KeyBanc Capital Markets has adjusted its outlook on Independence Realty Trust (NYSE:IRT), raising the real estate investment trust's price target from $20.00 to $22.00.
The firm maintained its Overweight rating on the stock. The price target increase follows Independence Realty Trust's announcement earlier in the week that it had raised approximately $218 million in net proceeds from a common equity issuance, including the overallotment option.
This move was aimed at leveraging the company's improved cost of capital and positioning its balance sheet to fund a growing pipeline of acquisition opportunities.
Independence Realty Trust's recent financial activities have led to a reduction in its net debt-to-EBITDA ratio, which is estimated to decrease to 5.9x, down from 6.6x as of the second quarter of 2024.
KeyBanc anticipates that the additional funds will be invested in new acquisitions across the company's target markets, with cap rates expected in the mid- to high-5%+ range. These acquisitions are projected to be neutral to modestly accretive to the firm's estimate of Adjusted Funds From Operations (AFFO).
The analyst noted that while the current market conditions may be volatile due to new supply, a slowdown in new developments over the coming years is likely to lead to an acceleration in core growth for Independence Realty Trust.
Moreover, any future transactions are expected to be conducted on a leverage-neutral basis or could be structured to further reduce the net debt-to-EBITDA ratio, in line with the company's goal of reaching the mid-5x range by the end of 2025.
In other recent news, Independence Realty Trust (IRT) has announced a public offering of 10 million shares of common stock, managed by Citigroup, KeyBanc Capital Markets, and RBC Capital Markets.
Concurrently, IRT has secured $150 million in a private placement involving two sets of unsecured notes due in 2031 and 2034, with the proceeds expected to be used for the repayment of secured mortgage debt and reduction of outstanding amounts under its revolving credit facility.
Further, IRT reported robust financial results for the second quarter of 2024, with an increase in average occupancy to 95.4% and a 3.5% growth in lease-over-lease effective rental rates for renewals. The company's liquidity has improved to $418 million and leverage decreased from 7.2x to 6.5x, despite increased operating expenses due to higher advertising, personnel costs, and maintenance timing.
In terms of leadership, Jim Sebra has been promoted to President and Chief Financial Officer, reflecting IRT's commitment to strong corporate governance. Sebra's expanded role will now include oversight of the company's operational functions.
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