Independence Realty Trust, Inc.

Good afternoon, ladies and gentlemen, and welcome to the Q1 2020 Independence Realty Trust, Inc. Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question and answer session, and instructions will follow at that time. If you should require assistance during the conference, please press star, then zero on your touchtone telephone. As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Ms. Annis. Thank you.

Thank you, and good morning, everyone. Thank you for joining us to review Independence Realty Trust first quarter 2020 financial results. On the call with me today is Scott Schaffer, our CEO, Jim Zebra, our Chief Financial Officer, and Farrell Ender, President of IRT. Today's call is being webcast on our website at irtliving.com. There will be a replay of the call available via webcast on our Investor Relations website and telephonically beginning at approximately 12 p.m. Eastern today. Before I turn the call over to Scott, I'd like to remind everyone that there may be forward-looking statements made in this call. These forward-looking statements reflect IRT's current views with respect to future events and financial performance. Actual results could differ substantially and materially from what IRT has projected. Such statements are made in good faith, pursuant to the safe harbor provision of the Private Securities Litigation Reform Act of 1995. Please refer to IRT's press release, supplemental information, and filings with the SEC for factors that could affect the accuracy of our expectations or cause our future results to differ materially from those expectations. Participants may discuss non-GAAP financial measures during this call. A copy of IRT's press release and supplemental information containing financial information, other statistical information, and a reconciliation of non-GAAP financial measures to the most direct comparable GAAP financial measure is attached to IRT's most recent current report on the Form 8K available at IRT's website under Investor Relations. IRT's other SEC filings are also available through this link. IRT does not undertake to update forward-looking statements in this call or with respect to matters described herein, except as may be required by law. With that, It's my pleasure to turn the call over to Scott Schaefer.

Thank you, Anna, and thank you all for joining us this morning. I know this is a difficult time for many people, so I hope you and your families are all staying safe and healthy. We at IRT have been focused on protecting the well-being of our employees and residents during these unprecedented times. I would like to thank our team who have led our efforts in keeping our communities safe and clean and maintaining full attention to our resident and property needs. all while remaining committed to creating and delivering value to our stakeholders. We understand that this pandemic has had a significant impact on our residents, and we remain committed to working with those that are directly impacted. We have provided flexibility to those residents demonstrating financial hardship with their near-term monthly rental requirements. This includes creating payment plans, waiving late fees, and halting evictions. The IR team is taking necessary steps to protect our business and maintain significant liquidity. This includes continuing to tightly manage our cost structure and pausing a portion of our value-add program for the time being. These decisions will enable us to be well-positioned to manage the impact of this crisis and have the financial flexibility to act decisively as we plan for an eventual market recovery. Touching briefly on our first quarter, we delivered favorable performance across the portfolio, including a year-over-year same-store NOI growth of 7%, with an NOI margin of 61.5%, 130 basis point improvement year over year. Core funds from operations per share was 19 cents, and we once again covered our dividend on an AFFO basis. In addition, our average occupancy at our 38 non-value-add properties was a strong 94%, and the same-store portfolio overall was 92.7% when including the value-add communities at quarter end, supporting our focus on retention and consistency during these uncertain times. As we look at the second quarter, there remains uncertainty regarding the short-term effects of our country's response to this pandemic. In April, we collected 98% of rents filled when including the 139 payment plans we entered into with households in need of assistance. In addition, there are over 150 payment plan requests approved for May were in the process of approval. Through May 6th, we have collected approximately 90% of May rent receipts, which is consistent with our collections at this point in April. We will continue to support our residents as they seek measures to keep up with their payments and we will closely manage our operational costs in order to mitigate the impact on NOI in the coming months. While it's hard to predict the length and depth of this crisis, we have been monitoring discussions regarding the potential reopening of states in which we have properties and plan to reopen our community offices and amenities in line with those guidelines. Based on current discussions, all of our states have or are in the process of easing restrictions in May. This should prove to be beneficial to our residents looking to resume activities and return to work but we are well aware that strict safety measures will need to be adhered to, and we will remain diligent on protecting our employees' and residents' health and well-being. Despite initial signs that a number of our markets are beginning to open, we must balance our cautious optimism with the reality that the trajectory of the economic recovery may be muted for a period of time. We will manage the portfolio, balancing appropriate rent growth strategies with the need to preserve occupancy. Further, our board has evaluated our dividend policy to ensure that we are well-positioned to navigate near-term uncertainty and have the financial flexibility to fund our long-term growth strategy. Given our track record of delivering organic rent growth and execution of our value-add initiative, both of which supported outside NOI growth, we were well-positioned to achieve a normalized dividend payout of 70% to 75% over time. With current market uncertainty, along with our decision to pause a portion of our value-add program, we believe it is prudent at this time to adjust our quarterly dividend from $0.18 to $0.12 per share. beginning in the second quarter of 2020. This equates to a payout ratio that is now more in line with our peers. The right size dividend increases our financial flexibility and will allow us to accelerate our deleveraging efforts as we will be retaining approximately $23 million annually. This decision will provide IRT with an even stronger foundation for continued growth and expansion when normal market conditions return. We remain confident in our resilient portfolio and sustainable business model. Simply stated, our confidence stems from four factors. First, IRT has built the right team and portfolio of assets across strong non-gateway markets to navigate this unprecedented challenge. Prior to the COVID-19 outbreak, these markets demonstrated strong employment trends and favorable apartment demand, as well as limited new construction and attractive demographics. We expect to benefit from these factors again and believe these markets should be generally less impacted than the major cities in the near term and recover sooner than most. Second, we have a clear investment strategy focused on middle market multifamily communities, which offer affordable, high-quality product. This segment attracts and retains a wide range of residents who recognize good value with attractive amenities, and we continue to see strong apartment demand in this highly defensive market segment that tends to benefit from when home ownership rates decline. Third, we have flexible investment opportunities. As we have discussed last quarter, 2019 was a year of acceleration priority. With respect to our growth initiative, in particular, our value-add and capital recycling programs, we have decided to slow these efforts until we have greater visibility on market conditions. We have reduced activity behind our value-add program, but still realized an 18.6% weighted average return on investment on interior renovations in the first quarter. Similarly, with our capital recycling program, we have put our efforts on hold, but will continue to evaluate markets where we see long-term growth and reevaluate those that may not be attractive to long-term investments. And fourth, IRT has a strong balance sheet. We have ample liquidity and no significant debt maturities until 2023. Our total liquidity position is approximately $258 million, which includes unrestricted cash, as well as additional capacity through our unsecured line of credit and proceeds from our forward equity offering earlier this year, which raised about $152 million in net proceeds. We will be prudent with the proceeds using the funds to strengthen our balance sheet in the near term, while remaining flexible until there is a clear path towards an economic recovery. As we look towards a return to normalcy and for our economy to fully recover, We are well positioned to manage through these challenging conditions, supported by our proven strategy and strong track record. We continue to believe that IRT has the right assets in the right markets, and effective initiatives like our value-adding capital recycling programs are ready to be fully reenacted at the appropriate time. Today, now more than ever, our IRT team remains focused on delivering our commitments and responsibilities to our colleagues, our residents, communities, and our shareholders. And with that, I'd like to turn the call over to Pharoah for an operational update. Pharoah?