Toggle SGML Header (+)


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


(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


Exhibit 99.1
Earnings Release
396048070_iretlogojpeg1200x1080a02.jpg 
 
IRET Announces Second Quarter Fiscal 2019 Results
 
MINNEAPOLIS, MN, December 10, 2018 – IRET (NYSE: IRET) announced today its second quarter fiscal 2019 financial and operating results. Net income and Funds from Operations (“FFO”) per share for the three and six months ended October 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
 
Six Months Ended
 
 
October 31,
 
October 31,
Per Share
 
2018
 
2017
 
2018
 
2017
Net Income (Loss)
 
$
(0.05
)
 
$
0.05

 
$
(0.04
)
 
$
(0.06
)
FFO
 
$
0.09

 
$
0.07

 
$
0.17

 
$
0.17

Core FFO
 
$
0.09

 
$
0.10

 
$
0.17

 
$
0.20

 
 
Year-Over-Year
Comparison
 
Sequential
Comparison
 
YTD
Comparison
Multifamily Same-Store Results
 
2Q19 vs. 2Q18
 
2Q19 vs. 1Q19
 
2Q19 vs. 2Q18
Revenues
 
3.6
 %
 
1.3
 %
 
3.3
%
Expenses
 
(2.4
)%
 
(0.1
)%
 
0.4
%
Net Operating Income (“NOI”)
 
8.7
 %
 
2.3
 %
 
5.7
%
Multifamily Same-Store Results
 
2Q19
 
1Q19
 
2Q18
Physical Occupancy
 
95.4
%
 
94.0
%
 
95.3
%
Weighted Average Occupancy
 
93.1
%
 
93.5
%
 
93.0
%
“We continue to execute our plan, and 8.7% same-store NOI growth reflects the value of our operations focus and our drive to improve our portfolio and markets,” said Mark O. Decker Jr., IRET’s President and CEO.
Second Quarter Fiscal Year 2019 Highlights
Same-store NOI grew by 8.7%, our fourth consecutive quarter of year-over-year NOI growth. NOI expansion has been driven by revenue growth and expense control initiatives;
Same-store revenue increased year-over-year by 3.6%, driven by growth in rental revenue;
Same-store expenses decreased by 2.4% from the prior year due to several cost containment initiatives undertaken by our operations team and a reduction in insurance claim losses; and
Continued the disposition of non-multifamily properties.

 
1
 



Dispositions
During the quarter, we sold one commercial property and one parcel of land for a total sale price of $3.1 million.
Subsequent to quarter-end, we disposed of our Minot Arrowhead commercial property for a total sale price of $6.6 million. Following this sale, we have only five remaining non-multifamily properties, representing less than 2.0% of NOI, in our portfolio.
Balance Sheet
During the quarter, we amended our line of credit to:
increase the overall unsecured facility from $370 million to $395 million, reallocating the commitment for the revolving line of credit to $250 million and the remaining $145 million between two term loans;
extend the maturity of the revolving line of credit to August 2022;
extend the existing $70 million unsecured term loan maturity to January 2024; and
add a new $75 million, 7-year unsecured term loan maturing in August 2025 that bears interest at a spread over LIBOR based on IRET’s overall leverage.
Under the amendment, the interest rate on the existing facilities decreased by 25-35 basis points depending on IRET’s overall leverage. IRET also entered into a swap agreement for the entire $75 million and full term of the new unsecured 7-year term loan in its ongoing effort to reduce floating interest rate exposure.
On September 10, 2018, we entered into a swap agreement covering the extension of the $70 million term loan from January 2023 to January 2024, resulting in both term loans being covered by swap agreements for the duration of the terms.
At the end of the second quarter, we had $195.3 million of total liquidity on our balance sheet, including $176.5 million available on our corporate revolver and $6.0 million on our operating line of credit.
Quarterly Distributions
On September 5, 2018, IRET’s Board of Trustees declared a regular quarterly distribution of $0.07 per share/unit payable on October 1, 2018, to common shareholders and unitholders of record on September 17, 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.
On September 5, 2018, IRET's 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 October 1, 2018, to holders of record on September 17, 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, December 11, 2018, at 10:00 AM ET
 
Replay available until December 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
10126592
Supplemental Information
Supplemental Operating and Financial Data for the Quarter ended October 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.

 
2
 



About IRET
IRET is a real estate company focused on the ownership, management, acquisition, redevelopment, and development of apartment communities. As of October 31, 2018, we owned interests in 87 apartment communities consisting of 13,702 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 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
CONTROLLING INTERESTS TO FFO AND CORE FFO
z
 
 
(in thousands, except per share amounts)
Three Months Ended October 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
 
$
(4,558
)
 
 
 
 
 
$
12,821

 
 
 
 
Less dividends to preferred shareholders
 
(1,706
)
 
 
 
 
 
(2,812
)
 
 
 
 
Less redemption of preferred shares
 

 
 
 
 
 
(3,649
)
 
 
 
 
Net income (loss) available to common shareholders
 
(6,264
)
 
119,396

 
$
(0.05
)
 
6,360

 
120,144

 
$
0.05

Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling interest – Operating Partnership
 
(722
)
 
13,789

 
 
 
773

 
14,623

 
 
Depreciation and amortization
 
18,446

 
 
 
 
 
19,894

 
 
 
 
Loss (gain) on depreciable property sales attributable to controlling interests
 
232

 
 
 
 
 
(17,562
)
 
 
 
 
FFO applicable to common shares and Units(1)
 
$
11,692

 
133,185

 
$
0.09

 
$
9,465

 
134,767

 
$
0.07

 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments to Core FFO:
 
 
 
 
 
 
 
 
 
 
 
 
Loss on extinguishment of debt
 
4

 
 
 
 
 
340

 
 
 
 
Redemption of preferred shares
 

 
 
 
 
 
3,649

 
 
 
 
Transition and severance costs
 

 
 

 
 

 
186

 
 

 
 
Core FFO applicable to common shares and Units(1)
 
$
11,696

 
133,185

 
$
0.09

 
$
13,640

 
134,767

 
$
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 INCOME ATTRIBUTABLE TO
CONTROLLING INTERESTS TO FFO AND CORE FFO

 
 
(in thousands, except per share amounts)
Six Months Ended October 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
 
$
(1,642
)
 
 
 
 
 
$
1,557

 
 
 
 
Less dividends to preferred shareholders
 
(3,411
)
 
 
 
 
 
(5,098
)
 
 
 
 
Less redemption of preferred shares
 

 
 
 
 
 
(3,649
)
 
 
 
 
Net income (loss) available to common shareholders
 
(5,053
)
 
119,320

 
$
(0.04
)
 
(7,190
)
 
120,282

 
$
(0.06
)
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling interest – Operating Partnership
 
(587
)
 
13,924

 
 
 
(871
)
 
14,912

 
 
Depreciation and amortization
 
36,282

 
 
 
 
 
48,013

 
 
 
 
Impairment of real estate investments attributable to controlling interests
 

 
 
 
 
 
256

 
 
 
 
Gain on depreciable property sales attributable to controlling interests
 
(8,395
)
 
 
 
 
 
(17,686
)
 
 
 
 
FFO applicable to common shares and Units(1)
 
$
22,247

 
133,244

 
$
0.17

 
$
22,522

 
135,194

 
$
0.17

 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments to Core FFO:
 
 

 
 

 
 

 
 

 
 

 
 

Loss on extinguishment of debt
 
556

 
 

 
 

 
539

 
 

 
 

Redemption of Preferred Shares
 

 
 

 
 

 
3,649

 
 

 
 

Severance and transition costs
 
510

 
 

 
 

 
650

 
 

 
 

Core FFO applicable to common shares and Units(1)
 
$
23,313

 
133,244

 
$
0.17

 
$
27,360

 
135,194

 
$
0.20

(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 October 31, 2018
Multifamily
 
All Other
 
Total
Real estate revenue
$
43,874

 
$
1,764

 
$
45,638

Real estate expenses
18,768

 
568

 
19,336

Net operating income
$
25,106

 
$
1,196

 
$
26,302

Property management expenses
 
 
 
 
(1,319
)
Casualty loss
 
 
 
 
(225
)
Depreciation and amortization
 
 
 
 
(19,191
)
General and administrative expenses
 
 
 
 
(3,374
)
Interest expense
 
 
 
 
(7,997
)
Loss on debt extinguishment
 
 
 
 
(4
)
Interest and other income
 
 
 
 
429

Income (loss) before gain on sale of real estate and other investments and income (loss) from discontinued operations
 
 
 
 
(5,379
)
Gain (loss) on sale of real estate and other investments
 
 
 
 
(232
)
Income (loss) from continuing operations
 
 
 
 
(5,611
)
Income (loss) from discontinued operations
 
 
 
 

Net income (loss)
 
 
 
 
$
(5,611
)

 
(in thousands)
Three Months Ended October 31, 2017
Multifamily
 
All Other
 
Total
Real estate revenue
$
37,457

 
$
4,409

 
$
41,866

Real estate expenses
17,201

 
1,517

 
18,718

Net operating income
$
20,256

 
$
2,892

 
$
23,148

Property management expenses
 
 
 
 
(1,372
)
Casualty loss
 
 
 
 
(115
)
Depreciation and amortization
 
 
 
 
(17,270
)
Loss on impairment
 
 
 
 

General and administrative expenses
 
 
 
 
(3,118
)
Interest expense
 
 
 
 
(8,509
)
Loss on debt extinguishment
 
 
 
 
(334
)
Interest and other income
 
 
 
 
255

Income (loss) before gain on sale of real estate and other investments and income (loss) from discontinued operations
 
 
 
 
(7,315
)
Gain (loss) on sale of real estate and other investments
 
 
 
 
5,324

Income (loss) from continuing operations
 
 
 
 
(1,991
)
Income (loss) from discontinued operations
 
 
 
 
15,130

Net income (loss)
 
 
 
 
$
13,139



 
6
 



IRET
RECONCILIATION OF NET OPERATING INCOME TO THE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
 
(in thousands)
Six Months Ended October 31, 2018
Multifamily
 
All Other
 
Total
Real estate revenue
$
86,963

 
$
4,621

 
$
91,584

Real estate expenses
37,254

 
1,611

 
38,865

Net operating income
$
49,709

 
$
3,010

 
$
52,719

Property management expenses
 
 
 
 
(2,686
)
Casualty loss
 
 
 
 
(450
)
Depreciation and amortization
 
 
 
 
(37,803
)
General and administrative expenses
 
 
 
 
(7,244
)
Interest expense
 
 
 
 
(16,382
)
Loss on debt extinguishment
 
 
 
 
(556
)
Interest and other income
 
 
 
 
945

Income (loss) before gain on sale of real estate and other investments and income (loss) from discontinued operations
 
 
 
 
(11,457
)
Gain (loss) on sale of real estate and other investments
 
 
 
 
8,992

Income (loss) from continuing operations
 
 
 
 
(2,465
)
Income (loss) from discontinued operations
 
 
 
 
570

Net income (loss)
 
 
 
 
$
(1,895
)

 
(in thousands)
Six Months Ended October 31, 2017
Multifamily
 
All Other
 
Total
Real estate revenue
$
73,455

 
$
9,389

 
$
82,844

Real estate expenses
32,934

 
3,311

 
36,245

Net operating income
$
40,521

 
$
6,078

 
$
46,599

Property management expenses
 
 
 
 
(2,728
)
Casualty loss
 
 
 
 
(600
)
Depreciation and amortization
 
 
 
 
(42,608
)
Impairment of real estate investments
 
 
 
 
(256
)
General and administrative expenses
 
 
 
 
(7,120
)
Interest expense
 
 
 
 
(16,640
)
Loss on debt extinguishment
 
 
 
 
(533
)
Interest and other income
 
 
 
 
483

Income (loss) before gain on sale of real estate and other investments and income (loss) from discontinued operations
 
 
 
 
(23,403
)
Gain (loss) on sale of real estate and other investments
 
 
 
 
5,448

Income (loss) from continuing operations
 
 
 
 
(17,955
)
Income (loss) from discontinued operations
 
 
 
 
17,815

Net income (loss)
 
 
 
 
$
(140
)


 
7
 
(Back To Top)

Section 3: EX-99.2 (EXHIBIT 99.2)

Exhibit


Exhibit 99.2

396048070_q22019.jpg




Supplemental Financial and Operating Data
Table of Contents
October 31, 2018
 
Page
 
 
 
 
Key Financial Data
 
 
 
Debt and Capital Analysis
 
 
 
Portfolio Analysis
 
 
 

 
S-1
 



Company Background
Second 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 October 31, 2018, we owned interests in 87 multifamily properties consisting of 13,702 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 October 31, 2018)
Company Headquarters
Minot, North Dakota
Fiscal Year-End
April 30
Reportable Segments
Multifamily
Total Multifamily Properties
87
Total Units
13,702
Common Shares Outstanding (thousands)
119,727
Limited Partnership Units Outstanding (thousands)
13,678
Common Share Distribution – Quarter/Annualized
$0.07/$0.28
Annualized Dividend Yield
5.2%
Total Capitalization
$1.5 billion
Investor Information
(as of October 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, Chair of Nominating and Governance Committee
Linda J. Hall
Trustee, Chair of Compensation Committee
Terrance P. Maxwell
Trustee
John A. Schissel
Trustee
Mary J. Twinem
Trustee

Management
Mark O. Decker, Jr.
President, Chief Executive Officer, Chief Investment 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)
 
 
2nd Quarter
 
1st Quarter
 
4th Quarter
 
3rd Quarter
 
2nd Quarter
 
 
Fiscal Year 2019
 
Fiscal Year 2019
 
Fiscal Year 2018
 
Fiscal Year 2018
 
Fiscal Year 2018
High Closing Price
 
$
5.98

 
$
5.94

 
$
5.58

 
$
6.06

 
$
6.32

Low Closing Price
 
$
5.33

 
$
5.13

 
$
4.65

 
$
5.52

 
$
5.81

Average Closing Price
 
$
5.51

 
$
5.51

 
$
5.09

 
$
5.80

 
$
6.09

Closing Price at end of quarter
 
$
5.43

 
$
5.48

 
$
5.33

 
$
5.67

 
$
5.85

Common Share Distributions – annualized
 
$
0.28

 
$
0.28

 
$
0.28

 
$
0.28

 
$
0.28

Closing Dividend Yield – annualized
 
5.2
%
 
5.1
%
 
5.3
%
 
4.9
%
 
4.8
%
Closing common shares outstanding (thousands)
 
$
119,727

 
$
119,507

 
$
119,526

 
$
120,035

 
$
120,188

Closing limited partnership units outstanding (thousands)
 
$
13,678

 
$
13,895

 
$
14,099

 
$
14,168

 
$
14,618

Closing market value of outstanding common shares, plus imputed closing market value of outstanding limited partnership units (thousands)
 
$
724,389

 
$
731,043

 
$
712,221

 
$
760,931

 
$
788,615

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)
 
 
10/31/2018
 
7/31/2018
 
4/30/2018
 
1/31/2018
 
10/31/2017
ASSETS
 
 
 
 
 
 
 
 
 
 
Real estate investments
 
 
 
 
 
 
 
 
 
 
Property owned
 
$
1,638,072

 
$
1,636,233

 
$
1,669,764

 
$
1,568,725

 
$
1,510,890

Less accumulated depreciation
 
(345,015
)
 
(326,772
)
 
(311,324
)
 
(304,149
)
 
(292,976
)
 
 
1,293,057

 
1,309,461

 
1,358,440

 
1,264,576

 
1,217,914

Unimproved land
 
6,522

 
7,926

 
11,476

 
15,123

 
15,216

Mortgage loans receivable
 
10,530

 
10,530

 
10,329

 
10,329

 
10,329

Total real estate investments
 
1,310,109

 
1,327,917

 
1,380,245

 
1,290,028

 
1,243,459

Assets held for sale and assets of discontinued operations
 

 

 

 

 
239,688

Cash and cash equivalents
 
12,777

 
16,261

 
11,891

 
22,666

 
42,464

Restricted cash
 
5,085

 
4,103

 
4,225

 
121,337

 
3,782

Other assets
 
29,769

 
27,885

 
30,297

 
21,664

 
21,634

TOTAL ASSETS
 
$
1,357,740

 
$
1,376,166

 
$
1,426,658

 
$
1,455,695

 
$
1,551,027

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

 
$

 
$

 
$
2,016

 
$
95,193

Accounts payable and accrued expenses
 
27,920

 
28,112

 
29,018

 
33,776

 
32,581

Revolving line of credit
 
69,500

 
130,000

 
124,000

 
67,000

 
247,500

Term loans payable, net of loan costs
 
143,956

 
69,540

 
69,514

 
69,483

 

Mortgages payable, net of loan costs
 
447,549

 
464,557

 
509,919

 
553,388

 
561,798

Construction debt
 

 

 

 

 
21,649

TOTAL LIABILITIES
 
688,925

 
692,209

 
732,451

 
725,663

 
958,721

 
 
 
 
 
 
 
 
 
 
 
REDEEMABLE NONCONTROLLING INTERESTS – CONSOLIDATED REAL ESTATE ENTITIES
 
6,078

 
6,230

 
6,644

 
6,644

 
6,812

EQUITY
 
 
 
 
 
 
 
 
 
 
Series C Preferred Shares of Beneficial Interest
 
99,456

 
99,456

 
99,456

 
99,456

 
99,467

Common Shares of Beneficial Interest
 
900,526

 
899,708

 
900,097

 
910,173

 
910,683

Accumulated distributions in excess of net income
 
(416,819
)
 
(402,190
)
 
(395,669
)
 
(364,684
)
 
(490,612
)
Accumulated other comprehensive income
 
3,321

 
1,987

 
1,779

 
359

 

Total shareholders’ equity
 
586,484

 
598,961

 
605,663

 
645,304

 
519,538

Noncontrolling interests – Operating Partnership
 
69,334

 
71,390

 
73,012

 
76,915

 
64,291

Noncontrolling interests – consolidated real estate entities
 
6,919

 
7,376

 
8,888

 
1,169

 
1,665

Total equity
 
662,737

 
677,727

 
687,563

 
723,388

 
585,494

TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND EQUITY
 
$
1,357,740

 
$
1,376,166

 
$
1,426,658

 
$
1,455,695

 
$
1,551,027


 
S-4
 



IRET
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share amounts)
 
 
Six months ended
 
 
Three Months Ended
OPERATING RESULTS
 
10/31/2018
 
10/31/2017
 
 
10/31/2018
 
7/31/2018
 
4/30/2018
 
1/31/2018
 
10/31/2017
Real estate revenue
 
$
91,584

 
$
82,844

 
 
$
45,638

 
$
45,946

 
$
44,185

 
$
42,716

 
$
41,866

Real estate expenses
 
38,865

 
36,245

 
 
19,336

 
19,529

 
18,734

 
18,055

 
18,718

Net operating income
 
52,719

 
46,599

 
 
26,302

 
26,417

 
25,451

 
24,661

 
23,148

Property management expense
 
(2,686
)
 
(2,728
)
 
 
(1,319
)
 
(1,367
)
 
(1,411
)
 
(1,387
)
 
(1,372
)
Casualty gain/loss
 
(450
)
 
(600
)
 
 
(225
)
 
(225
)
 
155

 
(55
)
 
(115
)
Depreciation/amortization
 
(37,803
)
 
(42,608
)
 
 
(19,191
)
 
(18,612
)
 
(21,072
)
 
(18,390
)
 
(17,270
)
Impairment of real estate investments
 

 
(256
)
 
 

 

 
(17,809
)
 

 

General and administrative expenses
 
(7,244
)
 
(7,120
)
 
 
(3,374
)
 
(3,870
)
 
(4,123
)
 
(3,011
)
 
(3,118
)
Interest expense
 
(16,382
)
 
(16,640
)
 
 
(7,997
)
 
(8,385
)
 
(8,302
)
 
(9,236
)
 
(8,509
)
Loss on extinguishment of debt
 
(556
)
 
(533
)
 
 
(4
)
 
(552
)
 
(122
)
 
(285
)
 
(334
)
Interest and other income
 
945

 
483

 
 
429

 
516

 
592

 
433

 
255

Loss before income on sale of real estate and other investments and income from discontinued operations
 
(11,457
)
 
(23,403
)
 
 
(5,379
)
 
(6,078
)
 
(26,641
)
 
(7,270
)
 
(7,315
)
Income on sale of real estate and other investments
 
8,992

 
5,448

 
 
(232
)
 
9,224

 
2,285

 
12,387

 
5,324

Income (loss) from continuing operations
 
(2,465
)
 
(17,955
)
 
 
(5,611
)
 
3,146

 
(24,356
)
 
5,117

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

 
17,815

 
 

 
570

 
197

 
146,811

 
15,130

Net income (loss)
 
$
(1,895
)
 
$
(140
)
 
 
$
(5,611
)
 
$
3,716

 
$
(24,159
)
 
$
151,928

 
$
13,139

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net (income) loss attributable to noncontrolling interest – Operating Partnership
 
587

 
871

 
 
722

 
(135
)
 
2,663

 
(16,236
)
 
(773
)
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities
 
(334
)
 
826

 
 
331

 
(665
)
 
622

 
413

 
455

Net income (loss) attributable to controlling interests
 
(1,642
)
 
1,557

 
 
(4,558
)
 
2,916

 
(20,874
)
 
136,105

 
12,821

Dividends to preferred shareholders
 
(3,411
)
 
(5,098
)
 
 
(1,706
)
 
(1,705
)
 
(1,705
)
 
(1,766
)
 
(2,812
)
Redemption of Preferred Shares
 

 
(3,649
)
 
 

 

 

 
(8
)
 
(3,649
)
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS
 
$
(5,053
)
 
$
(7,190
)
 
 
$
(6,264
)
 
$
1,211

 
$
(22,579
)
 
$
134,331

 
$
6,360

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per Share Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) per common share from continuing operations – basic & diluted
 
$
(0.04
)
 
$
(0.19
)
 
 
$
(0.05
)
 
$
0.01

 
$
(0.19
)
 
$
0.03

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

 
0.13

 
 

 

 

 
1.09

 
0.11

Net income (loss) per common share – basic & diluted
 
$
(0.04
)
 
$
(0.06
)
 
 
$
(0.05
)
 
$
0.01

 
$
(0.19
)
 
$
1.12

 
$
0.05

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate expenses
 
42.44
 %
 
43.8
 %
 
 
42.4
 %
 
42.5
%
 
42.4
 %
 
42.3
%
 
44.7
%
General and administrative expenses
 
7.91
 %
 
8.6
 %
 
 
7.4
 %
 
8.4
%
 
9.3
 %
 
7.0
%
 
7.4
%
Interest
 
17.89
 %
 
20.1
 %
 
 
17.5
 %
 
18.2
%
 
18.8
 %
 
21.6
%
 
20.3
%
Income from discontinued operations
 
0.62
 %
 
21.5
 %
 
 
 %
 
1.2
%
 
0.4
 %
 
343.7
%
 
36.1
%
Net (loss) income
 
(2.07
)%
 
(0.2
)%
 
 
(12.3
)%
 
8.1
%
 
(54.7
)%
 
355.7
%
 
31.4
%

 
S-5
 



IRET
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO
CONTROLLING INTERESTS TO FFO AND CORE FFO (unaudited)
(in thousands, except per share and unit amounts)
 
 
Six Months Ended
 
 
Three Months Ended
 
 
10/31/2018
 
10/31/2017
 
 
10/31/2018
 
7/31/2018
 
4/30/2018
 
1/31/2018
 
10/31/2017
Funds From Operations(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to controlling interests
 
$
(1,642
)
 
$
1,557

 
 
$
(4,558
)
 
$
2,916

 
$
(20,874
)
 
$
136,105

 
$
12,821

Less dividends to preferred shareholders
 
(3,411
)
 
(5,098
)
 
 
(1,706
)
 
(1,705
)
 
(1,705
)
 
(1,766
)
 
(2,812
)
Less redemption of preferred shares
 

 
(3,649
)
 
 

 

 

 
(8
)
 
(3,649
)
Net income (loss) available to common shareholders
 
(5,053
)
 
(7,190
)
 
 
(6,264
)
 
1,211

 
(22,579
)
 
134,331

 
6,360

Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling interests – Operating Partnership
 
(587
)
 
(871
)
 
 
(722
)
 
135

 
(2,663
)
 
16,236

 
773

Depreciation and amortization of real property
 
36,282

 
48,013

 
 
18,446

 
17,837

 
20,269

 
19,017

 
19,894

Impairment of real estate investments attributable to controlling interests
 

 
256

 
 

 

 
15,192

 

 

Gain on depreciable property sales
 
(8,395
)
 
(17,686
)
 
 
232

 
(8,628
)
 
(2,210
)
 
(163,791
)
 
(17,562
)
FFO applicable to common shares and Units
 
$
22,247

 
$
22,522

 
 
$
11,692

 
$
10,555

 
$
8,009

 
$
5,793

 
$
9,465

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FFO per share and unit – basic and diluted
 
$
0.17

 
$
0.17

 
 
$
0.09

 
$
0.08

 
$
0.06

 
$
0.04

 
$
0.07

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments to Core FFO:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Loss on extinguishment of debt
 
556

 
539

 
 
4

 
552

 
122

 
6,787

 
340

Redemption of Preferred Shares
 

 
3,649

 
 

 

 

 
8

 
3,649

Severance and transitions costs
 
510

 
650

 
 

 
510

 
301

 

 
186

Impairment of nondepreciable assets
 

 

 
 

 

 
2,617

 

 

Core FFO applicable to common shares and Units
 
$
23,313

 
$
27,360

 
 
$
11,696

 
$
11,617

 
$
11,049

 
$
12,588

 
$
13,640

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core FFO per share and unit – basic and diluted
 
$
0.17

 
$
0.20

 
 
$
0.09

 
$
0.09

 
$
0.08

 
$
0.09

 
$
0.10

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares and units
 
133,245

 
135,194

 
 
133,185

 
133,271

 
133,703

 
134,175

 
134,767

 
(1)
See Definitions section.

 
S-6
 



IRET
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO
CONTROLLING INTERESTS TO ADJUSTED EARNINGS BEFORE INTEREST,
TAXES, DEPRECIATION, AND AMORTIZATION (ADJUSTED EBITDA) (unaudited)
(in thousands)
 
 
Six Months Ended
 
 
Three Months Ended
 
 
10/31/2018

 
10/31/2017

 
 
10/31/2018
 
7/31/2018
 
4/30/2018
 
1/31/2018
 
10/31/2017
Adjusted EBITDA(1)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to controlling interests
 
$
(1,642
)
 
$
1,557

 
 
$
(4,558
)
 
$
2,916

 
$
(20,874
)
 
$
136,105

 
$
12,821

Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling interests – Operating Partnership
 
(587
)
 
(871
)
 
 
(722
)
 
135

 
(2,663
)
 
16,236

 
773

Income (loss) before noncontrolling interests – Operating Partnership
 
(2,229
)
 
686

 
 
(5,280
)
 
3,051

 
(23,537
)
 
152,341

 
13,594

Add:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
 
15,639

 
19,226

 
 
7,656

 
7,983

 
7,884

 
9,569

 
9,523

Loss on extinguishment of debt
 
556

 
539

 
 
4

 
552

 
122

 
6,787

 
340

Depreciation/amortization related to real estate investments
 
36,432

 
48,192

 
 
18,520

 
17,912

 
20,347

 
19,100

 
19,977

Impairment of unimproved land
 

 

 
 

 

 
2,617

 

 

Impairment of real estate investments attributable to controlling interests
 

 
256

 
 

 

 
15,192

 

 

Less:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
 
(891
)
 
(880
)
 
 
(410
)
 
(481
)
 
(569
)
 
(408
)
 
(316
)
Loss (gain) on sale of real estate and other investments
 
(8,396
)
 
(17,686
)
 
 
232

 
(8,628
)
 
(2,210
)
 
(163,791
)
 
(17,562
)
Adjusted EBITDA
 
$
41,111

 
$
50,333

 
 
$
20,722

 
$
20,389

 
$
19,846

 
$
23,598

 
$
25,556

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ratios
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA(1)/Interest expense
 
2.51
 x
 
2.51
 x
 
 
2.59
 x
 
2.43
 x
 
2.39
 x
 
2.36
 x
 
2.57
 x
Adjusted EBITDA(1)/Interest expense plus preferred distributions
 
2.08
 x
 
2.00
 x
 
 
2.14
 x
 
1.91
 x
 
1.98
 x
 
2.01
 x
 
2.00
 x
 
(1)
See Definitions.
(2)
Included in real estate revenue in the Statement of Operations.