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Section 1: 8-K (8-K)

Document





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): March 12, 2018
 
INVESTORS REAL ESTATE TRUST
(Exact name of Registrant as specified in its charter)
 

 
 
 
 
 
 
 
 
 
 
North Dakota
 
001-35624
 
45-0311232
(State or Other Jurisdiction
of Incorporation or Organization)
 
(Commission File Number)
 
(I.R.S. Employer Identification No.)
 
1400 31st Avenue SW, Suite 60, Post Office Box 1988, Minot, ND 58702-1988
(Address of principal executive offices) (Zip code)

(701) 837-4738
(Registrant’s telephone number, including area code)

Not Applicable
(Former name or former address, if changed from 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:
o
Written communications pursuant to Rule 425 under the Securities Act
o
Soliciting material pursuant to Rule 14a-12 under the Exchange Act
o
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act
o
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.
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. ¨





Item 2.02. Results of Operations and Financial Condition.
Investors Real Estate Trust (the “Company”) issued an earnings release on March 12, 2018, announcing certain financial and operational results for the three and nine months ended January 31, 2018. A copy of the press release is attached hereto as Exhibit 99.1.
The information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 furnished pursuant to Item 9.01, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities under that Section. Furthermore, the information in this Current Report on Form 8-K, including Exhibit 99.1 hereto, shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933.
Item 7.01. Regulation FD Disclosure.
Certain supplemental operating and financial data regarding the Company not included in the earnings release is attached as Exhibit 99.2. The foregoing information is not deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in filings under the Securities Act of 1933.
ITEM 9.01    Financial Statements and Exhibits
Exhibits
 
 
Exhibit
 
Number
Description
 
 
99.1
 
 
99.2

SIGNATURE

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.


 
 
 
 
INVESTORS REAL ESTATE TRUST
 
 
 
By
/s/ Mark O. Decker, Jr.
 
 
Mark O. Decker, Jr.
Date: March 12, 2018
 
President and Chief Executive Officer


(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


Exhibit 99.1
Earnings Release
392563718_iretlogojpeg1200x1080.jpg 
 
IRET Announces Fiscal Third Quarter 2018 Results
 
MINOT, N.D., March 12, 2018 – IRET (NYSE: IRET) announced today its fiscal third quarter 2018 financial and operating results. Net income and Funds from Operations (“FFO”) per share for the three and nine months ended January 31, 2018, are detailed below. Core FFO adjusts FFO for certain non-routine items, and both FFO and Core FFO are reconciled to net income in the tables accompanying this earnings release.
 
 
Three Months Ended
 
Nine Months Ended
 
 
January 31,
 
January 31,
Per Share
 
2018
 
2017
 
2018
 
2017
Net Income
 
$
1.12

 
$
0.16

 
$
1.06

 
$
0.03

FFO
 
$
0.04

 
$
0.09

 
$
0.21

 
$
0.33

Core FFO
 
$
0.09

 
$
0.12

 
$
0.30

 
$
0.35

 
 
Quarterly
Comparison
 
Sequential
Comparison
 
YTD
Comparison
Multifamily Same-Store Results
 
3Q18 vs. 3Q17
 
3Q18 vs. 2Q18
 
3Q18 vs. 3Q17
Revenues
 
5.2
%
 
(0.1
)%
 
4.3
 %
Expenses
 
4.5
%
 
(6.7
)%
 
11.3
 %
Net Operating Income (“NOI”)
 
5.8
%
 
6.1
 %
 
(1.2
)%
Multifamily Same-Store Results
 
3Q18
 
2Q18
 
3Q17
Physical Occupancy
 
95.2
%
 
95.2
%
 
92.3
%
Weighted Average Occupancy
 
94.0
%
 
93.1
%
 
91.4
%
“Today marks the moment IRET can be considered a multifamily real estate company,” said Mark O. Decker, Jr., IRET’s President and CEO. “With the previously-announced sales of our healthcare properties, apartment communities now comprise more than 90% of our portfolio, and with the pending acquisition in Denver, our redeployment is nearly finished. Our team completed the transformation we set out to achieve, and we can now focus the full attention of our organization on improving our operational performance and growing and refining our apartment portfolio.”
Third Quarter Fiscal Year 2018 Highlights
Substantially completed our transformation into a focused multifamily company by closing the sale of 27 of our 28 healthcare properties for an aggregate sale price of approximately $400.8 million. The final property remains under contract for sale pending the satisfaction of certain closing conditions. We used the proceeds from the sale of these assets to fund acquisitions and reduce debt.
Closed the acquisition of Dylan, a 274-home apartment community in Denver, Colorado, completing our inaugural investment in another top-25 MSA. Subsequent to quarter-end, we entered into a purchase agreement to acquire Westend, another Denver apartment community with 390 homes. Denver has a healthy and diverse economy and, together with Minneapolis-St. Paul, will be a key market in IRET’s push to achieve portfolio growth, geographic diversity, and operating efficiencies.

 
1
 



Achieved quarterly same-store NOI growth of 5.8% over the same period in the prior year, representing the first positive result in over two years. This performance was driven by revenue growth of 5.2%, due primarily to a 4.4% increase in occupancy, and expense growth of 4.5%. The reduction in expense growth this quarter compared to the 15.0% increase in first half of fiscal 2018 is due, in part, to a decrease in snow removal costs and a reduction in accruals related to self-funded healthcare costs.
Reduced debt from $928.0 million to $692.9 million during the quarter and have $116.8 million of restricted cash available to deploy toward future acquisitions.
Closed a $70 million unsecured term loan that expires in 2023 and executed a swap agreement to synthetically fix the interest rate for the full duration of the loan.
Acquisitions
We added one new property to our portfolio during the quarter:
 
 
 
 
 
 
(in thousands)
 
 
Property Name
 
Location
 
Total Units
 
Total Cost
 
% Occupied
as of 1/31/2018
Dylan
 
Denver, CO
 
274
 
$
90,600

 
81.4
%
Subsequent to quarter-end, we entered into a purchase agreement to acquire Westend, another Denver apartment community with 390 homes.
Dispositions
During the quarter, we sold 27 healthcare properties for $400.8 million, two other properties for $35.4 million, and two multifamily properties for $6.7 million.
Subsequent to quarter-end, we sold a commercial property and adjacent parcel of unimproved land in Bismarck, ND, for an aggregate sale price of $5.5 million.
Balance Sheet
At the end of the third quarter, we had $174.8 million of total liquidity on our balance sheet, including $152.2 million available on our corporate revolver.
During the quarter, we repurchased and retired approximately 152,000 common shares and redeemed approximately 450,000 Units for an aggregate cost of approximately $3.5 million, representing an average price of approximately $5.78 per share. We also closed on a $70 million unsecured term loan that matures in 2023 and executed a swap agreement to synthetically fix the interest rate for the full duration of the loan.
Quarterly Distributions
On March 5, 2018, IRET’s Board of Trustees declared a regular quarterly distribution of $0.07 per share/unit payable on April 2, 2018, to common shareholders and unitholders of record on March 15, 2018. This distribution will be the 188th consecutive quarterly distribution paid by IRET since its inception in 1970. It represents an annualized rate of $0.28 per share/unit with an annualized yield of 5.9% based on IRET’s closing share price as of March 9, 2018.
The Board of Trustees also declared a distribution of $0.4140625 per share on the 6.625% Series C Cumulative Redeemable Preferred Shares (NYSE: IRET PRC) payable on April 2, 2018, to holders of record on March 15, 2017. Series C preferred share distributions are cumulative and payable quarterly in arrears at an annual rate of $1.65625 per share.

 
2
 



Earnings Call
Live webcast and replay:  http://ir.iretapartments.com
 
 
 
Live Conference Call
 
Conference Call Replay
Tuesday, March 13, 2018, at 10:00 AM ET
 
Replay available until March 27, 2018
USA Toll Free Number
1-877-509-9785
 
USA Toll Free Number
1-877-344-7529
International Toll Free Number
1-412-902-4132
 
International Toll Free Number
1-412-317-0088
Canada Toll Free Number
1-855-669-9657
 
Canada Toll Free Number
1-855-669-9658
 
 
 
Conference Number
10117418
Supplemental Information
Supplemental Operating and Financial Data for the Quarter Ended January 31, 2018 (“Supplemental Information”), is available in the Investors section on IRET’s website at www.iretapartments.com or by calling Investor Relations at 701-837-7104.  Non-GAAP financial measures and other capitalized terms, as used in this earnings release, are defined and reconciled in the Supplemental Information, which accompanies this earnings release.
About IRET
IRET is a real estate company focused on the ownership, management, acquisition, redevelopment, and development of multifamily apartment communities. As of January 31, 2018, IRET owned interests in 89 multifamily properties consisting of 13,786 apartment homes.  IRET's common shares and Series C preferred shares are publicly traded on the New York Stock Exchange (NYSE symbols: IRET and IRET PRC, respectively).
Forward Looking Statements
Certain statements in this press release are based on our current expectations and assumptions, and are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements do not discuss historical fact, but instead include statements related to expectations, projections, intentions or other items related to the future. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and variations of those words and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements to be materially different from the results of operations, financial conditions, or plans expressed or implied by the forward-looking statements. Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, we can give no assurance our expectations will be achieved. Any statements contained herein that are not statements of historical fact should be deemed forward-looking statements. As a result, reliance should not be placed on these forward-looking statements as these statements are subject to known and unknown risks, uncertainties, and other factors beyond our control and could differ materially from our actual results and performance. Such risks and uncertainties are detailed from time to time in our filings with the SEC, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” contained in our Annual Report on Form 10-K for the fiscal year ended April 30, 2017, in subsequent quarterly reports on Form 10-Q and in other public reports. We assume no obligation to update or supplement forward-looking statements that become untrue due to subsequent events.

 
3
 



IRET
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO
IRET TO FFO AND CORE FFO
z
 
 
(in thousands, except per share amounts)
Three Months Ended January 31,
 
2018
 
2017
 
 
Amount
 
Weighted
Avg Shares
and Units(1)
 
Per
Share
And
Unit(2)
 
Amount
 
Weighted
Avg Shares
and Units(1)
 
Per
Share
And
Unit(2)
Net income attributable to controlling interests
 
$
136,105

 
 
 
 
 
$
23,110

 
 
 
 
Less dividends to preferred shareholders
 
(1,766
)
 
 
 
 
 
(2,503
)
 
 
 
 
Less redemption of preferred shares
 
(8
)
 
 
 
 
 
(1,435
)
 
 
 
 
Net loss available to common shareholders
 
134,331

 
119,741

 
$
1.12

 
19,172

 
121,255

 
$
0.16

Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling interest – Operating Partnership
 
16,236

 
14,434

 
 
 
2,525

 
16,120

 
 
Depreciation and amortization
 
19,017

 
 
 
 
 
12,933

 
 
 
 
Gains on depreciable property sales attributable to controlling interests
 
(163,791
)
 
 
 
 
 
(21,972
)
 
 
 
 
FFO applicable to Common Shares and Units(1)
 
$
5,793

 
134,175

 
$
0.04

 
$
12,658

 
137,375

 
$
0.09

 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments to Core FFO:
 
 
 
 
 
 
 
 
 
 
 
 
Lease termination fees
 

 
 
 
 
 
(7
)
 
 
 
 
Loss on extinguishment of debt
 
6,787

 
 
 
 
 
1,907

 
 
 
 
Redemption of Preferred Shares
 
8

 
 
 
 
 
1,435

 
 
 
 
Core FFO applicable to common shares and Units(1)
 
$
12,588

 
134,175

 
$
0.09

 
$
15,993

 
137,375

 
$
0.12

(1)
Units of the Operating Partnership are exchangeable for cash or, at our discretion, Common Shares on a one-for-one basis.
(2)
Net income attributable to IRET is calculated on a per Common Share basis. FFO is calculated on a per Common Share and Unit basis.

 
4
 



IRET
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO
IRET TO FFO AND CORE FFO
 
 
(in thousands, except per share amounts)
Nine Months Ended January 31,
 
2018
 
2017
 
 
Amount
 
Weighted
Avg Shares
and Units
(1)
 
Per
Share
And
Unit
(2)
 
Amount
 
Weighted
Avg Shares
and Units
(1)
 
Per
Share
And
Unit
(2)
Net income (loss) attributable to controlling interests
 
$
137,662

 
 
 
 
 
$
13,067

 
 
 
 
Less dividends to preferred shareholders
 
(6,864
)
 
 
 
 
 
(8,260
)
 
 
 
 
Less redemption of preferred shares
 
(3,657
)
 
 
 
 
 
(1,435
)
 
 
 
 
Net income available to common shareholders
 
127,141

 
120,102

 
$
1.06

 
3,372

 
121,175

 
$
0.03

Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling interest – Operating Partnership
 
15,365

 
14,768

 
 
 
403

 
16,229

 
 
Depreciation and amortization
 
67,030

 
 
 
 
 
39,341

 
 
 
 
Impairment of real estate investments attributable to controlling interests
 
256

 
 
 
 
 
39,190

 
 
 
 
Gains on depreciable property sales attributable to controlling interests
 
(181,477
)
 
 
 
 
 
(37,330
)
 
 
 
 
FFO applicable to Common Shares and Units(1)
 
$
28,315

 
134,870

 
$
0.21

 
$
44,976

 
137,404

 
$
0.33

 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments to Core FFO:
 
 
 
 
 
 
 
 
 
 
 
 
Lease termination fees
 

 
 
 
 
 
(7
)
 
 
 
 
Loss on extinguishment of debt
 
7,326

 
 
 
 
 
1,979

 
 
 
 
Redemption of Preferred Shares
 
3,657

 
 
 
 
 
1,435

 
 
 
 
Severance and transition costs
 
650

 
 
 
 
 

 
 
 
 
Core FFO applicable to common shares and Units(1)
 
$
39,948

 
134,870

 
$
0.30

 
$
48,383

 
137,404

 
$
0.35

(1)
Units of the Operating Partnership are exchangeable for cash or, at our discretion, Common Shares on a one-for-one basis.
(2)
Net income attributable to IRET is calculated on a per Common Share basis. FFO is calculated on a per Common Share and Unit basis.

 
5
 



IRET
RECONCILIATION OF NET OPERATING INCOME TO THE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
(in thousands)
Three Months Ended January 31, 2018
Multifamily
 
All Other
 
Amounts Not
Allocated To
Segments
(1)
 
Total
Real estate revenue
$
41,279

 
$
1,975

 
$

 
$
43,254

Real estate expenses
18,231

 
549

 
1,255

 
20,035

Net operating income (loss)
$
23,048

 
$
1,426

 
$
(1,255
)
 
$
23,219

Depreciation and amortization
 
 
 
 
 
 
(18,390
)
General and administrative expenses
 
 
 
 
 
 
(3,011
)
Interest expense
 
 
 
 
 
 
(9,236
)
Loss on debt extinguishment
 
 
 
 
 
 
(285
)
Interest and other income
 
 
 
 
 
 
433

Loss before gain on sale of real estate and other investments and income from discontinued operations
 
 
 
 
 
 
(7,270
)
Gain on sale of real estate and other investments
 
 
 
 
 
 
12,387

Income from continuing operations
 
 
 
 
 
 
5,117

Income from discontinued operations
 
 
 
 
 
 
146,811

Net income
 
 
 
 
 
 
$
151,928

(1)
Consists of offsite costs for property management and casualty-related amounts, which are excluded in our assessment of segment performance.

 
(in thousands)
Three Months Ended January 31, 2017
Multifamily
 
All Other
 
Amounts Not
Allocated To
Segments
(1)
 
Total
Real estate revenue
$
36,171

 
$
4,057

 
$

 
$
40,228

Real estate expenses
16,336

 
1,000

 
1,283

 
18,619

Net operating income (loss)
$
19,835

 
$
3,057

 
$
(1,283
)
 
$
21,609

Depreciation and amortization
 
 
 
 
 
 
(10,787
)
General and administrative expenses
 
 
 
 
 
 
(4,172
)
Interest expense
 
 
 
 
 
 
(8,832
)
Loss on debt extinguishment
 
 
 
 
 
 
(458
)
Interest and other income
 
 
 
 
 
 
427

Loss before gain on sale of real estate and other investments and income from discontinued operations
 
 
 
 
 
 
(2,213
)
Gain on sale of real estate and other investments
 
 
 
 
 
 
2,437

Income from continuing operations
 
 
 
 
 
 
224

Income from discontinued operations
 
 
 
 
 
 
24,965

Net income
 
 
 
 
 
 
$
25,189

(1)
Consists of offsite costs for property management and casualty-related amounts, which are excluded in our assessment of segment performance.


 
6
 



IRET
RECONCILIATION OF NET OPERATING INCOME TO THE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
(in thousands)
Nine Months Ended January 31, 2018
Multifamily
 
All Other
 
Amounts Not
Allocated To
Segments
(1)
 
Total
Real estate revenue
$
119,444

 
$
7,936

 
$

 
$
127,380

Real estate expenses
54,584

 
2,102

 
4,204

 
60,890

Net operating income (loss)
$
64,860

 
$
5,834

 
$
(4,204
)
 
$
66,490

Depreciation and amortization
 
 
 
 
 
 
(60,998
)
Impairment of real estate investments
 
 
 
 
 
 
(256
)
General and administrative expenses
 
 
 
 
 
 
(10,131
)
Interest expense
 
 
 
 
 
 
(25,876
)
Loss on debt extinguishment
 
 
 
 
 
 
(818
)
Interest and other income
 
 
 
 
 
 
916

Loss before gain on sale of real estate and other investments and income from discontinued operations
 
 
 
 
 
 
(30,673
)
Gain on sale of real estate and other investments
 
 
 
 
 
 
17,835

Loss from continuing operations
 
 
 
 
 
 
(12,838
)
Income from discontinued operations
 
 
 
 
 
 
164,626

Net income
 
 
 
 
 
 
$
151,788

(1)
Consists of offsite costs for property management and casualty-related amounts, which are excluded in our assessment of segment performance.

 
(in thousands)
Nine Months Ended January 31, 2017
Multifamily
 
All Other
 
Amounts Not
Allocated To
Segments
(1)
 
Total
Real estate revenue
$
107,400

 
$
11,307

 
$

 
$
118,707

Real estate expenses
46,781

 
2,787

 
4,002

 
53,570

Net operating income (loss)
$
60,619

 
$
8,520

 
$
(4,002
)
 
$
65,137

Depreciation and amortization
 
 
 
 
 
 
(33,193
)
Impairment of real estate investments
 
 
 
 
 
 
(54,153
)
General and administrative expenses
 
 
 
 
 
 
(11,195
)
Interest expense
 
 
 
 
 
 
(26,033
)
Loss on debt extinguishment
 
 
 
 
 
 
(458
)
Interest and other income
 
 
 
 
 
 
685

Loss before gain on sale of real estate and other investments and income from discontinued operations
 
 
 
 
 
 
(59,210
)
Gain on sale of real estate and other investments
 
 
 
 
 
 
11,292

Loss from continuing operations
 
 
 
 
 
 
(47,918
)
Income from discontinued operations
 
 
 
 
 
 
44,803

Net loss
 
 
 
 
 
 
$
(3,115
)
(1)
Consists of offsite costs for property management and casualty-related amounts, which are excluded in our assessment of segment performance.


 
7
 
(Back To Top)

Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit


Exhibit 99.2

392563718_pagesfromq32018.jpg




Supplemental Financial and Operating Data
Table of Contents
January 31, 2018
 
Page
 
 
S-2 
 
 
Key Financial Data
 
Condensed Consolidated Balance Sheets
S-4 
Condensed Consolidated Statements of Operations
Funds From Operations
Adjusted EBITDA
 
 
Debt and Capital Analysis
 
Debt Analysis
Debt Detail
Capital Analysis
 
 
Portfolio Analysis
 
Net Operating Income Detail
Same-Store Comparison
Portfolio Summary
Same-Store Capital Expenditures
 
 
Growth Analysis
 
Fiscal 2018 Acquisition Summary
 
 
Definitions

 
S-1
 



Company Background
Third Quarter Fiscal 2018
We are a multifamily real estate investment trust (REIT) focused on the ownership, management, acquisition, redevelopment, and development of multifamily apartment communities.  As of January 31, 2018, we owned interests in 89 multifamily properties consisting of 13,786 apartment homes. IRET's common shares and Series C preferred shares are publicly traded on the New York Stock Exchange (NYSE symbols: IRET and IRET PRC, respectively).  
Company Snapshot
(as of January 31, 2018)
Company Headquarters
Minot, North Dakota
Fiscal Year-End
April 30
Reportable Segments
Multifamily
Total Multifamily Properties
89
Total Units
13,786
Common Shares Outstanding (thousands)
120,035
Limited Partnership Units Outstanding (thousands)
14,168
Common Share Distribution – Quarter/Annualized
$0.07/$0.28
Annualized Dividend Yield
4.9%
Total Capitalization (see p. S-10 for details)
$1.6 billion
Investor Information
(as of March 12, 2018)
Board of Trustees
Jeffrey P. Caira
Trustee and Chair
Michael T. Dance
Trustee, Chair of Audit Committee
Mark O. Decker, Jr.
Trustee, President, Chief Executive Officer and Chief Investment Officer
Emily Nagle Green
Trustee
Linda J. Hall
Trustee, Chair of Compensation Committee
Terrance P. Maxwell
Trustee
Jeffrey L. Miller
Trustee, Chair of the Nominating and Governance Committee
John A. Schissel
Trustee, Chair of Capital Markets Committee
Mary J. Twinem
Trustee

Management
Mark O. Decker, Jr.
President, Chief Executive Officer, and Chief Investment Officer; Trustee
John A. Kirchmann
Executive Vice President and Chief Financial Officer
Anne Olson
Executive Vice President, General Counsel and Secretary
Andrew Martin
Executive Vice President – Property Operations
Nancy B. Andersen
Senior Vice President and Chief Accounting Officer
Matthew M. Volpano
Senior Vice President – Capital Markets

Corporate Headquarters:
Investor Relations Contact:
1400 31st Avenue SW, Suite 60
Matthew Volpano
P.O. Box 1988
701-837-7104
Minot, ND 58702-1988
IR@iret.com
 
 
Trading Symbol for Common Shares:  IRET
 
Trading Symbol for Series C Preferred Shares:  IRET PRC
 
Stock Exchange Listing:  NYSE
 

 
S-2
 



Common Share Data (NYSE: IRET)
 
 
3rd Quarter
 
2nd Quarter
 
1st Quarter
 
4th Quarter 
 
3rd Quarter 
 
 
Fiscal Year 2018
 
Fiscal Year 2018
 
Fiscal Year 2018
 
Fiscal Year 2017
 
Fiscal Year 2017
High Closing Price
 
$
6.06

 
$
6.32

 
$
6.72

 
$
6.61

 
$
7.20

Low Closing Price
 
$
5.52

 
$
5.81

 
$
5.64

 
$
5.67

 
$
5.81

Average Closing Price
 
$
5.80

 
$
6.09

 
$
6.07

 
$
6.09

 
$
6.65

Closing Price at end of quarter
 
$
5.67

 
$
5.85

 
$
6.22

 
$
5.91

 
$
6.44

Common Share Distributions – annualized
 
$
0.28

 
$
0.28

 
$
0.28

 
$
0.28

 
$
0.28

Closing Dividend Yield – annualized
 
4.9
%
 
4.8
%
 
4.5
%
 
4.7
%
 
4.3
%
Closing common shares outstanding (thousands)
 
$
120,035

 
$
120,188

 
$
120,587

 
$
121,199

 
$
121,889

Closing limited partnership units outstanding (thousands)
 
$
14,168

 
$
14,618

 
$
14,657

 
$
15,617

 
$
16,034

Closing market value of outstanding common shares, plus imputed closing market value of outstanding limited partnership units (thousands)
 
$
760,931

 
$
788,615

 
$
841,218

 
$
808,583

 
$
888,224

This Supplemental Operating and Financial Data contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements, which may be identified by the use of words such as “expects,” “plans,” “estimates,” “anticipates,” “projects,” “intends,” “believes,” “outlook” and similar expressions that do not relate to historical matters, specifically including our future plan and anticipated operating results, are based on our expectations, forecasts and assumptions at the time of this earnings release. Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in such forward-looking statements.
Such risks, uncertainties and other factors that might cause such differences include, but are not limited to: intentions and expectations regarding future distributions on common shares and units; changes in operating costs; fluctuations in interest rates; adverse capital and credit market conditions that might affect our access to various sources of capital and cost of capital; our ability to manage our current debt levels and repay or refinance our indebtedness upon maturity or other payment dates; our ability to maintain financial covenant compliance under our debt agreements; adequate insurance coverage; the effect of government regulation; delays or inability to obtain necessary governmental permits and authorizations; changes in general and local economic and real estate market conditions; changes in demand for our properties that may result in lower-than-expected occupancy and/or rental rates; ability to acquire quality properties in targeted markets; ability to successfully dispose of certain assets; competition for tenants from similar competing properties; ability to attract and retain skilled personnel; cyber-intrusion; delays in completing development, redevelopment and/or lease up of properties and increased costs; ability to maintain effective internal controls over financial reporting and disclosure controls and procedures; and those risks and uncertainties detailed from time to time in our filings with the Securities and Exchange Commission, including our Form 10-K for the fiscal year ended April 30, 2017 subsequent quarterly reports on Form 10-Q, and other public filings.  We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

 
S-3
 




IRET
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
 
 
1/31/2018
 
10/31/2017
 
7/31/2017
 
4/30/2017
 
1/31/2017
ASSETS
 
 
 
 
 
 
 
 
 
 
Real estate investments
 
 
 
 
 
 
 
 
 
 
Property owned
 
$
1,568,725

 
$
1,510,890

 
$
1,424,251

 
$
1,358,529

 
$
1,367,806

Less accumulated depreciation
 
(304,149
)
 
(292,976
)
 
(280,563
)
 
(255,599
)
 
(252,546
)
 
 
1,264,576

 
1,217,914

 
1,143,688

 
1,102,930

 
1,115,260

Development in progress
 

 

 

 

 
11,531

Unimproved land
 
15,123

 
15,216

 
15,195

 
18,455

 
19,076

Mortgage loans receivable
 
10,329

 
10,329

 

 

 

Total real estate investments
 
1,290,028

 
1,243,459

 
1,158,883

 
1,121,385

 
1,145,867

Assets held for sale and assets of discontinued operations
 

 
239,688

 
280,083

 
283,023

 
387,454

Cash and cash equivalents
 
22,666

 
42,464

 
23,801

 
28,819

 
56,999

Restricted cash
 
121,337

 
3,782

 
3,713

 
27,981

 
5,136

Other assets
 
21,664

 
21,634

 
15,870

 
13,306

 
13,633

TOTAL ASSETS
 
$
1,455,695

 
$
1,551,027

 
$
1,482,350

 
$
1,474,514

 
$
1,609,089

 
 
 
 
 
 
 
 
 
 
 
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND EQUITY
 
 
 
 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
 
 
 
Liabilities held for sale and liabilities of discontinued operations
 
$

 
$
95,193

 
$
127,413

 
$
130,904

 
$
154,528

Accounts payable and accrued expenses
 
35,792

 
32,581

 
34,248

 
35,566

 
38,115

Revolving line of credit
 
67,000

 
247,500

 
125,900

 
57,050

 
157,000

Term loan payable, net of loan costs
 
69,483

 

 

 

 

Mortgages payable, net of loan costs
 
553,388

 
561,798

 
565,705

 
565,978

 
591,505

Construction debt
 

 
21,649

 
20,134

 
41,741

 
39,442

TOTAL LIABILITIES
 
725,663

 
958,721

 
873,400

 
831,239

 
980,590

 
 
 
 
 
 
 
 
 
 
 
REDEEMABLE NONCONTROLLING INTERESTS – CONSOLIDATED REAL ESTATE ENTITIES
 
6,644

 
6,812

 
7,010

 
7,181

 
7,300

EQUITY
 
 
 
 
 
 
 
 
 
 
Series B Preferred Shares of Beneficial Interest
 

 

 
111,357

 
111,357

 
111,357

Series C Preferred Shares of Beneficial Interest
 
99,456

 
99,467

 

 

 

Common Shares of Beneficial Interest
 
910,173

 
910,683

 
912,625

 
916,121

 
921,735

Accumulated distributions in excess of net income
 
(364,684
)
 
(490,612
)
 
(488,535
)
 
(466,541
)
 
(486,015
)
Accumulated other comprehensive income
 
359

 

 

 

 

Total shareholders’ equity
 
645,304

 
519,538

 
535,447

 
560,937

 
547,077

Noncontrolling interests – Operating Partnership
 
76,915

 
64,291

 
64,789

 
73,233

 
72,007

Noncontrolling interests – consolidated real estate entities
 
1,169

 
1,665

 
1,704

 
1,924

 
2,115

Total equity
 
723,388

 
585,494

 
601,940

 
636,094

 
621,199

TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND EQUITY
 
$
1,455,695

 
$
1,551,027

 
$
1,482,350

 
$
1,474,514

 
$
1,609,089


 
S-4
 



IRET
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share amounts)
 
 
Nine Months Ended
 
 
Three Months Ended
OPERATING RESULTS
 
1/31/2018
 
1/31/2017
 
 
1/31/2018
 
10/31/2017
 
7/31/2017
 
4/30/2017
 
1/31/2017
Real estate revenue
 
$
127,380

 
$
118,707

 
 
$
43,254

 
$
42,557

 
$
41,569

 
$
43,569

 
$
40,228

Real estate expenses
 
60,890

 
53,570

 
 
20,035

 
20,896

 
19,959

 
18,388

 
18,619

Net operating income
 
66,490

 
65,137

 
 
23,219

 
21,661

 
21,610

 
25,181

 
21,609

Depreciation/amortization
 
(60,998
)
 
(33,193
)
 
 
(18,390
)
 
(17,270
)
 
(25,338
)
 
(11,060
)
 
(10,787
)
Impairment of real estate investments
 
(256
)
 
(54,153
)
 
 

 

 
(256
)
 
(2,875
)
 

General and administrative expenses
 
(10,131
)
 
(11,195
)
 
 
(3,011
)
 
(3,118
)
 
(4,002
)
 
(4,728
)
 
(4,172
)
Development pursuit and other write-offs
 

 

 
 

 

 

 
(3,224
)
 

Interest expense
 
(25,876
)
 
(26,033
)
 
 
(9,236
)
 
(8,509
)
 
(8,131
)
 
(8,281
)
 
(8,832
)
Loss on extinguishment of debt
 
(818
)
 
(458
)
 
 
(285
)
 
(334
)
 
(199
)
 
(1,193
)
 
(458
)
Interest and other income
 
916

 
685

 
 
433

 
255

 
228

 
461

 
427

Loss before income on sale of real estate and other investments and income from discontinued operations
 
(30,673
)
 
(59,210
)
 
 
(7,270
)
 
(7,315
)
 
(16,088
)
 
(5,719
)
 
(2,213
)
Income on sale of real estate and other investments
 
17,835

 
11,292

 
 
12,387

 
5,324

 
124

 
7,409

 
2,437

(Loss) income from continuing operations
 
(12,838
)
 
(47,918
)
 
 
5,117

 
(1,991
)
 
(15,964
)
 
1,690

 
224

Income from discontinued operations
 
164,626

 
44,803

 
 
146,811

 
15,130

 
2,685

 
31,950

 
24,965

Net income (loss)
 
$
151,788

 
$
(3,115
)
 
 
$
151,928

 
$
13,139

 
$
(13,279
)
 
$
33,640

 
$
25,189

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net loss (income) attributable to noncontrolling interest – Operating Partnership
 
(15,365
)
 
(403
)
 
 
(16,236
)
 
(773
)
 
1,644

 
(3,656
)
 
(2,525
)
Net loss attributable to noncontrolling interests – consolidated real estate entities
 
1,239

 
16,585

 
 
413

 
455

 
371

 
296

 
446

Net income (loss) attributable to controlling interests
 
137,662

 
13,067

 
 
136,105

 
12,821

 
(11,264
)
 
30,280

 
23,110

Dividends to preferred shareholders
 
(6,864
)
 
(8,260
)
 
 
(1,766
)
 
(2,812
)
 
(2,286
)
 
(2,286
)
 
(2,503
)
Redemption of Preferred Shares
 
(3,657
)
 
(1,435
)
 
 
(8
)
 
(3,649
)
 

 

 
(1,435
)
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS
 
$
127,141

 
$
3,372

 
 
$
134,331

 
$
6,360

 
$
(13,550
)
 
$
27,994

 
$
19,172

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per Share Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
(Loss) earnings per common share from continuing operations – basic & diluted
 
$
(0.16
)
 
$
(0.30
)
 
 
$
0.03

 
$
(0.06
)
 
$
(0.13
)
 
$

 
$
(0.03
)
Earnings per common share from discontinued operations – basic & diluted
 
1.22

 
0.33

 
 
1.09

 
0.11

 
0.02

 
0.23

 
0.19

Net (loss) income per common share – basic & diluted
 
$
1.06

 
$
0.03

 
 
$
1.12

 
$
0.05

 
$
(0.11
)
 
$
0.23

 
$
0.16

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate expenses
 
47.8
%
 
45.1
 %
 
 
46.3
%
 
49.1
%
 
48.0
 %
 
42.2
%
 
46.3
%
Depreciation/amortization
 
47.9
%
 
28.0
 %
 
 
42.5
%
 
40.6
%
 
61.0
 %
 
25.4
%
 
26.8
%
General and administrative expenses
 
8.0
%
 
9.4
 %
 
 
7.0
%
 
7.3
%
 
9.6
 %
 
10.9
%
 
10.4
%
Interest
 
20.3
%
 
21.9
 %
 
 
21.4
%
 
20.0
%
 
19.6
 %
 
19.0
%
 
22.0
%
Income from discontinued operations
 
129.2
%
 
37.7
 %
 
 
339.4
%
 
35.6
%
 
6.5
 %
 
73.3
%
 
62.1
%
Net (loss) income
 
119.2
%
 
(2.6
)%
 
 
351.2
%
 
30.9
%
 
(31.9
)%
 
77.2
%
 
62.6
%

 
S-5
 



IRET
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO
IRET TO FFO AND CORE FFO (unaudited)
(in thousands, except per share and unit amounts)
 
 
Nine Months Ended
 
 
Three Months Ended
 
 
1/31/2018
 
1/31/2017
 
 
1/31/2018
 
10/31/2017
 
7/31/2017
 
4/30/2017
 
1/31/2017
Funds From Operations(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to controlling interests
 
$
137,662

 
$
13,067

 
 
$
136,105

 
$
12,821

 
$
(11,264
)
 
$
30,280

 
$
23,110

Less dividends to preferred shareholders
 
(6,864
)
 
(8,260
)
 
 
(1,766
)
 
(2,812
)
 
(2,286
)
 
(2,286
)
 
(2,503
)
Less redemption of preferred shares
 
(3,657
)
 
(1,435
)
 
 
(8
)
 
(3,649
)
 

 

 
(1,435
)
Net (loss) income available to common shareholders
 
127,141

 
3,372

 
 
134,331

 
6,360

 
(13,550
)
 
27,994

 
19,172

Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling interests – Operating Partnership
 
15,365

 
403

 
 
16,236

 
773

 
(1,644
)
 
3,656

 
2,525

Depreciation and amortization of real property
 
67,030

 
39,341

 
 
19,017

 
19,894

 
28,119

 
13,222

 
12,933

Impairment of real estate investments attributable to controlling interests
 
256

 
39,190

 
 

 

 
256

 
2,875

 

Gain on depreciable property sales
 
(181,477
)
 
(37,330
)
 
 
(163,791
)
 
(17,562
)
 
(124
)
 
(37,517
)
 
(21,972
)
FFO applicable to common shares and Units
 
$
28,315

 
$
44,976

 
 
$
5,793

 
$
9,465

 
$
13,057

 
$
10,230

 
$
12,658

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FFO per share and unit – basic and diluted
 
$
0.21

 
$
0.33

 
 
$
0.04

 
$
0.07

 
$
0.10

 
$
0.07

 
$
0.09

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments to Core FFO:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Lease termination fees
 

 
(7
)
 
 

 

 

 
(3,244
)
 
(7
)
Loss on extinguishment of debt
 
7,326

 
1,979

 
 
6,787

 
340

 
199

 
2,910

 
1,907

Redemption of Preferred Shares
 
3,657

 
1,435

 
 
8

 
3,649

 

 

 
1,435

Severance and transitions costs
 
650

 

 
 

 
186

 
464

 
2,612

 

Development pursuit and other write-offs
 

 

 
 

 

 

 
3,224

 

Core FFO applicable to common shares and Units
 
$
39,948

 
$
48,383

 
 
$
12,588

 
$
13,640

 
$
13,720

 
$
15,732

 
$
15,993

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core FFO per share and unit – basic and diluted
 
$
0.30

 
$
0.35

 
 
$
0.09

 
$
0.10

 
$
0.10

 
$
0.11

 
$
0.12

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares and units
 
134,870

 
137,404

 
 
134,175

 
134,767

 
135,549

 
136,952

 
137,375

 
(1)
See Definitions on page S-19.

 
S-6
 



IRET
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO
IRET TO ADJUSTED EARNINGS BEFORE INTEREST,
TAXES, DEPRECIATION, AND AMORTIZATION (ADJUSTED EBITDA) (unaudited)
(in thousands)
 
 
Nine Months Ended
 
 
Three Months Ended
 
 
1/31/2018
 
1/31/2017
 
 
1/31/2018
 
10/31/2017
 
7/31/2017
 
4/30/2017
 
1/31/2017
Adjusted EBITDA(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to controlling interests
 
$
137,662

 
$
13,067

 
 
$
136,105

 
$
12,821

 
$
(11,264
)
 
$
30,280

 
$
23,110

Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling interests – Operating Partnership
 
15,365

 
403

 
 
16,236

 
773

 
(1,644
)
 
3,656

 
2,525

Income (loss) before noncontrolling interests – Operating Partnership
 
153,027

 
13,470

 
 
152,341

 
13,594

 
(12,908
)
 
33,936

 
25,635

Add:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
 
28,795

 
35,639

 
 
9,569

 
9,523

 
9,703

 
10,303

 
11,880

Loss on extinguishment of debt
 
7,326

 
1,979

 
 
6,787

 
340

 
199

 
2,910

 
1,907

Depreciation/amortization related to real estate investments
 
67,292

 
39,494

 
 
19,100

 
19,977

 
28,215

 
13,280

 
12,983

Amortization related to real estate revenues(2)
 

 
75

 
 

 

 

 
20

 
21

Impairment of real estate investments attributable to controlling interests
 
256

 
39,190

 
 

 

 
256

 
2,875

 

Less: