IRT(US:IRT)2021-02-18 21:16Part I Business The company is a self-managed REIT owning 56 multifamily properties with 15,667 units in non-gateway U.S. markets, focusing on value-add initiatives Portfolio Overview as of December 31, 2020 | Metric | Value | | :--- | :--- | | Number of Properties | 56 | | Number of Units | 15,667 | | Geographic Footprint | Georgia, North Carolina, Tennessee, Kentucky, Ohio, Oklahoma, Indiana, Texas, Florida, South Carolina, Missouri, and Alabama | - The company's investment strategy focuses on non-gateway cities with strong apartment demand, aiming to acquire properties with operational upside, improve them through capital expenditures, and selectively dispose of assets that no longer align with the long-term strategy2021 2020 Key Operational and Transactional Highlights | Activity | Details | | :--- | :--- | | COVID-19 Response | Increased weighted average occupancy to 95.0% from 92.5% in 2019. Implemented 276 deferred payment plans for residents, deferring over $0.5 million in rent | | Value Add Initiative | Incurred $13.1 million in renovation costs on 3,719 units, achieving a 15.9% return on total renovation costs | | Acquisitions | Acquired 2 communities (672 units) for $145.2 million in Dallas, TX, and Huntsville, AL | | Dispositions | Disposed of 3 communities (559 units) for $59.7 million, exiting Chattanooga, TN, and Baton Rouge, LA markets | | Capital Raising | Entered forward equity sales for 10,350,000 shares and established a $150.0 million ATM Program | Risk Factors The company faces risks from the COVID-19 pandemic, market concentration, debt financing, regulatory compliance, and maintaining REIT qualification - The COVID-19 pandemic poses a material risk, potentially affecting residents' ability to pay rent, disrupting leasing activities, and straining business continuity. The CDC's eviction moratorium further restricts the company's ability to enforce rental obligations656667 - The company's portfolio is concentrated in the multifamily apartment sector and geographically in the Southeastern United States, making it vulnerable to downturns in this specific asset class or regional economic weakness7374 - Significant financial risks include reliance on debt financing, potential unavailability of capital on favorable terms, and exposure to rising interest rates on its variable-rate debt. As of December 31, 2020, $484.8 million of its total debt bore interest at variable rates59132142 - Failure to maintain REIT qualification would subject the company to corporate income tax, reducing cash available for distributions. Compliance requires distributing at least 90% of REIT taxable income annually, which may necessitate borrowing funds or forgoing other attractive investment opportunities169174175 Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments217 Properties As of December 31, 2020, the company's portfolio comprised 56 multifamily properties with 15,667 units, primarily in the Southeastern U.S Portfolio Summary as of December 31, 2020 | Metric | Total | | :--- | :--- | | Property Count | 56 | | Units | 15,667 | | Gross Cost (in thousands) | $1,916,770 | | Net Book Value (in thousands) | $1,708,152 | | Period End Occupancy | 95.3% | | Average Occupancy (Q4) | 95.0% | | Avg. Effective Rent/Unit (Q4) | $1,136 | Legal Proceedings The company is involved in ordinary course legal proceedings, which management expects will not materially impact its financial position or operations - The company is subject to ordinary course legal proceedings, which are generally covered by insurance and are not expected to have a material adverse financial impact221 Mine Safety Disclosures This item is not applicable to the company - Not applicable222 Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the NYSE under 'IRT', with a quarterly dividend of $0.12 per share, and no issuer equity purchases in 2020 - The company's common stock is listed on the NYSE under the symbol "IRT"225 - The current quarterly dividend rate is $0.12 per common share226 - In 2020, the company issued 196,974 shares of common stock to settle exchanges of an equal number of IROP limited partnership units230 Selected Financial Data Selected financial data shows consistent revenue growth to $211.9 million in 2020, volatile net income, and a reduced cash distribution per share to $0.54 in 2020 Selected Financial Data (2018-2020) | (in thousands, except per share data) | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Operating Data | | | | | Total revenue | $211,906 | $203,223 | $191,232 | | Net income | $14,877 | $46,354 | $26,610 | | Diluted EPS | $0.16 | $0.51 | $0.30 | | Balance Sheet Data (End of Period) | | | | | Investments in real estate, net | $1,708,152 | $1,637,930 | $1,548,153 | | Total assets | $1,734,897 | $1,664,106 | $1,659,336 | | Total indebtedness, net | $945,686 | $985,572 | $985,488 | | Other Data | | | | | Property portfolio occupancy | 95.3% | 92.5% | 92.5% | | Cash distributions declared per share | $0.5400 | $0.7200 | $0.7200 | Management's Discussion and Analysis of Financial Condition and Results of Operations In 2020, total revenue grew 4.2% to $211.9 million, but net income decreased to $14.9 million due to lower gains on asset sales, while CFFO per share increased to $0.80 Results of Operations In 2020, total revenue increased 4.2% to $211.9 million, but net income decreased by $31.5 million to $14.9 million due to lower gains on asset sales Consolidated Results Comparison (2020 vs. 2019) | (in thousands) | 2020 | 2019 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $211,906 | $203,223 | $8,683 | 4.3% | | Property Operating Expenses | $82,978 | $79,568 | $3,410 | 4.3% | | Net Operating Income | $128,189 | $123,052 | $5,137 | 4.2% | | Gain on sale of real estate | $7,554 | $35,211 | ($27,657) | -78.5% | | Net Income | $14,877 | $46,354 | ($31,477) | -67.9% | Same Store Portfolio Performance (2020 vs. 2019, in thousands) | Metric | 2020 | 2019 | % Change | | :--- | :--- | :--- | :--- | | Rental & Other Property Revenue | $189,214 | $182,599 | 3.6% | | Total Operating Expenses | $74,201 | $71,005 | 4.5% | | Net Operating Income (NOI) | $115,013 | $111,594 | 3.1% | | Average Occupancy | 93.6% | 93.4% | 0.2% | Non-GAAP Financial Measures The company uses FFO and CFFO as non-GAAP measures, with 2020 FFO at $67.7 million ($0.72 per share) and CFFO at $75.9 million ($0.80 per share) FFO and Core FFO Reconciliation (2018-2020) | (in thousands, except per share) | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Net income | $14,877 | $46,354 | $26,610 | | Real estate depreciation & amortization | $60,352 | $52,482 | $45,067 | | (Gain on sale) of real estate assets, net | ($7,554) | ($42,628) | ($11,561) | | Funds From Operations (FFO) | $67,675 | $56,208 | $60,116 | | FFO per share | $0.72 | $0.62 | $0.68 | | Core Funds From Operations (CFFO) | $75,863 | $68,497 | $65,083 | | CFFO per share | $0.80 | $0.76 | $0.74 | Liquidity and Capital Resources The company's liquidity is sourced from operations, credit facilities, property sales, and equity issuances, with 2020 net cash from operations at $75.0 million and financing activities at $48.8 million Summary of Cash Flows (in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Operating Activities | $74,959 | $75,001 | | Investing Activities | ($124,540) | ($106,396) | | Financing Activities | $48,763 | $29,783 | - Key financing activities in 2020 included issuing 10,350,000 shares of common stock under forward sale agreements for approximately $148.8 million in proceeds and establishing a new $150.0 million ATM program266 Capitalization As of December 31, 2020, total debt was $945.7 million with a 2.7% weighted average interest rate and 3.1-year maturity, comprising unsecured facilities and fixed-rate mortgages Debt Summary as of December 31, 2020 | Debt Type | Outstanding Principal (in thousands) | Type | Weighted Avg. Rate | Weighted Avg. Maturity (years) | | :--- | :--- | :--- | :--- | :--- | | Unsecured credit facility | $184,802 | Floating | 1.6% | 2.4 | | Unsecured term loans | $300,000 | Floating | 1.5% | 3.3 | | Mortgages | $465,092 | Fixed | 3.9% | 3.2 | | Total Debt | $949,894 | | 2.7% | 3.1 | Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate risk from its $484.8 million variable-rate debt, partially mitigated by derivative instruments, with a 100-basis point rate increase impacting annual interest expense by $0.8 million - The company is exposed to interest rate risk on $484.8 million of floating-rate debt as of year-end 2020. This risk is partially managed through interest rate swaps and collars295 Interest Rate Sensitivity Analysis (as of Dec 31, 2020) | Scenario | Impact on Annual Interest Expense (in thousands) | | :--- | :--- | | 100 Basis Point Increase | $848 | | 100 Basis Point Decrease | ($848) | Financial Statements and Supplementary Data This section presents the audited consolidated financial statements for 2020, with KPMG LLP issuing an unqualified opinion and identifying real estate impairment evaluation as a critical audit matter - The financial statements were audited by KPMG LLP, which issued an unqualified opinion304305 - The auditor identified the evaluation of real estate assets for potential impairment as a critical audit matter due to the high degree of subjective and complex judgment required309310 Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Investments in real estate, net | $1,708,152 | $1,637,930 | | Total Assets | $1,734,897 | $1,664,106 | | Indebtedness, net | $945,686 | $985,572 | | Total Liabilities | $1,022,126 | $1,044,349 | | Total Equity | $712,771 | $619,757 | Consolidated Statement of Operations Highlights (in thousands) | Account | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Total revenue | $211,906 | $203,223 | $191,232 | | Total expenses | $168,095 | $152,854 | $139,410 | | Net income | $14,877 | $46,354 | $26,610 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None452 Controls and Procedures Management concluded that its disclosure controls and internal control over financial reporting were effective as of December 31, 2020 - Management concluded that both disclosure controls and procedures and internal control over financial reporting were effective as of December 31, 2020454456 Other Information The company reports no other information under this item - None459 Part III Directors, Executive Officers and Corporate Governance Information regarding directors, executive officers, and corporate governance is incorporated by reference from the 2021 proxy statement - The information required by this item will be set forth in the definitive proxy statement for the 2021 annual meeting of stockholders and is incorporated by reference461 Executive Compensation Information regarding executive compensation is incorporated by reference from the 2021 proxy statement - The information required by this item will be set forth in the definitive proxy statement for the 2021 annual meeting of stockholders and is incorporated by reference462 Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information on security ownership and related stockholder matters is incorporated by reference from the 2021 proxy statement - The information required by this item will be set forth in the definitive proxy statement for the 2021 annual meeting of stockholders and is incorporated by reference463 Certain Relationships and Related Transactions, and Director Independence Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2021 proxy statement - The information required by this item will be set forth in the definitive proxy statement for the 2021 annual meeting of stockholders and is incorporated by reference464 Principal Accountant Fees and Services Information on principal accountant fees and services is incorporated by reference from the 2021 proxy statement - The information required by this item will be set forth in the definitive proxy statement for the 2021 annual meeting of stockholders and is incorporated by reference465 Part IV Exhibits and Financial Statement Schedules This section lists all financial statements, schedules, and exhibits filed with the annual report, including consolidated financial statements and material contracts - This section contains the index of all financial statements, schedules, and exhibits filed with the annual report467470 Form 10-K Summary The company did not provide a Form 10-K summary - None480