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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): May 8, 2019
 
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 May 8, 2019, announcing certain financial and operational results for the three months ended March 31, 2019. 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

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: May 8, 2019
 
President and Chief Executive Officer


(Back To Top)

Section 2: EX-99.1 (EXHIBIT 99.1)

Exhibit


Exhibit 99.1

397859288_q12019.jpg




Earnings Release
397859288_iretlogojpeg1200x1080a02.jpg 
 
IRET Reports Strong First Quarter 2019 Financial Results
 
MINOT, ND, May 8, 2019 – IRET (NYSE: IRET) announced today its first quarter 2019 financial and operating results. Net Income (Loss), Funds from Operations (“FFO”), and Core FFO per share for the three months ended March 31, 2019, are detailed below.
First Quarter 2019 Highlights
We reported Net Loss, FFO, and Core FFO of $(6.4) million, $10.1 million, and $10.2 million, respectively, for the quarter ended March 31, 2019, compared to Net Income, FFO, and Core FFO of $6.7 million, $9.2 million, and $9.5 million for the quarter ended March 31, 2018.
Same-store revenue increased year-over-year by 4.1%, driven by 2.7% growth in rental revenue;
Core FFO grew by 8.5%, driven by NOI growth;
Same-store NOI grew by 4.6%, our sixth consecutive quarter of year-over-year NOI growth. NOI expansion has been driven by revenue growth and expense control initiatives;
Adverse weather-related events impacted many of our markets, including extreme cold and record-setting snowfall that caused excess ice and snow accumulation, resulting in water damage to some of our apartment communities. As a result, we experienced an increase in same-store expenses of $411,000 for snow removal costs and an increase in casualty losses of $591,000, representing the annual stop-loss under our insurance coverage;
We repurchased approximately 174,000 common shares for an aggregate total cost of approximately $8.8 million; and
We had revenue growth of 3.0% or more in 9 of our 11 markets.
 
 
Three Months Ended
 
 
March 31,
Per Share
 
2019
 
2018
Net Income (Loss)
 
$
(0.54
)
 
$
0.41

FFO
 
$
0.77

 
$
0.68

Core FFO
 
$
0.77

 
$
0.71

 
 
Year-Over-Year
Comparison
 
Sequential
Comparison
Same-Store Results
 
1Q19 vs. 1Q18
 
1Q19 vs. 4Q18
Revenues
 
4.1
%
 
0.6
 %
Expenses
 
3.6
%
 
7.2
 %
Net Operating Income (“NOI”)
 
4.6
%
 
(4.2
)%
 
 
Three months ended
Multifamily Same-Store Results
 
March 31, 2019
 
December 31, 2018
 
March 31, 2018
Weighted Average Occupancy
 
95.6
%
 
94.4
%
 
94.2
%

 
1
 



“Growth of same-store revenue of 4.1%, same-store NOI of 4.6%, and Core FFO of 8.5% are outstanding results,” said Mark O. Decker Jr., IRET’s President and CEO. "It's exciting to see our focus on resident experience and margin expansion drive strong financial results. The progress made to date and the opportunity remaining in our portfolio continues to motivate our team to further improve our business."
Acquisitions and Dispositions
On February 26, 2019, we acquired SouthFork Townhomes, a 272-unit apartment community located in Lakeville, Minnesota, for a total purchase price of $44.0 million, with $27.4 million paid in cash and $16.6 million paid through the issuance of convertible preferred units that have a 3.9% coupon and are convertible, at the holders' option, into common units at an exchange rate of $72.50 per common unit. The convertible preferred units also have a put feature that allows the holders to put all or any of the convertible preferred units to IRET for a cash payment equal to the issue price.
On March 29, 2019, we acquired the remaining 34.5% noncontrolling interests in the real estate partnership that owns Commons and Landing at Southgate, located in Minot, North Dakota, for $1.2 million.
During the first quarter, we sold one parcel of unimproved land for a sale price of $3.0 million.
Balance Sheet
At the end of the first quarter, we had $109.0 million of total liquidity on our balance sheet, including $85.7 million available under our corporate revolver.
Recent Developments
On April 30, 2019, we redeemed a total of approximately 129,000 Units from certain Unitholders for an aggregate purchase price of approximately $7.7 million, representing an average cash payment of $60.03 per Unit.
Subsequent to quarter-end, we repurchased approximately 15,500 shares at an average price of $58.51 per share between April 1, 2019 and April 30, 2019. Since authorization of the share repurchase program in December 2016, we have repurchased approximately 488,000 shares at an average price of $53.87.
Upcoming Events
IRET is scheduled to participate in the National Association of Real Estate Investment Trusts ("Nareit") Institutional Investor Forum in New York from June 4-6, 2019. IRET's President and Chief Executive Officer, Mark O. Decker, Jr., Chief Financial Officer, John Kirchmann, and Chief Operating Officer, Anne Olson, are scheduled to present at the conference on June 5, 2019 at 8:45 a.m. EDT. The presentation will be webcast and will be available on the Investors section of our website at ir.iretapartments.com. A copy of any materials provided by IRET at the conference will also be made available on the Investors section of our website.
Quarterly Distributions
On March 5, 2019, IRET’s Board of Trustees declared a regular quarterly distribution of $0.70 per share/unit payable on April 1, 2019, to common shareholders and unitholders of record on March 15, 2019. IRET has paid cash dividends to common shareholders and unitholders every quarter since its initial dividend payment in 1971.
On March 5, 2019, 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 April 1, 2019, to holders of record on March 15, 2019. Series C preferred share distributions are cumulative and payable quarterly in arrears at an annual rate of $1.65625 per share.
On March 7, 2019, IRET's Board of Trustees declared a distribution on the Series D preferred units payable on April 1, 2019, at the rate of 3.862% per annum, pro rated from the date of issuance (February 26, 2019) through March 31, 2019, to holders of record as of March 15, 2019. Series D preferred unit distributions are cumulative and payable quarterly in arrears at the rate of 3.862% per annum.

 
2
 



Earnings Call
Live webcast and replay:  http://ir.iretapartments.com
 
 
 
Live Conference Call
 
Conference Call Replay
Thursday, May 9, 2019, at 10:00 AM ET
 
Replay available until May 23, 2019
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
10130035
Supplemental Information
Supplemental Operating and Financial Data for the quarter ended March 31, 2019 included herein (“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 March 31, 2019, we owned interests in 88 apartment communities consisting of 13,975 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 and the accompanying Supplemental Operating and Financial Data are based on our current expectations and assumptions, and are “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. 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.
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 acquire or 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 the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” contained in our Transition Report on Form 10-KT for the transition period ended December 31, 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
 



Supplemental Financial and Operating Data
Table of Contents
March 31, 2019
 
Page
 
 
 
 
Key Financial Data
 
 
 
Debt and Capital Analysis
 
 
 
Portfolio Analysis
 
 
 
 
 




Common Share Data (NYSE: IRET)
 
 
1st Quarter
 
4th Quarter
 
3rd Quarter
 
2nd Quarter
 
1st Quarter
 
 
Calendar Year 2019
 
Calendar Year 2018
 
Calendar Year 2018
 
Calendar Year 2018
 
Calendar Year 2018
High Closing Price
 
$
61.50

 
$
59.10

 
$
59.80

 
$
59.40

 
$
58.20

Low Closing Price
 
$
49.92

 
$
47.00

 
$
53.30

 
$
51.30

 
$
46.50

Average Closing Price
 
$
58.11

 
$
53.40

 
$
54.99

 
$
54.50

 
$
52.16

Closing Price at end of quarter
 
$
59.91

 
$
49.07

 
$
59.80

 
$
55.30

 
$
51.90

Common Share Distributions – annualized
 
$
2.80

 
$
2.80

 
$
2.80

 
$
2.80

 
$
2.80

Closing Dividend Yield – annualized
 
4.7
%
 
5.7
%
 
4.7
%
 
5.1
%
 
5.4
%
Closing common shares outstanding (thousands)
 
11,768

 
11,942

 
11,961

 
11,939

 
11,979

Closing limited partnership units outstanding (thousands)
 
1,365

 
1,368

 
1,379

 
1,401

 
1,411

Closing market value of outstanding common shares, plus imputed closing market value of outstanding limited partnership units (thousands)
 
$
786,798

 
$
653,122

 
$
797,732

 
$
737,702

 
$
694,941



S-1




IRET
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
 
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
 
3/31/2018
ASSETS
 
 
 
 
 
 
 
 
 
 
Real estate investments
 
 
 
 
 
 
 
 
 
 
Property owned
 
$
1,673,158

 
$
1,627,636

 
$
1,638,909

 
$
1,637,991

 
$
1,692,987

Less accumulated depreciation
 
(371,672
)
 
(353,871
)
 
(339,515
)
 
(321,468
)
 
(313,763
)
 
 
1,301,486

 
1,273,765

 
1,299,394

 
1,316,523

 
1,379,224

Unimproved land
 
2,252

 
5,301

 
6,522

 
10,726

 
14,250

Mortgage loans receivable
 
10,260

 
10,410

 
10,530

 
10,955

 
10,329

Total real estate investments
 
1,313,998

 
1,289,476

 
1,316,446

 
1,338,204

 
1,403,803

Assets held for sale and assets of discontinued operations
 

 

 

 
33,840

 

Cash and cash equivalents
 
23,329

 
13,792

 
36,910

 
20,451

 
33,817

Restricted cash
 
4,819

 
5,464

 
4,669

 
4,454

 
4,053

Other assets
 
29,166

 
27,265

 
28,472

 
27,882

 
26,537

TOTAL ASSETS
 
$
1,371,312

 
$
1,335,997

 
$
1,386,497

 
$
1,424,831

 
$
1,468,210

 
 
 
 
 
 
 
 
 
 
 
LIABILITIES, MEZZANINE EQUITY, AND EQUITY
 
 
 
 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
 
 
 
Liabilities held for sale and liabilities of discontinued operations
 

 

 

 
$
29,624

 

Accounts payable and accrued expenses
 
$
40,697

 
$
40,892

 
$
38,203

 
36,288

 
$
37,350

Revolving line of credit
 
118,677

 
57,500

 
71,000

 
145,500

 
134,500

Term loans payable, net of loan costs
 
144,036

 
143,991

 
143,937

 
69,531

 
69,504

Mortgages payable, net of loan costs
 
430,950

 
444,197

 
463,052

 
465,244

 
511,683

TOTAL LIABILITIES
 
734,360

 
686,580

 
716,192

 
746,187

 
753,037

 
 
 
 
 
 
 
 
 
 
 
REDEEMABLE NONCONTROLLING INTERESTS – CONSOLIDATED REAL ESTATE ENTITIES
 

 
5,968

 
6,130

 
6,261

 
6,706

SERIES D PREFERRED UNITS
 
16,560

 

 

 

 

EQUITY
 
 
 
 
 
 
 
 
 
 
Series C Preferred Shares of Beneficial Interest
 
99,456

 
99,456

 
99,456

 
99,456

 
99,456

Common Shares of Beneficial Interest
 
895,381

 
899,234

 
900,368

 
899,480

 
901,312

Accumulated distributions in excess of net income
 
(443,661
)
 
(429,048
)
 
(414,900
)
 
(407,482
)
 
(377,871
)
Accumulated other comprehensive income
 
(3,139
)
 
(856
)
 
2,760

 
1,748

 
1,283

Total shareholders’ equity
 
548,037

 
568,786

 
587,684

 
593,202

 
624,180

Noncontrolling interests – Operating Partnership
 
66,060

 
67,916

 
69,578

 
71,066

 
75,161

Noncontrolling interests – consolidated real estate entities
 
6,295

 
6,747

 
6,913

 
8,115

 
9,126

Total equity
 
620,392

 
643,449

 
664,175

 
672,383

 
708,467

TOTAL LIABILITIES, MEZZANINE EQUITY, AND EQUITY
 
$
1,371,312

 
$
1,335,997

 
$
1,386,497

 
$
1,424,831

 
$
1,468,210


 
S-2
 



IRET
RECONCILIATION OF NET OPERATING INCOME TO THE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands)
 
 
Three Months Ended
 
 
3/31/19
 
12/31/2018
 
9/30/2018
 
6/30/2018
 
3/31/18
Revenue
 
 
 
 
 
 
 
 
 
 
Same-store
 
$
39,612

 
$
39,385

 
$
38,727

 
$
38,804

 
$
38,048

Non-same-store
 
5,202

 
4,608

 
4,687

 
4,345

 
2,006

Other properties and dispositions
 
794

 
1,737

 
1,992

 
3,048

 
2,981

Total revenue
 
45,608

 
45,730

 
45,406

 
46,197

 
43,035

Property operating expenses, including real estate taxes
 
 
 
 
 
 
 
 
 
 
Same-store
 
17,806

 
16,617

 
16,980

 
16,345

 
17,191

Non-same-store
 
1,882

 
1,403

 
1,696

 
1,481

 
937

Other properties and dispositions
 
348

 
370

 
811

 
1,111

 
1,139

Total property operating expenses, including real estate taxes
 
20,036

 
18,390

 
19,487

 
18,937

 
19,267

Net operating income (NOI)
 
 
 
 
 
 
 
 
 
 
Same-store
 
21,806

 
22,768

 
21,747

 
22,459

 
20,857

Non-same-store
 
3,320

 
3,205

 
2,991

 
2,864

 
1,069

Other properties and dispositions
 
446

 
1,367

 
1,181

 
1,937

 
1,842

Net operating income
 
$
25,572

 
$
27,340

 
$
25,919

 
$
27,260

 
$
23,768

Property management
 
(1,554
)
 
(1,447
)
 
(1,269
)
 
(1,444
)
 
(1,377
)
Casualty gain (loss)
 
(641
)
 
(540
)
 
(225
)
 

 
(50
)
Depreciation/amortization
 
(18,111
)
 
(18,812
)
 
(19,164
)
 
(19,132
)
 
(20,516
)
Impairment of real estate investments
 

 
(1,221
)
 

 
(17,809
)
 

General and administrative expenses
 
(3,806
)
 
(3,769
)
 
(3,147
)
 
(4,348
)
 
(3,619
)
Interest expense
 
(7,896
)
 
(7,682
)
 
(8,193
)
 
(8,562
)
 
(8,296
)
Loss on debt extinguishment
 
(2
)
 
(5
)
 
(540
)
 
(12
)
 
(121
)
Interest and other income
 
424

 
483

 
395

 
460

 
689

Income (loss) before gain (loss) on sale of real estate and other investments and income (loss) from discontinued operations
 
(6,014
)
 
(5,653
)
 
(6,224
)
 
(23,587
)
 
(9,522
)
Gain (loss) on sale of real estate and other investments
 
54

 
612

 
9,095

 

 
2,304

Income (loss) from continuing operations
 
(5,960
)
 
(5,041
)
 
2,871

 
(23,587
)
 
(7,218
)
Income (loss) from discontinued operations
 

 

 
570

 
238

 
13,882

Net income (loss)
 
$
(5,960
)
 
$
(5,041
)
 
$
3,441

 
$
(23,349
)
 
$
6,664

Dividends to preferred series D unitholders
 
(57
)
 

 

 

 

Net (income) loss attributable to noncontrolling interests – Operating Partnership
 
743

 
665

 
(112
)
 
2,580

 
(580
)
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities
 
576

 
270

 
(676
)
 
595

 
520

Net income (loss) attributable to controlling interests
 
(4,698
)
 
(4,106
)
 
2,653

 
(20,174
)
 
6,604

Dividends to preferred shareholders
 
(1,705
)
 
(1,705
)
 
(1,705
)
 
(1,706
)
 
(1,705
)
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS
 
$
(6,403
)
 
$
(5,811
)
 
$
948

 
$
(21,880
)
 
$
4,899

 
 
 
 
 
 
 
 
 
 
 
Per Share Data
 
 
 
 
 
 
 
 
 
 
Earnings (loss) per common share from continuing operations – basic & diluted
 
$
(0.54
)
 
$
(0.49
)
 
$
0.04

 
$
(1.85
)
 
$
(0.63
)
Earnings (loss) per common share from discontinued operations – basic & diluted
 

 

 
0.04

 
0.02

 
1.04

Net income (loss) per common share – basic & diluted
 
$
(0.54
)
 
$
(0.49
)
 
$
0.08

 
$
(1.83
)
 
$
0.41

 
 
 
 
 
 
 
 
 
 
 
Percentage of Revenues
 
 
 
 
 
 
 
 
 
 
Property operating expenses, including real estate taxes
 
43.9
 %
 
40.2
 %
 
42.9
%
 
41.0
 %
 
44.8
%
General and administrative expenses
 
8.3
 %
 
8.2
 %
 
6.9
%
 
9.4
 %
 
8.4
%
Interest
 
17.3
 %
 
16.8
 %
 
18.0
%
 
18.5
 %
 
19.3
%
Income (loss) from discontinued operations
 
 %
 
 %
 
1.3
%
 
0.5
 %
 
32.3
%
Net income (loss)
 
(13.1
)%
 
(11.0
)%
 
7.6
%
 
(50.5
)%
 
15.5
%

S-3



IRET
RECONCILIATION OF NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS TO FFO AND CORE FFO (unaudited)
(in thousands, except per share and unit amounts)
 
 
Three Months Ended
 
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
 
3/31/2018
Funds From Operations(1)
 
 
 
 
 
 
 
 
 
 
Net income (loss) available to common shareholders
 
$
(6,403
)
 
$
(5,811
)
 
$
948

 
$
(21,880
)
 
$
4,899

Adjustments:
 
 
 
 
 
 
 
 
 
 
Noncontrolling interests – Operating Partnership
 
(743
)
 
(665
)
 
112

 
(2,580
)
 
580

Depreciation and amortization
 
18,111

 
18,812

 
19,164

 
19,132

 
20,518

Less depreciation – non real estate
 
(85
)
 
(76
)
 
(76
)
 
(76
)
 
(79
)
Less depreciation – partially owned entities
 
(678
)
 
(680
)
 
(673
)
 
(719
)
 
(723
)
Impairment of real estate
 

 
1,221

 

 
17,809

 

Gain on sale of real estate
 
(54
)
 
(612
)
 
(8,499
)
 
(98
)
 
(16,036
)
FFO applicable to common shares and Units
 
$
10,148

 
$
12,189

 
$
10,976

 
$
11,588

 
$
9,159

 
 
 
 
 
 
 
 
 
 
 
FFO per share and unit – basic and diluted
 
$
0.77

 
$
0.92

 
$
0.82

 
$
0.87

 
$
0.68

 
 
 
 
 
 
 
 
 
 
 
Adjustments to Core FFO:
 
 
 
 
 
 
 
 
 
 
Casualty loss write off
 

 
43

 

 

 

Loss on extinguishment of debt
 
2

 
5

 
540

 
12

 
121

Severance and transition costs
 

 

 

 
586

 
225

Core FFO applicable to common shares and Units
 
$
10,150

 
$
12,237

 
$
11,516

 
$
12,186

 
$
9,505

 
 
 
 
 
 
 
 
 
 
 
Core FFO per share and unit – basic and diluted
 
$
0.77

 
$
0.92

 
$
0.86

 
$
0.91

 
$
0.71

 
 
 
 
 
 
 
 
 
 
 
Weighted average shares and units
 
13,130

 
13,317

 
13,318

 
13,335

 
13,396

 
(1)
See Definitions section.

S-4



IRET
RECONCILIATION OF NET INCOME AVAILABLE TO
COMMON SHAREHOLDERS TO ADJUSTED EARNINGS BEFORE INTEREST,
TAXES, DEPRECIATION, AND AMORTIZATION (ADJUSTED EBITDA) (unaudited)
(in thousands)
 
 
Three Months Ended
 
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
 
3/31/2018
Adjusted EBITDA(1)
 
 
 
 
 
 
 
 
 
 
Net income (loss) available to common shareholders
 
$
(4,698
)
 
$
(4,106
)
 
$
2,653

 
$
(20,174
)
 
$
6,604

Adjustments:
 
 
 
 
 
 
 
 
 
 
Dividends to preferred unitholders
 
57

 

 

 

 

Noncontrolling interests – Operating Partnership
 
(743
)
 
(665
)
 
112

 
(2,580
)
 
580

Income (loss) before noncontrolling interests – Operating Partnership
 
(5,384
)
 
(4,771
)
 
2,765

 
(22,754
)
 
7,184

Adjustments:
 
 
 
 
 
 
 
 
 
 
Interest expense
 
7,558

 
7,336

 
7,828

 
8,148

 
7,881

Loss on extinguishment of debt
 
2

 
4

 
541

 
11

 
121

Depreciation/amortization related to real estate investments
 
17,433

 
18,133

 
18,491

 
18,413

 
19,795

Impairment of real estate investments
 

 
1,221

 

 
17,809

 

Interest income
 
(407
)
 
(465
)
 
(366
)
 
(429
)
 
(673
)
Gain (loss) on sale of real estate and other investments
 
(54
)
 
(611
)
 
(8,499
)
 
(98
)
 
(16,036
)
Adjusted EBITDA
 
$
19,148

 
$
20,847

 
$
20,760

 
$
21,100

 
$
18,272

 
 
 
 
 
 
 
 
 
 
 
Ratios
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA(1)/Interest expense
 
2.43
 x
 
2.71
 x
 
2.53
 x
 
2.46
 x
 
2.20
 x
Adjusted EBITDA(1)/Interest expense plus preferred distributions
 
1.98
 x
 
2.22
 x
 
2.10
 x
 
2.05
 x
 
1.83
 x
 
(1)
See Definitions.

S-5




IRET
DEBT ANALYSIS
(in thousands)
Debt Maturity Schedule
Annual Expirations
 
 
Future Maturities of Debt
 
 
Fixed
Debt
 
Variable
Debt
 
Total
Debt
 
Weighted
Average(1)
 
% of
Total Debt
2019
 
$
19,068

 

 
$
19,068

 
5.72
%
 
2.7
%
2020
 
70,359

 

 
70,359

 
5.43
%
 
10.1
%
2021
 
103,702

 

 
103,702

 
5.24
%
 
14.9
%
2022
 
38,589

 

 
38,589

 
4.00
%
 
5.5
%
2023
 
49,093

 

 
49,093

 
4.02
%
 
7.1
%
Thereafter
 
151,777

 

 
151,777

 
3.85
%
 
21.8
%
Total mortgage debt
 
$
432,588

 

 
$
432,588

 
4.54
%
 
62.1
%
 
 
 
 
 
 
 
 
 
 
 
Primary line of credit(2)
 

 
$
99,200

 
99,200

 
3.89
%
 
14.2
%
Operating line of credit(2)
 

 
4,477

 
4,477

 
4.40
%
 
0.7
%
Secured line of credit(2)(3)
 

 
15,000

 
15,000

 
3.89
%
 
2.2
%
Term loans(4)
 
145,000

 

 
145,000

 
3.99
%
 
20.8
%
Total debt
 
$
577,588

 
$
118,677

 
$
696,265

 
4.32
%
 
100.0
%
 
(1)
Weighted average interest rate of debt that matures during the year.
(2)
Our primary line of credit matures on August 31, 2022. Our operating line of credit matures on April 1, 2020.
(3)
Our primary revolving line of credit consists primarily of unsecured borrowings. A portion of the line was secured in connection with our acquisition of SouthFork Townhomes, under an agreement which allowed us to offer the seller tax protection upon purchase.
(4)
Term loans have variable interest rates that are fixed with interest rate swaps that mature on January 31, 2023, January 15, 2024, and August 31, 2025.

 
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
 
3/31/2018
Debt Balances Outstanding(1)
 
 
 
 
 
 
 
 
 
 
Secured fixed rate
 
$
432,588

 
$
445,974

 
$
464,964

 
$
473,546

 
$
491,002

Secured variable rate
 

 

 

 
22,620

 
22,955

Unsecured lines of credit
 
103,677

 
57,500

 
71,000

 
145,500

 
134,500

Secured line of credit(2)
 
15,000

 

 

 

 

Unsecured term loans
 
145,000

 
145,000

 
145,000

 
70,000

 
70,000

Debt total
 
$
696,265

 
$
648,474

 
$
680,964

 
$
711,666

 
$
718,457

 
 
 
 
 
 
 
 
 
 
 
Mortgage Debt Weighted Average Interest Rate
 
4.54
%
 
4.58
%
 
4.65
%
 
4.67
%
 
4.69
%
Primary Line of Credit Rate
 
3.89
%
 
3.72
%
 
3.67
%
 
3.76
%
 
3.47
%
Operating Line of Credit Rate
 
4.40
%
 

 

 

 

Term Loan Rate
 
3.99
%
 
4.01
%
 
3.97
%
 
4.11

 
4.07

 
(1)
Includes mortgages on properties held for sale.
(2)
Our revolving line of credit consists primarily of unsecured borrowings. A portion of the line was secured in connection with our acquisition of SouthFork Townhomes, under an agreement which allowed us to offer the seller tax protection upon purchase.


 
S-6
 



IRET 
CAPITAL ANALYSIS 
(in thousands, except per share and unit amounts)
 
 
Three Months Ended
 
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
 
3/31/2018
Equity Capitalization
 
 
 
 
 
 
 
 
 
 
Common shares outstanding
 
11,768

 
11,942

 
11,961

 
11,939

 
11,979

Operating partnership units outstanding
 
1,365

 
1,368

 
1,379

 
1,401

 
1,411

Total common shares and units outstanding
 
13,133

 
13,310

 
13,340

 
13,340

 
13,390

Market price per common share (closing price at end of period)
 
$
59.91

 
$
49.07

 
$
59.80

 
$
55.30

 
$
51.90

Equity capitalization-common shares and units
 
786,798

 
653,122

 
797,732

 
737,702

 
694,941

Recorded book value of preferred shares
 
$
99,456

 
$
99,456

 
$
99,456

 
$
99,456

 
$
99,456

Total equity capitalization
 
$
886,254

 
$
752,578

 
$
897,188

 
$
837,158

 
$
794,397

 
 
 
 
 
 
 
 
 
 
 
Series D Preferred Units
 
$
16,560

 
$

 
$

 
$

 
$

 
 
 
 
 
 
 
 
 
 
 
Debt Capitalization
 
 
 
 
 
 
 
 
 
 
Total debt
 
$
696,265

 
$
648,474

 
$
680,964

 
$
711,666

 
$
718,457

Total capitalization
 
$
1,599,079

 
$
1,401,052

 
$
1,578,152

 
$
1,548,824

 
$
1,512,854

 
 
 
 
 
 
 
 
 
 
 
Total debt to total capitalization
 
0.44:1

 
0.46:1

 
0.43:1

 
0.46:1

 
0.47:1


 
 
Three Months Ended
 
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
 
3/31/2018
Debt service coverage ratio(1)
 
1.86
 x
 
2.07
 x
 
1.96
 x
 
1.83
 x
 
1.36
 x
 
 
 
 
 
 
 
 
 
 
 
Distribution Data
 
 
 
 
 
 
 
 
 
 
Common shares and Units outstanding at record date
 
13,135

 
13,276

 
13,340

 
13,340

 
13,363

Total common distribution declared
 
$
9,195

 
$
9,293

 
$
9,339

 
$
9,345

 
$
9,395

Common distribution per share and Unit
 
$
0.70

 
$
0.70

 
$
0.70

 
$
0.70

 
$
0.70

Payout ratio (FFO per share and Unit basis)(1)
 
90.9
%
 
76.1
%
 
85.4
%
 
80.5
%
 
102.9
%
Payout ratio (Core FFO per share and Unit basis)(1)
 
90.9
%
 
76.1
%
 
81.4
%
 
76.9
%
 
98.6
%
 
(1)
See Definitions section.

 
S-7
 




IRET
RECONCILIATION OF NET OPERATING INCOME TO THE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
QUARTERLY COMPARISON
(in thousands)
The following table reconciles NOI and our same-store NOI to net income (loss) (the most directly comparable GAAP financial measure) for the periods shown below:
 
(in thousands, except percentages)
 
Three Months Ended March 31,
 
2019
 
2018
 
$ Change
 
% Change
 
 
 
 
 
 
 
 
Real estate revenue
 
 
 
 
 
 
 
Same-store
$
39,612

 
$
38,048

 
$
1,564

 
4.1
 %
Non-same-store
5,202

 
2,006

 
3,196

 
159.3
 %
Other properties and dispositions
794

 
2,981

 
(2,187
)
 
(73.4
)%
Total
$
45,608

 
$
43,035

 
$
2,573

 
6.0
 %
 
 
 
 
 
 
 
 
Real estate expenses
 
 
 
 
 
 
 
Same-store
$
17,806

 
$
17,191

 
$
615

 
3.6
 %
Non-same-store
1,882

 
937

 
945

 
100.9
 %
Other properties and dispositions
348

 
1,139

 
(791
)
 
(69.4
)%
Total
$
20,036

 
$
19,267

 
$
769

 
4.0
 %
 
 
 
 
 
 
 
 
Net operating income
 
 
 
 
 
 
 
Same-store
$
21,806

 
$
20,857

 
$
949

 
4.6
 %
Non-same-store
3,320

 
1,069

 
2,251

 
210.6
 %
Other properties and dispositions
446

 
1,842

 
(1,396
)
 
(75.8
)%
Total
$
25,572

 
$
23,768

 
$
1,804

 
7.6
 %
 
 
 
 
 
 
 
 
Reconciliation of NOI to net income (loss) available to common shareholders
 
 
 
 
 
 
 
Property management
(1,554
)
 
(1,377
)
 
177

 
12.9
 %
Casualty loss
(641
)
 
(50
)
 
591

 
1,182.0
 %
Depreciation/amortization
(18,111
)
 
(20,516
)
 
(2,405
)
 
(11.7
)%
General and administrative expenses
(3,806
)
 
(3,619
)
 
187

 
5.2
 %
Interest expense
(7,896
)
 
(8,296
)
 
(400
)
 
(4.8
)%
Loss on debt extinguishment
(2
)
 
(121
)
 
(119
)
 
(98.3
)%
Interest and other income
424

 
689

 
265

 
(38.5
)%
Income (loss) before gain (loss) on sale of real estate and other investments and income (loss) from discontinued operations
(6,014
)
 
(9,522
)
 
3,508

 
36.8
 %
Gain (loss) on sale of real estate and other investments
54

 
2,304

 
(2,250
)
 
(97.7
)%
Income (loss) from continuing operations
(5,960
)
 
(7,218
)
 
1,258

 
(17.4
)%
Income (loss) from discontinued operations

 
13,882

 
(13,882
)
 
(100.0
)%
Net income (loss)
$
(5,960
)
 
$
6,664

 
(12,624
)
 
(189.4
)%
Dividends to preferred unitholders
(57
)
 

 
(57
)
 
100.0
 %
Net (income) loss attributable to noncontrolling interests – Operating Partnership
743

 
(580
)
 
1,323

 
(228.1
)%
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities
576

 
520

 
56

 
10.8
 %
Net income (loss) attributable to controlling interests
(4,698
)
 
6,604

 
(11,302
)
 
(171.1
)%
Dividends to preferred shareholders
(1,705
)
 
(1,705
)
 

 
 %
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS
$
(6,403
)
 
$
4,899

 
$
(11,302
)
 
(230.7
)%




S-8




IRET
SAME-STORE FIRST QUARTER COMPARISONS
(in thousands, except property data amounts)

 
 
Apartment Homes Included
 
Revenues
 
Expenses
 
NOI
Regions
 
 
CY19Q1
 
CY18Q1
 
% Change
 
CY19Q1
 
CY18Q1
 
% Change
 
CY19Q1
 
CY18Q1
 
% Change
Minneapolis, MN
 
1,796

 
$
7,689

 
$
7,184

 
7.0
 %
 
$
3,148

 
$
2,964

 
6.2
 %
 
$
4,541

 
$
4,220

 
7.6
 %
Rochester, MN
 
1,711

 
6,225

 
6,039

 
3.1
 %
 
2,454

 
2,549

 
(3.7
)%
 
3,771

 
3,490

 
8.1
 %
Omaha, NE
 
1,370

 
3,754

 
3,632

 
3.4
 %
 
1,774

 
1,626

 
9.1
 %
 
1,980

 
2,006

 
(1.3
)%
Grand Forks, ND
 
1,555

 
4,141

 
4,190

 
(1.2
)%
 
2,166

 
2,041

 
6.1
 %
 
1,975

 
2,149

 
(8.1
)%
Bismarck, ND
 
1,259

 
3,602

 
3,483

 
3.4
 %
 
1,717

 
1,568

 
9.5
 %
 
1,885

 
1,915

 
(1.6
)%
St. Cloud, MN
 
1,190

 
3,474

 
3,310

 
5.0
 %
 
1,808

 
1,615

 
12.0
 %
 
1,666

 
1,695

 
(1.7
)%
Topeka, KS
 
1,042

 
2,556

 
2,418

 
5.7
 %
 
1,105

 
993

 
11.3
 %
 
1,451

 
1,425

 
1.8
 %
Sioux Falls, SD
 
969

 
2,529

 
2,442

 
3.6
 %
 
1,193

 
1,274

 
(6.4
)%
 
1,336

 
1,168

 
14.4
 %
Billings, MT
 
770

 
2,156

 
1,977

 
9.1
 %
 
858

 
826

 
3.9
 %
 
1,298

 
1,151

 
12.8
 %
Minot, ND
 
712

 
2,118

 
2,061

 
2.8
 %
 
1,007

 
1,186

 
(15.1
)%
 
1,111

 
875

 
27.0
 %
Rapid City, SD
 
474

 
1,367

 
1,312

 
4.2
 %
 
576

 
550

 
4.7
 %
 
791

 
762

 
3.8
 %
Same-Store Total
 
12,848

 
$
39,611

 
$
38,048

 
4.1
 %
 
$
17,806

 
$
17,192

 
3.6
 %
 
$
21,805

 
$
20,856

 
4.6
 %


 
 
Apartment Homes Included
 
Weighted Average Occupancy (1)
 
Weighted Average Monthly
Rental Rate
(2)
 
Weighted Average Monthly
Revenue per Occupied Home
(3)
Regions
 
 
CY19Q1
 
CY18Q1
 
Growth
 
CY19Q1
 
CY18Q1
 
% Change
 
CY19Q1
 
CY18Q1
 
% Change
Minneapolis, MN
 
1,796

 
94.8
%
 
92.4
%
 
2.4
 %
 
$
1,408