10-Q 1 irt-20220630.htm 10-Q irt-20220630
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission file number 001-36041
______________________________________________________
INDEPENDENCE REALTY TRUST, INC.
(Exact Name of Registrant as Specified in Its Charter)
Maryland26-4567130
(State or Other Jurisdiction of
Incorporation or Organization)
(I.R.S. Employer
Identification No.)
1835 Market Street, Suite 2601
Philadelphia, PA
19103
(Address of Principal Executive Offices)(Zip Code)
(267) 270-4800
(Registrant’s Telephone Number, Including Area Code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
_________________________________________________________________________________________________
Securities registered pursuant to section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Common stockIRT
NYSE
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated filerxAccelerated filero
Non-Accelerated fileroSmaller reporting companyo
Emerging growth companyo
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of July 26, 2022 there were 222,069,162 shares of the Registrant’s common stock issued and outstanding.


INDEPENDENCE REALTY TRUST, INC.
INDEX
Page
Condensed Consolidated Statements of Operations for the Three and Six Months ended June 30, 2022 and June 30, 2021


PART I—FINANCIAL INFORMATION
Item 1.    Financial Statements
Independence Realty Trust, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
(Unaudited and dollars in thousands, except share and per share data)
As of
June 30,
2022
As of December 31, 2021
ASSETS:
Investments in real estate:
Investments in real estate, at cost$6,428,482 $6,462,355 
Accumulated depreciation(329,903)(243,475)
Investments in real estate, net6,098,579 6,218,880 
Real estate held for sale81,818 61,560 
Investment in real estate under development61,777 41,777 
Cash and cash equivalents11,378 35,972 
Restricted cash31,017 29,699 
Investments in unconsolidated real estate entities54,178 24,999 
Other assets26,707 38,052 
Derivative assets21,162 2,488 
Intangible assets, net of accumulated amortization of $18 and $4,779, respectively
18 53,269 
Total Assets$6,386,634 $6,506,696 
LIABILITIES AND EQUITY:  
Indebtedness, net$2,506,375 $2,705,336 
Indebtedness associated with real estate held for sale46,561  
Accounts payable and accrued expenses98,173 106,332 
Accrued interest payable6,891 7,175 
Dividends payable31,907 16,792 
Derivative liabilities 11,896 
Other liabilities15,077 17,089 
Total Liabilities2,704,984 2,864,620 
Equity:  
Stockholders’ equity:  
Preferred stock, $0.01 par value; 50,000,000 shares authorized, 0 and 0 shares
  issued and outstanding, respectively
  
Common stock, $0.01 par value; 500,000,000 shares authorized,
  222,060,280 and 220,753,735 shares issued and outstanding, including
   246,003 and 269,622 unvested restricted common share awards, respectively
2,221 2,208 
Additional paid-in capital3,698,763 3,678,903 
Accumulated other comprehensive income (loss)18,430 (11,940)
Retained earnings (accumulated deficit)(178,902)(188,410)
Total stockholders’ equity3,540,512 3,480,761 
Noncontrolling interests141,138 161,315 
Total Equity3,681,650 3,642,076 
Total Liabilities and Equity$6,386,634 $6,506,696 
The accompanying notes are an integral part of these condensed consolidated financial statements.
3

Independence Realty Trust, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations
(Unaudited and dollars in thousands, except share and per share data)
For the Three Months Ended June 30,For the Six Months Ended June 30,
2022202120222021
REVENUE:
Rental and other property revenue$154,643 $57,286 $304,621 $112,097 
Other revenue120 158 505 459 
Total revenue154,763 57,444 305,126 112,556 
EXPENSES:    
Property operating expenses58,976 22,298 114,858 43,136 
Property management expenses6,139 2,176 11,696 4,119 
General and administrative expenses6,968 4,241 14,896 10,183 
Depreciation and amortization expense72,793 16,763 150,966 33,315 
Casualty (gains) losses, net(5,592) (6,985)359 
Total expenses139,284 45,478 285,431 91,112 
Interest expense(20,994)(8,559)(41,525)(16,944)
Gain on sale of real estate assets, net  94,712  
Merger and integration costs(1,307) (3,202) 
Other income (expense)294  736  
Loss from investments in unconsolidated real
  estate entities
(871) (934) 
Net (loss) income:(7,399)3,407 69,482 4,500 
Loss (income) allocated to noncontrolling interest194 (21)(2,087)(28)
Net (loss) income allocable to common shares$(7,205)$3,386 $67,395 $4,472 
(Loss) earnings per share:    
Basic$(0.03)$0.03 $0.30 $0.04 
Diluted$(0.03)$0.03 $0.30 $0.04 
Weighted-average shares:
Basic221,164,284 102,023,204 220,982,714 101,847,876 
Diluted221,164,284 102,923,924 222,033,857 102,822,099 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4

Independence Realty Trust, Inc. and Subsidiaries
Condensed Consolidated Statements of Comprehensive Income (Loss)
(Unaudited and dollars in thousands)
For the Three Months Ended June 30,For the Six Months Ended June 30,
2022202120222021
Net (loss) income$(7,399)$3,407 $69,482 $4,500 
Other comprehensive income (loss):
Change in fair value of interest rate hedges10,169 364 34,879 15,537 
Realized (losses) gains on interest rate
  hedges reclassified to earnings
(1,502)(1,861)(3,622)(3,621)
Total other comprehensive income (loss)8,667 (1,497)31,257 11,916 
Comprehensive income before allocation to
  noncontrolling interests
1,268 1,910 100,739 16,416 
Allocation to noncontrolling interests(1)(38)(2,974)(133)
Comprehensive income$1,267 $1,872 $97,765 $16,283 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5

Independence Realty Trust, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Equity
(Unaudited and dollars in thousands, except share information)
Common
Shares
Par
Value
Common
Shares
Additional
Paid In
Capital
Accumulated Other Comprehensive Income (Loss)Retained
Earnings
(Accumulated Deficit)
Total
Stockholders’
Equity
Noncontrolling
Interests
Total
Equity
Balance, December 31, 2021
220,753,735 $2,208 $3,678,903 $(11,940)$(188,410)$3,480,761 $161,315 $3,642,076 
Net income— — — — 74,600 74,600 2,280 76,880 
Common dividends declared ($0.12 per share)
— — — — (26,833)(26,833)— (26,833)
Other comprehensive income— — — 21,898 — 21,898 692 22,590 
Stock compensation395,029 3 3,535 — — 3,538 — 3,538 
Repurchase of shares related to equity award tax
  withholding
(48,452)— (3,183)— — (3,183)— (3,183)
Conversion of noncontrolling interest to common
  shares
10,848 — 68 — — 68 (68) 
Issuance of common shares, net51,498 1 (845)— — (844)— (844)
Distribution to noncontrolling interest declared
  ($0.12 per unit)
— — — — — — (837)(837)
Balance, March 31, 2022221,162,658 $2,212 $3,678,478 $9,958 $(140,643)$3,550,005 $163,382 $3,713,387 
Net loss— — — — (7,205)(7,205)(194)(7,399)
Common dividends declared ($0.14 per share)
— — — — (31,054)(31,054)— (31,054)
Other comprehensive income— — — 8,472 — 8,472 195 8,667 
Stock compensation19,297 — 1,715 — — 1,715 — 1,715 
Repurchase of shares related to equity award tax withholding(1,496)— (2,698)— — (2,698)— (2,698)
Conversion of noncontrolling interest to common
  shares
879,821 9 21,384 — — 21,393 (21,393) 
Issuance of common shares, net— — (116)— — (116)— (116)
Distribution to noncontrolling interest declared
  ($0.14 per unit)
— — — — — — (852)(852)
Balance, June 30, 2022222,060,280 $2,221 $3,698,763 $18,430 $(178,902)$3,540,512 $141,138 $3,681,650 



6

Independence Realty Trust, Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Equity
(Unaudited and dollars in thousands, except share information)


 Common
Shares
Par
Value
Common
Shares
Additional
Paid In
Capital
Accumulated Other Comprehensive Income (Loss)Retained
Earnings
(Accumulated Deficit)
Total
Stockholders’
Equity
Noncontrolling
Interests
Total
Equity
Balance, December 31, 2020
101,803,762 $1,018 $919,615 $(33,822)$(178,751)$708,060 $4,711 $712,771 
Net income— — — — 1,086 1,086 7 1,093 
Common dividends declared ($0.12 per share)
— — — — (12,486)(12,486)— (12,486)
Other comprehensive income— — — 13,325 — 13,325 88 13,413 
Stock compensation286,647 2 3,346 — — 3,348 — 3,348 
Repurchase of shares related to equity award tax
  withholding
(56,677)(2)(2,860)— — (2,862)— (2,862)
Issuance of common shares, net— — (59)— — (59)— (59)
Distribution to noncontrolling interest declared
  ($0.12 per unit)
— — — — — — (80)(80)
Balance, March 31, 2021102,033,732 $1,018 $920,042 $(20,497)$(190,151)$710,412 $4,726 $715,138 
Net income— — — — 3,386 3,386 21 3,407 
Other comprehensive income— — — (1,514)— (1,514)17 (1,497)
Stock compensation23,436 1 1,356 — — 1,357 — 1,357 
Repurchase of shares related to equity award tax
  withholding
(1,674)1 (81)— — (80)— (80)
Issuance of common shares, net2,932,000 30 41,580 — — 41,610 — 41,610 
Conversion of noncontrolling interest to common
  shares
122,155 1 857 — — 858 (858) 
Common dividends declared ($0.12 per share)
— — — — (12,585)(12,585)— (12,585)
Distribution to noncontrolling interest declared
  ($0.12 per unit)
— — — — — — (67)(67)
Balance, June 30, 2021105,109,649 $1,051 $963,754 $(22,011)$(199,350)$743,444 $3,839 $747,283 
The accompanying notes are an integral part of these condensed consolidated financial statements
7

Independence Realty Trust, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(Unaudited and dollars in thousands)
For the Six Months Ended June 30,
20222021
Cash flows from operating activities:
Net income$69,482 $4,500 
Adjustments to reconcile net income to cash flow from operating activities:
Depreciation and amortization150,966 33,315 
Accretion of loan discounts and premiums, net(5,495) 
Amortization of deferred financing costs, net1,824 738 
Stock compensation expense5,178 4,646 
Gain on sale of real estate assets, net(94,712) 
Amortization related to derivative instruments634 608 
Casualty (gains) losses, net(6,985)359 
Loss from investments in unconsolidated real estate entities934  
Other (income) expense(736) 
Changes in assets and liabilities:
Other assets6,829 (4,886)
Accounts payable and accrued expenses(13,775)3,985 
Accrued interest payable(284)(67)
Other liabilities(2,273)54 
Cash flow provided by operating activities111,587 43,252 
Cash flows from investing activities:
Acquisition of real estate properties(25,957)(139,231)
Investments in unconsolidated real estate entities(33,519)(10,205)
Return of investment in unconsolidated real estate entities3,406  
Disposition of real estate properties, net155,639  
Capital expenditures(29,139)(17,244)
Additions to real estate under development(20,723) 
Proceeds from insurance claims15,462  
Cash flow provided by (used in) investing activities65,169 (166,680)
Cash flows from financing activities:
      (Costs) proceeds from issuance of common stock(960)41,551 
Proceeds from unsecured credit facility and term loans81,000 369,500 
Unsecured credit facility repayments(226,000)(234,800)
Mortgage principal repayments(3,680)(23,456)
Payments for deferred financing costs(49)(1,205)
Distributions on common stock(43,425)(24,666)
Distributions to noncontrolling interests(1,037)(162)
Repurchase of shares related to equity award tax withholding(5,881)(2,942)
Cash flow (used in) provided by financing activities(200,032)123,820 
Net change in cash and cash equivalents, and restricted cash(23,276)392 
Cash and cash equivalents, and restricted cash, beginning of period65,671 13,615 
Cash and cash equivalents, and restricted cash, end of the period$42,395 $14,007 
Reconciliation of cash, cash equivalents, and restricted cash to the Consolidated Balance
  Sheet
Cash and cash equivalents$11,378 $7,566 
Restricted cash31,017 6,441 
Total cash, cash equivalents, and restricted cash, end of period$42,395 $14,007 

The accompanying notes are an integral part of these condensed consolidated financial statements
8

Independence Realty Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 30, 2022
(Unaudited and dollars in thousands, except share and per share data)


NOTE 1: Organization
Independence Realty Trust, Inc. (“IRT”), is a self-administered and self-managed Maryland real estate investment trust (“REIT”) which was formed on March 26, 2009. Our primary purposes are to acquire, own, operate, improve and manage multifamily apartment communities in non-gateway markets. As of June 30, 2022, we owned and operated 120 multifamily apartment properties that contain 35,594 units across non-gateway U.S. markets including Atlanta, Columbus,
Dallas, Denver, Houston, Indianapolis, Louisville, Memphis, Oklahoma City, and Raleigh. In addition, as of June 30, 2022, we owned interests in four unconsolidated joint ventures that are developing multifamily apartment communities. We own all of our assets and conduct substantially all of our operations through Independence Realty Operating Partnership, LP (“IROP”), of which we are the sole general partner.
As used herein, the terms “we,” “our” and “us” refer to Independence Realty Trust, Inc. and, as required by context, IROP and their subsidiaries.
On July 26, 2021, IRT, together with IROP, and IRSTAR Sub, LLC, a wholly-owned subsidiary of IRT (“IRT Merger Sub”), entered into an agreement and plan of merger (the “Merger Agreement”) with Steadfast Apartment REIT, Inc. (“STAR”) and its operating partnership, Steadfast Apartment REIT Operating Partnership, L.P. (“STAR OP”). Consummation of the mergers provided for in the Merger Agreement (which we refer to collectively as the “STAR Merger”) was subject to customary closing conditions, including, among others, receipt of IRT stockholder approval and STAR stockholder approval, which occurred on December 13, 2021. The STAR Merger closed on December 16, 2021. For further discussion, see Note 3: IRT and STAR Merger included in our 2021 Annual Report on Form 10-K.
NOTE 2: Summary of Significant Accounting Policies
a. Basis of Presentation
The accompanying unaudited interim consolidated financial statements have been prepared by management in accordance with generally accepted accounting principles in the United States (“GAAP”). Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations, although we believe that the included disclosures are adequate to make the information presented not misleading. The unaudited interim consolidated financial statements should be read in conjunction with our audited financial statements as of and for the year ended December 31, 2021 included in our 2021 Annual Report on Form 10-K. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our consolidated financial position and consolidated results of operations and cash flows are included. The results of operations for the interim periods presented are not necessarily indicative of the results for the full year. The Company evaluated subsequent events through the date its financial statements were issued. No significant recognized or non-recognized subsequent events were noted other than those described in the footnotes.
b. Principles of Consolidation
The consolidated financial statements reflect our accounts and the accounts of IROP and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Pursuant to the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification Topic 810, “Consolidation”, IROP is considered a variable interest entity of which we are the primary beneficiary. As our significant asset is our investment in IROP, substantially all of our assets and liabilities represent the assets and liabilities of IROP.
c. Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.
9

Independence Realty Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 30, 2022
(Unaudited and dollars in thousands, except share and per share data)

d. Cash and Cash Equivalents
Cash and cash equivalents include cash held in banks and highly liquid investments with original maturities of three months or less when purchased. Cash, including amounts restricted, may at times exceed the Federal Deposit Insurance Corporation deposit insurance limit of $250 per institution. We mitigate credit risk by placing cash and cash equivalents with major financial institutions. To date, we have not experienced any losses on cash and cash equivalents.
e. Restricted Cash
Restricted cash includes escrows of our funds held by lenders to fund certain expenditures, such as real estate taxes and insurance, or to be released at our discretion upon the occurrence of certain pre-specified events. As of June 30, 2022 and December 31, 2021, we had $31,017 and $29,699, respectively, of restricted cash.
f. Investments in Real Estate
Investments in real estate are recorded at cost less accumulated depreciation. Costs, including internal costs, that both add value and appreciably extend the useful life of an asset are capitalized. Expenditures for repairs and maintenance are expensed as incurred.
Investments in real estate are classified as held for sale in the period in which certain criteria are met including when the sale of the asset is probable, and actions required to complete the plan of sale indicate that it is unlikely that significant changes to the plan of sale will be made or the plan of sale will be withdrawn.
Allocation of Purchase Price of Acquired Assets
In accordance with FASB ASC Topic 805, the properties we acquire are generally accounted for as asset acquisitions. 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.
We estimate the fair value of acquired tangible assets (consisting of land, building and improvements), identified intangible assets (consisting of in-place leases), and assumed debt at the date of acquisition, based on the evaluation of information and estimates available at that date.
The aggregate value of in-place leases is determined by evaluating various factors, including the terms of the leases that are in place and assumed lease-up periods. The value assigned to in-place lease assets is amortized over the assumed lease up period, typically six months. During the three and six months ended June 30, 2022, we acquired in-place leases with a value of $37 related to our acquisitions that are discussed further in Note 3: Investments in Real Estate. For the three and six months ended June 30, 2022, we recorded $24,206 and $53,288, respectively, of amortization for intangible assets. For the three and six months ended June 30, 2021, we recorded $439 and $835, respectively, of amortization for intangible assets. For each of the three and six months ended June 30, 2022, we wrote-off fully amortized intangible assets of $58,048. For each of the three and six months ended June 30, 2021, we wrote-off fully amortized intangible assets of $792. As of June 30, 2022, we expect to record additional amortization expense on current in-place intangible assets of $18 for the remainder of 2022.
Business Combinations
For properties we acquire or transactions we entered into that are accounted for as business combinations, we apply the acquisition method of accounting under ASC 805, which requires the identification of the acquiror, the determination date, and the recognition and measurement, at fair value, of the assets acquired and liabilities assumed. To the extent that the fair value of net assets acquired differs from the fair value of consideration paid, ASC 805 requires the recognition of goodwill or a gain from a bargain purchase price, if any. For the three and six months ended June 30, 2022, we incurred merger and integration costs of $1,307 and $3,202. These amounts were expensed as incurred, and are included in the consolidated statements of operations in the item titled "Merger and integration costs", and primarily consist of technology migration and implementation, consulting and professional fees and employee severance costs.
10

Independence Realty Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 30, 2022
(Unaudited and dollars in thousands, except share and per share data)

Impairment of Long-Lived Assets
Management evaluates the recoverability of our investment in real estate assets, including related identifiable intangible assets, in accordance with FASB ASC Topic 360, “Property, Plant and Equipment”. 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 our long-lived assets on an ongoing basis and evaluates the recoverability of the carrying value when there is an indicator of impairment. 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 and our views of market and economic conditions. 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.
Depreciation Expense
Depreciation expense for real estate assets is computed using a straight-line method based on a life of 40 years for buildings and improvements and five to ten years for furniture, fixtures, and equipment. For the three and six months ended June 30, 2022, we recorded $48,092 and $96,954 of depreciation expense, respectively. For the three and six months ended June 30, 2021, we recorded $16,324 and $32,480 of depreciation expense, respectively. During the three and six months ended June 30, 2022, we wrote-off fully depreciated fixed assets of $1,932 and $3,092, respectively.
Casualty Related Costs
Occasionally, we incur losses at our communities from wind storms, floods, fires and similar hazards. Sometimes, a portion of these losses are not fully covered by our insurance policies due to deductibles. In these cases, we estimate the carrying value of the damaged property and record a casualty loss for the difference between the estimated carrying value and the insurance proceeds. Any amount of insurance recovery in excess of the amount of the losses incurred is considered a gain contingency and is recorded in casualty (gains) losses, net when the proceeds are received. During the three and six months ended June 30, 2022, we recorded $5,592 and $6,985 of net casualty gains, respectively. During the three and six months ended June 30, 2021, we incurred $0 and $359 of casualty losses, respectively.
g. Investments in Real Estate Under Development
We capitalize direct and indirect project costs incurred during the development period such as construction, insurance, architectural, legal, interest costs, and real estate taxes. At such time as the development is considered substantially complete, the capitalization of certain indirect costs such as real estate taxes, interest costs, and all project-related costs in real estate under development are reclassified to investments in real estate.

As of June 30, 2022 and December 31, 2021, the carrying value of our investments in real estate under development totaled $61,777 and $41,777, respectively, and was recorded as a separate line item on the face of our consolidated balance sheet.
h. Investments in Unconsolidated Real Estate Entities
We invest in joint ventures in which we exercise significant influence but do not control the major decisions of the joint venture. Therefore, we account for these investments using the equity method of accounting. Under the equity method of accounting, the investments are carried at cost plus our share of net earnings or losses. As of June 30, 2022 and December 31, 2021, the carrying value of our investments in joint ventures totaled $54,178 and $24,999, respectively, and were recorded as a separate line item on the face of our consolidated balance sheet. We recognized losses of $871 and $934 from equity method investments during the three and six months ended June 30, 2022, and these losses were recorded in loss from investments in unconsolidated real estate entities on the face of our consolidated statements of operations.
11

Independence Realty Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 30, 2022
(Unaudited and dollars in thousands, except share and per share data)

i. Revenue and Expenses
Rental and Other Property Revenue
We apply FASB ASC Topic 842, “Leases” with respect to our accounting for rental income. We primarily lease apartment units under operating leases generally with terms of one year or less. Rental payments are generally due monthly and rental revenues are recognized on an accrual basis when earned. We have elected to account for lease (i.e. fixed payments including base rent) and non-lease components (i.e. tenant reimbursements and certain other service fees) as a single combined operating lease component since (1) the timing and pattern of transfer of the lease and non-lease components is the same, (2) the lease component is the predominant element, and (3) the combined single lease component would be classified as an operating lease.
We make ongoing estimates of the collectability of our base rents, tenant reimbursements, and other service fees included within rental and other property revenue. If collectability is not probable, we adjust rental and other property income for the amount of uncollectible revenue.
Advertising Expenses
For the three and six months ended June 30, 2022, we incurred $1,315 and $2,587 of advertising expenses, respectively. For the three and six months ended June 30, 2021, we incurred $636 and $1,180 of advertising expenses, respectively.
j. Derivative Instruments
We may use derivative financial instruments to hedge all or a portion of the interest rate risk associated with our borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with our operating and financial structure, as well as to hedge specific anticipated transactions. While these instruments may impact our periodic cash flows, they benefit us by minimizing the risks and/or costs previously described. The counterparties to these contractual arrangements are major financial institutions with which we and our affiliates may also have other financial relationships. In the event of nonperformance by the counterparties, we are potentially exposed to credit loss. However, because of the high credit ratings of the counterparties, we do not anticipate that any of the counterparties will fail to meet their obligations.
In accordance with FASB ASC Topic 815, “Derivatives and Hedging”, we measure each derivative instrument at fair value and record such amounts in our consolidated balance sheets as either an asset or liability. For derivatives designated as cash flow hedges, the changes in the fair value of the effective portions of the derivative are reported in other comprehensive income and changes in the fair value of the ineffective portions of cash flow hedges, if any, are recognized in earnings. For derivatives not designated as hedges (or designated as fair value hedges), the changes in fair value of the derivative instrument are recognized in earnings. Any derivatives that we designate in hedge relationships are done so at inception. At inception, we determine whether or not the derivative is highly effective in offsetting changes in the designated interest rate risk associated with the identified indebtedness using regression analysis. At each reporting period, we update our regression analysis and use the hypothetical derivative method to measure any ineffectiveness.
k. Fair Value of Financial Instruments
In accordance with FASB ASC Topic 820, “Fair Value Measurements and Disclosures”, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments’ complexity for disclosure purposes. Assets and liabilities recorded at fair value in our consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their value. Hierarchical levels, as defined in FASB ASC Topic 820, “Fair Value Measurements and Disclosures” and directly related to the amount of subjectivity associated with the inputs to fair valuations of these assets and liabilities, are as follows:
Level 1: Valuations are based on unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. The types of assets carried at Level 1 fair value generally are equity
12

Independence Realty Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 30, 2022
(Unaudited and dollars in thousands, except share and per share data)

securities listed in active markets. As such, valuations of these investments do not entail a significant degree of judgment.
Level 2: Valuations are based on quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active or for which all significant inputs are observable, either directly or indirectly.
Level 3: Inputs are unobservable for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.
FASB ASC Topic 825, “Financial Instruments” requires disclosure of the fair value of financial instruments for which it is practicable to estimate that value. Given that cash and cash equivalents and restricted cash are short term in nature with limited fair value volatility, the carrying amount is deemed to be a reasonable approximation of fair value and the fair value input is classified as a Level 1 fair value measurement. The fair value input for the derivatives is classified as a Level 2 fair value measurement within the fair value hierarchy. The fair value inputs for our unsecured credit facility and term loans are classified as Level 2 fair value measurements within the fair value hierarchy. The fair value of mortgage indebtedness is based on a discounted cash flows valuation technique. As this technique utilizes current credit spreads, which are generally unobservable, this is classified as a Level 3 fair value measurement within the fair value hierarchy. We determine appropriate credit spreads based on the type of debt and its maturity. There were no transfers between levels in the fair value hierarchy for the six months ended June 30, 2022. The following table summarizes the carrying amount and the fair value of our financial instruments as of the periods indicated:
 As of June 30, 2022As of December 31, 2021
Financial InstrumentCarrying
Amount
Estimated
Fair Value
Carrying
Amount
Estimated
Fair Value
Assets    
Cash and cash equivalents$11,378 $11,378 $35,972 $35,972 
Restricted cash31,017 31,017 29,699 29,699 
Derivative assets21,162 21,162 2,488 2,488 
 
Liabilities
Debt:
Unsecured Revolver129,406 129,406 274,109 274,109 
Unsecured Term loans498,255 498,255 497,951 497,951 
Secured credit facilities662,668 617,318 664,618 668,352 
Mortgages(1)
1,262,607 1,184,797 1,268,658 1,282,495 
Derivative liabilities   11,896 11,896 
(1)Includes indebtedness associated with real estate held for sale.
l. Deferred Financing Costs
Costs incurred in connection with debt financing are deferred and classified within indebtedness and charged to interest expense over the terms of the related debt agreements, under the effective interest method.
13

Independence Realty Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 30, 2022
(Unaudited and dollars in thousands, except share and per share data)

m. Office Leases
In accordance with FASB ASC Topic 842, “Leases”, lessees are required to recognize a right-of-use asset and a lease liability on the balance sheet at the lease commencement date for all leases, except those leases with terms of less than a year. We lease corporate office space under leases with terms of up to 10 years and that may include extension options, but that do not include any residual value guarantees or restrictive covenants. As of June 30, 2022, we have $3,232 of operating lease right-of-use assets and $3,557 of operating lease liabilities related to our corporate office leases. The operating lease right-of-use assets are presented within other assets and the operating lease liabilities are presented within other liabilities in our consolidated balance sheet. We recorded $383 and $844 of total operating lease expense during the three and six months ended June 30, 2022, which is recorded within property management expense and general and administrative expenses in our condensed consolidated statements of operations.
n. Income Taxes
We have elected to be taxed as a REIT. Accordingly, we recorded no income tax expense for the three and six months ended June 30, 2022 and 2021.
To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our ordinary taxable income to stockholders. As a REIT, we generally are not subject to federal income tax on taxable income that we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income taxes on our taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available for distribution to stockholders; however, we believe that we are organized and operate in such a manner as to qualify and maintain treatment as a REIT and intend to operate in such a manner so that we will remain qualified as a REIT for federal income tax purposes.o. R
NOTE 3: Investments in Real Estate
As of June 30, 2022, our investments in real estate consisted of 120 apartment properties that contain 35,594 units. The following table summarizes our investments consolidated in real estate:
As of June 30, 2022As of December 31, 2021Depreciable Lives
(In years)
Land$561,107 $567,507 
Building5,571,949 5,622,492 40
Furniture, fixtures and equipment295,426 272,356 
5-10
Total investments in real estate$6,428,482 $6,462,355  
Accumulated depreciation(329,903)(243,475) 
Investments in real estate, net$6,098,579 $6,218,880  
As of June 30, 2022, we owned two properties that were classified as held for sale. We expect the Meadows Apartments sale to close in the third quarter of 2022 and we continue to market Sycamore Terrace for sale. In connection with the sale of these properties we expect to extinguish $46,200 of mortgage debt and incur approximately $861 of loss on extinguishment of debt. The table below summarizes our held for sale properties.
Property NameNet carrying valueUnits (unaudited)
Meadows Apartments - Louisville, KY$36,285 400 
Sycamore Terrace - Terra Haute, IN45,533 250 
Totals$81,818 650 
Acquisitions
On April 6, 2022, we acquired Views of Music City (phase I), a 96-unit property (unaudited) located in Nashville, TN for $25,440. We purchased this property from one of our unconsolidated joint ventures. On account of our equity
14

Independence Realty Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 30, 2022
(Unaudited and dollars in thousands, except share and per share data)

interest in this joint venture, we received $4,428 of the sales proceeds, comprised of $3,406 as a return of capital and $1,022 as a preferred return on capital. In accordance with ASC 970-323-30-7, we recorded the preferred return on capital as a reduction to the carrying value of the purchased real estate, deferring the gain which will be recognized as income on a pro rata basis as the real estate is depreciated or when it is sold to a third party.
The following table summarizes the relative fair value of the assets and liabilities associated with the acquisition of the Views of Music City (phase I), acquired during the six month period ended June 30, 2022, on the date of acquisition accounted for under FASB ASC Topic 805-50-15-3.
Fair Value of Assets Acquired During the Six Months Ended June 30, 2022
Assets acquired:
      Investments in real estate$24,481 
      Intangible assets37 
      Total assets acquired24,518 
Liabilities assumed:
      Accounts payable and accrued expenses7 
      Other liabilities53 
      Total liabilities assumed60 
Estimated fair value of net assets acquired$24,458 
Dispositions
The following table summarizes our dispositions for the six months ended June 30, 2022:
Property NameDate of SaleSale PriceGain on sale
Riverchase01/18/2022$31,000 $12,901 
Heritage Park02/02/202248,500 31,366 
Raindance02/02/202247,500 33,748 
Haverford02/02/202231,050 16,697 
Total $158,050 $94,712 
NOTE 4: Investments in Unconsolidated Real Estate
We have entered into joint ventures with unrelated third parties to own, operate, acquire, develop and manage real estate assets that are accounted for under the equity method of accounting, and are included in investments in unconsolidated real estate entities on the consolidated balance sheets.
Our joint ventures are funded with a combination of debt and equity. We will consolidate entities that we control as well as any variable interest entity where we are the primary beneficiary. Under the VIE model, we will consolidate an entity when we have the control to direct the activities of the VIE and the obligations to absorb losses or the right to receive benefits that could potentially be significant to the VIE. Under the voting model, we consolidate an entity when we control the entity through ownership of a majority voting interest. We separately analyzed the initial accounting for each investment in unconsolidated entity and concluded that each are a voting interest entity. Our equity interest varies for each joint venture between 50% to 90% but, in each case, we share control of the major decisions that most significantly impact the joint ventures with our partners. Since we do not control the joint venture through our ownership interest, they are accounted for under the equity method of accounting. As of June 30, 2022, our investments in unconsolidated real estate entities had aggregate land, building, and construction in progress costs capitalized of $136,300 and aggregate construction debt of $60,240. We do not guarantee any debt, capital payout or other obligations associated with our joint ventures. We
15

Independence Realty Trust, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
June 30, 2022
(Unaudited and dollars in thousands, except share and per share data)

recognize earnings or losses from our investments in unconsolidated real estate entities consisting of our proportionate share of the net earnings or losses of the joint ventures.
The following table summarizes our investments in unconsolidated real estate entities as of June 30, 2022 and December 31, 2021:
Carrying Value As Of
Investments in Unconsolidated Real EstateLocation
Units(1) (Unaudited)
IRT Ownership InterestJune 30, 2022December 31, 2021
Metropolis at InnsbrookRichmond, VA40284.8 %$16,968 $14,632 
Views of Music City / The JacksonNashville, TN40850.0 %6,887 10,368 
VirtuosoHuntsville, AL40090.0 %15,640  
Lakeline StationAustin, TX37890.0 %14,683  
      Total1,588$54,178 $24,999 
(1)Represents the total number of units after development is complete and each property is placed in service. As of June 30, 2022 only the Virtuoso investment’s development is complete and has ongoing operations.
NOTE 5: Indebtedness
The following tables contain summary information concerning our indebtedness as of June 30, 2022:
Debt:Outstanding PrincipalUnamortized Debt Issuance CostsUnamortized Loan (Discount)/PremiumsCarrying
 Amount
TypeWeighted
Average Rate
Weighted
Average
Maturity
(in years)
Unsecured revolver(1)
$132,003 $(2,597)$ $129,406 Floating2.8%3.6
Unsecured term loans500,000 (1,745) 498,255 Floating2.7%2.7
Secured credit facilities635,128 (2,478)30,018 662,668 Floating/Fixed4.1%6.4
Mortgages(2)
1,234,932 (8,398)36,073 1,262,607 Fixed