IRT(US:IRT)2024-02-28 21:16Debt and Interest Rate Exposure - As of December 31, 2023, the company had $835.1 million of its $2,515.7 million total outstanding consolidated indebtedness bearing interest at variable rates, exposing it to interest rate risk[153]. - A 100-basis point increase in interest rates would result in a $0.9 million increase in annual interest expense due to current interest rate swap and collar agreements[153]. - The company expects to incur additional indebtedness in the future, with approximately $2,401.6 million requiring balloon payments at maturity dates ranging from 2024 to 2030[157]. - The company had $834.5 million of unsecured debt indexed to the Secured Overnight Financing Rate (SOFR) as of December 31, 2023[162]. - The transition to SOFR may introduce volatility, as daily changes in SOFR have been more volatile than those in other benchmark rates like USD LIBOR[164]. - Compliance with REIT requirements may limit the company's ability to hedge risks effectively, potentially increasing exposure to interest rate changes[156]. - As of December 31, 2023, the company has $2.52 billion of outstanding indebtedness, with $1.68 billion fixed rate and $0.84 billion floating rate[334]. - The company has three float-to-fixed interest rate swaps with a total notional amount of $500 million and two interest rate collars totaling $250 million[334]. - An increase of 100 basis points in the SOFR interest rate curve would result in an interest expense increase of $865,000 for variable-rate indebtedness[339]. - The company is exposed to market risk from interest rate changes, which may affect the value of financial instruments[330]. Environmental and Compliance Risks - The company may face significant costs related to environmental compliance, which could adversely affect net income and cash available for distributions[167]. - The presence of hazardous substances on properties could lead to substantial remediation costs and affect the ability to sell or rent properties[168]. - The company may incur significant costs related to indoor air quality issues, including mold remediation, which could impact financial condition[174]. - Compliance with the Fair Housing Amendments Act (FHAA) is mandatory, and failure to comply could lead to substantial costs, including fines and litigation expenses[177]. - Legislative changes regarding rent control and tenant rights may adversely affect the company's ability to raise rents and could impact property values[178]. - The company may incur costs related to compliance with the Disabilities Act, which could negatively affect financial performance[176]. Financial Performance and Results - Total revenue for the year ended December 31, 2023, was $660,983 thousand, an increase of 5.8% compared to $628,525 thousand in 2022[364]. - The Company reported a net loss of $17,807 thousand for 2023, compared to a net income of $120,659 thousand in 2022, indicating a significant decline in profitability[364]. - Rental and other property revenue increased to $659,841 thousand in 2023, up from $627,414 thousand in 2022, representing a growth of 5.2%[364]. - Total assets decreased to $6,280,175 thousand as of December 31, 2023, down from $6,532,095 thousand in 2022, a reduction of approximately 3.9%[362]. - The Company’s total liabilities decreased to $2,712,981 thousand in 2023 from $2,794,228 thousand in 2022, a decline of about 2.9%[362]. - The Company maintained effective internal control over financial reporting as of December 31, 2023, according to the audit opinion[354]. - The Company’s cash and cash equivalents increased to $22,852 thousand in 2023 from $16,084 thousand in 2022, reflecting a growth of approximately 42.1%[362]. - The Company incurred property operating expenses of $244,330 thousand in 2023, an increase from $232,275 thousand in 2022, representing a rise of about 5.2%[364]. - The Company’s accumulated deficit increased to $(348,405) thousand in 2023 from $(191,735) thousand in 2022, indicating a worsening financial position[362]. - The company recognized a noncontrolling interest upon consolidation of a former unconsolidated real estate entity, amounting to $256[371]. - The company reported a total comprehensive income of $3,431,297 for the year 2023[371]. - Net loss for 2023 was $17,807,000 compared to a net income of $120,659,000 in 2022[374]. - Net cash provided by operating activities increased to $262,170,000 in 2023 from $249,537,000 in 2022[374]. - Total cash, cash equivalents, and restricted cash at the end of 2023 was $50,732,000, up from $44,017,000 in 2022[376]. - Cash paid for interest in 2023 was $96,022,000, slightly down from $96,383,000 in 2022[376]. Shareholder and Stockholder Dynamics - The company may need to borrow funds to meet REIT minimum distribution requirements, which could increase expenses and reduce net income[184]. - Maintaining REIT qualification requires distributing at least 90% of taxable income, potentially limiting funds available for reinvestment[190]. - The company faces a 100% penalty tax on net income from prohibited transactions, which could reduce investment returns[193]. - If the operating partnership, IROP, is not treated as a partnership for tax purposes, it may be subject to corporate taxation, reducing available distributions[196]. - Distributions to tax-exempt investors may be classified as unrelated business taxable income (UBTI), requiring tax-exempt investors to pay tax on such income[197]. - The company intends to comply with various REIT requirements, which may hinder its ability to maximize profits and affect stock trading prices[191]. - Changes in federal income tax laws could adversely affect the company and its shareholders, impacting overall returns[180]. - The company’s Charter restricts any person from owning more than 9.8% of the outstanding shares to maintain REIT qualification[205]. - The Maryland General Corporation Law prohibits certain business combinations for five years after an interested stockholder becomes such, which may hinder acquisition attempts[207]. - The company may issue additional shares without stockholder approval, potentially affecting control dynamics[215]. - The bylaws designate specific courts for disputes, which may limit stockholders' ability to seek favorable judicial outcomes[218]. - The company may issue new shares of common stock, which could dilute existing stockholders' ownership percentage[225]. - Future issuances of debt securities may adversely affect the trading price of the company's common stock[229]. - The total number of shares outstanding as of December 31, 2023, is 224,706,731[371]. Real Estate Investments and Operations - The company owned and operated 116 multifamily apartment properties with a total of 34,431 units as of December 31, 2023[378]. - The company recognized a loss on impairment of real estate assets amounting to $66,547,000 in 2023[374]. - Capital expenditures in 2023 were $146,629,000, compared to $83,979,000 in 2022[374]. - The company completed the consolidation of a previously unconsolidated real estate entity, recognizing in-place leases valued at $398,000[391]. - The geographic concentration of rental revenue for 2023 was led by Texas (20.82%), Georgia (15.52%), and North Carolina (9.95%)[405]. - The carrying value of investments in real estate under development in Denver, Colorado was $98,365,000 as of December 31, 2023, down from $105,518,000 in 2022[400]. - The company recognized casualty losses of $925,000 in 2023, compared to gains of $(8,866,000) in 2022[398]. - The company recognized reimbursements of payroll-related expenses of $3,232,000 during the year ended December 31, 2023, related to employee retention credits[426]. - The STAR Merger, completed on December 16, 2021, involved assets valued at approximately $4.77 billion and liabilities of $1.89 billion[380]. - The STAR Merger resulted in the acquisition of 68 apartment communities containing 21,394 units, with a total purchase price of $4,677,522,000[434][436]. - The total sale price for the properties sold in 2023 was $562,575, with a net gain on sale of $1,900 after accounting for defeasance and debt prepayment gains[447]. - The total loss on impairment recorded for real estate assets in 2023 was $66,547, with significant losses from properties such as The Meadows at River Run and Fielders Creek[447]. - No property acquisitions were made during the year ended December 31, 2023, maintaining a focus on divestitures rather than expansion[449]. - The company expects to use net proceeds from property sales to reduce indebtedness, enhancing financial stability[444].