absorption this year. IRT's portfolio has a 20% concentration in the Midwest, providing us with a unique hedge against new supply in the Sunbelt. However, when discussing supply, we must also consider the associated absorption levels and the strength of rental housing demand.
To provide more color on deliveries the sunbelt region has seen unprecedented levels of new supply and while our mainly class b portfolio is somewhat insulated it is not immune certain markets such as Nashville, Orlando, Dallas, and Atlanta are forecasted to experience elevated deliveries, while Midwest markets, such as Columbus, Indianapolis, and Louisville will be better balanced one.
<unk> and absorption this year Irt's portfolio has a 20% concentration in the Midwest, providing us with a unique hedge against new supply in the sunbelt.
When discussing supply we must also consider the associated absorption levels and the strength of rental housing demand in 2023, new supply significantly outpaced absorption levels, we expect that in the second half of 2024, and 2025, new deliveries will stabilize near the level of absorption, resulting in a more balanced supply demand dynamic.
Scott Schaefer: In 2023, new supply significantly outpaced absorption. However, we expect that in the second half of 2024 and 2025, new deliveries will stabilize near the level of absorption, resulting in a more balanced supply-demand dynamic. In 2023, we made notable progress on our value-add program, completing renovations at 486 units during the fourth quarter and 2,455 units for the full year, achieving an annual weighted average return on investment of 16.1%. For 2024, we plan to continue our value-add efforts. We continue to see strong demand for these communities, which attract value-driven residents seeking well-maintained communities that offer similar amenities and finishes to Class A properties but at a lower price point. However, the focus on increased resident retention could reduce the number of value-add completions in 2024 as compared to 2023.
In 2023, we made notable progress on our value add program completing renovations at 486 units during the fourth quarter and 2000 and 455 units for the full year, achieving an annual weighted average return on investment of 16, 1% for.
For 2024, we plan to continue our value add efforts, we continue to see strong demand at these communities, which attracts value driven residents seeking well maintained communities that offer similar amenities and finishes to class a properties, but at a lower price point.
However, the focus on increased resident retention could reduce the number of value add completions in 2024 as compared to 2023.
Scott Schaefer: As I wrap up my remarks, I just want to reiterate my confidence in IRT's business model and strategy, which was constructed to succeed during all market cycles. Despite near-term market conditions, we expect to deliver growth in 2024, driven by a combination of occupancy gains and rental rate growth. Overall, we are optimistic as we have the right assets in the right markets that continue to perform well, supported by strong employment growth and population migration. I'm now turning the call over to my colleague John.
As I wrap up my remarks, I, just want to reiterate my confidence in <unk> business model and strategy, which was constructed to succeed during all market cycles. Despite near term market conditions, we expect to deliver growth in 2024, driven by a combination of occupancy gains and rental rate growth. Overall, we are optimistic because we have the right assets in the right markets that continue to perform.
Well supported by strong employment growth and population migration.
I'll now turn the call over to Mike.
Thanks Scott.
Mike Daly: At IRT, we have and will continue to take decisive actions to drive value. In response to current market dynamics, we're prioritizing higher retention and reducing unit vacancy. Ultimately, this will lower our turnover costs and increase NOI.
We have and will continue to take decisive actions to drive value in response to current market dynamics, we are prioritizing higher retention and reducing unit vacancies ultimately this will lower our turnover costs and drive NOI. This will put us in a position of strength to capitalize on an eventual market recovery in the back half of 2024 and in 2025.
Mike Daly: This will put us in a position of strength to capitalize on an eventual market recovery in the back half of 2024 and in 2025. Looking back at the fourth quarter, we achieved a same store average occupancy rate of 94.5%, a 70 basis point improvement year over year. As of February 12th, our first quarter to date same store occupancy is 94.3%, lower on a sequential basis as compared to the fourth quarter due to normal seasonality, as well as the supply pressure highlighted by Scott, but 110 basis points higher than this time last year. At our non-value add communities, average occupancy was 94.9% in the fourth quarter and is 94.6% in the first quarter.
Yes.
Looking back at the fourth quarter, we achieved our same store average occupancy rate of 94, 5%, a 70 basis point improvement year over year.
As of February 12 of our first quarter to date same store occupancy is 94, 3% lower on a sequential basis as compared to the fourth quarter due to normal seasonality as well as the supply pressure highlighted by Scott that is 110 basis points higher than this time last year.
At our non value add communities average occupancy was 94, 9% in the fourth quarter and is 94, 6% in the first quarter to date, our targeted average occupancy level for our same store portfolio in 2024 is 95%.
Our portfolio average rental rate increased two 4% in Q4 contributing to three 7% year over year property revenue growth for the quarter for.
Mike Daly: Our targeted average occupancy level for our same store portfolio in 2024 is 95%. Our portfolio average rental rate increased 2.4% in Q4, contributing to 3.7% year-over-year property revenue growth for the quarter. For the full year, our portfolio average rental rate increased 6.4%, supporting a 5.7% increase in rent.
For the full year, our portfolio average rental rate increased six 4% supporting a five 7% increase in revenue.
We use targeted concessions in the fourth quarter, especially in markets, such as Atlanta, Dallas, Charlotte and Raleigh.
We remain competitive and drive occupancy for Q4 total concessions offered equated to two 3% of monthly rent so.
Mike Daly: We use targeted concessions in the fourth quarter, especially in markets such as Atlanta, Dallas, Charlotte, and Raleigh, to remain competitive and drive occupancy; or, the Q4 total concessions offered equated to 2.3% of monthly rent. So far in Q1 2024, we have reduced the use of concessions and are offering targeted concessions at significantly fewer properties, equating to approximately 70 basis points of monthly rent at those properties. This, along with lower seasonal demand and supply pressure, contributed to negative new lease spreads in Q4. However, new lease rates have improved 220 basis points in the first quarter of 2024 to date due to more favorable demand and the reduced use of concessions. Renting continues to be more attractive than owning for many people, and the recent CPI report from the Bureau of Labor Statistics showed more persistent inflation than expected. This continues to keep the cost of home ownership higher.
So far in Q1 2024, we have reduced the use of concessions and are offering targeted concessions are significantly fewer properties equating to approximately 70 basis points of months rents at those properties.
This along with lower seasonal demand and supply pressure contributed some negative new lease spreads in Q4.
New lease rates have improved 220 basis points in the first quarter 2024 to date due to more favorable demand in our reduced use of concessions renting continues to be more attractive than owning for many people and the recent CPI report from the Bureau of Labor Statistics show more persistent inflation than expected.
It continues to keep the cost of home ownership higher.
Lease over lease effective rent growth for renewals in the fourth quarter was four 8% and through February 12 is four 5%, reflecting approximately 90% of our targeted Q1 lease renewals are blended lease over lease effective rental rate growth in the first quarter to date is two 1% up from zero, 2%.
Mike Daly: Lease over lease effective rent growth for renewals in the fourth quarter was 4.8%, and through February 12th was 4.5%, reflecting approximately 90% of our targeted Q1 lease renewals. Our blended lease-over-lease effective rental rate for us in the first quarter to date is 2.1%, up from 0.2% in Q4 2020. As mentioned in our prior calls, we continue to leverage technology to increase our operational efficiency and performance. One example of this is enhanced ID screening, which was fully implemented across the portfolio at the end of January 2024. We've seen a meaningful, positive improvement in our ability to identify potential fraud.
In Q4 2023.
As mentioned on our prior calls we continue to leverage technology to increase our operational efficiency and performance. One example of this is enhanced screening which was fully implemented across the portfolio at the end of January 2024, we.
We are seeing a meaningful positive improvement in our ability to identify potential fraud. We believe that this and other technologies will not only make us operationally more efficient, but will reduce bad debt and contribute to our results.
Finally, I'd like to thank our teams for delivering for our residents and helping drive our business results. We have a strong operations team, including very experienced leaders with a track record of performance. We are committed to supporting our community teams, including dedicated time to focus on employee development.
The advancements made over the past year have allowed us to be more efficient and effective and we will continue to innovate and explore further opportunities to strengthen our performance I will now turn the call over to Jim.
Mike Daly: We believe that this and other technologies will not only make us operationally more efficient, but will also reduce bad debt and contribute to our results. Finally, I'd like to thank our teams for delivering for our residents and helping drive our business. We have a strong operations team, including very experienced leaders with a track record of performance. We are committed to supporting our community teams, including dedicated time to focus on employee development. The advancements made over the past year have allowed us to be more efficient and effective, and we will continue to innovate and explore further opportunities to strengthen our portfolio. I'll now turn the call over to Mike. Thanks, Mike, and good morning, everybody.
Thanks, Mike and good morning, everyone.
Beginning with our 2023 performance update for the fourth quarter net loss available to common shareholders was $45 million down from a net income of $33 6 million in the fourth quarter of 2022.
For the full year 2023, net loss available to common shareholders was $17 2 million.
Down from a net income of $117 $2 million in the full year of 2022.
The decrease in the quarter and for the full year was a result of the previously disclosed asset impairments associated with our portfolio optimization and deleveraging strategy.
During the fourth quarter of 2023 core <unk> increased to <unk> 30 per share from 29 per share in the fourth quarter of 2022.
For the full year core <unk> per share increased to $1 15 per share up from $1 88 per share or six 5% growth year over year.
Jim Sebra: Beginning with our 2023 performance update for the fourth quarter, the net loss available to common shareholders was $40.5 million, down from a net income of $33.6 million in the fourth quarter of 2022. For the full year 2023, the net loss available to common shareholders was $17.2 million, down from a net income of $117.2 million in the full year of 2022. The decrease in the quarter and for the full year was a result of the previously disclosed asset impairments associated with our portfolio optimization and deep leveraging strategy. In the fourth quarter of 2023, Core FFO increased to $0.30 per share from $0.29 per share in the fourth quarter of 2022. For the full year, core FFO per share increased to $1.15 per share, up from $1.08 per share, or 6.5% growth year over year.
Iot same store NOI growth in the fourth quarter was three 3% driven by revenue growth of three 7%.
This growth was led by a two 4% increase in average monthly rental rate to one $551 per month, and a 70 basis point increase in average occupancy during Q4, both as compared to Q4 of 2022 for.
For the full year 2023, Iot same store revenue and NOI, each increased five 7% with rental rates, increasing by six 4% to one $537 per month.
On the operating expense side Iot same store operating expenses increased four 5% during the fourth quarter and five 6% for the full year 2023.
While we were able to keep real estate taxes in check during 2023 operating expenses increase for property insurance contract services repairs and maintenance as well as higher advertising expenses as a result of our increased efforts to drive occupancy amid a slowing macroeconomic environment.
Turning to our balance sheet as of December 31, our liquidity position was $288 million, we had approximately $23 million of unrestricted cash and $265 million of additional capacity through our unsecured credit facility.
Jim Sebra: IoT's same-story NOI growth in the fourth quarter was 3.3% due to my revenue growth of $3.7 million. This growth was led by a 2.4% increase in average monthly rental rates to $1,551 per month and a 70 basis point increase in average occupancy during Q4, both as compared to Q4 of 2022. For the full year 2023, IRT's same-share revenue and NOI each increased 5.7%, with rental rates increasing by 6.4% to $1,537 per month. On the operating expense side, IRT's change to operating expenses increased 4.5% during the fourth quarter and 5.6% for the full year 2023. While we were able to keep real estate taxes in check during 2023, operating expenses increased for property insurance, contract services, repairs, and maintenance, as well as higher advertising expenses as a result of our increased efforts to drive occupancy amid a slowing macroeconomic environment. Turning to our balance sheet, as of December 31st, our liquidity position was $288 million. We had approximately $23 million of unrestricted cash and $265 million of additional capacity through our unsecured credit facility.
We continue to make progress against our leverage as we ended 2023 at six seven times net debt to adjusted EBITDA down from six nine times in 2022. In addition, I'd like to highlight that we only have about 7% of our pro forma debt maturing through year end 2025, with only $22 million of maturities in 2024.
This is pro forma after the deleveraging associated with our portfolio optimization strategy that it will be completed later this quarter.
We have and will continue to maintain sufficient liquidity to address these maturities using our unsecured credit facility.
We also have adequate hedges that are effectively converted our floating rate debt to fixed rate debt such that our floating rate debt exposure as of year end is only 3% of our outstanding debt. After the effects of the portfolio optimization and deleveraging strategy, we expect to have zero percent of our outstanding debt exposed to floating interest rates.
Before I wrap up my remarks, with a discussion of our 2024 guidance I'd like to provide a further update on the portfolio optimization and deleveraging strategy.
During Q4, we sold four communities for $201 million and used all of the net proceeds to repay $197 million of debt, which was comprised of $112 million of property level debt associated with the sold properties and $85 million of borrowings outstanding on our line of credit.
Jim Sebra: We continue to make progress against our leverage as we ended 2023 at 6.7 times net debt to adjusted EBITDA, down from 6.9 times in 2022. In addition, I'd like to highlight that we only have about 7% of our pro forma debt maturing through year-end 2025, with only $22 million of maturities in 2024. This is pro forma after the deleveraging associated with our Portfolio Optimization Strategy that will be completed later this quarter. We have and will continue to maintain sufficient liquidity to address these maturities using our unsecured credit. We also have adequate hedges that have effectively converted our floating rate debt to fixed rate debt, such that our floating rate debt exposure as of year end is only 3% of our outstanding debt.
On these four properties, we recorded a loss on sale of $35 million.
As Scott mentioned, we had an additional fixed assets held for sale as part of this strategy as of December 31 2023.
Two of these six assets were sold earlier this week for $128 million the final four assets aggregating $197 million.
Our under contract and expected to be sold before the end of Q1 2012 before.
All of the proceeds from these sales will be used to reduce debt.
Once the sale of all 10 properties are complete we expect to generate $525 million in gross sales proceeds and mutual of use those proceeds to reduce our debt by approximately $519 million. This will.
<unk>, our net debt to adjusted EBITDA by approximately <unk> eight times with a <unk> <unk> dilutive impact of <unk>, which is already included in our 2020 for guidance.
Jim Sebra: After the effects of the Portfolio Optimization and Delivery Strategy, we expect to have 0% of our outstanding debt exposed to floating interest rates. Before I wrap up my remarks with the discussion of our 2024 guidance, I'd like to provide a further update on the portfolio optimization and deleveraging strategy. During Q4, we sold four communities for $201 million and used all the net proceeds to repay $197 million of debt, which was comprised of $112 million of property-level debt associated with the sold properties and $85 million of borrowings outstanding on our line of credit. On these four properties, we recorded a loss on sale of $35 million.
This strategy will further improve our unencumbered asset ratios as we work towards achieving an investment grade rating.
With respect to our full year 2024 outlook, we are introducing our EPS guidance range of 40 to 44 per share, which reflects 87 per share related to depreciation and amortization and then 11 per share gains, which we expect to realize in Q1 due to the disposition of one of our <unk>.
Assets held for sale.
As a result, our 2024 core <unk> per share guidance midpoint is $1 14 per share.
When thinking about our core <unk> per share guidance for this year. The bridge from our $1 15, starting point for 2023 would include <unk> <unk> of accretion from additional NOI growth in 2024.
Jim Sebra: As Scott mentioned, we had an additional six assets held for sale as part of the strategy as of December 31, 2023. Two of these six assets were sold earlier this week for $128 million. The final four assets, aggregating $197 million, are under contract and expected to be sold before the end of Q1 2024. All of the proteins from these six cells will be used.
Offsetting by dilution of <unk> <unk> from our portfolio optimization strategy and <unk> from increased expenses.
Bringing us to our guided midpoint of $1 14 per share for 2024.
For 2024, we expect our same store portfolio will be 109 properties after reflecting the impact of our portfolio optimization and deleveraging strategy.
Jim Sebra: Once the sale of all 10 properties is complete, we expect to generate $525 million in gross sales proceeds, and we should use those proceeds to reduce our debt by approximately $519 million. This will reduce our net debt to adjusted EBITDA by approximately 0.8 times, with a $0.03 dilutive impact on CorpFO, which is already included in our 2024. This strategy will further improve our unencumbered asset ratios as we work towards achieving an investment grade ratio. With respect to our full year 2024 outlook, we are introducing our EPS guidance range of $0.40 to $0.44 per share, which reflects $0.87 per share related to depreciation and amortization and then $0.11 per share gain, which we expect to realize in Q1 due to the disposition of one of our assets held for sale. As a result, our 2024 core FFO per share guidance midpoint is $1.14 per share.
Our guidance range for the same store revenue growth in 2024 is from 3% to four 5%. This range reflects the following assumptions.
And average occupancy of 95, 2%.
Blended net effective rental rate increase of two 2%.
And bad debt at approximately 175% of revenue.
On the expense side, our guidance range for full year 2020 for total operating expense growth is from five 4% to six 4%.
Controllable operating expenses are expected to be up five 4% at the midpoint driven by higher payroll cost inflationary pressure on services and higher advertising expenses as we continue to drive back occupancy during a softer macro environment.
Non controllable operating expenses for real estate taxes, and insurance are expected to be up six 6% at the midpoint.
As a result for 2024, and we expect that property NOI growth will be between 1% and 4% or two 5% at the midpoint.
Jim Sebra: When thinking about our core FFO per share guidance for this year, the bridge from our $1.15 starting point for 2023 would include $0.04 of accretion from additional NOI growth in 2024, offset by dilution of $0.03 from our portfolio optimization strategy and $0.02 from increased expense, bringing us to our guided midpoint of $1.14 per share for 2021. For 2024, we expect our same store portfolio will be 109 properties after adjusting for the impact of our portfolio optimization and deleveraging strategy. Our guidance range for same store revenue growth in 2024 is from 3% to 4.5%. This range reflects the following assumptions: an average occupancy of 95.2%.
At the midpoint, our G&A and property management expense guidance for the year is $53 million.
While the midpoint for full year interest expense is $84 million.
While G&A and property management expense is up $4 million approximately.
<unk> $1 $5 million relates to onetime items in 2023.
Excluding the effect of these items the increase in our G&A and property management expense is about 5%.
Lastly, other than the completion of our portfolio optimization strategy, we are not assuming any additional transaction volume during 2024.
Now I'll turn the call back to Scott Scott.
Thanks, Jim at Iot, we are focused on executing our 2024 business plan, which includes solidifying our operating gains and driving further on site efficiencies further executing our portfolio optimization and deleveraging strategy and continuing our value add renovations with a focus on supporting occupancy and improving resident retention.
Jim Sebra: A blended net effective rental rate increase of 2.2% and bad debt at approximately 1.75% of revenue. On the expense side, our guidance range for full year 2024 total operating expense growth is from 5.4% to 6.4%. Controllable operating expenses are expected to be up 5.4% at the midpoint, driven by higher payroll costs, inflationary pressure on services, and higher advertising expenses as we continue to drive back occupancy during a softer macro environment. Non-controllable operating expenses for real estate taxes and insurance are expected to be up 6.6% at the midpoint.
And while we expect certain industry headwinds to persist. This year, we are confident in our portfolio is solid renter demand fundamentals and our ability to implement our strategic initiatives, which will strengthen our business over the near term and long term, we remain committed to driving shareholder value and returning capital to our shareholders. We thank you for joining us today and look forward to seeing many of you at <unk> global property.
CEO Conference next month, operator, you can now open the call for questions.
Thank you.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
To withdraw your question Press Star one a second time.
To be able to take as many of your questions as possible. We ask that you. Please limit yourself to one question and one follow up and we will pause for just a moment to compile the Q&A roster.
Jim Sebra: As a result, for 2024, we expect that property NOI growth will be between 1% and 4%, and 2.5% at the midpoint. At the midpoint, our GNA and property management expense guidance for the year is $53 million, while the midpoint for four-year adjusted expenses is $84 million. While GNA and property management expense is up $4 million, approximately $1.5 million relates to one-time items in 2023. Excluding the effect of these items, the increase in our G&A and property management expenses is about 5%.
Okay.
And we will take our first question from Eric Wolfe with Citi. Your line is open.
Hey, good morning.
Was just curious how you came up.
I was just curious how you came up with your occupancy forecast, obviously, a large increase there. So just trying to understand what gives you the confidence that youll see this increase even with certain certain markets being impacted by supply.
Jim Sebra: Lastly, other than the completion of our portfolio optimization strategy, we are not assuming any additional transaction volume during 2020. Now, I'll turn the call back to Scott. Scott?
Hi, Eric This is Mike I think.
In terms of our occupancy we're starting the year significantly above where we were last year about 110 basis points quarter to date.
That that is going to be sustained through the rest of the year in terms of.
Scott Schaefer: Thanks, Jim. At IRT, we are focused on executing our 2024 business plan, which includes solidifying our operating gains and driving further onsite efficiencies. Further executing our portfolio optimization and deleveraging strategy and continuing our value-add renovations with a focus on supporting occupancy and improving resident retention. And while we expect certain industry headwinds to persist this year, we are confident in our portfolio's solid renter demand fundamentals and our ability to implement our strategic initiatives, which will strengthen our business over the near term and long term. We remain committed to driving shareholder value and returning capital to our shareholders. We thank you for joining us today and look forward to seeing many of you at Citi's Global Property CEO Conference next month. Operator, you can now open the call for questions. Thank you. At this time, I would like to remind everyone that in order to ask a question, press star and then the number one on your telephone keypad. To withdraw your question, press star 1 a second time.
Our renewal strategy that we've been discussing our retention strategy and.
Compared to 2023 were starting out at a much more favorable position and we think based on the weighting competition to the end of.
2024 in terms of the new supply that will be able to sustain that I think a big factor in all of this as well.
Our significantly focused as we have said on renewals and retention.
But in addition to that we're being very.
Purposeful about our.
New leases so in terms of our lead volume quarter to date in 2024.
Well above the rate of leads that are coming in from 2023. So combination of all of those things spending more on advertising on the front end.
Very aggressive on our retention strategy, we are confident in our numbers for occupancy.
Okay.
You just mentioned how youre prioritizing retention I guess, where do you think we will see sort of retention go from current levels and what is your sort of lease rate look like which include new leases signed versus known move out sort of your forward exposure.
Yes, so right now.
Our guidance includes a 55% retention rate on average throughout the year.
Operator: To be able to take as many of your questions as possible, we ask that you please limit yourself to one question and one follow-up. And we will pause for just a moment to compile the Q&A roster, www.independencerealty.com. Then we will take our first question from Eric Wolfe with Citi. Your line is open. Hey, good morning.
And right now for all of the leases that were set to expire in the in the first quarter. We've already renewed assuming we're trying to target that 55%, we've already renewed 90% of them. So.
So we're well on our way to hitting that 55% market sorry, 55% target.
Thank you.
And we will take our next question from Brad Heffern with RBC capital markets. Your line is open.
Eric Wolfe: I was just curious how you came up with your occupancy forecast, obviously a large increase there, so just trying to understand what gives you the confidence that you'll see this increase even with certain markets being impacted by supply. Hi Eric, this is Mike. I think in terms of our occupancy, you know, we're starting the year significantly above where we were last year, about 110 basis points quarter to date. We think that that is going to be sustained through the rest of the year in terms of, you know, our renewal strategy that we've been discussing, our retention strategy, and just compared to 2023, we're starting out in a much more favorable position. And we think, based on the waning competition at the end of 2024, in terms of new supply, that we'll be able to sustain that. I think a big factor in all of this is that we are significantly focused, as we have said, on renewals and retention. But in addition to that, we're being very purposeful about our new leases.
Yes. Thank you good morning, everybody.
Average production plan is obviously almost wrapped up do you think we'll see another plan at some point to either reduce leverage further or to reduce some of the remaining single asset exposures.
Thanks for the question.
We're always looking at the portfolio and.
Analyzing what markets, we want to be in and when we should be exiting and at this point, we haven't made any announcements, but I think capital recycling for opportunistic reinvestment <unk> debt leverage reduction is going to be part of our strategy going forward.
Okay got it and then Jim I think a couple little remaining underlying pieces for the revenue guide that you didn't give could you give <unk>.
And loss to lease and the impact of value out if you have it.
Sure so loss to lease 80 basis points earned.
Earn in 70 basis points and then the for new leases on the value added premium we're assuming is roughly about 13%. So it pulls the kind of the blend because you obviously new leases, we signed both second generation new lease and the value add as well as first turns the blended new lease growth.
Mike Daly: So, in terms of our lead volume quarter to date in 2024, we're well above the rate of leads that are coming in from 2023. So, a combination of all of those things, spending more on advertising on the front end, and being very aggressive on our retention strategy, we are confident in our numbers for occupancy. Okay, and you just mentioned how you're prioritizing retention. I guess, where do you think we'll see sort of retention go from current levels? And you know, what is your sort of lease rate looking like when you include leases signed versus none without sort of your forward exposure?
Is including new leases and second gens at about 7% for 2024.
Okay. Thank you.
And we will take our next question from Austin <unk> with Keybanc capital markets. Your line is open.
Hey, good morning, everybody, sorry, if I missed this but I guess, so how are you guys thinking about renewals trending out.
Mike Daly: Yeah, so right now, our guidance includes a 55% retention rate on average throughout the year. And right now, for all the leases that were set to expire in the first quarter, we've already renewed, assuming we're trying to target that 55%, we've already renewed 90% of them. So we're well on our way to hitting that 55% market, sorry, 55% target. Thank you. www.independencerealitytrust.com. And we will take our next question from Brad Heffern with RBC Capital Markets. Your line is open. Yeah, thank you. Morning everybody.
Into the into the spring leasing season, as Youre targeting that 55% retention because you have seen occupancy dip a little bit to start the year. So just thinking about sort of that.
Kind of intentional strategy of growing occupancy, where do you think renewables need to be in order to drive that retention figure higher as well as occupancy.
You're also and you're basically asking for where you think where do we think the renewal percentage that is rental renewal rent growth for the renewals will be to achieve that retention.
Correct.
Yes, so it's built into our guidance.
Estimated one 8% renewal.
Gross rate.
We will see then it will normalize over the season as we see higher exploration based on seasonality and we're confident in that number.
And as you saw we've already kind of started this year at call. It four 5% renewal growth. So we're certainly expecting that to kind of blend down a little bit as we continue to push retention in there.
Scott Schaefer: The leverage reduction plan is obviously almost wrapped up. Do you think we'll see another plan at some point to either reduce leverage further or to reduce some of the remaining single asset exposures? Thanks for the question.
Scott Schaefer: We're always looking at the portfolio and, you know, analyzing what markets we want to be in and when we should be exiting. And at this point, we haven't made any announcements, but I think capital recycling for opportunistic reinvestment and or leverage reduction is going to be part of our strategy going forward. Okay.
Higher elements of leasing season.
No. That's helpful. And then how much of the blended rate growth year to date is really skewed by that 90% renewable piece that you flagged in.
Any sense with the blends would look like if you normalize for a more typical breakout for a full quarter period between new and renewals.
Jim Sebra: And then Jim, I think a couple little remaining underlying pieces for the revenue guide that you didn't give. Could you give earn-in, loss to lease, and the impact of value add if you have it? Sure, so lost lease 80 basis points, earn in 70 basis points.
I'll follow up I'll follow up with you offline after that with that question I don't have that array of top of my head, but you are right in that.
The number the volume of renewals is obviously much higher than the volume of new leases and there isn't that new lease growth presented his own way through effectively yesterday or maybe two days ago I forget the exact date, but it's not for the obviously the whole quarter, because we just don't know what all the new leases.
Jim Sebra: And then the for new leases on the value add, the premium we're assuming is roughly about 13%. So it pulls the kind of the blend, because obviously new leases, we sign both second generation new leases on value add as well as first turns the blended new lease growth that is including new leases and second gens, about 7% for 2024. Okay, thank you. And we will take our next question from Austin Berschmitt with KeyBank Capital Markets. Your line is open. You're awesome.
I also want to make sure. This is Mike I also want to make sure and clarify what you. What you just said about the 90% that's of the renewals that we expect to happen in the first quarter, we've got 90% in <unk>.
Not that we have a 90% renewal rates no correct.
Thanks for the clarification.
And we will take our next question from John Kim with BMO capital markets. Your line is open.
Okay.
Mike Daly: You're basically asking where do we think the renewal percentage that is the rental renewal rent growth for the renewals will be to achieve that retention? Yeah, so we built into our guidance an estimated 1.8% renewal growth rate. So we will see that it will normalize over the season as we see higher expirations based on seasonality, and we're confident in that number being achieved.
Thank you on the blended two 1% growth that you had in the first quarter.
Which is unlike term leases can you remind us what percentage of overall leases that is and I just wanted to clarify the two 2% in guidance. That's also on a like term basis correct.
Mike Daly: Yeah, and as you saw, we've already kind of started this year at a call four and a half percent renewal growth. So we're certainly expecting that to kind of blend down a little bit as we continue to push retention in the higher elements of leasing. I'll follow up with you offline after that with that question. I don't have that right off the top of my head.
Correct Thats on the same 9% to 13 months basis, historically that 9% to 13 months kind of made up anywhere between 80% to 90% of our leasing activity every month every quarter that number is roughly about 65% today.
Mike Daly: But you're right in that the number, the volume of renewals, is obviously much higher than the volume of new leases. And that new lease growth presented is only through effectively yesterday, or maybe two days ago; I forget the exact date. But it's obviously not for the whole quarter because we just don't know what all the new leases are. I also want to make sure, this is Mike. I also want to make sure and clarify what you just said about the 90 percent, that is, of the renewals that we expect to happen in the first quarter. We've got 90 percent in, not that we have a 90 percent renewal rate. Okay. And we will take our next question from John Kim with BMO Capital Markets. Your line is open.
We're just kind of continuing to kind of tell people from an exploration standpoint out of the shoulder seasons of the year and into the higher leasing velocity seasons months April through call. It August.
Hi, John.
Got it.
Go ahead.
How does that how should we read that remaining 35% is that.
Above or below.
The $2 one.
Yes, I think its probably slightly below that to one but I think I guess I can follow back up with you offline with that exact answer.
It's kind of just again, it's not significantly, but I would say probably our guests 181, 9%.
Okay. My second question is on bad debt, how that trended in.
John P. Kim: Thank you. On the blended 2.1% growth that you had in the first quarter, which is on like-term leases, can you remind us what percentage of overall leases that is? And I just wanted to clarify that the 2.2% in guidance is also on a like-term basis.
In the fourth quarter versus two 1% in the third quarter.
And where do you see that going in 2024, and how you got there.
Did you say that again, John I missed the first part.
Part of that question the bad debt.
Jim Sebra: That's on the same nine to 13 month basis. Historically, that nine to 13 month kind of made up anywhere between 80 to 90% of our, you know, kind of leasing activity every month, every quarter. That number is roughly about 65% today, as we're just kind of continuing to kind of tilt people from an expiration standpoint out of the shoulder seasons of the year and into the higher leasing velocity season months, April through August. John, do we expect that? Go ahead.
Where it was in the fourth quarter and what's in your guidance for 2020 for sure.
So we ended the fourth quarter about two 1% of that is bad debt as a percentage of revenue and we expect that for the year that all kind of average out to be about 175% in terms of what it is what's in our guidance. We expect Q1 to be slightly underneath that two 1% and then kind of move down throughout the year into the fourth quarter.
Yes, and from a from a bad debt perspective, I think we've talked about it in.
Jim Sebra: I was going to say, how should we read that remaining 35%? Above or below 2.1? Yeah, I think it's probably slightly below that 2.1.
In the past we continue to look at additional technology solutions, and as we mentioned or as Mike mentioned in the call. We've already implemented a better idea screening that really kind of pinpoint identify the I'd fraud. Since that is so prevalent in some of these days and some of our markets like Atlanta.
Jim Sebra: But I think, again, I can follow back up with you offline with that exact answer. But it's kind of just again, it's not significantly below, it's like the rate, probably, I'll guess 1.8 to 1.9%. Okay, my second question is on how that trended. I'm the fourth quarter versus 2.1% of the third quarter and where you see that going in 2024 and how you, Did you say that again, John? I missed the first part of that question. The bad judge.
We're excited about what that's going to have for the portfolio for the year.
That's great. Thank you.
We will take our next question from Anthony Powell with Barclays. Your line is open.
Hi, Good morning, I guess a question on the customer profile as you build occupancy up are you noticing any changes in your rent to income ratios and also where are you gaining share from a class a class b.
Jim Sebra: The bad judge, where was it in the fourth quarter, and what's in your guidance for 2024? Yeah, sure. So we ended the fourth quarter with about 2.1 percent bad debt as a percentage of revenue. And we expect that for the year, that'll kind of average out to be about 1.75 percent in terms of what's in our guidance. We expect Q1 to be slightly underneath that 2.1 percent and then to kind of move down throughout the year into the fourth quarter. Yeah, and from a bad debt perspective, as we've talked about in the past, we continue to look at, you know, additional technology solutions. And as we mentioned, or as Mike mentioned in the call, we've already implemented a better ID screening to really kind of pinpoint ID fraud since that is so prevalent these days in some of our, you know, markets like Atlanta. And we're excited about what that's going to have for the portfolio for the year. That's great, thank you. And we will take our next question from Anthony Powell with Barclays. Your line is open. Hi, good morning.
Well I can take the first part of that I think.
In terms of our renter profile has not changed we're still at about 22% in terms of the rent to income which is.
Very comfortable in terms of the financial ability of our average resident to pay.
Dennis do you have any thoughts in terms of migration from from AWP or some of the competition at the top end I think our value add.
Glen.
Very well to the current market date, when we have that opportunity to provide a product that has similar Q at a value rate of that class a at a lower price point and so we look to see that would be significant.
Benefit for us this year.
Yes, so maybe on the competitive environment I know last quarter. There was talk about some of the merchant developers being aggressive with the sessions as the tenure with a 5% has that changed at all as kind of rates have stabilized here and how you expect those developers to behave as we approach peak leasing season.
Okay. This is Janet again, I think we've seen concessions continue in this first quarter from those merchant builders at relatively the same level I think we'll start to see that dwindle as demand picks up for the seasonal leasing patterns.
And our user conversion has decreased.
Mike Daly: I guess a question on the customer profile as you build occupancy. Are you noticing any changes in your rent to income ratios? And also, where are you gaining share from Class A or Class B? I can take the first part of that.
Actually quarter to quarter, and we will continue to be very strategic in our targeted concessions to maintain that 95 to occupancy, but look to maximize NOI.
Okay. Thank you.
We will take our next question from John Pawlowski with Green Street. Your line is open.
Janice Richards: I think, you know, in terms of our renter profile, it has not changed. We're still at about 22% in terms of the rent to income ratio, which is, you know, very comfortable in terms of the financial ability of our average resident to pay. Janice, do you have any thoughts in terms of migration from A to B or some of the competition at the top end? Yeah, I think our value add lends very well to the current market state where we have that opportunity to provide a product that is similar to at a value rate of that class A at a lower price point. And so we look to see that be a significant benefit for us this year.
Alright. Thanks for your time curious if you can share on what your market rent growth what your market rent growth assumptions are for your average sunbelt market versus Midwest markets. This year.
Yes, so it's a good.
Question.
Overall in our guidance the market rent growth of blended market rent growth we have.
That is about 60 basis points.
And across our top 10 markets, which include obviously sunbelt markets as well as mid Midwest markets. That's about call. It 80 basis points or other market is kind of a little bit lower roughly 40 to 50 basis points. If you were looking at some of the real kind of core sunbelt markets like Atlanta.
Market rent growth is actually about 10 basis points negative if you look at some of our Midwest markets.
Janice Richards: So maybe on the competitive environment, I know last quarter there was talk about some of the merchant developers being aggressive with concessions as the 10-year went to 5%. Has that changed at all as rates have stabilized here, and how do you expect those developers to behave as the year progresses? This is Janice again.
Columbus were about one two I'm, sorry, two 2% market rent growth.
Alright Thats great.
<unk> on property taxes, so curious geography.
Janice Richards: I think we've seen concessions continue in the first quarter from those merchant builders at relatively the same level, but I think we'll start to see that dwindle as demand picks up for the seasonal leasing pattern. And, you know, our use of concessions has decreased sequentially quarter to quarter, and we will continue to be very strategic in our targeted concessions to maintain that 95.2 occupancy but look to maximize, you know, NOI at every. Okay, thank you. And we will take our next question from John Pawlowski on Green Street. Your line is open.
Low to mid single digit property tax growth rate that seems to be embedded in the expense guide, which geographies youre expecting to see really really higher, particularly low property tax pressure around that average.
Yes.
We have a.
For our 2024, our guide we are assuming roughly about a 4.25% increase in real estate taxes.
The markets that are continual kind of.
Say issues, but continual kind of increases.
Texas markets of Dallas, and Austin continue to be obviously sooner.
Jim Sebra: Thanks for your time. Curious if you can share what your market rent growth assumptions are for your average sunbelt market versus Midwest markets this year. Yeah, so it's a good question.
Reassessment process annually as well as we're expecting a little bit of additional pressure from some of the worst markets like Columbus and indeed.
Alright, Thank you for your time.
And we will take our next question from Mason well with Baird. Your line is open.
Jim Sebra: The, you know, overall, in our guidance, the market rent growth, the blended market rent growth we have is about 60 basis points. And across our top 10 markets, which include obviously Sunbelt markets as well as Midwest markets, that's about 80 basis points. Other markets kind of are a little bit lower, roughly 40 and 50 basis points. If you were looking at some of the real core Sunbelt markets, like Atlanta, the market rent growth is actually about 10 basis points negative. If you look at some of our Midwest markets, like Columbus, we're about 1.2, I'm sorry, 2.2% market rent growth. Hi, that's great. Question on property taxes.
Hey, good morning, everyone on the G&A and property management expenses guidance could you speak to what is driving the 5% year over year core increase given fewer assets in your portfolio.
Sure I mean, I think it's just inflationary pressure on payroll for all of the teams both on onsite, obviously property opex as well as the corporate teams.
Just hire basis.
In terms of the 5% obviously the guide the guide is roughly almost a seven 5% increase but as I mentioned on my prepared remarks, there is about $1 5 million of onetime benefits in 2023 that when you exclude that brings it back down to about four 5% inflation inflationary rate.
And under two developments in Denver, what are the expectations for the initial yields in the stabilized yields on these assets.
Jim Sebra: So, curious geography, the low to mid single-digit property tax growth rate that seems to be embedded in the expense guide, which geographies are expected to see really, really high or particularly low property tax pressure around that average? Yeah, we have for our 2024 guide, we're assuming roughly about a four and a quarter percent increase in real estate taxes. The markets that are continual, kind of, I won't say issues, but continual kind of increases. The Texas markets of Dallas and Austin continue to go obviously through their reassessment process annually, as well as we're expecting a little bit of additional pressure from some of the West markets like Columbus and India. Thank you for your time, www.independencerealty.com. And we will take our next question from Mason Guell with Baird. Your line is open. Hey, good morning, everyone.
So the Arista deal that's coming this is Scott in the fourth quarter and in lease up at about 45% leased today.
The expectation is that that portfolio or that asset sorry will deliver a stabilized yield at 7%.
The flat irons deal that's coming out of the ground. We're up it is under construction today is already out of the ground.
That will be stabilizing at roughly a 6% yield.
Okay.
And we will take our final question from Linda Tsai with Jefferies. Your line is open.
Hi.
Susan first quarter I know Thats through February 12.
The breakdown between new leases in January I guess, where do you expect February to end up and then March.
The new leases in January and February are very close to that kind of negative two 2% I don't think theres a big difference also just confirm that and come back to you.
Jim Sebra: On the G&A and Property Management Expenses Guide, could you speak to what is driving the 5% year over year core increase given fewer assets in your portfolio? Sure. I mean, I think it's just inflationary pressure on payroll for all the teams, both on site, obviously, in property outbacks, as well as the corporate team, to higher bases.
And then March Jonathan do you want to kind of comment, but I think March we expect the trend to.
Continue.
Would not.
See a difference between February and March.
Got it and then the dilution from asset sales to deleverage within your range, but at the high end was that related to timing.
Jim Sebra: In terms of the 5%, obviously, the guide, the guide roughly takes almost a seven and a half percent increase. But as I mentioned in my prepared remarks, there are about 1.5 million one-time benefits in 2023 that when you exclude that brings it back down to that 5% inflationary rate. Thank you. And for your two developments in Denver, what are the expectations for the initial yields and the stabilized yields on these assets? So the Arista deal that's coming, that just got CO'd in the fourth quarter, and it's in lease up at about 45% leased today. The expectation is that that portfolio, or that asset, sorry, will deliver a stabilized yield at 7%. The Flatirons deal that's coming out of the ground, or is under construction today, it's already out of the ground, that will be stabilizing at roughly a 6% yield, www.independencerealty.com. And we will take our final question from Linda Psi with Jeffreys. Your line is open.
Not so much timing. It's just it was a range was two to three so that was $2.05 at the midpoint and the actual number is two seven so it's just rounding to three.
Okay, and then in terms of the buyers of the assets that youre selling two just curious what are the buyers source of funding.
Most of them are.
Using.
Fannie and Freddie financing, but also a number of them are assuming the debt that we had in place.
And then last one.
I think there was one I am sorry, I think there was $102 31 transaction in the group as well.
Thank you and then just on the technology that is helping you reduce fraud, how quickly can that impact fraud going forward.
So we've been I'll ask Janice or Mike to comment, but we've been we've been piloting the technology since October and we've already seen.
Jim Sebra: Hi, the new lease is in the first quarter. I know that's through February 12th. What's the breakdown between new leases in January, I guess, where you expect February to end up and then? The new lease is in January and February, very close to that kind of negative 2.2 percent. I don't think there's a big difference.
A really good benefit where it's kind of pointing out that are clearly fraudulent and theyre not even when since we do it at tour those folks don't even get a chance to tour the units and really helps our teams safe time as well as prevent the opportunity for me is submitting an application that Mike and I think we've absolutely seen a track with communities where we've had.
Jim Sebra: I'll just confirm that and come back to you. And in March, I don't know, Janice, if you want to kind of comment, but I think we expect the trend to kind of continue. Yeah, I would not see a difference between February and March with the trend.
Janice Richards: Got it. And then the dilution from asset sales to deliver is within your range, but at the high end. Was that related to timing? Um, not so much timing, it's just that our range was two to three cents, so that was, you know, two and a half cents at the midpoint, and the actual number is 2.7 cents, so it's just rounding to three. OK, and then in terms of the buyers, the assets that you're selling to, just curious, what are the buyers' sources of funding? Most of them are using Fannie and or Freddie financing, but a number of them are also assuming the debt that we had in place.
More of an issue historically with fraud, we've definitely seen a higher.
Right.
Alerts in terms of IV <unk>.
Potential fraud. So we have seen the impacts really hit us, where we were where we needed it the most.
It has been very effective from our perspective, and we also believe although you can't quantify it but it is also.
In these markets, sometimes you get fraud rings, and folks who coordinate these activities.
You build a reputation for these stringent.
Jim Sebra: I think there was one, I think there was one, I'm sorry, I think there was one 1031 transaction in the group as well. Thank you. And then just on the technology that's helping you reduce fraud, how quickly can that impact fraud going forward? We've been, I'll ask Janice or Mike to comment, but we've been piloting the technology since October, and we've already seen a really good benefit where it's kind of pointing out IDs that are clearly fraudulent, and they're not even, since we do it at TOR, those folks don't even get Mike and Janice.
E checks and you avoid some that never even come in so it's been very beneficial and we expect that to continue.
Because your bad debt expectation include the benefit of this.
Technology, Yes, yes.
Thank you.
Okay.
And we have no further questions at this time I will now turn the call back to Mr. Scott Schaeffer for closing remarks.
Thank you all for joining us this morning, and we will speak to you again next quarter.
Okay.
And ladies and gentlemen, this concludes today's conference call and we thank you for your participation you may now disconnect.
Mike Daly: I think we've absolutely seen a track with, you know, communities where we've had more of an issue historically with fraud. We've definitely seen a higher rate of, you know, alerts in terms of ID potential fraud. So we have seen the impact really hit us where we, you know, where we needed it the most. But it has been very effective from our perspective. And we also believe, although you can't quantify it, that it is also in these markets. Sometimes you get fraud rings and folks who coordinate these activities.
Okay.
[music].
Okay.
[music].
Mike Daly: You build a reputation for these stringent ID checks, and you avoid some that never even come in. So it's been very beneficial. We expect that to continue. Does your bad debt expectation include the benefit of this?
Yes.
[music].
Mike Daly: Thank you. Thank you. Yeah. Thank you for joining us. Thank you. Thank you.
Scott Schaefer: And we have no further questions at this time, so I will now turn the call back to Mr. Scott Schaefer for closing remarks. Well, thank you all for joining us this morning, and we'll speak to you again next quarter. And ladies and gentlemen, this concludes today's conference call, and we thank you for your participation.
Yes.
Thank you.
[music].