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What changed in INDEPENDENCE REALTY TRUST, INC.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of INDEPENDENCE REALTY TRUST, INC.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+303 added−341 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-23)

Top changes in INDEPENDENCE REALTY TRUST, INC.'s 2023 10-K

303 paragraphs added · 341 removed · 236 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

42 edited+23 added−36 removed42 unchanged
Biggest changeFederal Income Tax Considerations” contained in Exhibit 99.1 to this Annual Report on Form 10-K. 8 Table of Contents The table below reconciles the differences between reported net income, total taxable income and estimated REIT taxable income for the three years ended December 31, 2022 (dollars in thousands): For the Years Ended December 31, 2022 2021 2020 Net income $ 120,659 $ 45,529 $ 14,877 Add (deduct): Depreciation and amortization differences 76,021 9,280 (1,092) Gain/loss differences 10,457 (1,344) 6,003 Other book to tax differences: Share-based compensation expense (8,099) (392) 1,050 Non Deductible Merger and integration costs — 28,381 — Other 414 12,974 3,944 Total taxable income $ 199,452 $ 94,428 $ 24,782 Deductible capital gain distribution (119,120) (78,181) (13,696) Taxable income allocable to noncontrolling interest (5,078) (660) (804) Estimated REIT taxable income (loss) before dividends paid deduction $ 75,254 $ 15,587 $ 10,282 For the year ended December 31, 2022, the tax classification of our dividends on common shares was as follows: Record Date Payment Date Dividend Paid Ordinary Income Total Capital Gain Distribution Unrecaptured Section 1250 Gain Return of Capital Section 199A 4/1/2022 4/22/2022 $ 0.1200 $ 0.0011 $ 0.1189 $ 0.0185 $ — $ 0.0011 7/1/2022 7/22/2022 0.1400 0.0013 0.1387 0.0216 — 0.0013 9/30/2022 10/21/2022 0.1400 0.0013 0.1387 0.0216 — 0.0013 12/30/2022 1/20/2023 0.1400 0.0013 0.1387 0.0216 — 0.0013 $ 0.5400 $ 0.0050 $ 0.5350 $ 0.0833 $ — $ 0.0050 For the year ended December 31, 2021, the tax classification of our dividends on common shares was as follows: Record Date Payment Date Dividend Paid Ordinary Income Total Capital Gain Distribution Unrecaptured Section 1250 Gain Return of Capital Section 199A 12/30/2020 1/22/2021 $ 0.1200 $ — $ 0.1200 $ 0.0190 $ — $ — 4/2/2021 4/23/2021 0.1200 — 0.1200 0.0190 — — 7/2/2021 7/23/2021 0.1200 — 0.1200 0.0190 — — 10/1/2021 10/22/2021 0.1200 — 0.1200 0.0190 — — 12/15/2021 1/14/2022 0.0991 — 0.0991 0.0157 — — 12/30/2021 1/21/2022 0.0209 — 0.0209 0.0033 — — $ 0.6000 $ — $ 0.6000 $ 0.0950 $ — $ — Insurance Our multifamily properties are covered by all risk property insurance covering the replacement cost for each building and business interruption and rental loss insurance.
Biggest changeFederal Income Tax Considerations” contained in Exhibit 99.1 to this Annual Report on Form 10-K. 7 Table of Contents The table below reconciles the differences between reported net income, total taxable income and estimated REIT taxable income for the three years ended December 31, 2023 (dollars in thousands): For the Years Ended December 31, 2023 2022 2021 Net (loss) income $ (17,807) $ 120,659 $ 45,529 Add (deduct): Depreciation and amortization differences 48,013 76,021 9,280 Gain/loss differences 173,337 10,457 (1,344) Other book to tax differences: Share-based compensation expense (5,744) (8,099) (392) Non Deductible Merger and integration costs — — 28,381 Other 8,036 414 12,974 Total taxable income $ 205,835 $ 199,452 $ 94,428 Deductible capital gain distribution (102,877) (119,120) (78,181) Taxable income allocable to noncontrolling interest (4,854) (5,078) (660) Estimated REIT taxable income before dividends paid deduction $ 98,104 $ 75,254 $ 15,587 For the year ended December 31, 2023, the tax classification of our dividends on common shares was as follows: Record Date Payment Date Dividend Paid Ordinary Income Total Capital Gain Distribution Unrecaptured Section 1250 Gain Return of Capital Section 199A 3/31/2023 4/21/2023 $ 0.1400 $ 0.0364 $ 0.1036 $ 0.0560 $ — $ 0.0364 6/30/2023 7/21/2023 0.1600 0.0417 0.1183 0.0640 — 0.0417 9/29/2023 10/20/2023 0.1600 0.0417 0.1183 0.0640 — 0.0417 12/29/2023 1/19/2024 0.1600 0.0417 0.1183 0.0640 — 0.0417 $ 0.6200 $ 0.1615 $ 0.4585 $ 0.2480 $ — $ 0.1615 For the year ended December 31, 2022, the tax classification of our dividends on common shares was as follows: Record Date Payment Date Dividend Paid Ordinary Income Total Capital Gain Distribution Unrecaptured Section 1250 Gain Return of Capital Section 199A 4/1/2022 4/22/2022 $ 0.1200 $ 0.0011 $ 0.1189 $ 0.0185 $ — $ 0.0011 7/1/2022 7/22/2022 0.1400 0.0013 0.1387 0.0216 — 0.0013 9/30/2022 10/21/2022 0.1400 0.0013 0.1387 0.0216 — 0.0013 12/30/2022 1/20/2023 0.1400 0.0013 0.1387 0.0216 — 0.0013 $ 0.5400 $ 0.0050 $ 0.5350 $ 0.0833 $ — $ 0.0050 Insurance Our multifamily properties are covered by all risk property insurance covering the replacement cost for each building and business interruption and rental loss insurance.
We do not intend to limit ourselves to properties in this target profile, however, and may make acquisitions outside of this profile or change our target profile whenever market conditions warrant.
We do not intend to limit ourselves to properties in this target profile, however, and we may make acquisitions outside of this profile or change our target profile whenever market conditions warrant.
These benefits help further stimulate an environment where we support and reward the efforts of our employees and their families to maintain and improve their overall well-being, their future plans, and their performance excellence. 7 Table of Contents Regulation Governmental Regulations Our properties are subject to various federal, state and local regulatory laws and requirements, including, but not limited to, the Americans with Disabilities Act of 1990, the Fair Housing Amendments Act of 1988, rent control, rent stabilization and other landlord/tenant laws, environmental regulations, zoning regulations, building codes and land use laws, and building, operation, occupancy and other permit and licensure requirements.
These benefits help further stimulate an environment where we support and reward the efforts of our employees and their families to maintain and improve their overall well-being, their future plans, and their performance excellence. 6 Table of Contents Regulation Governmental Regulations Our properties are subject to various federal, state and local regulatory laws and requirements, including, but not limited to, the Americans with Disabilities Act of 1990, the Fair Housing Amendments Act of 1988, rent control, rent stabilization and other landlord/tenant laws, environmental regulations, zoning regulations, building codes and land use laws, and building, operation, occupancy and other permit and licensure requirements.
In addition, we promote pay equity with clear and consistent performance criteria, performance reviews, and non-discriminatory pay practices. Training and Development and Program . We are committed to providing the resources to engage our employees and enhance their educational and professional growth. We provide technical and leadership training to employees through more than 550 on-demand e-learning courses.
In addition, we promote pay equity with clear and consistent performance criteria, performance reviews, and non-discriminatory pay practices. Training and Development and Program . We are committed to providing the resources to engage our employees and enhance their educational and professional growth. We provide technical and leadership training to employees through more than 300 on-demand e-learning courses.
Any amendments to or waivers of our Code of Ethics that apply to our principal executive officer, principal financial officer, principal accounting officer, controller and persons performing similar functions and that relate to any matter enumerated in Item 406(b) of Regulation S-K promulgated by the SEC will be disclosed on our website. 10 Table of Contents
Any amendments to or waivers of our Code of Ethics that apply to our principal executive officer, principal financial officer, principal accounting officer, controller and persons performing similar functions and that relate to any matter enumerated in Item 406(b) of Regulation S-K promulgated by the SEC will be disclosed on our website. 9 Table of Contents
Our current employee benefits include, but are not limited to, Medical, Prescription Drug, Dental and Vision Plans, Health Savings Accounts (HSA), Short-Term and Long-Term Disability Income, Life and Accidental Death and Dismemberment Insurance, Paid Time Off, Adoption Benefits, and a company-matched 401(K) Retirement Savings Plan.
Our current employee benefits include, but are not limited to, Medical, Prescription Drug, Dental and Vision Plans, Health Savings Accounts (HSA), Short-Term and Long-Term Disability Income, Life and Accidental Death and Dismemberment Insurance, Paid Time Off, Adoption Benefits, telemed services and a company-matched 401(K) Retirement Savings Plan.
IROP was formed as a Delaware limited partnership on March 27, 2009. IRT is the sole general partner of IROP and manages and controls its business. As of December 31, 2022, IRT owned a 97.4% interest in IROP.
IROP was formed as a Delaware limited partnership on March 27, 2009. IRT is the sole general partner of IROP and manages and controls its business. As of December 31, 2023, IRT owned a 97.4% interest in IROP.
If our Board of Directors changes our policies regarding our use of leverage, we expect that it will consider many factors, including, our long-term strategic plan, the leverage ratios of publicly traded REITs with similar investment strategies, the cost of leverage as compared to 5 Table of Contents expected net operating income and general market conditions.
If our Board of Directors changes our policies regarding our use of leverage, we expect that it will consider many factors, including, our long-term strategic plan, the leverage ratios of publicly traded REITs with similar investment strategies, the cost of leverage as compared to expected net operating income and general market conditions.
If we maintain our qualification as a REIT, we generally will not be subject to U.S. federal income taxes at the corporate level on our net income to the extent we distribute such net income to our stockholders annually.
If we maintain our qualification as a REIT, we generally will not be subject to U.S. federal corporate income taxes on our net income to the extent we distribute such net income to our stockholders annually.
We have significant experience allocating capital to value-added improvements of apartment properties to produce increased occupancy and rental rates. We intend to continue to deploy capital into revenue-enhancing capital projects that we believe will improve the physical plant or market positioning of particular apartment properties and generate increased income over time.
We have significant experience allocating capital to value-added improvements of apartment properties to produce increased occupancy and rental rates. We intend to continue to deploy capital into revenue-enhancing capital projects that we believe will improve the physical 2 Table of Contents plant or market positioning of particular apartment properties and generate increased income over time.
This competition affects our ability to acquire properties and the price that we pay for such acquisitions. Sustainability We published our 2022 (inaugural) Sustainability Report, which discloses our sustainability progress and vision for the future as we continue to integrate Environmental, Social and Governance (ESG) initiatives into our business strategy.
This competition affects our ability to acquire properties and the price that we pay for such acquisitions. Sustainability In 2022, we published our inaugural Sustainability Report, which disclosed our sustainability progress and vision for the future as we continue to integrate Environmental, Social and Governance (ESG) initiatives into our business strategy.
As a steward of our assets, and a provider of homes to thousands of individuals, we seek to bolster our resilience to climate hazards and severe weather through the 6 Table of Contents implementation of proactive facilities management practices and the preparation of and adherence to emergency operating plans if weather-related events impact our communities.
As a steward of our assets, and a provider of homes to thousands of individuals, we seek to bolster our resilience to climate hazards and severe weather through the implementation of proactive facilities management practices and the preparation of and adherence to emergency operating plans if weather-related events impact our communities.
In addition, we generally obtain title insurance policies when we acquire a property, with each policy covering an amount equal to the initial purchase price of each property. Accordingly, any of our title insurance policies may be in an amount less than the current value of the related property.
In addition, we generally obtain title insurance policies when we 8 Table of Contents acquire a property, with each policy covering an amount equal to the initial purchase price of each property. Accordingly, any of our title insurance policies may be in an amount less than the current value of the related property.
Although we may carry insurance for potential losses associated with our multifamily properties, we may still incur losses due to uninsured risks, deductibles, co- 9 Table of Contents payments or losses in excess of applicable insurance coverage and those losses may be material.
Although we may carry insurance for potential losses associated with our multifamily properties, we may still incur losses due to uninsured risks, deductibles, co-payments or losses in excess of applicable insurance coverage and those losses may be material.
Our target profile for acquisitions currently is midrise/garden-style apartments containing 150-500 units with high quality amenities that we can acquire at less than replacement cost in the $35 million to $100 million price range with a five to fifteen-year operating track record.
Our target profile for acquisitions currently is midrise/garden-style apartments containing 150-500 units with high quality amenities that we can acquire at less than replacement cost in the $35 million to $125 million price range with a three to fifteen-year operating track record.
Our Service teams receive training through a combination of online courses, simulation training, and on-site, hands-on training. In addition to company-specific training, we have established professional education benefits and guidelines under which our team members may receive financial assistance for professional certifications and continued education. Compensation, Benefits, Safety and Wellness .
Many of our employees completed leadership training courses and our Service teams receive training through a combination of online courses, simulation training, and on-site, hands-on training. In addition to company-specific training, we have established professional education benefits and guidelines under which our team members may receive financial assistance for professional certifications and continued education. Compensation, Benefits, Safety and Wellness .
The data and disclosures within the report are aligned with the Sustainability Accounting Standards Board (SASB) Standards for the real estate industry. We also have identified the United Nations Sustainable Development Goals (SDGs) that we believe best align with our business activities and key priorities.
The data and disclosures within the report were aligned with the Sustainability Accounting Standards Board (SASB) Standards for the real estate industry. We also identified the United Nations Sustainable Development Goals (SDGs) that we believe best aligned with our business activities and key priorities.
Our wholly owned subsidiary, IRT Management, LLC (“IRT Management”), which was formed on October 26, 2016, is a full-service apartment property management company that, as of December 31, 2022 managed 35,526 apartment units, all of which are owned by us. IRT Management provides services to us in connection with the rental, leasing, operation and management of our properties.
Our wholly owned subsidiary, IRT Management, LLC (“IRT Management”), which was formed on October 26, 2016, is a full-service apartment property management company that, as of December 31, 2023 managed 34,431 apartment units, all of which are owned by us. IRT Management provides services to us in connection with the rental, leasing, operation and management of our properties.
In addition to offering competitive salaries and wages, we offer our employees incentive compensation linked to the achievement of individual and corporate goals, as well as stock-based compensation that vests over a number of years.
In addition to offering competitive salaries and wages, we offer our employees incentive compensation linked to the achievement of individual and corporate goals, and all of our employees receive stock-based compensation that vests over a number of years.
Available Information We file annual, quarterly and current reports, proxy statements and other information with the SEC. The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The internet address of the SEC site is http://www.sec.gov . Our internet address is http://www.irtliving.com .
The SEC maintains an internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The internet address of the SEC site is http://www.sec.gov . Our internet address is http://www.irtliving.com .
We compute return on cost by using the rent premium per unit per month, multiplied by 12, divided by the applicable renovation costs per unit and we compute the rent premium as the difference between the rental rate on the renovated unit and the market rent for a comparable unrenovated unit as of the date presented, as determined by management consistent with its customary rent-setting and evaluation procedures.
We compute return on cost by using the rent premium per unit per month, multiplied by 12, divided by the applicable renovation costs per unit and we compute the rent premium as the difference between the rental rate on the renovated unit (excluding the impact of concessions) and the market rent for a comparable unrenovated unit as of the date presented, as determined by management consistent with its customary rent-setting and evaluation procedures, including its views of third party rental rates.
We believe that our commitment to diversity, equity and inclusion is not only objectively moral but also unites us as co- workers and connects us with the residents we serve. 55% of the individuals in our workforce self-identify as Male and 45% as Female, while 45% self-identify as Caucasian, 22% as Hispanic/Latinx, 20% as African American, 2% as Asian and 11% as other races or ethnicities.
We believe that our commitment to diversity, equity and inclusion is not only objectively moral but also unites us as co-workers and connects us with the residents we serve. 64% of the individuals in our workforce self-identify as Male and 36% as Female, while 37% self-identify as Caucasian, 27% as Hispanic/Latinx, 23% as African American, 2% as Asian and 11% as other races or ethnicities.
Value Add Initiative Our Value Add Initiative, comprised of renovations and upgrades at selected communities to drive increased rental rates, commenced in 2018 and currently has a pipeline of 12,583 units across 38 properties identified for renovation and upgrade.
Value Add Initiative Our Value Add Initiative, comprised of renovations and upgrades at selected communities to drive increased rental rates, commenced in 2018 and currently has a pipeline of 13,281 units across 41 properties identified for renovation and upgrade.
Our investment strategy is focused on the following: • gaining scale near major employment centers within key amenity rich submarkets of non-gateway cities that offer good school districts and high-quality retail and are unlikely to experience substantial new apartment construction in the foreseeable future; • increasing cash flows at our existing apartment properties through prudent property management and strategic renovation projects; and • acquiring and developing additional properties that have strong and stable occupancies and support a rise in rental rates or that have the potential for repositioning through capital expenditures or tailored management strategies. 2 Table of Contents We seek to achieve these objectives by executing the following strategies: • Focus on properties in markets that have strong apartment demand, reduced competition from national apartment buyers and no substantial new apartment construction.
Our investment strategy is focused on the following: • gaining scale near major employment centers within key amenity rich submarkets of non-gateway cities that offer good school districts and high-quality retail and are unlikely to experience substantial new apartment construction in the foreseeable future; • increasing cash flows at our existing apartment properties through prudent property management and strategic renovation projects; and • acquiring and developing additional properties that have strong and stable occupancies and support a rise in rental rates or that have the potential for repositioning through capital expenditures or tailored management strategies.
On a case-by-case basis, based on an assessment of the likelihood of the risk, availability and cost of insurance, and in accordance with standard market practice, we obtain earthquake, windstorm, flood, terrorism and boiler and machinery insurance.
On a case-by-case basis, based on an assessment of the likelihood of the risk, availability and cost of insurance, and in accordance with standard market practice, we obtain property and casualty insurance.
ATM Program On November 13, 2020, we entered into an equity distribution agreement pursuant to which we may from time to time offer and sell shares of our common stock having an aggregate offering price of up to $150.0 million (the “ATM Program”) in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended (the “Securities Act”).
On July 28, 2023, we entered into an equity distribution agreement pursuant to which we may from time to time offer and sell shares of our common stock under our shelf registration statement having an aggregate offering price of up to $450 million (the “2023 ATM Program”) in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act.
ITEM 1. Business Our Company IRT, a Maryland corporation, is a self-administered and self-managed real estate investment trust (“REIT”) that acquires, owns, operates, improves and manages multifamily apartment communities across non-gateway U.S. markets. As of December 31, 2022, we owned and operated 120 multifamily apartment properties that contain 35,526 units.
ITEM 1. Business Our Company IRT, a Maryland corporation, is a self-administered and self-managed real estate investment trust (“REIT”) that acquires, owns, operates, improves and manages multifamily apartment communities across non-gateway U.S. markets.
Through December 31, 2022, we renovated 5,316 of the 12,583 units currently owned at an average cost per unit of $13,357 and achieved a return on our total renovation costs for these units of 19.6% (and approximately 21.6% on the interior portion of such renovation costs).
Through December 31, 2023, we renovated 7,771 of the 13,281 units currently owned at an average cost per unit of $15,716 and achieved a return on our total renovation costs for these units of 17.7% (and approximately 19.5% on the interior portion of such renovation costs).
Development and Structure of Our Company; Segment IRT was formed as a Maryland corporation on March 26, 2009 and conducts its business through a traditional umbrella partnership REIT (“UPREIT”) structure in which all of its assets are held by, and substantially all of its operations are conducted through, IRT’s operating partnership, IROP and subsidiaries of IROP.
Risk Factors – Risks Associated with Debt Financing” below for more information about risks associated with indebtedness and operating on a leveraged basis. 4 Table of Contents Development and Structure of Our Company; Segment IRT was formed as a Maryland corporation on March 26, 2009 and conducts its business through a traditional umbrella partnership REIT (“UPREIT”) structure in which all of its assets are held by, and substantially all of its operations are conducted through, IRT’s operating partnership, IROP and subsidiaries of IROP.
We are especially proud of our efforts in advancing reforestation by sponsoring the planting of one tree for every new move-in at one of our residential communities. The reforestation projects we support are located in Florida, Montana and Appalachia. Through these projects, our goal of offsetting our carbon emissions is implemented by directly restoring our natural environment.
We are especially proud of our efforts in advancing reforestation by sponsoring the planting of one tree for every new move-in at one of our residential communities. The reforestation projects we have supported are located in Florida, Montana, Texas and Appalachia.
Under the ATM Program, we may also enter into one or more forward sale transactions for the sale of shares of our common stock on a forward basis. On September 28, 2022, we physically settled in full 2,000,000 shares of our common stock that were previously sold on a forward basis under the ATM Program.
Under the 2023 ATM Program, we may also enter into one or more forward sale transactions for the sale of shares of our common stock on a forward basis.
We consider diversity, equity and inclusion to be an essential part of our foundation, culture, and identity.
We have experienced no material interruptions of our operations due to disputes with our employees. Diversity, Equity and Inclusion . We consider diversity, equity and inclusion to be an essential part of our foundation, culture, and identity.
For further description of our indebtedness at December 31, 2022, see “Part II-Item 8 Financial Statements and Supplementary Data-Note 6: Indebtedness” below, or the financial statement indebtedness note. See also “Part I-Item 1A. Risk Factors – Risks Associated with Debt Financing” below for more information about the risks related to operating on a leveraged basis.
For further description of our indebtedness at December 31, 2023, see “Part II-Item 8 Financial Statements and Supplementary Data-Note 6: Indebtedness” below. See also “Part I-Item 1A.
Moreover, no assurance can be given concerning future laws, ordinances or regulations, or the potential introduction of hazardous or toxic substances by neighboring properties or residents Qualification as a Real Estate Investment Trust We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, (the “Code”), commencing with our taxable year ended December 31, 2011.
Qualification as a Real Estate Investment Trust We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, (the “Code”), commencing with our taxable year ended December 31, 2011. We recorded no income tax expense for the years ended December 31, 2023, 2022, and 2021.
We also recognize that a successful company must incorporate the best corporate governance practices in order to better serve its stakeholders. Human Capital Our Purpose is to provide exceptional living experiences. We believe our employees drive our success and fostering a workplace built on our core values of excellence, opportunity, integrity, and service is vital to our long-term success.
As detailed below, we believe our people are our greatest asset and so we strive to support and engage with our associates. We also recognize that a successful company must incorporate the best corporate governance practices in order to better serve its stakeholders. Human Capital Our Purpose is to provide exceptional living experiences.
Investment in Unconsolidated Real Estate Entities To create another avenue for accretive capital allocation and to increase our options for capital investment, we partner with developers through preferred equity investments and joint venture relationships focused on new multifamily development. On March 31, 2022, we formed the Virtuoso joint venture to acquire and own a project in Huntsville, AL.
We expect to begin renovations at the remaining value add projects contemplated in connection with our Value Add Initiative at the selected communities throughout 2024. 3 Table of Contents Investment in Unconsolidated Real Estate Entities To create another avenue for accretive capital allocation and to increase our options for capital investment, we have partnered with, and may in the future partner with, developers through preferred equity investments and joint venture relationships focused on new multifamily development.
Our principal executive offices are located at 1835 Market Street, Suite 2601, Philadelphia, PA 19103 and our telephone number is (267) 270-4800. We also have corporate offices in Chicago, Illinois and Irvine, California. Our 2021 Merger On December 16, 2021, we completed our merger with Steadfast Apartment REIT, Inc. (“STAR”).
We do not have any foreign operations and our business is not seasonal. Our principal executive offices are located at 1835 Market Street, Suite 2601, Philadelphia, PA 19103 and our telephone number is (267) 270-4800.
In addition, as of December 31, 2022, we owned interests in five unconsolidated joint ventures that are developing multifamily apartment communities that will contain, in aggregate, 1,641 units upon completion. We do not have any foreign operations and our business is not seasonal.
As of December 31, 2023, we also owned interests in four unconsolidated joint ventures, two of which own and operate multifamily apartment properties that contain an aggregate of 810 units and two that are developing multifamily apartment properties that will, upon completion, contain an aggregate of 653 units.
Our People . As of December 31, 2022, we had 923 employees, all of whom were employed in the United States, and none of whom are covered by collective bargaining agreements. We have experienced no material interruptions of our operations due to disputes with our employees. Diversity, Equity and Inclusion .
We believe our employees drive our success and fostering a workplace built on our core values of excellence, opportunity, integrity, and service is vital to our long-term success. Our People . As of December 31, 2023, we had 952 employees, all of whom were employed in the United States, and none of whom are covered by collective bargaining agreements.
During the year ended December 31, 2022, we had no repurchases of shares under the Stock Repurchase Program.
There were no forward sale transactions as of December 31, 2023, and no shares of our common stock were sold under the 2023 ATM Program during the year ended December 31, 2023.
In evaluating potential dispositions, we evaluate the opportunity to strategically exit markets where we lack scale and redeploy sales proceeds to fund acquisitions and renovations and to reduce our leverage in lieu of raising additional capital. 2022 Developments STAR Merger The STAR Merger was consummated in order to increase the scale and scope of our business, provide enhanced portfolio diversification and exposure to high growth markets, and to unlock synergies.
In evaluating potential dispositions, we evaluate the opportunity to strategically exit markets where we lack scale and redeploy sales proceeds to fund acquisitions and renovations and to reduce our leverage in lieu of raising additional capital. 2023 Developments 2023 Property Sales and Properties Held for Sale During the three months ended March 31, 2023, we sold one multifamily apartment community for a gross sales price of $37.3 million and recognized a gain on sale of $1.2 million.
Our properties are located in Alabama, Colorado, Florida, Georgia, Illinois, Indiana, Kentucky, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee, Texas, and Virginia. During 2022, we acquired three communities, totaling 678 units and disposed of six communities, totaling 1,983 units.
As of December 31, 2023, we owned and operated 116 multifamily apartment properties (including one owned through a consolidated joint venture) that contain an aggregate of 34,431 units. These properties are located in Alabama, Colorado, Florida, Georgia, Indiana, Kentucky, North Carolina, Ohio, Oklahoma, South Carolina, Tennessee, and Texas.
Removed
Pursuant to the Agreement and Plan of Merger dated as of July 26, 2021, STAR merged with and into a wholly-owned subsidiary of IRT (with such IRT subsidiary surviving), and Steadfast Apartment REIT Operating Partnership, L.P.
Added
In addition, as of December 31, 2023, we owned two investments in real estate under development in Denver, Colorado that will, upon completion, contain an aggregate of 621 units.
Removed
(“STAR OP”), the operating partnership through which STAR owned its assets and conducted its operations, merged with and into Independence Realty Operating Partnership, LP (“IROP”), the operating partnership subsidiary through which IRT owns its assets and conducts its operations (with IROP surviving).
Added
We seek to achieve these objectives by executing the following strategies: • Focus on properties in markets that have strong apartment demand, reduced competition from national apartment buyers and no substantial new apartment construction.
Removed
We refer to these two mergers collectively as the “STAR Merger.” Through the STAR Merger, we acquired 68 apartment communities that contain 21,394 units and two apartment communities that are under development and that will contain upon completion an aggregate of 621 units.
Added
Proceeds from the sale were used to reduce our indebtedness.
Removed
The consolidated net assets and results of operations of STAR have been included in our consolidated financial statements since the closing date, December 16, 2021. In the STAR Merger, each then outstanding share of common stock of STAR was automatically converted into the right to receive 0.905 shares of our common stock, with cash paid in lieu of fractional shares.
Added
Our Portfolio Optimization and Deleveraging Strategy On October 26, 2023, our Board of Directors approved a plan, which we refer to as our Portfolio Optimization and Deleveraging Strategy, which targeted the sale of 10 properties located in seven markets in order to exit or reduce our presence in these markets while also deleveraging our balance sheet.
Removed
In addition, each then outstanding unit of limited partnership of STAR OP was automatically converted into the right to receive 0.905 common units of limited partnership of IROP (each such unit, an “IROP unit”). As a result, we issued an aggregate of 99,720,948 shares of our common stock and an aggregate of 6,429,481 IROP units in the STAR Merger.
Added
During the three months ended December 31, 2023, we sold four of these targeted properties, totaling 996 units, for an aggregate gross sale price of $200.7 million and recognized an aggregate impairment loss on sale of $34.8 million.
Removed
Holders of IROP units have the right to tender their IROP units to us from time to time for cash in an amount equal to the market price (based on a trailing average computation) of an equivalent number of shares of our common stock at the time we receive notice of the exchange.
Added
These sales represent a reduction in our exposure to the Denver, Colorado market and our exit from the Chicago, Illinois, Norfolk, Virginia, and Fort Wayne, Indiana markets. As discussed further below, as of December 31, 2023, the six remaining properties targeted for sale under our Portfolio Optimization and Deleveraging Strategy were classified as held for sale.
Removed
We have the option, in lieu of paying cash, to settle the exchange for a number of shares of our common stock equal to the number of IROP units tendered for exchange.
Added
We sold two of these properties, totaling 648 units, subsequent to December 31, 2023 for an aggregate gross sale price of $128 million. In addition, as of the date of this Annual Report, we have executed contracts of sale for the four remaining properties and expect to consummate these sales in the first quarter of 2024.
Removed
During 2022, we successfully combined teams and integrated our property and revenue management systems across all former STAR communities, including merging human resources systems and benefit plans. We also completed property dispositions identified in conjunction with the STAR Merger that enabled us to delever our combined balance sheet.
Added
Once the sale of all 10 properties has been completed, we expect to have generated $525 million in gross sales proceeds, used net proceeds to reduce our debt by approximately $519 million and to have exited five single asset markets.
Removed
We expect to complete the remaining value add projects contemplated in connection with our Value Add Initiative at the selected communities throughout 2023 and 2024. 3 Table of Contents 2022 Property Acquisitions During 2022, we acquired three communities, totaling 678 units, for a gross purchase price of $203.4 million.
Added
While the four remaining properties that are part of the Portfolio Optimization and Deleveraging Strategy are under contracts of sale, there can be no assurance that the sales will be consummated at expected pricing levels, within expected time frames, or at all.
Removed
These acquisitions expanded our reach in Nashville, TN, Charlotte, NC, and Tampa, FL. Views of Music City (phase I), developed by our joint venture partner in Nashville, TN in 2022, had an average rent per unit of $1,483 at the time of our acquisition on April 6, 2022.
Added
We did not make new investments in unconsolidated real estate entities during the year ended December 31, 2023. However, we continued to fund commitments to our existing investments in unconsolidated real estate entities. As of December 31, 2023 and December 31, 2022, we had investments in unconsolidated real estate of $89.0 million and $80.2 million, respectively.
Removed
The property we acquired in Charlotte, NC was built in 2022 with an average rent per unit of $1,701 at the time of our acquisition on August 16, 2022.
Added
During 2023, we entered into an amendment to the Virtuoso joint venture agreement which provided us with control over the major decisions that most significantly impact the joint venture and removed our joint venture partner’s rights to a promote interest.
Removed
The property we acquired in Tampa, FL was built in 2012 with an average rent per unit of $1,714 at the time of our acquisition on September 13, 2022. 2022 Property Sales and Properties Held for Sale During 2022, we sold six communities, totaling 1,983 units, for a gross sale price of $257.1 million and recognized a total net gain on sale of $111.8 million.
Added
As a result of the amendment, we reassessed the accounting for Virtuoso, a former unconsolidated real estate entity, that consists of 178 units in Huntsville, Alabama, during the quarter ended September 30, 2023.
Removed
The sales represent a reduction in exposure to the Oklahoma City, OK, Louisville, KY, Indianapolis, IN, and Terre Haute, IN markets. As of December 31, 2022, we had one community held for sale, totaling 277 units. We expect the disposition to close during the first quarter of 2023.
Added
Because we concluded that Virtuoso is a voting interest entity and that we now control the major decisions that most significantly impact the joint venture through our 90% voting interest, we began consolidating the assets and liabilities and operating results of Virtuoso, effective August 1, 2023.
Removed
Development of this project, comprised of 178 units, was completed in 2021. Upon acquisition by the joint venture, 85% of the units were leased. As of December 31, 2022, we had fully funded $16.4 million on account of this commitment.
Added
In accordance with FASB Topic ASC 805, upon consolidation, we recognized the assets and liabilities of Virtuoso at carryover basis, allocating the individual assets and liabilities based upon their relative fair values on our consolidated balance sheets. Capital Markets Shelf Registration Statement On June 14, 2023, we replaced our previous shelf registration statement with our new shelf registration statement.
Removed
We own approximately 90% interest in this joint venture but share control of the major decisions that most significantly impact the joint venture with our partners and therefore account for this investment using the equity method of accounting.
Added
Swap Agreement On March 16, 2023, we entered into an interest rate swap contract with a notional value of $200 million, a strike rate of 3.39% and a maturity date of March 17, 2030.
Removed
On June 3, 2022, we entered into a joint venture for the development of Lakeline Station, a 378-unit community to be built in Austin, TX. We have committed to invest an aggregate $29.7 million in this joint venture, and, as of December 31, 2022, had funded $24.9 million on account of this commitment.
Added
We designated this interest rate swap as a cash flow hedge at inception and determined that the hedge is highly effective in offsetting interest rate fluctuations associated with the identified indebtedness. Financing Strategy We use a combination of debt and equity sources to fund our business objectives.
Removed
The project is scheduled to be completed by the second quarter of 2024. We own approximately 90% interest in this joint venture but share control of the major decisions that most significantly impact the joint venture with our partners and therefore account for this investment using the equity method of accounting.
Added
Through these projects, our goal of offsetting our carbon emissions is implemented by 5 Table of Contents directly restoring our natural environment.
Removed
On August 16, 2022, we entered into a joint venture for the development of The Mustang, a 275-unit community to be built in Dallas, TX. We have committed to invest an aggregate $25.6 million in this joint venture, and, as of December 31, 2022, had funded $11.7 million on account of this commitment.
Added
Since the inception of the IRTree Project in April 2020, we have successfully planted over 37,000 trees, one for each new move-in, across multiple regions of the United States including Apalachicola and Myakka State Forests in Florida and Texas, respectively. We are also keenly focused on the “Social” and “Governance” aspects of ESG.
Removed
The project is scheduled to be completed by the third quarter of 2024. We own approximately 85% interest in this joint venture but share control of the major decisions that most significantly impact the joint venture with our partners and therefore account for this investment using the equity method of accounting.
Added
Moreover, no assurance can be given concerning future laws, ordinances or regulations, or the potential introduction of hazardous or toxic substances by neighboring properties or residents.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeGeneral Risk Factors If we are unable to retain or obtain key personnel, our ability to implement our investment strategies could be hindered, which could reduce our ability to make distributions and adversely affect the trading price of our common stock. Our success depends to a significant degree upon the contributions of certain of our officers and our other personnel.
Biggest changeOur success depends to a significant degree upon the contributions of certain of our officers and our other personnel. If any of our key personnel were to terminate their employment with us, our operating results could suffer.
Such impairment charges reflect non-cash losses at the time of recognition; subsequent disposition or sale of such assets could further affect our future losses or gains, as they are based on the difference between the sale price received and adjusted amortized cost of such assets at the time of sale.
Such impairment charges reflect non-cash losses at the time of recognition; and subsequent disposition or sale of such assets could further affect our future losses or gains, as they are based on the difference between the sale price received and adjusted amortized cost of such assets at the time of sale.
A decline in the fair value of our assets may require us to recognize an impairment against such assets under generally accepted accounting principles as in effect in the United States (“GAAP”), if we were to determine that, with respect to any assets in unrealized loss positions, we do not have the ability and intent to hold such assets to maturity or for a period of time sufficient to allow for recovery to the amortized cost of such assets.
A further decline in the fair value of our assets may require us to recognize an impairment against such assets under generally accepted accounting principles as in effect in the United States (“GAAP”), if we were to determine that, with respect to any assets in unrealized loss positions, we do not have the ability and intent to hold such assets to maturity or for a period of time sufficient to allow for recovery to the amortized cost of such assets.
Such 24 Table of Contents investments may involve risks not otherwise present when we acquire or develop properties without third parties, including the following: • a co-venturer or partner may have certain approval rights over major decisions, including as to forms, amounts and timing of equity and debt financing, operating and capital budgets, and timing of sales and liquidations, which may prevent us from taking actions that we believe are in the best interest of our stockholders but are opposed by our co-venturers or partners; • a co-venturer or partner may at any time have economic or business interests or goals which are or become inconsistent with our business interests or goals, including inconsistent goals relating to the sale of properties held in the joint venture or the timing of termination or liquidation of the joint venture; • a co-venturer or partner might experience financial distress, become insolvent or bankrupt or fail to fund its share of required capital contributions, which may delay construction or development of a property or increase our financial commitment to the joint venture; • we may incur liabilities as a result of an action taken by our co-venturer or partner; • a co-venturer or partner may be in a position to take actions contrary to our instructions, requests, objectives or policies, including our policy with respect to qualifying and maintaining our qualification as a REIT; • agreements governing joint ventures, limited liability companies and partnerships often contain restrictions on the transfer of a member’s or partner’s interest or “buy-sell” or other provisions that may result in a purchase or sale of the interest at a disadvantageous time or on disadvantageous terms; • disputes between us and our co-venturer or partner may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our business and result in subjecting the properties owned by the joint venture to additional risk; and • under certain joint venture arrangements, neither venture partner may have the power to control the venture, and an impasse could be reached which may result in a delay of key decisions and such delay may have a negative effect on the joint venture.
Such investments may involve risks not otherwise present when we acquire or develop properties without third parties, including the following: • a co-venturer or partner may have certain approval rights over major decisions, including as to forms, amounts and timing of equity and debt financing, operating and capital budgets, and timing of sales and liquidations, which may prevent us from taking actions that we believe are in the best interest of our stockholders but are opposed by our co-venturers or partners; • a co-venturer or partner may at any time have economic or business interests or goals which are or become inconsistent with our business interests or goals, including inconsistent goals relating to the sale of properties held in the joint venture or the timing of termination or liquidation of the joint venture; • a co-venturer or partner might experience financial distress, become insolvent or bankrupt or fail to fund its share of required capital contributions, which may delay construction or development of a property or increase our financial commitment to the joint venture; • we may incur liabilities as a result of an action taken by our co-venturer or partner; • a co-venturer or partner may be in a position to take actions contrary to our instructions, requests, objectives or policies, including our policy with respect to qualifying and maintaining our qualification as a REIT; • agreements governing joint ventures, limited liability companies and partnerships often contain restrictions on the transfer of a member’s or partner’s interest or “buy-sell” or other provisions that may result in a purchase or sale of the interest at a disadvantageous time or on disadvantageous terms; • disputes between us and our co-venturer or partner may result in litigation or arbitration that would increase our expenses and prevent our officers and directors from focusing their time and effort on our business and result in subjecting the properties owned by the joint venture to additional risk; and • under certain joint venture arrangements, neither venture partner may have the power to control the venture, and an impasse could be reached which may result in a delay of key decisions and such delay may have a negative effect on the joint venture.
Risks Related to Our Organization and Structure • Our structure as a Maryland real estate investment trust may make it more difficult for us to be acquired. • Stockholders have limited control over changes in our policies and operations. • Our holding company structure may limit our ability to get cash from our operating company and its subsidiaries. • Our authorized but unissued shares of common and preferred stock may prevent a change in our control. • Rights to recover on claims against our directors are limited. • Our bylaws could limit stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees and could discourage lawsuits against us and our directors, officers and employees. 12 Table of Contents DETAILED DISCUSSION OF RISK FACTORS Risks Related to Our Business and Operations We are dependent on a concentration of our investments in a single asset class, making our results of operations more vulnerable to a downturn in the sector.
Risks Related to Our Organization and Structure • Our structure as a Maryland real estate investment trust may make it more difficult for us to be acquired. • Stockholders have limited control over changes in our policies and operations. • Our holding company structure may limit our ability to get cash from our operating company and its subsidiaries. • Our authorized but unissued shares of common and preferred stock may prevent a change in our control. • Rights to recover on claims against our directors are limited. • Our bylaws could limit stockholders' ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees and could discourage lawsuits against us and our directors, officers and employees. 11 Table of Contents DETAILED DISCUSSION OF RISK FACTORS Risks Related to Our Business and Operations We are dependent on a concentration of our investments in a single asset class, making our results of operations more vulnerable to a downturn in the sector.
Portfolio acquisitions may also result in us owning investments in geographically dispersed markets, placing additional demands on our ability to manage the properties in the portfolio. In addition, a seller may require that a group of properties be purchased as a package even though we may not want to purchase one or more properties in the portfolio.
Portfolio acquisitions may also result in us owning investments in geographically dispersed markets and placing additional demands on our ability to manage the properties in the portfolio. In addition, a seller may require that a group of properties be purchased as a package even though we may not want to purchase one or more properties in the portfolio.
Recently there has been heightened scrutiny of apartment housing properties for compliance with the requirements of the FHAA and the Disabilities Act and an increasing number of substantial enforcement actions and private lawsuits have been brought against apartment communities to ensure compliance with these requirements.
There has been heightened scrutiny of apartment housing properties for compliance with the requirements of the FHAA and the Disabilities Act and an increasing number of substantial enforcement actions and private lawsuits have been brought against apartment communities to ensure compliance with these requirements.
These conditions include: • changes in national, regional and local economic conditions, which may be negatively impacted by concerns about inflation, deflation, government deficits, high unemployment rates, decreased consumer confidence and liquidity concerns, particularly in markets in which we have a high concentration of properties; • fluctuations in interest rates, which could adversely affect our ability to obtain financing on favorable terms or at all, or could reduce our ability to deploy capital in investments that are accretive to our stockholders; • the inability of our residents to pay rent timely, or at all; • the existence and quality of the competition, such as the attractiveness of our properties as compared to our competitors’ properties based on considerations such as convenience of location, rental rates, amenities and safety record; • increased operating costs, including increased real property taxes, maintenance, insurance, utilities and labor costs; • weather conditions that may increase or decrease energy costs and other weather-related expenses; • civil unrest, acts of God, including earthquakes, floods, hurricanes and other natural disasters, which may result in uninsured losses, acts of war or terrorism, or other natural or human causes beyond our control, which may disrupt or interrupt our operations; • oversupply of multifamily housing or a reduction in demand for real estate in the markets in which our properties are located; • a favorable interest rate environment that may result in a significant number of potential residents of our multifamily communities deciding to purchase homes instead of renting; • changes in, or increased costs of compliance with, laws and/or governmental regulations, including those governing usage, zoning, the environment and taxes; and • rent control or stabilization laws, or other laws regulating rental housing, which could prevent us from raising rents to offset increases in operating costs.
These conditions include: • changes in national, regional and local economic conditions, which may be negatively impacted by concerns about inflation, deflation, government deficits, high unemployment rates, decreased consumer confidence and liquidity concerns, particularly in markets in which we have a high concentration of properties; • fluctuations in interest rates, which could adversely affect our ability to obtain financing on favorable terms or at all, or could reduce our ability to deploy capital in investments that are accretive to our stockholders; • the inability of our residents to pay rent timely, or at all; • the existence and quality of the competition, such as the attractiveness of our properties as compared to our competitors’ properties based on considerations such as convenience of location, rental rates, amenities and safety record; • increased operating costs, including increased real property taxes, maintenance, insurance, utilities and labor costs; • weather conditions that may increase or decrease energy costs and other weather-related expenses; • civil unrest, acts of God, including earthquakes, floods, hurricanes and other natural disasters, which may result in uninsured losses, acts of war or terrorism, or other natural or human causes beyond our control, which may disrupt or interrupt our operations; • oversupply of multifamily housing or a reduction in demand for real estate in the markets in which our properties are located; • a favorable interest rate environment that may result in a significant number of potential residents of our multifamily communities deciding to purchase homes instead of renting; • changes in, or increased costs of compliance with, laws and/or governmental regulations, including those governing usage, zoning, the environment and taxes; and • rent control or stabilization laws, or other laws regulating rental housing, which could prevent us from raising rents to offset increases in operating costs. 21 Table of Contents Economic conditions may adversely affect the residential real estate market and our income.
Our revenues may be adversely affected by the general or local economic climate, local real estate considerations (such as oversupply of or reduced demand for multifamily units), the perception by prospective residents of the safety, convenience and attractiveness of the areas in which our multifamily communities are located 13 Table of Contents (including the quality of local schools and other amenities) and increased operating costs (including real estate taxes and utilities).
Our revenues may be adversely affected by the general or local economic climate, local real estate considerations (such as oversupply of or reduced demand for multifamily units), the perception by prospective residents of the safety, convenience and attractiveness of the areas in which our multifamily communities are located 12 Table of Contents (including the quality of local schools and other amenities) and increased operating costs (including real estate taxes and utilities).
RISK FACTOR SUMMARY Risks Related to Our Business and Operations • We depend on residents for revenue and if residents fail to pay rent it may cause a material decline in our operating results. • Future unfavorable changes in economic conditions could adversely impact us. • Our concentration of investments in a single asset class makes our results of operations more vulnerable to a downturn in the multifamily sector. • Competition could limit our ability to lease apartments or increase or maintain rental income, and short-term leases make us more susceptible to these risks. • Redevelopment risks may cause our revenues and expenses to fluctuate significantly from one period to another which may result in losses. • Labor and materials required for maintenance, repair, renovation or capital expenditure may be more expensive than anticipated or significantly delayed. • We face the risk of fluctuations in the cost, availability and quality of our materials and products, which could adversely affect our results of operations. • Capital expenditure costs, and other costs of operating real estate assets, may be greater than anticipated which may adversely affect our results of operations. • Increasing real estate taxes, utilities and insurance costs may negatively impact operating results. • Substantial inflationary pressures could adversely affect our financial condition or results of operations. • The loss of services of any of our senior officers or key employees and increased competition for personnel could adversely affect us and/or increase our labor costs. • We may fail to grow our portfolio through acquisitions or such acquisitions may not yield the cash flows expected. • A cybersecurity incident and other technology disruptions could negatively impact our business. • Damage from catastrophic weather and other natural events could result in losses. • We may be subject to contingent or unknown uninsurable liabilities related to properties or businesses that we have acquired. • We may be adversely affected by changes in state and local tax laws and may become subject to tax audits from time to time. • We may fail to produce accurate and timely financial statements. • We may acquire or develop properties through joint ventures, which may be riskier than our typical acquisitions. • Bankruptcy or defaults of our counterparties could adversely affect our performance. • If we sell properties by providing financing to purchasers, we will bear the risk of default by the purchaser. • New strains of the COVID-19 virus could adversely affect our business operations. • We are subject to ESG risks that could adversely affect our reputation and the market price of our securities. 11 Table of Contents Risks Associated with Debt Financing • We plan to incur mortgage indebtedness and other borrowings and are not limited in the amount or percentage of indebtedness that we may incur, which may increase our business risk. • Debt financing and other required capital may not be available to us or may only be available on adverse terms. • Rising interest rates could both increase our borrowing costs, thereby adversely affecting our cash flows and the amounts available for distribution to our stockholders, and decrease our share price, if investors seek higher yields through other investments. • Failure to hedge effectively against interest rates may adversely affect our results of operations. • Lender-imposed restrictions may affect our ability to make distributions to our stockholders and otherwise affect our operating policies. • We may guaranty certain debt made to the entities that own our properties.
RISK FACTOR SUMMARY Risks Related to Our Business and Operations • We depend on residents for revenue and if residents fail to pay rent it may cause a material decline in our operating results. • Future unfavorable changes in economic conditions could adversely impact us. • Our concentration of investments in a single asset class makes our results of operations more vulnerable to a downturn in the multifamily sector. • Competition could limit our ability to lease apartments or increase or maintain rental income, and short-term leases make us more susceptible to these risks. • Redevelopment risks may cause our revenues and expenses to fluctuate significantly from one period to another which may result in losses. • Labor and materials required for maintenance, repair, renovation or capital expenditure may be more expensive than anticipated or significantly delayed. • We face the risk of fluctuations in the cost, availability and quality of our materials and products, which could adversely affect our results of operations. • Capital expenditure costs, and other costs of operating real estate assets, may be greater than anticipated which may adversely affect our results of operations. • Increasing real estate taxes, utilities and insurance costs may negatively impact operating results. • Substantial inflationary pressures could adversely affect our financial condition or results of operations. • The loss of services of any of our senior officers or key employees and increased competition for personnel could adversely affect us and/or increase our labor costs. • We may fail to grow our portfolio through acquisitions or such acquisitions may not yield the cash flows expected. • A cybersecurity incident and other technology disruptions could negatively impact our business. • Damage from catastrophic weather and other natural events could result in losses. • International military conflicts or war could negatively impact our business, increase costs, and increase the likelihood of a cybersecurity incident. • We may be subject to contingent or unknown uninsurable liabilities related to properties or businesses that we have acquired. • We may be adversely affected by changes in state and local tax laws and may become subject to tax audits from time to time. • We may fail to produce accurate and timely financial statements. • We may acquire or develop properties through joint ventures, which may be riskier than our typical acquisitions. • Bankruptcy or defaults of our counterparties could adversely affect our performance. • If we sell properties by providing financing to purchasers, we will bear the risk of default by the purchaser. • New strains of the COVID-19 virus or other infectious diseases could adversely affect our business operations. • We are subject to ESG risks that could adversely affect our reputation and the market price of our securities. 10 Table of Contents Risks Associated with Debt Financing • We plan to incur mortgage indebtedness and other borrowings and are not limited in the amount or percentage of indebtedness that we may incur, which may increase our business risk. • Debt financing and other required capital may not be available to us or may only be available on unfavorable terms. • Rising interest rates could both increase our borrowing costs, thereby adversely affecting our cash flows and the amounts available for distribution to our stockholders, and decrease our share price, if investors seek higher yields through other investments. • Failure to hedge effectively against interest rates may adversely affect our results of operations. • Lender-imposed restrictions may affect our ability to make distributions to our stockholders and otherwise affect our operating policies. • We may guaranty certain debt made to the entities that own our properties.
A number of our markets had tax reassessments in 2022 and we expect this to continue in future years. If our costs continue to rise, without being offset by a corresponding increase in rental rates, our results of operations could be negatively impacted, and our ability to pay our dividends and distributions and senior debt could be affected.
A number of our markets had tax reassessments in 2023 and we expect this to continue in future years. If our costs continue to rise, without being offset by a corresponding increase in rental rates, our results of operations could be negatively impacted, and our ability to pay our dividends and distributions and senior debt could be affected.
If we are not able to cost-effectively maximize the life of our properties, we may incur greater than anticipated capital expenditure costs, which may adversely affect our ability to make distributions to our stockholders. As of December 31, 2022, the average age of our multifamily communities was approximately 18 years.
If we are not able to cost-effectively maximize the life of our properties, we may incur greater than anticipated capital expenditure costs, which may adversely affect our ability to make distributions to our stockholders. As of December 31, 2023, the average age of our multifamily communities was approximately 18 years.
To the extent we purchase real estate in such an environment, we are subject to the risk that, if the real estate market subsequently ceases to attract the same level of capital investment, or if the number of investors seeking to acquire such assets decreases, our returns will be lower and the value of our assets may not appreciate or may decrease significantly below the amount we paid for such assets.
To the extent we purchase real estate in such an environment, we are subject to the risk that, if the real estate market subsequently ceases to attract the same level of capital investment, or if the number of investors seeking to acquire such assets decreases, our returns will be lower and the value of our assets may not appreciate or may decrease significantly 22 Table of Contents below the amount we paid for such assets.
No assurance can be given that any particular property we own, directly or through any subsidiary entity, including IROP, but excluding a “TRS”, will not be treated as inventory or property held primarily for sale to customers in the ordinary course of a trade or business. The use of TRSs would increase our overall tax liability.
No assurance can be given that any particular property we own, directly or through any subsidiary entity, including IROP, but excluding a “TRS”, will not be treated as inventory or property held primarily for sale to customers in the ordinary course of a trade or business. 32 Table of Contents The use of TRSs would increase our overall tax liability.
In order to partially mitigate our exposure to increases in interest rates, we have entered into interest rate swaps and collars on $550.0 million of our variable rate debt, which involve the exchange of variable for fixed rate interest payments.
In order to partially mitigate our exposure to increases in interest rates, we have entered into interest rate swaps and collars on $750.0 million of our variable rate debt, which involve the exchange of variable for fixed rate interest payments.
In addition, our board of directors may, without stockholder approval, amend our Charter from time to time to increase or decrease the aggregate number of shares of our stock or the number of shares of stock of any class or series that we have authority to issue and classify or reclassify any unissued shares of common or preferred stock into other classes or series of 36 Table of Contents stock and set the preferences, rights and other terms of the classified or reclassified shares.
In addition, our board of directors may, without stockholder approval, amend our Charter from time to time to increase or decrease the aggregate number of shares of our stock or the number of shares of stock of any class or series that we have authority to issue and classify or reclassify any unissued shares of common or preferred stock into other classes or series of stock and set the preferences, rights and other terms of the classified or reclassified shares.
Certain of our outstanding debt contains, and we may in the future acquire or finance properties with debt containing, limited or no principal amortization, which would require that the principal be repaid at the maturity of the loan in a so-called “balloon payment.” As of December 31, 2022, the financing arrangements of our outstanding indebtedness could require us to make lump-sum or “balloon” payments of approximately $2,454.6 million at maturity dates that range from 2024 to 2030.
Certain of our outstanding debt contains, and we may in the future acquire or finance properties with debt containing, limited or no principal amortization, which would require that the principal be repaid at the maturity of the loan in a so-called “balloon payment.” As of December 31, 2023, the financing arrangements of our outstanding indebtedness could require us to make lump-sum or “balloon” payments of approximately $2,401.6 million at maturity dates that range from 2024 to 2030.
United States Federal Income Tax Risks • Legislative or regulatory action could adversely affect the returns to our investors. • Dividends paid by REITs generally do not qualify for the reduced tax rates provided under current law. • The ability of our Board of Directors to revoke our REIT election without stockholder approval may cause adverse consequences to our stockholders. • Failure to qualify as a REIT could have adverse consequences. • We may take action to maintain our REIT status which could adversely affect our overall financial performance. • Certain of our business activities are potentially subject to the prohibited transaction tax, which could reduce the return on any investment in our securities. • The use of TRSs would increase our overall tax liability. • If our operating partnership, IROP, is not treated as a partnership or disregarded entity for U.S. federal income tax purposes, its income may be subject to taxation. • Distributions to tax-exempt investors may be classified as unrelated business taxable income, or UBTI, and tax-exempt investors would be required to pay tax on such income and to file income tax returns. • Distributions to foreign investors may be treated as an ordinary income distribution to the extent that it is made out of current or accumulated earnings and profits. • Foreign investors may be subject to FIRPTA tax upon the sale of their shares of our stock or upon a capital gain dividend. • We may make distributions consisting of both stock and cash, in which case stockholders may be required to pay income taxes in excess of the cash distributions they receive.
United States Federal Income Tax Risks • Legislative or regulatory action could adversely affect the returns to our investors. • Dividends paid by REITs generally do not qualify for the reduced tax rates applicable to qualified dividend income provided under current law. • The ability of our Board of Directors to revoke our REIT election without stockholder approval may cause adverse consequences to our stockholders. • Failure to qualify as a REIT could have adverse consequences. • We may take action to maintain our REIT status which could adversely affect our overall financial performance. • Certain of our business activities are potentially subject to the prohibited transaction tax, which could reduce the return on any investment in our securities. • The income of TRSs will be subject to federal and possibly state corporate income tax. • If our operating partnership, IROP, is not treated as a partnership or disregarded entity for U.S. federal income tax purposes, its income may be subject to taxation. • Distributions to tax-exempt investors may be classified as unrelated business taxable income, or UBTI, and tax-exempt investors would be required to pay tax on such income and to file income tax returns. • Distributions to foreign investors may be treated as an ordinary income distribution to the extent that it is made out of current or accumulated earnings and profits. • Foreign investors may be subject to FIRPTA tax upon the sale of their shares of our stock or upon a capital gain dividend. • We may make distributions consisting of both stock and cash, in which case stockholders may be required to pay income taxes in excess of the cash distributions they receive.
The Maryland General Corporation Law provides that a director has no liability in such capacity if he performs his duties in good faith, in a manner he reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances.
The Maryland General Corporation Law provides that a director has no liability in such capacity if he or she performs his or her duties in good faith, in a manner he or she reasonably believes to be in our best interests and with the care that an ordinarily prudent person in a like position would use under similar circumstances.
In these cases, we will be responsible to the lender for satisfaction of the debt if it is not paid by such entity. If any mortgages contain cross-collateralization or cross-default provisions, there is a 25 Table of Contents risk that we could lose part or all of our investment in multiple properties.
In these cases, we will be responsible to the lender for satisfaction of the debt if it is not paid by such entity. If any mortgages contain cross-collateralization or cross-default provisions, there is a risk that we could lose part or all of our investment in multiple properties.
If we cease to maintain our qualification as a REIT, we would become subject to U.S. federal income tax on our taxable income without the benefit of the dividends paid deduction and would no longer be required to distribute most of our taxable income to our stockholders, which may have adverse consequences on the total return to our stockholders.
If we cease to maintain our qualification as a REIT, we would become subject to U.S. federal 31 Table of Contents income tax on our taxable income without the benefit of the dividends paid deduction and would no longer be required to distribute most of our taxable income to our stockholders, which may have adverse consequences on the total return to our stockholders.
In any such case, we may incur liabilities that could result in losses and could harm our operating results and, therefore distributions we make to our stockholders. We rely on information technology systems in our operations, and any breach or security failure of those systems could materially adversely affect our business, results of operations, financial condition and reputation.
In any such case, we may incur liabilities that could result in losses and could harm our operating results and, therefore distributions we make to our stockholders. 18 Table of Contents We rely on information technology systems in our operations, and any breach or security failure of those systems could materially adversely affect our business, results of operations, financial condition and reputation.
Under the Disabilities Act, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. The Disabilities Act has separate compliance requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services be made accessible and available to people with disabilities.
Under the Disabilities Act, all places of public accommodation are required to comply with federal requirements related to access and use by disabled persons. The Disabilities Act has separate compliance 29 Table of Contents requirements for “public accommodations” and “commercial facilities” that generally require that buildings and services be made accessible and available to people with disabilities.
In addition, the members of the current presidential administration have announced that restructuring and privatizing Fannie Mae and Freddie Mac is a priority of the current administration, and there is uncertainty regarding the impact of this action on us and buyers of our properties. Bankruptcy or defaults of our counterparties could adversely affect our performance.
In addition, the members of the current presidential administration have announced that restructuring and privatizing Fannie Mae and Freddie Mac is a 19 Table of Contents priority of the current administration, and there is uncertainty regarding the impact of this action on us and buyers of our properties. Bankruptcy or defaults of our counterparties could adversely affect our performance.
In the event extreme weather conditions such as prolonged changes in precipitation and temperature become more common or severe in areas where our communities are located, we may experience a decrease in demand for our 20 Table of Contents communities located in these areas or affected by these conditions, which may lead to a decline in the value of these communities.
In the event extreme weather conditions such as prolonged changes in precipitation and temperature become more common or severe in areas where our communities are located, we may experience a decrease in demand for our communities located in these areas or affected by these conditions, which may lead to a decline in the value of these communities.
Dividends from REITs as well as regular corporate dividends will also be subject to a 3.8% Medicare surtax for taxpayers with modified adjusted gross income above $200,000 (if single) or $250,000 (if married and filing jointly). 31 Table of Contents We may decide to borrow funds to satisfy our REIT minimum distribution requirements, which could adversely affect our overall financial performance.
Dividends from REITs as well as regular corporate dividends will also be subject to a 3.8% Medicare surtax for taxpayers with modified adjusted gross income above $200,000 (if single) or $250,000 (if married and filing jointly). We may decide to borrow funds to satisfy our REIT minimum distribution requirements, which could adversely affect our overall financial performance.
However, we cannot assure you that we will be able to acquire 30 Table of Contents properties or allocate responsibilities in this manner. If we cannot, costs in complying with these laws may adversely affect our results of operations, financial condition and ability to make distributions to our stockholders.
However, we cannot assure you that we will be able to acquire properties or allocate responsibilities in this manner. If we cannot, costs in complying with these laws may adversely affect our results of operations, financial condition and ability to make distributions to our stockholders.
As of December 31, 2022, substantially all of our investments are concentrated in the multifamily apartment sector. As a result, we are subject to risks inherent in investments in a single type of property.
As of December 31, 2023, substantially all of our investments are concentrated in the multifamily apartment sector. As a result, we are subject to risks inherent in investments in a single type of property.
From time to time, changes in state and local tax laws or regulations are enacted, which may result in an increase in our tax liability. A shortfall in tax 16 Table of Contents revenues for states and local jurisdictions in which we own multifamily communities may lead to an increase in the frequency and size of such changes.
From time to time, changes in state and local tax laws or regulations are enacted, which may result in an increase in our tax liability. A shortfall in tax revenues for states and local jurisdictions in which we own multifamily communities may lead to an increase in the frequency and size of such changes.
We intend to acquire properties selectively. Acquisition of properties entails risks that investments will fail to perform in accordance with expectations. In undertaking acquisitions, we will incur certain risks, including the expenditure 23 Table of Contents of funds on, and the devotion of management’s time to, transactions that may not come to fruition.
We intend to acquire properties selectively. Acquisition of properties entails risks that investments will fail to perform in accordance with expectations. In undertaking acquisitions, we will incur certain risks, including the expenditure of funds on, and the devotion of management’s time to, transactions that may not come to fruition.
We maintain comprehensive insurance for our properties, including casualty, liability, accidental death or injury to persons, fire, extended coverage, terrorism, earthquakes, hurricanes and rental loss customarily obtained for similar properties in amounts which our advisor determines are sufficient to cover reasonably foreseeable losses, and with policy specifications and insured limits that we believe are adequate and appropriate under the circumstances.
We maintain comprehensive insurance for our properties, including casualty, liability, accidental death or injury to persons, fire, extended coverage, terrorism, earthquakes, hurricanes and rental loss customarily obtained for similar properties in amounts which our advisors determine are sufficient to cover reasonably foreseeable losses, and with policy specifications and insured limits that we believe are adequate and appropriate under the circumstances.
A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented or detected and corrected, on a timely basis by the company’s internal controls.
A 15 Table of Contents material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented or detected and corrected, on a timely basis by the company’s internal controls.
To obtain the favorable tax treatment accorded to REITs, we generally are required each year to distribute to our stockholders at least 90% of our REIT taxable income (excluding net capital gain), determined without regard to the 32 Table of Contents deduction for distributions paid.
To obtain the favorable tax treatment accorded to REITs, we generally are required each year to distribute to our stockholders at least 90% of our REIT taxable income (excluding net capital gain), determined without regard to the deduction for distributions paid.
Any such covenants, restrictions or limitations may limit our ability to make distributions to you and could make it difficult for us to satisfy the requirements necessary to maintain our qualification as a REIT for U.S. federal income tax purposes. Lenders may be able to recover against our other properties under our mortgage loans.
Any such 25 Table of Contents covenants, restrictions or limitations may limit our ability to make distributions to you and could make it difficult for us to satisfy the requirements necessary to maintain our qualification as a REIT for U.S. federal income tax purposes. Lenders may be able to recover against our other properties under our mortgage loans.
This competition may increase as investments in real estate become increasingly attractive relative to other forms of investment. As a result of competition, we may be unable to acquire additional properties as we desire or the purchase price may be significantly elevated.
This competition may increase as investments in real estate become increasingly attractive relative to other forms of investment. As a result 16 Table of Contents of competition, we may be unable to acquire additional properties as we desire or the purchase price may be significantly elevated.
Common stockholders bear the risk that our future issuances of debt or equity securities or our incurrence of other borrowings may negatively affect the trading price of our common stock. 39 Table of Contents The market prices for our common stock may be volatile. The prices at which our common stock may sell in the public market may be volatile.
Common stockholders bear the risk that our future issuances of debt or equity securities or our incurrence of other borrowings may negatively affect the trading price of our common stock. The market prices for our common stock may be volatile. The prices at which our common stock may sell in the public market may be volatile.
Under the Maryland General Corporation Law, “business combinations” between a Maryland corporation and an “interested stockholder” or an affiliate of an interested stockholder are prohibited for five years after the most recent date on which the interested stockholder became an interested stockholder.
Under the Maryland General Corporation Law, “business combinations” between a Maryland corporation and an “interested stockholder” or an affiliate of an interested stockholder are prohibited for five years after the most recent date 34 Table of Contents on which the interested stockholder became an interested stockholder.
In addition, our acquisition activities pose the following risks to our ongoing operations: • we may not achieve the increased occupancy, cost savings and operational efficiencies projected at the time of acquiring a property; • management may incur significant costs and expend significant resources evaluating and negotiating potential acquisitions, including those that we subsequently are unable to complete; • we may acquire properties that are not initially accretive to our results upon acquisition, and we may not successfully manage and operate those properties to meet our expectations; • we may acquire properties outside of our existing markets where we are less familiar with local economic and market conditions; • some properties may be worth less or may generate less revenue than, or simply not perform as well as, we believed at the time of the acquisition; • we may be unable to assume mortgage indebtedness with respect to properties we seek to acquire or obtain financing for acquisitions on favorable terms or at all; • we may forfeit earnest money deposits with respect to acquisitions we are unable to complete due to lack of financing, failure to satisfy closing conditions or certain other reasons; • we may spend more than budgeted to make necessary improvements or renovations to acquired properties; and • we may acquire properties without any recourse, or with only limited recourse, for liabilities, whether known or unknown, such as clean-up of environmental contamination, claims by residents, vendors or other persons against the former owners of the properties, and claims for indemnification by general partners, trustees, officers, and others indemnified by the former owners of the properties. 17 Table of Contents Our investment in property development or redevelopment may be more costly or difficult to complete than we anticipate, and development and construction risks could adversely affect our profitability.
In addition, our acquisition activities pose the following risks to our ongoing operations: • we may not achieve the increased occupancy, cost savings and operational efficiencies projected at the time of acquiring a property; • management may incur significant costs and expend significant resources evaluating and negotiating potential acquisitions, including those that we subsequently are unable to complete; • we may acquire properties that are not initially accretive to our results upon acquisition, and we may not successfully manage and operate those properties to meet our expectations; • we may acquire properties outside of our existing markets where we are less familiar with local economic and market conditions; • some properties may be worth less or may generate less revenue than, or simply not perform as well as, we believed at the time of the acquisition; • we may be unable to assume mortgage indebtedness with respect to properties we seek to acquire or obtain financing for acquisitions on favorable terms or at all; • we may forfeit earnest money deposits with respect to acquisitions we are unable to complete due to lack of financing, failure to satisfy closing conditions or certain other reasons; • we may spend more than budgeted to make necessary improvements or renovations to acquired properties; and • we may acquire properties without any recourse, or with only limited recourse, for liabilities, whether known or unknown, such as clean-up of environmental contamination, claims by residents, vendors or other persons against the former owners of the properties, and claims for indemnification by general partners, trustees, officers, and others indemnified by the former owners of the properties.
Under our Charter, and bylaws and the Maryland General Corporation Law, our stockholders generally have a right to vote only on the following matters: • the election or removal of directors; • certain mergers, consolidations, statutory share exchanges and transfers of assets; • our dissolution; • adoption, amendment, alteration or repeal of provisions in our bylaws; • the amendment of our charter, except that our board of directors may amend our charter without stockholder approval to: • change our name; • change the name or other designation or the par value of any class or series of stock and the aggregate par value of our stock; • increase or decrease the aggregate number of our authorized shares; • increase or decrease the number of our shares of any class or series of stock that we have the authority to issue; and • effect certain reverse stock splits.
Under our Charter, and bylaws and the Maryland General Corporation Law, our stockholders generally have a right to vote only on the following matters: • the election or removal of directors; • certain mergers, consolidations, statutory share exchanges and transfers of assets; • our dissolution; • adoption, amendment, alteration or repeal of provisions in our bylaws; • the amendment of our charter, except that our board of directors may amend our charter without stockholder approval to: • change our name; • change the name or other designation or the par value of any class or series of stock and the aggregate par value of our stock; • increase or decrease the aggregate number of our authorized shares; • increase or decrease the number of our shares of any class or series of stock that we have the authority to issue; and • effect certain reverse stock splits. 35 Table of Contents All other matters are subject to the discretion of our board of directors.
Failure to meet our 18 Table of Contents projected earnings and distributable cash flow levels in a particular reporting period could have an adverse effect on our financial condition and on the market price of our common stock.
Failure to meet our projected earnings and distributable cash flow levels in a particular reporting period could have an adverse effect on our financial condition and on the market price of our common stock.
A foreign investor disposing of a U.S. real property interest, including shares of stock of a U.S. corporation whose assets consist principally of U.S. real property interests, is generally subject to FIRPTA tax on the gain recognized on the disposition.
A foreign investor disposing of a U.S. real property interest, including shares of stock of a U.S. corporation whose assets consist principally of U.S. real property interests, is generally subject to FIRPTA tax on the gain recognized on the 33 Table of Contents disposition.
Lock-out provisions may prohibit us from reducing the outstanding indebtedness with respect to any properties, refinancing such indebtedness on a non-recourse basis at maturity, or increasing the amount of indebtedness with respect to such properties.
Lock-out 26 Table of Contents provisions may prohibit us from reducing the outstanding indebtedness with respect to any properties, refinancing such indebtedness on a non-recourse basis at maturity, or increasing the amount of indebtedness with respect to such properties.
However, in approving a 35 Table of Contents transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board.
However, in approving a transaction, the board of directors may provide that its approval is subject to compliance, at or after the time of approval, with any terms and conditions determined by the board.
Consequently, we may rely on third-party sources to fund our capital needs. We may not be able to obtain financing on favorable terms or at all. Any additional debt we incur may increase our leverage or impose additional and more stringent restrictions on our operations than we currently have.
Consequently, we may rely on third-party sources to fund our capital needs. We may not be able to obtain financing on favorable terms or 17 Table of Contents at all. Any additional debt we incur may increase our leverage or impose additional and more stringent restrictions on our operations than we currently have.
Taking into account our current interest rate swap and collar agreements, a 100-basis point increase in interest rates would result in a $2.7 million increase in annual interest expense. See Item 7.
Taking into account our current interest rate swap and collar agreements, a 100-basis point increase in interest rates would result in a $0.9 million increase in annual interest expense. See Item 7.
We may experience a decline in the fair value of our assets and be forced to recognize impairment charges, which could materially and adversely impact our financial condition, liquidity and results of operations and the market price of our common stock.
We recently experienced impairment charges and may in the future experience a decline in the fair value of our assets and be forced to recognize additional impairment charges, which could materially and adversely impact our financial condition, liquidity and results of operations and the market price of our common stock.
If we were to fail to so qualify, gain realized by foreign investors on a sale of shares of our stock would be subject to FIRPTA tax, unless the shares of our stock were traded on an established securities market and the foreign investor did not at any time during a specified testing period directly or indirectly own more than 10% of the value of our outstanding common stock. 34 Table of Contents Foreign investors may be subject to FIRPTA tax upon a capital gain dividend.
If we were to fail to so qualify, gain realized by foreign investors on a sale of shares of our stock would be subject to FIRPTA tax, unless the shares of our stock were traded on an established securities market and the foreign investor did not at any time during a specified testing period directly or indirectly own more than 10% of the value of our outstanding common stock.
Accordingly, we are subject to any flaws in or breaches to their information technology systems or those which they operate for us. 19 Table of Contents A security breach or other significant disruption involving our information technology networks and related systems or those of our vendors could: disrupt our operations; result in the unauthorized access to, and the destruction, loss, theft, misappropriation or release of, proprietary, personally identifiable, confidential, sensitive or otherwise valuable information including resident information and lease data, which others could use to compete against us or which could expose us to damage claims by third parties for disruptive, destructive or otherwise harmful outcomes; require significant management attention and resources to remedy any damages that result; subject us to claims for breach of contract, damages, credits, penalties or termination of leases or other agreements; or damage our business relationships or reputation generally.
A security breach or other significant disruption involving our information technology networks and related systems or those of our vendors could: disrupt our operations; result in the unauthorized access to, and the destruction, loss, theft, misappropriation or release of, proprietary, personally identifiable, confidential, sensitive or otherwise valuable information including resident information and lease data, which others could use to compete against us or which could expose us to damage claims by third parties for disruptive, destructive or otherwise harmful outcomes; require significant management attention and resources to remedy any damages that result; subject us to claims for breach of contract, damages, credits, penalties or termination of leases or other agreements; or damage our business relationships or reputation generally.
We may not be able to sell a property or 22 Table of Contents properties quickly or on favorable terms in response to changes in the economy or other conditions when it otherwise may be prudent to do so.
We may not be able to sell a property or properties quickly or on favorable terms in response to changes in the economy or other conditions when it otherwise may be prudent to do so.
The more favorable rates applicable to regular corporate dividends could cause stockholders who are individuals to perceive investments in REITs to be relatively less attractive than investments in the stock of non-REIT corporations that pay dividends to which more favorable rates apply, which could reduce the value of the stocks of REITs.
The more favorable rates applicable to qualified dividend income could cause stockholders who are individuals to perceive investments in REITs to be relatively less attractive than investments in the stock of non-REIT corporations that pay dividends to which more favorable rates apply, which could reduce the value of the stocks of REITs.
If we fail to consummate a targeted acquisition and have issued additional securities to fund such acquisition, then we will have issued securities without 15 Table of Contents realizing a corresponding increase in earnings and cash flow from the targeted acquisition.
If we fail to consummate a targeted acquisition and have issued additional securities to fund such acquisition, then we will have issued securities without realizing a corresponding increase in earnings and cash flow from the targeted acquisition.
As a result of these rules, we may have to limit the use of hedging techniques that might otherwise be advantageous, which could result in greater risks associated with interest rate or other changes than we would otherwise incur. 27 Table of Contents There is refinancing risk associated with our debt.
As a result of these rules, we may have to limit the use of hedging techniques that might otherwise be advantageous, which could result in greater risks associated with interest rate or other changes than we would otherwise incur. There is refinancing risk associated with our debt. We expect that we will incur additional indebtedness in the future.
The general risk of inflation is that interest on our debt, general and administrative expenses and other expenses, including our costs of personnel, capital improvements and expenditures, increase at a rate faster than increases in our residential rental rates, which would adversely affect our financial condition or results of operations. 14 Table of Contents Monetary policy actions by the U.S.
The general risk of inflation is that interest on our debt, general and administrative expenses and other expenses, including our costs of personnel, capital improvements and expenditures, increase at a rate faster than increases in our residential rental rates, which would adversely affect our financial condition or results of operations.
If we are required to recognize asset impairment charges in the future, these charges could materially and adversely affect our financial condition, liquidity, results of operations and the per share trading price of our common stock. Changes in U.S. accounting standards may materially and adversely affect our reported results of operations.
If we are required to recognize asset impairment charges in the future, these charges could materially and adversely affect our financial condition, liquidity, results of operations and the per share trading price of our common stock.
Our inability to remedy any additional deficiencies or material weaknesses that may be identified in the future could, among other things, cause us to fail to file timely our periodic reports with the SEC (which may have a material adverse effect on our ability to access the capital markets); prevent us from providing reliable and accurate financial information and forecasts or from avoiding or detecting fraud; or require us to incur additional costs or divert management resources to achieve compliance COVID-19, or a future, similar global pandemic, could have a material adverse effect on our business, results of operations, cash flows and financial condition.
Our inability to remedy any additional deficiencies or material weaknesses that may be identified in the future could, among other things, cause us to fail to file timely our periodic reports with the SEC (which may have a material adverse effect on our ability to access the 20 Table of Contents capital markets); prevent us from providing reliable and accurate financial information and forecasts or from avoiding or detecting fraud; or require us to incur additional costs or divert management resources to achieve compliance.
In addition, the deterioration of global economic conditions as a result of the pandemic may ultimately decrease the demand for multifamily communities within the markets in which we operate and may adversely impact occupancy levels and rental rates across our portfolio.
In addition, the deterioration of global economic conditions as a result of COVID-19 or other infectious disease outbreaks may ultimately decrease the demand for multifamily communities within the markets in which we operate and may adversely impact occupancy levels and rental rates across our portfolio.
Further, employees or others may disclose non-public information regarding us or our business or otherwise make negative comments regarding 38 Table of Contents us on social networking or other websites, which could adversely affect our business and results of operations. As social media evolves we will be presented with new risks and challenges.
Further, employees or others may disclose non-public information regarding us or our business or otherwise make negative comments regarding us on social networking or other websites, which could adversely affect our business and results of operations. As social media evolves we will be presented with new risks and challenges. Lawsuits or other legal proceedings could result in substantial costs.
Should the U.S. Federal Reserve continue to raise the federal funds rate in the future, this will likely result in an increase in market interest rates, which may increase our interest expense under our variable-rate borrowings and the costs of refinancing existing indebtedness or obtaining new debt.
Federal Reserve raise the federal funds rate in the future, it will likely result in an increase in market interest rates, which will increase our interest expense under our variable-rate borrowings and the costs of refinancing existing indebtedness or obtaining new debt.
In addition, we intend to incur additional mortgage debt by obtaining loans secured by some, or all, of our real properties to obtain funds to acquire additional real properties and/or make capital improvements to properties.
We have and intend to acquire properties subject to existing financing or by borrowing new funds. In addition, we have and intend to incur additional mortgage debt by obtaining loans secured by some, or all, of our real properties in order to obtain funds to acquire additional real properties and/or make capital improvements to properties.
If we fail to qualify as a REIT in any taxable year: • we would not be allowed to deduct our distributions to our stockholders when computing our taxable income; • we would be subject to U.S. federal income tax (including any applicable alternative minimum tax in tax years beginning before January 1, 2018) on our taxable income at regular corporate rates; • we generally would be disqualified from being taxed as a REIT for the four taxable years following the year during which qualification was lost, unless entitled to relief under certain statutory provisions; • we would have less cash to make distributions to our stockholders; and • we might be required to borrow additional funds or sell some of our assets in order to pay corporate tax obligations we may incur as a result of our disqualification.
If we fail to qualify as a REIT in any taxable year: • we would not be allowed to deduct our distributions to our stockholders when computing our taxable income; • we would be subject to U.S. federal income tax (including any applicable alternative minimum tax in tax years beginning before January 1, 2018) on our taxable income at regular corporate rates; • for tax years beginning after December 31, 2022, we would possibly also be subject to certain taxes enacted by the Inflation Reduction Act of 2022 that are applicable to non-REIT corporations such as the nondeductible one percent excise tax on certain stock repurchases; • we generally would be disqualified from being taxed as a REIT for the four taxable years following the year during which qualification was lost, unless entitled to relief under certain statutory provisions; • we would have less cash to make distributions to our stockholders; and • we might be required to borrow additional funds or sell some of our assets in order to pay corporate tax obligations we may incur as a result of our disqualification.
Our investment strategy may limit an increase in the diversification of our investments. Our ability to diversify our portfolio may be limited both as to the number of investments owned and the geographic regions in which our investments are located.
Our ability to diversify our portfolio may be limited both as to the number of investments owned and the geographic regions in which our investments are located.
In such event, this would reduce the amount of distributions that IROP could make to us. This would also result in our losing REIT status, and becoming subject to a corporate level tax on our own income. This would substantially reduce our cash available to pay distributions and the yield on any investment in our securities.
This would also result in our losing REIT status, and becoming subject to a corporate level tax on our own income. This would substantially reduce our cash available to pay distributions and the yield on any investment in our securities.
These laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of the hazardous or toxic substances.
The costs of removal or remediation could be substantial. These laws often impose liability whether or not the owner or operator knew of, or was responsible for, the presence of the hazardous or toxic substances.
In certain circumstances, we may be responsible for the satisfaction of the debt which could negatively impact our business. • We may be adversely affected by changes in LIBOR reporting practices, the method in which LIBOR is determined, the use of alternative reference rates, or our use of SOFR as the base rate for our unsecured debt due to SOFR's limited history and its potential to be volatile.
In certain circumstances, we may be responsible for the satisfaction of the debt which could negatively impact our business. • We may be adversely affected by our use of SOFR as the base rate for our unsecured debt due to SOFR's limited history and its potential to be volatile.
We intend that all transactions between us and any TRS we form will be conducted on an arm’s-length basis, and, therefore, any amounts paid by any TRS we form to us will not be subject to the excise tax.
We intend that all transactions between us and any TRS we form will be conducted on an arm’s-length basis, and, therefore, any amounts paid to us by any TRS we form to us will not be subject to the excise tax. However, no assurance can be given that no excise tax would arise from such transactions.
Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or, if that court does not have jurisdiction, the United States District Court for the District of Maryland, Baltimore Division, will be the sole and exclusive forum for (a) any Internal Corporate Claim, as such term is defined in Section 1-101(p) of the Maryland General Corporation Law, or any successor provision thereof, (b) any derivative action or proceeding brought on our behalf, (c) any action asserting a claim of breach of any duty owed by any of our directors or officers or other employees to us or to our stockholders, (d) any action asserting a claim against us or any of our directors or officers or other employees arising pursuant to any provision of the Maryland General Corporation Law or our charter or bylaws, or (e) any other action asserting a claim against us or any of our directors or officers or other employees that is governed by the internal affairs doctrine.
Our bylaws provide that, unless we consent in writing to the selection of an alternative forum, the Circuit Court for Baltimore City, Maryland, or, if that court does not have jurisdiction, the United States District Court for the District of Maryland, Baltimore Division, will be the sole and exclusive forum for (a) any Internal Corporate Claim, as such term is defined in Section 1-101(p) of the Maryland General Corporation Law, or any successor provision thereof, (b) any derivative action or proceeding brought on our behalf, (c) any action asserting a claim of breach of any duty owed by any of our directors or officers or other employees to us or to our stockholders, (d) any action asserting a claim against us or any of our directors or officers or other employees arising pursuant to any provision of the Maryland General Corporation Law or our charter or bylaws, or (e) any other action asserting a claim against us or any of our directors or officers or other employees that is governed by the internal affairs doctrine. 36 Table of Contents General Risk Factors If we are unable to retain or obtain key personnel, our ability to implement our investment strategies could be hindered, which could reduce our ability to make distributions and adversely affect the trading price of our common stock.
These shifts in investing priorities may result in adverse effects on the market price of our securities to the extent that investors determine that we have not made sufficient progress on ESG matters. In 2022 we published our inaugural Sustainability Report. A risk exists that we fail to meet announced goals and targets stated in such report.
These shifts in investing priorities may result in adverse effects on the market price of our securities to the extent that investors determine that we have not made sufficient progress on ESG matters. In 2022 we published our inaugural Sustainability Report.
We may develop or redevelop properties where market conditions warrant such investment. Development and redevelopment activities may be more costly or difficult to complete than we anticipate, and once made, investments in these activities may not produce results in accordance with our expectations.
Development and redevelopment activities may be more costly or difficult to complete than we anticipate, and once made, investments in these activities may not produce results in accordance with our expectations.
We may issue common stock, convertible debt or preferred stock pursuant to a public offering or a private placement, to sellers of properties we directly or indirectly acquire instead of, or in addition to, cash consideration.
Stockholders have no rights to buy additional shares of stock if we issue new shares of stock. We may issue common stock, convertible debt or preferred stock pursuant to a public offering or a private placement, to sellers of properties we directly or indirectly acquire instead of, or in addition to, cash consideration.
COVID-19 could negatively impact our businesses in a number of ways. Various federal, state and local authorities have issued measures imposing restrictions on our ability to enforce tenants’ contractual rental obligations or more burdensome eviction processes to combat rising evictions resulting from financial hardships caused by the COVID-19 pandemic.
Various federal, state and local authorities have issued measures imposing restrictions on our ability to enforce tenants’ contractual rental obligations or more burdensome eviction processes to combat rising evictions resulting from financial hardships caused by the COVID-19 pandemic. These measures make more onerous our ability to enforce tenants’ contractual rental obligations through evictions.
Economic conditions may adversely affect the residential real estate market and our income. A residential property’s income and value may be adversely affected by international, national and regional economic conditions. The COVID-19 pandemic, the military conflict between Russia and Ukraine, have disrupted financial markets and significantly impacted worldwide economic activity resulting in a global economic recession.
A residential property’s income and value may be adversely affected by international, national and regional economic conditions. The military conflicts between Russia and Ukraine and in the Middle East have disrupted financial markets and significantly impacted worldwide economic activity resulting in a global economic recession.
Since the initial publication of SOFR, daily changes in the rate have, on occasion, been more volatile than daily changes in other benchmark or market rates, such as USD LIBOR, during corresponding periods.
Hypothetical or historical performance data are not indicative of, and have no bearing on, the potential performance of SOFR. Since the initial publication of SOFR, daily changes in the rate have, on occasion, been more volatile than daily changes in other benchmark or market rates, such as USD LIBOR, during corresponding periods.
All other matters are subject to the discretion of our board of directors. Our authorized but unissued shares of common and preferred stock may prevent a change in our control. Our Charter authorizes us to issue additional authorized but unissued shares of common or preferred stock.
Our authorized but unissued shares of common and preferred stock may prevent a change in our control. Our Charter authorizes us to issue additional authorized but unissued shares of common or preferred stock.
Potential impacts of the military conflict between Russia and Ukraine include the following: • an increase in oil and gas prices are likely to contribute to inflation, which may make it more challenging for residents to meet their ongoing rental payment obligations and which may result in higher construction costs; • an increase in the likelihood of supply chain disruptions, making it harder for us to find favorable pricing and reliable sources for the materials we need for our value add initiative and putting upward pressure on our costs; and • an increase in cybersecurity risks generally as Russia and Russia-aligned cyber threat groups and cyber-crime groups reach to the U.S.’s response to and involvement in Russia’s invasion of Ukraine.
Potential impacts of these military conflicts include the following: • an increase in oil and gas prices are likely to contribute to inflation, which may make it more challenging for residents to meet their ongoing rental payment obligations and which may result in higher construction costs; • an increase in the likelihood of supply chain disruptions, making it harder for us to find favorable pricing and reliable sources for the materials we need for our value add initiative and putting upward pressure on our costs; and • an increase in cybersecurity risks generally as Russia and Iran and Russia- or Iran-aligned cyber threat groups and cyber-crime groups react to the U.S.’s response to and involvement in these conflicts. 13 Table of Contents Short-term resident leases expose us to the effects of declining market rent, which could adversely impact our ability to make cash distributions to our stockholders.
While we provide guidance and specific requirements in some cases, we do not directly control any of such parties’ information technology security operations, or the amount of investment they place in guarding against cybersecurity threats.
While we provide guidance and specific requirements in some cases, we do not directly control any of such parties’ information technology security operations, or the amount of investment they place in guarding against cybersecurity threats. Accordingly, we are subject to any flaws in or breaches to their information technology systems or those which they operate for us.
In such case, the value of our common stock and the trading price of our securities could decline, and you may lose all or a significant part of your investment. Some statements in the following risk factors constitute forward looking statements.
In such case, the value of our common stock and the trading price of our securities could decline, and you may lose all or a significant part of your investment. Some statements in the following risk factors constitute forward-looking statements. Please refer to the explanation of the qualifications and limitations on forward-looking statements under “Forward-Looking Statements” of this Form 10-K.
We are subject to a variety of risks arising from ESG matters. ESG matters include climate risk, hiring practices, the diversity of our work force, and racial and social justice issues involving our personnel, customers and third parties with whom we otherwise do business and our internal governance practices.
ESG matters include climate risk, hiring practices, the diversity of our work force, and racial and social justice issues involving our personnel, customers and third parties with whom we otherwise do business and our internal governance practices. Risks arising from ESG matters may adversely affect, among other things, our reputation and the market price of our securities.
Federal Reserve could adversely impact our financial condition and our ability to make distributions to our stockholders. During 2022, the U.S. Federal Reserve rapidly increased the target range for the federal funds rate in response to rising inflation.
Federal Reserve could adversely impact our financial condition and our ability to make distributions to our stockholders. During 2023, the U.S. Federal Reserve increased the target range for the federal funds rate by a total of 100 basis points in response to sticky inflation.
If such conditions do not improve or if new economic or capital markets problems arise, the value of our portfolio may decline significantly. A deterioration in economic conditions may also have an adverse effect on our operations if they result in our residents or prospective residents being unable to afford the rents we need to charge to be profitable.
A deterioration in economic conditions may also have an adverse effect on our operations if they result in our residents or prospective residents being unable to afford the rents we need to charge to be profitable.
The credit agreement governing our unsecured revolving credit facility and unsecured term loans (the “Unsecured Credit Agreement”) provides that on July 1, 2023 or potentially earlier, the benchmark for our LIBOR based debt will be determined using SOFR, unless SOFR is unavailable.
The credit agreement governing our unsecured revolving credit facility and unsecured term loans (the “Unsecured Credit Agreement”) provided that on July 1, 2023 or earlier, the benchmark for our London Interbank Offer Rate ("LIBOR") based debt would be determined using the Secured Overnight Financing Rate ("SOFR"), unless SOFR was unavailable.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest change(d) Average effective monthly rent, per unit, represents the average monthly rent for all occupied units for the three-month period ended December 31, 2022. Additional information on our consolidated properties is contained in “Schedule III - Real Estate and Accumulated Depreciation” in this Annual Report on Form 10-K, which is incorporated herein by reference. ITEM 3 .
Biggest changeAdditional information on our consolidated properties is contained in “Schedule III - Real Estate and Accumulated Depreciation” in this Annual Report on Form 10-K, which is incorporated herein by reference. 41 Table of Contents ITEM 3 . Legal Proceedings We are subject to various legal proceedings and claims that arise in the ordinary course of our business operations.
ITEM 2. Properties We hold fee title to all of the multifamily properties in our portfolio (other than two properties under development and five properties owned by unconsolidated joint ventures in which we hold interests). The following table presents an overview of our consolidated portfolio as of December 31, 2022.
ITEM 2. Properties We hold fee title to all of the multifamily properties in our portfolio (other than four properties owned by unconsolidated joint ventures in which we hold interests). The following table presents an overview of our consolidated portfolio as of December 31, 2023 (including one development property).
While the resolution of these matters cannot be predicted with certainty, we currently believe the final 41 Table of Contents outcome of such matters will not have a material adverse effect on our financial position, results of operations or cash flows. On November 14, 2022, a complaint was filed in the U.S.
Matters which arise out of allegations of bodily injury, property damage, and employment practices are generally covered by insurance. While the resolution of these matters cannot be predicted with certainty, we currently believe the final outcome of such matters will not have a material adverse effect on our financial position, results of operations or cash flows.
(b) Period end occupancy for each of our properties is calculated as (i) total units rented as of December 31, 2022 divided by (ii) total units available for rent as of December 31, 2022, expressed as a percentage. (c) Average occupancy represents the daily average occupancy of available units for the three-month period ended December 31, 2022.
(b) Period end occupancy for each of our properties is calculated as (i) total units rented as of December 31, 2023 divided by (ii) total units available for rent as of December 31, 2023, expressed as a percentage. Excludes the Destination at Arista, which, as of December 31, 2023, is in the lease-up phase and has not reached 90% occupancy.
Plaintiffs have filed responses requesting that the cases be transferred to the districts other than the Northern District of Texas. We deny all allegations of wrongdoing. ITEM 4. Mine Safety Disclosures Not applicable. 42 Table of Contents PART II
We deny all allegations of wrongdoing and intend to defend against these claims vigorously. ITEM 4. Mine Safety Disclosures Not applicable. 42 Table of Contents PART II
Removed
Market Property Count Units (a) Gross Cost Accumulated Depreciation Net Book Value Period End Occupancy (b) Average Occupancy (c) Average Effective Rent per Occupied Unit (d) Asheville, NC 1 252 $ 29,210 $ (5,107) $ 24,103 96.8% 96.8% $ 1,475 Atlanta, GA 13 5,180 1,061,734 (57,014) 1,004,720 92.5% 92.6% 1,615 Austin, TX 1 256 55,782 (1,665) 54,117 87.1% 87.3% 1,741 Birmingham, AL 2 1,074 231,912 (6,942) 224,970 90.1% 90.3% 1,473 Charleston, SC 2 518 81,208 (13,733) 67,475 95.0% 95.3% 1,585 Charlotte, NC 3 714 189,216 (10,347) 178,869 95.8% 95.9% 1,753 Chattanooga, TN 1 192 36,942 (1,005) 35,937 94.8% 94.0% 1,398 Chicago, IL 1 374 90,126 (2,524) 87,602 95.2% 94.4% 1,746 Cincinnati, OH 2 542 122,104 (3,473) 118,631 93.7% 94.1% 1,544 Columbus, OH 10 2,510 367,205 (31,490) 335,715 95.0% 95.3% 1,348 Dallas, TX 14 4,007 849,344 (39,969) 809,375 93.7% 94.4% 1,770 Denver, CO 9 2,292 605,319 (18,067) 587,252 94.1% 94.3% 1,685 Fort Wayne, IN 1 222 44,140 (1,415) 42,725 93.2% 94.6% 1,417 Greenville, SC 1 702 123,165 (3,665) 119,500 95.0% 95.0% 1,234 Houston, TX 7 1,932 322,076 (8,941) 313,135 94.5% 94.0% 1,423 Huntsville, AL 3 873 189,690 (9,250) 180,440 93.8% 95.2% 1,515 Indianapolis, IN 8 2,256 326,079 (20,613) 305,466 93.1% 95.2% 1,310 Lexington, KY 3 886 159,841 (4,652) 155,189 94.9% 96.6% 1,270 Louisville, KY 4 1,150 148,564 (35,876) 112,688 93.2% 93.7% 1,257 Memphis, TN 4 1,383 159,297 (33,611) 125,686 94.3% 93.3% 1,521 Myrtle Beach, SC - Wilmington, NC 3 628 67,766 (10,492) 57,274 95.4% 95.2% 1,400 Nashville, TN 5 1,508 365,470 (10,166) 355,304 90.0% 91.3% 1,605 Norfolk, VA 1 183 54,058 (1,516) 52,542 94.5% 96.1% 1,870 Oklahoma City, OK 8 2,147 318,567 (18,668) 299,899 92.7% 92.2% 1,152 Orlando, FL 1 297 50,139 (8,803) 41,336 95.9% 94.6% 1,770 Raleigh - Durham, NC 6 1,690 255,292 (40,432) 214,860 94.4% 94.8% 1,519 San Antonio, TX 1 306 57,040 (1,706) 55,334 97.1% 97.6% 1,506 Tampa-St.
Added
Market Property Count Units (a) Gross Cost Accumulated Depreciation Net Book Value Period End Occupancy (b) Average Occupancy (c) Average Effective Rent per Occupied Unit (d) Asheville, NC 1 252 $ 29,377 $ (5,815) $ 23,562 96.8% 96.6% $ 1,552 Atlanta, GA 13 5,180 1,090,677 (90,537) 1,000,140 93.6% 92.2% 1,648 Austin, TX 1 256 58,946 (3,893) 55,053 94.1% 92.1% 1,808 Birmingham, AL 2 1,074 233,911 (13,897) 220,014 93.2% 91.8% 1,482 Charleston, SC 2 518 81,866 (15,589) 66,277 94.6% 94.6% 1,692 Charlotte, NC 3 714 189,558 (14,754) 174,804 94.4% 95.5% 1,762 Chattanooga, TN 1 192 30,179 (1,935) 28,244 89.1% 91.5% 1,377 Cincinnati, OH 2 542 123,465 (6,990) 116,475 92.3% 94.5% 1,598 Columbus, OH 10 2,510 374,054 (43,394) 330,660 94.8% 94.7% 1,425 Dallas, TX 14 4,007 866,009 (65,789) 800,220 94.6% 94.2% 1,814 Denver, CO 9 2,400 614,501 (33,686) 580,815 94.7% 94.9% 1,734 Greenville, SC 1 702 124,546 (7,330) 117,216 96.0% 94.2% 1,293 Houston, TX 7 1,932 316,463 (17,722) 298,741 95.2% 95.3% 1,459 Huntsville, AL 4 1,051 241,112 (14,487) 226,625 94.8% 95.4% 1,527 Indianapolis, IN 7 1,979 293,760 (28,197) 265,563 94.6% 95.4% 1,369 Lexington, KY 3 886 161,068 (9,316) 151,752 96.7% 96.7% 1,323 Louisville, KY 4 1,150 147,034 (35,701) 111,333 96.3% 94.2% 1,284 Memphis, TN 4 1,383 162,113 (39,830) 122,283 93.0% 93.5% 1,519 Myrtle Beach, SC - Wilmington, NC 3 628 68,185 (11,901) 56,284 93.3% 94.8% 1,420 Nashville, TN 5 1,508 371,562 (21,450) 350,112 95.0% 93.6% 1,634 Oklahoma City, OK 8 2,147 328,355 (29,900) 298,455 95.1% 93.9% 1,184 Orlando, FL 1 297 50,331 (10,029) 40,302 94.9% 93.8% 1,815 Raleigh - Durham, NC 6 1,690 254,971 (45,528) 209,443 95.5% 94.4% 1,562 San Antonio, TX 1 306 57,300 (3,380) 53,920 95.4% 96.2% 1,475 Tampa-St.
Removed
Petersburg, FL 5 1,452 290,797 (24,955) 265,842 95.2% 94.5% 1,780 TOTAL 120 35,526 $ 6,652,083 $ (426,097) $ 6,225,986 93.6% 93.9% $ 1,522 (a) Units represent the total number of units available for rent at December 31, 2022.
Added
Petersburg, FL 5 1,452 309,847 (35,354) 274,493 96.3% 94.7% 1,822 TOTAL 117 34,756 $ 6,579,190 $ (606,404) $ 5,972,786 94.6% 94.2% $ 1,558 (a) Units represent the total number of units available for rent at December 31, 2023, including 325 units at the Destination at Arista development property.
Removed
Legal Proceedings We are subject to various legal proceedings and claims that arise in the ordinary course of our business operations. Matters which arise out of allegations of bodily injury, property damage, and employment practices are generally covered by insurance.
Added
(c) Average occupancy represents the daily average occupancy of available units for the three-month period ended December 31, 2023. Excludes the Destination at Arista, which, as of December 31, 2023, is in the lease-up phase and has not reached 90% occupancy.
Removed
District Court for the Northern District of Illinois on behalf of putative classes of consumers alleging collusion among RealPage, Inc.
Added
(d) Average effective monthly rent, per unit, represents the average monthly rent for all occupied units for the three-month period ended December 31, 2023. Excludes the Destination at Arista, which, as of December 31, 2023, is in the lease-up phase and has not reached 90% occupancy.
Removed
(“RealPage”), Greystar Real Estate Partners, LLC, Mid-America Apartment Communities, Inc., Avenue5 Residential, LLC, Equity Residential, Camden Property Trust, Essex Property Trust, Inc., Thrive Communities Management, LLC, Security Properties Inc., B/T Washington, LLC, d/b/a Blanton Turner, and us to fix, raise, maintain, and stabilize multifamily rental housing prices in violation of Section 1 of the Sherman Act.
Added
Starting around November 2022, putative class action representatives began filing complaints in various United States District Courts across the country naming as defendants RealPage, Inc. (“RealPage”) and approximately 50 defendants who own and/or manage multifamily residential rental housing, alleging that the defendants conspired to fix, raise, maintain, and stabilize rent prices in violation of Section 1 of the Sherman Act.
Removed
Since then, the above-referenced case was dismissed and refiled in the U.S. District Court for the Western District of Washington. A number of similar putative class action complaints were filed in other federal district courts against these and other defendants allegedly engaged in the leasing of residential rental units.
Added
Some of the complaints, including one filed on November 14, 2022 in the U.S. District Court for the Northern District of Illinois, named us as one of the defendants, and others did not.
Removed
Some of the complaints name us as a defendant and others do not. On January 4, 2023, a number of defendants filed a motion before the Judicial Panel on Multidistrict Litigation to transfer the cases to the Northern District of Texas.
Added
On April 10, 2023, the United States Judicial Panel on Multidistrict Litigation issued an order transferring the cases to the United States District Court for the Middle District of Tennessee for coordinated and consolidated pretrial proceedings, where plaintiffs filed a consolidated complaint. We filed an answer to the consolidated complaint and asserted affirmative defenses.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeWe expect to make future quarterly distributions to stockholders; however, future distributions will be at the discretion of our Board of Directors and will depend on our actual funds from operations, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code (see “Business - Qualification as a Real Estate Investment Trust” above) and such other factors as our Board of Directors deems relevant. 43 Table of Contents PERFORMANCE GRAPH On August 13, 2013, our common stock commenced trading on the NYSE MKT.
Biggest changeWe expect to make future quarterly distributions to stockholders; however, future distributions will be at the discretion of our Board of Directors and will depend on our actual funds from operations, our financial condition, capital requirements, the annual distribution requirements under the REIT provisions of the Code (see “Business - Qualification as a Real Estate Investment Trust” above) and such other factors as our Board of Directors deems relevant. 43 Table of Contents PERFORMANCE GRAPH The following graph compares the index of the cumulative total stockholder return on our common stock for the measurement period beginning December 31, 2018 and ending December 31, 2023 with the cumulative total returns of the National Association of Real Estate Investment Trusts (NAREIT) Equity REIT index and the Russell 3000 Index.
At the close of business on February 13, 2023, the closing price for our common stock on the NYSE was $19.31 per share and there were 6,359 holders of record, one of which is the holder for all beneficial owners who hold in street name. Dividends Our quarterly dividend rate is currently $0.14 per common share.
At the close of business on February 23, 2024, the closing price for our common stock on the NYSE was $14.94 per share and there were 5,638 holders of record, one of which is the holder for all beneficial owners who hold in street name. Dividends Our quarterly dividend rate is currently $0.16 per common share.
We have the option, in lieu of paying cash, to settle the exchange for a number of shares of IRT common stock equal to the number of IROP units tendered for exchange. On March 15, 2022, we issued 10,848 shares of common stock in exchange for an equal number of IROP units.
We have the option, in lieu of paying cash, to settle the exchange for a number of shares of IRT common stock equal to the number of IROP units tendered for exchange. On January 9, 2023, we issued 144,600 shares of common stock in exchange for an equal number of IROP units.
As a result of the foregoing exchanges of IROP units, an aggregate of 6,091,171 IROP units held by unaffiliated third parties were outstanding at December 31, 2022 and as of February 13, 2023 reduced by 144,600 IROP units exchanged on January 9, 2023. Issuer Purchases of Equity Securities None. 44 Table of Contents ITEM 6. Reserved
As a result of the foregoing exchange of IROP units, an aggregate of 5,946,571 IROP units held by unaffiliated third parties were outstanding at December 31, 2023 and as of February 14, 2024 reduced by 4,928 IROP units exchanged on February 6, 2024. Issuer Purchases of Equity Securities None. ITEM 6. Reserved 44 Table of Contents
The following graph assumes that each index was 100 on the initial day of the relevant measurement period and that all dividends were reinvested. 12/31/2016 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 IRT 100.00 121.60 119.02 193.30 194.74 384.00 257.73 Russell 3000 100.00 121.02 114.61 150.07 181.32 208.90 183.84 NAREIT Equity 100.00 108.67 104.28 134.17 127.30 179.87 134.99 Unregistered Sales of Equity Securities As of January 1, 2022, an aggregate of 6,981,841 IROP units were outstanding and held by unaffiliated third parties.
The following graph assumes that each index was 100 on the initial day of the relevant measurement period and that all dividends were reinvested. 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 IRT 100.00 162.40 162.77 320.96 215.42 203.29 Russell 3000 100.00 130.93 158.21 198.65 160.40 201.96 NAREIT Equity 100.00 128.66 122.07 172.49 129.45 144.16 Unregistered Sales of Equity Securities As of January 1, 2023, an aggregate of 6,091,171 IROP units were outstanding and held by unaffiliated third parties.
Removed
On July 31, 2017 we transferred the listing of our common stock to the NYSE from the NYSE MKT.
Removed
The following graph compares the index of the cumulative total stockholder return on our common shares for the measurement period beginning December 30, 2016 and ending December 31, 2022 with the cumulative total returns of the National Association of Real Estate Investment Trusts (NAREIT) Equity REIT index and the Russell 3000 Index.
Removed
On May 25, 2022, we issued 21,170 shares of common stock in exchange for an equal number of IROP units. On June 14, 2022, we issued 858,651 shares of common stock in exchange for an equal number of IROP units.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeTwelve-Months Ended December 31 (a) 2022 2021 % change Revenue: Rental and other property revenue $ 587,777 $ 531,097 10.7 % Property Operating Expenses Real estate taxes 74,988 69,299 8.2 % Property insurance 12,488 11,485 8.7 % Personnel expenses (b) 47,683 47,062 1.3 % Utilities 29,884 28,000 6.7 % Repairs and maintenance 19,996 19,255 3.8 % Contract services 19,990 18,601 7.5 % Advertising expenses 4,992 5,183 (3.7) % Other expenses 7,040 6,026 16.8 % Total property operating expenses 217,061 204,911 5.9 % Net operating income $ 370,716 $ 326,186 13.7 % Combined same-store portfolio NOI Margin 63.1 % 61.4 % 1.7 % Average Occupancy 94.7 % 96.0 % (1.3) % Average effective monthly rent, per unit $ 1,446 $ 1,291 12.0 % Reconciliation of Combined Same-Store Portfolio NOI to Net Income (Loss) Combined same-store portfolio NOI $ 370,716 $ 326,186 Combined non same-store portfolio NOI 24,423 26,666 Pre-Merger STAR Portfolio NOI (c) — (196,612) Other revenue 1,111 760 Property management expenses (24,033) (9,539) General and administrative expenses (26,260) (18,610) Depreciation and amortization (252,849) (76,909) Casualty gains (losses), net 8,866 (359) Interest expense (86,955) (36,401) Gain on sale (loss on impairment) of real estate assets, net 111,756 87,671 Loss on extinguishment of debt — (10,261) Other income, net 1,558 — Loss from investments in unconsolidated real estate entities (2,169) — Merger and integration costs (5,505) (47,063) Net income (loss) $ 120,659 $ 45,529 (a) Combined Same-Store Portfolio for the years ended December 31, 2022 and 2021 includes 112 properties, which represent 33,527 units.
Biggest changeSet forth below is a reconciliation of GAAP net (loss) income to Same-Store Portfolio (a) NOI for the years ended December 31, 2023 and 2022 (in thousands): Year Ended December 31, 2023 2022 % change Net (loss) income $ (17,807) $ 120,659 (114.8) % Other revenue (1,142) (1,111) 2.8 % Property management expenses 27,081 24,033 12.7 % General and administrative expenses 22,766 26,260 (13.3) % Depreciation and amortization expense 218,968 252,849 (13.4) % Casualty losses (gains), net 925 (8,866) (110.4) % Interest expense 89,921 86,955 3.4 % Loss on impairment (gain on sale) of real estate assets, net 66,547 (111,756) (159.5) % Loss on extinguishment of debt 124 — 100.0 % Other loss (income), net 427 (1,558) (127.4) % Loss from investments in unconsolidated real estate entities 4,488 2,169 106.9 % Merger and integration costs — 5,505 (100.0) % Restructuring costs 3,213 — 100.0 % NOI 415,511 395,139 5.2 % Less: Non same-store portfolio NOI 43,971 43,623 0.8 % Same-store portfolio (a) NOI $ 371,540 $ 351,516 5.7 % (a) Same-Store Portfolio for the years ended December 31, 2023 and 2022 included 106 properties containing 31,829 units. 50 Table of Contents Set forth below is Same-Store Portfolio (a) NOI for the years ended December 31, 2023 and 2022 (in thousands, except per unit data): Year Ended December 31, 2023 2022 % change Revenue: Rental and other property revenue $ 589,749 $ 558,203 5.7 % Property Operating Expenses Real estate taxes 72,947 72,406 0.7 % Property insurance 14,647 11,683 25.4 % Personnel expenses 46,179 45,347 1.8 % Utilities 29,277 28,026 4.5 % Repairs and maintenance 20,545 18,484 11.2 % Contract services 21,612 18,998 13.8 % Advertising expenses 6,350 4,852 30.9 % Other expenses 6,652 6,891 (3.5) % Total property operating expenses 218,209 206,687 5.6 % Same-store portfolio (a) NOI $ 371,540 $ 351,516 5.7 % Same-store portfolio NOI Margin 63.0 % 63.0 % 0.0 % Average Occupancy 94.0 % 94.7 % (0.7) % Average effective monthly rent, per unit $ 1,537 $ 1,445 6.4 % (a) Same-Store Portfolio for the years ended December 31, 2023 and 2022 included 106 properties containing 31,829 units.
Factors which may cause our actual results or performance to differ materially from those contemplated by forward-looking statements include, but are not limited to, the following: • Unfavorable changes in economic conditions, either nationally or regionally in one or more of the markets in which we operate, could adversely impact us; • Short-term leases expose us to the effects of declining rents; • Competition could limit our ability to lease our units or increase or maintain rental income; • Redevelopment risks could impact our profitability; • Labor and materials required for maintenance, repair, renovation or capital expenditure may be more expensive than anticipated or significantly delayed; • Competition could adversely affect our ability to acquire properties; • Our acquisition strategy may not produce the cash flows expected; • Failure to qualify as a REIT could have adverse consequences; • Litigation risks could affect our business; • A cybersecurity incident and other technology disruptions could negatively impact our business; • Damage from catastrophic weather and other natural events could result in losses; • Volatility in capital markets may result in fluctuations in our share price; • Debt financing and other required capital may not be available to us or may only be available on adverse terms; • Substantial inflationary or deflationary pressures could adversely affect our financial condition or results of operations; • Rising interest rates could both increase our borrowing costs, thereby adversely affecting our cash flows and the amounts available for distribution to our stockholders, and decrease our share price, if investors seek higher yields through other investments; • Failure to hedge effectively against interest rates may adversely affect results of operations; and • Additional factors as discussed in Item 1A.
Factors which may cause our actual results or performance to differ materially from those contemplated by forward-looking statements include, but are not limited to, the following: • Unfavorable changes in economic conditions, either nationally or regionally in one or more of the markets in which we operate, could adversely impact us; • Short-term leases expose us to the effects of declining rents; • Competition could limit our ability to lease our units or increase or maintain rental income; • Redevelopment risks could impact our profitability; • Impairment charges; • Labor and materials required for maintenance, repair, renovation or capital expenditure may be more expensive than anticipated or significantly delayed; • Competition could adversely affect our ability to acquire properties; • Our acquisition strategy may not produce the cash flows expected; • Failure to qualify as a REIT could have adverse consequences; • Litigation risks could affect our business; • A cybersecurity incident and other technology disruptions could negatively impact our business; • Damage from catastrophic weather and other natural events could result in losses; • Volatility in capital markets may result in fluctuations in our share price; • Debt financing and other required capital may not be available to us or may only be available on adverse terms; • Substantial inflationary or deflationary pressures could adversely affect our financial condition or results of operations; • Rising interest rates could both increase our borrowing costs, thereby adversely affecting our cash flows and the amounts available for distribution to our stockholders, and decrease our share price, if investors seek higher yields through other investments; • Failure to hedge effectively against interest rates may adversely affect results of operations; and • Additional factors as discussed in Item 1A.
We use NOI to evaluate our performance on a same-store and non same-store basis because NOI measures the core operations of property performance by excluding corporate level expenses and other items not related to property operating performance and captures trends in rental housing and property operating expenses.
We use NOI to evaluate our performance on a same-store and non same-store basis because NOI measures the core operations of property performance by excluding corporate level expenses, financing expenses, and other items not related to property operating performance and captures trends in rental housing and property operating expenses.
Newmark Secured Credit Facility On December 16, 2021, in connection with the STAR Merger, we assumed the Newmark secured credit facility (“Newmark MCFA”), which includes four tranches: (1) a fixed rate loan in the aggregate principal amount of $331,001 that accrues interest at 4.43% per annum; (2) a fixed rate loan in the aggregate principal amount of $137,917 that accrues interest at 4.57% per annum; (3) a variable rate loan in the aggregate principal amount of $49,493 that accrues interest at the one-month LIBOR plus 1.70% per annum; and (4) a fixed rate loan in the aggregate principal amount of $40,468 that accrues interest at 3.34% per annum.
Newmark Secured Credit Facility On December 16, 2021, in connection with the STAR Merger, we assumed the Newmark secured credit facility (“Newmark MCFA”), which includes four tranches: (1) a fixed rate loan in the aggregate principal amount of $331,001 that accrues interest at 4.43% per annum; (2) a fixed rate loan in the aggregate principal amount of $137,917 that accrues interest at 4.57% per annum; (3) a variable rate loan in the aggregate principal amount of $49,493 that accrues interest at the one-month LIBOR plus 1.70% per annum; and (4) a fixed rate loan in the aggregate principal amount of $40,468 that 54 Table of Contents accrues interest at 3.34% per annum.
CFFO is a computation made by analysts and investors to measure a real estate company’s operating performance by removing the effect of items that do not reflect ongoing property operations, including depreciation and amortization of other items not included in FFO, and other non-cash or non-operating gains or losses related to items such as casualty (gains) losses, abandoned deal costs, loan premium accretion and discount amortization, debt extinguishment costs, and merger and integration costs from the determination of FFO.
CFFO is a computation made by analysts and investors to measure a real estate company’s operating performance by removing the effect of items that do not reflect ongoing property operations, including depreciation and amortization of other items not included in FFO, and other non-cash or non-operating gains or losses related to items such as casualty (gains) losses, loan premium accretion and discount amortization, debt extinguishment costs, merger and integration costs, and restructuring costs from the determination of FFO.
“Risk Factors”. Forward-looking statements and related uncertainties are also included in the Notes to Consolidated Financial Statements in this report. Overview See Item 1. Business for an overview of our company. Business Objective and Investment Strategies See Item 1. Business for discussion regarding our business objective and investment strategies.
“Risk Factors”. Forward-looking statements and related uncertainties are also included in the Notes to Consolidated Financial Statements in this report. Overview See Item 1. Business for an overview of our company. Business Objective and Investment Strategies See Item 1.
As landlord, we are directly responsible for all real estate taxes, sales and use taxes, special assessments, property-level utilities, insurance building repairs, and other building operation and management costs. Individual residents are generally responsible for the utility costs of their unit. Our lease terms are generally for one year or less and average twelve months.
As landlord, we are directly responsible for all real estate taxes, sales and use taxes, special assessments, property-level utilities, insurance, building repairs, and other building operation and management 55 Table of Contents costs. Individual residents are generally responsible for the utility costs of their unit. Our lease terms are generally for one year or less and average twelve months.
The identifiable assets acquired in the business combination included investments in real estate properties measured using a combination of income, market and cost approaches. 59 Table of Contents Impairment of Long-Lived Assets Management evaluates the recoverability of its investment in real estate assets, including related identifiable intangible assets, in accordance with FASB ASC Topic 360, “Property, Plant and Equipment”.
The identifiable assets acquired in the business combination included investments in real estate properties measured using a combination of income, market and cost approaches. Impairment of Long-Lived Assets Management evaluates the recoverability of its investment in real estate assets, including related identifiable intangible assets, in accordance with FASB ASC Topic 360, “Property, Plant and Equipment”.
The Fourth Restated Credit Agreement represents an increase of $100.0 million over the Third Restated Credit Agreement which provided for (i) the Revolving Credit Facility, (ii) the 2026 Term Loan, and (iii) two additional term loans of $200.0 million and $100.0 million, which had maturity dates of January 17, 2024 and November 20, 2024, respectively (collectively, the “2024 Term Loans”).
The Fourth Restated Credit Agreement represents an increase of $100,000 over the Third Restated Credit Agreement which provided for (i) the Revolving Credit Facility, (ii) the 2026 Term Loan, and (iii) two additional term loans of $200,000 and $100,000, which had maturity dates of January 17, 2024 and November 20, 2024, respectively (collectively, the “2024 Term Loans”).
These strategies include using the proceeds from sales of properties which are outside our core geographic footprint in the Southeastern United States or which we believe have limited potential for further improvements to their operating results to repay a portion of our indebtedness or to acquire new properties at a lower leverage and selectively raising capital through the sale of common stock under our at-the-market program and re-investing the proceeds into our value add initiative in order to increase our portfolio’s gross asset value.
These strategies include using the proceeds from sales of properties which are outside our core geographic footprint in the Southeastern United States or which we believe have limited potential for further improvements to their operating results to repay a portion of our indebtedness or to acquire new properties at a lower leverage and selectively raising capital through the sale of common stock under our 2023 ATM Program and re-investing the proceeds into our value add initiatives in order to increase our portfolio’s gross asset value.
The Restated Credit Agreement otherwise continues, without material change, the 2026 Term Loan and the Revolving Credit Facility. We recognized the restructuring of the Fourth Restated Credit Agreement as a modification of debt for all lenders except for one and incurred deferred financing costs of $1.5 million associated with the transaction.
The Fourth Restated Credit Agreement otherwise continues, without material change, the 2026 Term Loan and the Revolving Credit Facility. We recognized the restructuring of the Fourth Restated Credit Agreement as a modification of debt for all lenders except for one and incurred deferred financing costs of $1,477 associated with the transaction.
Refer to Item 7, “Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2021 for a comparison of the year ended December 31, 2021 to the year ended December 31, 2020.
Refer to Item 7, “Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2022 for a comparison of the year ended December 31, 2022 to the year ended December 31, 2021.
We carry comprehensive liability insurance and umbrella policies for each of our properties at levels which we believe are prudent in light of our business activities and are in accordance with standard market practice. We seek certain extensions of coverage, valuation clauses, and 58 Table of Contents deductibles in accordance with standard market practice and availability.
We carry comprehensive liability insurance and umbrella policies for each of our properties at levels which we believe are prudent in light of our business activities and are in accordance with standard market practice. We seek certain extensions of coverage, valuation clauses, and deductibles in accordance with standard market practice and availability.
We compute FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts (“NAREIT”), as net income or loss allocated to common shares (computed in accordance with GAAP), excluding real estate-related depreciation and amortization expense, gains or losses on sales of real estate and the cumulative effect of changes in accounting principles.
We compute FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts (“NAREIT”), as net income or loss allocated to common shares (computed in accordance with GAAP), excluding real estate-related depreciation and amortization expense, loss on impairment (gain on sale) of real estate and the cumulative effect of changes in accounting principles.
Proceeds from the 2028 Term Loan were used to (i) repay and retire the 2024 Term Loans, and (ii) reduce $100.0 million of outstanding borrowings under the Revolving Credit Facility. In addition, the Restated Credit Agreement changed the LIBOR interest rate option to SOFR.
Proceeds of the new 2028 Term Loan were used to (i) repay and retire the 2024 Term Loans, and (ii) reduce $100,000 of outstanding borrowings under the Revolving Credit Facility. In addition, the Fourth Restated Credit Agreement changed the LIBOR interest rate option to SOFR.
However, substantial inflationary pressures could have a negative effect on rental rates and property operating expenses.
However, substantial inflationary pressures have had and could continue to have a negative effect on rental rates and property operating expenses.
We intend to meet our liquidity requirements primarily through a combination of one or more of the following: • the use of our cash and cash equivalents of $16.1 million as of December 31, 2022; • existing and future unsecured financing, including advances under our unsecured credit facility, and financing secured directly or indirectly by the apartment properties in our portfolio; • cash generated from operating activities; • net cash proceeds from property sales, including sales undertaken as part of our capital recycling strategy and other sales; and • proceeds from the sales of our common stock and other equity securities, including common stock that may be sold under our ATM Program.
We intend to meet our liquidity requirements primarily through a combination of one or more of the following: • the use of our cash and cash equivalents of $22.9 million as of December 31, 2023; • existing and future unsecured financing, including advances under our unsecured credit facility, and financing secured directly or indirectly by the apartment properties in our portfolio; 51 Table of Contents • cash generated from operating activities; • net cash proceeds from property sales, including sales undertaken as part of our capital recycling strategy, Portfolio Optimization and Deleveraging Strategy, and other sales; and • proceeds from the sales of our common stock and other equity securities, including common stock that may be sold under our 2023 ATM Program (as defined below).
However, NOI should only be used as an alternative measure of our financial performance. 50 Table of Contents Same-Store Properties and Same-Store Portfolio We review our same-store portfolio at the beginning of each calendar year. Properties are added into the same-store portfolio if they were owned at the beginning of the previous year.
However, NOI should only be used as an alternative measure of our financial performance. Same-Store Properties and Same-Store Portfolio We review our same-store portfolio at the beginning of each calendar year. Properties are added into the same-store portfolio if they were owned and not a development property at the beginning of the previous year.
The Fourth Restated Credit Agreement provides for an aggregate amount available for borrowing of $1.1 billion, which consists of (i) a $500.0 million unsecured revolving credit facility with a January 31, 2026 maturity date (the “Revolving Credit Facility”), (ii) a $400.0 55 Table of Contents million term loan with a January 28, 2028 maturity date (the “2028 Term Loan”); and (iii) a $200.0 million term loan with a May 18, 2026 maturity date (the “2026 Term Loan”).
The Fourth Restated Credit Agreement provides for an aggregate amount available for borrowing of $1,100,000, which consists of (i) a $500,000 unsecured revolving credit facility with a January 31, 2026 scheduled maturity date (the “Revolving Credit Facility”), (ii) a $400,000 term loan with a January 28, 2028 maturity date (the “2028 Term Loan”); and (iii) a $200,000 term loan with a May 18, 2026 maturity date (the “2026 Term Loan”).
Our cash flows used in investing activities during the year ended December 31, 2022 were primarily driven by $201.8 million of outflows related to the acquisitions of three multifamily apartment communities, $84.0 million of capital expenditures, $61.8 million in additions to real estate under development, and $60.8 million of outflows related to our investment in five unconsolidated real estate entities, partially offset by $253.6 million of inflows from property dispositions and $15.6 million in proceeds from insurance claims.
Our cash flows used in investing activities during the year ended December 31, 2022 were primarily driven by $201.8 million of outflows related to the acquisitions of three multifamily apartment communities, $84.0 million of capital expenditures, $61.8 million in additions to real estate under development, and $60.8 million of outflows related to our investment in five unconsolidated real estate entities, partially offset by $253.6 million of inflows from property dispositions and $15.6 million in proceeds from insurance claims. 52 Table of Contents Our cash flows used in investing activities during the year ended December 31, 2021 were primarily driven by $186.1 million of outflows related to the STAR Merger, $139.5 million of outflows related to two property acquisitions, $25.0 million of outflows related to our investment in two unconsolidated real estate entities, and capital expenditures of $43.0 million, partially offset by $177.5 million of inflows from property dispositions.
The estimates consider matters such as current and historical rental rates, occupancies for the respective and/or comparable properties, and recent sales data for comparable properties. Changes in estimated future cash flows due to changes in our plans or views of market and economic conditions could result in recognition of impairment losses, which, under the applicable accounting guidance, could be substantial.
The estimates consider matters such as current and historical rental rates, occupancies for the respective and/or comparable properties, and recent sales data for comparable properties. Changes in our plans or views of market and economic conditions may result in adjustments to estimated future cash flows, which could lead to recognition of impairment losses.
Other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to other REITs. We believe that this measure provides an operating perspective not immediately apparent from GAAP operating income or net income.
Other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to other REITs. We believe that this measure provides an operating perspective not immediately apparent from GAAP operating income or net income insofar as the measure reflects only operating income and expense at the property level.
An impairment charge is recorded when it is determined that the carrying value of the asset exceeds the fair value. The estimated cash flows used for the impairment analysis and the determination of estimated fair value are based on our plans for the respective assets (e.g., hold period) and our views of market and economic conditions.
An impairment charge is recognized when it is determined that the carrying value of the asset exceeds the fair value. The estimated cash flows and estimated fair value used in the impairment analysis are determined based on our plans for the respective assets, including the expected hold period, and our assessment of market and economic conditions.
Capitalization New $400 Million Term Loan On July 25, 2022, we entered into the Fourth Amended, Restated and Consolidated Credit Agreement (the “Fourth Restated Credit Agreement”) which amended and restated in its entirety the Third Amended and Restated Credit Agreement dated as of December 14, 2021 (the “Third Restated Credit Agreement”).
Unsecured Revolving Credit Facility and Term Loans On July 25, 2022, we entered into the Fourth Amended, Restated and Consolidated Credit Agreement (the “Fourth Restated Credit Agreement”) which amended and restated in its entirety the Third Amended and Restated Credit Agreement dated as of December 14, 2021 (the “Third Restated Credit Agreement”).
This statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that recoverability of the assets is not assured. Management reviews its long-lived assets on an ongoing basis and evaluates the recoverability of the carrying value when there is an indicator of impairment.
This accounting standard requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that recoverability of the assets is not assured. We review our long-lived assets on an ongoing basis and evaluate the recoverability of the carrying value when there is an indicator of impairment.
Neither FFO nor CFFO should be considered as an alternative to net income or any other GAAP measurement as an indicator of our operating performance or as an alternative to cash flow from operating, investing, and financing activities as a measure of our liquidity. 49 Table of Contents Set forth below is a reconciliation of net income to FFO and Core FFO for the years ended December 31, 2022, 2021 and 2020 (in thousands, except share and per share information): For the Year Ended December 31, 2022 For the Year Ended December 31, 2021 For the Year Ended December 31, 2020 Amount Per Share (1) Amount Per Share (1) Amount Per Share (1) Funds From Operations (FFO): Net income $ 120,659 $ 0.53 $ 45,529 $ 0.41 $ 14,877 $ 0.16 Adjustments: Real estate depreciation and amortization 251,545 1.10 76,487 0.70 60,352 0.64 Real estate depreciation and amortization from unconsolidated joint venture 2,320 0.01 — — — — (Gain on sale) loss on impairment of real estate assets, net, excluding prepayment (gains) losses (111,347) (0.49) (90,277) (0.82) (7,554) (0.08) FFO $ 263,177 $ 1.15 $ 31,739 $ 0.29 $ 67,675 $ 0.72 Core Funds From Operations (CFFO): FFO $ 263,177 $ 1.15 $ 31,739 $ 0.29 $ 67,675 $ 0.72 Adjustments: Other depreciation and amortization 1,304 0.01 423 — 335 — Abandoned deal costs — — — — 130 — Casualty (gains) losses, net (8,866) (0.04) 359 — 711 0.01 Loan (premium accretion) discount amortization, net (11,005) (0.05) (501) — — — Prepayment (gains) losses on asset dispositions (409) — 2,607 0.02 — — Loss on extinguishment of debt — — 10,261 0.09 — — Other income, net (2,298) (0.01) — — — — Merger and integration costs 5,505 0.02 47,063 0.44 — — CFFO $ 247,408 $ 1.08 $ 91,951 $ 0.84 $ 68,851 $ 0.73 (1) Based on 228,452,958, 109,418,810, and 94,430,935 weighted average shares and units outstanding for the years ended December 31, 2022, December 31, 2021, and December 31, 2020, respectively.
Neither FFO nor CFFO should be considered as an alternative to net income or any other GAAP measurement as an indicator of our operating performance or as an alternative to cash flow from operating, investing, and financing activities as a measure of our liquidity. 48 Table of Contents Set forth below is a reconciliation of net (loss) income to FFO and CFFO for the years ended December 31, 2023, 2022 and 2021 (in thousands, except share and per share information): For the Year Ended December 31, 2023 For the Year Ended December 31, 2022 For the Year Ended December 31, 2021 Amount Per Share (1) Amount Per Share (1) Amount Per Share (1) Net (loss) income $ (17,807) $ (0.08) $ 120,659 $ 0.53 $ 45,529 $ 0.41 Adjustments: Real estate depreciation and amortization 217,716 0.94 251,545 1.10 76,487 0.70 Our share of real estate depreciation and amortization from investments in unconsolidated real estate entities 2,115 0.01 2,320 0.01 — — Loss on impairment (gain on sale) of real estate assets, net, excluding prepayment gains 68,447 0.30 (111,347) (0.49) (90,277) (0.82) FFO $ 270,471 $ 1.17 $ 263,177 $ 1.15 $ 31,739 $ 0.29 FFO $ 270,471 $ 1.17 $ 263,177 $ 1.15 $ 31,739 $ 0.29 Adjustments: Other depreciation and amortization 1,252 0.01 1,304 0.01 423 — Casualty losses (gains), net 925 0.01 (8,866) (0.04) 359 — Loan (premium accretion) discount amortization, net (10,899) (0.04) (11,005) (0.05) (501) — Prepayment (gains) losses on asset dispositions (1,900) (0.01) (409) — 2,607 0.02 Loss on extinguishment of debt 124 — — — 10,261 0.09 Other expense (income) 743 — (2,298) (0.01) — — Merger and integration costs — — 5,505 0.02 47,063 0.44 Restructuring costs 3,213 0.01 — — — — CFFO $ 263,929 $ 1.15 $ 247,408 $ 1.08 $ 91,951 $ 0.84 (1) Based on 230,364,184, 228,452,958, and 109,418,810 weighted average shares and units outstanding for the years ended December 31, 2023, 2022, and 2021, respectively.
Under asset acquisition accounting, the costs to acquire real estate, including transaction costs related to the acquisition, are accumulated and then allocated to the individual assets and liabilities acquired based upon their relative fair value. Transaction costs and fees incurred related to the financing of an acquisition are capitalized and amortized over the life of the related financing.
Under asset acquisition accounting, the costs to acquire real estate, including transaction costs related to the acquisition, are accumulated and then allocated to the individual assets and liabilities acquired based upon their relative fair 56 Table of Contents value.
Equity On November 13, 2020, we entered into an equity distribution agreement pursuant to which we may from time to time offer and sell shares of our common stock having an aggregate offering price of up to $150 million (the “ATM Program”) in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended.
On July 28, 2023, we entered into an equity distribution agreement pursuant to which we may from time to time offer and sell shares of our common stock under our shelf registration statement having an aggregate offering price of up to $450,000 (the “2023 ATM Program”) in negotiated transactions or transactions that are deemed to be “at the market” offerings as defined in Rule 415 under the Securities Act.
While our calculation of FFO is in accordance with NAREIT’s definition, it may differ from the methodology for calculating FFO utilized by other REITs and, accordingly, may not be comparable to FFO computations of such other REITs. We updated our definition of CFFO during the three months ended March 31, 2021 to the definition described below.
While our calculation of FFO is in accordance with NAREIT’s definition, it may differ from the methodology for calculating FFO utilized by other REITs and, accordingly, may not be comparable to FFO computations of such other REITs.
Casualty (gains) losses, net. During the year ended December 31, 2022, we recognized net casualty gains of $8.9 million as a result of receiving insurance proceeds in excess of the carrying value of the associated damage.
During the year ended December 31, 2022, we recognized net casualty gains of $8.9 million as a result of receiving insurance proceeds in excess of the carrying value of the associated damage. Interest expense. Interest expense increased $3.0 million to $89.9 million for the year ended December 31, 2023 from $86.9 million for the year ended December 31, 2022.
During the year ended December 31, 2021, we incurred $0.4 million in casualty losses due to winter storm damage at various properties where the carrying value of the damage exceeded insurance proceeds due to policy deductible levels. Loss from investments in unconsolidated joint ventures.
During the year ended December 31, 2023, we incurred $0.9 million in net casualty losses due to fires at three properties and winter storm damage at various properties where the carrying value of the damage exceeded insurance proceeds due to policy deductible levels.
Our cash flows provided by operating activities during the years ended December 31, 2021 and 2020 were primarily driven by the ongoing operations of our properties.
Our cash flows provided by operating activities during the years ended December 31, 2022 and 2021 were primarily driven by an increase in the size of our operating portfolio by the STAR Merger and ongoing operations of our properties, respectively.
(c) The summation of quarterly amounts may not equal the full year amounts due to rounding. 53 Table of Contents Liquidity and Capital Resources Overview Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain investments, pay distributions and other general business needs.
Liquidity and Capital Resources Overview Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain investments, pay distributions and other general business needs.
Our cash and cash equivalents were generated from the following activities (dollars in thousands): For the Years Ended December 31 2022 2021 2020 Cash flows provided by operating activities $ 249,537 $ 52,257 $ 74,959 Cash flows used in investing activities (135,766) (216,124) (124,540) Cash flows (used in) provided by financing activities (135,425) 215,923 48,763 Net change in cash and cash equivalents, and restricted cash (21,654) 52,056 (818) Cash and cash equivalents, and restricted cash, beginning of period 65,671 13,615 14,433 Cash and cash equivalents, and restricted cash, end of the period $ 44,017 $ 65,671 $ 13,615 Our cash flows provided by operating activities during the year ended December 31, 2022 were primarily driven by an increase in the size of our operating portfolio by the STAR Merger.
Our cash and cash equivalents were generated from the following activities (dollars in thousands): For the Years Ended December 31, 2023 2022 2021 Cash flows provided by operating activities $ 262,170 $ 249,537 $ 52,257 Cash flows used in investing activities (1,712) (135,766) (216,124) Cash flows (used in) provided by financing activities (253,743) (135,425) 215,923 Net change in cash and cash equivalents, and restricted cash 6,715 (21,654) 52,056 Cash and cash equivalents, and restricted cash, beginning of period 44,017 65,671 13,615 Cash and cash equivalents, and restricted cash, end of the period $ 50,732 $ 44,017 $ 65,671 Our cash flows provided by operating activities during the year ended December 31, 2023 were primarily driven by the ongoing operations of our properties.
Under the ATM Program, we may also enter into one or more forward sale transactions for the sale of shares of our common stock on a forward basis. During the fourth quarter of 2021 and the first quarter of 2022, we sold 2.0 million shares on a forward basis under the ATM program.
Under the 2023 ATM Program, we may also enter into one or more forward sale transactions for the sale of shares of our common stock on a forward basis.
During the year ended December 31, 2022, we had no repurchases of shares under the Stock Repurchase Program. 54 Table of Contents Cash Flows As of December 31, 2022 and 2021, we maintained cash, cash equivalents, and restricted cash of approximately $44.0 million and $65.7 million, respectively.
The Stock Repurchase Program has no time limit and may be suspended or discontinued at any time. During the year ended December 31, 2023, we had no repurchases of shares under the Stock Repurchase Program. Cash Flows As of December 31, 2023 and 2022, we maintained cash, cash equivalents, and restricted cash of approximately $50.7 million and $44.0 million, respectively.
Net Operating Income We believe that Net Operating Income (“NOI”), a non-GAAP financial measure, is a useful measure of our operating performance. We define NOI as total property revenues less total property operating expenses, excluding depreciation and amortization, casualty related costs and gains, property management expenses, general administrative expenses, interest expense, and net gains on sale of assets.
We define NOI as total property revenues less total property operating expenses, excluding interest expenses, depreciation and amortization, casualty related costs and gains, property management expenses, general and administrative expense, net gains on sale of assets, merger and integration costs, and restructuring costs.
Interest only payments are payable monthly through August 1, 2025 and April 1, 2027 on the first three tranches and fourth tranche, respectively, with interest and principal payments due monthly thereafter.
Interest only payments are payable monthly through August 1, 2025 and April 1, 2027 on the first three tranches and fourth tranche, respectively, with interest and principal payments due monthly thereafter. As of December 31, 2023, and 2022, the outstanding principal balance under the Newmark MCFA was $510,038 and $558,880, respectively.
Business for an additional discussion regarding developments in our business during 2022. 46 Table of Contents Results of Operations The following discussion is based on our Consolidated Financial Statements for the years ended December 31, 2022 and 2021. As of December 31, 2022, we owned and consolidated 120 multifamily apartment properties, of which 112 comprised the Combined Same-Store Portfolio.
Business for discussion regarding our business objective and investment strategies and for an additional discussion regarding developments in our business during 2023. 45 Table of Contents Results of Operations The following discussion is based on our Consolidated Financial Statements for the years ended December 31, 2023 and 2022.
Our cash flows used in investing activities during the year ended December 31, 2021 were primarily driven by $186.1 million of outflows related to the STAR Merger, $139.5 million of outflows related to two property acquisitions, $25.0 million of outflows related to our investment in two unconsolidated real estate entities, and capital expenditures of $43.0 million, partially offset by $177.5 million of inflows from property dispositions.
Our cash flows used in investing activities during the year ended December 31, 2023 were primarily driven by $146.6 million of capital expenditures, $66.2 million in additions to real estate under development, and $26.0 million of outflows related to our investments in four unconsolidated real estate entities, partially offset by $230.8 million of inflows from property dispositions and $4.2 million in proceeds from insurance claims.
During the year ended December 31, 2022, we incurred losses of $2.2 million on investments in unconsolidated joint ventures, due to the depreciation and amortization recognized by the unconsolidated real estate entities. Interest expense. Interest expense increased $50.6 million to $87.0 million for the year ended December 31, 2022 from $36.4 million for the year ended December 31, 2021.
Loss from investments in unconsolidated joint ventures increased $2.3 million to $4.5 million for the year ended December 31, 2023, from $2.2 million for the year ended December 31, 2022, primarily due to an increase in our proportionate share of net losses of unconsolidated real estate entities, which primarily included increases in interest expense and depreciation and amortization recognized by the unconsolidated real estate entities. 47 Table of Contents Restructuring costs .
The PNC MCFA has a maturity date of July 1, 2030, unless the maturity date is accelerated in accordance with the terms of the loan documents. Interest only payments are payable monthly through the maturity date. As of December 31, 2022, and 2021 the outstanding principal balance was $76,248 and $76,248, respectively.
The PNC MCFA provided for a fixed rate loan in the aggregate principal amount of $79,170 that accrues interest at 2.82% per annum. The PNC MCFA has a maturity date of July 1, 2030, unless the maturity date is accelerated in accordance with the terms of the loan documents. Interest only payments are payable monthly through the maturity date.
In addition, same-store real estate operating expenses increased by $12.2 million during the year ended December 31, 2022, primarily due to an increase in real estate taxes, utilities, repairs and maintenance, and contract services. Property management expenses.
The increase was primarily due to the $11.5 million increase in same-store property operating expenses, primarily due to inflationary pressures resulting in higher contract services, insurance expense, and repairs and maintenance during the year ended December 31, 2023.
PNC Secured Credit Facility On December 16, 2021, in connection with the STAR Merger, we assumed the PNC MCFA, a fixed rate multifamily note and other loan documents for the benefit of PNC Bank. The PNC MCFA provided for a fixed rate loan in the aggregate principal amount of $79,170 that accrues interest at 2.82% per annum.
As of December 31, 2023 we were in compliance with all financial covenants contained in our consolidated indebtedness. PNC Secured Credit Facility On December 16, 2021, in connection with the STAR Merger, we assumed the PNC multifamily credit facility agreement (“PNC MCFA”), a fixed rate multifamily note and other loan documents for the benefit of PNC Bank.
During the year ended December 31, 2022, we incurred no losses on the extinguishment of debt compared to $10.3 million during the year ended December 31, 2021, as a result of deleveraging efforts undertaken in contemplation of the STAR Merger. 48 Table of Contents Non-GAAP Financial Measures Funds from Operations and Core Funds from Operations We believe that Funds from Operations (“FFO”) and Core FFO (“CFFO”), each of which is a non-GAAP financial measure, are additional appropriate measures of the operating performance of a REIT and us in particular.
Non-GAAP Financial Measures Funds from Operations (FFO) and Core Funds from Operations (CFFO) We believe that FFO and CFFO, each of which is a non-GAAP financial measure, are additional appropriate measures of the operating performance of a REIT and us in particular.
Properties are added into the Same-Store Portfolio if they were owned at the beginning of the previous year. Properties that are held for sale or have been sold are excluded from the Same-Store Portfolio. The table below presents our same-store results for the years ended December 31, 2022 and 2021 (in thousands).
Properties that are held for sale or have been sold are excluded from the same-store portfolio. 49 Table of Contents Non Same-Store Properties and Non Same-Store Portfolio Properties that did not meet the definition of a same-store property as of the beginning of the previous year are added into the non same-store portfolio.
These costs primarily consist of technology migration and implementation, consulting and professional fees and employee severance costs. Gain on sale (loss on impairment) of real estate assets, net. During the year ended December 31, 2022, six multi-family properties were sold resulting in net gains of $111.8 million.
During the year ended December 31, 2022, six multifamily properties were sold resulting in a gain on sale of real estate, net of $111.8 million. Merger and integration costs. We incurred no STAR Merger-related integration costs during the year ended December 31, 2023 compared to $5.5 million during the year ended December 31, 2022.
Our cash flows provided by financing activities during the year ended December 31, 2020 were primarily driven by $148.2 million of proceeds from common stock issuances and was partially offset by $56.1 million of distributions on our common stock and mortgage repayments of $39.8 million.
Our cash flows used in financing activities during the year ended December 31, 2023 were primarily driven by distributions of $138.5 million and mortgage principal repayments of $129.6 million partially offset by new borrowings on the unsecured credit facility, net of repayments of $19.7 million.
During the year ended December 31, 2021, three multi-family properties were sold resulting in net gains of $87.7 million. Loss on extinguishment of debt.
During the year ended December 31, 2023, we sold five multifamily properties resulting in a loss on impairment of $33.5 million.
Debt The following tables contain summary information concerning our consolidated indebtedness as of December 31, 2022 (dollars in thousands): Debt: Outstanding Principal Unamortized Debt Issuance Costs Unamortized Loan (Discount)/Premiums Carrying Amount Type Weighted Average Rate Weighted Average Maturity (in years) Unsecured revolver (1) $ 165,978 $ (1,695) $ — $ 164,283 Floating 4.9% 3.1 Unsecured term loans 600,000 (3,388) — 596,612 Floating 5.1% 4.5 Secured credit facilities 635,128 (2,256) 27,670 660,542 Floating/Fixed 4.3% 5.9 Mortgages 1,185,246 (7,305) 32,267 1,210,208 Fixed 3.9% 5.2 Total Debt $ 2,586,352 $ (14,644) $ 59,937 $ 2,631,645 4.5% 5.1 (1) The unsecured credit facility total capacity is $500,000, of which $165,978 was outstanding as of December 31, 2022.
On May 10, 2023, our board of directors approved a quarterly dividend of $0.16 per share on our common stock, which represented a 14% increase in the dividend over the prior quarterly rate of $0.14 per share. 53 Table of Contents Consolidated Debt The following tables contain summary information concerning our consolidated indebtedness as of December 31, 2023 (dollars in thousands): Debt: Outstanding Principal Unamortized Debt Issuance Costs Unamortized Loan (Discount)/Premiums Carrying Amount Type Weighted Average Contractual Rate (3) Weighted Average Effective Rate (4) Weighted Average Maturity (in years) Unsecured revolver (1) $ 234,479 $ (1,117) $ — $ 233,362 Floating 6.6% 5.4% 2.1 Unsecured term loans 600,000 (2,456) — 597,544 Floating 6.5% 3.9% 3.5 Secured credit facilities 586,286 (1,949) 21,762 606,099 Floating/Fixed 4.2% 4.6% 4.9 Mortgages (2) 1,094,933 (5,250) 22,721 1,112,404 Fixed 3.8% 4.0% 4.3 Total Debt $ 2,515,698 $ (10,772) $ 44,483 $ 2,549,409 4.8% 4.2% 4.0 (1) The unsecured credit facility total capacity is $500,000, of which $234,479 was outstanding as of December 31, 2023.
During the year ended December 31, 2022, we had no repurchases of shares under the Stock Repurchase Program.
There were no forward sale transactions as of December 31, 2023, and no shares of our common stock were sold under the 2023 ATM Program during the year ended December 31, 2023.
In addition, same-store rental income increased by $56.7 million for the year ended December 31, 2022 driven by a 12.0% increase in average effective monthly rent per unit. Expenses Property operating expenses. Property operating expenses increased $139.0 million to $232.3 million for the year ended December 31, 2022 from $93.3 million for the year ended December 31, 2021.
Property operating expenses increased $12.1 million to $244.3 million for the year ended December 31, 2023 from $232.3 million for the year ended December 31, 2022.
Contractual Obligations The table below summarizes our material cash requirement related to contractual obligations, which primarily consist of principal and interest payments on our outstanding consolidated debt obligations and operating lease obligations as of December 31, 2022 (dollars in thousands): 2023 2024 2025 2026 2027 Thereafter Total Principal payments on outstanding debt obligations $ 9,677 $ 69,012 $ 177,435 $ 521,413 $ 27,405 $ 1,781,410 $ 2,586,352 Interest payments on outstanding debt obligations (1) 112,100 111,511 104,824 87,523 79,457 69,127 564,542 Operating lease obligations 844 692 482 480 486 2,042 5,026 Total $ 122,621 $ 181,215 $ 282,741 $ 609,416 $ 107,348 $ 1,852,579 $ 3,155,920 (1) Our unsecured credit facility and term loans assumed a SOFR rate of 4.32% as of December 31, 2022.
Contractual Obligations The table below summarizes our material cash requirement related to contractual obligations, which primarily consist of principal and interest payments on our outstanding consolidated debt obligations and operating lease obligations as of December 31, 2023 (dollars in thousands): 2024 2025 2026 2027 2028 Thereafter Total Principal payments on outstanding debt obligations $ 66,827 $ 138,989 $ 587,825 $ 25,279 $ 1,055,248 $ 641,530 $ 2,515,698 Interest payments on outstanding debt obligations (1) 120,521 114,718 90,260 80,475 45,968 20,735 472,677 Operating lease obligations 692 482 480 486 492 383 3,015 Total $ 188,040 $ 254,189 $ 678,565 $ 106,240 $ 1,101,708 $ 662,648 $ 2,991,390 (1) Our unsecured credit facility and term loans assumed a SOFR rate of 5.32% as of December 31, 2023.
Rental and other property revenue increased $377.9 million to $627.4 million for the year ended December 31, 2022 from $249.5 million for the year ended December 31, 2021. The increase was primarily attributable to the STAR Merger, which contributed a pre-merger revenue base of $327.6 million partially offset by our Non Same-Store Portfolio which decreased by $6.4 million.
See Non-GAAP Financial Measures for our definition of a development property and our methodology for determining same-store properties. 46 Table of Contents Revenue Rental and other property revenue. Rental and other property revenue increased $32.4 million to $659.8 million for the year ended December 31, 2023 from $627.4 million for the year ended December 31, 2022.
Year Ended December 31, 2022 Compared to the Year Ended December 31, 2021 SAME-STORE PROPERTIES NON SAME-STORE PROPERTIES Pre-Merger STAR Portfolio (1) CONSOLIDATED 2022 2021 Increase (Decrease) % Change 2022 2021 Increase (Decrease) % Change 2022 2021 Increase (Decrease) % Change Period-end Property Data: Number of properties 112 112 — —% 8 11 (3) (27.3)% (68) 120 123 (3) (2.4)% Number of units 33,527 33,527 — —% 1,999 3,304 (1,305) (39.5)% (21,394) 35,526 36,831 (1,305) (3.5)% Average occupancy 94.7% 96.0% — (1.3)% 93.3% 88.2% — 5.1% NM* 94.6% 95.8% — (1.2)% Average effective monthly rent, per unit $1,446 $1,291 $155 12.0% $1,384 $1,100 $284 25.8% NM* $1,431 $1,245 $186 14.9% Revenue: Rental and other property revenue $587,777 $531,097 $56,680 10.7% $39,637 $45,999 $(6,362) (13.8)% $(327,604) $627,414 $249,492 $377,922 151.5% Expenses: Property operating expenses 217,061 204,911 12,150 5.9% 15,214 19,333 (4,119) (21.3)% (130,992) 232,275 93,252 139,023 149.1% Net Operating Income $370,716 $326,186 $44,530 13.7% $24,423 $26,666 $(2,243) (8.4)% $(196,612) $395,139 $156,240 $238,899 152.9% Other Revenue: Other revenue $1,111 $760 $351 46.2% Corporate and other expenses: Property management expenses 24,033 9,539 14,494 151.9% General and administrative expenses 26,260 18,610 7,650 41.1% Depreciation and amortization expense 252,849 76,909 175,940 228.8% Casualty (gains) losses, net (8,866) 359 (9,225) -2569.6% Other income, net 1,558 — 1,558 100.0% Loss from investments in unconsolidated real estate entities 2,169 — 2,169 100.0% Interest expense (86,955) (36,401) (50,554) 138.9% Merger and integration costs (5,505) (47,063) 41,558 -88.3% Gain on sale (loss on impairment) of real estate assets, net 111,756 87,671 24,085 27.5% Loss on extinguishment of debt — (10,261) 10,261 (100)% Net income 120,659 45,529 75,130 165.0% Income allocated to noncontrolling interests (3,410) (940) (2,470) 262.8% Net income available to common shares $117,249 $44,589 $72,660 163.0% (1) Represents metrics of the STAR Portfolio, for the year ended December 31, 2021, the period of ownership prior to the consummation of the STAR Merger on December 16, 2021 and is presented for the purpose of reconciling Combined Same-Store Portfolio results to the consolidated results for the year ended December 31, 2021. • Not meaningful (“NM”). 47 Table of Contents Revenue Rental and other property revenue.
Year Ended December 31, 2023 Compared to the Year Ended December 31, 2022 SAME-STORE PROPERTIES NON SAME-STORE PROPERTIES CONSOLIDATED (Dollars in thousands except per unit data) 2023 2022 Increase (Decrease) % Change 2023 2022 Increase (Decrease) % Change 2023 2022 Increase (Decrease) % Change Statistical Property Data: Number of properties (1) 106 106 — — 10 14 (4) (28.6)% 116 120 (4) (3.3)% Number of units (1) 31,829 31,829 — — 2,602 3,697 (1,095) (29.6)% 34,431 35,526 (1,095) (3.1)% Average occupancy (1) 94.0% 94.7% (0.7)% (0.7)% 93.6% 94.3% (0.7)% (0.7)% 94.0% 94.6% (0.6)% (0.6)% Average effective monthly rent, per unit (1) $1,537 $1,445 $92 6.4% $1,627 $1,496 $131 8.7% $1,543 $1,431 $112 7.9% Revenue: Rental and other property revenue $589,749 $558,203 $31,546 5.7% $70,092 $69,211 $881 1.3% $659,841 $627,414 $32,427 5.2% Expenses: Property operating expenses 218,209 206,687 11,522 5.6% 26,121 25,588 533 2.1% 244,330 232,275 12,055 5.2% Net Operating Income $371,540 $351,516 $20,024 5.7% $43,971 $43,623 $348 0.8% $415,511 $395,139 $20,372 5.2% Other Revenue: Other revenue $1,142 $1,111 $31 2.8% Corporate and other expenses: Property management expenses 27,081 24,033 3,048 12.7% General and administrative expenses 22,766 26,260 (3,494) (13.3)% Depreciation and amortization expense 218,968 252,849 (33,881) (13.4)% Casualty losses (gains), net 925 (8,866) 9,791 (110.4)% Interest expense (89,921) (86,955) (2,966) 3.4% (Loss on impairment) gain on sale of real estate assets, net (66,547) 111,756 (178,303) (159.5)% Loss on extinguishment of debt (124) — (124) 100.0% Merger and integration costs — (5,505) 5,505 (100.0)% Other (loss) income, net (427) 1,558 (1,985) (127.4)% Loss from investments in unconsolidated real estate entities (4,488) (2,169) (2,319) 106.9% Restructuring costs (3,213) — (3,213) 100.0% Net (loss) income (17,807) 120,659 (138,466) (114.8)% Loss (income) allocated to noncontrolling interests 580 (3,410) 3,990 (117.0)% Net (loss) income available to common shares $(17,227) $117,249 $(134,476) (114.7)% (1) Excludes our development projects.
Depreciation and amortization expense increased $175.9 million to $252.8 million for the year ended December 31, 2022 from $76.9 million for the year ended December 31, 2021. The increase was primarily attributable to an increase in depreciation of $128.3 million and approximately $52.6 million of amortization of in-place lease intangibles, from properties acquired in the STAR Merger.
The decrease was primarily due to lower personnel costs from the departure of executives in 2023, including from the forfeiture of their bonus and stock awards. Depreciation and amortization expense. Depreciation and amortization expense decreased $33.9 million to $219.0 million for the year ended December 31, 2023 from $252.8 million for the year ended December 31, 2022.
Removed
In 2022, we acquired three wholly-owned communities, totaling 678 units, and disposed of six communities, totaling 1,983 units. We also formed three unconsolidated joint ventures (in which we own an 85% to 90% interest) that are developing communities that will contain, upon completion, 831 units.
Added
The increase was primarily attributable to a $31.5 million increase in same-store rental and other property revenue driven by a 6.4% increase in average effective monthly rents and partially offset by a 0.7% decrease in average occupancy compared to the prior year period. Expenses Property operating expenses.
Removed
These acquisitions, dispositions and joint venture 45 Table of Contents investments represent the execution of our strategy to gain scale within desired submarkets, while exiting markets in which we lack scale.
Added
In addition, advertising expenses increased 31% during the year ended December 31, 2023 compared to the prior year period, as we increased investment in our brand. Property management expenses. Property management expenses increased $3.1 million to $27.1 million for the year ended December 31, 2023 from $24.0 million for the year ended December 31, 2022.
Removed
In 2023, subject to market conditions, we intend to continue to seek opportunities to gain scale within our existing markets through acquisitions of communities which fit within our investment strategy. We face competition for attractive investment opportunities from other real estate investors and, as a result, we may be unable to acquire additional properties on desirable terms, or at all.
Added
The increase was primarily due to higher personnel costs, stock compensation, and subscription costs related to the rollout of community call centers, compared to the prior year. General and administrative expenses. General and administrative expenses decreased $3.5 million to $22.8 million for the year ended December 31, 2023 from $26.3 million for the year ended December 31, 2022.
Removed
The STAR Merger was consummated in order to increase the scale and scope of our business, provide enhanced portfolio diversification and exposure to high growth markets, and to unlock synergies. During 2022, we successfully combined teams and integrated our property and revenue management systems across all former STAR communities, including merging human resources systems and benefit plans.
Added
The decrease was primarily due to lower intangible asset amortization expenses during the year ended December 31, 2023 compared to the prior year period as a result of the full amortization in 2022 of the intangible assets acquired in the STAR merger on December 16, 2021. Casualty losses (gains), net.
Removed
We also completed property dispositions identified in conjunction with the STAR Merger that enabled us to delever our combined balance sheet. We incurred approximately $5.5 million and $47.1 million in merger and integration costs related to the STAR Merger during the years ended December 31, 2022 and 2021.
Added
The increase was primarily driven by a 0.3% increase in our weighted average effective interest rate from 3.9% for the full year 2022 to 4.2% for the full year 2023. (Loss on impairment) gain on sale of real estate assets, net.
Removed
These costs primarily consisted of technology migration and implementation, consulting and professional fees and employee severance costs. These costs are presented in a separate line item, “Merger and integration costs,” in our consolidated statements of operations. An important part of our investment strategy is to strengthen our balance sheet and drive long-term growth and unlock value through portfolio enhancements.
Added
In addition, as of December 31, 2023, we identified six multifamily properties as held for sale and recorded a loss on impairment of $33.0 million as a result of the carrying value of the real estate exceeding the expected sales price, less transaction costs.
Removed
Our Value Add Initiative, which is comprised of renovations and upgrades at selected communities to drive increased rental rates, is a core component of this strategy. As of December 31, 2022, we had identified 12,583 units across 38 of our communities for renovations and upgrades as part of our Value Add Initiative.
Added
These costs in the prior year period primarily consisted of technology migration and implementation costs, consulting and professional fees and employee severance costs. Loss from investments in unconsolidated joint ventures.
Removed
Since January 2018 and through December 31, 2022, we renovated 5,316 of the 12,583 units currently owned while achieving a return on total investment of 19.6% (and approximately 21.6% on the interior portion of such renovation costs). We compute return on cost by measuring our cost against our rent premiums.
Added
During the year ended December 31, 2023, we incurred approximately $3.2 million of severance costs related to the reorganization of certain departments that impacted a limited number of employees.
Removed
We expect to complete the remaining projects included in our Value Add Initiative at the selected communities during 2023 and 2024. See Item 1.
Added
Same-Store Portfolio Net Operating Income We believe that Net Operating Income (“NOI”), a non-GAAP financial measure, is a useful supplemental measure of our operating performance.
Removed
We discuss below, under “Non-GAAP Financial Measures,” our methodology for categorizing our 120 properties, as applicable, into IRT Same-Store Portfolio (48 properties as of December 31, 2022), STAR Same-Store Portfolio (64 properties as of December 31, 2022) and Combined Same-Store Portfolio (112 properties as of December 31, 2022).
Added
Development Property A development property is a property that is either currently under development or is in lease-up prior to reaching overall occupancy of 90%.
Removed
Because of substantial changes in our total property portfolio as the result of the STAR Merger that closed on December 16, 2021, the financial data presented below show significant changes in revenue and expenses from period-to-period.
Added
Capitalization Shelf Registration Statement On June 14, 2023, we replaced our previous shelf registration statement with our new shelf registration statement.
Removed
The increase was driven by the STAR Merger, which contributed $131.0 million of operating expenses partially offset by our Non Same-Store Portfolio which decreased by $4.1 million.
Added
Swap Agreement On March 16, 2023, we entered into an interest rate swap contract with a notional value of $200,000, a strike rate of 3.39% and a maturity date of March 17, 2030.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+1 added−1 removed10 unchanged
Biggest changeTo mitigate such risk, we may use interest rate derivative contracts. 60 Table of Contents As of December 31, 2022 and 2021, the fair value of our fixed-rate indebtedness was $1.63 billion and $1.90 billion, respectively.
Biggest changeWe monitor interest rate risk routinely and seek to minimize the possibility that a change in interest rates would impact the interest incurred and our cash flows. To mitigate such risk, we may use interest rate derivative contracts. As of December 31, 2023 and 2022, the fair value of our fixed-rate indebtedness was $1.58 billion and $1.63 billion, respectively.
As of December 31, 2022, our only interest rate sensitive assets or liabilities related to our principal amount of $2.59 billion of outstanding indebtedness, of which $1.77 billion was fixed rate and $0.82 billion was floating rate, two float-to-fixed interest rate swaps with a total notional amount of $300 million, two interest rate collars with a total notional amount of $250 million and two forward interest rate collars with a total notional amount of $200 million.
As of December 31, 2022, our only interest rate sensitive assets or liabilities related to our principal amount of $2.59 billion of outstanding indebtedness, of which $1.77 billion was fixed rate and $0.82 billion was floating rate, two float-to-fixed interest rate swaps with a total notional amount of $300 million, and two interest rate collars with a total notional amount of $250 million, and two forward interest rate collars with a total notional amount of $200 million.
The fair value of our fixed rate indebtedness was estimated using a discounted cash flow analysis utilizing rates that we believe a market participant would expect to pay for debt of a similar type and remaining maturity as if the debt was originated at December 31, 2022 and 2021, respectively.
The fair value of our fixed rate indebtedness was estimated using a discounted cash flow analysis utilizing rates that we believe a market participant would expect to pay for debt of a similar type and remaining maturity as if the debt was originated at December 31, 2023 and 2022, respectively.
The following table summarizes our indebtedness, and the impact to interest expense for a 12-month period, and the change in the net fair value of our indebtedness assuming an instantaneous increase or decrease of 100 basis points in the SOFR or LIBOR interest rate curve, as applicable (dollars in thousands).
The following table summarizes our indebtedness, and the impact to interest expense for a 12-month period, and the change in the net fair value of our indebtedness assuming an instantaneous increase or decrease of 100 basis points in the SOFR interest rate curve (dollars in thousands).
As of December 31, 2022, our interest rate swaps and interest rate collars had a combined asset fair value of $41.1 million. The fair values of our interest rate swaps and interest rate collars were estimated using a discounted cash flow analysis based on forward interest rate curves.
As of December 31, 2023, our interest rate swaps and interest rate collars had a combined asset fair value of $29.9 million. The fair values of our interest rate swaps and interest rate collars were estimated using a discounted cash flow analysis based on forward interest rate curves.
A change in market interest rates applicable to the fixed-rate portion of our indebtedness affects the fair value, but it has no effect on interest incurred or cash flows. A change in market interest rates applicable to the variable portion of our indebtedness affects the interest incurred and cash flows, but does not affect the fair value.
A change in market interest rates 57 Table of Contents applicable to the fixed-rate portion of our indebtedness affects the fair value, but it has no effect on interest incurred or cash flows.
Fair value of fixed-rate indebtedness as of December 31, 2022 is shown. 61 Table of Contents
Fair value of fixed-rate indebtedness as of December 31, 2023 is shown. 58 Table of Contents
As of December 31, 2021, our only interest rate sensitive assets or liabilities related to our principal amount of $2.65 billion of outstanding indebtedness, of which $1.82 billion was fixed rate and $0.83 billion was floating rate, two float-to-fixed interest rate swaps with a total notional amount of $150 million, and five interest rate collars with a total notional amount of $250 million.
As of December 31, 2023, our only interest rate sensitive assets or liabilities related to our principal amount of $2.52 billion of outstanding indebtedness, of which $1.68 billion was fixed rate and $0.84 billion was floating rate, three float-to-fixed interest rate swaps with a total notional amount of $500 million, two interest rate collars with a total notional amount of $250 million and two forward interest rate collars with a total notional amount of $200 million.
The impact of the interest rate swaps and interest rate collars have been included in the table below: Liabilities Subject to Interest Rate Sensitivity (a) 100 Basis Point Increase 100 Basis Point Decrease Interest expense from variable-rate indebtedness $ 65,472 $ 2,697 $ (3,199) Fair value of fixed-rate indebtedness 1,627,804 (74,382) 78,691 (a) Unpaid balance of variable-rate indebtedness as of December 31, 2022 is shown.
The impact of the interest rate swaps and interest rate collars have been included in the table below: Liabilities Subject to Interest Rate Sensitivity (a) 100 Basis Point Increase 100 Basis Point Decrease Interest expense from variable-rate indebtedness $ 85,131 $ 865 $ (865) Fair value of fixed-rate indebtedness 1,582,574 (61,492) 64,564 (a) Unpaid and unhedged balance of variable-rate indebtedness as of December 31, 2023 is shown.
Removed
We monitor interest rate risk routinely and seek to minimize the possibility that a change in interest rates would impact the interest incurred and our cash flows.
Added
A change in market interest rates applicable to the variable portion of our indebtedness affects the interest incurred and cash flows, but does not affect the fair value.

Other IRT 10-K year-over-year comparisons