• Core FFO per Share: $1.16 for the full year 2024, at the high end of guidance.
• Same Store NOI Growth: 3.2% for the year, with a 5.3% increase in Q4.
• Same Store Average Occupancy: Increased by 110 basis points to 95.2%.
• Average Effective Rental Rates: Increased by 1.3% for the year.
• Resident Renewal Rate: 62.7% for the year.
• Value Add Program: Completed 1,671 renovations, driving a $239 average increase in monthly rent per unit.
• Acquisitions: $240 million invested in three properties with a blended economic cap rate of 5.7%.
• Net Debt to Adjusted EBITDA: Reduced to 5.9 times at year-end.
• Investment Grade Rating: Received a B flat rating with a stable outlook from S&P and Fitch.
• Liquidity: Nearly three-quarters of a billion dollars, including $156 million available on forward equity commitments.
• 2025 EPS Guidance: $0.19 to $0.22 per share.
• 2025 Core FFO Guidance: $1.16 to $1.19 per share.
• 2025 Same Store NOI Growth Expectation: 2.1% at the midpoint.
• 2025 Blended Rental Rate Growth Expectation: 1.6% for the year.
• 2025 Planned Renovations: Approximately 2,500 to 3,000 units.
• 2025 Acquisition Plan: Approximately $240 million in properties with a mid-5s economic cap rate.

• Warning! GuruFocus has detected 10 Warning Signs with IRT.

Release Date: February 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Independence Realty Trust Inc (NYSE:IRT) achieved a core FFO per share of $1.16 for 2024, which was at the high end of their guidance.
• The company increased same store average occupancy by 110 basis points to 95.2% and achieved a 1.3% increase in average effective rental rates.
• IRT completed 1,671 renovations in 2024, driving a $239 average increase in monthly rent per unit and achieving a 15% return on investment.
• The company strengthened its portfolio by investing $240 million to acquire three properties in high growth markets, expanding its presence in Charlotte, Tampa, and Orlando.
• IRT achieved investment grade issuer status, receiving a B flat rating with a stable outlook from both S&P and Fitch, which improved their cost of debt capital.

Negative Points

• New lease rate growth remains negative early in 2025, although it is gradually improving.
• The company expects a blended rental rate growth of only 1.6% for 2025, which is relatively conservative compared to peers.
• There is a forecasted increase in same store operating expenses by 3.5% in 2025, driven by a 3.8% increase in controllable expenses.
• Bad debt was up sequentially in the fourth quarter of 2024, with expectations to improve to 1.4% of revenue in 2025.
• The company is cautious about the impact of elevated supply in markets like Denver and Charlotte, which could affect rental rates and occupancy.

Q & A Highlights

Q: Jim, you mentioned new lease rate growth remains negative early this year. What does guidance assume for new lease rate growth in 2025, and does it include benefits from value add redevelopment? A: In guidance, we've assumed a blended lease rate growth of 1.6% for the year, excluding any benefit from value add. This assumes a renewal growth of 3%, a 55% retention rate, and effectively 0% new lease growth over the year. We expect new leases to move from slightly negative to positive by early April.

Q: Can you discuss the investment pipeline and the types of assets you're targeting? A: We have a robust pipeline of both new construction communities in lease-up and existing Class B properties. We're seeing opportunities due to financing challenges and higher interest rates, leading to more properties becoming available. We're confident in effectively deploying our capital.

Q: Why are you increasing the value add spend in 2025, and how will you manage occupancy growth with this increase? A: We plan to increase value add renovations as supply pressures wane and rents rise. We aim to start 15 new communities in 2025, dispersing potential occupancy pressure across a larger volume of properties, allowing us to achieve our target of 2,500 to 3,000 renovations.

Q: Can you explain the expected improvement in bad debt for 2025? A: The increase in bad debt in Q4 was due to seasonal timing, particularly in Atlanta and Memphis. We expect it to normalize to 1.4% for the year, supported by measures to identify and address fraud and reduce eviction queue volumes.

Q: How do the cap rates for new investments compare to six months ago, and are you seeing more distressed properties? A: Cap rates have remained stable in the mid-5s. We're seeing more properties come to market due to financing challenges, but cap rates have not significantly changed. The Indianapolis asset is at a 5.7% cap rate, similar to recent acquisitions in Charlotte and Orlando.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.