Good afternoon, ladies and gentlemen, and welcome to the Q1 2019 Independence Realty Trust Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] And as a reminder, this conference call is being recorded. I would now like to turn the conference over to your host Alex Jorgensen - Investor Relations.

Thank you, and good morning, everyone. Thank you for joining us to review Independence Realty Trust first quarter 2019 financial results. On the call with me today are Scott Schaeffer, our CEO; Jim Sebra, our Chief Financial Officer; and Farrell Ender, President of IRT. Today'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 noon 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 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 discuss non-GAAP financial measures during 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 on 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 in 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, Alex, and thank you all for joining us this morning. Our performance in the first quarter highlights IRT's ability to capitalize on the deep value indebted within our existing portfolio through the execution of our differentiated operating model. This model is grounded by three key components. First, owning and operating high quality middle market communities within non-gateway markets that exhibit continued expansion of real estate fundamentals. Second, executing on our multi-face value-add program to deliver outsized NOI growth. And lastly, delivering an accretive capital recycling program into disposing of communities that no longer match our core investment thesis, and reallocating that capital to target markets where we feel there is long-term growth opportunity. Looking at the first quarter, I am very pleased to report same-store NOI growth of 5.1% signaling an inflection point in our portfolio transformation. We are building this business for long-term stability and are excited to see our investment set the foundation for long-term value creation. We have continued to see positive momentum in leasing activity in the second quarter, which Farrell will provide an update on in a moment. I would like to now take a moment to provide an update on our ongoing commitment to execute on the key components of our operating model. First, we own and operate a differentiated portfolio of communities within the multi-family REIT space. Our strategy is centered around non-gateway and middle market communities that benefit from attractive supply-demand dynamics. Our top markets like Atlanta, Raleigh-Durham and Columbus are being driven by strong job creation in corporate expansion while competing new construction remains low. Within this dynamic, we believe we will continue to have stable rental rate growth and heightened occupancy in all real estate cycles. Second, in the beginning of 2018 we commenced the strategic value-add program…

Thanks, Scott and good morning everyone. We generated strong operational performance in the first quarter driven by solid multi-family fundamentals and the momentum we continue to build through our value-add program. During the first quarter, we experienced revenue growth in 16 of our 19 markets. We continue to see the benefit of owning our differentiated mainly rich, middle market communities across the vast majority of our portfolio. When looking specifically at NOI growth, our largest markets provided significant outperformance which reinforces our portfolio strategy. Oklahoma City, Memphis, Columbus, Raleigh-Durham and Atlanta, all generated NOI growth above 5%. Oklahoma City led same-store sale portfolio by market in terms of NOI growth at 17% year-over-year and 33% on a two-year stacked basis. Oklahoma City continues to rebound as it is benefiting from almost no new supply being added to it's 90,000 units. We anticipate wage growth of 3.4% in 2019, paired with job growth of 1% which should provide consistent performance throughout the balance of the year. We've run occupancy to 94.8% and an increased rent 3.4% year-over-year. Memphis with 11.8% NOI growth is another market experiencing limited supply with only 800 units or less than 1% projected to be added this year. These fundamentals helped us generate revenue growth of 3.6% year-over-year, as well as average effective rank growth of 5.9%. This growth occurred while we had slightly higher vacancies as two of our communities in this market are undergoing value add renovations. Columbus, which generated 7.2% NOI growth is a similar story and also has two communities undergoing renovations. While it's experiencing a little bit more supply pressure with 2% inventory growth over the last 12 months, we were able to increase revenues by 4.1%, and rental rates by 6.3%. The Atlanta market continues to display optimal fundamentals for our…

Thanks, Farrell and good morning everyone. Before discussing the results, I wanted to mention a few changes we've made to our supplement. First, as most of you know, the new leasing standard requires representing uncollectible lease revenue against property rental income rather than as a property operating expense. this change is required to be perspective rather than retroactive. As a result for our GAAP income statement, this reclassification has been reflected solely for Q1, 2019 and has not been reflected for the historical period. However to help with comparability, we have adjusted the historical periods in our same-store analyzed comparison. Lastly we've added a same-store market table on Page 18 of the supplement. This reflects same-store performance for each of our markets, showing changes in revenue, operating expenses, NOI, occupancy and effect -- effective rental rates per month. Now I'll turn to our operation results. For the first quarter of 2019, net income available to common shareholders was $2.5 million down from $3.4 million in the first quarter of 2018. Core FFO grew to $16 million from $15.6 million in 2018. Core FFO per share was $0.18 flat year-over-year primarily due to higher corporate expenses as well as higher interest expense. Adjusted EBITDA for the quarter increased to $24.7 million representing a 7% increase year-over-year. This increased demonstrates the value creation our renovating communities and Cappris [ph] happy program are bringing to our portfolio. The benefit of value add programs is further underscored By our same-store results. We reported same-store NOI growth 5.1% with revenue growth of 4% and property level expenses increasing 2.5%. Occupancy is in our same-store communities average 92.5% during Q1, down a 120 basis points from Q1 last year but up 50 basis points sequentially. After April 30, however, with 94.5% up 90 basis points since…

Thanks, Jim. As you can see from my remarks we are pleased with our strong first quarter performance and are encouraged by our continued leasing momentum into the second quarter. We look forward to seeing many of you next month that read week in New York. And now, operator, I'd like to open the call for questions.

[Operator Instructions] Your first question comes from Andrew Babin with Baird.

Apologies, if I missed this but I was curious if you could provide cap information for a year 1 on both the Atlanta acquisition but also the Chicago sale and also the mortgage rate on the mortgage on the Chicago property.

The cap On the Atlanta purchase was a 5.5 Cap on out year one under rating. The sale of the Chicago asset was a 5 7 on our budget -- 2019 budget numbers and Jim do you know the interest rate?

The mortgage balance on the property in north of Chicago was just under $19 million and it had an effective interest rate of 4.7%.

Okay, yes thanks for those details. And then just one more question for me. Expense growth was obviously prepayment for the first quarter which helps seems to run a lot quite a bit and I guess, the first quarter in the context of full year guidance which is a little more bust. I guess what quarter to quarter volatility can we expect in expenses and which quarters might be the toughest as far as year over year comparisons go?

Yes, sure. Generally speaking Q2 and Q3, you typically see the higher expenses so save us and seasonal items as Farrell mentioned in his notes, as well as just obviously all the kind of -- typical kind of contract or a contractor landscaping and utility costs rising.

Okay, but I would assume that that was the case to some degree last year as well so from a comparability perspective I guess other same two quarters going to have the highest year over year growth rates or just the highest that we absolute expense numbers.

They should have both, the highest absolute expense -- growth rates.

Your next question comes from Nicholas Joseph with Citi.

Thanks. Where are you on debt at the little rock assets under contract.

There is -- there is give me one second. There is…

Maybe the rate as well while you're looking that up.

I think there is $20 million of debt and the rate is about 3.6%.

And that $20 million for the two assets?

For the two assets, yes.

Thanks and then just in terms of occupancy, Sorry.

Yes, $40 million for the two assets; $20 million for just one -- $20 million for both, rates about 3.6%.

And in just in terms of occupancy, obviously the redevelopments impact in the overall portfolio but even if you strip out the value add, it’s still around 94% which is lower than how many of your peers were on, so wondering if it's a tactical decision to put push rate At the expense of occupancy or how you think about the in occupancy up to a more normalized level? Assets outside of their current redevelopment program.

And we're driving, you know we're -- our goal is to be that 95%, 96% and you think some of what's driving this down is that baton Rouge asset which is the same store portfolio this quarter. we're still trying you know we bought that at a 50% occupancy we're at about 78%, 79% now but it's just been a tough market to get that property leased up.

Your next question comes from John Guinee with Stifel.

Good morning, this is Erin Wolf [ph], I'm with John Guinee. I have a question on the Atlanta asset you purchased. You know how competitive was that that process for the other bidders?

We preempted we need to sell and we bought from them before they basically called us they were taking this out the market here's our number We agreed with their value, we have another property, yes within a mile of this and I think you know We under wrote The benefit of the combined being able to operate them in addition to being able to operate them. So it was going to be marketed. We got a look at it preemptively.

Okay, great. And on Little Rock asset; how long has that property -- properties been marketed? How long has this taken?

Longer than we wanted it, John. When we had the property under contract in December and again as we mentioned on our previous call there was some volatility in December which made the sale not happen. We were going to go back to the other people that did in that process and we thought it would be more prudent to just remarket the deals so that it's an additional 60 days longer than we wanted to. So it properties around our contract due diligence and our goal is to close this in the next 60 days.

Okay, great. And then type of buyer? If you are able to disclose that.

Really not, just based on where we are in the process.

Okay, all right. Great.

I would say that we've done business with them before, so we're pretty comfortable with their execution.

Okay, great. Thanks for taking my questions.

Your next question comes from John Massocca with Ladenburg Thalmann.

Good morning!

Good morning, John.

Hi, John.

Starting this, was there any kind of value add -- I know you're obviously -- it's not coming in Phase 1 or Phase 2, but as you look at the Atlanta acquisition, to me, is there a potential value add component to that transaction? Or was this kind of bothered to full performance?

There is. We haven't underwritten it. We build out a pretty strong team in that market considering how much other value add we're doing. So even if it's just floors are applying to it, they're not a full-blown unit reservation, we do believe that we'll be able to create some value add at all of our Atlanta properties.

I know your plan is still being kind of formulated for Phase 3, but is that still something you anticipate maybe having a more tangible idea? A timeline for at the end of this year? Or is that maybe a little earlier to date?

As Scott mentioned, on our next call we'll be able to provide more detailed information. I will say we are starting -- each market, we're building out teams, so we have started that in Tampa and we'll start projects there in the very near future.

Okay. And then on kind of a same-store basis. All the moving pieces were kind of pretty explainable. The only thing that was a little -- it wasn't a huge delta -- but the other expenses, what kind of forced through there and why was that maybe down so much kind of quarter over -- is that year-over-year?

Year-over-year was down fair enough. If you remember first quarter last year, we had some weather-related issues around pipes piercing that was in the first quarter number of last year and it's not there this year.

So as you look forward, this should probably be a pretty -- I mean obviously some seasonality, pretty comparable number to this quarter versus last year?

That's right.

Okay. That's it for me. Thank you very much

Your next question comes from Austin Wurschmidt with KeyBanc.

Hi, good morning, everyone. Just a quick clarification. On the Little Rock assets, is this the same buyer that you were previously in negotiations with or under contract with in the fourth quarter or somebody new?

No. Somebody new. As I mentioned, we completed remarketed the properties in the first quarter as opposed to going back to any of the bidders that we have talked to in the first round.

Okay, thanks. So it seems like there's a fairly high certainty of close there. So I guess this virtually buttons up the 2018 capital recycling plan. So as you look out through the balance of the year, what's kind of the appetite for additional deals on both the buy and sell side?

There's a good appetite, but we continue to evaluate the portfolio and our assets and the markets, I want to say specifically and were not at this point ready to announce any further recycling, but we think there will be some. But it depends on what the acquisition market looks like and how we continue to evaluate the existing portfolio.

Have you seen any pullback or changes in demand for the types of assets that you're looking to sell?

We have not.

Okay. And then Jim, just curious. I know we talked a little bit about this offline, but just digging in a little deeper, can you remind me what same-store revenue growth was excluding the accounting change this quarter and what revenue guidance would have been at the outside of that year had that accounting change not occurred to give us a sense of the change on a comparable basis?

The first question in terms of what revenue growth was pre the accounting change on what we call bad debt or uncollectible lease revenue, the revenue growth would have been 4.3%. we did have a sense that this was obviously coming so we did factored into elements of our guidance. So the initial guidance to the outside of the year would not have been tremendously different.

Thanks. Then last one for me. It looked like there were a couple small moving pieces in the value add full and I'm just curious, the property in Atlanta, looks like you pulled some units from what kind of drove that decision.

I'm not following. Your moving pieces?

It looked like there were about 20 assets that you previously expected to renovate, which are no longer within in Atlanta property which seem to have gotten pulled out of the mix. And I was just curious what drove that change.

If we could circle out one information you're looking at so I can answer it correctly.

Sure, no problem. We can take it offline. Thanks, guys.

Thank you.

[Operator Instructions]

Thank you, everyone for joining us and we will speak with you next quarter.

Ladies and gentlemen, this concludes today's conference. Thank you for your participation and have a wonderful day. You may all disconnect.