Thank you for joining us for the Independence Realty Trust Inc. Q4 Earnings Conference Call. My name is Sam, and I will be moderating today's call. All lines will be muted during the presentation, and there will be a chance for questions and answers at the end. I will now pass the call to Lauren Torres. Lauren, please proceed.

Thank you and good morning, everyone. Thank you for joining us to review Independence Realty Trust fourth quarter and full year 2022 financial results. On the call with me today are Scott Schaeffer, Chief Executive Officer; Mike Daley, EVP of Operations and People; Farrell Ender, President of IRT; and Jim Sebra, Chief Financial Officer. Today's call is being webcast on our website at irtliving.com. There will be a replay of the call available via webcast on our Investor Relations website and telephonically beginning at approximately 12 PM Eastern Time today. Before I turn the call over to Scott, I'd like to remind everyone that there may be forward-looking statements made on this call. These forward-looking statements reflect IRT's current views with respect to future events, financial performance, and the merger with Steadfast Apartment REIT, referred to herein as STAR. Actual results could differ substantially and materially from what IRT has projected. Such statements are made in good faith pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Please refer to IRT's press release, supplemental information, and filings with the SEC for factors that could affect the accuracy of our expectations or cause our future results to differ materially from those expectations. Participants may discuss non-GAAP financial measures during this call. A copy of IRT's earnings press release and supplemental information containing financial information, other statistical information and a reconciliation of non-GAAP financial measures to the most direct comparable GAAP financial measure is attached to IRT's current report on the form 8-K available at IRT's website under Investor Relations. IRT's other SEC filings are also available through this link. IRT does not undertake to update forward-looking statements on this call, or with respect to matters described herein except as may be required by law. With that, it's my pleasure to turn the call over to Scott Schaeffer.

Thank you, Lauren. And thank you all for joining us this morning. 2022 was a strong year for IRT as we integrated the STAR portfolio and exceeded our initial synergies and full year operating guidance during a challenging macroeconomic environment. Our ability to deliver nearly 30% core FFO per share growth in 2022 was the result of the strategic positioning of our expanded portfolio concentrated in non-gateway markets within the Sunbelt region, where we continue to benefit from positive supply and demand dynamics. Our team delivered another year of robust performance, which was reflected in our fourth quarter and full year results. Specifically, our average rental rate increased 12% in 2022, supporting a double-digit increase in revenue. Our same-store NOI increased 13% in the fourth quarter and 13.7% for the full year compared to last year. We continue to effectively reduce our leverage from 7.7 times EBITDA a year ago to 6.9 times at year end 2022, ahead of our low-70s guided target. We also made meaningful progress on our value-added program, as we renovated 656 units in the fourth quarter and 1,451 units for the full year while achieving an annual return on investment of more than 24%. This positions us well to deliver the 2,500 to 3,000 units that we've previously guided for 2023. We remain confident about the potential of the value-add program and continue to assess the economic landscape as we determine the pace and scope of renovations of properties in selected markets. While coming off a strong year, we recognize there is more work to be done to drive sustainable occupancy gains across the entire portfolio, and I can assure you that this is a top priority for us in 2023. We are focused on working with our regional leaders and frontline leasing teams to improve all aspects of our leasing and sales process. As we mentioned previously, our target occupancy is 95% for non-value-add communities, and we will continue to drive rent growth where appropriate. Looking ahead, we are factoring in a mild recession, which we expect to be more pronounced in the second half of this year. Despite these uncertain conditions, we are well positioned across all points of market cycles in our portfolio footprint across key Sunbelt markets that continue to see significant migration and job growth. We expect to build upon our solid foundation and continue to deliver outsized growth rates, as shown in our 2023 guidance, which includes a 6.5% NOI growth at the midpoint of our dynamic range. This is on top of NOI growth of 11.4% in 2021 and 13.7% in 2022. Our 2023 guidance also includes 5.6% core FFO per share growth at the midpoint. We are off to a good start this year and remain very excited about the growth opportunities for IRT as real estate fundamentals remain strong in our resilient growth markets. I'd now like to introduce you to Mike Daley, our EVP of Operations and People. Mike is a core member of the IRT team overseeing all aspects of our day-to-day operations. Mike has been with IRT since 2019 and has successfully guided us through the pandemic with consistently strong operational performance. He is a seasoned executive and returned to lead the operations in December 2022. With that introduction, I'd like to hand the call over to Mike.

Thanks, Scott. I'm happy to join today's call for the first time and share in greater detail why we are excited about our portfolio and its ability to provide stable growth through different economic cycles. Our strong fourth quarter and year-end results were driven by double-digit rent growth, with markets like Tampa, Myrtle Beach, Memphis, Atlanta, and Raleigh-Durham achieving mid to high-teens average rent increases for the full year. We continue to see strong migration trends into our southern markets. This was recently confirmed by the U.S. Census Bureau, which reported that Florida, Texas, North and South Carolina, Tennessee, and Georgia were the states with the highest net domestic migration gains in 2022. These six states represent over 60% of IRT's NOI and are not only well situated in the attractive Sunbelt region, but also have experienced a robust job market recovery after the pandemic, averaging 5% job growth since March 2020. As Scott mentioned, we are laser-focused on driving improved occupancy. In the fourth quarter, average occupancy at our total same-store portfolio was 93.8%, down 40 basis points from Q3 2022, driven in part by seasonality. As we've previously indicated, the start of renovations in our value-add communities within our same-store portfolio also impacts occupancy, as every unit comes offline for approximately 30 days. We started renovations on 10 communities during the second half of 2022 through today. We also recognize that the average occupancy of our same-store non-value-add communities during the fourth quarter was 94.6%, below our previously stated target of 95%. Improving our leasing and sales process is a priority for the entire organization, and we are confident that our occupancy will increase to our targeted levels during the leasing season. We are pleased to note that we are seeing positive momentum as we begin 2023. On a blended basis, we have achieved 4.8% lease-over-lease rental growth through February 13, with a 4.6% increase in new leases and a 4.9% increase in renewals for our combined same-store portfolio. We have a 4.9% earn in that will contribute to 2023 revenue growth, and our loss to lease across the portfolio is 6%. I'd now like to turn the call over to Farrell to provide you with an update on our investment opportunities.

Thanks, Mike. Starting with our value-add program, we completed renovations on 656 units in the fourth quarter, and as a result of the four properties from our ongoing renovation list, we completed under the program. For the full year, we completed renovations on 1,451 units, achieving a return on investment of 24.1%. This was done with an average cost per renovated unit of $13,659 and an average rent increase of $270 over unrenovated costs. As Scott mentioned, we expect to renovate between 2,500 to 3,000 units in 2023. Currently, we have 18 properties in 10 markets included in our ongoing value-add program. Over the course of 2023, we plan to add another nine properties comprising 2,654 units and expect to achieve an average ROI on interior costs of 22% at these new projects. In connection with our ongoing capital recycling program, we sold two previously held-for-sale properties in the fourth quarter: Meadows Apartments in Louisville, Kentucky, and Sycamore Terrace in Terre Haute, Indiana. The aggregate sale price was $99 million and we recognized a $17 million net gain on sale from these two communities. The blended economic cap rate on these dispositions was 4.5%. We also moved one property to held-for-sale status, a 277-unit community in Indianapolis. The property was built in 1976 and requires a high level of annual CapEx spend relative to our other communities located in the same market. We expect the sale of this property to close at the end of this month, with proceeds from the disposition to be used to reduce debt. Due diligence is complete, the buyer's deposit is hard, and they rate locked on the debt they're using to finance the purchase. The economic cap rate on this disposition is 4.8%. Regarding new supply, deliveries are expected to increase in 2023, but declined in the years following. CoSTAR has projected new deliveries in our submarkets based on our weighted average exposure at 2.8% of the existing inventory, dropping to 2.4% in 2024, and potentially declining further as many projects that are not triple A have been put on hold due to several factors including elevated cost of construction and increased interest rates. While select submarkets in Atlanta, Dallas, Tampa, and Nashville will have elevated new deliveries in 2023, we expect that this will have limited impact as these are primarily Class B communities, with monthly rents substantially lower than comparable new construction. Longer term, supply-demand imbalance is expected to continue in our markets, with construction not meeting the overall housing needs. Lastly, I would like to share with you one of our larger capital projects for 2023. In anticipation of the continued growth of electric vehicles over the course of the next decade, we're committing $2 million to the first phase of our EV charging station program. The first step will involve installing 192 charging stations at 32 communities to better understand resident demand and usage of this amenity. We believe that these charging stations will be well received and expect to continue rollout in the following years throughout the portfolio. I'd now like to turn the call over to Jim.

Thanks, Farrell. Good morning, everyone. Beginning with our 2022 performance update, for the fourth quarter of 2022, net income available to common shareholders was $33.6 million, up from $28.6 million in the fourth quarter of 2021. For the full year 2022, net income available to common shareholders was $117.2 million, up from $44.6 million in the full year 2021. During the fourth quarter, core FFO more than doubled to $66.8 million from $31 million a year ago, and core FFO per share grew 20.8% to $0.29 per share. For the full year, core FFO grew to $247.4 million from $92 million, and core FFO per share grew 20.6% to $1.80 per share on a year-over-year basis. This growth reflects the earnings accretion associated with our merger with STAR as well as the sizable organic rent and NOI growth experienced throughout the combined portfolio during 2022. IRT's same-store NOI growth in the fourth quarter was 13%, driven by a revenue growth of 9.8%. This growth was led by a 12.2% increase in our average rental rates. For the full year, IRT's same-store NOI growth increased 13.7%, supported by revenue growth of 10.7%, with rental rates increasing by 12%. On the property operating expense side, IRT's same-store operating expenses increased 4.6% in the fourth quarter, led by higher real estate taxes and utility expenses, while repairs and maintenance costs and advertising expenses declined compared to a year ago. For the full year, IRT's same-store operating expenses grew 5.9%, mostly reflecting increases in property insurance, real estate taxes, and contract services. While inflation continues to drive higher costs for products and services, we are continuing to roll out efficiencies using technology and procurement efforts to help reduce the inflation burden. Turning to our balance sheet, as of December 31, our liquidity position was $350 million. We had approximately $16 million in unrestricted cash and $334 million in additional capacity for our unsecured credit facility. Regarding the ongoing topic of leverage, we are excited to announce that we continue to make significant progress. Since last year, we ended 2022 at 6.9 times net debt-to-EBITDA, down from 7.7 times a year ago, and came in ahead of our year-end target of low-7s. As Farrell mentioned earlier, the proceeds from the upcoming property sale in Indianapolis will be used to repay outstanding indebtedness and put us on good footing to achieve our leverage target of mid-6s by year-end 2023. While we do anticipate some macroeconomic uncertainty in the coming months, I wanted to reiterate that we have no debt maturities in 2023 and only $70 million of maturities in 2024. We have and will continue to maintain sufficient liquidity to address these maturities using our unsecured credit facility. We also have adequate hedges that have effectively converted floating-rate debt to fixed-rate, such that a floating-rate debt exposure as of year-end is only 10% of our outstanding debt. With respect to our outlook for 2023, our EPS guidance is in the range of $0.23 to $0.27 per diluted share, and for core FFO in the range of $1.12 to $1.16 per share. For 2023, at the midpoint of our guidance, we expect NOI in our same-store portfolio to increase by 6.5%. This guidance reflects same-store revenue growth of 6.4%, which is comprised of an average occupancy of 94.5% and earning of 4.9%, a blended rental rate increase of 3% for all leases signed in 2023, and a bad debt expense of 1.5% of revenue. Moving on to expenses, our projected growth in same-store operating expenses of 6.1% at the midpoint is a result of our expectation that non-controllable expenses for real estate taxes and insurance will increase by 8.6%. Our controllable operating expenses will increase by 4.4%. This is primarily the result of inflationary increases, and we will continue to implement various strategies including automation and centralization to improve our efficiencies throughout 2023. As it relates to our general administrative and property management expenses, we are guiding to $52.5 million at the midpoint, or an increase of 4.3%. For interest expense, we are guiding to a midpoint of $105.5 million excluding the effects of amortization of a debt premium adjustment related to our merger that we add back for presentation purposes. This is an increase of 7% over 2022 and is entirely driven by the expected increase in floating rates during 2023. For example, the current 2023 yield curve for SOFR is an average of 4.9% as compared to 1.5% for 2022. Remember, 90% of our debt is either fixed or hedged, thereby mitigating the effects of this increase. Regarding our transaction and investment expectations, we are currently not assuming any acquisition volume but are providing guidance for disposition volume of $35 million to $40 million, reflecting the asset held for sale in Indianapolis, which we expect to close later this month. Lastly, regarding CapEx, we expect $20 million in recurring maintenance CapEx, $80 million in value-added and non-revenue generating expenses, and $85 million in development CapEx in 2023, each at the midpoint of our guided ranges. These incremental development and value-added CapEx will be funded primarily through our excess cash flow of $133 million generated during 2023, which is after paying our current dividend of $0.14 per quarter. Now, I'll turn the call back to Scott.

Thank you, Jim. As we move ahead in 2023, we remain well positioned for continued growth as we execute our strategy and invest in our portfolio. Our confidence stems from IRT's ability to build a leading presence in attractive markets with solid renter demand fundamentals, which has been able to withstand the backdrop of macroeconomic uncertainty. We are fully committed to enhancing shareholder value and regularly returning capital to our shareholders. We look forward to another year achieving our targets and strengthening our presence in the multifamily sector. Thank you for joining us today and we look forward to speaking with you again. Operator, you can now open a call for questions.

We will now begin the Q&A session. Our first question today comes from Austin Wurschmidt with KeyBanc. Austin, your line is now open.

Thanks and good morning, everybody. Scott and Mike, I appreciate all your comments around the focus on ramping and stabilizing occupancy. But I'm curious, do you feel like you have the right personnel in place on the operations team? Have there been any other recent changes to the team that are worth highlighting? And do you feel that the team really has a handle on quickly reacting to changing market conditions in order to keep occupancy within a tighter band moving forward, particularly within that non-value-add pool?

Thanks, Austin. Good question. I think the best way to answer your question is to start with a little bit about how we got to where we are. As I mentioned in the past, I wasn't happy with our occupancy trends in the fourth quarter. We pushed rents a little too hard, which had a negative effect on our resident retention and our ability to sign new leases. The market was changing, and frankly, our team was slow to adapt. On the positive side, we had one of the highest increases in lease rates of all the multifamily REITs, but I've always stressed the importance of balancing rent increases with occupancy so that we can deliver the highest possible revenue. Frankly, we got away from that formula. This happened at the same time that we were increasing the number of properties going through the value-add program, which we previously mentioned has a significant negative impact on our occupancy. The 656 units that we completed in the fourth quarter reduced overall occupancy by 50 to 60 basis points. So it really does have an effect. We decided to make some changes in our operations team in the fourth quarter, including adding additional senior leaders with proven track records in multifamily operations. We just brought on Janice Richards, who heads our operating platform with 16 years of experience with Camden, and we really look forward to having her voice in charge of operations. We made these changes during the slowest leasing period, the fourth quarter leading into the first quarter of 2023, so that we were prepared as we headed into an uncertain 2023. As you can see from our 2023 guidance, we're confident that we've done the right things. Our guidance is pretty strong. To list out some changes we’ve made, we've improved the flow of information from the communities to our pricing team relative to market rents, to ensure we are not behind the curve going forward. We've opened a 24/7 call center to capture all leasing leads, which was started right before the STAR merger but put on hold during the integration. We’ve expanded our sales training and brought on special sales coaches. The leasing professionals at the properties are where we have the highest turnover, as is common for all multifamily REITs. We constantly have to train them. We are ensuring they are coached and ready for leasing. Additionally, we are improving our technology to streamline how our teams manage leads, so that we can maximize the lead-to-lease conversion ratio. This is a primary focus for us. We will have occupancy back up to that 95% level in non-value-add communities, and I wanted to ensure all these changes were made during the slowest leasing period as we head into the 2023 leasing season.

Yeah. I appreciate all the detail you provided. Can you share how you were interacting or overriding the revenue management system previously? And how much, I guess, did the frictional vacancy redevelopment impact pricing?

I’m not sure 'overriding' is the right description. The pricing team, I believe, was not getting real-time market information. The market changed dramatically last year. All the REITs were seeing rent increases of 12-15%, even up to 20% or more, and that changed in the third quarter going into the fourth quarter. Our team was a little slow to react. We send out our review letters 90 days in advance to tenants as leases expire. That slow reaction has a forward effect as well, because here in January we are renewing leases based on the letters received back in October-November. We frankly were pricing above the market, which led to turnover. I made the changes, and going forward, we are in a much better position.

Just one last question from me. If you could provide a bit of additional detail on your occupancy assumption and the milestones or cadence through the year for how we should expect that to ramp?

The average occupancy assumption in guidance at the midpoint is 94.5%. That's expected to ramp up similar to some of the seasonal gains we saw last year through the summer months and then tail off in the latter half of the year back to that seasonal norm we observed pre-COVID in October-November.

Okay, thanks, everybody.

Thank you. The next question comes from the line of Brad Heffern with RBC. Brad?

Yeah, thank you. On the new 6% loss to lease quote, I think that's down a decent amount from the last quarter. Can you talk about what contributed to that change? And what gives you confidence in the new number against this backdrop of declining occupancy?

Great question, Brad. Our loss to lease is based on a comparison of our asking rents at our communities versus our average in-place rents, suggesting that if we were to lease based on our asking rents, how much rent would grow. There is a bit of seasonality to rental rates in the fourth quarter that caused a slight decline. At the same time, as Scott mentioned, we began to drive out occupancy in the fourth quarter, which caused estimates to come down a little bit.

Is there an underlying assumption for market rent growth in the revenue growth guide? I think the 3% blend seems half of the current loss to lease. Is there anything being added on top of that?

There is a little bit of an assumption on market rent growth. We discussed market rent growth in the low single digits, about 1% to 3% in terms of our guidance. We typically say it takes us around 12-18 months to capture. But there is some market rent growth assumption, and we are approaching 2023 with a relatively conservative eye.

Okay, thank you.

Thank you. The next question comes from the line of John Kim with BMO. John?

Hey, thank you. I just wanted to follow up on that previous question. So your blended lease growth assumption is 3%, and your last lease is 6%. You're expecting market rental growth this year, in addition to your value-add programs ramping up. So I’m curious how you get to that 3% lease growth rate assumption?

The 3% lease growth stage is just a conservative estimate around what the leasing cadence will be to continue to drive occupancy. The value-add program definitely supports this, with the highest lease expirations occurring in the summer months, but we are approaching this year with caution due to macroeconomic uncertainty.

Okay, thanks. You mentioned last quarter that you were going to moderate the value-add this year, and it appears you're doubling it. I'd like to understand that.

The moderation is due to our original target of 4,000 units for 2023. We've now adjusted this to a target of 2,500 to 3,000 units.

The next question comes from the line of Nick Joseph with Citi. Nick?

Thanks. Regarding market rent growth, how much of a range is there between the markets expected? Could you provide insights into the top and bottom performing market expectations?

There are markets expected to have good rent growth. The top end of the range is around 3%-4%, while the bottom end is about 1%. However, we are advised to remain conservative given macroeconomic uncertainties.

Could you specify which markets fall at the top versus the bottom?

Markets like Tampa are expected to see strong rent growth. We're generally looking to maintain a conservative standpoint in light of uncertainty.

What stage is the property in the sales process? Any insights on pricing or demand in the market?

The property we have under contract will close in the next couple of weeks. They have a hard deposit and their financing is lined up. We are confident it will close. Overall transaction volume is down considerably, and there’s a significant disconnect between bid and ask. We’re seeing transactions for specific reasons, like 1031s or debt maturities, pricing in the high-4s or low-5s cap range. However, many, including ourselves, are waiting for the market to settle.

Next question is from Anthony Powell with Barclays. Anthony?

Just a question on occupancy and turnover. When residents leave due to high rents, where are they going? Are they opting for Class A apartments?

We're dependent on feedback from exiting residents to understand their reasons for leaving. We are seeing some residents move to different classes of community due to affordability. There is a normal level of relocations, with some moderation in people buying new houses, reflecting mortgage rates. However, affordability remains a common theme for those leaving our properties.

I would add that those reasons have not changed dramatically from prior years. Moving out to buy a home is still the primary reason, followed by job relocations and moving to single-family rentals. Pricing will always be an issue in Class B apartments.

Given the economic climate, do you expect a tailwind this year from tenants migrating to Class B communities?

We do expect this to be a tailwind. Class A assets are not in a rent-reduction mode, and we're likely to see increased demand from residents moving from Class A to our value-add communities, as we offer a product comparable to new construction but at a better value.

If we experience a mild recession, is that reflected in your guidance and what potential upside do you see?

It's a base case for both the high and low end of our guidance. In the case of a soft landing, how much the market rents re-accelerate will be pivotal, potentially driving occupancy higher, though expenses will likely remain stable.

Thank you. The next question is from an unidentified analyst with Baird. Mason?

Good morning, everyone. Thanks for taking my question. I noticed the fourth quarter dispositions came in at $99 million, though you expected $103 million after the third quarter. Could you clarify if this was the net number or if the buyer retreated at a lower price?

The market changed, interest rates went up, and they came back with a price reduction. We went through a couple iterations with different buyers and determined it was still a good time to sell the asset, even though we experienced a retreat in the offer. I don't enjoy retreating, but this was a one-off asset in a market where we had no interest in growing, so the decision was made to proceed with the sale.

That's all for me. Thanks.

Thank you. Our next question is from Linda Tsai with Jefferies. Linda?

Thanks for taking my question. What would your expectation be for the retention ratio by year-end?

We've always targeted our retention ratio to be in the 50% to 55% range. So I think a target of around 53% would be a reasonable expectation for the year based on our guidance.

Thank you. We have no further questions at this time. Seeing none, I would like to turn the call back to the management team for any closing remarks.

Thanks everyone, and we look forward to speaking with you again next year.

That concludes the Independence Realty Trust Inc. Q4 earnings conference call. Thank you all for your participation. You may now disconnect your lines.