Thank you for standby and welcome to the Q3 2019 Independence Realty Trust Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the conference over to your host, Ms. Lauren Tarola[ph], Investor Relations Representative. Please go ahead.

Thank you, good morning everyone. Thank you for joining us to review Independence Realty Trust Third 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 12 PM Eastern Time today.Before I turn the call over to Scott, I'd like to remind everyone that there may be forward-looking statements made 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 Security 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 the 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 direct comparable GAAP financial measure is attached to IRT's most recent current report on the Form 8-K available at IRT's website under Investor Relations.IRT's other SEC filings are also available through this link. IRT does not undertake to update forward-looking statements 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, Lauren and thank you all for joining us this morning. Q3 marked another quarter of steady progress within our value-add initiative which helped fuel strong revenue and NOI growth. Consistent demand for housing in our core markets coupled with our ability to lease up newly renovated units, generated same store NOI growth of 8.1% for the quarter and 7% year-to-date. With phases one, two and three underway, we have strong momentum and a sound process in place to execute our value-add projects.As of quarter end 2,364 units have been completed and 93% of those units have been leased. We are seeing an 18.2% average rental rate increase and nearly 16% return on total investment. We are very pleased with the progress to-date. At current cap rates, we have created $3 of value for every dollar invested. However, we have only just scratched the surface. We have just under 4,000 units earmarked for renovations that are yet to be completed. And six of the eight properties within our Phase 3 have yet to commence, meaning there is a substantial amount of opportunity ahead within the current program.In addition, we believe there are more opportunities in our portfolio beyond Phase 3. Our decision to invest in this value-add initiative was strategic and intended to create not only short-term rental rate and NOI increases, but also to build a foundation for long-term sustainable growth as we create communities that offer residents an upgraded living experience at a lower price point.We also continue to recycle capital to both improve the quality of our assets and create operating efficiencies in our markets. We continue to review all communities in our portfolio with the goal of building scale and operating efficiencies in the attractive growth markets, while reducing our exposure in markets with limited scale and lower growth. As discussed with you on our Q2 call in mid-July we closed the sale of our two properties in Little Rock, Arkansas, completing our 2018 capital recycling plan.Our community currently held for sale in Austin, Texas is under contract with settlement expected in mid-December. As Farrell will discuss in more detail, in July we acquired a community in Tampa, Florida and then in October we acquired an additional community in Raleigh, North Carolina, increasing our exposure to these dynamic markets. I want to reiterate that our portfolio continues to benefit from our value-add initiative and as a result we are confident, the growth will flow through to the bottom line, allowing us to cover the dividend by this fourth quarter and then beyond.And now I'll turn the call over to Farrell for a deep dive into our markets and activity during the quarter. Farrell?

Thanks Scott and good morning everyone. To echo Scott comments, we had a strong quarter from an execution and performance standpoint across the portfolio. Revenue increased in 15 of our 18 markets and same store NOI grew 8.1%, both strong indicators of the continued demand for many rich middle-market communities and our non-gateway markets.Looking at NOI growth by market, the Myrtle Beach, Wilmington, Raleigh-Durham, Louisville, Charlotte and Tampa markets all exceeded 11% growth for the quarter, leading the broader portfolio. These markets have consistently been strong performers for IRT as a combination of population and job growth along with a sense of livability are drawing an influx of people to these areas of the country. Wilmington, Raleigh and Louisville also continue to benefit from our value-add initiative. In the Myrtle Beach, Wilmington market, same store NOI increased 14.2% as compared to last year.One of our three communities in this market is going through renovations when combined with limited supply has enabled us increase rents by 18.4% as compared to last year. Our other two communities in this market are also benefiting, experiencing rental rate increases of over 7%. Myrtle Beach is among the fastest growing metros in the country having grown four times as fast as the national average. The market has posted 28% population growth from 2010 to 2018 and has seen significant employment growth in both the education and health service industries during the current cycle.In Raleigh-Durham, average occupancy is up 2.7% from Q3 2018 to 94.1%. The Village at Auburn is one of our early and most significant value-add project to-date and as we near completion of the renovations on this community, we are seeing occupancy normalize and rental rates increasing. 17% on average.Shifting to Charlotte and Tampa, which as I mentioned are growing organically without the…

Thanks Farrell, and good morning everyone. For the third quarter of 2019, net income allocable to common shareholders was $4.9 million, up from $4.8 million in the third quarter of 2018. Core FFO grew to $17 million up from $16.5 million in 2018. Core FFO per share remain stable at $0.19 per share.Turning to the same-store portfolio for the third quarter, NOI growth, excuse me, was 8.1% with revenue growth of 6.6% and property level expenses increasing 4.4%. Occupancy in our same-store communities average 93.4% during Q3, flat year-over-year. Rental rates for the same-store communities increased year-over-year with an average effective monthly rent of $1,078 this quarter, up 5.7% since last year.On operating expenses, our non-controllable expenses increased 7.9% year-to-date, primarily driven by real estate taxes. Controllable operating expenses increased 1.1% in Q3 over the same period of last year and 0.6% year-to-date. As we discussed in our second quarter call, some of the same earnings trends we mentioned then are continuing this quarter. Namely, interest expense is elevated due to higher debt balances associated with our capital recycling initiatives.Looking at Q4, the sale of our community in Austin, Texas will reduce our overall debt balances and related interest expense. Additionally, our G&A expenses increased over 2018, as we continued to invest in the platform and in our management team. These investments have already enabled us to deliver outsize growth for the portfolio year-to-date and represent a critical foundation to support further scaling of the platform without incremental G&A growth.Turning towards the balance sheet, we closed Q3 with 57 properties and total gross assets of approximately $1.8 billion. Our debt level came down slightly with a normalized net debt to adjusted EBITDA at 9.0 times. At quarter end, our debt is 94% fixed rate or hedged with no significant maturities…

Thank you, Jim. As we move into the final months of 2019, I want to take a moment to recognize our team, both in the field and in our corporate offices for their dedication and strong execution. Over the past 10 months, we have generated the strongest NOI growth since our inception. Looking out into 2020, we are very excited about the state-of-art business and the tremendous opportunities that lie ahead.First, as it relates to the value-add initiative, we have an additional 4,000 units to be renovated under the first three phases of the program and expect to complete between 500 to 700 units per quarter next year. Secondly, we continue to see strong real estate fundamentals across our core markets and we'll execute a capital recycling strategy to align our portfolio to best capitalize on these positive trends. And lastly, our ability to continue to drive outsized growth provides a line of sight to improve our leverage profile over time and deliver a long-term shareholder value.And now, I'd like to – operator open the call for questions.

Thank you. [Operator Instructions] Your first question comes from the line of Drew Babin from Baird.

Hey, good morning.

Thank you, Drew.

Hi, Drew.

Wanted to touch on Charleston, that's been a market where both occupancy and rent growth kind of been under some pressure, presuming that supply is sort of working into that equation there. Could you just maybe give a little more color on that market and when you expect it to turn more towards positive?

Sure, Drew. We’re two communities there, one is a Class A and one is a Class B and Class B to the Northern suburbs and it's doing okay, we're seeing on average 2%, 3% rent growth. The Class A assets on Daniel Island is the one that's facing a lot of supply pressure. We don't see that going away, at least for another year or two as they continue to build in that market, so we're just going to have to manage through it.

I will add though, for the long-term, we believe in that property in that market. So we are as Farrell says managing through that.

Okay. I appreciate the color there. And just one more for me. Just based on your current capital costs that you’re evaluating today potential assets that you sort might want to sell longer-term. Do you envision Independence being a net acquirer next year based on everything we know today?

Yes, I do.

Okay. And I guess just building on that, can you talk at all about maybe the number of properties or some subset of the portfolio that you prefer to sell at some point or if addition by subtraction essentially, especially non-core assets, how large is that portfolio? And how aggressively might you be willing to approach?

Well, we're consistently, as we've stated looking at the portfolio relative to recycling of the capital. We stated that we're looking to exit markets where we have limited exposure and either the inability or the desire not to grow. So at this point, we really haven't concluded on any specific assets that we're going to recycle out of – in the near-term. But just please recognize that it is an important part of our business strategy and we do expect to be, again, focusing the portfolio in growth markets and expanding it that way.

Okay. I appreciate the color. That’s all for me.

Thanks, Drew.

Your next question comes from the line of Austin Wurschmidt from KeyBanc.

Hi, good morning everyone. Scott, I think towards the end of your remarks, I believe you said you're targeting 500 to 700 of value-add turns per quarter next year. And if I'm not mistaken that, that's a pickup from sort of the 350 to 400 you've been achieving per quarter this year. Just curious if you think you have the personnel in place today to handle that heightened level of renovations and really what's driving that decision?

Thanks Austin. And we do have the personnel in place, we think we have a very good team, we've been working on the processes since we've started this program and really the increase is more due to the fact that we are starting Phase 3, while winding down Phase 1 and then continuing with Phase 2. So it's still having some units in Phase 1 being completed, Phase 2 continuing through all of next year and then adding Phase 3 and just gives us more units to renovate. And yes, the team is in place and we're very excited about it.

And just to add Austin, these are all the markets that we're already in with teams built-out. So we're just leveraging what we've already put in place.

Understood. Appreciate the thoughts there. And then Farrell, is the decel that you referenced in new lease rates in October, is that strictly within non-value-add assets that's driving that or do you also expect a little bit of moderation in the increases you're achieving on value-add units as well?

It's across the board, it's just again, the cyclical nature where we have less leases expiring and less traffic and we see it every year. If we go back to Q3 and Q4 last year, it was a similar trend.

Got it. And then Jim, maybe one for you. You highlighted you were a bit more aggressive under the ATM this quarter. Just curious, should we continue to expect you to utilize the ATM moving forward opportunistically?

Yes. Austin, that's right. Opportunistic issuances on the ATM, that would be appropriate for accretion to the NAV, the decree to the NAV and earnings per share.

Great. Thanks guys.

Thank you, Austin.

Your next question comes from the line of Nick Joseph from Citi.

Thanks. Jim, I'm wondering if you can give a little more color and walk through updated guidance. Same-store NOI growth went up 75 bps at the midpoint again, addition of net acquisition growth with the core FFO guidance was maintained at the midpoint. So wondering, if you can go over the pushes and pulls there?

Yes, sure. As we kind of mentioned in the call, the timing around the capital recycling certainly happening a little bit later, the acquisitions happening a little bit later than we expected originally, as well as just some of the cap rates, we – the cap rates we’re acquiring at in the last half of the year as Farrell mentioned are 5.1% or 5%, we had assumed a slightly higher cap rate, and then also just the effects of the de-leveraging from the ATM issuances in the last part of the year.

So given those and that some are still exists in the fourth quarter, I think implied guidance is little over $0.21 for 4Q. Is that a fair run rate going forward or how do you think about the run rate going into 2020?

And obviously we'll give guidance in the early part of next year, but I think, the 2020 $0.21 is exciting has a little bit of a double up with the acquisition of the property in the beginning of part of the quarter. And obviously we will get that when the cap recycling sales occur, we'll offset that. But I think kind of $0.20 to $0.21 a quarter is certainly a fair run rate.

Thanks.

Your final question comes from the line of Neil Malkin from Capital One Securities.

Hey guys. Good morning.

Good morning.

Following up on Austin's question, obviously you guys have had a impressive share price appreciation this year and I just wonder, with that and given your elevated ATM issuance this quarter, I mean, are you looking to potentially get more aggressive or are you seeing more opportunities to take down deals like Raleigh? Just given that it's easier to get accretive acquisitions in day one, which would indeed kind of kill two birds with one stone in terms of deleveraging and funding the dividends?

Well, as we've always stated, we're looking to do transactions that are accretive and we are laser focused to be covering this dividend in this fourth quarter and keeping it covered and growing into a more normalized dividend ratio, payout ratio in the future. So we will continue to look at opportunities and we will use the ATM when opportunistic and again, always focused on transactions that will be accretive to both NAV and earnings per share.

Is your pipeline kind of more robust than it was a year ago?

No the market continues to be very aggressive and there's a lot of money chasing multifamily assets. We've always had a very fulsome pipeline and we're looking again to do deals opportunistically where we can grow in the markets that we've identified and have a current exposure.

All right, thanks. A question about your strategy in general. What would you say as a push-back to the following? The kind of Sun Belt non-coastal markets are expected to have really strong population growth and that's a great thing, but at the same time, those markets are notorious for being able to bring supply on a lot more easily than in the sort of more blue states coastal markets. I wonder – if you obviously know, describe to that in the current day NAVs. And then also, how do you sort of maybe put a competitive moat around yourself for the assets that you invest in when thinking about that?

Well, sure. And it's really, the basis of our investment thesis, we are looking in non-gateway, non-coastal markets where there is good population growth and job creation and you're right, that's where, people who are developing want to build new communities as well. However, that goes to the other part of our strategy, which is the Class B assets that are typically 10 to 15 years old.New supply is not being built as Class B, so we have a very attractive price point advantage. And with the value-add program, we can deliver a product and are delivering a product that competes effectively with the newer Class A supply, but still at a much lower price point. So I agree with you that there is more development in the Sun Belt markets, but that goes to our Class B strategy and how we compete effectively.

Sure. And then last thing for me. Could you just give us an example of what sort of spread is normal for a post-renovated assets, rent per unit compared to Class A asset in the same market?

So when we're analyzing to do a renovation, we want to – post-renovation we still want to be $300 to $500 below a new Class A constructed deal.

All right. Thank you.

And I am showing no further questions at this time. I will now turn the call back to Mr. Scott Schaeffer for any closing remarks.

Thank you all for joining us today. We look forward to seeing many of you in Nareit in a couple of weeks. And if we don't see you in Nareit, we will speak with you again in next quarter. Thank you.

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