IRT and STAR Merger

12 Months Ended

Dec. 31, 2022

Business Combination and Asset Acquisition [Abstract]

On December 16, 2021, the STAR Merger closed. In the STAR Merger, each share of common stock, par value $0.01 per share, of STAR issued and outstanding immediately prior to the STAR Merger was converted into 0.905 newly issued shares of IRT common stock, par value $0.01 per share, with cash paid in lieu of fractional shares. In addition, each then outstanding unit of limited partnership of STAR OP (other than units owned by STAR) was automatically converted into 0.905 common units of limited partnership of IROP (each such unit, an “IROP unit”). Following the STAR Merger, continuing IRT common stockholders and IROP unitholders, as a group, held approximately 53% of the issued and outstanding shares of common stock of the combined company and former STAR common stockholders and STAR OP unitholders, as a group, held approximately 47% (assuming, in each case, an exchange of each IROP unit for a share of IRT common stock). The STAR Merger was consummated in order to increase the scale and scope of our business, provide enhanced portfolio diversification and exposure to high growth markets, and to unlock synergies.

Through the STAR Merger, we acquired 68 apartment communities that contained 21,394 units and two apartment communities that are under development and that will contain upon completion an aggregate of 621 units

(unaudited). The consolidated net assets and results of operations of STAR are included in our consolidated financial statements from the closing date of December 16, 2021, going forward.

The following table summarizes the purchase price of STAR as of the date of the STAR Merger:


	Common Stock		OP Units		Amount
Shares of STAR common stock and STAR OP common units exchanged	110,188,893		7,104,399		117,293,292
Exchange ratio	0.905		0.905		0.905
Shares of IRT common stock and IRT OP common units issued	99,720,948		6,429,481		106,150,429
Closing stock price of IRT on December 15, 2021	$	24.45	$	24.45	$	24.45
Fair value of IRT common stock and IRT OP common units issued to former holders of STAR common stock and STAR OP common units	$	2,438,177	$	157,200	$	2,595,378
STAR indebtedness paid off in connection with the Mergers					288,530
Consideration transferred					$	2,883,908
Fair value of STAR debt assumed by IRT					1,793,614
Total purchase price					$	4,677,522

We accounted for the STAR Merger as a business combination under the acquisition method of accounting under ASC 805, which requires, among other things, the assets and liabilities assumed to be recognized at their fair values as of the acquisition date. Management engaged a third-party valuation specialist to assist with the fair value assessment of the investments in real estate, which included an allocation of the purchase price. Similar to management’s methods, the third party generally used income, market, and cost approaches to determine the fair value of the assets acquired. The third party used stabilized NOI and market specific capitalization and discount rates. Management reviewed the inputs used by the third party specialist as well as the allocation of the purchase price provided by the third party to ensure reasonableness and that the procedures were performed in accordance with management’s policy. The following table shows the purchase price allocation of STAR’s identifiable assets and liabilities assumed as of the date of the STAR Merger:


	Amount
Assets:
Real estate held for investment	$	4,547,608
Real estate held for development	38,949
Cash and cash equivalents	69,179
Restricted cash	33,228
Other assets	23,596
Derivative assets	90
Intangible assets	58,048
Total assets	$	4,770,698

Liabilities:
Indebtedness	$	1,793,614
Accounts payable and accrued liabilities	79,099
Accrued interest payable	3,113
Other liabilities	10,965
Total liabilities	1,886,791
Net assets acquired	$	2,883,907

For the period from December 16, 2021 through December 31, 2021, STAR contributed $15,589 of revenues and $18,388 of net loss to our results of operations, inclusive of certain merger and integration costs.

We incurred total merger and integration related expenses of $5,505 and $47,063 for the years ended December 31, 2022, and 2021, respectively. These amounts were expensed as incurred, and are included in the consolidated statements of operations in the item titled “Merger and integration costs”, and primarily consist of technology migration and implementation costs, consulting and professional fees and employee severance costs.

The following unaudited pro forma operating information is presented as if the STAR Merger occurred in 2021 and had been included in operations as of January 1, 2020. This pro forma information does not purport to represent what the actual results of the Company would have been had the STAR Merger occurred on this date, nor does it purport to predict the results of operations for future periods.


	Unaudited Year Ended December 31,
	2021		2020
Revenue	$	591,292	$	540,516
Net income (loss) (a)	$	103,932	$	(44,899)
Net (income) loss attributable to noncontrolling interests	$	(3,426)	$	1,480
Net income (loss) attributable to common stockholders	$	100,506	$	(43,419)
Net income (loss) attributable to common stockholders per share - basic and diluted	$	0.45	$	(0.22)


			(a)			Contemporaneously with the closing of the STAR Merger, we hired 485 employees, previously employed by STAR, to operate the properties acquired in the STAR Merger in addition to serving in corporate positions.