UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): December 14, 2021
Independence Realty Trust, Inc.
(Exact name of registrant as specified in its charter)
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Maryland |
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001-36041 |
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26-4567130 |
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(State or other jurisdiction |
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(Commission |
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(I.R.S. Employer |
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of incorporation) |
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File Number) |
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Identification No.) |
1835 Market Street, Suite 2601
Philadelphia, Pennsylvania, 19103
(Address of Principal Executive Office) (Zip Code)
(267) 270-4800
(Registrant’s telephone number, including area code)
N/A
Former name or former address, if changed since last report
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
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Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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Common stock |
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IRT |
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NYSE |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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. ☐
Introductory Note
This Current Report on Form 8-K is being filed in connection with the consummation, on December 16, 2021 (the “Closing Date”), of the transactions contemplated by that certain Agreement and Plan of Merger (the “Merger Agreement”), dated July 26, 2021, by and among Independence Realty Trust, Inc., a Maryland corporation (“IRT” or the “Company”), Independence Realty Operating Partnership, LP, a Delaware limited partnership and a subsidiary of IRT (“IRT OP”), IRSTAR Sub, LLC, a Maryland limited liability company and a wholly-owned subsidiary of IRT (“IRT Merger Sub”), Steadfast Apartment REIT, Inc., a Maryland corporation (“STAR”), and Steadfast Apartment REIT Operating Partnership, L.P., a Delaware limited partnership and a subsidiary of STAR (“STAR OP”). Pursuant to the Merger Agreement, on the Closing Date, STAR merged with and into IRT Merger Sub, with IRT Merger Sub continuing as the surviving entity (the “Company Merger”), and STAR OP merged with and into IRT OP, with IRT OP continuing as a subsidiary of IRT (the “Partnership Merger” and, together with the Company Merger, the “Mergers”). As a result of the Mergers, IRT Merger Sub remained as a wholly-owned subsidiary of IRT and IRT OP remained as a subsidiary of IRT. The combined company will conduct business under the name Independence Realty Trust, Inc. The events described below took place in connection with the consummation of the Mergers.
Item 1.01.Entry into a Material Definitive Agreement.
On December 16, 2021, IRT, in its capacity as general partner of IRT OP, entered into Amendment No. 1 (the “Amendment”) to the Fifth Amended and Restated Agreement of Limited Partnership of IRT OP, dated as of March 3, 2017 (the “Partnership Agreement”). The Amendment amends the Partnership Agreement to reflect changes in the U.S. federal tax laws made by the Bipartisan Budget Act of 2015 related to the tax audits of partnerships, including to designate IRT as the partnership representative of IRT OP, to state the powers granted to IRT as partnership representative, including the power to require the current and former partners of IRT OP to make cash payments to IRT OP equal to their share of IRT OP level assessments and to withhold from distributions to the IRT OP partners their share of the IRT OP level taxes and assessments, to require the current and former partners of IRT OP to cooperate with IRT and provide information related to tax audits of IRT OP, to give IRT the authority to amend the Partnership Agreement to implement the partnership tax audit rules in the Bipartisan Budget Act of 2015 and related rules or regulations, and to provide that the obligations of the partners of IRT OP related to tax audits of IRT OP will survive the termination, dissolution, liquidation and winding up of IRT OP and such partner’s withdrawal from IRT OP or the transfer of such partner’s interest in IRT OP.
In addition, the Amendment amends the Partnership Agreement to revise the definition of “Affiliate” and to provide that IRT shall have satisfied its obligations under Section 9.3(a) and Section 9.3(b) of the Partnership Agreement by posting or making available the reports required by Section 9.3 of the Partnership Agreement on the website maintained from time to time by IRT OP or IRT, provided that such reports are able to be printed or downloaded from such website.
The foregoing description of the Amendment does not purport to be complete and is qualified in its entirety by reference to the complete text of the Amendment, a copy of which is attached to this Current Report on Form 8-K as Exhibit 10.1 and incorporated by reference herein.
Item 2.01.Completion of Acquisition or Disposition of Assets.
At the effective time of the Company Merger (the “Company Merger Effective Time”), each share of common stock, par value $0.01 per share, of STAR (“STAR Common Stock”) issued and outstanding immediately prior to the Company Merger Effective Time (other than certain shares set forth in the Merger Agreement) was automatically converted into the right to receive 0.905 (the “Exchange Ratio”) newly issued, fully paid and nonassessable shares of common stock, par value $0.01 per share, of IRT (“IRT Common Stock”), with cash paid in lieu of fractional shares.
At the effective time of the Partnership Merger (the “Partnership Merger Effective Time”), (1) each unit of limited partnership interest of STAR OP designated as a “Class A Common Unit” (each a “Class A STAR OP Unit”) issued and outstanding immediately prior to the Partnership Merger Effective Time and owned by STAR or a subsidiary of STAR was automatically converted into the right to receive 0.905 common units of limited partnership interest of IRT OP (each, an “IROP Common Unit”) and will be owned by IRT through IRT Merger Sub and (2) each unit of limited partnership interest of STAR OP designated as a “Class A-2 Common Unit” or “Class B Common Unit” issued and outstanding immediately prior to the Partnership Merger Effective Time was automatically converted into the right to receive 0.905 IROP Common Units.
The foregoing description of the Mergers and the Merger Agreement contained in this Item 2.01 does not purport to be complete and is subject to and qualified in its entirety by reference to the Merger Agreement, which was filed as Exhibit 2.1 to the Current Report
on Form 8-K filed by IRT with the Securities and Exchange Commission (the “SEC”) on July 26, 2021 (Film No.: 211114141), and is incorporated by reference herein.
Item 2.03.Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
As a result of the Mergers, on December 16, 2021, IRT, through certain of its subsidiaries, assumed approximately $1.7 billion aggregate principal amount of existing mortgage indebtedness of STAR and its subsidiaries. The mortgage loans are secured by a total of 49 underlying properties, bear interest at fixed rates ranging from 2.8% to 4.7% per annum or at a variable rate of London Inter-Bank Offered Rate (LIBOR) plus 1.7% (as of December 1, 2021), and have remaining maturities ranging from approximately 2.7 years to 8.6 years. The assumed indebtedness has a weighted average interest rate of 3.9% per annum and a weighted average maturity date of 6.7 years, with 97.1% of such indebtedness bearing interest at fixed rates and 2.9% of such indebtedness bearing interest at a variable rate.
The assumed indebtedness contains customary covenants, restrictions and events of default for real property loans, including restrictions on the ability to sell the mortgaged property.
Item 3.02. Unregistered Sales of Equity Securities.
As indicated under Item 2.01 “Completion of Acquisition or Disposition of Assets,” IRT OP issued 6,429,481.095 IROP Common Units in the Partnership Merger (other than IROP Common Units issued to IRT or IRT Merger Sub) that were not registered under the Securities Act of 1933, as amended (the “Securities Act”). IROP Common Units are subject to exchange agreements that permit the holders of the IROP Common Units to tender the units to IRT for cash in an amount equal to the market price (based on a trailing average computation) of an equivalent number of shares of IRT Common Stock at the time we receive notice of the exchange. IRT has the option, in lieu of paying cash, to settle the exchange for a number of shares of IRT Common Stock equal to the number of IROP Common Units tendered for exchange. The IROP Common Units were issued in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act.
Item 5.02.Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Departure of Certain Directors
As of the Company Merger Effective Time, and in accordance with the Merger Agreement, William C. Dunkelberg resigned as a member of the board of directors of IRT (the “Board”) and from each of the committees of the Board on which he served. The resignation was not due to any disagreement with IRT regarding any matter related to IRT’s operations, policies or practices. Mr. Dunkelberg formerly served on the Audit Committee and the Compensation Committee of the Board.
Appointment of Directors
As of the Company Merger Effective Time, and in accordance with the Merger Agreement, the Board consists of the following ten directors: (i) Scott F. Schaeffer, Melinda H. McClure, Richard D. Gebert, DeForest Blake Soaries Jr. and Lisa Washington, each a continuing director of the Board, and (ii) Stephen R. Bowie, Ned W. Brines, Ana Marie del Rio, Ella S. Neyland and Thomas H. Purcell, each a former director of STAR. Scott F. Schaffer continues to serve as Chairman of the Board.
Ned W. Brines is expected to be named to serve on the Audit Committee, Compensation Committee and Nominating and Governance Committee of the Board, (ii) Thomas H. Purcell is expected to be named to serve on the Audit Committee and Finance & Investment Committee of the Board, (iii) Stephen R. Bowie is expected to be named to serve on the Finance & Investment Committee and Risk Committee of the Board, and (iv) Ana Marie del Rio is expected to be named to serve on the Risk Committee of the Board.
Appointment and Continuation of Certain Officers
As of the Company Merger Effective Time, and in accordance with the Merger Agreement, Ella S. Neyland became the Chief Operating Officer of IRT. The remainder of the senior leadership team of IRT includes the following continuing officers: Scott F. Schaeffer as Chairman of the Board and Chief Executive Officer, James J. Sebra as Chief Financial Officer, Farrell M. Ender as President, Jessica K. Norman as Chief Legal Officer and Jason R. Delozier as Chief Accounting Officer.
The joint proxy statement/prospectus of IRT and STAR that forms part of IRT’s registration statement on Form S-4 (File No. 333-258871), as amended, contains biographical information about the newly appointed directors and officers in Annex E thereto. Such information is incorporated herein by reference. Other than the Merger Agreement, there are no arrangements or understandings between any of Messrs. Bowie, Brines or Purcell or Mses. del Rio or Neyland, on one hand, and any other person on the other hand, pursuant to which any of Messrs. Bowie, Brines or Purcell or Mses. del Rio or Neyland was selected as a director. There are no transactions in which Messrs. Bowie, Brines or Purcell or Mses. del Rio or Neyland has an interest requiring disclosure under Item 404(a) of Regulation S-K.
Indemnification Agreements
As of the Company Merger Effective Time, each of Messrs. Bowie, Brines and Purcell and Mses. del Rio and Neyland entered into an indemnification agreement with IRT, the form of which is attached as Exhibit 10.7 to IRT’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, filed with the SEC on August 1, 2019.
Item 7.01Regulation FD Disclosure.
On the Closing Date, IRT issued a press release announcing the completion of the Mergers. A copy of the press release is furnished as Exhibit 99.1 hereto and is incorporated into this Item 7.01 by reference. The press release shall not be deemed “filed” for any purpose, including for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section. The information in this Item 7.01, including Exhibit 99.1, shall not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act regardless of any general incorporation language in the filing.
Item 8.01Other Events.
On July 27, 2021 and July 29, 2021, IRT entered into forward equity sales agreements to sell an aggregate of 16,100,000 shares of IRT Common Stock at a price of $17.04 per share, net of underwriting discounts and commissions. On December 14, 2021, IRT issued and physically settled 16.1 million shares of IRT Common Stock under the forward equity sales agreements, receiving net proceeds of $271.8 million.
Item 9.01Financial Statements and Exhibits.
(a) Financial Statements of Business Acquired.
The audited financial statements of STAR as of December 31, 2020 and December 31, 2019 and for each of the years in the three-year period ended December 31, 2020 are incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K filed by IRT on July 26, 2021 (Film No.: 211114746).
The unaudited financial statements of STAR as of September 30, 2021, and for the nine-month periods ended September 30, 2021 and 2020, are incorporated by reference to Exhibit 99.1 to the Current Report on Form 8-K filed by IRT on November 12, 2021.
(b) Pro Forma Financial Information.
The unaudited pro forma condensed combined financial statements of IRT as of and for the nine-month period ended September 30, 2021, and as of and for the year ended December 31, 2020, giving effect to the Mergers and the transactions contemplated by the Merger Agreement, will be filed as an exhibit to an amendment to this Current Report on Form 8-K not later than 71 days after the date on which this Current Report on Form 8-K is required to be filed.
(d) Exhibits.
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2.1 |
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10.1* |
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99.1* |
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104 |
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Cover Page Interactive Data File (embedded within the Inline XBRL document). |
* Filed herewith.
SIGNATURES
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 hereunto duly authorized.
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Independence Realty Trust, Inc. |
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December 16, 2021 |
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By: |
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/s/ James J. Sebra |
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Name: |
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James J. Sebra |
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Title: |
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Chief Financial Officer and Treasurer |
Execution Version
AMENDMENT NO. 1
TO THE FIFTH AMENDED AND RESTATED
AGREEMENT OF
LIMITED PARTNERSHIP OF
INDEPENDENCE REALTY OPERATING PARTNERSHIP, LP
This Amendment No. 1 (this “Amendment”), dated as of December 16, 2021, to the Fifth Amended and Restated Agreement of Limited Partnership of Independence Realty Operating Partnership, LP, a Delaware limited partnership (the “Partnership”), dated as of March 3, 2017 (the “Partnership Agreement”), is hereby entered into by Independence Realty Trust, Inc., a Maryland corporation, as general partner (the “General Partner”).
WHEREAS, the General Partner is the sole general partner of the Partnership; and
WHEREAS, acting pursuant to the power and authority granted to the General Partner under Section 14.1 of the Partnership Agreement, the General Partner has determined that this Amendment does not require the approval of any other Partner.
NOW, THEREFORE, it is hereby agreed as follows:
1. Amendment of Article 1. The definition of the term “Affiliate” is deleted in its entirely and replaced in full as follows:
“Affiliate” means,
(a)with respect to any individual Person, any member of the Immediate Family of such Person or a trust established for the benefit of such member, or
(b)with respect to any Entity, any Person which, directly or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, any such Entity. For purposes of this definition, “control,” when used with respect to any Person, means the power to direct the management and policies of such Person, directly or indirectly, whether through the ownership of voting securities, by contract or otherwise, and the terms “controlling” and “controlled” have meanings correlative to the foregoing; or
(c)any Person owning or controlling ten percent (10%) or more of the outstanding voting interests of such Person, or
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(d) any Person of which such Person owns or controls ten percent (10%) or more of the voting interests, or
(e)any officer, director, general partner or trustee of such Person or any Person referred to in clauses (b), (c) or (d) above.
2. Amendment of Section 9.3. Section 9.3 is hereby amended by adding the following new subsection (d):
(d) The General Partner shall have satisfied its obligations under Section 9.3(a) and Section 9.3(b) by posting or making available the reports required by this Section 9.3 on the website maintained from time to time by the Partnership or the Parent, provided that such reports are able to be printed or downloaded from such website.
3. Amendment of Section 10.3. Section 10.3 is hereby deleted in its entirety and replaced in full as follows:
10.3Partnership Representative
(a)General
(i)The General Partner shall be the “tax matters partner” of the Partnership for U.S. federal income tax purposes for tax years prior to the first tax year that is subject to the BBA Rules. Upon receipt of notice from the IRS of the beginning of an administrative proceeding with respect to the Partnership, the tax matters partner shall furnish the IRS with the name, address, taxpayer identification number and profit interest of each of the Limited Partners and any Assignees; provided, however, that such information is provided to the Partnership by the Limited Partners. For purposes of the Agreement, “BBA Rules” means Sections 6221 through 6241 of the Code, as amended, together with any final or temporary Regulations, Revenue Rulings, and case law interpreting Sections 6221 through 6241 of the Code, as amended (and any analogous provision of state or local tax law), as in effect following the enactment of the Bipartisan Budget Act of 2015.
(ii)The General Partner shall be the “partnership representative” of the Partnership for U.S. federal income tax purposes, and relevant state income tax purposes (the “Partnership Representative”) for all Tax years beginning with the first Taxable year that is subject to the BBA Rules; provided that the General Partner may resign as, remove and replace the Partnership’s Partnership Representative, in each case in its sole discretion. The Partnership Representative shall be entitled to, and shall, designate, a “designated individual” within the meaning of and in accordance with applicable Regulations; provided that any such designated individual may resign, and the partnership representative may remove, revoke and replace any such designated individual, in each case in accordance with
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such Regulations. The Partnership and each Partner shall take such actions as are necessary to effect the designations made in accordance with this Section 10.3(a), and the following provisions of this Section 10.3 shall apply with respect to each Partnership Representative and designated individual for the Taxable year(s) with respect to which such persons are so designated. References to Partnership Representative in the remainder of Section 10.3 shall include the designated individual unless the context otherwise requires.
(b)Powers.
(i)For all tax years prior to the first tax year that is subject to the BBA Rules, the tax matters partner is authorized, but not required:
(A)to enter into any settlement with the Internal Revenue Service with respect to any administrative or judicial proceedings for the adjustment of Partnership items required to be taken into account by a Partner for income tax purposes (such administrative proceedings being referred to as a “tax audit” and such judicial proceedings being referred to as “judicial review”), and in the settlement agreement the tax matters partner may expressly state that such agreement shall bind all Partners, except that such settlement agreement shall not bind any Partner
(1)who (within the time prescribed pursuant to the Code and Regulations) files a statement with the Internal Revenue Service providing that the tax matters partner shall not have the authority to enter into a settlement agreement on behalf of such Partner; or
(2)who is a “notice partner” (as defined in Section 6231(a)(8) of the Code, as in effect before the BBA Rules) or a member of a “notice group” (as defined in Section 6223(b)(2) of the Code, as in effect before the BBA Rules);
(B)in the event that a notice of a final administrative adjustment at the Partnership level of any item required to be taken into account by a Partner for tax purposes (a “final adjustment”) is mailed to the tax matters partner, to seek judicial review of such final adjustment, including the filing of a petition for readjustment with the Tax Court or the filing of a complaint for refund with the United States Claims Court or the District Court of the United States for the district in which the Partnership’s principal place of business is located;
(C)to intervene in any action brought by any other Partner for judicial review of a final adjustment;
(D)to file a request for an administrative adjustment with the Internal Revenue Service and, if any part of such request is not allowed by the Internal Revenue Service, to file an appropriate pleading (petition or complaint) for judicial review with respect to such request;
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(E)to enter into an agreement with the Internal Revenue Service to extend the period for assessing any tax which is attributable to any item required to be taken into account of by a Partner for tax purposes, or an item affected by such item; and
(F)to take any other action on behalf of the Partners or the Partnership in connection with any tax audit or judicial review proceeding to the extent permitted by applicable law or regulations.
The taking of any action and the incurring of any expense by the tax matters partner in connection with any such audit or proceeding, except to the extent required by law, is a matter in the sole and absolute discretion of the tax matters partner and the provisions relating to indemnification of the General Partner set forth in Section 7.6 of this Agreement shall be fully applicable to the tax matters partner in its capacity as such.
(ii)For all tax years beginning with the first tax year that is subject to the BBA Rules, the Partnership Representative is authorized, but not required (unless required by applicable law):
(A)to enter into any settlement with the IRS or state taxing authority with respect to any administrative or judicial proceedings for the adjustment of Partnership items required to be taken into account by a Partner for U.S. federal or state income tax purposes (such administrative proceedings being referred to as a “tax audit” and such judicial proceedings being referred to as “judicial review”), and in the settlement agreement the Partnership Representative may expressly state that such agreement shall bind all Partners;
(B)if a notice of a final administrative adjustment at the Partnership level (a “final adjustment”) is mailed to the partnership representative, to seek judicial review of such final adjustment, including the filing of a petition for readjustment with the Tax Court or the filing of a complaint for refund with the United States Claims Court or the District Court of the United States for the district in which the Partnership’s principal place of business is located;
(C)to intervene in any action brought by any other Partner for judicial review of a final adjustment;
(D)to file a request for an administrative adjustment with the IRS at any time and, if any part of such request is not allowed by the IRS, to file an appropriate pleading (petition or complaint) for judicial review with respect to such request;
(E)to enter into an agreement with the IRS or state taxing authority to extend the period for assessing any tax which is attributable to
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any item required to be taken into account by a Partner for tax purposes, or an item affected by such item;
(F)to take any other action on behalf of the Partnership and its Partners in connection with any tax audit or judicial review proceeding, to the extent permitted by applicable law or Regulations, including determining whether an election under Section 6221(b) and Section 6226 (and analogous provisions of state law) is available, and making an election under Section 6221(b) and Section 6226 of the Code (and analogous provisions of state law); and
(G)to take any other action required or permitted by the Code and Regulations, and analogous provision of applicable state laws, in connection with its role as Partnership Representative, which action may bind the Partnership and the Partners.
The taking of any action and the incurring of any expense by the Partnership Representative in connection with any such audit or proceeding, except to the extent required by law, is a matter in the sole and absolute discretion of the Partnership Representative and the provisions relating to indemnification of the General Partner set forth in Section 7.7 shall be fully applicable to the Partnership Representative and designated individual in their capacities as such.
(c)BBA Rules - Elections and Imputed Underpayment Modifications. If the Partnership Representative makes a push out election with respect to any adjustment to any partnership-related item to the extent such adjustment results in an “imputed underpayment” as described in Section 6225(b) of the Code, or any analogous provision of state or local law (“covered audit adjustment”), each Partner (including transferees or successors of any Partner) covenants and agrees that it shall (1) pay any and all resulting taxes, additions to tax, penalties and interest in a timely fashion and (2) cooperate with the Partnership and the Partnership Representative in good faith. To the extent the Partnership Representative does not make a push out election with respect to any covered audit adjustment, the Partnership Representative may make any modification under Section 6225(c) of the Code (or any analogous provision of state or local law) and each Partner shall, as requested by the Partnership Representative, take such action as may be necessary or prudent for the Partnership Representative to seek an imputed underpayment modification under Section 6225(c) of the Code (or any analogous provision of state or local law) (“imputed underpayment modification”), including, for the avoidance of doubt, filing an amended federal or state income tax return or following an alternative procedure to filing an amended federal income tax return, as described in Section 6225(c) of the Code, paying any and all resulting federal and state income taxes penalties and interest in a timely fashion, providing all necessary information to the Partnership to support the modification of the tax rate applicable to any imputed underpayment modification pursuant to Section 6225(c)(4) of the Code, and providing an affidavit to the Partnership Representative that such actions have been taken). To the extent the Partnership representative
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does not make a push-out election with respect to a covered audit adjustment, the Partnership Representative is authorized to obtain a loan on behalf of the Partnership to pay any Partnership Level Taxes. For purposes of the Agreement, “Partnership Level Taxes” means any federal, state, or local taxes, additions to tax, penalties, and interest payable by the Partnership as a result of a tax audit under the BBA Rules.
(d)Cooperation. Each Partner shall take all actions or refrain from taking any actions that the Partnership Representative informs it are reasonably necessary to effect a decision of the Partnership Representative in its capacity as such. References to Code Sections in this paragraph are to such provisions as amended by the BBA Rules. Each Partner shall deliver to the Partnership Representative: (i) any certificates, forms, affidavits, or instruments reasonably requested by the Partnership Representative relating to such Partner’s status under tax laws, and (ii) any information requested by the Partnership Representative in connection with the BBA Rules, including, but not limited to upper-tier partner specific information if a Partner sis or becomes a partnership for federal income tax purposes, tax returns, information regarding the character of income as capital gain or qualified dividend income, and information regarding passive activity losses).
(1)The Partnership Representative shall receive no compensation for its services.
(2)All third party costs and expenses incurred by the Partnership Representative in performing its duties as such (including legal and accounting fees and expenses) shall be borne by the Partnership.
(3)Nothing herein shall be construed to restrict the Partnership from engaging an accounting firm and/or law firm to assist the Partnership Representative in discharging its duties hereunder, so long as the compensation paid by the Partnership for such services is reasonable.
(f)Indemnification. The provisions relating to indemnification of the General Partner set forth in Section 7.7 shall be fully applicable to the Partnership Representative in its capacity as such.
(g)Survival. The provisions of this Section 10.3, including the Partnership Representative’s authority under this Section 10.3 shall survive the termination, dissolution, liquidation and winding up of the Partnership and the termination or transfer of any Partner’s interest in the Partnership and shall remain binding on each Partner for the period of time necessary to resolve any tax audit involving or related to the Partnership.
4. Amendment of Section 10.5. Section 10.5 is hereby amended as follows:
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A.Section 10.5(a). Section 10.5(a) is deleted in its entirety and is replaced in full as follows:
Each Limited Partner hereby authorizes the Partnership to withhold from, or pay on behalf of or with respect to, such Limited Partner any amount of federal, state, local, or foreign taxes that the General Partner determines that the Partnership is required to withhold or pay with respect to any amount distributable or allocable to such Limited Partner pursuant to this Agreement, including, without limitation, any taxes required to be withheld or paid by the Partnership pursuant to Sections 1441, 1442, 1445,1446 or 1471-1474 of the Code, and any Partnership Level Taxes payable by the Partnership under the BBA Rules, that the General Partner determines relates to one or more specific Partners.
B.Section 10.5(d) and (e). Section 10.5 is hereby amended by adding the new subsections (d) and (e) as follows:
(d)For the avoidance of doubt, any Person who ceases to be a Partner shall be deemed to be a Partner for purposes of this Section 10.5, and the obligations of a Partner pursuant to this Section 10.5 shall survive indefinitely with respect to any taxes withheld or paid by the Partnership that relate to the period during which such Person was actually a Partner, regardless of whether such taxes are assessed, withheld or otherwise paid during such period.
(e)Notwithstanding the foregoing, the General Partner may choose to not recover an amount of Partnership Level Taxes or other taxes withheld or paid with respect to a Partner under this Section 10.5 if the General Partner determines, in its reasonable discretion, that such an decision would be in the best interests of the Partnership (e.g., where the cost of recovering the amount of taxes withheld or paid with respect to such Partner is not justified in light of the amount that may be recovered from such Partner).
5. Entire Agreement. Together with the Partnership Agreement (and the Exhibits thereto), this Amendment contains the entire understanding and agreement among the Partners with respect to the subject matter hereof and supersedes all prior written or oral understandings or agreements among them with respect thereto.
6. Headings. The headings of the sections of this Amendment are inserted for convenience only and shall not constitute a part hereof nor affect in any way the meaning or interpretation of this Amendment.
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7. Partnership Continuation; Partnership Agreement Ratified and Confirmed. This Amendment shall not dissolve the Partnership, and the business of the Partnership shall be deemed to have continued notwithstanding this Amendment, and notwithstanding any contrary rights and privileges which may be contained in the Partnership Agreement. Except as amended by this Amendment, the Partnership Agreement is hereby ratified and confirmed in all other respects and shall otherwise remain unmodified and in full force and effect.
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IN WITNESS WHEREOF, the General Partner has executed this Amendment as of the date first written above.
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GENERAL PARTNER: |
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INDEPENDENCE REALTY TRUST, INC, a Maryland corporation
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By: |
/s/ James Sebra |
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Name: James Sebra |
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Title: Chief Financial Officer |
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[Signature Page to Amendment No. 1 to Fifth Amended and Restated Agreement of
Limited Partnership of Independence Realty Operating Partnership, LP]
Independence Realty Trust and Steadfast Apartment REIT Complete Strategic Merger
PHILADELPHIA, PA and IRVINE, CA, December 16, 2021 -- (BUSINESS WIRE) -- Independence Realty Trust, Inc. (NYSE: IRT) (“IRT”) and Steadfast Apartment REIT, Inc. (“STAR”) today announced the completion of the merger transaction between the two companies, forming a combined company with an equity market capitalization of approximately $5.6 billion and a total enterprise value of approximately $8.3 billion, as of market close on December 15, 2021. The transaction was previously approved by both companies’ stockholders at their respective special meetings held on December 13, 2021. The combined company, headquartered in Philadelphia, Pennsylvania, will retain the Independence Realty Trust name and will trade under the existing ticker symbol “IRT” on the New York Stock Exchange.
“We are excited to announce the successful completion of our merger with STAR, together forming a leading public multifamily REIT focused on the high-growth U.S. Sunbelt region,” said Scott F. Schaeffer, IRT’s Chairman and CEO. “Our combined company creates a best-in-class operating platform, further redevelopment opportunities and notable economies of scale in markets where we expect to benefit from strong growth fundamentals. We remain on-track to generate approximately $28 million in annual synergies and realize the immediate accretion to Core FFO per share. Our future is bright as we unite two high-quality portfolios in attractive non-gateway markets, and look to strengthen and expand our business, while delivering long-term value for our stakeholders.”
Leadership and Organization
Concurrently with the completion of the merger, the number of directors on IRT’s Board of Directors was increased to 10, and five incumbent directors of the STAR Board of Directors, Stephen R. Bowie, Ned W. Brines, Ana Marie del Rio, Ella S. Neyland and Thomas H. Purcell, joined the following five incumbent directors of the IRT Board of Directors, Scott F. Schaeffer, Richard D. Gebert, Melinda H. McClure, DeForest Blake Soaries Jr., and Lisa Washington. Scott F. Schaeffer continues to serve as CEO and Chairman of the Board of Directors.
James J. Sebra continues to serve as Chief Financial Officer of the combined company. Farrell Ender continues to serve as President of the combined company. Jessica Norman, formerly IRT’s Executive Vice President and General Counsel, serves as Chief Legal Officer of the combined company. Ella S. Neyland, formerly STAR’s President, Chief Financial Officer and Treasurer, joined the combined company as its Chief Operating Officer.
The Merger
As a result of the merger, each former share of STAR common stock has been converted into 0.905 shares of newly issued IRT common stock, and cash in lieu of fractional shares. On a pro forma basis former STAR common stockholders hold approximately 47% of the combined company’s common equity, with continuing IRT common stockholders holding approximately 53% of the combined company.
Portfolio Optimization and Capital Allocation Update
As part of the merger, IRT identified nine assets to sell in order to manage market concentrations. In the fourth quarter of 2021, five assets were sold, two from the legacy IRT portfolio and three from STAR, while the remaining four legacy IRT assets are expected to be disposed of during the first quarter of 2022. IRT expects to receive total gross proceeds of approximately $404 million for the nine assets sold, representing an economic cap rate of approximately 3.8%. Proceeds from these non-core asset sales, along with proceeds received from IRT’s July forward equity offering totaling approximately $271.8 million will be used to pay down debt of the combined company.
Advisors
Barclays is acting as lead financial advisor and BMO Capital Markets is acting as financial advisor, and Troutman Pepper Hamilton Sanders LLP is acting as legal advisor to IRT. RBC Capital Markets and Robert A. Stanger & Co. are acting as financial advisors, and Morrison & Foerster LLP is acting as legal advisor to STAR.
About IRT
Independence Realty Trust (NYSE: IRT) is a real estate investment trust that owns and operates multifamily apartment properties across non-gateway U.S. markets, including Atlanta, Dallas, Louisville, Memphis, Raleigh and Tampa. IRT’s investment strategy is focused on gaining scale within key amenity rich submarkets that offer good school districts, high-quality retail and major employment centers. IRT aims to provide stockholders attractive risk-adjusted returns through diligent portfolio management, strong operational performance, and a consistent return on capital through distributions and capital appreciation. More information may be found on IRT’s website www.irtliving.com.
Forward-Looking Statements
This press release contains forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933, as amended, and Section 21E of the U.S. Securities Exchange Act of 1934, as amended. These forward-looking statements, which are based on current expectations, estimates and projections about the industry and markets in which the combined company operates and beliefs of and assumptions made by IRT management, involve uncertainties that could significantly affect the financial results of the combined company. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and variations of such words and similar expressions are intended to identify such forward-looking statements, which generally are not historical in nature. Such forward-looking statements include, but are not limited to, statements about the anticipated benefits of the merger, including future financial and operating results, and the combined company’s plans, objectives, expectations and intentions. All statements that address financial and operating performance, events or developments that we expect or anticipate will occur or be achieved in the future are forward-looking statements. These statements are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict. Although we believe the expectations reflected in any forward-looking statements are based on reasonable assumptions, we can give no assurance that our expectations will be attained and therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements. Some of the factors that may affect outcomes and results include, but are not limited to: risks related to the impact of COVID-19 and other potential future outbreaks of infectious diseases on our financial condition, results of operations, cash flows and performance and those of our residents as well as on the economy and real estate and financial markets; changes in market demand for rental apartment homes and pricing pressures, including from competitors, that could limit our ability to lease units or increase rents or that could lead to declines in occupancy and rent levels; uncertainty and volatility in capital and credit markets, including changes that reduce availability, and increase costs, of capital; inability of tenants to meet their rent and other lease obligations and charge-offs in excess of our allowance for bad debt; legislative restrictions that may delay or limit collections of past due rents; risks endemic to real estate and the real estate industry generally; impairment charges; the effects of natural and other disasters; delays in completing, and cost overruns incurred in connection with, our value add initiatives and failure to achieve projected rent increases and occupancy levels on account of the initiatives; any effects of the completion of the merger, including failure to realize the cost savings, synergies and other benefits expected to result from the merger; the ability to successfully integrate the IRT and STAR businesses; unexpected costs of REIT qualification compliance; unexpected changes in our intention or ability to repay certain debt prior to maturity; inability to sell certain assets within the time frames or at the pricing levels expected; costs and disruptions as the result of a cybersecurity incident or other technology disruption; and share price fluctuations those additional risks and factors discussed in reports filed with the Securities and Exchange
Commission by IRT from time to time, including those discussed under the heading “Risk Factors” in our most recently filed reports on Forms 10-K and 10-Q. We undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events, except as may be required by law.
Independence Realty Trust, Inc. Contact
Edelman Financial Communications & Capital Markets
Ted McHugh and Lauren Torres
917-365-7979
IRT@edelman.com
Source: Independence Realty Trust, Inc.