Welcome to the First Quarter 2017 Independence Realty Trust, Inc. Earnings Conference Call. [Operator Instructions]. As a reminder, this call is being recorded. I would now like to turn the call over to Andres Viroslav. You may begin.

Thank you, Michelle. Good morning to everyone. Thank you for joining us today to review Independence Realty Trust first quarter 2017 Financial Results. On the call with me today are Scott Schaeffer, our chief Executive Officer; Jim Sieber IRT's Chief Financial Officer and Farrell Ender, President of Independence Realty Trust. This morning's call is being webcast on our website at www.irtliving.com. There will be a replay of the call available via webcast on our Investor Relations website and telephonically beginning at approximately 12:00 PM Eastern Time today, that the dial-in for the replay is 855-859-2056 with a confirmation code of 6292257. Before I turn the call over to Scott, I would like to remind everyone that there may be forward-looking statements made in this call. These forward-looking statements reflect IRT's current views with respect to future events and financial performance. Actual results could differ substantially and materially from what IRT has projected. Such statements are made in good faith pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Please refer to IRT's press release, supplemental information and filings with the SEC for factors that could affect the accuracy of our expectations or cause our future results to differ materially from those expectations. Participants may get discuss non-GAAP financial measures in this call. A copy of IRT's press release and supplemental information containing financial information other statistical information and a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measure is attached to IRT's most recent current report on the Form 8-K, available at IRT's website www.irtliving.com under Investor Relations. IRT's other SEC filings are also available through this link. IRT does not undertake to update forward-looking statements in this call or with respect to matters described herein except as may be required by law. Now I would like to turn the call over to IRT's Chief Executive Officer, Scott Schaeffer. Scott?

Thanks, Andres. And thanks you all for joining our call today. I'm pleased to report on IRT's progress for Q1, our first full quarter as an internally-managed equity REIT. Our strong operating capabilities, capital recycling initiatives and ongoing efforts to strengthen our balance sheet are all evidenced through our results this quarter, while putting IRT in a favorable position as we move forward. Core FFO for the quarter came in at $0.18, while same-store operating NOI grew 5.2%. The results highlight the potential within our 47 property portfolio and the viability of our strategy to own and efficiently manage apartment communities located primarily in non-gateway markets. These markets continue to share attractive fundamentals including healthy job and population growth with limited editions of new apartment supply, resulting in a robust tenant demand. We also benefit from the continuing challenges faced by home builders, including labor and land shortages as well as increasing material costs. We have made progress against our stated strategy of recycling capital out of our 4 non-core properties that are currently held for sale and reinvesting into high-quality communities that fit our long term investment criteria. During the quarter, we acquired a 216-unit community in Tampa, Florida located in an attractive submarket with strong demographics and growth potential. We also have a second property in Lexington, Kentucky under agreement. Farrel will discuss both of these transactions in additional details shortly. The previously announced sales of our 4 Class C communities are expected to be completed before the end of the second quarter. Simultaneously, we've begun value-added improvements at a number of our properties and expect to expand this type of investment into additional properties during 2018 as we review the entire portfolio for unit upgrade opportunities. Turning to the balance sheet. We have closed the refinancing of our secured line of credit with a new 4-year unsecured credit facility. This new facility will eliminate the 2018 debt maturity on the existing line, while lowering the interest cost. This line will provide greater flexibility, support future growth and result in a higher proportion of unencumbered properties which will help position the company towards our goal of pursuing an investment grade rating. At this point, I'd like to turn the call over to Farrell to discuss IRT's portfolio and capital recycling plans. Then followed by Jim to go through the financial results. Farrell?

We continue to see sound fundamentals across our core markets and the ability to increase rents across the portfolio. Overall, during the first quarter, we saw revenue growth in 18 of our 20 markets. In 2 of our markets, Chicago and Oklahoma City, we were flat or down 1% respectively as compared to last year. For the 6 months -- for the past 6 months we've committed additional resources to our Oklahoma City portfolio, both capital and personnel and current occupancy for the portfolio stands at 93.3%. Oklahoma City's economy is slowly improving with limited new construction entering the market. New deliveries in 2017 and 2018 are estimated to be 1500 and 694 units, respectively. The market is expected to see positive absorption in both those year pushing overall vacancy down to 6.1%. In addition, employment growth which was flat in 2016, is projected to be 1.1% in 2017. The markets where we have the most exposure to continue to perform well. Remember, our objective is to acquire assets in submarkets that have limited exposure in new construction and are located within a close distance to employments centers, retail and quality schools. Louisville had year-over-year revenue growth of 4.4% and NOI growth of 8.1%. In Memphis, we experienced revenue growth of 7.9% and NOI growth of 12.3% compared to Q1 of last year. Raleigh saw revenue growth of 7.2% and NOI growth of 9.3%. Finally, Atlanta had revenue growth of 7.2% as well and NOI growth of 6.4%. As Scott mentioned, during the quarter, we purchased a community in Tampa, Florida for $29.8 million which equated to a 6.3% economic cap rate on Year 1 NOI. The acquisition was funded through a combination of available cash and our line of credit. The property contains 216 units and is located in…

Thanks, Farrell. Before we get into the financial results, I wanted to call to your attention as to typo in the earnings release. The same-store rental rate increase was 3.7% in Q1. We've already updated the press release and we apologize for this typo. GAAP earrings this quarter was $0.06 per share or $4.1 million. Core FFO this quarter was $0.18 per share, up $0.01 from $0.17 in Q4 of 2016. Q1 was another solid quarter of operational performance for IRT. Total revenue was $39.1 million, up $38.7 million last year. Same-store revenue was up 4.8% as the same-store properties increased occupancy and rental rates. The same-store properties monthly average rental rate was $1007 for Q1, up 3.7% from Q1 last year. On the expense side, property operating expenses on a same-store basis were up $560,000 or 4.1%. The primary driver of that increased is repairs and maintenance which was up $216,000 in Q1 as compared to prior year. The increase is simply due to timing as the maintenance teams took advantage of the mild winter weather in the first quarter and completed many of their spring maintenance projects ahead of schedule and in advance of the spring leasing season. In previous years, most or some of this would have been incurred in the second quarter. The remaining increases for taxes and insurance were as expected and in line with our previous guidance. With respect to real estate taxes, we've been monitoring the situation closely and continue to be cautiously optimistic. To date, we've received approximately half of our taxes assessments for 2017 and those assessments are slightly better than our expectations. As with most assessments, we appeal most real estate tax increases. When looking at G&A, we completed the of IRT during Q4 and we're currently in the 6-month…

Thank you, Jim. Operator, at this time let's open the call up for questions.

[Operator Instructions]. Our first question comes from David Corak of RBC Capital Markets.

Appreciate the color on the dispositions. Has anything changed in your mind over the past 60 days just in terms of pricing? And then I think on the last call you guys mentioned that the capital recycling would be accretive, maybe just an update there, if you still think that holds true today.

No, nothing has changed on pricing I think. We had previously disclosed about $85 million of the proceeds from the sale of these pools, I think it is going to be about $86 million when we're complete. And we're selling these, as Farrell indicated, at a 6.25% cap and these are C Class assets which we think that -- has limited upside in their current condition without significant investment. And the assets that we're buying are a higher class B to B+. And again, as Farrell indicated, one recycle is a 6.3% cap and the other was a 7% cap. So clearly, the acquisitions while not only being higher-class properties, we think with a better future, are going to be accretive right from day one.

And then you guys mentioned on the last call that only 7 of your markets had negative absorption in '16 which is probably lower than some of your peers concentrated in the higher-supply markets. But just curious, what markets are you assuming are going to have some negative absorption in '17, you mentioned a couple. But have any of those assumption changed, now that we're 1/3 of the way through the year?

No, it will probably play out as the year goes on, I mean the same markets we talked about before which is Charlotte, Dallas, Austin, Raleigh, that will have negative absorption but you'll see slightly increase in vacancy. But remember most of our assets are B Class and aren't competing directly with this new construction. Where we see some impact is on some of the Trade Street portfolio that's of newer vintage. You'll see that in Greenville, you'll see that in Charlotte as I mentioned. On the flipside, if you look at what happened in Charleston, we were impacted a year ago at our property -- the property we acquired through the Trade Street acquisition, with new construction a year ago and now it bounced back and we saw almost 8% revenue growth once that property stabilized and we stopped.

Our next question comes from Drew Babin of Robert W. Baird.

Quick question on the new line of credit. How did the LIBOR spreads on the revolver and term loan stack up the versus your expectations as you set guidance for the year?

They are much lower than our guidance for the year.

So we had assumed that our existing facility was going to be kind of continue for the entire year when it came to setting guidance.

Okay. And secondly, are you able to bifurcate the performance from the Trade Street portfolio in your legacy assets for the quarter?

We're looking at it as a combined portfolio.

Okay. In a general sense, do you think the Trade Street portfolio is still providing kind of net tailwinds due to the operational improvements made there and the margin improvements or is the supply?

It's been two years. I think any benefit we saw from the initial acquisition has been incorporated and now its just organic market rent growth and our operational expertise.

Our next question comes from Craig Kucera of Wunderlich.

Getting back to the new credit facility, is there any sort of facility fee or anything of that form baked into the agreement?

There is certainly standard unused fees and some upfront kind of arrangement fees, but they're generally consistent with the rest of the market terms.

Okay, so call it 25 basis points or something like that. And as far as your property management and other income line, can you give us some color on that and how we should think about the growth of that business throughout the year?

Sure, so as you're aware as part of the internalization, there was some property that came across from RAIT that we continue to third-party manage for them. That will continue so long as they continue to own those properties. We're not looking to grow that business, third-party management and the expenses should continue to be in that kind of $1.5 million kind of run rate on a quarterly basis.

Our next question comes from Brian Hogan of William Blair.

Just going back to the interest expense savings that you expect to -- with the new credit facility and just kind of the give-and-takes, reiterated your guidance of $0.70 to $0.76, the savings there. What's the offset if you didn't increase the guidance there?

Well I think what we're suggesting is we're still in the middle of our range, so we weren't updating our guidance or increasing our guidance for that and we're still remain cautiously optimistic on the real estate taxes.

Obviously, as we get further through the year, the range on that guidance will narrow as we have better visibility towards what the year as a whole will be. But we just didn't think it prudent at this time to be increasing guidance, because there's an interest savings -- interest cost savings.

Sure, the next is just a question on the overall ability to push rents and occupancy rates, I mean how long do you think you can increase rents? I mean same story sale was an impressive 3.7%, kind of how long can that continue?

In the markets we're in, we're seeing very good demand for our units. Occupancy at the end of April is now close to 96% on the portfolio as a whole. And we believe that because there's not a lot of new construction bringing competition into the market and there is population and job growth in these areas, we will be able to continue to push rents higher for the foreseeable future.

And last one for me is kind of the operating margin -- net operating margin is 59% -- just shy of 59% in the quarter, do you -- where do you see the trends going there? Is it 60% by the end of the year, 61%?

Yes, it's approaching close to that 60.5% by the fourth quarter timeframe.

Our next question comes from Daniel Donlan of Ladenburg Thalmann.

This is actually John Massocca on for Dan. I know you guys said that the maintenance and repairs, that 21.2% year-over-year jump was tied to some one time-ish seasonal opportunities to get some work done but if you kind of take out the one-time increases, have you been seeing any kind of inflation there? I mean, we have been hearing that good maintenance techs have become more expensive to retain and there was some kind of inflation push in that line item for a lot of people.

Yes, so we're on the same page, they weren't one time so much as it was a timing of seasonality where we had mild winters in Atlanta and Louisville and where some of the spring maintenance was done in the first quarter versus those in the second quarter. Then regards to your second question. Yes, we've seen some pricing pressure on hiring. We've seen it throughout the industry and throughout the construction industry and it's our job to maintain a culture where people want to work and have opportunity to do that. We've been pretty good at our employee retention. I think that's a result of it.

If you kind of, you -- just kind of going forward though you expect maybe that line item to probably increase at, say, at around 4% kind of rate your expenses that have grown at on average? Or is this something that could get out beyond that?

The salary cost of the actual workers are in the payroll line item not the actual repairs and maintenance. So you are already seeing some of the increase on the -- what I'll call this the annual kind of increases to keep the people or the employees themselves. The repairs and maintenances are just repairs, there's no people cost in those numbers.

Okay, is there like third-party contractors in that line or...

In some cases, yes. But this is your mulching, your power washing, your gutter cleaning, all the stuff that you do coming out of the spring season to prepare the properties.

Okay, that make sense. And then as you kind of look beyond the Lexington, the opportunity to acquire that Lexington property, what does your portfolio look like, have you -- your view on any markets changed over the course of the current year? Does any market looking more attractive now than it was say during the last earnings call?

Not since -- not really since the last earning call and we continue to really like the markets we're in. We're looking to expand. We bought in Tampa, we'd like to add there as well. And we have the opportunity to buy one or 2 more properties once we're done recycling capital and it'll be in those type of markets.

There are no further questions. I'd like to turn the call back over to Scott Schaeffer for any closing remarks.

Well thank you for joining us today and we look forward to speaking with you again next quarter. Have a good day.

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a great day.