Independence Realty (IRT) Advances on Strategy With Asset Sales
Independence Realty Trust, Inc. IRT recently completed the sale of four properties in different markets, marking a significant step forward in the company's Portfolio Optimization and Deleveraging Strategy. The total gross sales price for these properties amounted to $200.7 million, with each sale concluding in December 2023.
The key objective of these transactions was to execute IRT's strategic plan, announced in October 2023, aimed at optimizing its portfolio and reducing debt levels. The proceeds from sales allowed IRT to repay a substantial portion of its debt, totaling $196.8 million. This debt repayment comprised $112.3 million associated with property-level debt from the sold assets and $84.5 million of borrowings outstanding on its line of credit.
Scott Schaeffer, the chairman and CEO of IRT, expressed satisfaction with the progress, stating, “We are successfully executing our Portfolio Optimization and Deleveraging Strategy, which we announced in October 2023. These recent non-core asset sales highlight our effort to exit or reduce our presence in certain markets while also deleveraging our balance sheet over the near term.”
The impact of these transactions goes beyond debt reduction. IRT's strategy involves exiting or reducing its footprint in specific markets, enhancing financial flexibility and positioning the company for an investment-grade rating. Schaeffer emphasized that these initiatives would contribute to increasing financial flexibility, reducing leverage and keeping the company on track toward achieving its goal of an investment-grade rating.
The momentum is expected to continue, with five of the six remaining assets under contract as part of the Portfolio Optimization and Deleveraging Strategy. These are anticipated to close in the first quarter of 2024.
Upon completion of the sale of all 10 properties, IRT expects to generate gross sales proceeds ranging between $521 million and $533 million. These funds will be utilized to further deleverage the balance sheet, resulting in IRT's exit from five single-asset markets and a significant reduction in its net debt to adjusted EBITDA ratio by 0.8 to 0.9, paving a well-defined route to achieve its mid-5x target by the conclusion of 2024.
IRT owns and operates multifamily communities in non-gateway U.S. markets, strategically located near major employment centers in key amenity-rich submarkets. Its recent property sales underscore the company's dedication to its strategic objectives, including portfolio optimization and debt reduction. The successful execution of these initiatives will position IRT for sustained growth, improved financial health and the realization of its long-term goals.
Shares of this Zacks Rank #4 (Sell) company have rallied 10.1% in the past three months, underperforming the industry's growth of 13.2%.
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Stocks to Consider
Some better-ranked stocks from the REIT sector are EastGroup Properties EGP, Park Hotels & Resorts PK and UMH Properties UMH. While PK sports a Zacks Rank #1 (Strong Buy), EGP and UMH each carry a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for EastGroup Properties’ 2023 FFO per share has moved marginally upward in the past two months to $7.69.
The consensus mark for Park Hotels & Resorts’ current-year FFO per share has moved nearly 1% northward over the past month to $2.03.
The consensus estimate for UMH Properties’ ongoing year’s FFO per share has increased 1.2% over the past two months to 84 cents.
Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
Disclaimer: This article has been written with the assistance of Generative AI. However, the author has reviewed, revised, supplemented, and rewritten parts of this content to ensure its originality and the precision of the incorporated information.
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