Quarterly Report (10-q)

Share Name	Share Symbol	Market	Type
Independence Realty Trust Inc	NYSE:IRT	NYSE	Common Stock

	Price Change	% Change	Share Price	High Price	Low Price	Open Price	Shares Traded	Last Trade
	0.135	0.64%	21.385	21.40	21.15	21.22	582,071	17:02:18

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-36041

INDEPENDENCE REALTY TRUST, INC.

(Exact Name of Registrant as Specified in Its Charter)

Maryland	26-4567130
(State or Other Jurisdiction of Incorporation or Organization)	(I.R.S. Employer Identification No.)

Two Liberty Place 50 S. 16 ^th Street, Suite 3575 Philadelphia, PA	19102
(Address of Principal Executive Offices)	(Zip Code)

(267) 270-4800

(Registrant’s Telephone Number, Including Area Code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated filer	☐	Accelerated filer	☒

Non-Accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 29, 2018 there were 88,920,879 shares of the Registrant’s common stock issued and outstanding.

INDEPENDENCE REALTY TRUST, INC.

INDEX

		Page

PART I—FINANCIAL INFORMATION		3

Item 1.	Financial Statements (unaudited)	3

	Consolidated Balance Sheets as of September 30, 2018 and December 31, 201 7	3

	Consolidated Statements of Operations for the Three and Nine Months ended September 30, 2018 and September 30, 201 7	4

	Consolidated Statements of Comprehensive Income (Loss) for the Three and Nine Months ended September 30, 2018 and September 30, 2017	5

	Consolidated Statements of Changes in Equity for the Nine Months ended September 30, 2018	6

	Consolidated Statements of Cash Flows for the Nine Months ended September 30, 2018 and September 30, 2017	7

	Condensed Notes to Consolidated Financial Statements as of September 30, 2018	8

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	22

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32

Item 4.	Controls and Procedures	32

PART II—OTHER INFORMATION

Item 1.	Legal Proceedings	33

Item 1A.	Risk Factors	33

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	33

Item 3.	Defaults Upon Senior Securities	33

Item 4.	Mine Safety Disclosures	33

Item 5.	Other Information	33

Item 6.	Exhibits	34

Signatures		35

P ART I—FINANCIAL INFORMATION

Item 1.

Financial Statements

Independence Realty Trust, Inc. and Subsidiaries

Consolidated Balance Sheets

(Unaudited and dollars in thousands, except share and per share data)

	As of September 30, 2018			As of December 31, 2017
ASSETS:
Investments in real estate:
Investments in real estate, at cost	$	1,572,015		$	1,504,156
Accumulated depreciation		(101,589	)		(84,097	)
Investments in real estate, net		1,470,426			1,420,059
Real estate held for sale (see Note 3)		141,853			-
Cash and cash equivalents		7,645			9,985
Restricted cash		8,265			4,634
Accounts receivable and other assets		6,924			7,556
Derivative assets		12,440			7,291
Intangible assets, net of accumulated amortization of $256 and $1,511, respectively		555			1,099
Total Assets	$	1,648,108		$	1,450,624
LIABILITIES AND EQUITY:
Indebtedness, net of unamortized deferred financing costs of $5,500 and $6,198, respectively	$	963,238		$	778,442
Accounts payable and accrued expenses		28,477			17,216
Accrued interest payable		540			249
Dividends payable		16,113			5,245
Other liabilities		3,697			3,353
Total Liabilities		1,012,065			804,505
Equity:
Stockholders’ equity:
Preferred stock, $0.01 par value; 50,000,000 shares authorized, 0 and 0 shares issued and outstanding, respectively		-			-
Common stock, $0.01 par value; 300,000,000 shares authorized, 88,920,879 and 84,708,551 shares issued and outstanding, including 313,254 and 295,847 unvested restricted common share awards, respectively		889			846
Additional paid-in capital		739,152			703,849
Accumulated other comprehensive income		9,788			4,626
Retained earnings (accumulated deficit)		(120,924	)		(85,221	)
Total stockholders’ equity		628,905			624,100
Noncontrolling interests		7,138			22,019
Total Equity		636,043			646,119
Total Liabilities and Equity	$	1,648,108		$	1,450,624

The accompanying notes are an integral part of these consolidated financial statements.

Independence Realty Trust, Inc. and Subsidiaries

Consolidated Statements of Operations

(Unaudited and dollars in thousands, except share and per share data)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2018			2017			2018			2017
REVENUE:
Rental income	$	43,418		$	35,531		$	125,951		$	105,444
Tenant reimbursement income		1,618			1,373			4,819			4,232
Other property income		3,608			2,960			10,224			8,514
Property management and other income		135			202			429			579
Total revenue		48,779			40,066			141,423			118,769
EXPENSES:
Property operating expenses		19,792			16,196			56,913			48,106
Property management expenses		1,661			1,328			4,936			4,310
General and administrative expenses		2,578			2,322			8,184			7,128
Acquisition and integration expenses		-			569			-			956
Depreciation and amortization expense		10,783			8,671			33,590			24,289
Total expenses		34,814			29,086			103,623			84,789
Operating income		13,965			10,980			37,800			33,980
Interest expense		(9,129	)		(6,963	)		(26,063	)		(21,573	)
Other income (expense)		-			12			144			(5	)
Net gains (losses) on sale of assets		-			(92	)		-			15,873
Gains (losses) on extinguishment of debt		-			-			-			(572	)
Acquisition related debt extinguishment expenses		-			(2,781	)					(2,781	)
Net income (loss):		4,836			1,156			11,881			24,922
(Income) loss allocated to noncontrolling interest		(49	)		(59	)		(173	)		(1,009	)
Net income (loss) allocable to common shares	$	4,787		$	1,097		$	11,708		$	23,913
Earnings (loss) per share:
Basic	$	0.05		$	0.02		$	0.14		$	0.34
Diluted	$	0.05		$	0.02		$	0.13		$	0.34
Weighted-average shares:
Basic		87,702,078			71,972,394			86,559,294			69,875,802
Diluted		88,046,311			72,144,544			86,818,337			70,105,571

The accompanying notes are an integral part of these consolidated financial statements.

Independence Realty Trust, Inc. and Subsidiaries

Consolidated Statements of Comprehensive Income (Loss)

(Unaudited and dollars in thousands)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2018			2017			2018			2017
Net income (loss)	$	4,836		$	1,156		$	11,881		$	24,922
Other comprehensive income (loss):
Change in fair value of interest rate hedges		1,072			(14	)		5,959			(424	)
Realized (gains) losses on interest rate hedges reclassified to earnings		(382	)		(14	)		(862	)		177
Total other comprehensive income		690			(28	)		5,097			(247	)
Comprehensive income (loss) before allocation to noncontrolling interests		5,526			1,128			16,978			24,675
Allocation to noncontrolling interests		(54	)		(33	)		(108	)		(979	)
Comprehensive income (loss)	$	5,472		$	1,095		$	16,870		$	23,696

The accompanying notes are an integral part of these consolidated financial statements.

Independence Realty Trust, Inc. and Subsidiaries

Consolidated Statements of Changes in Equity

(Unaudited and dollars in thousands, except share information)

	Common Shares			Par Value Common Shares		Additional Paid In Capital			Accumulated Other Comprehensive Income		Retained Earnings (Deficit)			Total Stockholders’ Equity			Noncontrolling Interests			Total Equity
Balance, January 1, 2018		84,708,551		$	846	$	703,849		$	4,626	$	(85,221	)	$	624,100		$	22,019		$	646,119
Net income (loss)		-			-		-			-		11,708			11,708			173			11,881
Other comprehensive income		-			-		-			5,162		-			5,162			(65	)		5,097
Stock compensation expense		197,632			2		1,988			-		-			1,990			-			1,990
Issuance of common shares		1,923,164			20		19,184			-		-			19,204			-			19,204
Repurchase of shares related to equity award tax withholding		(38,712	)		-		(354	)		-		-			(354	)		-			(354	)
Conversion of noncontrolling interest to common shares		2,130,244			21		14,485			-		-			14,506			(14,506	)		-
Common dividends declared		-			-		-			-		(47,411	)		(47,411	)		-			(47,411	)
Distribution to noncontrolling interest declared		-			-		-			-		-			-			(483	)		(483	)
Balance, September 30, 2018		88,920,879		$	889	$	739,152		$	9,788	$	(120,924	)	$	628,905		$	7,138		$	636,043

The accompanying notes are an integral part of these consolidated financial statements.

Independence Realty Trust, Inc. and Subsidiaries

Consolidated Statements of Cash Flows

(Unaudited and dollars in thousands)

	For the Nine Months Ended September 30,
	2018			2017
Cash flows from operating activities:
Net income (loss)	$	11,881		$	24,922
Adjustments to reconcile net income (loss) to cash flow from operating activities:
Depreciation and amortization		33,590			24,289
Amortization of deferred financing costs		1,078			1,160
Stock compensation expense		1,966			1,548
Net (gains) losses on sale of assets		-			(15,873	)
(Gains) losses on extinguishment of debt		-			572
Change in fair value of derivative instruments		(52	)		-
Acquisition related debt extinguishment expenses		-			2,781
Changes in assets and liabilities:
Accounts receivable and other assets		59			(1,931	)
Accounts payable and accrued expenses		8,659			8,098
Accrued interest payable		291			(345	)
Other liabilities		(157	)		(165	)
Net cash provided by (used in) operating activities		57,315			45,056
Cash flows from investing activities:
Disposition of real estate properties		-			34,519
Acquisition of real estate properties		(154,082	)		(169,156	)
Capital expenditures		(28,348	)		(10,100	)
Cash flow (used in) provided by investing activities		(182,430	)		(144,737	)
Cash flows from financing activities:
Proceeds from unsecured credit facility		169,000			148,190
Unsecured credit facility repayments		(22,000	)		(138,500	)
Mortgage principal repayments		(2,402	)		(1,969	)
Payments for deferred financing costs		(16	)		(1,166	)
Proceeds from issuance of common stock		19,204			125,707
Distributions on common stock		(36,527	)		(37,279	)
Distributions to noncontrolling interests		(499	)		(1,573	)
Payments related to extinguishment of debt		-			(2,781	)
Repurchase of shares related to equity award tax withholding		(354	)		(565	)
Cash flow provided by (used in) financing activities		126,406			90,064
Net change in cash and cash equivalents, and restricted cash		1,291			(9,617	)
Cash and cash equivalents, and restricted cash, beginning of period		14,619			26,410
Cash and cash equivalents, and restricted cash, end of the period	$	15,910		$	16,793
Reconciliation of cash, cash equivalents, and restricted cash to the Consolidated Balance Sheet
Cash and cash equivalents	$	7,645		$	10,128
Restricted cash		8,265			6,665
Total cash, cash equivalents, and restricted cash, end of period	$	15,910		$	16,793

The accompanying notes are an integral part of these consolidated financial statements.

Independence Realty Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

As of September 30, 2018

(Unaudited and dollars in thousands, except share and per share data)

NOTE 1: Organization

Independence Realty Trust, Inc., or IRT, was formed on March 26, 2009 as a Maryland corporation that elected to be taxed as a real estate investment trust, or REIT, commencing with the taxable year ended December 31, 2011. We became an internally managed REIT on December 20, 2016. Prior to that date, we were externally managed by a subsidiary of RAIT Financial Trust, or RAIT, a publicly traded Maryland REIT (referred to as our former advisor).

As of September 30, 2018, we own and operate 58 multifamily apartment properties, totaling 15,860 units, across non-gateway U.S markets, including Atlanta, Louisville, Memphis, and Raleigh. Our investment strategy is focused on gaining scale within key amenity rich submarkets that offer good school districts, high-quality retail and major employment centers. We aim to provide stockholders with attractive risk-adjusted returns through diligent portfolio management, strong operational performance, and a consistent return through distributions and capital appreciation. We own substantially all of our assets and conduct our operations through Independence Realty Operating Partnership, LP, which we refer to as IROP, of which we are the sole general partner.

As used herein, the terms “we,” “our” and “us” refer to Independence Realty Trust, Inc. and, as required by context, IROP and their subsidiaries.

NOTE 2: Summary of Significant Accounting Policies

a. Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared by management in accordance with generally accepted accounting principles in the United States, or GAAP. Certain information and footnote disclosures normally included in annual consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations, although we believe that the included disclosures are adequate to make the information presented not misleading. The unaudited interim consolidated financial statements should be read in conjunction with our audited financial statements as of and for the year ended December 31, 2017 included in our Annual Report on Form 10-K, or the 2017 annual report. In the opinion of management, all adjustments, consisting only of normal recurring adjustments, necessary to present fairly our consolidated financial position and consolidated results of operations and cash flows are included. The results of operations for the interim periods presented are not necessarily indicative of the results for the full year.

b. Principles of Consolidation

The consolidated financial statements reflect our accounts and the accounts of IROP and its subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation. Pursuant to FASB Accounting Standards Codification Topic 810, “Consolidation”, IROP is considered a variable interest entity. As our significant asset is our investment in IROP, substantially all of our assets and liabilities represent the assets and liabilities of IROP.

c. Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

d. Cash and Cash Equivalents

Cash and cash equivalents include cash held in banks and highly liquid investments with maturities of three months or less when purchased. Cash, including amounts restricted, may at times exceed the Federal Deposit Insurance Corporation deposit insurance limit of $250 per institution. We mitigate credit risk by placing cash and cash equivalents with major financial institutions. To date, we have not experienced any losses on cash and cash equivalents.

Independence Realty Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

As of September 30, 2018

(Unaudited and dollars in thousands, except share and per share data)

e. Restricted Cash

Restricted cash includes escrows of our funds held by lenders to fund certain expenditures, such as real estate taxes and insurance, or to be released at our discretion upon the occurrence of certain pre-specified events. As of September 30, 2018 and December 31, 2017, we had $8,265 and $4,634, respectively, of restricted cash.

f. Accounts Receivable and Allowance for Bad Debts

We make estimates of the collectability of our accounts receivable related to base rents, expense reimbursements and other revenue. We analyze accounts receivable and historical bad debt levels, tenant credit worthiness and current economic trends when evaluating the adequacy of the allowance for doubtful accounts. In addition, tenants experiencing financial difficulties are analyzed and estimates are made in connection with expected uncollectible receivables. Our reported operating results are affected by management’s estimate of the collectability of accounts receivable. For the three months ended September 30, 2018 and 2017, we recorded bad debt expense of $236 and $101, respectively. For the nine months ended September 30, 2018 and 2017, we recorded bad debt expense of $286 and $670, respectively.

g. Investments in Real Estate

Investments in real estate are recorded at cost less accumulated depreciation. Costs that both add value and appreciably extend the useful life of an asset are capitalized. Expenditures for repairs and maintenance are expensed as incurred.

Investments in real estate are classified as held for sale in the period in which certain criteria are met including when management commits to a plan to sell, an active program to locate a buyer has been initiated, the sale is probable, and actions required to complete the plan of sale indicate that it is unlikely that significant changes to the plan of sale will be made or the plan of sale will be withdrawn.

Allocation of Purchase Price of Acquired Assets

Effective January 1, 2018, FASB ASC Topic 805, “Business Combinations” was amended to clarify the definition of a business by more clearly outlining the requirements for an integrated set of assets and activities to be considered a business and by establishing a practical framework to determine when the integrated set of assets and activities is a business. Prior to January 1, 2018, the properties we acquired were generally considered businesses and were accounted for as business combinations. Subsequent to January 1, 2018, we expect the properties we acquire to generally not be considered businesses and, therefore, to be accounted for as asset acquisitions.

Under business combination accounting, the fair value of the real estate acquired is allocated to the acquired tangible assets, generally consisting of land, building and tenant improvements, and identified intangible assets and liabilities, consisting of the value of above-market and below-market leases for acquired in-place leases and the value of tenant relationships, based, in each case, on their fair values. Transaction costs and fees incurred related to the acquisition are expensed as incurred. Under asset acquisition accounting, the costs to acquire real estate, including transaction costs related to the acquisition, are accumulated and then allocated to the individual assets and liabilities acquired based upon their relative fair value. Under both business combination and asset acquisition accounting, t ransaction costs and fees incurred related to the financing of an acquisition are capitalized and amortized over the life of the related financing.

We estimate the fair value of acquired tangible assets (consisting of land, building and improvements), identified intangible assets (consisting of in-place leases), and assumed debt at the date of acquisition, based on the evaluation of information and estimates available at that date.

The aggregate value of in-place leases is determined by evaluating various factors, including the terms of the leases that are in place and assumed lease-up periods. During the three and nine months ended September 30, 2018, we acquired in-place leases with a value of $715 and $2,356, respectively, as part of related property acquisitions that are discussed further in Note 3. The value assigned to this intangible asset is amortized over the assumed lease up period, typically six months. For the three and nine months ended September 30, 2018, we recorded $567 and $2,900, respectively, of amortization expense for intangible assets. For the three and nine months ended September 30, 2017, we recorded $416 and $664, respectively, of amortization expense for intangible assets. For the

Independence Realty Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

As of September 30, 2018

(Unaudited and dollars in thousands, except share and per share data)

three and nine months ended September 30, 2018, we wrote-off intangible assets of $1,641 and $4,155, respe ctively. For the three and nine months ended September 30, 2017, we did not write-off any intangible assets. As of September 30, 2018, we expect to record additional amortization expense on current in-place intangible assets of $358 for the remainder of 20 18.

Impairment of Long-Lived Assets

Management evaluates the recoverability of our investment in real estate assets, including related identifiable intangible assets, in accordance with FASB ASC Topic 360, “Property, Plant and Equipment”. This statement requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that recoverability of the assets is not assured.

Management reviews its long-lived assets on an ongoing basis and evaluates the recoverability of the carrying value when there is an indicator of impairment. An impairment charge is recorded when it is determined that the carrying value of the asset exceeds the fair value. The estimated cash flows used for the impairment analysis and the determination of estimated fair value are based on our plans for the respective assets and our views of market and economic conditions. The estimates consider matters such as current and historical rental rates, occupancies for the respective and/or comparable properties, and recent sales data for comparable properties. Changes in estimated future cash flows due to changes in our plans or views of market and economic conditions could result in recognition of impairment losses, which, under the applicable accounting guidance, could be substantial.

Depreciation Expense

Depreciation expense for real estate assets is computed using a straight-line method based on a life of 40 years for buildings and improvements and five to ten years for equipment and fixtures. For the three and nine months ended September 30, 2018, we recorded $10,216 and $30,690 of depreciation expense, respectively. For the three and nine months ended September 30, 2017, we recorded $8,255 and $23,625 of depreciation expense, respectively.

h. Revenue and Expenses

Rental Income

We apply FASB ASC Topic 840, “Leases” with respect to our accounting for rental income. We primarily lease apartments units under operating leases generally with terms of one year or less. Rental payments are generally due monthly and rental revenues are recognized on an accrual basis when earned.

Tenant Reimbursement and Other Property Income

We apply FASB ASC Topic 606, “Revenue from Contracts with Customers” with respect to tenant reimbursement and other property income. Tenant reimbursement income represents reimbursement from tenants for utility charges, while other property income includes cable, parking, trash, late fees, application fees, and other miscellaneous property related income. The performance obligations of providing residents with these services are stipulated within the lease agreement and may be provided over time or at a point in time. The services provided over time include cable, parking, and trash services, which are generally provided over a monthly period for the term of the respective lease. The services provided at a point in time include late fees and application fees. Given the short period of time over which this revenue is then recognized and since payments with respect to tenant reimbursement and other property income are generally due monthly, no contract assets or liabilities have been recognized.

For the three and nine months ended September 30, 2018, we recognized revenues of $65 and $171, respectively, related to recoveries of lost rental revenue due to natural disasters and other insurable events from our insurance providers. For the three and nine months ended September 30, 2017, we recognized revenues of $11 and $96, respectively, related to recoveries of lost rental revenue due to natural disasters and other insurable events from our insurance providers.

Advertising Expenses

For the three and nine months ended September 30, 2018, we incurred $577 and $1,674 of advertising expenses, respectively. For the three and nine months ended September 30, 2017, we incurred $437 and $1,285 of advertising expenses, respectively.

Independence Realty Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

As of September 30, 2018

(Unaudited and dollars in thousands, except share and per share data)

i. Derivative Instruments

We may use derivative financial instruments to hedge all or a portion of the interest rate risk associated with our borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with our operating and financial structure, as well as to hedge specific anticipated transactions. While these instruments may impact our periodic cash flows, they benefit us by minimizing the risks and/or costs previously described. The counterparties to these contractual arrangements are major financial institutions with which we and our affiliates may also have other financial relationships. In the event of nonperformance by the counterparties, we are potentially exposed to credit loss. However, because of the high credit ratings of the counterparties, we do not anticipate that any of the counterparties will fail to meet their obligations.

In accordance with FASB ASC Topic 815, “Derivatives and Hedging”, we measure each derivative instrument (including certain derivative instruments embedded in other contracts) at fair value and record such amounts in our consolidated balance sheets as either an asset or liability. For derivatives designated as cash flow hedges, the changes in the fair value of the effective portions of the derivative are reported in other comprehensive income and changes in the fair value of the ineffective portions of cash flow hedges, if any, are recognized in earnings. For derivatives not designated as hedges (or designated as fair value hedges), or for derivatives designated as cash flow hedges associated with debt for which we elected the fair value option under FASB ASC Topic 825, “Financial Instruments”, the changes in fair value of the derivative instrument are recognized in earnings. Any derivatives that we designate in hedge relationships are done so at inception. At inception, we determine whether or not the derivative is highly effective in offsetting changes in the designated interest rate risk associated with the identified indebtedness using regression analysis. At each reporting period, we update our regression analysis and use the hypothetical derivative method to measure any ineffectiveness.

j. Fair Value of Financial Instruments

In accordance with FASB ASC Topic 820, “Fair Value Measurements and Disclosures”, fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or inputs are not available, valuation models are applied. These valuation techniques involve management estimation and judgment, the degree of which is dependent on the price transparency for the instruments or market and the instruments’ complexity for disclosure purposes. Assets and liabilities recorded at fair value in our consolidated balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their value. Hierarchical levels, as defined in FASB ASC Topic 820, “Fair Value Measurements and Disclosures” and directly related to the amount of subjectivity associated with the inputs to fair valuations of these assets and liabilities, are as follows:

•

Level 1 : Valuations are based on unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date. The types of assets carried at Level 1 fair value generally are equity securities listed in active markets. As such, valuations of these investments do not entail a significant degree of judgment.

•

Level 2 : Valuations are based on quoted prices for similar instruments in active markets or quoted prices for identical or similar instruments in markets that are not active or for which all significant inputs are observable, either directly or indirectly.

•

Level 3 : Inputs are unobservable for the asset or liability, and include situations where there is little, if any, market activity for the asset or liability. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, the level in the fair value hierarchy within which the fair value measurement in its entirety falls has been determined based on the lowest level input that is significant to the fair value measurement in its entirety. Our assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the asset or liability.

The availability of observable inputs can vary depending on the financial asset or liability and is affected by a wide variety of factors, including, for example, the type of investment, whether the investment is new, whether the investment is traded on an active exchange or in the secondary market, and the current market condition. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by us in determining fair value is greatest for instruments categorized in Level 3.

Independence Realty Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

As of September 30, 2018

(Unaudited and dollars in thousands, except share and per share data)

Fair value is a market-based measure considered from the perspective of a market participant who holds the asset or owes the liability rather than an entity-specific measure. Therefore, even when market assumptions are not readily available, our own assumptions are set to reflect thos e that management believes market participants would use in pricing the asset or liability at the measurement date. We use prices and inputs that management believes are current as of the measurement date, including during periods of market dislocation. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This condition could cause an instrument to be transferred from Level 1 to Level 2 or Level 2 to Level 3.

Fair value for certain of our Level 3 financial instruments is derived using internal valuation models. These internal valuation models include discounted cash flow analyses developed by management using current interest rates, estimates of the term of the particular instrument, specific issuer information and other market data for securities without an active market. In accordance with FASB ASC Topic 820, “Fair Value Measurements and Disclosures”, the impact of our own credit spreads is also considered when measuring the fair value of financial assets or liabilities, including derivative contracts. Where appropriate, valuation adjustments are made to account for various factors, including bid-ask spreads, credit quality and market liquidity. These adjustments are applied on a consistent basis and are based on observable inputs where available. Management’s estimate of fair value requires significant management judgment and is subject to a high degree of variability based upon market conditions, the availability of specific issuer information and management’s assumptions.

FASB ASC Topic 825, “Financial Instruments” requires disclosure of the fair value of financial instruments for which it is practicable to estimate that value. Given that cash and cash equivalents and restricted cash are short term in nature with limited fair value volatility, the carrying amount is deemed to be a reasonable approximation of fair value and the fair value input is classified as a Level 1 fair value measurement. The fair value input for the derivatives is classified as a Level 2 fair value measurement within the fair value hierarchy. The fair value inputs for our unsecured credit facility and our former secured credit facility are classified as Level 2 fair value measurements within the fair value hierarchy. The fair value of mortgage indebtedness is based on a discounted cash flows valuation technique. As this technique utilizes current credit spreads, which are generally unobservable, this is classified as a Level 3 fair value measurement within the fair value hierarchy. We determine appropriate credit spreads based on the type of debt and its maturity. There were no transfers between levels in the fair value hierarchy for the three or nine months ended September 30, 2018 or 2017. The following table summarizes the carrying amount and the fair value of our financial instruments as of the periods indicated:

	As of September 30, 2018				As of December 31, 2017
Financial Instrument	Carrying Amount		Estimated Fair Value		Carrying Amount		Estimated Fair Value
Assets
Cash and cash equivalents	$	7,645	$	7,645	$	9,985	$	9,985
Restricted cash		8,265		8,265		4,634		4,634
Derivative assets		12,440		12,440		7,291		7,291

Liabilities
Debt:
Unsecured credit facility		249,108		251,005		101,629		104,005
Term Loan		99,155		100,000		99,105		100,000
Mortgages		614,975		596,310		577,708		564,333

k. Deferred Financing Costs

Costs incurred in connection with debt financing are deferred and classified within indebtedness and charged to interest expense over the terms of the related debt agreements, under the effective interest method.

l. Income Taxes

We have elected to be taxed as a REIT beginning with the taxable year ended December 31, 2011. Accordingly, we recorded no income tax expense for the three and nine months ended September 30, 2018 and 2017.

Independence Realty Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

As of September 30, 2018

(Unaudited and dollars in thousands, except share and per share data)

To qualify as a REIT, we must meet certain organizational and operational requirements, including a requirement to distribute at least 90% of our ordinary taxable income to stockholders. As a REIT, we generally are not subject to federal income tax on taxable income that we distribute to our stockholders. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income taxes on our taxable income at regular corporate rates and will not be permitted to qualify for treatment as a REIT for federal income tax purposes for four years following the year during which qualification is lost unless the Internal Revenue Service grants us relief under certain statutory provisions. Such an event could materially adversely affect our net income and net cash available for distri bution to stockholders; however, we believe that we are organized and operate in such a manner as to qualify and maintain treatment as a REIT and intend to operate in such a manner so that we will remain qualified as a REIT for federal income tax purposes.

m. Recent Accounting Pronouncements

Below is a brief description of recent accounting pronouncements that could have a material effect on our financial statements.

Adopted Within these Financial Statements

In May 2014, the FASB issued an accounting standard classified under FASB ASC Topic 606, “Revenue from Contracts with Customers”. This accounting standard generally replaces existing guidance by requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. This accounting standard applies to all contracts with customers, except those that are within the scope of other Topics in the FASB ASC. Subsequently, the FASB issued amendments to this accounting standard that provided further clarification. These standards amending FASB ASC Topic 606 were effective for annual reporting periods beginning after December 15, 2017. We adopted these accounting standard updates on January 1, 2018 using the modified retrospective approach. A majority of our revenue is derived from real estate lease contracts, which are specifically excluded from the scope of these standards. The portion of our revenue that was impacted by these standards included revenue recorded within the tenant reimbursement income, other property income, and property management and other income captions of our Consolidated Statements of Operations. The adoption of these standards did not have a material impact on our consolidated financial statements and no cumulative effect adjustment was recorded upon adoption.

In August 2016, the FASB issued an accounting standard classified under FASB ASC Topic 230, “Statement of Cash Flows”. This accounting standard provides guidance on eight specific cash flow issues: (i) debt prepayment or debt extinguishment costs; (ii) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing; (iii) contingent consideration payments made after a business combination; (iv) proceeds from the settlement of insurance claims; (v) proceeds from the settlement of corporate-owned life insurance policies, including bank-owned life insurance policies; (vi) distributions received from equity method investees; (vii) beneficial interests in securitization transactions; and (viii) separately identifiable cash flows and application of the predominance principle. Subsequently, the FASB issued amendments to this accounting standard that required companies to include restricted cash and restricted cash equivalents with cash and cash equivalents when reconciling the statement of cash flows. The amendments were effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. We adopted these standards as of January 1, 2018. The adoption of this accounting standard resulted in a decrease in net cash used in investing activities of $1,147 for the nine months ended September 30, 2017.

In January 2017, the FASB issued an accounting standard update under FASB ASC Topic 805, “Business Combinations” that changes the definition of a business to assist entities with evaluating whether a set of transferred assets is a business. As a result, the accounting for acquisitions of real estate could be impacted. The new definition will be applied prospectively to any transactions occurring within the period of adoption. We adopted this standard on January 1, 2018. Management expects that the updated standard will result in fewer acquisitions of real estate meeting the definition of a business and fewer acquisition-related costs being expensed in the period incurred, with these costs instead being capitalized as part of the acquired asset.

In February 2017, the FASB issued an accounting standard update under FASB ASC Topic 610 “Other Income.” The amendments in this update provide guidance for partial sales of nonfinancial assets, including partial sales of real estate. Historically, GAAP contained several different accounting models to evaluate whether the transfer of certain assets qualified for sale treatment. This new standard reduces the number of potential accounting models that might apply and clarifies which model does apply in various circumstances. Partial sales of nonfinancial assets are common in the real estate industry and include transactions in which the seller retains an equity interest in the entity that owns the assets or has an equity interest in the buyer. This update was effective for

Independence Realty Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

As of September 30, 2018

(Unaudited and dollars in thousands, except share and per share data)

interim and annu al periods beginning after December 15, 2017. We adopted this standard as of January 1, 2018. While this is common in the real estate industry, we have never participated in a transaction of this nature, therefore, the adoption of this accounting standard did not have any impact on our consolidated financial statements.

In May 2017, the FASB issued an accounting standard update under FASB ASC Topic 718, “Compensation – Stock Compensation.” The amendments in this update provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. As a result, the accounting for share-based payment award transactions could be impacted. The updated standard was adopted by us on January 1, 2018. The new definition will be applied prospectively to an award modified on or after the adoption date. The adoption of this accounting standard did not have a material impact on our consolidated financial statements.

In August 2017, the FASB issued an accounting standard update under FASB ASC Topic 815, “Derivatives and Hedging.” The amendments in this update provide guidance about the application of the hedge accounting guidance in current GAAP based on the feedback received from preparers, auditors, and other stakeholders. As a result, the accounting for derivatives and hedging transactions could be impacted. The updated standard is effective for us on January 1, 2019 with early adoption permitted. We early adopted this update on October 1, 2017. The adoption of this update did not have a material impact on our consolidated financial statements. In accordance with this accounting standard update, upon adoption, we revised our approach to recognizing interest expense for our interest rate swap that was designated as an off-market cash flow hedge. Rather than record interest expense based on the hypothetical derivative method with differences from actual net settlements reflected as ineffectiveness, we will record actual net settlements to interest expense adjusted for the straight-line amortization of the inception clean value of the hedging instrument over the hedge term. The result will be that no ineffectiveness will be recorded in future periods related to our off-market interest rate swap. Since we entered into the off-market hedging relationship in 2017, no transition entry was necessary upon adoption.

Not Yet Adopted Within these Financial Statements

In February 2016, the FASB issued an accounting standard classified under FASB ASC Topic 842, “Leases”. For lessees, this accounting standard amends lease accounting by requiring (1) the recognition of lease assets and lease liabilities for those leases classified as operating leases on the balance sheet and (2) additional disclosure about leasing arrangements. For lessors, the guidance under the new lease standard is substantially similar to existing accounting guidance. This standard is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years, with early adoption permitted. Management expects to adopt the new standard on January 1, 2019 using the modified retrospective approach and the package of practical expedients. Therefore, a cumulative-effect adjustment will be recorded on the effective date and all prior comparative periods will be presented in accordance with legacy lease accounting standards. Management anticipates that our apartment leases, where we are lessor, will continue to be accounted for as operating leases under the new standard and, therefore, we do not expect significant changes in accounting for these leases. Management expects that for various corporate office leases, where we are lessee, we will record a right of use asset and a lease liability on our consolidated balance sheets upon adoption. Management will continue to evaluate the impact of the new lease standard on our consolidated financial statements.

In June 2018, the FASB issued an accounting standard classified under FASB ASC Topic 718, “Compensation – Stock Compensation.” The amendments in this update expand the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. As a result, the accounting for share-based payment award transactions could be impacted. This standard is effective for annual periods beginning after December 15, 2018, including interim periods within those fiscal years. Early application of the amendments in this standard is permitted. Management does not expect this standard to have a significant impact on our consolidated financial statements.

Independence Realty Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

As of September 30, 2018

(Unaudited and dollars in thousands, except share and per share data)

NOTE 3: Investments in Real Estate

As of September 30, 2018, our investments in real estate consisted of 58 apartment properties with 15,860 units. The table below summarizes our investments in real estate:

	As of September 30, 2018			As of December 31, 2017			Depreciable Lives (In years)
Land	$	203,130		$	193,026			—
Building		1,313,805			1,279,777			40
Furniture, fixtures and equipment		55,080			31,353		5-10
Total investment in real estate	$	1,572,015		$	1,504,156
Accumulated depreciation		(101,589	)		(84,097	)
Investments in real estate, net	$	1,470,426		$	1,420,059

As of September 30, 2018, we owned five properties that were classified as held for sale and expect these properties to be sold in the next twelve months. The table below summarizes our held for sale properties. We did not have any properties classified as held for sale as of December 31, 2017.

Property Name	Location	Units		Net Carrying Value
Reserve at Eagle Ridge	Waukegan, IL		370	$	26,941
Carrington Park	Little Rock, AR		202		20,581
Arbors at the Reservoir	Ridgeland, MS		170		19,411
Stonebridge at the Ranch	Little Rock, AR		260		29,598
Aventine Greenville	Greenville, SC		346		45,322
Total			1,348	$	141,853

Acquisitions

The below table summarizes the acquisitions for the nine months ended September 30, 2018:

Property Name	Date of Purchase	Location	Units		Contract Price
Creekside Corners (1)	1/3/2018	Lithonia, GA		444	$	43,901
Hartshire Lakes (1)	1/3/2018	Bargersville, IN		272		27,597
The Chelsea	1/4/2018	Columbus, OH		312		36,750
Avalon Oaks	2/27/2018	Columbus, OH		235		23,000
Bridgeview	7/11/2018	Tampa, FL		348		43,000
Collier Park	7/26/2018	Grove City, OH		232		21,200
Total				1,843	$	195,448

(1)

These properties were acquired as the last phase of our acquisition of a nine-community portfolio, totaling 2,352 units, which we agreed to acquire on September 3, 2017 for a total purchase price of $228,144.

The following table summarizes the aggregate fair value of the assets and liabilities associated with the properties acquired during the nine-month period ended September 30, 2018, on the date of acquisition, accounted for under FASB ASC Topic 805-50-15-3.

Independence Realty Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

As of September 30, 2018

(Unaudited and dollars in thousands, except share and per share data)

Description	Fair Value of Assets Acquired During the Nine-Month Period Ended September 30, 2018
Assets acquired:
Investments in real estate (a)	$	193,237
Accounts receivable and other assets		460
Intangible assets		2,356
Total assets acquired	$	196,053
Liabilities assumed:
Indebtedness	$	39,362
Accounts payable and accrued expenses		1,062
Other liabilities		501
Total liabilities assumed		40,925
Estimated fair value of net assets acquired	$	155,128

(a)

Included $395 of property related acquisition costs capitalized during the nine months ended September 30, 2018.

In October 2018, we acquired Waterford Landing, a 260-unit property located in McDonough, GA, which we purchased for $30,500.

NOTE 4: Indebtedness

The following tables contain summary information concerning our indebtedness as of September 30, 2018:

Debt:	Outstanding Principal		Unamortized Discount and Debt Issuance Costs			Carrying Amount		Type	Weighted Average Rate	Weighted Average Maturity (in years)
Unsecured credit facility (1)	$	251,005	$	(1,897	)	$	249,108	Floating	3.6%		2.8
Unsecured term loan		100,000		(845	)		99,155	Floating	3.9%		6.1
Mortgages		617,733		(2,758	)		614,975	Fixed	3.8%		5.2
Total Debt	$	968,738	$	(5,500	)	$	963,238		3.8%		4.6

(1)

The unsecured credit facility total capacity is $300,000, of which $251,005 was outstanding as of September 30, 2018.

	Original maturities on or before December 31,
Debt:	2018		2019		2020		2021		2022		2023		Thereafter
Unsecured credit facility	$	-	$	-	$	-	$	201,005	$	50,000	$	-	$	-
Unsecured term loan		-		-		-		-		-		-		100,000
Mortgages		842		5,581		8,726		103,764		74,978		106,972		316,870
Total	$	842	$	5,581	$	8,726	$	304,769	$	124,978	$	106,972	$	416,870

As of September 30, 2018, we were in compliance with all financial covenants contained in documents governing our indebtedness.

Independence Realty Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

As of September 30, 2018

(Unaudited and dollars in thousands, except share and per share data)

The following table contains summary information concerning our indebtedness as of December 31, 2017:

Debt:	Outstanding Principal		Unamortized Discount and Debt Issuance Costs			Carrying Amount		Type	Weighted Average Rate	Weighted Average Maturity (in years)
Unsecured credit facility (1)	$	104,005	$	(2,376	)	$	101,629	Floating	3.0%		3.8
Unsecured term loan		100,000		(895	)		99,105	Floating	3.2%		6.9
Mortgages		580,635		(2,927	)		577,708	Fixed	3.7%		5.8
Total Debt	$	784,640	$	(6,198	)	$	778,442		3.6%		5.7

(1)

The unsecured credit facility total capacity was $300,000, of which $104,005 was outstanding as of December 31, 2017.

On January 3, 2018, in connection with the acquisition of our Hartshire Lakes property, we assumed a $16,000 loan secured by a first mortgage on the property. The loan bears interest at a rate of 4.68% per annum, provides for monthly payments of interest only through January 2019, when principal and interest payments will be due monthly based on a 30-year amortization schedule, and matures January 2025. The loan was recorded at its fair value of $15,936 based on a discounted cash flows valuation technique. As this technique utilizes current credit spreads, which are generally unobservable, this is classified as a Level 3 fair value measurement within the fair value hierarchy.

On January 3, 2018, in connection with the acquisition of our Creekside Corners property, we assumed a $23,500 loan secured by a first mortgage on the property. The loan bears interest at a rate of 4.56% per annum, provides for monthly payments of interest only through January 2019, when principal and interest payments will be due monthly based on a 30-year amortization schedule, and matures January 2025. The loan was recorded at its fair value of $23,426 based on a discounted cash flows valuation technique. As this technique utilizes current credit spreads, which are generally unobservable, this is classified as a Level 3 fair value measurement within the fair value hierarchy.

On October 11, 2018, in connection with the acquisition of our Waterford Landing property, we assumed a $15,500 loan secured by a first mortgage on the property. The loan bears interest at a rate of 4.82% per annum, provides for monthly payments of interest only through January 2019, when principal and interest payments will be due monthly based on a 30-year amortization schedule, and matures January 2026. In addition during October 2018, we made draws on our credit facility totaling $31,000 for the Waterford Landing acquisition and capital expenditures.

On October 30, 2018, we entered into a five-year, $200,000 unsecured term loan agreement with KeyBank, that matures January 2024. The term loan bears interest at a spread over LIBOR, based on our overall leverage. At closing, the spread to LIBOR was 145 basis points. At closing, we drew $150,000 with the remaining $50,000 available for twelve months following closing. We applied proceeds of the draw to reduce outstanding borrowings under our credit facility.

NOTE 5: Derivative Financial Instruments

We may use derivative financial instruments to hedge all or a portion of the interest rate risk associated with our borrowings. The principal objective of such arrangements is to minimize the risks and/or costs associated with our operating and financial structure as well as to hedge specific anticipated transactions. While these instruments may impact our periodic cash flows, they benefit us by minimizing the risks and/or costs previously described. The counterparties to these contractual arrangements are major financial institutions with which we and our affiliates may also have other financial relationships. In the event of nonperformance by the counterparties, we are potentially exposed to credit loss. However, because of the high credit ratings of the counterparties, we do not anticipate that any of the counterparties will fail to meet their obligations.

Independence Realty Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

As of September 30, 2018

(Unaudited and dollars in thousands, except share and per share data)

The following table summarize s the aggregate notional amount and estimated net fair value of our derivative instruments as of September 30, 2018 and December 31, 2017:

	As of September 30, 2018						As of December 31, 2017
	Notional		Fair Value of Assets		Fair Value of Liabilities		Notional		Fair Value of Assets		Fair Value of Liabilities
Cash flow hedges:
Interest rate swap	$	150,000	$	6,823	$	—	$	150,000	$	4,700	$	—
Interest rate collar		100,000		5,617		—		50,000		1,297		—
		250,000		12,440		—		200,000		5,997		—
Freestanding derivatives:
Interest rate collar		—		—		—		50,000		1,294		—
Total	$	250,000	$	12,440	$	—	$	250,000	$	7,291	$	—

Interest Rate Swaps

On June 24, 2016, we entered into an interest rate swap contract with a notional value of $150,000, a strike rate of 1.145% and a maturity date of June 17, 2021. We designated this interest rate swap as a cash flow hedge at inception and determined that the hedge is highly effective in offsetting interest rate fluctuations associated with the identified indebtedness. We did not recognize any ineffectiveness associated with this cash flow hedge through April 2017. On April 17, 2017, in conjunction with the refinance of our credit facility, we restructured our existing interest rate swap to remove the LIBOR floor. This resulted in a decrease in the strike rate to 1.1325%. The notional value and maturity date remained the same. We designated the restructured interest rate swap as a cash flow hedge at inception and determined that the hedge is highly effective in offsetting interest rate fluctuations associated with the identified indebtedness. Upon our early adoption of accounting standard updates to ASC Topic 815, “Derivatives”, ineffectiveness is no longer measured or reported.

Interest Rate Collar

On November 17, 2017, in connection with our then new $100,000 unsecured term loan, we purchased an interest rate collar with a notional value of $100,000, a 2.00% cap and 1.25% floor, and a maturity date of November 17, 2024. We designated $50,000 of the interest rate collar as a cash flow hedge at inception and determined that the hedge is highly effective in offsetting interest rate fluctuations associated with the identified indebtedness. We concluded that this hedging relationship was and will continue to be highly effective using the hypothetical derivative method.

The other $50,000 notional value interest rate collar was accounted for as a freestanding derivative from inception. On January 4, 2018, we designated this other $50,000 notional value interest rate collar as a cash flow hedge and determined that the hedge is highly effective in offsetting interest rate fluctuations associated with the identified indebtedness. During the nine months ended September 30, 2018, we recognized a $52 gain within other income (expense) in our consolidated statements of operations reflecting the change in fair value of the instrument.

Effective interest rate swaps and caps are reported in accumulated other comprehensive income, and the fair value of these hedge agreements is included in other assets or other liabilities.

For our interest rate swap and collars that are considered highly effective hedges, we reclassified realized gains of $382 and $862 to earnings within interest expense for the three and nine months ended September 30, 2018, respectively, and we expect $2,666 to be reclassified out of accumulated other comprehensive income to earnings over the next 12 months.

On October 17, 2018, we purchased an interest rate collar with an initial notional value of $100,000, a 2.50% cap and 2.25% floor, and a maturity date of January 17, 2024. The notional value adjusts to $150,000 in November 2018. We designated this interest rate collar as a cash flow hedge at inception and determined that the hedge is highly effective in offsetting interest rate fluctuations associated with the identified indebtedness.

Independence Realty Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

As of September 30, 2018

(Unaudited and dollars in thousands, except share and per share data)

NOTE 6: Stockholder Equity and Noncontrolling Interests

Stockholder Equity

Effective the first quarter of 2018, we transitioned to a quarterly distribution of cash dividends on our common stock.

On March 13, 2018, our board of directors declared a distribution of $0.18 per share, which was paid on April 20, 2018 to common shareholders of record as of April 4, 2018.

On June 13, 2018, our board of directors declared a distribution of $0.18 per share, which was paid on July 20, 2018 to common shareholders of record as of July 6, 2018.

On September 17, 2018, our board of directors declared a distribution of $0.18 per share, which was paid on October 19, 2018 to common shareholders of record as of October 5, 2018.

During the three and nine months ended September 30, 2018, we also paid $0 and $181, respectively, of dividends on restricted common share awards that vested during the period.

On August 4, 2017, we entered into an At-the-Market Issuance Sales Agreement (the “Sales Agreement”) with various sales agents. Pursuant to the Sales Agreement, we may offer and sell shares of our common stock, $0.01 par value per share, having an aggregate offering price of up to $150,000, from time to time through the sales agents. The sales agents are entitled to compensation in an agreed amount not to exceed 2.0% of the gross sales price per share for any shares sold from time to time under the Sales Agreement. We have no obligation to sell any of the shares under the Sales Agreement and may at any time suspend solicitations and offers under the Sales Agreement. For the three months ended September 30, 2018, 1,861,508 shares were issued at a weighted average price of $10.32, resulting in $18,823 of net proceeds, after deducting $384 of commissions. For the nine months ended September 30, 2018, 1,923,164 shares were issued at a weighted average price of $10.32, resulting in $19,445 of net proceeds, after deducting $397 of commissions. Pursuant to the Sales Agreement $118,065 remained available for issuance as of September 30, 2018.

Noncontrolling Interest

During the three months ended September 30, 2018, holders of IROP units exchanged 18,108 units for 18,108 shares of our common stock. Based on the cost basis of the IROP units on the dates of these exchanges, $198 was reclassified from noncontrolling interests to stockholders’ equity. During the nine months ended September 30, 2018, holders of IROP units exchanged 2,130,244 units for 2,130,244 shares of our common stock. Based on the cost basis of the IROP units on the dates of these exchanges, $14,506 was reclassified from noncontrolling interests to stockholders’ equity.

As of September 30, 2018, 881,107 IROP units held by unaffiliated third parties remain outstanding.

Independence Realty Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

As of September 30, 2018

(Unaudited and dollars in thousands, except share and per share data)

On March 13, 2018, our board of directors declared a distribution of $0.18 per unit, which was paid on April 20, 2018 to IROP LP unitholders of record as of April 4, 2018.

On June 13, 2018, our board of directors declared a distribution of $0.18 per unit, which was paid on July 20, 2018 to IROP LP unitholders of record as of July 6, 2018.

On September 17, 2018, our board of directors declared a distribution of $0.18 per unit, which was paid on October 19, 2018 to IROP LP unitholders of record as of October 5, 2018.

NOTE 7: Equity Compensation Plans

Long Term Incentive Plan

In May 2016, our shareholders approved and our board of directors adopted an amended and restated Long Term Incentive Plan, or the incentive plan, which provides for the grants of awards to our directors, officers and full-time employees, full-time employees of our former advisor and its affiliates, full-time employees of entities that provide services to our former advisor, directors of our former advisor or of entities that provide services to it, certain of our consultants and certain consultants to our former advisor and its affiliates or to entities that provide services to our former advisor. The incentive plan authorizes the grant of restricted or unrestricted shares of our common stock, non-qualified and incentive stock options, restricted stock units, stock appreciation rights, dividend equivalents and other stock- or cash-based awards. In conjunction with the amendment, the number of shares of common stock issuable under the incentive plan was increased to 4,300,000 shares, and the term of the incentive plan was extended to May 12, 2026.

Under the incentive plan or predecessor incentive plans, we granted restricted shares and stock appreciation rights, or SARs, to our employees and employees of our former advisor. These awards generally vested over a three-year period. In addition, we granted unrestricted shares to our directors. These awards generally vested immediately.

On February 8, 2018, our compensation committee awarded, to our non-executive officer employees, 93,700 restricted stock awards, valued at $8.37 per share, or $784 in the aggregate. The restricted stock awards vest over a three-year period. On February 23, 2018, our compensation committee awarded, to our named executive officers, 100,922 restricted stock awards and performance share units, or PSUs. The restricted stock awards vest over a four-year period and were valued at $8.67 per share, or $875 in the aggregate. The number of PSUs earned will be based on attainment of certain performance criteria over a three-year period, with 454,151 PSUs granted for achieving the maximum performance criteria. The aggregate grant date fair value of the PSUs was $2,513.

On May 17, 2018, our compensation committee granted stock under the incentive plan such that our non-employee directors received an aggregate of 39,084 shares of our common stock, valued at $360 using our closing stock price of $9.21. These awards vested immediately.

NOTE 8: Related Party Transactions and Arrangements

Fees and Expenses Paid to and by Our Former Advisor

On December 20, 2016, we completed our management internalization, which provided for transactions that changed us from being externally managed by our former advisor, RAIT, to being internally managed and separated from RAIT. The management internalization consisted of two parts: (i) our acquisition of our former advisor, which was a subsidiary of RAIT, and (ii) our acquisition of substantially all of the assets and the assumption of certain liabilities relating to the multifamily property management business of RAIT, including property management contracts relating to apartment properties owned by us, RAIT and third parties. Also, pursuant to the internalization agreement, on October 5, 2016, we repurchased all of the 7,269,719 shares of our common stock owned by certain of RAIT’s subsidiaries and retired these shares.

Subsequent to our management internalization, from December 21, 2016 through June 20, 2017 we were party to a shared services agreement whereby RAIT provided us with certain back office services. For the three and nine months ended September 30, 2017, we incurred costs of $0 and $727, respectively, with respect to this shared services agreement which are included within general and administrative expenses in our consolidated statements of operations.

Independence Realty Trust, Inc. and Subsidiaries

Notes to Consolidated Financial Statements

As of September 30, 2018

(Unaudited and dollars in thousands, except share and per share data)

Subsequent to our management internalization, we are party to property management agreements with RAIT under which we provide property management services to RAIT owned properties. For the three and nine months ended September 30, 2018, we earned property management fees from RAIT of $16 and $63, respectively. For the three and nine months ended September 30, 2017, we earned property management fees from RAIT of $27 and $238, respectively.

As of September 30, 2018 and December 31, 2017, we had no payables to or receivables from RAIT for shared service fees or property management fees.

NOTE 9: Earnings (Loss) Per Share

The following table presents a reconciliation of basic and diluted earnings (loss) per share for the three and nine months ended September 30, 2018 and 2017:

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2018			2017			2018			2017
Net income (loss)	$	4,836		$	1,156		$	11,881		$	24,922
(Income) loss allocated to noncontrolling interests		(49	)		(59	)		(173	)		(1,009	)
Net income (loss) allocable to common shares		4,787			1,097			11,708			23,913
Weighted-average shares outstanding—Basic		87,702,078			71,972,394			86,559,294			69,875,802
Weighted-average shares outstanding—Diluted		88,046,311			72,144,544			86,818,337			70,105,571
Earnings (loss) per share—Basic	$	0.05		$	0.02		$	0.14		$	0.34
Earnings (loss) per share—Diluted	$	0.05		$	0.02		$	0.13		$	0.34

Certain IROP units, stock appreciation rights, or SARs, and unvested shares were excluded from the earnings (loss) per share computation because their effect would have been anti-dilutive, totaling 881,107 and 962,066 for the three and nine months ended September 30, 2018, and 3,035,654 for the three and nine months ended September 30, 2017.

NOTE 10: Other Disclosures

Litigation

We are subject to various legal proceedings and claims that arise in the ordinary course of our business operations. Matters which arise out of allegations of bodily injury, property damage, and employment practices are generally covered by insurance. While the resolution of these matters cannot be predicted with certainty, we currently believe the final outcome of such matters will not have a material adverse effect on our financial position, results of operations or cash flows.

Other Matters

To the extent that a natural disaster or similar event occurs with more than a remote risk of having a material impact on the consolidated financial statements, we will disclose the estimated range of possible outcomes, and, if an outcome is probable, accrue an appropriate liability.

Item 2.

M anagement’s Discussion and Analysis of Financial Condition and Res ults of Operations

Forward-Looking Statements

The Securities and Exchange Commission, or SEC, encourages companies to disclose forward-looking information so that investors can better understand a company’s future prospects and make informed investment decisions. This report contains or incorporates by reference such “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, or Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or Exchange Act.

Words such as “anticipates,” “estimates,” “expects,” “projects,” “intends,” “plans,” “believes” and words and terms of similar substance used in connection with any discussion of future operating or financial performance identify forward-looking statements. As used herein, the terms “we,” “our” and “us” refer to Independence Realty Trust, Inc., which we refer to as IRT, and, as required by context, Independence Realty Operating Partnership, LP, which we refer to as IROP, and their subsidiaries.

We claim the protection of the safe harbor for forward-looking statements provided in the Private Securities Litigation Reform Act of 1995. These statements may be made directly in this report and they may also be incorporated by reference in this report to other documents filed with the SEC, and include, but are not limited to, statements about future financial and operating results and performance, statements about our plans, objectives, expectations and intentions with respect to future operations, products and services, and other statements that are not historical facts. These forward-looking statements are based upon the current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are difficult to predict and generally beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Actual results may differ materially from the anticipated results discussed in these forward-looking statements.

The risk factors discussed and identified in Item 1A of our 2017 Annual Report on Form 10-K, this Report and in other of our public filings with the SEC, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements. We caution you not to place undue reliance on these forward-looking statements, which speak only as of the date of this report. All subsequent written and oral forward-looking statements attributable to us or any person acting on our behalf are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Except to the extent required by applicable law or regulation, we undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this filing or to reflect the occurrence of unanticipated events.

Overview

General

We are a Maryland corporation that owns and operates multifamily apartment properties across non-gateway U.S. markets, including Atlanta, Louisville, Memphis, and Raleigh. Our investment strategy is focused on gaining scale within key amenity rich submarkets that offer good school districts, high-quality retail and major employment centers. We aim to provide stockholders attractive risk-adjusted returns through diligent portfolio management, strong operational performance, and a consistent return of capital through distributions and capital appreciation. We elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended, or the Code, commencing with our taxable year ended December 31, 2011.

We seek to acquire and operate apartment properties that:

•

have stable occupancy;

•

are located in submarkets that have solid economic demand fundamentals, including an expectation of low levels of new apartment construction in the foreseeable future;

•

in appropriate circumstances, present opportunities for repositioning or updating through capital expenditures when we see opportunities for increased rents; and

•

present opportunities to apply tailored marketing and management strategies to attract and retain residents and enable rent increases.

Property Portfolio

As of September 30, 2018, we owned 58 multifamily apartment properties, totaling 15,860 units. Below is a summary of our property portfolio by market.


(Dollars in thousands, except per unit data)	As of September 30, 2018									For the Three Months Ended September 30, 2018
Market	Number of Properties		Units		Gross Real Estate Assets		Period End Occupancy			Average Effective Monthly Rent per Unit		Net Operating Income (a)		% of NOI
Atlanta, GA		4		1,536	$	187,481		91.0	%	$	1,119	$	3,278		11.4	%
Raleigh - Durham, NC		5		1,372		186,811		90.3	%		1,113		2,806		9.7	%
Memphis, TN		4		1,383		139,500		94.3	%		1,059		2,722		9.4	%
Louisville, KY		6		1,710		187,358		87.8	%		957		2,673		9.3	%
Columbus, OH		6		1,547		147,278		91.6	%		947		2,384		8.3	%
Oklahoma City, OK		5		1,658		75,271		94.9	%		650		1,766		6.1	%
Indianapolis, IN		4		916		89,211		93.3	%		964		1,508		5.2	%
Dallas, TX		3		734		86,291		96.7	%		1,164		1,422		4.9	%
Charleston, SC		2		518		79,333		93.8	%		1,302		1,163		4.0	%
Tampa-St. Petersburg, FL		2		564		72,749		90.8	%		1,098		1,024		3.5	%
Little Rock, AR (a)		2		462		55,249		95.0	%		975		839		2.9	%
Orlando, FL		1		297		48,013		93.9	%		1,449		839		2.9	%
Greenville, SC (b)		1		346		48,378		93.6	%		1,083		704		2.4	%
Chicago, IL (b)		1		370		29,804		92.7	%		1,060		664		2.3	%
Austin, TX		1		300		35,863		91.7	%		1,268		639		2.2	%
Myrtle Beach, SC		2		340		30,832		94.4	%		986		630		2.2	%
Charlotte, NC		1		208		41,992		92.3	%		1,495		615		2.1	%
Asheville, NC		1		252		28,467		96.0	%		1,113		605		2.1	%
Wilmington, NC		1		288		30,849		93.4	%		884		563		2.0	%
St. Louis, MO		1		152		33,260		92.8	%		1,424		470		1.6	%
Chattanooga, TN		2		295		26,564		96.9	%		964		455		1.6	%
Jackson, MS (b)		1		170		21,494		96.5	%		1,154		394		1.4	%
Baton Rouge, LA		1		264		28,591		76.9	%		931		359		1.2	%
Huntsville, AL		1		178		16,299		96.6	%		905		330		1.1	%
Total/Weighted Average		58		15,860	$	1,726,938		92.3	%	$	1,024	$	28,852		100.0	%

(a)

Market includes two properties which have been classified as held for sale as of September 30, 2018.

(b)

Market includes one property which has been classified as held for sale as of September 30, 2018.

As of September 30, 2018, our same-store portfolio consisted of 37 multifamily apartment properties, totaling 10,329 units. See “Non-GAAP Financial Measures – Same Store Portfolio Net Operating Income” below for our definition of same store and definitions and reconciliations related to our net operating income and net operating income margin.

Property Operations

During the three months ended September 30, 2018, on a same-store basis, our total revenues were up 1.9% as compared to the third quarter of 2017 driven by higher average effective monthly rents. Revenue growth was strong in the Huntsville, AL, Orlando, FL, and St. Louis, MO markets driven by higher occupancy and higher average effective rent per unit in the third quarter of 2018 as compared to the third quarter of 2017.

Same-store net operating income increased 1.9% during the third quarter of 2018 as compared to the same period in the prior year driven by the higher revenues. For the nine months ended September 30, 2018, our same-store total revenues were 2.0% higher and our same-store net operating income was 2.2% higher than for the nine months ended September 30, 2017. Excluding the seven properties that are in our same store property portfolio and are currently undergoing renovations, NOI increased 3.0% and 2.3% for the three and nine months ended September 30, 2018.

Property Acquisitions

During the nine months ended September 30, 2018, we acquired six properties. On January 3, 2018, we acquired two properties representing the completion of the nine-property portfolio acquisition initially announced in September 2017. In whole, the nine-community portfolio totaled 2,352 units and was acquired for a gross purchase price of $228.1 million. We assumed $58.5 million of property level debt in association with three of the acquired assets. On January 4, 2018, we acquired a 312-unit community located in Columbus, OH for approximately $36.8 million. On February 27, 2018, we acquired a 235-unit community located in Columbus, OH for approximately $23.0 million. On July 11, 2018, we acquired a 348-unit community located in Tampa, FL for approximately $43.0 million. On July 26, 2018, we acquired a 232-unit community located in Grove City, OH for approximately $21.2 million.

On October 11, 2018, we acquired a 260-unit community located in McDonough, GA for approximately $30.5 million. In November 2018 we expect to acquire a 276-unit property located in Brandon, FL for $47.0 million.

The properties above that were acquired during the second half of 2018 were acquired using proceeds from our line of credit in advance of completing sales associated with our capital recycling initiative, which we commenced during mid-2018. The capital recycling program consists of disposing of assets in smaller markets where we lack scale and/or markets where management believes that growth is slowing. As of September 30, 2018, we had five properties classified as held for sale as part of this capital recycling program, totaling 1,348 units and $154.9 million in gross real estate investments.

Value Add

Value add initiatives, comprised of renovations and upgrades at selected communities to drive increased rental rates, remain a core component of our growth strategy for 2018 and beyond. We currently have plans to execute on two phases of value add projects covering 4,317 units across 14 properties. During the third quarter of 2018, we had redevelopment completed or underway in 3,949 units across 12 properties. The renovations for the remaining two properties are scheduled to commence in the fourth quarter of 2018.

Results of Operations

Three Months Ended September 30, 2018 compared to the Three Months Ended September 30, 2017

	SAME STORE PROPERTIES									NON SAME STORE PROPERTIES									CONSOLIDATED
(Dollars in thousands)	Three Months Ended September 30,									Three Months Ended September 30,									Three Months Ended September 30,
	2018		2017		Increase (Decrease)		% Change			2018		2017		Increase (Decrease)		% Change			2018			2017			Increase (Decrease)			% Change
Property Data:
Number of properties	37		37							21			9		12		133.3	%	58			46				12			26.1	%
Number of units		10,329		10,329							5,531		2,483		3,048		122.8	%		15,860			12,812			3,048			23.8	%
Revenue:
Rental income	$	29,136	$	28,682	$	454		1.6	%	$	14,282	$	6,849	$	7,433		108.5	%	$	43,418		$	35,531		$	7,887			22.2	%
Reimbursement and other income		3,628		3,468		160		4.6	%		1,598		865		733		84.7	%		5,226			4,333			893			20.6	%
Total revenue		32,764		32,150		614		1.9	%		15,880		7,714		8,166		105.9	%		48,644			39,864			8,780			22.0	%
Expenses:
Real estate operating expenses		13,365		13,108		257		2.0	%		6,427		3,088		3,339		108.1	%		19,792			16,196			3,596			22.2	%
Net Operating Income	$	19,399	$	19,042	$	357		1.9	%	$	9,453	$	4,626	$	4,827		104.3	%	$	28,852		$	23,668		$	5,184			21.9	%

Other Income:
Property management and other income																				135			202			(67	)		-33.2	%
Total other income																				135			202			(67	)		-33.2	%
Corporate and other expenses:
Property management expenses																				1,661			1,328			333			25.1	%
General and administrative expenses																				2,578			2,322			256			11.0	%
Acquisition and integration expenses																				-			569			(569	)		-100.0	%
Depreciation and amortization expense																				10,783			8,671			2,112			24.4	%
Total corporate and other expenses																				15,022			12,890			2,132			16.5	%
Operating Income (loss)																				13,965			10,980			2,985			27.2	%
Interest expense																				(9,129	)		(6,963	)		(2,166	)		-31.1	%
Hedge ineffectiveness																				-			12			(12	)		-100.0	%
Net gains (losses) on sale of assets																				-			(92	)		92			100.0	%
Acquisition related debt extinguishment expenses																				-			(2,781	)		2,781			100.0	%
Net income (loss)																				4,836			1,156			3,680			318.3	%
(Income) loss allocated to noncontrolling interests																				(49	)		(59	)		10			16.9	%
Net income (loss) available to common shares																			$	4,787		$	1,097		$	3,690			336.4	%

Revenue

Rental income . Rental revenue increased $7.9 million to $43.4 million for the three months ended September 30, 2018 from $35.5 million for the three months ended September 30, 2017. The increase was primarily attributable to a $0.5 million increase in same store rental income driven by a 2.5% increase in average effective monthly rents compared to the prior year period and a $7.4 million increase in non same store rental income. The non same store rental income increase was due to the number of properties included in each period being different as a result of the timing of property sales and acquisitions.

Reimbursement and other income . Reimbursement and other income increased $0.9 million to $5.2 million for the three months ended September 30, 2018 from $4.3 million for the three months ended September 30, 2017. The increase was primarily due to a $0.2 million increase in same store reimbursement and other income attributable to our continued focus on driving non-rental revenue and fee income through an increase in amenities offered and higher amenity usage and a $0.7 million increase in non same store reimbursement and other income. The non same store reimbursement income increase was due to the number of properties included in each period being different as a result of the timing of property sales and acquisitions.

Property management income. Property management income decreased $0.1 million to $0.1 million for the three months ended September 30, 2018 compared to $0.2 million for the three months ended September 30, 2017. This was due to a decrease in the number of third party properties managed in the three months ended September 30, 2018 compared to the three months ended September 30, 2017.

Expenses

Real estate operating expenses . Property operating expenses increased $3.6 million to $19.8 million for the three months ended September 30, 2018 from $16.2 million for the three months ended September 30, 2017. The increase was primarily due to a $0.3 million increase in same store real estate operating expenses and a $3.3 million increase in non same store real estate operating expenses. The non same store real estate operating expense increase was due to the number of properties included in each period being different as a result of the timing of property sales and acquisitions.

Property management expenses. Property management expenses increased $0.4 million to $1.7 million for the three months ended September 30, 2018 from $1.3 million for the three months ended September 30, 2017. This was primarily due to an increase in compensation and legal fees for our property management company as the size of our property portfolio has grown.

General and administrative expenses. General and administrative expenses increased $0.3 million to $2.6 million for the three months ended September 30, 2018 from $2.3 million for the three months ended September 30, 2017. This increase was primarily due to an increase in compensation expense and professional services as the size of our corporate office has grown.

Acquisition and integration expenses . Acquisition and integration expenses were $0.6 million for the three months ended September 30, 2017. No acquisition costs were capitalized during the three months ended September 30, 2018 because all acquisitions after January 1, 2018 were accounted for as asset acquisitions rather than business combinations.

Depreciation and amortization expense . Depreciation and amortization expense increased $2.1 million to $10.8 million for the three months ended September 30, 2018 from $8.7 million for the three months ended September 30, 2017. The increase was primarily attributable to a $1.9 million increase in depreciation expense due to property acquisitions during 2017 and 2018.

Interest expense . Interest expense increased $2.1 million to $9.1 million for the three months ended September 30, 2018 from $7.0 million for the three months ended September 30, 2017. This is primarily due to a $191.3 million increase in the balance of our unsecured credit facility from September 30, 2017 to September 30, 2018, which related to our investments in additional property acquisitions and value add related capital expenditures.

Nine Months Ended September 30, 2018 compared to the Nine Months Ende d September 30, 2017

	SAME STORE PROPERTIES									NON SAME STORE PROPERTIES									CONSOLIDATED
(Dollars in thousands)	Nine Months Ended September 30,									Nine Months Ended September 30,									Nine Months Ended September 30,
	2018		2017		Increase (Decrease)		% Change			2018		2017		Increase (Decrease)		% Change			2018			2017			Increase (Decrease)			% Change
Property Data:
Number of properties	37		37							21			9		12		133.3	%	58				46			12			26.1	%
Number of units		10,329		10,329							5,531		2,483		3,048		122.8	%		15,860			12,812			3,048			23.8	%
Revenue:
Rental income	$	86,523	$	85,093	$	1,430		1.7	%	$	39,428	$	20,351	$	19,077		93.7	%	$	125,951		$	105,444		$	20,507			19.4	%
Reimbursement and other income		10,752		10,228		524		5.1	%		4,291		2,518		1,773		70.4	%		15,043			12,746			2,297			18.0	%
Total revenue		97,275		95,321		1,954		2.0	%		43,719		22,869		20,850		91.2	%		140,994			118,190			22,804			19.3	%
Expenses:
Real estate operating expenses		39,288		38,556		732		1.9	%		17,625		9,550		8,075		84.6	%		56,913			48,106			8,807			18.3	%
Net Operating Income	$	57,987	$	56,765	$	1,222		2.2	%	$	26,094	$	13,319	$	12,775		95.9	%	$	84,081		$	70,084		$	13,997			20.0	%

Other Income:
Property management and other income																				429			579			(150	)		-25.9	%
Total other income																				429			579			(150	)		-25.9	%
Corporate and other expenses:
Property management expenses																				4,936			4,310			626			14.5	%
General and administrative expenses																				8,184			7,128			1,056			14.8	%
Acquisition and integration expenses																				-			956			(956	)		-100.0	%
Depreciation and amortization expense																				33,590			24,289			9,301			38.3	%
Total corporate and other expenses																				46,710			36,683			10,027			27.3	%
Operating Income (loss)																				37,800			33,980			3,820			11.2	%
Interest expense																				(26,063	)		(21,573	)		(4,490	)		-20.8	%
Other income (expense)																				144			(5	)		149		NM
Net gains (losses) on sale of assets																				-			15,873			(15,873	)		-100.0	%
Gains (losses) on extinguishment of debt																				-			(572	)		572			-100.0	%
Acquisition related debt extinguishment expenses																				-			(2,781	)		2,781			-100.0	%
Net income (loss)																				11,881			24,922			(13,041	)		-52.3	%
(Income) loss allocated to noncontrolling interests																				(173	)		(1,009	)		836			82.9	%
Net income (loss) available to common shares																			$	11,708		$	23,913		$	(12,205	)		-51.0	%

Revenue

Rental income. Rental revenue increased $20.6 million to $126.0 million for the nine months ended September 30, 2018 from $105.4 million for the nine months ended September 30, 2017. The increase was primarily attributable to a $1.5 million increase in same store rental income driven by a 2.1% increase in average effective monthly rents compared to the prior year period and a $19.1 million increase in non same store rental income. The non same store rental income increase was due to the number of properties included in each period being different as a result of the timing of property sales and acquisitions.

Reimbursement and other income . Reimbursement and other income increased $2.3 million to $15.0 million for the nine months ended September 30, 2018 from $12.7 million for the nine months ended September 30, 2017. The increase was primarily due to a $0.5 million increase in same store reimbursement and other income attributable to our continued focus on driving non-rental revenue and fee income increase in amenities offered and higher amenity usage and a $1.8 million increase in non same store reimbursement and other income. The non same store reimbursement income increase was due to the number of properties included in each period being different as a result of the timing of property sales and acquisitions.

Property management income. Property management income decreased $0.2 million to $0.4 million for the nine months ended September 30, 2018 compared to $0.6 million for the nine months ended September 30, 2017. This was due to a decrease in the number of third party properties managed in the nine months ended September 30, 2018 compared to the nine months ended September 30, 2017.

Expenses

Real estate operating expenses. Property operating expenses increased $8.8 million to $56.9 million for the nine months ended September 30, 2018 from $48.1 million for the nine months ended September 30, 2017. The increase was primarily due to a $0.7 million increase in same store real estate operating expenses and a $8.1 million increase in our non same store real estate operating expenses. The non same store real estate operating expenses increase was due to the number of properties included in each period being different as a result of the timing of property sales and acquisitions.

Property management expenses: Property management expenses increased $0.6 million to $4.9 million for the nine months ended September 30, 2018 from $4.3 million for the nine months ended September 30, 2017. This was primarily due to an increase in legal fees, software costs, and advertising costs for our property management company as the size of our property portfolio has grown.

General and administrative expenses . General and administrative expenses increased $1.1 million to $8.2 million for the nine months ended September 30, 2018 from $7.1 million for the nine months ended September 30, 2017. This increase was primarily due to a $0.6 million increase in compensation expense, a $0.2 million increase in professional fees, and a $0.1 million increase in rent expense as the size of our corporate office has grown.

Acquisition and integration expenses . Acquisition and integration expenses were $1.0 million for the nine months ended September 30, 2017. No acquisition costs were capitalized during the nine months ended September 30, 2018 because all acquisitions after January 1, 2018 were accounted for as asset acquisitions rather than business combinations.

Depreciation and amortization expense . Depreciation and amortization expense increased $9.3 million to $33.6 million for the nine months ended September 30, 2018 from $24.3 million for the nine months ended September 30, 2017. The increase was primarily attributable to a $4.9 million increase in depreciation expense due to property acquisitions during 2017 and 2018 and a $2.2 million increase in in-place lease intangible amortization, and a $2.2 million increase in the depreciation and amortization for our same store portfolio.

Interest expense . Interest expense increased $4.5 million to $26.1 million for the nine months ended September 30, 2018 from $21.6 million for the nine months ended September 30, 2017. This is primarily due to a $191.3 million increase in the balance of our unsecured credit facility from September 30, 2017 to September 30, 2018, which related to our investments in additional property acquisitions and value add related capital expenditures.

Non-GAAP Financial Measures

Funds from Operations (FFO) and Core Funds from Operations (CFFO)

We believe that FFO and CFFO, each of which is a non-GAAP financial measure, are additional appropriate measures of the operating performance of a REIT and IRT in particular. We compute FFO in accordance with the standards established by the National Association of Real Estate Investment Trusts, or NAREIT, as net income or loss (computed in accordance with GAAP), excluding real estate-related depreciation and amortization expense, gains or losses on sales of real estate and the cumulative effect of changes in accounting principles.

CFFO is a computation made by analysts and investors to measure a real estate company’s operating performance by removing the effect of items that do not reflect ongoing property operations, including stock compensation expense, depreciation and amortization of other items not included in FFO, amortization of deferred financing costs, acquisition and integration expenses, and other non-cash or non-operating gains or losses related to items such as defeasance costs we incur when we sell a property subject to secured debt, asset sales, debt extinguishments, and acquisition related debt extinguishment expenses from the determination of FFO.

Our calculation of CFFO differs from the methodology used for calculating CFFO by certain other REITs and, accordingly, our CFFO may not be comparable to CFFO reported by other REITs. Our management utilizes FFO and CFFO as measures of our operating performance, and believes they are also useful to investors, because they facilitate an understanding of our operating performance after adjustment for certain non-cash or non-operating items that are required by GAAP to be expensed but may not necessarily be indicative of current operating performance and that may not accurately compare our operating performance between periods. Furthermore, although FFO, CFFO and other supplemental performance measures are defined in various ways throughout the REIT industry, we believe that FFO and CFFO provide investors with additional useful measures to compare our financial performance to certain other REITs. Neither FFO nor CFFO is equivalent to net income or cash generated from operating activities determined in accordance with GAAP. Furthermore, FFO and CFFO do not represent amounts available for management’s discretionary use because of needed capital replacement or expansion, debt service obligations or other commitments or uncertainties. Neither FFO nor CFFO should be considered as an alternative to net income as an indicator of our operating performance or as an alternative to cash flow from operating activities as a measure of our liquidity.

Set forth below is a reconciliation of net income (loss) to FFO and CFFO for the three and nine months ended September 30, 2018 and 2017 (in thousands, except share and per share information):

	For the Three Months Ended September 30, 2018				For the Three Months Ended September 30, 2017
	Amount		Per Share (1)		Amount			Per Share (2)
Funds From Operations (FFO):
Net income (loss)	$	4,836	$	0.05	$	1,156		$	0.02
Adjustments:
Real estate depreciation and amortization		10,738		0.13		8,645			0.11
Net (gains) losses on sale of assets excluding defeasance costs		-		-		92			-
Funds From Operations (FFO)	$	15,574	$	0.18	$	9,893		$	0.13
Core Funds From Operations (CFFO):
Funds From Operations (FFO)	$	15,574	$	0.18	$	9,893		$	0.13
Adjustments:
Stock compensation expense		563		0.01		422			0.01
Amortization of deferred financing costs		309		-		282			-
Acquisition and integration expenses		-		-		569			0.01
Other depreciation and amortization		45		-		26			-
Other expense (income)		-		-		(12	)		-
Acquisition related debt extinguishment expenses		-		-		2,781			0.04
Core Funds From Operations (CFFO)	$	16,491	$	0.19	$	13,961		$	0.19

	For the Nine Months Ended September 30, 2018					For the Nine Months Ended September 30, 2017
	Amount			Per Share (1)		Amount			Per Share (2)
Funds From Operations (FFO):
Net income (loss)	$	11,881		$	0.14	$	24,922		$	0.34
Adjustments:
Real estate depreciation and amortization		33,489			0.38		24,227			0.34
Net (gains) losses on sale of assets excluding defeasance costs		-			-		(18,621	)		(0.26	)
Funds From Operations (FFO)	$	45,370		$	0.52	$	30,528		$	0.42
Core Funds From Operations (CFFO):
Funds From Operations (FFO)	$	45,370		$	0.52	$	30,528		$	0.42
Adjustments:
Stock compensation expense		1,966			0.02		1,548			0.02
Amortization of deferred financing costs		1,078			0.01		1,160			0.01
Acquisition and integration expenses		-			-		956			0.01
Other depreciation and amortization		101			-		62			-
Other expense (income)		(52	)		-		-			-
Defeasance costs included in net gains (losses) on sale of assets		-			-		2,748			0.04
(Gains) losses on extinguishment of debt		-			-		572			0.01
Acquisition related debt extinguishment expenses		-			-		2,781			0.04
Core Funds From Operations (CFFO)	$	48,463		$	0.55	$	40,355		$	0.55

(1)

Based on 88,585,940 and 87,870,135 weighted-average shares and units outstanding for the three and nine months ended September 30, 2018, respectively.

(2)

Based on 75,009,859 and 72,801,899 weighted-average shares and units outstanding for the three and nine months ended September 30, 2017, respectively.

Same Store Portfolio Net Operating Income

We believe that Net Operating Income (“NOI”), a non-GAAP financial measure, is a useful measure of its operating performance. We define NOI as total property revenues less total property operating expenses, excluding interest expenses, depreciation and amortization, acquisition expenses, property management expenses, and general and administrative expenses. Other REITs may use different methodologies for calculating NOI, and accordingly, our NOI may not be comparable to other REITs. We believe that this measure provides an operating perspective not immediately apparent from GAAP operating income or net income. We use NOI to evaluate our performance on a same store and non-same store basis because NOI measures the core operations of property performance by excluding corporate level expenses, financing expenses, and other items not related to property operating performance and captures trends in rental housing and property operating expenses. However, NOI should only be used as an alternative measure of our financial performance.

We review our same store properties or portfolio at the beginning of each calendar year. Properties are added into the same store portfolio if they were owned at the beginning of the previous year. Properties that have been sold or are classified as held for sale are excluded from the same store portfolio.

Set forth below is a reconciliation of same store net operating income to net income (loss) available to common shares for the three and nine months ended September 30, 2018 and 2017 (in thousands, except per unit data):

	Three Months Ended September 30, (a)									Nine Months Ended September 30, (a)
	2018			2017			% change			2018			2017			% change
Revenue:
Rental income	$	29,136		$	28,682			1.6	%	$	86,523		$	85,093			1.7	%
Reimbursement and other income		3,628			3,468			4.6	%		10,752			10,228			5.1	%
Total revenue		32,764			32,150			1.9	%		97,275			95,321			2.0	%
Operating Expenses
Real estate taxes		3,922			3,836			2.2	%		11,951			11,592			3.1	%
Property insurance		638			660			-3.3	%		1,997			2,074			-3.7	%
Personnel expenses		3,249			3,157			2.9	%		9,511			9,274			2.6	%
Utilities		2,083			2,121			-1.8	%		6,154			6,020			2.2	%
Repairs and maintenance		1,345			1,383			-2.7	%		3,508			3,670			-4.4	%
Contract services		1,004			996			0.8	%		3,069			2,926			4.9	%
Advertising expenses		376			356			5.6	%		1,127			1,045			7.8	%
Casualty expense (income)		20			11		nm				54			8		nm
Other expenses		728			588			23.8	%		1,917			1,947			-1.5	%
Total operating expenses		13,365			13,108			2.0	%		39,288			38,556			1.9	%
Net operating income	$	19,399		$	19,042			1.9	%	$	57,987		$	56,765			2.2	%
NOI Margin		59.2	%		59.2	%		0.0	%		59.6	%		59.6	%		0.1	%
Average Occupancy		94.1	%		94.9	%		-0.8	%		94.5	%		94.6	%		-0.1	%
Average effective monthly rent, per unit	$	1,041		$	1,015			2.5	%	$	1,028		$	1,007			2.1	%
Reconciliation of Same-Store Net Operating Income to Net Income (Loss)
Same-store portfolio net operating income (a)	$	19,399		$	19,042					$	57,987		$	56,765
Non same-store net operating income		9,453			4,626						26,094			13,319
Property management income and other income		135			202						429			579
Property management expenses		(1,661	)		(1,328	)					(4,936	)		(4,310	)
General and administrative expenses		(2,578	)		(2,322	)					(8,184	)		(7,128	)
Acquisition and integration expenses		-			(569	)					-			(956	)
Depreciation and amortization		(10,783	)		(8,671	)					(33,590	)		(24,289	)
Interest expense		(9,129	)		(6,963	)					(26,063	)		(21,573	)
Other income (expense)		-			12						144			(5	)
Net gains (losses) on sale of assets		-			(92	)					-			15,873
Gains (losses) on extinguishment of debt		-			-						-			(572	)
Acquisition related debt extinguishment expenses		-			(2,781	)					-			(2,781	)
Net income (loss)	$	4,836		$	1,156					$	11,881		$	24,922

(a)

Same store portfolio for the three and nine months ended September 30, 2018 and 2017 included 37 properties containing 10,329 units.

Liquidity and Capital Resources

Liquidity is a measure of our ability to meet potential cash requirements, including ongoing commitments to repay borrowings, fund and maintain investments, pay distributions and other general business needs. We believe our available cash balances, financing arrangements and cash flows from operations will be sufficient to fund our liquidity requirements with respect to our existing portfolio for the next twelve months and the foreseeable future.

Our primary cash requirements are to:

•

make investments and fund the associated costs, including expenditures, to continue our value add initiatives to improve the quality and performance of our properties;

•

repay our indebtedness;

•

fund recurring maintenance necessary to maintain our properties;

•

pay our operating expenses; and

•

distribute a minimum of 90% of our REIT taxable income (determined without regard to the deduction for dividends paid and excluding net capital gain) and to make investments in a manner that enables us to maintain our qualification as a REIT.

We intend to meet our liquidity requirements primarily through a combination of one or more of the following:

•

the use of our cash and cash equivalent of $7.6 million as of September 30, 2018;

•

existing and future unsecured financing and financing secured directly or indirectly by the apartment properties in our portfolio;

•

cash generated from operating activities;

•

net cash proceeds from property sales, including sales undertaken as part of our capital recycling strategy and other sales; and

•

proceeds from the sales of our common stock and other equity securities, including common stock that may be sold under our at-the-market program; and advances under our unsecured credit facility.

Cash Flows

As of September 30, 2018 and 2017, we maintained cash and cash equivalents, and restricted cash of approximately $15.9 million and $16.8 million, respectively. Our cash and cash equivalents were generated from the following activities (dollars in thousands):

	For the Nine Months Ended September 30,
	2018			2017
Cash flow (used in) provided by operating activities	$	57,315		$	45,056
Cash flow (used in) provided by investing activities		(182,430	)		(144,737	)
Cash flow (used in) provided by financing activities		126,406			90,064
Net change in cash and cash equivalents, and restricted cash		1,291			(9,617	)
Cash and cash equivalents, and restricted cash, beginning of period		14,619			26,410
Cash and cash equivalents, and restricted cash, end of the period	$	15,910		$	16,793

The increase in our cash flow from operating activities during the nine months ended September 30, 2018 was primarily driven by the increased number of properties in our portfolio.

Our cash outflow from investing activities during the nine months ended September 30, 2018 was primarily due to six property acquisitions. Our cash outflow from investing activities during the nine months ended September 30, 2017 was primarily due to seven property acquisitions partially offset by three property dispositions.

Our cash inflow from financing activities during the nine months ended September 30, 2018 was primarily due to draws on our current and previous credit facilities related to the acquisitions of six properties, partially offset by the distribution of dividends of our common stock. Our cash inflow from financing activities during the nine months ended September 30, 2017 was primarily due to repayments of mortgage indebtedness and the interim facility with proceeds from the three property dispositions.

As a REIT, we evaluate our dividend coverage based on our cash flow from operating activities, excluding changes in other assets and liabilities. During the nine months ended September 30, 2018, we paid distributions to our common stockholders and noncontrolling interests of $37.0 million and generated cash flow from operating activities excluding changes in other assets and liabilities of $48.5 million.

Contractual Commitments

Our Annual Report on Form 10-K for the year ended December 31, 2017 filed on February 23, 2018, includes a table of contractual commitments. There were no material changes to these commitments since the filing of our Annual Report on Form 10-K.

Off-Balance She et Arrangements

There were no off-balance sheet arrangements during the nine months ended September 30, 2018 that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to our interests.

Critical Accounting Estimates and Policies

Our 2017 Annual Report on Form 10-K contains a discussion of our critical accounting policies. On January 1, 2018, we adopted several new accounting pronouncements and revised our accounting policies as described in Note 2 to the Consolidated Financial Statements included in Part I, Item 1 of this report. Management discusses our critical accounting policies and management’s judgments and estimates with the audit committee of our board of directors.

Item 3.

Qualitative and Quantitative Disclosure About Market Risk.

Market risk is the adverse effect on the value of a financial instruments that results from a change in interest rates. We may be exposed to interest rate changes primarily as a result of long-term debt used to maintain liquidity, fund capital expenditures and expand our real estate investment portfolio and operations. Market fluctuations in real estate financing may affect the availability and cost of funds needed to expand our investment portfolio. In addition, restrictions upon the availability of real estate financing or high interest rates for real estate loans could adversely affect our ability to dispose of real estate in the future. We seek to limit the impact of interest rate changes on earnings and cash flows and to lower our overall borrowing costs. We may use derivative financial instruments to hedge exposures to changes in interest rates on loans secured by our assets. The market risk associated with interest-rate contracts is managed by establishing and monitoring parameters that limit the types and degree of market risk that may be undertaken. With regard to variable rate financing, we assess our interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows and by evaluating hedging opportunities. We maintain risk management control systems to monitor interest rate cash flow risk attributable to both our outstanding and forecasted debt obligations as well as our potential offsetting hedge positions. While this hedging strategy is designed to minimize the impact on our net income and funds from operations of changes in interest rates, the overall returns on any investment in our securities may be reduced. We currently have limited exposure to financial market risks.

We may also be exposed to credit risk in derivative contracts we may use. Credit risk is the failure of the counterparty to perform under the terms of the derivative contract. If the fair value of a derivative contract is positive, the counterparty will owe us, which creates credit risk for us. If the fair value of a derivative contract is negative, we will owe the counterparty and, therefore, do not have credit risk. We seek to minimize the credit risk in derivative instruments by entering into transactions with high-quality counterparties.

There have been no material changes in quantitative and qualitative market risks during the nine months ended September 30, 2018 from the disclosures included in our 2017 Annual Report on Form 10-K.

Item 4.

Controls and Procedures.

Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, is recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including our chief executive officer and our chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, our management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Under the supervision of our chief executive officer and chief financial officer and with the participation of our disclosure committee, we have carried out an evaluation of the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based upon that evaluation, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures are effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There has been no change in our internal control over financial reporting or in other factors during the quarter ended September 30, 2018, that have materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.

PART II—OTHER INFORMATION

Item 1.

Legal Proceedings.

Item 1A.

Risk Factors.

There have not been any material changes from the risk factors previously disclosed in Item 1A—“Risk Factors” in our 2017 Annual Report on Form 10-K.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

IROP’s partnership agreement provides that holders of IROP units have the right to exchange their IROP units for cash, subject to IRT’s right to acquire some or all of the IROP units tendered for exchange through the issuance of an equal number of shares of common stock. During the three months ended September 30, 2018, 18,108 IROP units were exchanged for an equal number of shares of common stock, and the issuance of the common stock was exempt from registration pursuant to Section 4(a)(2) of the Securities Act of 1933, as amended.

Item 3.

Defaults Upon Senior Securities.

None.

Item 4.

Mine Safety Disclosures.

None.

Item 5.

Other Information.

Term Loan Agreement

On October 30, 2018, IROP entered into a Term Loan Agreement (the “Loan Agreement”) dated as of October 30, 2018 by and among IROP and the subsidiary borrowers named therein, collectively, as borrower, KeyBank National Association (“KeyBank”), as an initial lender thereunder together with the other lenders named therein, KeyBank, as administrative agent, Citibank, N.A. (“Citibank”), as syndication agent, Citibank and KeyBank Capital Markets (“KeyBank Markets”), as joint bookrunners and Citibank and KeyBank Markets, as joint lead arrangers.

The Loan Agreement relates to a $200 million unsecured term loan (the “Term Loan”). At closing we drew $150 million to reduce borrowings currently outstanding under the revolving portion of IROP’s $300 million unsecured credit facility, as well as for fees and expenses related to the Term Loan. The remaining $50 million will be available for twelve months following closing. IROP has the right to request an increase, subject to customary terms and conditions, of the aggregate amount of the Term Loan of up to $400 million. The maturity date of the Term Loan is January 17, 2024. IROP may voluntarily prepay all or a portion of the Term Loan at any time, subject to the payment of any breakage costs associated with LIBOR borrowings and certain other conditions as set forth in the Loan Agreement. The Loan Agreement contains customary representations and warranties, financial covenants, negative covenants, affirmative covenants and events of default.

The Term Loan will bear interest at a rate equal to either (i) the LIBOR rate plus a margin of 120 to 190 basis points, or (ii) a base rate plus a margin of 20 to 90 basis points. The applicable margin will be determined based upon IROP’s total leverage ratio, as defined in the Loan Agreement. The Term Loan requires interest only payments but requires mandatory prepayments under certain circumstances as set forth in the Loan Agreement.

All obligations under the Loan Agreement are unconditionally guaranteed by us.

The foregoing description of the Loan Agreement and the transactions contemplated thereby is not complete and is subject to and qualified in its entirety by reference to the full text of the Loan Agreement, a copy of which is attached as Exhibit 10.1 hereto and incorporated herein by reference.

The Loan Agreement is not intended to provide any other factual or financial information about us or our subsidiaries or affiliates. The representations, warranties and covenants contained in the Loan Agreement were made only for purposes of that agreement and as of the date of the Loan Agreement or such other dates as are specified in the Loan Agreement; were solely for the benefit of the parties to the Loan Agreement; have been qualified by confidential disclosures made for the purposes of allocating contractual risk between the parties to the Loan Agreement instead of establishing these matters as facts; and are subject to materiality qualifications contained in the Loan Agreement that may differ from what may be viewed as material by investors. Investors should not rely on the representations, warranties and covenants or any description thereof as characterizations of the actual state of facts or condition of us or any of our subsidiaries or affiliates. Moreover, information concerning the subject matter of the representations, warranties and covenants may change after the respective dates of the Loan Agreement, which subsequent information may or may not be fully reflected in our public disclosures. The Loan Agreement should not be read alone but should instead be read in conjunction with the other information regarding us and our subsidiaries and affiliates that is contained in this Quarterly Report on Form 10-Q and in the other filings that we make with the Securities and Exchange Commission.

Item 6.

Exhibits.

The following exhibits are filed as part of, or incorporated by reference into, this Quarterly Report on Form 10-Q.

10.1		Term Loan Agreement dated as of October 30, 2018 by and among Independence Realty Operating Partnership, LP and the subsidiary borrowers named therein, collectively, as borrower, KeyBank National Association (“KeyBank”), as an initial lender thereunder together with the other lenders named therein, KeyBank, as administrative agent, Citibank, N.A. (“Citibank”), as syndication agent, Citibank and KeyBank Capital Markets (“KeyBank Markets”), as joint bookrunners and Citibank and KeyBank Markets, as joint lead arrangers, filed herewith.

12.1		Statements regarding computation of ratios as of September 30, 2018, filed herewith.

31.1		Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

31.2		Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, filed herewith.

32.1		Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.

32.2		Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, filed herewith.

101		XBRL (eXtensible Business Reporting Language). The following materials, formatted in XBRL: (i) Consolidated Balance Sheets as of September 30, 2018 and December 31, 2017, (ii) Consolidated Statements of Operations for the three and nine months ended September 30, 2018 and 2017, (iii) Consolidated Statement of Comprehensive Income (Loss) for the three and nine months ended September 30, 2018 and 2017, (iv) Consolidated Statements of Changes in Equity for the nine months ended September 30, 2018, (v) Consolidated Statements of Cash Flows for the nine months ended September 30, 2018 and 2017 and (vi) notes to the consolidated financial statements as of September 30, 2018.

S IGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	Independence Realty Trust, Inc.

Date: November 1, 2018	By:	/s/ Scott f . Schaeffer
		Scott F. Schaeffer
		Chairman of the Board and Chief Executive Officer
		(Principal Executive Officer)

Date: November 1, 2018	By:	/s/ James J. Sebra
		James J. Sebra
		Chief Financial Officer and Treasurer
		(Principal Financial Officer)

Date: November 1, 2018	By:	/s/ Jason R. Delozier
		Jason R. Delozier
		Chief Accounting Officer
		(Principal Accounting Officer)

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