Independence Realty Trust, Inc.

Ladies and gentlemen, good morning. My name is Abby and I will be your conference operator today. At this time, I would like to welcome everyone to the Independence Realty Trust fourth quarter earnings conference call. Today's conference is being recorded and 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 that time, Simply press the star key followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time. Thank you, and I want to turn the conference over to Lauren Torres. You may begin.

Thank you, and good morning, everyone. Thank you for joining us to review Independence Realty Trust's fourth quarter and full year 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 8-K 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. 2023 was a notable year for IRT as we achieved our operating targets under challenging market conditions. We continue to execute on our strategic initiatives, which included supporting occupancy, delivering on our plan value-add improvements, and reducing our leverage. I'm proud of the results the IRT team achieved in the fourth quarter and full year of 2023. The reorganization implemented last year has paid off, as evidenced by our year-over-year growth of 5.7%, and full year same store portfolio NOI and 6.5% of core FFO per share, the latter of which came in at the high end of our guidance range. For the fourth quarter, our same store portfolio NOI grew 3.3% year over year, supported by a 70 basis point increase in average occupancy to 94.5% and a 2.4% increase in rental rates. These results reflected our ongoing efforts to achieve sustainable operating gains across our entire portfolio. Over the past year, we continued working with our regional leaders and frontline leasing teams to improve all aspects of our leasing and sales process. This enabled us to move more quickly and adapt to an evolving market conditions, improving occupancy and maximizing rent growth. In particular, we enhanced the speed of our local market pricing feedback from our communities to the revenue management team, fully established our 24-7 call center, significantly expanded our sales training program, and continued to maximize lead-to-lease conversion. These efforts are positively impacting our results as evidenced by our 94.9% average occupancy at our non-value-add communities in the fourth quarter of 2023. We will continue to enhance and streamline our operations to further maximize our performance and efficiency. In addition to our operational efforts, we also put into action our portfolio optimization and deleveraging strategy. Our stated goal was to sell 10 properties, reducing our presence in non-core markets while also significantly deleveraging our balance sheet. Since this announcement, we have made meaningful progress on this initiative. In December, we closed on the sale of four properties in four separate markets, and we recently closed on two additional properties, bringing us to six property sales. The remaining four assets are under contract through due diligence and have hard non-refundable deposits. We expect the sales of these remaining four properties to close by the end of the first quarter. The blended economic cap rate for the entire portfolio optimization plan is 5.9% on total sale values, which is consistent with our initial expectations. Importantly, our portfolio optimization strategy will fundamentally reset our leverage profile as we expect to reduce our net debt to adjusted EBITDA ratio by approximately a full term by the end of this year. Looking ahead through 2024, we expect the operating environment to remain challenging, with elevated new supply still being delivered and inflationary cost pressure persisting. As a result, and as Jim will discuss shortly, our guidance for 2024 assumes market rent growth of 0 to 1% this year, with new supply continuing to be a headwind. To provide more color on deliveries, the Sunbelt region has seen unprecedented levels of new supply, and while our mainly Class B portfolio is somewhat insulated, it is not immune. Certain markets such as Nashville, Orlando, Dallas, and Atlanta are forecasted to experience elevated deliveries, while Midwest markets such as Columbus, Indianapolis, and Louisville will be better balanced on supply and absorption this year. IRG's portfolio has a 20% concentration in the Midwest, providing us with a unique hedge against new supply in the Sun Belt. When discussing supply, we must also consider the associated absorption levels and the strength of rental housing demand. In 2023, new supply significantly outpaced absorption levels. We expect that in the second half of 2024 and 2025, new deliveries will stabilize near the level of absorption, resulting in a more balanced supply-demand dynamic. In 2023, we made notable progress on our value-add program, completing renovations at 486 units during the fourth quarter and 2,455 units for the full year, achieving an annual weighted average return on investment of 16.1%. For 2024, we plan to continue our value-add efforts. We continue to see strong demand at these communities, which attracts value-driven residents seeking well-maintained communities that offer similar amenities and finishes to Class A properties, but at a lower price point. However, the focus on increased resident retention could reduce the number of value-add completions in 2024 as compared to 2023. As I wrap up my remarks, I just want to reiterate my confidence in IRT's business model and strategy, which was constructed to succeed during all market cycles. Despite near-term market conditions, we expect to deliver growth in 2024, driven by a combination of occupancy gains and rental rate growth. Overall, we are optimistic as we have the right assets and the right markets that continue to perform well, supported by strong employment growth and population migration. I'll now turn the call over to Mike.