Independence Realty Trust, Inc.

Thank you for standing by. My name is Brianna and I will be your conference operator today. At this time, I would like to welcome everyone to the Independence Realty Trust second quarter 2023 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, please press star followed by the number one on your telephone keypad. I will now turn the call over to Lauren Torres. You may begin your conference.

Thank you. And good morning, everyone. Thank you for joining us to review Independence Realty Trust second quarter 2023 financial results. On the call with me today are Scott Schaefer, Chief Executive Officer, Mike Daly, EVP of Operations and People, Jim Sebra, Chief Financial Officer, and Janice Richards, SVP of Operations. 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 Time today. Before I turn the call over to Scott, I'd like to remind everyone that there may be forward-looking statements made on 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 provisions 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 earnings 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 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 on 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, Lauren, and thank you all for joining us this morning. It's now been two years since we announced our merger with Steadfast Department REIT, and 18 months since the merger transaction closed. After a number of changes during the integration process, we are confident that we have the right team in place to lead IRT into the future. Before getting into second quarter operating results, I want to share that IRT has delivered the best FFO per share growth across the large public apartment peer group with a 106% cumulative growth over the last five years. This growth and improvement in our business can also be seen in various other metrics that we will cover throughout this call. We are proud of the business that we've built and the shareholder returns we've delivered, but we're not done and we continue to execute on our business plan in a disciplined manner. Now onto the quarterly results. In the second quarter, we delivered a 6.3% same-store portfolio NOI growth and 8.7% core FFO growth on a year-over-year basis, reflecting the strength and resiliency of our portfolio across key Sunbelt and Midwest markets. We delivered operational improvements that drove increased same-store occupancy of 94.2% in the second quarter, reflecting a sequential 110 basis point improvement compared to last quarter. As of July 24th, our same-store occupancy reached 94.8%, with our same-store non-value-add portfolio at 95.3%. We expect continued occupancy growth in the second half of this year. Lead volume and conversion to leases remain strong, and the sustainable occupancy enables us to drive rental rate increases in many of our sub-markets. Our key performance metrics in the second quarter include average rental rate increased 8% year-over-year, supporting a 6.2% increase in revenue. NOI margin improved to 62.1% year-over-year, up from 60.1% three years ago. We continue to invest in our communities, particularly through our value-add renovation program, where we renovated 625 units in the second quarter and 1,260 in the first half of 2023, achieving an unlevered return on investment of 17%. With the first half of the year behind us and a higher resident retention rate than anticipated, we now expect to deliver between 2,500 and 2,700 renovated units in 2023. As we enter the third quarter, our team remains confident that we will deliver on our full-year operational and leverage targets through the continuation of our thoughtful and paced approach. Demand fundamentals in our key markets remain favorable, and we continue to benefit from positive migration, demographic, and employment trends. In a recent report by Bank of America titled The Great Migration Continues, they note that pandemic migration trends are not reversing. Data as of the first quarter of 2023 suggests that cities that saw a large influx of people during the pandemic continue to grow faster than other cities in recent quarters. A number of these cities, including Dallas, Tampa, Houston, Charlotte, Orlando, and Austin, saw the largest net inflow of population during 2020 through 2022. RIT has a notable presence in these markets, and we are currently seeing this dynamic play out across our portfolio, having achieved mid-teen NOI growth during the first half of 2023 in key markets such as Dallas, Raleigh-Durham, Tampa, Charlotte, and Myrtle Beach. This strength isn't limited to the Sun Belt, as our Midwest markets, including Indianapolis and Columbus, also continue to deliver strong NOI growth. In total, these markets have shown double-digit increases in average monthly rent, benefiting from job growth and increasing wages. We remain focused on increasing scale in these attractive markets, while also recycling capital out of less attractive markets when conditions warrant. To that point, we have one property held for sale, our only asset in Illinois, which we expect the sale to close early in the fourth quarter of 2023, with an anticipated economic cap rate of 5%. This location isn't a fit for IRT's footprint and makes economic and strategic sense to exit. Our primary use of sale proceeds will be to reduce debt. Lastly, on the development side, we have made advancements with our properties under development in Denver. Our destination at Arista Community is now 44% complete, and those completed units are 42% leased. We expect this development to be stabilized by the first quarter of 2025. These results are ahead of our original plan, and we now expect a 6.9% unlevered yield on cost. We are pleased to increase the midpoints of our full year 2023 EPS and core FFO guidance ranges. We will remain focused on driving occupancy, delivering planned value-add improvements, further managing our cost structure through technology initiatives, and further reducing leverage. I would like to now turn the call over to Mike.