Independence Realty Trust Q1 2025 Earnings Report

Independence Realty Trust EPS Results

• Actual EPS: $0.27
• Consensus EPS: $0.28
• Beat/Miss: Missed by -$0.01
• One Year Ago EPS: $0.27

Independence Realty Trust Revenue Results

• Actual Revenue: $160.91 million
• Expected Revenue: $164.08 million
• Beat/Miss: Missed by -$3.18 million
• YoY Revenue Growth: +0.40%

Independence Realty Trust Announcement Details

• Quarter: Q1 2025
• Date: 4/30/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 1, 2025
• Conference Call Time: 9:00AM ET

Independence Realty Trust (NYSE:IRT) (NYSE: IRT) is a real estate investment trust that owns and operates multifamily communities, across non-gateway U.S. markets including Atlanta, GA, Dallas, TX, Denver, CO, Columbus, OH, Indianapolis, IN, Raleigh-Durham, NC, Oklahoma City, OK, Nashville, TN, Houston, TX, and Tampa, FL. IRT's investment strategy is focused on gaining scale near major employment centers within key amenity rich submarkets that offer good school districts and high-quality retail. IRT aims to provide stockholders attractive risk-adjusted returns through diligent portfolio management, strong operational performance, and a consistent return on capital through distributions and capital appreciation.

Independence Realty Trust Q1 2025 Earnings Call Transcript

Key Takeaways

• In Q1, IRT delivered 2.7% same store NOI growth driven by a 100 bps occupancy gain and higher effective rents, while completing 275 value-add unit renovations at a 16.2% ROI and advancing a 4,600-unit program.
• IRT sold its final Birmingham asset for $111 M, acquired a 280-unit Indianapolis community for $59.5 M at a 5.6% economic cap rate, entered a JV to develop 324 Charleston units, and is under contract on two more properties totalling $155 M at high-5% cap rates.
• The company reaffirmed full-year guidance for same store NOI and core FFO per share, citing a 60% drop in new supply in 2025 and resilient Sunbelt fundamentals to sustain rent gains and occupancy.
• Balance sheet metrics remain strong with net debt/EBITDA at 6.3x, 100% fixed or hedged debt, only 17% of maturities through 2027, and ~$750 M of liquidity available for accretive investments.
• CoStar forecasts new deliveries in IRT submarkets will fall to 2% of existing stock in 2025 (from 6% in 2024), driving 8.5% net absorption locally vs. 1.5% nationally, while homeownership costs average 94% above IRT rents and rent-to-income holds at ~21%.

Presentation

[Operator]

Ladies and gentlemen, thank you for standing by, and welcome to the Independence Realty Trust First Quarter twenty twenty five Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. As a reminder, today's call is being recorded. I will now hand today's call over to Stephanie Krusen Kelly.

[Operator]

Please go ahead.

[Stephanie Krewson-Kelly, Head of Investor Relations at Independence Realty Trust]

Good morning and thank you for joining us to review Independence Realty Trust first quarter twenty twenty five financial results. On the call with me today are Scott Schafer, Chief Executive Officer Jim Sibra, President and CFO and Janice Richards, Executive Vice President of Operations. Today's call is being webcast in the Investors section of our website, irtliving.com, and a replay will be available via webcast and telephonically beginning at approximately twelve noon today Eastern Time. 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.

[Stephanie Krewson-Kelly, Head of Investor Relations at Independence Realty Trust]

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 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 reconciliations of non GAAP financial measures to the most direct comparable GAAP financial measures is attached to IRT's current report on the Form eight ks available in the SEC filings section of IRT's Investors website.

[Stephanie Krewson-Kelly, Head of Investor Relations at Independence Realty Trust]

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 Schafer.

[Scott Schaeffer, CEO & Chairman of The Board at Independence Realty Trust]

Thanks, Stephanie, and thank you all for joining us this morning. I'm happy to report that 2025 is unfolding largely as we anticipated despite the macroeconomic uncertainties that have emerged since our last call. We are on track to achieve both our full year same store NOI and core FFO per share guidance. Our communities are well located in areas with strong population and employment growth and will continue to outperform even during periods of economic uncertainty. First quarter results were solid.

[Scott Schaeffer, CEO & Chairman of The Board at Independence Realty Trust]

We delivered 2.7% same store NOI growth driven by a 100 basis point increase in average occupancy year over year as well as an increase in our average effective rent since the first quarter of last year. Value add renovations also contributed to our same store results. During the quarter, we completed two seventy five units and achieved a weighted average return on investment of 16.2%. We now have 28 communities with over 4,600 units in our ongoing value add program and expect to complete between 505,000 units this year at our targeted ROIs. We continue to execute on our long term investment strategy.

[Scott Schaeffer, CEO & Chairman of The Board at Independence Realty Trust]

During the quarter, we sold our final asset in Birmingham, Alabama for $111,000,000 which completed our exit from that market. And we expanded scale in Indianapolis by purchasing a two eighty unit community for $59,500,000 at a 5.6% economic cap rate. We also entered into a new joint venture investment that will develop three twenty four units in Charleston, South Carolina. We are under contract on two additional communities with a combined purchase price of approximately $155,000,000 1 asset located in Orlando was developed in 2019, is adjacent to an existing IRT owned community and will provide many operating synergies. The second property is a newly developed community in Colorado Springs that is in lease up.

[Scott Schaeffer, CEO & Chairman of The Board at Independence Realty Trust]

These investments will provide an economic cap rate in the high fives during year one. Beyond these pending transactions, our acquisition pipeline remains strong. As Jim will discuss, we have ample liquidity to deploy into these and other accretive investments. Regarding our markets, apartment fundamentals will improve across the portfolio during this year as prior deliveries are absorbed and new supply deliveries decrease sharply from recent peak levels. In 2020 approximately 79,000 new apartment units were delivered across our submarkets, representing 6.1% of existing supply.

[Scott Schaeffer, CEO & Chairman of The Board at Independence Realty Trust]

We expect 32,000 new deliveries in 2025 and only 24,000 units in 2026, representing 21.5% of existing supply respectively. These deliveries equate to annual decrease of 60% in 2025 and an additional 24% in 2026. We expect our Sunbelt markets will benefit the most from expected declines in new apartment deliveries this year. Demand for our portfolio of high quality largely Class B communities has proven to be resilient over the years even during challenging economic times as demonstrated by our stable occupancy rates and positive blended rent growth. During 2024, nationwide new deliveries of multifamily units exceeded absorption resulting in a negative net absorption of 21%.

[Scott Schaeffer, CEO & Chairman of The Board at Independence Realty Trust]

In 2025, while the national apartment market is expected to see positive net absorption of 1.5%, our submarkets are forecasted to rebound strongly and enjoy positive net absorption of 8.5% as increases in population outpace new supply. Longer term, IRT submarkets are forecasted to see population growth of seven people for every one newly delivered apartment over the next three years. Additionally, homeownership affordability factors that include elevated mortgage rates and home prices continue to favor renting. Across our top 10 markets, average home ownership costs are 94% higher than IRT's monthly rent. Importantly, IRT's average resident rent to income ratio is stable at approximately 21%, indicating our residents are on solid financial footing.

[Scott Schaeffer, CEO & Chairman of The Board at Independence Realty Trust]

As I mentioned earlier, we are sensitive to the macroeconomic uncertainties that have emerged since our last call. However, we believe supply and demand fundamentals in our markets will continue to be the dominant influence on our operations. Based on our outlook for continued strong demand and significant declines in new supply, our 2025 plan continues to assume ongoing rental rate gains without sacrificing occupancy. First quarter results have demonstrated this to date and we expect this dynamic to accelerate as we advance into 2026. Before handing the call over to Jim, I want to thank the IRT team for their continued hard work and dedication to delivering exceptional service to our residents.

[Scott Schaeffer, CEO & Chairman of The Board at Independence Realty Trust]

I'll now turn the call over to Jim.

[Jim Sebra, President & CFO at Independence Realty Trust]

Thanks, Scott, and good morning, everyone. Core FFO per share of $0.27 in the first quarter of twenty twenty five was flat as compared to the prior year period reflecting the impact of the final stages of our portfolio optimization and deleveraging strategy that was completed last year. Same store NOI grew 2.7% in the quarter comprised of a 2.3% increase in same store revenue and a 1.6 increase in operating expenses over the prior year. As we forecasted, same store revenue growth was driven by a 100 basis point increase in average occupancy, a 90 basis point increase in average effective monthly rents and 50 basis points of lower bad debt compared to the prior year. Same store operating expense growth in the quarter reflected a 2.9% increase in controllable expenses driven by higher contract services and advertising.

[Jim Sebra, President & CFO at Independence Realty Trust]

These increases were partially offset by a 30 basis point decrease in non controllable expenses. Overall, lower repair and maintenance costs, turn costs and property insurance costs kept total expense growth below inflation levels during Q1 of twenty twenty five. Regarding recent leasing trends, the year is unfolding as expected broadly speaking. For our light term leases during Q1, our blended rental rate growth was up 10 basis points with new lease rates down 4.6% and renewal rents up 4.8%. Please keep in mind that during Q1 twenty twenty five only 12% of our leases expired.

[Jim Sebra, President & CFO at Independence Realty Trust]

For Q1 twenty twenty five our resident retention rate was 59.5% and our rate of resident renewals was 68.6%. Regarding investment activity, during the first quarter we sold a property in Birmingham, Alabama for $111,000,000 representing a 5.6% economic cap rate and we recognized a $55,000,000 tax gain. As Scott mentioned, we acquired a community in Indianapolis for $59,500,000 which was a 5.6% economic cap rate and the property is a candidate for our value add program. We also entered into a new joint venture to develop a three twenty four unit community in Charleston, South Carolina which is targeted for delivery in the second quarter of twenty twenty seven at an anticipated yield on cost of 6.8%. Our balance sheet is strong with low risk.

[Jim Sebra, President & CFO at Independence Realty Trust]

We ended the quarter with a net debt to adjusted EBITDA ratio of 6.3 times, which is higher than our fourth quarter twenty twenty four ratio due to seasonally lower Q1 EBITDA associated with seasonally higher operating expenses. We remain on track to achieve a mid-five net debt to adjusted EBITDA ratio by year end 2025. Including principal amortization, only 17% of our total debt matures between now and year end 2027, which is one of the lowest among public multifamily peers. In March, we entered into a new one year one hundred million dollars SOFR swap resulting in 100% of our debt being fixed and or hedged. Lastly, we have nearly $750,000,000 of liquidity to fund accretive investments.

[Jim Sebra, President & CFO at Independence Realty Trust]

With respect to our financial outlook for 2025, we are certainly aware of the potential for an economic slowdown. However, in our submarkets, we see pricing power in front of us and accordingly are not making any changes to our guidance. Scott, back to you.

[Scott Schaeffer, CEO & Chairman of The Board at Independence Realty Trust]

Thanks, Jim. We are off to a solid start to the year and continue to believe that we are at the beginning of a multiyear period of improving fundamentals and growth. Because of our portfolio's market concentrations, waning supply pressures and strong balance sheet, we expect our portfolio and platform will continue to outperform in 2025 and enter 2026 with solid earnings momentum and growth opportunities. We thank you for joining us today and look forward to seeing many of you at the Wells Fargo Conference next week and the NAREIT Conference in June. Operator, you can now open the call for questions.

[Operator]

Your first question is from the line of Brad Heffern with RBC.

[Brad Heffern, Director at RBC Capital Markets]

Hey, good morning everyone. Thanks.

[Brad Heffern, Director at RBC Capital Markets]

Can you walk through

[Brad Heffern, Director at RBC Capital Markets]

the leasing spreads for the first quarter? Obviously, below guidance. Why was that? And does it change your view at all on the original spread guidance for the full year?

[Jim Sebra, President & CFO at Independence Realty Trust]

Sure. Thanks, Brad. I'll obviously give you some commentary. Janice or Scott, obviously, jump Leasing spreads, new leases were down 4.6% in the first quarter. Renewals are up 4.8%.

[Jim Sebra, President & CFO at Independence Realty Trust]

Obviously, in terms of the trajectory throughout the year as well as the full year guide, obviously, there's a lot of facets to the question. I think when you compare that trajectory from Q4 to Q1 for us, you compare it versus our peers, I just want to remind everybody that we have predominantly a B class portfolio and as a result, didn't really experience the same level of decline in rental rates as some of our peers did because they're mainly a Class A portfolio and compete more with the new supply that was delivered. Secondly, the trend that we're seeing month to month so far this year continue to be very positive. We continue to see January was better, February was better than January, and that continues all the way through April. So we're quite excited about that kind of development of the waning pressure from new supply that we kind of highlighted earlier this year and really kind of seeing that improving rental rate growth in the back half of the year.

[Brad Heffern, Director at RBC Capital Markets]

Okay. Got it. And then on the tenant level, have you seen any evidence yet of stress from the tariffs, macro uncertainty, etcetera?

[Janice Richards, EVP - Operations at Independence Realty Trust]

Overall, we've not felt any effects from the tariffs and or from deportations. I think it's a little early, but we are watching it extremely closely, and we have great faith in our teams that we will be able to offset and continue to outperform as we've done in the past with economic uncertainty.

[Jim Sebra, President & CFO at Independence Realty Trust]

And just to add on to that, in the first quarter of this year, our bad debt was roughly down 50 basis points versus Q1 of last year. So a lot of the initiatives we took in place to kind of deal with fraud have working, and we haven't seen a related kind of uptick because of hardships or anything else. We're seeing the good progression that we anticipated.

[Operator]

Your next question is from the line of Austin Wurschmidt with KeyBanc Capital Markets.

[Austin Wurschmidt, Senior Equity Research Analyst at KeyBanc Capital Markets]

Great. Thanks. Good morning, everybody. Jim, you

[Austin Wurschmidt, Senior Equity Research Analyst at KeyBanc Capital Markets]

mentioned month to month improvement in market rents this

[Austin Wurschmidt, Senior Equity Research Analyst at KeyBanc Capital Markets]

that starting to lead to acceleration in leasing spreads as we get into the second quarter? Or if you compare kind of the trade outs for like term leases?

[Jim Sebra, President & CFO at Independence Realty Trust]

Yes. The comment was more directed at the improvement in the trade outs that we're seeing. The trade outs in February were better than January, March were better than February and April is better than March. Obviously, we're getting away from talking about specific numbers month to month, but just kind of general trajectory is that it is improving at the pace that we anticipated. And as we mentioned earlier, we really do see the pressure from new supply waiting in the back half of the year, and that's really going to help accelerate further more accelerate in the back half of the year.

[Austin Wurschmidt, Senior Equity Research Analyst at KeyBanc Capital Markets]

That's helpful. And then can

[Austin Wurschmidt, Senior Equity Research Analyst at KeyBanc Capital Markets]

you just speak to maybe how trends are playing out in the ground from a traffic and conversion perspective versus prior years? And just give us a sense of when new lease rate growth might turn positive. Just wondering if there's kind of any change in that expectation.

[Jim Sebra, President & CFO at Independence Realty Trust]

Yeah. You know, from the standpoint of the the the leasing traffic on on on the ground, you know, here in May and so far for for kind of April as well as March, you know, the demand is 25% versus the same time period last year. So the demand is increasing. And I would generally say that the conversion is still kind of relatively the same as last year. So we're beginning to see kind of upward trajectory to, obviously, that lease rate growth and then, obviously, occupancy.

[Jim Sebra, President & CFO at Independence Realty Trust]

I don't Janet, if want to kind of add any additional comments.

[Janice Richards, EVP - Operations at Independence Realty Trust]

Yeah. I think seasonality is playing out as anticipated, and we're seeing some great demands in the markets that we're ready to capitalize on.

[Operator]

Your next question is from the line of John Kim with BMO Capital Markets.

[John Kim, Managing Director - US Real Estate at BMO Capital Markets]

I just wanted

[John Kim, Managing Director - US Real Estate at BMO Capital Markets]

to clarify on what you're seeing in April and May. You discussed, Jim, that pricing power is in front of you, and I just want to make sure that commentary was based on what you're seeing on new lease rates and renewals on what you're signing in April and May so far.

[Jim Sebra, President & CFO at Independence Realty Trust]

Yeah. The commentary is on obviously blended rental rates. And yes, we obviously both that trajectory is developing positively for both new leases and the overall blended rates.

[John Kim, Managing Director - US Real Estate at BMO Capital Markets]

Do you anticipate starting or sourcing more development opportunities this year? You mentioned the one in Charleston will be developed at a 6.8% yield. It seems like there couldn't be some more opportunities at attractive yield spreads to acquisitions. But I'm wondering what you're seeing on the ground and if you anticipate putting more capital in developments.

[Scott Schaeffer, CEO & Chairman of The Board at Independence Realty Trust]

John, this is Scott. We're seeing a lot of opportunities. We're very cognizant of our cost of capital. And we have over since we started that program, limited our exposure to the development just as a management of the balance sheet risk or the risk to the balance sheet. But we are seeing opportunities.

[Scott Schaeffer, CEO & Chairman of The Board at Independence Realty Trust]

The one in Charleston was particularly attractive to us because we have some a couple of assets in Charleston and have been looking to grow there, but have found it difficult to buy accretively. So this was a way to invest in an asset, giving us the option to buy it when it's completed, hopefully, at a good return.

[Operator]

Your next question is from the line of Eric Wolf with Citigroup.

[Eric Wolfe, Director at Citi]

Hey, thanks. Can you just talk about the decision to raise capital on the ATM and sort of how you're thinking about the spread between your cost of capital and where you can acquire assets today and what that opportunity set looks like?

[Jim Sebra, President & CFO at Independence Realty Trust]

Sure. Yes. At the obviously, when we did the September equity raise last year and ATM raise in fourth quarter and then some additional ATM in the first quarter, the breakeven, call it, economic cap rate for the deal for the for it to be accretive from an earnings standpoint is in the kind of 5.4% range.

[Jim Sebra, President & CFO at Independence Realty Trust]

And as we've been able to demonstrate, we're able to purchase assets with a year one economic cap rate of five, six or north. So the deals we're doing are accretive from an earnings standpoint. So for us, to continue to raise capital when the market's kind of giving us a go signal makes a lot of sense, especially when we believe we could put it to work. The two deals, and you kind of heard us talk about it in our prepared remarks, the two deals that are under contract, the one in Orlando and the new build in Colorado Springs, that blended economic cap rate is high fives or roughly 5.8% year one.

[Eric Wolfe, Director at Citi]

That's helpful.

[Eric Wolfe, Director at Citi]

And then maybe just a follow-up on the sort of blended spreads. It looks like the sort of all in blended spreads are a bit lower than your like term spreads. And I think you mentioned before that the reason is you're trying to move away from short term leases and extend duration on those leases. Can you just talk about sort of when you began that process, why you began that process and sort of how long you think that will impact your sort of overall rent growth?

[Jim Sebra, President & CFO at Independence Realty Trust]

Yes.

[Jim Sebra, President & CFO at Independence Realty Trust]

So we started that process in the mid part And as you can imagine, it takes, call it, almost a year for us to fully kind of go through the process. So we would expect that transition from less short term leases and more long term leases to be almost done by the middle part of this year. Obviously, it's always market driven. You know, when a prospect comes in, they have the option to choose, you know, at whatever the rates are for a three month lease up to a twelve or thirteen month lease, and that is a little bit out of our control.

[Jim Sebra, President & CFO at Independence Realty Trust]

But we certainly kind of look at, you know, setting the premiums to go from a longer term lease to a shorter term lease to, you know, kind of influence the expiration curve so that the expirations are happening in the period of time where you have the highest leasing leasing traffic.

[Operator]

Your next question is from the line of Amy Probat with UBS.

[Ami Probandt, Equity Research Associate at UBS Group]

Hi. Thanks. So, you're passing the easy comp, the last of the easy comps on occupancy, and the occupancy comps are then normalized starting in the next quarter. So I'm just wondering how we should be thinking about the cadence of same store revenue from here? And if there are any other pieces outside of the rent spreads themselves that could be leading to some lumpiness in same store revenue through the year?

[Jim Sebra, President & CFO at Independence Realty Trust]

Yes. Obviously, you're absolutely right. Occupancy was a big lift here in the first quarter relative to the first quarter of last year. Second quarter, third quarter and fourth quarter, the revenue growth is really kind of going to come from both the rental rate growth as well as the reduction in bad debt that we forecasted throughout the year. I would say, generally speaking, the reduction in bad debt throughout the year will continue to kind of pace.

[Jim Sebra, President & CFO at Independence Realty Trust]

I think our original forecast kind of had us getting at, call it, 1.4%, one point five % one point four % to 1.5% of revenue this year. And we ended we're right about 1.8% today, and it will kind of move down to, call it, 1.2 to 1.3% to average out to that 1.4 And then obviously the rent growth trajectory is really going to benefit us in the second half of the year.

[Ami Probandt, Equity Research Associate at UBS Group]

Got it. And then as we move past supply, how are you thinking about the relative performance between the Bs and the As or the renovated Bs?

[Jim Sebra, President & CFO at Independence Realty Trust]

In terms of relative performance of just rent growth or occupancy?

[Ami Probandt, Equity Research Associate at UBS Group]

Yes, rent growth. Yes, mainly rent growth, but if you could touch on some of the demand trends that you might see as well.

[Jim Sebra, President & CFO at Independence Realty Trust]

Yes. We continue to see we're predominantly a Class B property or portfolio. We continue to see really good demands for, obviously, the Class B product. The value added units or the units when they do go into the renovation program are pretty much always pre leased. We really don't have kind of excess inventory on the value add communities.

[Jim Sebra, President & CFO at Independence Realty Trust]

The Class A deals that we do have, they did compete a little more with some of the new supply that was delivered, But we still see demand trends picking up there. But they continue to see just nice stable demand.

[Operator]

Your next question is from the line of Jamie Feldman with Wells Fargo.

[Jamie Feldman, Managing Director, Head of REIT Research at Wells Fargo]

Great. Thanks and good morning. Can you talk about costs in your redevelopment program and the potential impacts from tariffs? How early do you lock in costs ahead of projects? And how sustainable are your mid single digit returns on investment if we see costs move 10% higher or more?

[Jim Sebra, President & CFO at Independence Realty Trust]

Yes. It's a great question. For the vast majority of our costs in the renovation program, obviously, there's a good chunk of it that is labor to obviously do the actual turn. Some of the more product heavy costs are in the value add and then the actual vinyl flooring that we'll put in or in the appliances. A good chunk of the appliances come from manufacturers inside of America, so we don't necessarily have a huge tariff issue there unless, obviously, they have tariff issues sourcing raw materials from non U.

[Jim Sebra, President & CFO at Independence Realty Trust]

S. Countries. The vast majority of the vinyl flooring will either come from Vietnam or South Korea, And we've already locked in pricing for the next for 2025, for a full year. So we're at this point, we're really not expecting any kind of really significant pressure on the value add. But that's where if there is issues in the tariff and trade world, that's where we at IRT will expect to see it.

[Jim Sebra, President & CFO at Independence Realty Trust]

But as you can imagine, it's still very early to tell.

[Jamie Feldman, Managing Director, Head of REIT Research at Wells Fargo]

Okay. Thanks for that. And then, just thinking more about the blend, it looks like your new and renewals are in line and slightly better than your March update, but more new leases took the blend down. Can you talk about did you take back any more delinquent units that would have changed the blended occupancy as you did your leasing and focused on your leasing?

[Janice Richards, EVP - Operations at Independence Realty Trust]

Overall, we've seen our delinquent units maintained. We did see a decrease of 50 basis points in our bad debt from year over year. And so we're anticipating that to continue to decrease to achieve guidance of 1.2%. So we did have early terms that contributed to that mix, but it was relatively normal for the season.

[Operator]

Your next question is from the line of Linda Tsai with Jefferies. Linda, your line is open.

[Janice Richards, EVP - Operations at Independence Realty Trust]

There's no response from that Yes.

[Scott Schaeffer, CEO & Chairman of The Board at Independence Realty Trust]

We can move the next analyst.

[Operator]

Your next question comes from the line of John Pawlowski with Green Street.

[John Pawlowski, Managing Director at Green Street Advisors, LLC]

Thanks for the time. A few questions about the thought process and the assumptions underpinning the full year revenue guide. I know it sounds like you're assuming supply comes down pretty substantially this year. Can you help frame your job growth assumptions for 2025? How that kind of compares to the job growth you saw across your footprint in 2024?

[Jim Sebra, President & CFO at Independence Realty Trust]

Yes. I don't have I apologize. I don't have the job growth assumptions right in front of me. I would say that some of the data points that we've talked about in the past where you have both, obviously, population and job growth per unit of new supply. Over the last three years, that ratio of kind of population growth to supply growth in our submarkets was, I think, 3.8 people for every new supply.

[Jim Sebra, President & CFO at Independence Realty Trust]

In the next three years, so 2025, '20 '20 '6, '20 '20 '7, that ratio is going to be roughly seven times. I do know that, obviously, when you look at the supply trends, we delivered or in 2024, the deliveries were about six percent of existing stock in our submarkets. And in 2025, that's going to drop to about 2%. So the job growth and the population growth, we think, is just generally relatively steady with historical trends. It's just the supply is really dropping off.

[Scott Schaeffer, CEO & Chairman of The Board at Independence Realty Trust]

Yes. And I would add to that, as we stated in the prepared remarks, that according to CoStar, there was a negative absorption in 2024 of 21%. And while nationwide, 2025 is expected to have a 1.5% positive absorption and while our submarkets specifically will be 8.5% positive absorption. So according to CoStar, that indicates continued job growth and far, far less new supply, which is what we're seeing as we move through 2025.

[John Pawlowski, Managing Director at Green Street Advisors, LLC]

Okay. And on that point, it'd be helpful just to maybe hear you talk through a few of the most heavily supplied markets right now, the Denver sorry, the Raleigh's, the Atlanta's. And just any statistics that you can point to say, hey, this inflection point is happening right now. Rent spreads are about to lag higher. You know, the exact numbers in any given quarter, I'm less concerned about.

[John Pawlowski, Managing Director at Green Street Advisors, LLC]

It's just it doesn't feel like the light is is turning on in some of these heavily supplied markets. So any data points that give you confidence for this big reacceleration that seems to be underpinning the the revenue guidance would be helpful to hear.

[Janice Richards, EVP - Operations at Independence Realty Trust]

Sure. We see, you know, Charlotte and Colorado are going to continue to have some supply pressures throughout '24. And so I'm sorry. '25. So we will be, you know, looking to outperform and maintain not only occupancy but maximize revenue where we can.

[Janice Richards, EVP - Operations at Independence Realty Trust]

Atlanta and Raleigh, we've seen a positive new lease rent growth since January and sorry. Not positive new lease rent growth, but less negative new lease growth with the trajectory where it's becoming, less and less every month. And I think that is starting to be a data point that shows the trajectory of the supply with the demand and the absorption rates increasing. So I think we'll continue to see that through the rest of 'twenty five in Atlanta and Raleigh. Charlotte and Colorado will still be having pressures throughout 'twenty five.

[Jim Sebra, President & CFO at Independence Realty Trust]

Josh, just as a little aside, but some specific numbers. In terms of supply growth, when you look at this pick a market like at Lam, which is our largest market, in 2024, the new deliveries that occurred was about 6% of existing stock in our submarkets, not even just the overall, just in our submarkets. For 2025, CoStar estimates that to be 90 basis points, a significant falloff.

[Operator]

Your next question is from the line of Jamie Feldman with Wells Fargo.

[Jamie Feldman, Managing Director, Head of REIT Research at Wells Fargo]

Great. Thanks for taking the follow-up question. I just wanted to follow-up on the expense side. You have two insurance renewals coming here in May and June. Thus far, we've seen declines in insurance premiums year to date from some of your peers.

[Jamie Feldman, Managing Director, Head of REIT Research at Wells Fargo]

So curious how you're thinking about the renewal in terms of your expectations and what's in your guidance? And then any other OpEx line items we should be thinking about where you could see some benefits here?

[Jim Sebra, President & CFO at Independence Realty Trust]

Sure. Good question. You know, we have two renew expense, insurance renewals. Our property and casualty will renew on May 15, and our liability will renew on July 1, not June. So the still a little bit early on the property and casualty, and I don't want to obviously talk about too much specifics.

[Jim Sebra, President & CFO at Independence Realty Trust]

Our guidance at this point assumed a 10% increase for the for the year, but we will we are expecting to generate a decrease in the premium once once the the renewal is signed. So it's a little bit early, but I don't want to give kind of too much, direction in terms of the quantification of it yet until it's really firm. The liability premium or liability policy that we'll renew in early July, we are expecting an increase. But overall, between both policies, it should it is expected to be a net decrease.

[Scott Schaeffer, CEO & Chairman of The Board at Independence Realty Trust]

The liability expense is far smaller insurance premium expense is far smaller than the property and casualty. Correct.

[Jamie Feldman, Managing Director, Head of REIT Research at Wells Fargo]

Okay. So just to make sure I heard it right, you're assuming a 10% increase, but you think it'll be meaningfully lower, maybe even a decrease?

[Jim Sebra, President & CFO at Independence Realty Trust]

Yes.

[Jamie Feldman, Managing Director, Head of REIT Research at Wells Fargo]

Okay. That's nice. And then, any other OpEx line items we should be thinking about that, you know, you think are either trending in line with guidance or or things might be changing better or worse?

[Jim Sebra, President & CFO at Independence Realty Trust]

Yeah. I would say one of the items that, as I mentioned in the prepared remarks, that trended, in the q one better than guidance was repairs and maintenance and turnover costs. We just had better retention than we would originally assume in guidance. That's obviously sticky rather than a timing thing, and that obviously will move and shape throughout the year as retention changes. And obviously, the rest of the categories continue to kind of be in line with guidance.

[Jim Sebra, President & CFO at Independence Realty Trust]

The big boy of real estate taxes, that is a TBD that will we won't get the vast majority of our assessments in until, call it, the June, early mid July. So we'll have a lot more commentary for, obviously, you and the market in our July earnings call.

[Operator]

Your next question is from the line of Linda Tsai with Jefferies.

[Linda Tsai, Senior Analyst at Jefferies]

Hi. Sorry about that earlier and I might have missed this. So you exited Birmingham. Are there any other markets you would expect to exit by year end?

[Jim Sebra, President & CFO at Independence Realty Trust]

Yes. At this point, no. Our dispositions guidance is currently complete. We're obviously always reviewing the portfolio, but there's no expected change at this very moment. Once there is an update, we'll be obviously happy to give it.

[Linda Tsai, Senior Analyst at Jefferies]

And then in terms of June and July being your highest expiration month, kind of any, initial color you could give there?

[Jim Sebra, President & CFO at Independence Realty Trust]

In terms of leasing velocity, I mean, yeah, you're you're right. June and July are our highest expiration month. Obviously, Janice and the team are working expeditiously to try to drive leasing ahead of those expiration months. As I mentioned, here in the month of May, the net demand is 25% better this year than it was last year at this point. So we're excited about kind of where we are heading into the leasing season.

[Jim Sebra, President & CFO at Independence Realty Trust]

And we're trying to continue to keep retention as high as we can to really offset any kind of negative new lease pressure or lease pressure in the back half of year so we can really take advantage of that waning supply.

[Operator]

Your next question is from the line of Mason Gall with Baird.

[Mason Guell, Equity Research Analyst at Baird]

Thanks. Good morning, everyone. You talk about the blend difference between your Midwest and Sunbelt markets in general? And then kind of how you expect that to trend throughout the year?

[Janice Richards, EVP - Operations at Independence Realty Trust]

We're seeing as anticipated blends in the Midwest where, you know, anywhere between 2% to 3%, based on seasonality. And then in our Sunbelt, we're starting to see positive trajectory on our blended, from January through April, and we'll continue to see that through the rest of the year.

[Mason Guell, Equity Research Analyst at Baird]

Thanks for that. And then on your acquisitions, I mean, you guys expect to acquire one in lease up and one stabilized. I guess going forward, do you have a preference for one or the other? Or do you kind of see it as more opportunistic?

[Scott Schaeffer, CEO & Chairman of The Board at Independence Realty Trust]

It's more opportunistic. There are certain markets where we're looking to add exposure. But as I said before, we're always focused on doing or acquiring assets that will be accretive to earnings in year one. I will add that everything in our pipeline today is the values would be below replacement cost. So we think any acquisition will fare well over the next few years.

[Operator]

You have a follow-up question from the line of Linda Tsai with Jefferies.

[Linda Tsai, Senior Analyst at Jefferies]

Hi, thanks. I just want to ask, I know Class B is holding up a bit better and that's the majority of your portfolio. Any sort of color around the delta between the performance of Class A versus B?

[Jim Sebra, President & CFO at Independence Realty Trust]

I apologize. You broke up at the beginning of the question. Would you mind just starting over again?

[Linda Tsai, Senior Analyst at Jefferies]

Sure. Class B is holding up better within your portfolio, which I understand is the majority. I was just wondering what the delta is in performance between Class A and Class B?

[Jim Sebra, President & CFO at Independence Realty Trust]

Yes. I don't have the NOI differences right now between the As and the Bs. I would say that the rental rate growth is certainly better in the Bs. The blends in the first quarter on the B portfolio was about positive, call it, 40 basis points. And the blends on the Class A, which is only 17 properties, was about minus, call it, 80 basis points.

[Operator]

Thank you. This concludes today's call. We thank you for joining. You may now disconnect your lines.

Participants

Executives

• Stephanie Krewson-Kelly, Head of Investor Relations
• Scott Schaeffer, CEO & Chairman of The Board
• Jim Sebra, President & CFO
• Janice Richards, EVP - Operations

Analysts

• Brad Heffern, Director at RBC Capital Markets
• Austin Wurschmidt, Senior Equity Research Analyst at KeyBanc Capital Markets
• John Kim, Managing Director - US Real Estate at BMO Capital Markets
• Eric Wolfe, Director at Citi
• Ami Probandt, Equity Research Associate at UBS Group
• Jamie Feldman, Managing Director, Head of REIT Research at Wells Fargo
• John Pawlowski, Managing Director at Green Street Advisors, LLC
• Linda Tsai, Senior Analyst at Jefferies
• Mason Guell, Equity Research Analyst at Baird