IRT(IRT) - 2021 Q4 - Annual Report

Debt and Interest Rate Exposure - As of December 31, 2021, the company had $826.5 million of its $2,705.3 million total outstanding indebtedness bearing interest at variable rates, exposing it to interest rate risk[156] - A 100-basis point increase in interest rates would result in a $3.5 million increase in annual interest expense, considering the company's current interest rate swap and collar agreements[156] - The company expects to incur additional indebtedness in the future, with approximately $2,553.0 million in balloon payments due at maturity dates ranging from 2022 to 2030[160] - The company has $826.5 million of unsecured debt indexed to LIBOR, with a transition to SOFR expected by July 1, 2023, which may affect financing costs[163] - Compliance with REIT requirements may limit the company's ability to hedge risks effectively, potentially increasing exposure to interest rate changes[159] - The company has $2,650.7 million of outstanding indebtedness as of December 31, 2021, with $1,824.2 million fixed rate and $826.5 million floating rate[324] - The fair value of the company's fixed-rate indebtedness was estimated at $1,903.2 million as of December 31, 2021[325] - An increase in market interest rates may negatively impact the market price of the company's common stock due to higher required distribution yields[227] Compliance and Regulatory Risks - The company may face significant costs related to compliance with environmental laws, which could adversely affect net income and cash available for distributions[166] - The presence of hazardous substances on properties could lead to substantial remediation costs and affect the company's ability to sell or rent properties[168] - The company may incur significant costs related to indoor air quality issues, moisture infiltration, and mold remediation, which could impact financial condition[174] - Compliance with the Americans with Disabilities Act may incur costs that adversely affect net income[175] - The Fair Housing Amendments Act compliance could lead to substantial costs due to potential fines and litigation[176] - Noncompliance with COVID-19 related laws may result in significant costs or business disruptions[177] - Rent control and stabilization laws could limit the ability to raise rents, adversely impacting property values[178] - Legislative changes could negatively affect returns to investors and the company's financial performance[180] Taxation and Distribution Issues - Dividends from REITs are generally not eligible for reduced tax rates, potentially making them less attractive to investors[183] - Borrowing to meet REIT distribution requirements may increase expenses and reduce net income[184] - Failure to maintain REIT qualification could lead to taxation on income, reducing distributions to stockholders[185] - Annual distribution requirements may force the company to distribute funds that could otherwise be reinvested[189] - The use of taxable REIT subsidiaries may increase overall tax liability[194] - Distributions to tax-exempt investors may be classified as unrelated business taxable income (UBTI), requiring tax-exempt investors to pay tax on such income[196] - Foreign investors may be subject to a 30% U.S. withholding tax on ordinary income distributions unless reduced by an applicable treaty[197] - Foreign investors disposing of U.S. real property interests may be subject to FIRPTA tax on recognized gains[198] - The company intends to qualify as "domestically controlled" to avoid FIRPTA tax implications for foreign investors[199] - Distributions may consist of both stock and cash, potentially leading to stockholders owing taxes exceeding cash received[202] Corporate Governance and Control - The company's Charter restricts ownership to prevent any individual or entity from owning more than 9.8% of the outstanding shares[204] - The Maryland General Corporation Law prohibits certain business combinations for five years after an interested stockholder becomes such[206] - The board of directors has the authority to amend the Charter without stockholder approval, which may affect control dynamics[211] - Stockholders have limited control over major policy changes, which are determined by the board of directors[209] - The company is a holding entity dependent on its operating partnership for cash flow, with stockholder claims subordinated to its obligations[214] Financial Performance and Risks - The company may experience a decline in the fair value of its assets, which could lead to impairment charges adversely affecting financial condition and stock price[220] - The company has limited exposure to financial market risks and uses derivative financial instruments to hedge against interest rate changes[321] - The company may issue new shares of common stock, which could dilute existing stockholders' ownership percentages[225] - The company has not established a minimum dividend payment level and cannot assure future dividend payments[231] - The company may suffer losses not covered by insurance, which could lead to loss of invested capital and anticipated profits[219] - The company is subject to various lawsuits and legal proceedings that could result in substantial costs[224] - The company may choose to self-insure a greater portion of risks in the future, which could affect its financial stability[219]