Jul 29, 2015
Executives
Andres Viroslav - IR Scott Schaeffer - Chairman, President and CEO Jim Sebra - CFO and Treasurer Farrell Ender - President
Analysts
Wilkes Graham - Compass Point Daniel Donlan - Ladenburg Craig Kucera - Wunderlich Brian Hogan - William Blair
Operator
Good day ladies and gentlemen, and welcome to your Q2 2015 Independence Realty Trust Earnings Conference Call. My name is Grant and I'll be your operator for today.
At this time, all participants are in listen-only mode. [Operator Instructions] As a reminder, this call is being recorded for replay purposes.
I would now like to turn the call over to Mr. Andres Viroslav.
Please go ahead.
Andres Viroslav
Thank you, Grant, and good morning to everyone. Thank you for joining us today to review Independence Realty Trust's second quarter 2015 financial results.
On the call with me today are Scott Schaeffer, IRT's Chief Executive Officer; Jim Sebra, IRT's Chief Financial Officer; and Farrell Ender, President of Independence Realty Trust. This morning's call is being webcast on our website at www.irtreit.com.
There will be a replay of the call available via webcast on our website and telephonically beginning at approximately 1:00 p.m. Eastern Time today.
The dial in for the replay is (888) 286-8010 with a confirmation code of 40907553. Before I turn the call over to Scott, I would like to remind everyone that there may be forward-looking statements made in this call.
These forward-looking statements reflect IRT's current views with respect to future events and financial performance. Actual results could differ substantially and materially from what IRT has projected.
Such statements are made in good faith pursuant to the Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995. Please refer to IRT's press release and filings with the SEC for factors that could affect the accuracy of our expectations or cause our future results to differ materially from those expectations.
Participants may discuss non-GAAP financial measures in this call. A copy of IRT's press release containing financial information, other statistical information, and a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measure is attached to IRT's most recent current report on Form 8-K available at IRT's website www.irtreit.com under Investor Relations.
IRT's other SEC filings are also available through this link. IRT does not undertake to update forward-looking statements in this call or with respect to matters described herein except as may be required by law.
Now, I'd like to turn the call over to IRT's Chief Executive Officer, Scott Schaeffer. Scott?
Scott Schaeffer
Thanks, Andres, and thank you all for joining our call today. First of all, we believe there is an absolute disconnect between the fundamentals of our business and the recent performance of IRTs common stock.
The portfolio is performing well and good things are happening highlighted by our previously announced acquisition of Trade Street Residential, and continuing opportunities to grow the way we have over the past two years. The second quarter total revenues grew, occupancies remained stable, and we continue to push run rates when impossible.
Jim will share these details shortly. On May 11, 2015, we announced that we entered into an agreement to acquire Trade Street Residential, the S4 has been filed and we expect it to be declared effective by the SEC shortly.
The transaction is expected to close by the end of the third quarter. We also recently received the commitment from KeyBanc on a new credit facility plus a 120 million interim facility.
We expect to use both of these facilities to fund the Trade Street acquisition. The acquisition provides many positives to IRT and moves us to a step closer to our goal of building IRT into a leading owner of multi-family properties and predominantly non-gateway markets.
First, IRT will have an enhanced scale as our asset base will increase by approximately $650 million to $1.4 billion as the portfolio increases from 31 to 50 properties and our number of units will increase 55% to 14,044 units. Also liquidity in IRT shares should improve since half the merger consideration will in the form of IRT stock approximately 16 million shares will issue to current Trade Street shareholders at closing.
Second, the addition of Trade Street's high quality apartment communities will reduce IRTs average property age to 20 years while improving average base rent occupancy levels and operating margins on a combined portfolio. Third, the acquisition accelerates IRTs market penetration as a leading non-gateway multi-family property owner by expanding IRTs geographic diversity into eight new markets while enhancing IRTs presence in three existing markets with the focus on South-East region and finally we expect the transaction will have an immediate financial benefit for IRT.
The transaction is expected to be accretive in 2016 core FFO with meaningful identified run-rate cost savings and NOI upside from value added CapEx. The S4 [ph] fully details the transaction and perform an impact on IRT but I would like to take a moment to summarize our plans for funding the transaction and our longer term plans regarding our balance sheet.
To fund the transaction we will assume and require 161 million in mortgage financing, draw down 262 million from our new credit facility and fully utilize our new 120 million interim facility. The Trade Street shareholders will receive approximately 16 million IRT shares and we will use approximately 11 million of cash from IRTs balance sheet.
We will not issue common equity at current levels to fund any portion of this transaction. After closing the transaction we expect IRTs debt to total assets to be approximately 71%, to reduce our leverage we have identified three properties for sale which we believe have reached their economic potential and don’t fit within our post Trade Street geographic focus.
The proceeds would be used to retire short term debt thereby reducing our leverage. Looking forward our goal is to have leverage reduced to approximately 50% of assets within two years.
At this point I would like to turn the call over to Jim to provide details on our results and then to Farrell to discuss IRTs portfolio and provide some color around the Trade Street assets. Jim?
Jim Sebra
Thank you, Scott. I will discuss our operating results for the quarter first and end with a discussion of our merger with Trade Street.
During the quarter core FFO is $0.19 per share or $6.3 million up 85% to $3.4 million for the same quarter last year. This quarter we are reporting a GAAP net income of $337,000.
During the quarter revenue was up $11.2 million as compared to last year, this increase is primarily for $9.9 million of revenue from 12 properties that were required after the second quarter of last year. Property operating expenses increased $5 million this quarter as compared to last quarter most of which was associated with properties acquired since Q2 of last year.
NOI for the portfolio was $12.2 million with an NOI margin of approximately 53%. At quarter-end, the portfolio's occupancy was 92.5% with a weighted average monthly rental rate of $840.
As discussed on previous calls when we acquire a property some transition occurs resulting in tenant turnover which is anticipated in our underwriting. Most of the properties acquired had to set way transition whereas that transition is still in progress.
With regard to the same store portfolio, rental revenue was $11.7 million up 5.1% this quarter as compared to last year as rental rates picked up across the same store portfolio. Operating expenses at the same store properties were $5.6 million up $200,000 or 3.5%.
Same store NOI was $6.1 million this quarter, an increase of 6.5% over the second quarter of last year. At quarter end the same store portfolio reported occupancy at 92.2% with a weighted average monthly rental rate of $787.
During the quarter we closed on our previously announced acquisition of a 236 unit property in Indianapolis for $25.3 million. The property was 91% occupied at closing with an average effective monthly rent of $925 per year.
We acquired this property with cash and subsequently financed the property with $14.8 million of borrowings on our existing line of credit. During the quarter we incurred $1.3 million of the management fees paid to our external advisor, of this amount $1.1 million represented our base asset management fee and $200,000 represented our incentive management fees.
Interest expense increased by $2.3 million during the second quarter as compared to the second quarter last year. This increase is due to the $229 million of financing obtained and purchase of properties acquired after the second quarter of last year.
As of June 30, our weighted average respective interest cost is 3.6% and our consolidated leverage is 61.9%. We ended the quarter with $770 million of growth in assets in real estate representing just over 9000 units and $457 million of debt.
During the quarter we spent $2.2 million in capital expenditures, $1 million of which was associated revenue in our acquisition related CapEx and $1.2 million or a $133 per unit on recurring CapEx. Normally our maintenance CapEx runs higher in the second and third quarters as the weather [indiscernible].
We target to spend approximately $350 to $400 per unit annually on maintenance CapEx. Turning now to Trade Street, we expect to close the transaction close by the end of the third quarter.
As Scott mentioned we did file our first amended to our Form S4 registration statement and have asked the SEC to declare it effective so we can begin the processing process. As Scott mentioned we have agreed to acquire Trade Street through a merger at $7.60 per share of which approximately 50% will be paid in cash and 50% will be paid through the issuance of IRT shares at a $9.25 per IRT share reference price.
This is a good transaction for IRT as an increase through operating scale by adding $650 million of assets through our balance sheet comprising just under 5000 units and reducing the average age of our portfolio to 20 years along with a host of other benefits. Upon the closing the merger we received a commitment from KeyBanc on a new $325 million three year credit facility and a 18 months $120 million interim term facility.
The credit facility bears interest on a siding [ph] scale ranging from a 155 basis points over the LIBOR to 245 basis points over LIBOR based on our corporate leverage. At closing we’re expecting to draw $276 million on this credit facility which includes $14 million to refinance our existing line of credit.
The bridge term loan bears interest at LIBOR plus 500 basis points and is expected to be fully drawn in closing. In addition we’re obtaining and assuming a $160 million of first mortgage financing on six properties acquired from Trade Street.
These mortgages will have interest rates ranging from 3.2% to 4.3% and maturities ranging from September 2020 to September 2023. While we have financing from our investment bankers these key bank facilities provide longer term and more flexibilities to fund the merger and remaining plans for growth at the credit facility has an quoting [ph] feature up to $450 million.
As Farrell will discuss, the Trade Street properties are experiencing positive NOI growth as their first generation leases term. We forecast that the Trade Street properties will provide approximately $38 million to $39 million of NOI annually.
By adding this into our historical portfolio we are expecting to see core FFO of approximately $0.21 to $0.22 per quarter once the transaction is closed. At this point we will turn the call over to Farrell to discuss the portfolio.
Farrell?
Farrell Ender
Thanks, Jim. Scott mentioned the current IRT portfolios performing well including the two outliers.
Windrush one of our communities in Oklahoma City is located two miles from the University of Central Oklahoma and has exposure to its student volume [ph]. So for this reason the property historically experiences a short term drop in occupancy in June with occupancy ramping back up in July and August as schools open for session.
The community is 94% pre-lease and has experienced an average occupancy of 94% over the past 12 months. In regards to the Bay View which we purchased in May the previous management entered into a corporate lease program at the local hospital in 2010, the 29 units or 12% of the property at below market rents.
Prior to closing we came in terms with the hospital to terminate this contract and phase up the corporate units. We have recognized an average monthly rental increase of $191,000 equal to 23% on the seven units we have released to-date.
As the portfolio continues to scale and becomes more granular these fluctuations will have less and less of impact on any given quarter. We are continuing to see strong fundamentals in the multi-family sector.
Our markets are experience stable occupancy and continued rent growth both year-over-year and quarter-over-quarter. On a macro level total deliveries for 2015 are reaching pre-recession levels but in a much different environment.
There are significantly more renters in the rental pool by choice and necessity. The Urban Institute projected between 2010 - 2030 growth in rental households will exceed that of home loan by an increase of $13 million directly compared to $9 million home owner households through several factors that are contributing to this.
Millenials are finally working, creating households and generally postponing the decision to [indiscernible] spend the amount of finally remain in pool. There is general attitude shift between renting and owning where renting has become more acceptable and a lifestyle choice.
Credit remains challenging making it difficult for many to qualify for home loans and the general overhang from the recession persists. We believe these factors will continue to present opportunities in our business with stable occupancy and consistent rent growth.
On May 1 we purchased a 236 unit community built in 2004 and located in Indianapolis. We purchased the property from a tenant in common ownership structure with a third-party managing the property, and believe that we can recognize operational upside relatively quickly in these situations, for instance, with the calculation of the corporate lease contracts.
The property is well located and the capital enables us that the interchange of 5465 which is the city [ph] and I69. It's a short distance with a 1 million square foot capital business park in the capital mall which is the largest mall in the state.
The acquisition is consistent with our approach to find newer communities in well located sub-markets and close proximity to employment and retail. This particular sub-market contains 15,000 units with a 4.5% vacancy and an average effective rent of $832.
No units were added to the sub-market in 2015 and only 99 additional units are expected to be delivered in 2016. Regards to the Trade Street portfolio, we saw an opportunity to add quality portfolio communities in some new markets while expanding our footprint in existing markets.
The acquisition creates immediate scale in the cities that has strong fundamentals. The growth in Ralyburne [ph] is well documented.
Greenville is the manufacturing machine with BMW, Michelin, GE, Ford, and Martin all with facilities are headquartered in the area. Boeing is continuing to grow in Charleston and Volvo just announced the city at the location for its first US manufacturing plant.
The Dow's assets are well located in the fiscal plan and the Craig Ranch property will benefit due to a success ability to legacy office retail quarter which is experiencing significant development. ZX, Toyota and Liberty Mutual, will create 10,000 additional jobs in the area located just 10 minutes to the avenues in Craig Ranch.
In addition, given that many of the communities are recently built, several of the properties contain first generation leases with rents that are typically below market. As you can see, rental rates at least property, because of this we believe there is stability on some assets to outperform market rent growth.
We also intend to implement an interior renovation in two other communities and install much needed corporate to two of the Dallas communities. These improvements are budgeted to cost $4 million and would generate additional 1 million in NOI annually.
We are looking forward to close on the transaction and have a reasonably based management platform that will make the transition seamlessly possible. Scott?
Scott Schaeffer
Thank you, Farrell. At this point Grant, let's open the call up for questions.
Operator
Thank you. [Operator Instructions] First question comes from the line of Wilkes Graham from Compass Point.
Please go ahead.
Wilkes Graham
Good morning, everyone.
Scott Schaeffer
Good morning, Wil.
Wilkes Graham
I appreciate all the detail on the financing of the TSRE deal. Can we just go over the numbers again on that?
Jim, I think you said that the KeyBanc facilities, $325 million of capacity, it's three years and it's LIBOR plus 165 to 245. Is that correct?
Jim Sebra
That's correct. Spread data on our corporate leverage.
Wilkes Graham
Right. And you're going to draw $276 million right away?
Jim Sebra
That's correct and that includes us paying back or repaying or refinancing the bank line of credit which has around $14 million outstanding today.
Wilkes Graham
Okay. And then there is the $100 million bridge loan, LIBOR plus 500, what was the term on that?
Jim Sebra
It's $120 million interim term loan. It's got a 12-months term with a six month extension option, so 18 months old.
Wilkes Graham
Okay. And then you've got the $161 million of mortgages, do you know the weighted average rate on this?
Jim Sebra
To begin, 3.8%.
Wilkes Graham
Okay, great.
Jim Sebra
This ranges from 3.2% to 4.3%.
Wilkes Graham
And Scott, I was just trying to jot down everything you were saying, where do you have debt-to-total assets sort of day one when the deal closes relative to the 50% you want to get to in two years?
Scott Schaeffer
71%.
Wilkes Graham
Okay. And so…
Scott Schaeffer
And we think we can reduce that down to about 66% or 67%, relatively quickly after closing by selling the number of properties that we've identified as I said we believe they have reached their value potential and they are really not within the company's footprint post Trade Street closing.
Wilkes Graham
Okay. And so your point is, obviously the stock has disconnected from fundamentals, you're comfortable just staying at a higher leverage range until the stock prices are at a level that makes us stable [ph].
Scott Schaeffer
We are, and we have again, we've identified these properties for sale, there is a couple of properties within the TSRE portfolio that we think we probably were not going to hold long term. So we will appropriately generate cash of capital from other areas that rather than issuing common stock to start to reduce leverage.
Wilkes Graham
How far down do you think you can get that leverage number in the next couple of years?
Scott Schaeffer
I would like it to be about 50%, and I think we can get there.
Wilkes Graham
And do you think you can get there all the way there without raising equity at all?
Scott Schaeffer
Probably not, probably down to the 50% leverage, but remember at the same time we want to continue to grow the portfolio. I mean it all is determined on where the equity is trading.
And we have no preferred stock outstanding at all, other peers of ours are growing and growing and growing ridiculously amounts of preferred stock, we haven't done that, so that's an opportunity in the future. I don't like where our commonstock is trading, I think it makes no sense and I've made the point directly and I reiterated again, we are not going to issue shares anywhere near this level.
Wilkes Graham
Okay, I appreciate that. And Jim, just to confirm, the maintenance CapEx was $1.2 million for the quarter?
Jim Sebra
That's correct, about $133 per unit.
Wilkes Graham
Okay. I think that's it for me, thank you.
Scott Schaeffer
Thanks, Wil.
Operator
Thank you for your question. Our next question comes from the line of Daniel Donlan from Ladenburg.
Please go ahead.
Daniel Donlan
Thank you, and good morning. Jim, can you walk through - I think you said that same-store in line was up 6.5% on the quarter, I wasn't able to find that number in the press release, could you just kind of walk through the components of what's driving that increase?
Jim Sebra
Sure, it's primarily driven by just increase in revenues, so the same-store revenues for the quarter was $11.7 million, and that was up about 5.1% since the second quarter of last year.
Daniel Donlan
Okay. But then, expenses - go ahead.
Jim Sebra
Probably our banks was $5.6 million, and that was up $200,000.
Daniel Donlan
So, I guess maybe the March, I guess that - so what's that - why is the same-store NOI up more than the revenues if the expenses went up, is that just NOI margins having some hard time?
Jim Sebra
Yes, the NOI margin improved in that quarter from Q2 last year to Q2 this year.
Daniel Donlan
Okay, alright. Okay, that's helpful.
And as talking about the merger, I think you said that you saw those run rate between $0.21 and $0.22, is that right?
Jim Sebra
That's correct.
Daniel Donlan
And what does that contemplate in terms of - I assume that it contemplates no equity issuance, and then does that contemplate that you keep the bridge loan and the line of credit outstanding the amounts that you guys just discussed?
Jim Sebra
It does not include any equity related capital raising and it does also factor in, as Scott mentioned, recycling some capital to regain the bridge facility.
Daniel Donlan
Okay, that makes sense. But it doesn't have any terming out of the credit facility that you guys are going to pay?
Jim Sebra
That's correct.
Daniel Donlan
Okay. And then as far as a pro forma dividend, you're yielding like 9.7% right now I think Trade Streets in the mid sixes, it seems like you're not getting credit at all for the dividend that you're paying.
Any thoughts that kind of - you discussed you wanted to lever one of the easiest ways, delever would be to lower your yield or lower the dividend that you're paying, could you provide us any color on that? Should we expect a more of a reasonable yield going forward on the featured company?
Scott Schaeffer
We have no intention will we reduce the dividend. We think that the yield should be lower because the share price should be higher.
The company pro formed for the TSRE closing, as Jim said, has a core FFO that's $0.22 but there is more than enough to cover the $0.18 dividend and that’s where you expect it to be as of now.
Jim Sebra
But I just also want to clear one thing up. Your first question regarding the growth in NOI and same store, the revenues were up 5.1% year-over-year the expenses were 3.5%, so that’s where you get the 6% growth in NOI.
Daniel Donlan
And then one of the things that Trade Street did is they had a nice supplemental that provided all the metrics of same store NOI and what went into that, is this something that you guys are going to contemplate doing it, I think it would very much help investors be able to underwrite the portfolio and better understand the metrics because 6.5% same store NOI growth is something that is really positive relative to some of the other names and it wasn’t mentioned in the press release.
Jim Sebra
We will be putting out a supplemental after the completion of the Trade Street transaction and it will be part of the quarterly process going forward.
Operator
And our next question comes from the line of Craig Kucera from Wunderlich. Please go ahead.
Craig Kucera
I was revisiting your comments from last quarter and I think it was before you announced Trade Street of course but you did mention you had a $140 million pipeline. Is there any contemplation or ability to do that and are you committed to purchase any of those or have all those transaction sort of enabled for the near term?
Scott Schaeffer
We’re not committed at this point, we closed on one of them which we announced and we have enough capacity after the Trade Street closing to acquire another 2 or 3 properties without raising additional capital, let me be clear about that and that’s how we’re managing the pipeline forward. So we can close Trade Street, we will close Trade Street we have the capacity to close another 2 or 3.
We’re managing through that pipeline. We have not committed to it yet but we expect that to happen before the end of the year.
Craig Kucera
And is that - any future acquisitions beyond Trade Street, is that component of your guidance or is your guidance sort of the acquisition of Trade Street on a standalone basis?
Scott Schaeffer
The guidance is the acquisition of Trade Street's only, not another acquisition.
Craig Kucera
And it sounds like as you were discussing some of the assets that you’re looking to sell I think [indiscernible] those are likely to be Trade Street dispositions as opposed to existing IRT assets?
Scott Schaeffer
No they are existing IRT assets that if you look at the in our investor presentation if you look at the map there is a number of properties that don’t appear on the map and they are in a footnote and the reason they don’t appear on the map is because they are - we will call them outliers they are not in the - the combined company is geographic focus at the moment. So we think it would be appropriate to sell those not only because of where they like but because we also believe they have really reached their economic potential.
They are in markets that have seen strong growth values are extremely high and they are performing very well. So it's the time to sell.
I didn’t want to for Trade Street because I don’t want to be reducing the company that’s already considered too small. So after we close Trade Street these then become properties, they are easy to sell and again use those proceeds to deliver.
Craig Kucera
And just lastly kind of what kind of cap rate do you think you’re get on those dispositions?
Scott Schaeffer
I would think in the 5% range.
Operator
Our next question comes from the line of Brian Hogan from William Blair. Please go ahead.
Brian Hogan
What were the cap rates that you bought those properties at?
Jim Sebra
They were part of the original portfolio so I think it's back to - it's above 6%.
Scott Schaeffer
Above 6%, above 7% probably. These are properties that IRT has had since the beginning.
Jim Sebra
Yes since mid-2011.
Brian Hogan
I guess what are the NOI from those three properties and then are those dispositions included in your guidance as well of 21, 22?
Scott Schaeffer
Yes the dispositions are included in the guidance.
Brian Hogan
As in like removed or? Sorry.
Scott Schaeffer
It is.
Brian Hogan
Okay. And so the NOI where you can kind of back into that or continue to?
Scott Schaeffer
Well we’re estimating about $50 million in cash proceeds from the sale of those three assets.
Brian Hogan
The occupancy rates obviously they got to move around from quarter to quarter and you mentioned that couple of factors but broadly occupancy rates were down across most of the portfolio, what do you attribute that to just pushing these rates or?
Scott Schaeffer
It's pushing these rates and it's also timing it, you’re looking at a 630 date at the end of the month and occupancies are usually lower as you move out but there is nothing specific if you can point to and we’re managing to 94% - 95% if we take out the two properties that I mentioned that you got blended 94% occupancy on the entire portfolio.
Brian Hogan
And what do you think you’re ability to continue to push these rates?
Scott Schaeffer
We think it's very positive as you mentioned all the factors that are going into markets. I mean everybody is focused on deliveries but it's really not having significant impact on the ability to push rents.
So we’re going to continue to do till we can.
Jim Sebra
We believe we have another two years - a clear two years of rent increases within these market.
Brian Hogan
Of how much, about 3% per year?
Scott Schaeffer
3 to 5, depending on the property.
Brian Hogan
The two Trade Street properties that you mentioned that potential sale, are those included in that 21 - 22?
Scott Schaeffer
We were looking at the portfolio of what we might discuss but we didn’t talk about the sale, the two properties I mentioned were older properties one at Atlanta and one at Dallas, the ability to increase rents with the small value add program so that’s where we anticipate doing with this too.
Operator
Our next question comes from the line of John Bender [ph] from National Securities. Please go ahead.
Unidentified Analyst
So just on your thoughts of 3% to 5% rent increases over the next two years, I think a lot of larger group usually demographics and the Trade Street acquisition, what is your forwardability to pursue additional one-off acquisitions as you see opportunities develop. I know you guys have a leverage goal that you want to meet, you’re also selling properties and so how are you going to address your [indiscernible] that might come where property is very attractively priced you want to add it to the portfolio but you don’t want to get in the way of [indiscernible].
Scott Schaeffer
Well I think it's a for lack a better of term, the gain time decision if the property is not attractive. We will find a way again we have no preferred shares again many of our peers have been funding their growth through that type of issuance.
We have an Oklahoma City portfolio that we acquired that is very lowly levered at very high rates relative to its value today and again it has to - we will have to wait how attractive an opportunity is. As I stated even after the Trade Street closing without any new capital we still have an up-drive power to another 2 to 3 acquisitions that will take us through the end of the year.
And we will manage from that point forward. I have to stress, this company started two years ago with a $160 million of assets when we IPOed in August of 2013.
We’re now $700 million worth of assets, we have done multiple one-offs and we have done it in a way by putting the money to work quickly without having to be diluted to earnings at all. So we have accomplished exactly what we set out to do and think we will continue to do that going forward.
We have to get through the closing of this Trade Street acquisition and hopefully the markets will settle down and we will continue on with our plan.
Unidentified Analyst
And then also would you comment on the properties that are being sold, is it the portfolio kind of reaching their peak in terms of occupancy, I thought you pushed rents. How many more of those may move on over the next 18 - 24 months that will give you that additional opportunities to recycle capital?
Scott Schaeffer
Well there is more, there is definitely more.
Jim Sebra
Again we want to grow so these are outliers and not what we have identified these now but there are more.
Operator
Our next question comes from the line of Rob Stevenson from Jay [ph]. Please go ahead.
Unidentified Analyst
Good morning guys, just one quick question. Does the body agreements we sender [ph] and Monarch have any sort of break provision if IRT stock price drops below certain threshold?
Scott Schaeffer
It does. Now see - the agreement which, the merger agreement, not within specifically, it's the merger agreement.
15% below the RMZ, a change down to more than 15% of the change in new RMZ.
Unidentified Analyst
Okay, thank you guys.
Scott Schaeffer
Thank you.
Operator
Thank you for your question now. I would now like to turn the call back over to Scott for closing remarks.
Scott Schaeffer
Well, thank you for joining our call today. As we've mentioned multiple times, we look forward to moving this TSRE transaction forward in closing, and then speaking with you after the end of the third quarter.
Have a good day everyone.
Operator
Thank you, ladies and gentlemen for your participation in today's conference. This now concludes your presentation.
You may now disconnect. Have a good day.