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Presentation

Operator: Good morning, ladies and gentlemen, and welcome to the Independence Realty Trust First Quarter 2026 Earnings Conference Call. As a reminder, today’s call is being recorded, and a replay will be made available on the Investors section of the company’s website shortly after this concludes. At this time, I will turn the call over to Stephanie Krewson-Kelly, Senior Vice President of Investor Relations and Capital Markets. Ms. Krewson-Kelly, you may go ahead.

Stephanie Krewson-Kelly: Thank you. Good morning, and welcome to Independence Realty Trust conference call to discuss first quarter 2026 results. On the call with me today are Scott Schaeffer, Chief Executive Officer; Jim Sebra, President and Chief Financial Officer; Janice Richards, Executive Vice President; and Jason Lynch, Senior Vice President of Investments. Before we begin, please note that any forward-looking statements made during this call are based on our current expectations and beliefs as to future events and financial performance. These statements are not guarantees of future performance and involve risks and uncertainties that could cause actual results to differ materially. Such statements are made in good faith pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995, and IRT does not undertake to update them, except as may be required by law.

Please refer to IRT’s press release, supplemental information and filings with the SEC for further information about these risks. A copy of IRT’s earnings press release and supplemental information is attached to IRT’s current report on the Form 8-K that is available in the Investors section of our website. They contain reconciliations of non-GAAP financial measures referenced on this call to the most direct comparable GAAP financial measure. With that, it’s my pleasure to turn the call over to Scott Schaeffer.

Scott Schaeffer: Thanks, Stephanie, and thank you all for joining us this morning. First quarter results were in line with our expectations and represented a solid start to the year. Same-store revenue and NOI increased, reflecting stable year-over-year occupancy and a 40 basis point increase in effective rents. Our performance this quarter reinforces 3 themes: portfolio stability, improving market fundamentals, and disciplined capital allocation. While certain markets are still working through late cycle supply, the trajectory we are seeing in asking rents, along with the stability of demand supports our outlook for sequential improvement in revenue as we move through the leasing season. On the supply front, new deliveries in our markets continue to decrease and are trending well below the long-term average.

On a macro level, job growth, population growth and household formation in our markets are forecasted to meaningfully outpace the national average. First quarter operating results reflect these improving market fundamentals. Average occupancy was stable at 95.2% and resident retention of 60.5% remained high, both consistent with our expectations. Asking rents in our markets have increased an average of 2.8% this year, and every one of our markets has seen asking rents increase since January 1. Our recent strategy of prioritizing occupancy now positions us to prioritize rental rate growth during the upcoming leasing season. Concession activity has started to moderate, but is still elevated compared to historical levels. The combination of normalizing concessions and the trajectory of market rent growth against our known lease expirations supports our confidence that new lease trade-outs will reach breakeven this leasing season.

Turning to capital allocation. Value-add renovations continue to be our most attractive investment opportunity. During the quarter, we completed 426 units, generating an average unlevered return of 15.4%. First quarter volume supports our full year assumption of completing 2,000 to 2,500 units in 2026. On the capital recycling front, we continue to make progress on the 2 assets held for sale and our joint venture in the Las-Colinas submarket of Dallas, known as The Mustang, is currently marketed for sale. The proceeds from these recycling efforts will be redeployed based on the best risk-adjusted return opportunities at that time, including stock repurchases, deleveraging and/or new investments. Finally, during the quarter, we took advantage of the ongoing dislocation in the public markets by repurchasing 1.8 million of our shares at a cost of $30 million, bringing total repurchases since the fourth quarter of last year to 3.7 million shares and $60 million.

With that, I’ll turn the call over to Jim.

James Sebra: Thank you, Scott, and good morning, everyone. Core FFO per share for the quarter was $0.26, in line with our expectations. Same-store NOI grew 1% during the quarter, driven by revenue growth that was consistent with expectations and modest outperformance on operating expenses. Same-store revenues grew 1.4% year-over-year, supported by stable occupancy of 95.2%, higher average rental rates, growth in other income and bad debt that is 60 basis points lower than Q1 of last year. On the expense side, lower property insurance and repairs and maintenance partially offset higher personnel and utility costs, resulting in same-store expense growth of 2%. The leasing environment remains competitive but continues to improve as new supply is absorbed.

Asking rents across our same-store portfolio have increased 2.8% since the beginning of the year, up significantly from the 73 basis points we cited on our February call. Within our top 10 markets, those with the largest asking rent increases to date are Raleigh, which is up 5.7%; Indianapolis, up 5.2%; Oklahoma City, up 4.8%; Columbus, up 4.6%; and Nashville, up 4.5%. In our 2 largest markets, Atlanta is up 80 basis points this year and Dallas asking rents are up 2.1% year-to-date. Concession activity increased materially late last year and continued into the first quarter. In the first quarter, approximately 27% of our right-term leases had a concession that averaged $1,241. Early second quarter trends are directionally encouraging as leasing activity accelerates in the peak leasing season.

Blended rent growth of 70 basis points for the first quarter was in line with the trajectory of our full year guidance assumption of 1.7%. Renewal rate growth of 3.2% and resident retention of 60.5% were also in line with our expectations. April and May renewal trade-outs are tracking modestly ahead of plan at approximately 4% and retention has remained steady. New lease trade-outs of negative 4% in the quarter were in line with our previous commentary and our expectations. Given the rise in asking rents, our gross lease trade-outs are at breakeven levels with almost all of the negative trade-out on new leases due to the higher-than-normal concession activity in the first quarter. As mentioned previously, we are seeing an improvement in concessions early in Q2 and expect them to continue trending lower during leasing season.

Before moving on to our balance sheet, let me give you an update on our property WiFi initiative. As mentioned previously, we are installing property WiFi across 19,000 units this year with an expectation that all will be done and operating on July 1. I’m pleased to announce that we are slightly ahead of schedule with residents excited about the new gig-speed WiFi and halfway converting over to the program. I look forward to updating you further on our Q2 call later this year. Our investment-grade balance sheet remains strong with ample liquidity and no debt maturities to refinance until 2028. Net debt to adjusted EBITDA was 6.5x at quarter end, reflecting seasonally lower first quarter EBITDA and the impact of consolidating our Austin joint venture asset in January.

We expect leverage to trend lower towards the mid-5s over the course of the year. As Scott mentioned, we expect to use some of the proceeds from pending asset sales to reduce leverage. And longer term, we will further reduce leverage organically through EBITDA growth. Based on the results to date, we are affirming our full year core FFO per share range of $1.12 to $1.16 and are comfortable with the major assumptions that support that range. Scott, back to you.

Scott Schaeffer: Thanks, Jim. We are firmly on track to achieve our 2026 plan. Portfolio performance remains in line with our expectations and market fundamentals are improving. While select markets continue to work through elevated concessions, demand in our submarkets remains durable and continues to be supported by population inflows into the Sunbelt and Midwest for quality of life, employment opportunities and long-term affordability trends. We are encouraged by the increase in market rents to date and our ability to capture market pricing without meaningfully sacrificing occupancy. Early signs of improvement in new lease trade-outs during April represent a constructive start to the leasing season, and we believe we are well positioned to benefit as conditions continue to normalize. We thank you for joining us today. And operator, you can now open the call for questions.

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Operator: [Operator Instructions] Your first question is from the line of Austin Wurschmidt with KeyBanc Capital Markets.

Austin Wurschmidt: Scott, you highlighted in your prepared remarks about prioritizing lease rate growth over occupancy. Just wondering if this is a change in the operating strategy or consistent with what was assumed in initial guidance? And can you kind of share where you’re sending out renewals for the months ahead, what you expect to achieve and just how aggressive you really think you can be on renewals given the competitive landscape?

Scott Schaeffer: Thanks, Austin. It is clearly consistent with our original guidance. This was the plan that we put in place towards the end of last year as we saw the pressure of new supply starting to subside. So during that period of excess deliveries, we really were focused on keeping our occupancy high. And now we feel that we’re well positioned with that stable occupancy and the supply-demand equation flipping better to for landlords that we can now start pushing rents while still keeping occupancy stable. I’m going to let Jim talk about what we’re doing with growth tradeoff.

James Sebra: So on the — you asked a question about renewal growth and what we’re sending renewals out in the future. Obviously, April is done, May is almost done. We’re right in the kind of the low 4% range for those 2 months. June is still a little early, so I don’t want to get too far ahead, but it’s approximately a little bit ahead of that 4% and then July is even a little ahead of that. So again, we expect to — and they are the rate that we expect to secure. So we actually see a lot of really great opportunity here to capture rate during peak leasing season.

Austin Wurschmidt: Then just kind of sticking with the lease rate growth, you underwrite an improvement through the year in new lease rate growth as well. And I think, Scott, you even mentioned kind of that hitting kind of positive territory in the months ahead. How confident are you that, that trajectory is kind of consistent with what you originally underwrote, again, going back to the competitiveness that you highlighted earlier in the call?

James Sebra: Yes. Good question. I’ll take it for Scott. I think from a new lease perspective, we kind of commented on it pretty much kind of in line with what we expect in the first quarter. We see new lease pricing improving kind of as you move into April and certainly May. I think it’s right around the kind of plus or minus 130 basis points better in April and May. And we just see the opportunities there — it’s in our prepared remarks, we see this kind of asking rents have improved, and we do see concessions beginning to come down a little bit that gives us that confidence around kind of hitting that breakeven level here during that leasing season. As you kind of look out into kind of the May, the June, the July months and you look at what our expiring rents are, they are all lower than our current asking rents, meaning we are clearly moving in the positive territory.

It just comes down to kind of the concessions ebbing and flowing in the market dynamics, which we are still very much positive on and is developing as kind of we expected.

Operator: Your next question is from the line of Eric Wolfe with Citigroup.

Eric Wolfe: You mentioned that asking rents were up 2.8% year-to-date. You’re seeing improved new leases in April, lower concessions. Can you just put that in context for us? Is that normal seasonality? Did the same thing on concessions happen last year? I’m just trying to understand what’s normal seasonality from your perspective versus maybe signs that supply impact is easing?

James Sebra: Yes. So the 2.8% asking rent growth is a little bit ahead of what we would say is a normal growth in the beginning part of the year. Again, this is pretty kind of supply ebb and flowing. The concessions in terms of broad views right now in the first quarter and certainly in April, they’re all higher than historical periods, right? We do expect them to continue to wane. So I would say that kind of the plus or minus on the asking rent side, again, is kind of slightly ahead of where you would see a typical seasonal pattern.

Eric Wolfe: I guess based on your answer to the previous question, June and July, it sounds like the expirations are a bit lower. I guess my question is, you’re expecting this big sort of ramp in the back half of the year. I guess when do you think we’ll see signs of that happening? Is it sort of in the June, July time period that you’ll see that sort of plus 2% type of blend? Because I guess at some point, you would expect, right, for asking rents to be sort of better than normal seasonality or maybe it’s just the comp is so easy. I’m just curious when you kind of see that sort of 2% blend that you’re expecting.

James Sebra: Yes. You start seeing that not as much in the month of July, but you start seeing that in the kind of the September forward months, especially because, again, the concessions in 2025, you suggest the comp is easier. I think the concessions were heavier. So the renewal growth that we’re anticipating in the back half of the year is expected to be sizably better in the first part of the year.

Operator: Your next question is from the line of Jamie Feldman with Wells Fargo.

James Feldman: Can you talk more about your blended rent growth across your key markets and how this compares to your expectations? And then I know you’ve kept your outlook for the year, but any that are trending better or worse than you would have thought on both the blended rent side and the concession side?

James Sebra: Yes. I’ll ask Janice or Jason to kind of jump in here in a minute. But I would just say, broadly speaking, the trajectory of the kind of the blended rents and stuff — for this year are very much kind of trending aligned with what we expected. As I mentioned, concessions are a little heavier. But as we said, we’re getting a little bit better asking rent growth, but Janice will go through it market by market.

Janice Richards: Sure. From a market perspective, we’ve got Atlanta, Raleigh and Nashville showing positive momentum supported by moderating supply and improved pricing power year-to-date. Atlanta achieved an 80 basis point rent buildup on top of what we saw at the tail end of last year. Raleigh is leading with the 5.7% growth, as Jim alluded to, and then followed by Nashville at 4.5%. Looking ahead, both Raleigh and Atlanta are expected to benefit from this meaningful decline in supply as a percentage of inventory, down 31% and 69%, respectively, compared to 25%. So that further supports continued rent growth and stabilization of occupancy.

James Feldman: Any other markets to call out?

Janice Richards: I mean, we have some markets that we’re keeping close eye on as well. So relative to expectations, all of our markets are generally in line. Denver and Austin remains supply driven and will continue to experience pressures from elevated new deliveries. However, Austin continues to stand out with the highest household formation across all of our markets at 2.3%, which would help support absorption as supply begins to moderate. Orlando, Tampa and Houston showed some softness in Q1. In Houston, we believe the softness is temporary as the second half of the year will benefit from continued strength in oil production. Anecdotally, in Orlando, we’re seeing some movement tied to return to office activity while still working through late cycle supply pressures.

And in Tampa, we’re seeing some impact from the hurricane-related displacement that followed in Q4 of 2024. However, as Tampa local, I remain very encouraged with the growth coming in the market and optimistic about the back half of 2026.

James Feldman: Then just thinking about like the other income contribution to same-store revenue in the back half of the year. Can you talk about any change? I know you kept your guidance again, but like how are you trending on that part of the earnings model? And anything we should be thinking about in terms of your ability to hit those numbers?

James Sebra: So yes, I think generally speaking, for the first part of the year so far, other income has grown about 5% over the prior year. We obviously expected in our guidance a fairly significant ramp with the property WiFi program. And as I mentioned in my prepared remarks, we’re ahead of schedule. We’re obviously not prepared at this very moment to give any kind of significant update to that, but we do see a little bit of potential upside to that assumption with respect to guidance.

Operator: Your next question is from the line of Brad Heffern with RBC Capital Markets.

Brad Heffern: On Atlanta, you called it out as having positive momentum, but you also quoted, I think, the lowest asking rent changes of any of the numbers that you quoted. I guess, can you just give a broader perspective on that market given it is your largest and maybe reconcile those things?

James Sebra: Yes. Brad, I’ll start and then maybe I’ll ask Janice to kind of chime in here. If you look at the asking rent growth that we talked about on our third quarter call in Atlanta, that was one of the biggest in 2025 by almost 5%. And Janice’s prepared remarks were another 80 basis points on top of that. So a lot of really great things are happening. When you look at kind of blends for the first quarter, Atlanta was roughly 1.5% blended rent growth, and that’s double what it was in the fourth quarter. So that’s the kind of the positive trajectory that we’re seeing there. Janice, feel free to add.

Janice Richards: No, I think from Atlanta, what we’re also seeing on the concession side is we’re seeing some decrease in submarket specific areas where we’re going to be able to optimize and grow revenue holistically without the use of concessions.

Brad Heffern: Jim, I just wanted to clarify your comments on reaching breakeven on the new lease side. When you say that expiring rents are below asking rents, is that including the impact of concessions? Like if concessions are flat year-over-year, would you get to positive leasing spreads in the summer months? Or does that need concessions to go away? Basically, just wondering like what you mean by asking rents and expiring rents and how those incorporate concessions.

James Sebra: All great question. I think if concessions kind of stay at the current level, we should still reach breakeven.

Operator: Your next question is from the line of Ami Probandt with UBS.

Ami Probandt: How much of an impact, if any, do you think that the winter storms had on your blended rent growth, which decelerated in the first quarter?

Janice Richards: We did see some change and some slowness in demand in January and February. However, we’ve seen it pick back up and come back within expectations. We actually exceeded our demand expectations by about 10% for Q1 holistically. So I think we’re good to go with the expectation going into leasing season to have that demand back in place.

Ami Probandt: There have been some soft results in some of the smaller markets like Huntsville. Could you highlight what’s happening in some of those markets? Is it competitive supply? Or have you seen any demand challenges?

Janice Richards: Huntsville is still working through supply pressures. We actually were just in Huntsville recently on a town hall and joining with the team and really saw some great opportunity there and are still very bullish on the market. So no challenges from a demand side as we work through this lingering supply.

Operator: Your next question is from the line of John Kim with BMO Capital Markets.

John Kim: Your value add — so your value-add performance, it’s underperformed your non-value-add portfolio in terms of both blends and occupancy. I’m wondering how you see that trending for the remainder of the year? And how much of a driver is the value-add portfolio to the improvement in blended lease growth in the second half of the year?

Scott Schaeffer: Good question, John. I think from an occupancy perspective, the value-add portfolio is inherently going to run at a lower occupancy just because it’s — the units are vacant for plus or minus 20 to 30 days, where a typical turn time in our non-value-add portfolio — sorry, I get this in my head. Non-value-add portfolio is 7 to 10 days, right? So inherently, the occupancy there is going to be always a little bit lower structurally than a typical non-value-add portfolio. I think from a blend perspective in the first quarter, you saw just a desire to kind of keep retention a little bit higher and therefore, a little bit, call it, softer blend growth because it’s the retention renewal growth. The renewal rate growth wasn’t as strong in the value add as opposed to the non-value add.

But I think fundamentally, when you look at the whole value-add portfolio versus the non-value-add portfolio from an NOI perspective, the value-add portfolio generated about 3.2% NOI growth in the first quarter versus about 50 basis points of NOI growth in the non-value-add portfolio. So we’re really still very bullish on it. We really think it’s going to continue to produce the returns. Now for the rest of the year, I think, obviously, the guidance is pretty strong with respect to kind of the benefits the value-add provides to that, and we still expect it to do what we — we still expect to hit those targets.

John Kim: I may have missed this, but did you provide the blended that you’ve seen in April and what you’re seeing in terms of how the rest of the quarter plays out?

Scott Schaeffer: We had spoken about it on one of our first questions here. But from the standpoint of as we see kind of April and May developing, specifically on renewal rates, April and May are kind of right around the low 4%, 4% range. June is a little bit higher than that, but June is still a little bit early. On the new lease trade-outs, April and early kind of May, we do see them kind of getting better to the tune of about 130 basis points from where they were in the first quarter.

Operator: Your next question is from the line of Jason Wayne with Barclays.

Jason Wayne: Thinking about capital allocation from here. So you said you wanted to pay down debt, but just wondering how you’re thinking about more share repurchases from here?

James Sebra: So obviously, capital allocation is very important as we move forward. And we are continuing to analyze the portfolio for — to recycle capital, recycle out of properties where we think the capital has a better use long term. And as that recycling happens, we will then consider what the best use is. And our stock price will help determine whether share buybacks are better than deleveraging and/or new investments. So it’s hard to say sitting here today what the use of that capital will be. We have to really determine it when the capital is available and then determine what the best use is.

Jason Wayne: Yes, makes sense. And just on the value-add completions, I think you gave a guidance range last quarter of 2,000 to 2,500 completions this year. Is that still the assumption? And how are you trending on that this year so far?

James Sebra: Yes. As Scott had mentioned in his prepared remarks, that’s still the expectation and 426 units that we did do in the first quarter are right in line with that goal for the year.

Operator: [Operator Instructions] Your next question is from the line of Mason Guell, Baird.

Mason P. Guell: How the development performing so far versus expectations?

James Sebra: The 2 on-balance sheet developments — well, there’s 2, call it, historical on-balance sheet developments. That’s the Arista in Broomfield, Colorado, and Flatiron in Broomfield, Colorado. Arista is fully occupied, stabilized. It’s in our same-store pool, so performing just fine. Flatirons, as we mentioned last year, is in the process of lease-up. As we disclosed in the supplement, 82% leased and it’s about 66% occupied. It should hit stabilization here in the low 90% in the month of June, maybe early July. And again, as we mentioned, rental rates there are a little behind our initial underwriting expectations, but we believe it’s still a great market and a good long-term investment, and we’ll be able to push rate once we get it stabilized.

The additional asset that was added to our in-development disclosure in the quarter is our joint venture asset called the Tisdale at Lakeline Station in Austin, Texas. That deal is in lease-up is still very early. It’s about 33% leased — 37% leased. 33% occupied, 37% leased, which is up from roughly 25% occupied when we took it over. So again, leasing up as we would have expected at this point since we now are managing it and consolidating it.

Mason P. Guell: Great. And is the anticipated timing for the 2 consolidated held-for-sale properties still around midyear?

James Sebra: Jason will answer. The question is what’s the timing of disposition for the 2 health care.

Jason Lynch: Sorry. Yes, we’re still aiming towards the midyear. We are actively marketing those and working towards a sale.

Operator: At this time, there are no further questions. I will now hand the call back over to presenters for any closing remarks.

Scott Schaeffer: Well, thank you all for joining us this morning, and we look forward to seeing many of you at NAREIT and then speaking with you again next quarter.

Operator: This concludes today’s call. Thank you for joining. You may now disconnect your lines.

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