Centerspace M&A announcement

You may begin. Good morning, and thank you for joining us on short notice.

On the call today are Scott Schaeffer, Chairman and Chief Executive Officer of Independence Realty Trust; Anne Olson, President and Chief Executive Officer of Centerspace; Jim Sebra, President and CFO of Independence Realty Trust; and Jason Lynch, Senior Vice President of Investments at Independence Realty Trust. Earlier this morning, IRT and Centerspace issued a joint press release announcing that the two companies have entered into a definitive merger agreement. That release and an investor presentation filed with the SEC are available in the investors section of IRT's website, irtliving.com, and on Centerspace's website at centerspacehomes.com. A replay of this call will be available on both websites shortly after we conclude.

Before we begin, I would like to remind everyone that statements made on this call may constitute forward-looking statements within the meaning of the federal securities laws and are made in good faith pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are based on the current beliefs, expectations, and assumptions of IRT's and Centerspace's management and are subject to business, economic, competitive risks, and uncertainties, many of which are difficult to predict and outside of either company's control. Neither IRT nor Centerspace undertakes any obligation to update or supplement any forward-looking statement except as required by law. Today's discussion also includes non-GAAP financial measures, including FFO, Core FFO, EBITDA, Adjusted EBITDA, and net operating income.

Definitions of these measures are included in the appendix to today's presentation and the press release, and reconciliations to the most directly comparable GAAP measures are available on each company's SEC filings. With that, I'll turn the call over to Scott Schaeffer.

Thank you, Stephanie, and good morning, everyone. This morning, Independence Realty Trust and Centerspace announced a definitive agreement to combine in an all-stock merger, creating a leading middle market multifamily REIT with a total enterprise value of approximately $8.1 billion and more than 44,000 apartment homes across 17 states. Before I discuss the strategic logic, let me say how pleased I am to be joined this morning by Anne Olson. Anne and her team have built an excellent portfolio at Centerspace, and just as importantly, they have built a culture and operating philosophy much like our own. The conversations that brought us here were direct and constructive, and they were grounded in a shared view of where value gets created in this business. Let me frame why we are doing this and why now in five points. First, scale matters in multifamily, and it matters more every year.

The combined company will own 163 communities and over 44,000 units in predominantly non-gateway markets across 17 states. Scale improves our access to the capital markets, and over time, our cost of capital. Just as importantly, it lets us spread our institutional operating platform across a much larger base of units. This is how a bigger company becomes a better company rather than simply a larger one. Second, we achieve better growth without changing who we are. I want to be clear on this point because I expect it to be the first question we get. IRT is and will remain a Sun Belt-weighted company. The Sun Belt represents 58% of pro forma NOI and remains our largest exposure and our primary growth engine. Centerspace's portfolio increases IRT's concentrations in the Midwest and Mountain West regions to 27% and 15% pro forma NOI respectively.

The Midwest and Mountain West markets have historically delivered NOI growth above the U.S. average with less volatility. Over the period from 2017 through 2025, IRT and Centerspace together delivered weighted average same-store NOI growth of 5.7% a year, above both our non-gateway peers at 4.2% and gateway peers at 2.3%. It did so with a narrower band of outcomes through the cycle. This is the case for a better risk-adjusted portfolio. A high-growth Sun Belt core paired with lower volatility Midwest and Mountain West markets. Roughly 80% of our pro forma NOI comes from markets that rank in the top quartile for projected population growth, and no single market accounts for more than 11% of our pro forma NOI. Third, the supply picture is turning in our favor.

Across the combined footprint, new deliveries are set to decline through 2029 while population growth continues to outpace the national average. In the greater Denver MSA, CoStar projects rent growth turning positive this year. Deliveries in the Denver Front Range are expected to fall from 6.7% of inventory in 2024 to approximately 2.8% by 2027, against population growth that is projected to be twice the national average over the next five years. Minneapolis has one of the lowest supply pipelines of any market we track, with deliveries expected to fall from 3.8% in 2024 to 1.3% in 2027. Much like Denver, Minneapolis's population growth is expected to be almost twice the national average over the next five years. We are not underwriting recovery that has to be imagined. We are seeing it in the data today. Fourth, we gain a bigger opportunity set for our proven platform.

The near-term synergies from this merger are tangible. The reason this combination improves our long-term growth rate rather than just their size is because it provides a longer, broader runway for the two internal growth engines we have built, namely our value add renovation program and our other income initiatives, including our community Wi-Fi program that we began implementing this year. Both drivers are scalable, are funded with free cash flow, and now have several thousand additional units to work with. Jim will take you through the economics shortly. Fifth, we have done this before. In 2015, we acquired Trade Street Residential in a cash and stock transaction that added scale across our regional Sunbelt markets. Then, in 2021, we more than doubled the size of this company through the Steadfast Apartment REIT merger.

We integrated into a single operating platform within months of closing, and we exceeded the synergy and accretion targets that we had set at announcement. This is the same management team running the same playbook, and this transaction is roughly a quarter of our current size rather than doubling of it. Our track record of successfully integrating companies does not eliminate execution risk, but it does mean we know the cadence of how and what to do. Upon closing, I will continue as Chairman and Chief Executive Officer, and Jim Sieber will serve as President and Chief Financial Officer. Our board will expand to 11 directors, nine from IRT and two from Centerspace. The combined company will retain the Independence Realty Trust name and will continue to trade on the New York Stock Exchange under the ticker IRT.

We will have more to say on organizational structure as we work through the integration planning between now and closing. With that, I'll turn the call over to Anne.

Thank you, Scott, and good morning, everyone. Our board and management team are pleased to be working with IRT on this transformative transaction that is in the best interest of all of our stakeholders. At Centerspace, we've worked to scale our business in strong, growing markets while seeking enhancement to our balance sheet. This merger significantly advances that strategy. The company will now have scale that benefits the operating platform, and the cost of capital will further diversify the market exposure and will have an improved leverage profile. I'm confident that IRT's commitment to residents and stakeholders reflects our own. I want to give a special thanks to the Centerspace team. I'm very proud of what our team has accomplished, and I'm confident that IRT's leadership will further our commitment to providing great homes for our residents, opportunities for our team members, and returns for our shareholders.

With that, Jim is ready to walk through the financial impacts.