IRT(US:IRT)2021-10-28 15:40Financial Data and Key Metrics Changes - In Q3 2021, net income available to common shareholders was $11.5 million, up from $1.1 million in Q3 2020 [28] - Core FFO grew to $22.7 million, a 25% increase from $18.2 million in Q3 2020, with core FFO per share at $0.21, up 10.5% from $0.19 [28] - Same store NOI increased by 14.7%, driven by a revenue growth of 9.4% [29] - The company collected 98.4% of third quarter billings, maintaining a bad debt reserve of $1.2 million [30] Business Line Data and Key Metrics Changes - Same store average occupancy increased to 96%, a 220 basis point increase year-over-year [12] - Average effective monthly rent per unit grew by 7.3% in the quarter [12] - New lease rates increased by 19.8% and renewals were up 5% during Q3, leading to a combined lease-over-lease rental rate increase of 10.5% [21] Market Data and Key Metrics Changes - The total portfolio average occupancy was 96.2% in October, a 130 basis point improvement compared to the previous year [13] - The company is experiencing strong demand due to favorable migration trends and population growth in its markets [11] Company Strategy and Development Direction - The company is focused on executing its value-add program, completing renovations on 330 units in Q3, with a total of 4,419 units renovated since the program's inception [14] - A joint venture was established to develop three new communities in Nashville, indicating a strategy to enter markets with long-term growth potential [15] - The proposed merger with STAR aims to create a 38,000 unit portfolio in the sunbelt region, with expected annual synergies of $28 million [17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about continued strong demand and rental rate growth, with expectations of double-digit blended rent growth in 2022 [44] - The company is evaluating potential impacts of inflation, labor shortages, and supply chain disruptions on its operations [41] - The merger with STAR is expected to close in mid-December, with management confident in achieving projected synergies [17][93] Other Important Information - The board declared a quarterly cash dividend of $0.12 per share, representing a payout ratio of 63% on $0.19 of AFFO during Q3 2021 [34] - The updated guidance for 2021 EPS is a range of $0.18 to $0.23 per diluted share, and for core FFO is a range of $0.80 to $0.82 per share [35] Q&A Session Summary Question: Integration challenges with the merger - Management is confident in the integration process due to similar operating systems and cultures between IRT and STAR, with weekly integration meetings in place [52][55] Question: Value-add platform and material shortages - The company has a procurement supply chain team to mitigate material shortages, focusing on appliances and countertops rather than ground-up construction [58] Question: Demand drivers for pricing power - Strong demand is attributed to a supply-demand imbalance in the markets, compounded by COVID-19 impacts and slowed new construction [59][60] Question: Guidance on blended lease rates - The guidance reflects a midpoint revenue growth of 7.5%, with year-to-date blended rent growth at about 9% [64] Question: Expected capex investments post-merger - No deferred maintenance was found in the STAR portfolio, with recurring capex spending expected to be consistent with IRT's [65] Question: Dividend considerations post-merger - The board will evaluate the dividend after the merger and integration are completed [66] Question: STAR asset integration into redevelopment - The company plans to quickly add STAR assets to the renovation platform, starting with markets already served [70] Question: Impact of asset dispositions on guidance - The removal of six properties from the same store pool had a minimal effect on growth guidance [71][72] Question: Managing potential shareholder sell-down post-merger - Management anticipates that index buying will offset potential sell-downs from STAR's retail shareholders [74]