Independence Realty: Compass Point upgrades Buy from Neutral, PT raised to $24.

Independence Realty: Compass Point upgrades Buy from Neutral, PT raised to $24.

Independence Realty Trust (IRT) has seen a significant upgrade in its investment outlook from Compass Point. The firm has raised its price target (PT) to $24, upgrading the rating from Neutral to Buy. This move is based on the company's strong performance during the second quarter of 2025, as highlighted in its recent earnings call.

During the earnings call, CEO Scott F. Schaeffer reported that same-store NOI (Net Operating Income) and core FFO (Funds from Operations) per share results were in line with expectations. The company's same-store revenues increased by 1% over the prior year, with strong retention, declining bad debt, and a modest rise in average occupancy [1]. However, blended rent growth in the quarter lagged expectations due to softer-than-anticipated market conditions.

The company also completed 454 value-add renovations during the quarter, contributing to a weighted average return on investment (ROI) of 16.2%. Additionally, three assets were identified for sale in the fourth quarter, with two Orlando communities being acquired for $155 million [1].

CFO James J. Sebra detailed that core FFO per share increased to $0.28 from $0.27 in Q1 2025, driven by a 1% revenue increase and a 60 basis point expense decrease. The company's guidance for 2025 now projects full-year same-store revenue growth between 1.5% to 1.9%, a 90 basis point reduction at the midpoint, primarily due to lower new lease growth [1].

The revised guidance also assumes average occupancy of 95.7% for the second half of the year, with controllable expenses expected to grow by 1.9% and noncontrollable expenses to decline by about 40 basis points. The midpoint for core FFO per share remains at $1.175 [1].

Compass Point's upgrade reflects the company's ability to navigate a challenging revenue environment through disciplined cost management and strategic capital recycling initiatives. The firm is focused on targeting newer assets and scaling in key markets like Orlando, while remaining attentive to near-term risks and market volatility.

References:

[1] https://seekingalpha.com/news/4476222-independence-realty-trust-signals-2_1-percent-same-store-noi-growth-outlook-as-supply