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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): September 10, 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 September 10, 2018, announcing certain financial and operational results for the three months ended July 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: September 10, 2018
 
President and Chief Executive Officer


(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


Exhibit 99.1
Earnings Release
394949829_iretlogojpeg1200x1080.jpg 
 
IRET Announces First Quarter Fiscal 2019 Results
 
MINOT, ND, September 10, 2018 – IRET (NYSE: IRET) announced today its first quarter fiscal 2019 financial and operating results. Net income and Funds from Operations (“FFO”) per share for the three months ended July 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
 
 
July 31,
Per Share
 
2018
 
2017
Net Income (Loss)
 
$
0.01

 
$
(0.11
)
FFO
 
$
0.08

 
$
0.10

Core FFO
 
$
0.09

 
$
0.10

 
 
Year-Over-Year
Comparison
 
Sequential
Comparison
Multifamily Same-Store Results
 
1Q19 vs. 1Q18
 
1Q19 vs. 4Q18
Revenues
 
3.0
%
 
0.7
 %
Expenses
 
3.3
%
 
3.0
 %
Net Operating Income (“NOI”)
 
2.8
%
 
(1.0
)%
Multifamily Same-Store Results
 
1Q19
 
4Q18
 
1Q18
Physical Occupancy
 
94.0
%
 
96.4
%
 
94.5
%
Weighted Average Occupancy
 
93.5
%
 
94.8
%
 
92.9
%
"We continued to improve as an organization in the first quarter of fiscal 2019," said Mark O. Decker, Jr., IRET's President and CEO. "Same-store NOI grew 2.8% year-over-year, with strong revenue growth in most markets and expense growth in line with our expectations. In addition, our sale of the Williston portfolio in the first quarter enabled us to exit a non-core market and eliminate $30 million of recourse debt. Finally, we made significant changes to our operations in the first quarter, restructuring the leadership team with a focus on achieving operational excellence. We believe that these changes will advance the speed at which we can realize our earnings potential and become the premier provider of apartment homes in our markets."
First Quarter Fiscal Year 2019 Highlights
Posted same-store NOI growth of 2.8%, our third consecutive quarter of year-over-year NOI growth;
Increased same-store revenue by 3.0% year-over-year, driven by a 2.4% rental increase and a 0.6% average occupancy increase;
Experienced an increase in same-store expenses of 3.3% year-over-year, which is in line with expectations but does not reflect the impact of expense reduction initiatives implemented during the quarter;
Sold seven non-core assets in the quarter for total proceeds of $49.1 million, as described in "Dispositions" below;

 
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Took a charge of $510,000 to general and administrative expenses during the quarter related to the realignment and reduction of corporate officers;
Implemented operations expense reduction initiatives during the quarter that resulted in a charge to property expenses of $110,000; and
Subsequent to quarter-end, refinanced our line of credit to increase the overall borrowing capacity from $370 million to $395 million by right-sizing our revolver commitment to $250 million, extending our existing $70 million term loan maturity to January 2024, and adding a new $75 million term loan maturing in August 2025.
Dispositions
During the quarter, we sold three apartment communities, two commercial properties, and two parcels of land for a total sale price of $49.1 million.
Balance Sheet
At the end of the first quarter, we had $192.3 million of total liquidity on our balance sheet, including $170.0 million available on our corporate revolver and $6.0 million on our operating line of credit.
During the quarter, we repurchased and retired approximately 118,000 common shares and redeemed approximately 90,000 Units for an aggregate cost of approximately $1.1 million, representing an average price of approximately $5.23 per share.
Quarterly Distributions
On June 5, 2018, IRET’s Board of Trustees declared a regular quarterly distribution of $0.07 per share/unit payable on July 2, 2018, to common shareholders and unitholders of record on June 15, 2018. This distribution was the 190th consecutive quarterly distribution paid by IRET since the inception of our dividends in 1971. It represents an annualized rate of $0.28 per share/unit.
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 July 2, 2018, to holders of record on June 15, 2018. Series C preferred share distributions are cumulative and payable quarterly in arrears at an annual rate of $1.65625 per share.
Earnings Call
Live webcast and replay:  http://ir.iretapartments.com
 
 
 
Live Conference Call
 
Conference Call Replay
Tuesday, September 11, 2018, at 10:00 AM ET
 
Replay available until September 25, 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
10123388
Supplemental Information
Supplemental Operating and Financial Data for the Quarter ended July 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 that accompanies this earnings release.
About IRET
IRET is a real estate company focused on the ownership, management, acquisition, redevelopment, and development of apartment communities. As of July 31, 2018, we owned interests in 87 apartment communities consisting of 13,703 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

 
2
 



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 that 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, 2018, in our 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 July 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
 
$
2,916

 
 
 
 
 
$
(11,264
)
 
 
 
 
Less dividends to preferred shareholders
 
(1,705
)
 
 
 
 
 
(2,286
)
 
 
 
 
Less redemption of preferred shares
 

 
 
 
 
 

 
 
 
 
Net income (loss) available to common shareholders
 
1,211

 
119,245

 
$
0.01

 
(13,550
)
 
120,421

 
$
(0.11
)
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling interest – Operating Partnership
 
135

 
14,026

 
 
 
(1,644
)
 
15,128

 
 
Depreciation and amortization
 
17,837

 
 
 
 
 
28,119

 
 
 
 
Gains on depreciable property sales attributable to controlling interests
 
(8,628
)
 
 
 
 
 
(124
)
 
 
 
 
FFO applicable to Common Shares and Units(1)
 
$
10,555

 
133,271

 
$
0.08

 
$
13,057

 
135,549

 
$
0.10

 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments to Core FFO:
 
 
 
 
 
 
 
 
 
 
 
 
Loss on extinguishment of debt
 
552

 
 
 
 
 
199

 
 
 
 
Transition and severance costs
 
510

 
 
 
 
 
464

 
 
 
 
Core FFO applicable to common shares and Units(1)
 
$
11,617

 
133,271

 
$
0.09

 
$
13,720

 
135,549

 
$
0.10

(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 OPERATING INCOME TO THE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
(in thousands)
Three Months Ended July 31, 2018
Multifamily
 
All Other
 
Total
Real estate revenue
$
43,089

 
$
2,857

 
$
45,946

Real estate expenses
18,486

 
1,043

 
19,529

Net operating income
$
24,603

 
$
1,814

 
$
26,417

Property management expenses
 
 
 
 
(1,367
)
Casualty loss
 
 
 
 
(225
)
Depreciation and amortization
 
 
 
 
(18,612
)
General and administrative expenses
 
 
 
 
(3,870
)
Interest expense
 
 
 
 
(8,385
)
Loss on debt extinguishment
 
 
 
 
(552
)
Interest and other income
 
 
 
 
516

Loss before gain on sale of real estate and other investments and income from discontinued operations
 
 
 
 
(6,078
)
Gain on sale of real estate and other investments
 
 
 
 
9,224

Income (loss) from continuing operations
 
 
 
 
3,146

Income (loss) from discontinued operations
 
 
 
 
570

Net income (loss)
 
 
 
 
$
3,716


 
(in thousands)
Three Months Ended July 31, 2017
Multifamily
 
All Other
 
Total
Real estate revenue
$
35,999

 
$
4,979

 
$
40,978

Real estate expenses
15,734

 
1,793

 
17,527

Net operating income
$
20,265

 
$
3,186

 
$
23,451

Property management expenses
 
 
 
 
(1,356
)
Casualty loss
 
 
 
 
(485
)
Depreciation and amortization
 
 
 
 
(25,338
)
Loss on impairment
 
 
 
 
(256
)
General and administrative expenses
 
 
 
 
(4,002
)
Interest expense
 
 
 
 
(8,131
)
Loss on debt extinguishment
 
 
 
 
(199
)
Interest and other income
 
 
 
 
228

Loss before gain on sale of real estate and other investments and income from discontinued operations
 
 
 
 
(16,088
)
Gain on sale of real estate and other investments
 
 
 
 
124

Income (loss) from continuing operations
 
 
 
 
(15,964
)
Income (loss) from discontinued operations
 
 
 
 
2,685

Net income (loss)
 
 
 
 
$
(13,279
)



 
5
 
(Back To Top)

Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit


Exhibit 99.2
394949829_q12019cover.jpg




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

 
S-1
 



Company Background
First Quarter Fiscal 2019
We are a multifamily real estate investment trust (REIT) focused on the ownership, management, acquisition, redevelopment, and development of multifamily apartment communities.  As of July 31, 2018, we owned interests in 87 multifamily properties consisting of 13,703 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 July 31, 2018)
Company Headquarters
Minot, North Dakota
Fiscal Year-End
April 30
Reportable Segments
Multifamily
Total Multifamily Properties
87
Total Units
13,703
Common Shares Outstanding (thousands)
119,507
Limited Partnership Units Outstanding (thousands)
13,895
Common Share Distribution – Quarter/Annualized
$0.07/$0.28
Annualized Dividend Yield
5.1%
Total Capitalization
$1.5 billion
Investor Information
(as of August 31, 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 Trustee
John A. Kirchmann
Executive Vice President and Chief Financial Officer
Anne Olson
Executive Vice President, Chief Operating Officer, General Counsel and Secretary

Corporate Headquarters:
Investor Relations Contact:
1400 31st Avenue SW, Suite 60
Jonathan Bishop
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)
 
 
1st Quarter
 
4th Quarter
 
3rd Quarter
 
2nd Quarter
 
1st Quarter
 
 
Fiscal Year 2019
 
Fiscal Year 2018
 
Fiscal Year 2018
 
Fiscal Year 2018
 
Fiscal Year 2018
High Closing Price
 
$
5.94

 
$
5.58

 
$
6.06

 
$
6.32

 
$
6.72

Low Closing Price
 
$
5.13

 
$
4.65

 
$
5.52

 
$
5.81

 
$
5.64

Average Closing Price
 
$
5.51

 
$
5.09

 
$
5.80

 
$
6.09

 
$
6.07

Closing Price at end of quarter
 
$
5.48

 
$
5.33

 
$
5.67

 
$
5.85

 
$
6.22

Common Share Distributions – annualized
 
$
0.28

 
$
0.28

 
$
0.28

 
$
0.28

 
$
0.28

Closing Dividend Yield – annualized
 
5.1
%
 
5.3
%
 
4.9
%
 
4.8
%
 
4.5
%
Closing common shares outstanding (thousands)
 
$
119,507

 
$
119,526

 
$
120,035

 
$
120,188

 
$
120,587

Closing limited partnership units outstanding (thousands)
 
$
13,895

 
$
14,099

 
$
14,168

 
$
14,618

 
$
14,657

Closing market value of outstanding common shares, plus imputed closing market value of outstanding limited partnership units (thousands)
 
$
731,043

 
$
712,221

 
$
760,931

 
$
788,615

 
$
841,218

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, 2018 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)
 
 
7/31/2018
 
4/30/2018
 
1/31/2018
 
10/31/2017
 
7/31/2017
ASSETS
 
 
 
 
 
 
 
 
 
 
Real estate investments
 
 
 
 
 
 
 
 
 
 
Property owned
 
$
1,636,233

 
$
1,669,706

 
$
1,568,725

 
$
1,510,890

 
$
1,424,251

Less accumulated depreciation
 
(326,772
)
 
(311,324
)
 
(304,149
)
 
(292,976
)
 
(280,563
)
 
 
1,309,461

 
1,358,382

 
1,264,576

 
1,217,914

 
1,143,688

Development in progress
 

 

 

 

 

Unimproved land
 
7,926

 
11,534

 
15,123

 
15,216

 
15,195

Mortgage loans receivable
 
10,530

 
10,329

 
10,329

 
10,329

 

Total real estate investments
 
1,327,917

 
1,380,245

 
1,290,028

 
1,243,459

 
1,158,883

Assets held for sale and assets of discontinued operations
 

 

 

 
239,688

 
280,083

Cash and cash equivalents
 
16,261

 
11,891

 
22,666

 
42,464

 
23,801

Restricted cash
 
4,103

 
4,225

 
121,337

 
3,782

 
3,713

Other assets
 
27,885

 
30,297

 
21,664

 
21,634

 
15,870

TOTAL ASSETS
 
$
1,376,166

 
$
1,426,658

 
$
1,455,695

 
$
1,551,027

 
$
1,482,350

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

 
$

 
$
2,016

 
$
95,193

 
$
127,413

Accounts payable and accrued expenses
 
28,112

 
29,018

 
33,776

 
32,581

 
34,248

Revolving line of credit
 
130,000

 
124,000

 
67,000

 
247,500

 
125,900

Term loan payable, net of loan costs
 
69,540

 
69,514

 
69,483

 

 

Mortgages payable, net of loan costs
 
464,557

 
509,919

 
553,388

 
561,798

 
565,705

Construction debt
 

 

 

 
21,649

 
20,134

TOTAL LIABILITIES
 
692,209

 
732,451

 
725,663

 
958,721

 
873,400

 
 
 
 
 
 
 
 
 
 
 
REDEEMABLE NONCONTROLLING INTERESTS – CONSOLIDATED REAL ESTATE ENTITIES
 
6,230

 
6,708

 
6,644

 
6,812

 
7,010

EQUITY
 
 
 
 
 
 
 
 
 
 
Series B Preferred Shares of Beneficial Interest
 

 

 

 

 
111,357

Series C Preferred Shares of Beneficial Interest
 
99,456

 
99,456

 
99,456

 
99,467

 

Common Shares of Beneficial Interest
 
899,708

 
907,843

 
910,173

 
910,683

 
912,625

Accumulated distributions in excess of net income
 
(402,190
)
 
(395,669
)
 
(364,684
)
 
(490,612
)
 
(488,535
)
Accumulated other comprehensive income
 
1,987

 
1,779

 
359

 

 

Total shareholders’ equity
 
598,961

 
613,409

 
645,304

 
519,538

 
535,447

Noncontrolling interests – Operating Partnership
 
71,390

 
73,012

 
76,915

 
64,291

 
64,789

Noncontrolling interests – consolidated real estate entities
 
7,376

 
1,078

 
1,169

 
1,665

 
1,704

Total equity
 
677,727

 
687,499

 
723,388

 
585,494

 
601,940

TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND EQUITY
 
$
1,376,166

 
$
1,426,658

 
$
1,455,695

 
$
1,551,027

 
$
1,482,350


 
S-4
 



IRET
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share amounts)
 
 
Three Months Ended
OPERATING RESULTS
 
7/31/2018
 
4/30/2018
 
1/31/2018
 
10/31/2017
 
7/31/2017
Real estate revenue
 
$
45,946

 
$
44,185

 
$
42,716

 
$
41,866

 
$
40,978

Real estate expenses
 
19,529

 
18,734

 
18,055

 
18,718

 
17,527

Net operating income
 
26,417

 
25,451

 
24,661

 
23,148

 
23,451

Property management expense
 
(1,367
)
 
(1,411
)
 
(1,387
)
 
(1,372
)
 
(1,356
)
Casualty gain/loss
 
(225
)
 
155

 
(55
)
 
(115
)
 
(485
)
Depreciation/amortization
 
(18,850
)
 
(21,072
)
 
(18,390
)
 
(17,270
)
 
(25,338
)
Impairment of real estate investments
 

 
(17,809
)
 

 

 
(256
)
General and administrative expenses
 
(3,870
)
 
(4,123
)
 
(3,011
)
 
(3,118
)
 
(4,002
)
Interest expense
 
(8,385
)
 
(8,302
)
 
(9,236
)
 
(8,509
)
 
(8,131
)
Loss on extinguishment of debt
 
(552
)
 
(122
)
 
(285
)
 
(334
)
 
(199
)
Interest and other income
 
516

 
592

 
433

 
255

 
228

Loss before income on sale of real estate and other investments and income from discontinued operations
 
(6,316
)
 
(26,641
)
 
(7,270
)
 
(7,315
)
 
(16,088
)
Income on sale of real estate and other investments
 
9,249

 
2,285

 
12,387

 
5,324

 
124

Income (loss) from continuing operations
 
2,933

 
(24,356
)
 
5,117

 
(1,991
)
 
(15,964
)
Income (loss) from discontinued operations
 
570

 
197

 
146,811

 
15,130

 
2,685

Net income (loss)
 
$
3,503

 
$
(24,159
)
 
$
151,928

 
$
13,139

 
$
(13,279
)
 
 
 
 
 
 
 
 
 
 
 
Net (income) loss attributable to noncontrolling interest – Operating Partnership
 
(113
)
 
2,663

 
(16,236
)
 
(773
)
 
1,644

Net (income) loss attributable to noncontrolling interests – consolidated real estate entities
 
(665
)
 
622

 
413

 
455

 
371

Net income (loss) attributable to controlling interests
 
2,725

 
(20,874
)
 
136,105

 
12,821

 
(11,264
)
Dividends to preferred shareholders
 
(1,705
)
 
(1,705
)
 
(1,766
)
 
(2,812
)
 
(2,286
)
Redemption of Preferred Shares
 

 

 
(8
)
 
(3,649
)
 

NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS
 
$
1,020

 
$
(22,579
)
 
$
134,331

 
$
6,360

 
$
(13,550
)
 
 
 
 
 
 
 
 
 
 
 
Per Share Data
 
 
 
 
 
 
 
 
 
 
Earnings (loss) per common share from continuing operations – basic & diluted
 
$
0.01

 
$
(0.19
)
 
$
0.03

 
$
(0.06
)
 
$
(0.13
)
Earnings per common share from discontinued operations – basic & diluted
 

 

 
1.09

 
0.11

 
0.02

Net income (loss) per common share – basic & diluted
 
$
0.01

 
$
(0.19
)
 
$
1.12

 
$
0.05

 
$
(0.11
)
 
 
 
 
 
 
 
 
 
 
 
Percentage of Revenues
 
 
 
 
 
 
 
 
 
 
Real estate expenses
 
42.5
%
 
42.4
 %
 
42.3
%
 
44.7
%
 
42.8
 %
General and administrative expenses
 
8.4
%
 
9.3
 %
 
7.0
%
 
7.4
%
 
9.8
 %
Interest
 
18.2
%
 
18.8
 %
 
21.6
%
 
20.3
%
 
19.8
 %
Income from discontinued operations
 
1.2
%
 
0.4
 %
 
343.7
%
 
36.1
%
 
6.6
 %
Net (loss) income
 
7.6
%
 
(54.7
)%
 
355.7
%
 
31.4
%
 
(32.4
)%

 
S-5
 



IRET
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO
IRET TO FFO AND CORE FFO (unaudited)
(in thousands, except per share and unit amounts)
 
 
Three Months Ended
 
 
7/31/2018
 
4/30/2018
 
1/31/2018
 
10/31/2017
 
7/31/2017
Funds From Operations(1)
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to controlling interests
 
$
2,916

 
$
(20,874
)
 
$
136,105

 
$
12,821

 
$
(11,264
)
Less dividends to preferred shareholders
 
(1,705
)
 
(1,705
)
 
(1,766
)
 
(2,812
)
 
(2,286
)
Less redemption of preferred shares
 

 

 
(8
)
 
(3,649
)
 

Net income (loss) available to common shareholders
 
1,211

 
(22,579
)
 
134,331

 
6,360

 
(13,550
)
Adjustments:
 
 
 
 
 
 
 
 
 
 
Noncontrolling interests – Operating Partnership
 
135

 
(2,663
)
 
16,236

 
773

 
(1,644
)
Depreciation and amortization of real property
 
17,837

 
20,269

 
19,017

 
19,894

 
28,119

Impairment of real estate investments attributable to controlling interests
 

 
15,192

 

 

 
256

Gain on depreciable property sales
 
(8,628
)
 
(2,210
)
 
(163,791
)
 
(17,562
)
 
(124
)
FFO applicable to common shares and Units
 
$
10,555

 
$
8,009

 
$
5,793

 
$
9,465

 
$
13,057

 
 
 
 
 
 
 
 
 
 
 
FFO per share and unit – basic and diluted
 
$
0.08

 
$
0.06

 
$
0.04

 
$
0.07

 
$
0.10

 
 
 
 
 
 
 
 
 
 
 
Adjustments to Core FFO:
 
 
 
 
 
 
 
 
 
 
Loss on extinguishment of debt
 
552

 
122

 
6,787

 
340

 
199

Redemption of Preferred Shares
 

 

 
8

 
3,649

 

Severance and transitions costs
 
510

 
301

 

 
186

 
464

Core FFO applicable to common shares and Units
 
$
11,617

 
$
11,049

 
$
12,588

 
$
13,640

 
$
13,720

 
 
 
 
 
 
 
 
 
 
 
Core FFO per share and unit – basic and diluted
 
$
0.09

 
$
0.08

 
$
0.09

 
$
0.10

 
$
0.10

 
 
 
 
 
 
 
 
 
 
 
Weighted average shares and units
 
133,271

 
133,703

 
134,175

 
134,767

 
135,549

 
(1)
See Definitions section.

 
S-6
 



IRET
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO
IRET TO ADJUSTED EARNINGS BEFORE INTEREST,
TAXES, DEPRECIATION, AND AMORTIZATION (ADJUSTED EBITDA) (unaudited)
(in thousands)
 
 
Three Months Ended
 
 
7/31/2018
 
4/30/2018
 
1/31/2018
 
10/31/2017
 
7/31/2017
Adjusted EBITDA(1)
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to controlling interests
 
$
2,916

 
$
(20,874
)
 
$
136,105

 
$
12,821

 
$
(11,264
)
Adjustments:
 
 
 
 
 
 
 
 
 
 
Noncontrolling interests – Operating Partnership
 
135

 
(2,663
)
 
16,236

 
773

 
(1,644
)
Income (loss) before noncontrolling interests – Operating Partnership
 
3,051

 
(23,537
)
 
152,341

 
13,594

 
(12,908
)
Add:
 
 
 
 
 
 
 
 
 
 
Interest expense
 
7,983

 
7,884

 
9,569

 
9,523

 
9,703

Loss on extinguishment of debt
 
552

 
122

 
6,787

 
340

 
199

Depreciation/amortization related to real estate investments
 
17,912

 
20,347

 
19,100

 
19,977

 
28,215

Amortization related to real estate revenues(2)
 

 

 

 

 

Impairment of unimproved land
 

 
2,617

 

 

 

Impairment of real estate investments attributable to controlling interests
 

 
15,192

 

 

 
256

Less:
 
 
 
 
 
 
 
 
 
 
Interest income
 
(481
)
 
(569
)
 
(408
)
 
(316
)
 
(564
)
Gain on sale of real estate and other investments
 
(8,628
)
 
(2,210
)
 
(163,791
)
 
(17,562
)
 
(124
)
Adjusted EBITDA
 
$
20,389

 
$
19,846

 
$
23,598

 
$
25,556

 
$
24,777

 
 
 
 
 
 
 
 
 
 
 
Ratios
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA(1)/Interest expense
 
2.43
 x
 
2.57
 x
 
2.36
 x
 
2.57
 x
 
2.45
 x
Adjusted EBITDA(1)/Interest expense plus preferred distributions
 
1.91
 x
 
2.00
 x
 
2.01
 x
 
2.00
 x
 
2.00
 x
 
(1)
See Definitions.
(2)
Included in real estate revenue in the Statement of Operations.

 
S-7
 




IRET
DEBT ANALYSIS
(in thousands)
Debt Maturity Schedule
Annual Expirations
 
 
Future Maturities of Debt(1)
Fiscal Year
 
Fixed
Debt
 
Variable
Debt
 
Total
Debt
 
Weighted
Average(2)
 
% of
Total Debt
2019
 

 

 

 

 

2020
 
$
79,219

 

 
$
79,219

 
6.01
%
 
11.9
%
2021
 
54,871

 

 
54,871

 
5.05
%
 
8.2
%
2022
 
101,391

 

 
101,391

 
5.23
%
 
15.2
%
2023
 
27,883

 

 
27,883

 
4.13
%
 
4.2
%
Thereafter
 
203,191

 

 
203,191

 
3.79
%
 
30.5
%
Total secured maturing debt
 
$
466,555

 

 
$
466,555

 
4.65
%
 
70.0
%
 
 
 
 
 
 
 
 
 
 
 
Unsecured line of credit
 

 
$
130,000

 
130,000

 
3.83
%
 
19.5
%
Unsecured term loan(3)
 
70,000

 

 
70,000

 
3.86
%
 
10.5
%
Total debt
 
$
536,555

 
$
130,000

 
$
666,555

 
4.41
%
 
100.0
%
 
(1)
Includes line of credit and term loan.
(2)
Weighted average interest rate of debt that matures in fiscal year.
(3)
Term loan has a variable interest rate that is hedged with an interest rate swap and matures on January 31, 2023.
 
 
7/31/2018
 
4/30/2018
 
1/31/2018
 
10/31/2017
 
7/31/2017
Debt Balances Outstanding(1)
 
 
 
 
 
 
 
 
 
 
Secured fixed rate
 
$
466,555

 
$
489,401

 
$
494,874

 
$
593,854

 
$
605,028

Secured variable rate
 

 
22,739

 
61,001

 
86,672

 
100,388

Unsecured line of credit
 
130,000

 
124,000

 
67,000

 
247,500

 
125,900

Unsecured term loan
 
70,000

 
70,000

 
70,000

 

 

Debt total
 
$
666,555

 
$
706,140

 
$
692,875

 
$
928,026

 
$
831,316

 
 
 
 
 
 
 
 
 
 
 
Weighted Average Interest Rate Secured
 
4.65
%
 
4.69
%
 
4.63
%
 
4.63
%
 
4.62
%
Line of Credit Rate
 
3.83
%
 
3.63
%
 
3.45
%
 
3.08
%
 
2.98
%
Term Loan Rate
 
3.86
%
 
3.86
%
 
4.01
%
 

 

 
(1)
Includes mortgages on properties held for sale.

 
S-8
 



IRET 
CAPITAL ANALYSIS 
(in thousands, except per share and unit amounts)
 
 
Three Months Ended
 
 
7/31/2018
 
4/30/2018
 
1/31/2018
 
10/31/2017
 
7/31/2017
Equity Capitalization
 
 
 
 
 
 
 
 
 
 
Common shares outstanding
 
119,507

 
119,526

 
120,035

 
120,188

 
120,587

Operating partnership units outstanding
 
13,895

 
14,099

 
14,168

 
14,618

 
14,657

Total common shares and units outstanding
 
133,402

 
133,625

 
134,203

 
134,806

 
135,244

Market price per common share (closing price at end of period)
 
$
5.48

 
$
5.33

 
$
5.67

 
$
5.85

 
$
6.22

Equity capitalization-common shares and units
 
731,043

 
712,221

 
760,931

 
788,615

 
841,218

Recorded book value of preferred shares
 
$
99,456

 
$
99,456

 
$
99,456

 
$
99,467

 
$
111,357

Total equity capitalization
 
$
830,499

 
$
811,677

 
$
860,387

 
$
888,082

 
$
952,575

 
 
 
 
 
 
 
 
 
 
 
Debt Capitalization
 
 
 
 
 
 
 
 
 
 
Total debt
 
$
666,555

 
$
706,140

 
$
692,875

 
$
927,968

 
$
839,134

Total capitalization
 
$
1,497,054

 
$
1,517,817

 
$
1,553,262

 
$
1,816,050

 
$
1,791,709

 
 
 
 
 
 
 
 
 
 
 
Total debt to total capitalization
 
0.45:1

 
0.47:1

 
0.45:1

 
0.51:1

 
0.47:1


 
 
Three Months Ended
 
 
7/31/2018
 
4/30/2018
 
1/31/2018
 
10/31/2017
 
7/31/2017
Earnings to fixed charges(1)
 
1.30
 x
 
(2
)
 
1.56
x
 
(3
)
 
(4
)
Earnings to combined fixed charges and preferred distributions(1)
 
1.08
 x
 
(2
)
 
1.33
x
 
(3
)
 
(4
)
Debt service coverage ratio(1)
 
1.88
 x
 
1.81
 x
 
1.78
 x
 
1.84
 x
 
1.75
 x
 
 
 
 
 
 
 
 
 
 
 
Distribution Data
 
 
 
 
 
 
 
 
 
 
Common shares and units outstanding at record date
 
133,402

 
133,625

 
134,203

 
134,806

 
135,830

Total common distribution paid
 
$
9,345

 
$
9,395

 
$
9,420

 
$
9,462

 
$
9,509

Common distribution per share and unit
 
$
0.07

 
$
0.07

 
$
0.07

 
$
0.07

 
$
0.07

Payout ratio (FFO per share and unit basis)(1)
 
87.5
%
 
116.7
%
 
175.0
%
 
100.0
%
 
70.0
%
Payout ratio (Core FFO per share and unit basis)(5)
 
77.8
%
 
87.5
%
 
77.8
%
 
70.0
%
 
70.0
%
 
(1)
Payout ratio (FFO per share and unit basis) is the ratio of the current quarterly or annual distribution rate per common share and unit divided by quarterly or annual FFO per share and unit.
(2)
Earnings were inadequate to cover (a) fixed charges and (b) combined fixed charges and preferred distributions by $23.7 million and $25.4 million, respectively. Excluding non-cash asset impairment charges of $17.8 million in the three months ended April 30, 2018, the ratio of earnings to fixed charges and of earnings to combined fixed charges and preferred distributions would have been .29x and .24x, respectively, for the three months ended April 30, 2018.
(3)
Earnings were inadequate to cover (a) fixed charges and (b) combined fixed charges and preferred distributions by $1.6 million and $4.5 million, respectively, for the three months ended October 31, 2017.
(4)
Earnings were inadequate to cover (a) fixed charges and (b) combined fixed charges and preferred distributions by $15.5 million and $17.8 million, respectively. Excluding non-cash depreciation charges related to a change in depreciable lives and non-cash impairment charges of $14.7 million in the three months ended July 31, 2017, the ratio of earnings to fixed charges and of earnings to combined fixed charges and preferred distributions would have been .92x and .75x, respectively, for the three months ended July 31, 2017.
(5)
Payout ratio (Core FFO per share and unit basis) is the ratio of the current quarterly or annual distribution rate per common share and unit divided by quarterly or annual Core FFO per share and unit.

 
S-9
 




IRET
NET OPERATING INCOME DETAIL
(in thousands)
 
 
Three months ended July 31,
 
 
2018
 
2017
 
$ Change
 
% Change
Real estate rental revenue
 
 
 
 
 
 
 
 
Same-store
 
$
36,737

 
$
35,668

 
$
1,069

 
3.00
 %
Non-same-store
 
6,352

 
331

 
6,021

 
1,819.03
 %
Other properties and dispositions
 
2,857

 
4,979

 
(2,122
)
 
(42.62
)%
Total
 
45,946

 
40,978

 
4,968

 
12.12
 %
 
 
 
 
 
 
 
 
 
Real estate expenses
 
 
 
 
 
 
 
 
Same-store
 
16,093

 
15,578

 
515

 
3.31
 %
Non-same-store
 
2,393

 
156

 
2,237

 
1,433.97
 %
Other properties and dispositions
 
1,043

 
1,793

 
(750
)
 
(41.83
)%
Total
 
19,529

 
17,527

 
2,002

 
11.42
 %
 
 
 
 
 
 
 
 
 
Net operating income (NOI)
 
 
 
 
 
 
 
 
Same-store
 
20,644

 
20,090

 
554

 
2.76
 %
Non-same-store
 
3,959

 
175

 
3,784

 
2,162.29
 %
Other properties and dispositions
 
1,814

 
3,186

 
(1,372
)
 
(43.06
)%
Net operating income
 
$
26,417

 
$
23,451

 
$
2,966

 
12.65
 %
 
 
 
 
 
 
 
 
 
Reconciliation of NOI to net income (loss) available to common shareholders
 
 
 
 
 
 
 
 
Property management
 
$
(1,367
)
 
$
(1,356
)
 
$
(11
)
 
0.81
 %
Casualty
 
(225
)
 
(485
)
 
260

 
(53.61
)%
Depreciation/amortization
 
(18,612
)
 
(25,338
)
 
6,726

 
(26.55
)%
Impairment of real estate investments
 

 
(256
)
 
256

 
(100.00
)%
General and administrative expenses
 
(3,870
)
 
(4,002
)
 
132

 
(3.30
)%
Interest expense
 
(8,385
)
 
(8,131
)
 
(254
)
 
3.12
 %
Loss on debt extinguishment
 
(552
)
 
(199
)
 
(353
)
 
177.39
 %
Interest and other income
 
516

 
228

 
288

 
126.32
 %
Loss before gain on sale of real estate and other investments and income from discontinued operations
 
(6,078
)
 
(16,088
)
 
10,010

 
(62.22
)%
Gain on sale of real estate and other investments
 
9,224

 
124

 
9,100

 
7,338.71
 %
Income (loss) from continuing operations
 
3,146

 
(15,964
)
 
19,110

 
(119.71
)%
Income (loss) from discontinued operations