8-K

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 11, 2017

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:

☐Written communications pursuant to Rule 425 under the Securities Act

☐Soliciting material pursuant to Rule 14a-12 under the Exchange Act

☐Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act

☐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 11, 2017 announcing financial and operational results for the three months ended July  31, 2017. 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 information regarding the Company’s capital, portfolio and tenant analyses and development activity 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 9.01Financial Statements and Exhibits

(d) Exhibits

Exhibit
Number	Description
99.1	Earnings Release issued September 11, 2017, regarding financial and operational results for the three months ended July  31, 2017
99.2	Supplemental information

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 11, 2017		President and Chief Executive Officer

EX-99.1

Exhibit 99.1

Earnings Release

IRET Announces Fiscal First Quarter 2018 Results

MINOT, N.D., September 11, 2017 – IRET (NYSE:IRET) announced today its fiscal first quarter 2018 financial and operating results.  Net income and Funds from Operations (“FFO”) per share for the three months ended July 31, 2017, 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	2017		2016
Net Income	$	(0.11)	$	(0.20)
FFO	$	0.10	$	0.12
Core FFO	$	0.10	$	0.11

	Quarterly Comparison		Sequential Comparison
Multifamily Same-Store Results	1Q18 vs. 1Q17		1Q18 vs. 4Q17
Revenues	3.9	%	2.3	%
Expenses	13.9	%	6.1	%
Net Operating Income ("NOI")	(3.4)	%	(0.8)	%

Multifamily Same-Store Results	1Q18		1Q17		4Q17
Physical Occupancy	94.4	%	92.5	%	93.8	%
Weighted Average Occupancy	92.9	%	91.7	%	91.6	%

“I’m very pleased with what we achieved this quarter,” said Mark O. Decker, Jr., IRET’s President and CEO.  “Our team remains focused on providing outstanding service to our residents and executing on our stated business plan while completing our senior management transition.  We are committed to our ongoing transformation and dedicated to building a high-quality multifamily portfolio, supported by a strong and efficient operating platform that delivers consistent growth to our investors.”

First Quarter Fiscal Year 2018 Highlights

· Achieved multifamily same-store revenue and occupancy growth over both year-over-year and sequential time periods through a combination of initiatives, including implementation of a  revenue management system across the portfolio, expansion of utility billings to residents, and completion of revenue-generating capital expenditures.

· Experienced elevated multifamily same-store expense increase year-over-year.  The primary drivers of this increase were capital expenditure policy changes and increased turnover costs related to a reduction in revenue generating capital spend.  Additionally, we experienced higher labor costs and increased real estate taxes, primarily attributable to stabilizing developments and higher North Dakota levy rates.

· Closed the previously announced acquisition of Oxbo Apartments and, subsequent to quarter end, executed a purchase agreement and concluded due diligence on Park Place Apartments, which we believe has opportunity

1

for revenue-generating capital upgrades.  Both properties advanced our portfolio transition and added to our holdings in the Minneapolis-St. Paul MSA, which continues to exhibit economic strength and attract capital from national and international investors.

· Established a new senior management team to complete and enhance the portfolio transition and continue the operational improvements.

Acquisitions

We added one new property to our portfolio during the quarter:

				(in millions)
		Total		Total	% Leased
Property Name	Location	Units		Cost	as of 8/31/17
Oxbo	St. Paul, MN	191	$	61.5	53.9	%

Subsequent to quarter end, we signed an agreement to acquire Park Place Apartments, a 500-unit multifamily property in Plymouth, MN, for $92.3 million.  Our due diligence investigation is complete, and we expect to close the acquisition of this property before the end of September 2017.

Dispositions

During the quarter, we sold a retail property in Minot, ND, for $3.4 million.

Subsequent to quarter end, we sold a parcel of unimproved land in Bismarck, ND, for $3.2 million, an industrial property in Eagan, MN, for $9.0 million, 13 multifamily properties in Minot, ND, for $12.3 million, and a healthcare property in Eagan, MN, for $2.1 million,

Other Investments

In July 2017, we originated a $16.2 million loan on a multifamily development located in New Hope, MN, a suburb of Minneapolis.  The investment will be funded through the third quarter of fiscal year 2018.  As of July 31, 2017, we had funded $3.0 million. The investment has an initial return of 6.0% and matures in 2023.  Additionally, the investment provides IRET an option to purchase the development before the loan matures.

Balance Sheet

At the end of the first quarter we had $117.9 million of total liquidity on our balance sheet, including $94.1 million available on our corporate revolver.  Net debt to annualized Adjusted EBITDA totaled 8.2x, and total debt to total market capitalization was 46.8%.

During the quarter, the Company repurchased and retired approximately 682,000 common shares for an aggregate cost of $3.9 million.  In addition, we redeemed approximately 960,000 Units for an aggregate cost of $5.7 million.

Quarterly Distributions

On September 6, 2017, IRET’s Board of Trustees declared a regular quarterly distribution of $0.07 per share/unit payable on October 2, 2017, to common shareholders and unitholders of record on September 15, 2017.  This distribution will be the 186th consecutive quarterly distribution paid by IRET since its inception in 1970.  It represents an annualized rate of $0.28 per share/unit with an annualized yield of 4.5% based on IRET’s closing share price as of September 8, 2017.

The Board of Trustees also declared a distribution of $0.496875 per share on the 7.95% Series B Cumulative Redeemable Preferred Shares (NYSE: IRET PRB) payable on October 2, 2017, to holders of record on September 15, 2017.  Series B preferred share distributions are cumulative and payable quarterly in arrears at an annual rate of $1.9875 per share.

2

Earnings Call

Live webcast and replay:  http://ir.iretapartments.com
Live Conference Call		Conference Call Replay
Tuesday, September 12, 2017, at 10:00 AM ET		Replay available until September 26, 2017
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	10111813

Supplemental Information

Supplemental Operating and Financial Data for the Quarter Ended July 31, 2017, (“Supplemental Information”) is available in the Investors section on IRET’s website at www.iretapartments.com or by calling Investor Relations at 701-837-7104.  Non-GAAP financial measures and other capitalized terms, as used in this earnings release, are defined and reconciled in the Supplemental Information, which accompanies this earnings release.

About IRET

IRET focuses on the acquisition, development, redevelopment and management of multifamily communities located primarily in select growth markets.  As of July 31, 2017, IRET owned interests in 130 properties that were held for investment, consisting of: (1) 88 multifamily properties consisting of 13,076 units, and (2) 42 commercial properties, including 29 healthcare properties, containing a total of approximately 2.6 million square feet of leasable space.  IRET's common shares and Series B preferred shares are publicly traded on the New York Stock Exchange (NYSE symbols: IRET and IRETPRB, respectively).

Forward Looking Statements

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements in certain circumstances. Certain information included in this Quarterly Report contains or may contain information that is forward-looking, within the meaning of the federal securities laws, including, without limitation, statements regarding: our ability to maintain current or meet projected occupancy, rental rate and property operating results; the effect of acquisitions, dispositions, redevelopments and developments; our ability to meet budgeted costs and timelines, and achieve budgeted rental rates related to our redevelopment and development investments; expectations regarding sales of our properties and the use of proceeds thereof; and our ability to comply with debt covenants, including financial coverage ratios.

Actual results may differ materially from those described in these forward-looking statements and, in addition, will be affected by a variety of risks and factors, some of which are beyond our control, including, without limitation:

· Real estate and operating risks, including fluctuations in real estate values and the general economic climate in the markets in which we operate and competition for residents and commercial tenants in such markets; national and local economic conditions, including the pace of job growth and the level of unemployment; the amount, location and quality of competitive new housing supply; the timing of acquisitions, dispositions, redevelopments and developments; and changes in operating costs, including energy costs;

· Financing risks, including the availability and cost of capital markets financing and the risk that our cash flows from operations may be insufficient to meet required payments of principal and interest and the risk that our earnings may not be sufficient to maintain compliance with debt covenants;

· Our geographic concentration in Minnesota and North Dakota;

· Insurance risks, including the cost of insurance and natural disasters and severe weather; and

· Legal and regulatory risks, including costs associated with prosecuting or defending claims and any adverse outcomes; the terms of governmental regulations that affect us and interpretations of those regulations; and

3

possible environmental liabilities, including costs, fines or penalties that may be incurred due to necessary remediation of contamination of apartment communities presently or previously owned by us.

In addition, our current and continuing qualification as a real estate investment trust involves the application of highly technical and complex provisions of the Internal Revenue Code and depends on our ability to meet the various requirements imposed by the Internal Revenue Code, through actual operating results, distribution levels and diversity of stock ownership. Readers should review the risks and uncertainties detailed from time to time in our filings with Securities and Exchange Commission, 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 fiscal year ended April 30, 2017.

4

IRET

RECONCILIATION OF NET INCOME ATTRIBUTABLE TO

IRET TO FFO AND CORE FFO

z

	(inthousands,exceptpershareamounts)
Three Months Ended July 31,		2017					2016
				Per					Per
			Weighted	Share				Weighted	Share
			Avg Shares	And				Avg Shares	And
	Amount		and Units(1)	Unit(2)			Amount	and Units(1)	Unit(2)
Net loss attributable to IRET	$	(11,264)		$		$	(21,643)		$
Less dividends to preferred shareholders		(2,286)					(2,879)
Net loss available to common shareholders		(13,550)	120,421		(0.11)		(24,522)	121,117		(0.20)
Adjustments:
Noncontrolling interest – Operating Partnership		(1,644)	15,128				(3,296)	16,285
Depreciation and amortization		28,119					13,437
Impairment of real estate investments		256					39,189
Gains on depreciable property sales attributable to IRET		(124)					(8,958)
FFO applicable to Common Shares and Units(1)	$	13,057	135,549	$	0.10	$	15,850	137,402	$	0.12
Adjustments to Core FFO:
Straight-line rents		(66)					(697)
Non-real estate depreciation		77					88
Loss on extinguishment of debt		199					—
Transition and severance costs		464					—
Core FFO applicable to common shares and Units(1)	$	13,731	135,549	$	0.10	$	15,241	137,402	$	0.12

(1)Units of the Operating Partnership are exchangeable for cash, or, at our discretion, for Common Shares on a one-for-one basis.

(2)Net income attributable to Investors Real Estate Trust is calculated on a per Common Share basis. FFO is calculated on a per Common Share and Unit basis.

5

IRET

RECONCILATION OF NET OPERATING INCOME TO THE

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	(in thousands)
Three Months Ended July 31, 2017	Multifamily		Healthcare		All Other		Amounts Not Allocated To Segments(1)		Total
Real estate revenue	$	38,430		11,378		2,927	$	—	$	52,735
Real estate expenses		17,465		4,285		793		1,707		24,250
Net operating income (loss)	$	20,965	$	7,093	$	2,134	$	(1,707)		28,485
Depreciation and amortization										(28,927)
Impairment of real estate investments										(256)
General and administrative expenses										(4,002)
Interest expense										(9,295)
Loss on debt extinguishment										(199)
Interest and other income										231
Loss before gain on sale of real estate and other investments										(13,963)
Gain on sale of real estate and other investments										124
Loss from continuing operations										(13,839)
Income from discontinued operations										560
Net loss									$	(13,279)

	(in thousands)
Three Months Ended July 31, 2016	Multifamily		Healthcare		All Other		Amounts Not Allocated To Segments(1)		Total
Real estate revenue	$	35,042	$	11,541	$	3,028	$	—	$	49,611
Real estate expenses		14,879		4,192		725		1,838		21,634
Net operating income (loss)	$	20,163	$	7,349	$	2,303	$	(1,838)		27,977
Depreciation and amortization										(14,267)
Impairment of real estate investments										(54,153)
General and administrative expenses										(3,501)
Interest expense										(10,364)
Interest and other income										188
Loss before gain on sale of real estate and other investments										(54,120)
Gain on sale of real estate and other investments										8,958
Loss from continuing operations										(45,162)
Income from discontinued operations										4,568
Net loss									$	(40,594)

(1) Consists of offsite costs associated with property management and casualty-related amounts.

6

EX-99.2

Exhibit 99.2

Supplemental Financial and Operating Data

Table of Contents

July  31, 2017

	Page
Company Background	S-2
Key Financial Data
Condensed Consolidated Balance Sheets	S-4
Condensed Consolidated Statements of Operations	S-5
Funds From Operations	S-6
Adjusted EBITDA	S-7
Capital Analysis
Debt Analysis	S-8
Debt Detail	S-10
Capital Analysis	S-12
Portfolio Analysis
Net Operating Income Detail	S-13
Tenant Analysis
Same-Store Multifamily Comparison	S-15
Multifamily Summary	S-16
Healthcare Leasing Summary	S-17
10 Largest Commercial Tenants	S-19
Growth Analysis
Acquisition Summary	S-20
Definitions	S-21

S-1

Company Background

First Quarter Fiscal 2018

We are a real estate investment trust (REIT) focused on the acquisition, development, redevelopment and management of multifamily communities located primarily in select growth markets throughout the Midwest. Our portfolio consists of multifamily and healthcare segments.

As of July  31, 2017, we held for investment a portfolio of 130 properties consisting of 88 multifamily properties, 29 healthcare properties, and 13 other commercial properties.    As of July  31, 2017, our common shares and Series B preferred shares were publicly traded on the New York Stock Exchange (NYSE symbols: IRET and IRETPRB, respectively).

Company Snapshot

(as of July  31, 2017)

Company Headquarters	Minot, North Dakota
Fiscal Year-End	April 30
Reportable Segments	Multifamily and Healthcare
Total Properties Held for Investment	130
Total Units Held for Investment
(multifamily properties)	13,076
Total Square Feet Held for Investment
(healthcare and other commercial properties)	2.6 million
Common Shares Outstanding (thousands)	120,587(1)
Limited Partnership Units Outstanding (thousands)	14,657
Common Share Distribution - Quarter/Annualized	$0.07/$0.28
Annualized Dividend Yield	4.5%
Total Capitalization (see p. S-12 for detail)	$1.8 billion

(1) Common Shares and Limited Partnership Units outstanding as of September 5,  2017 were 120,586,875 and 14,633,687, respectively.  

Investor Information

Board of Trustees

Jeffrey P. Caira	Trustee and Chair
John D. Stewart	Trustee, Vice Chair, and Chair of the Audit Committee
Linda J. Hall	Trustee, Chair of Compensation Committee
Jeffrey L. Miller	Trustee, Chair of the Nominating and Governance Committee
Michael T. Dance	Trustee, Chair of Capital Markets Committee
Terrance P. Maxwell	Trustee
John A. Schissel	Trustee
Mark O.  Decker, Jr.	Trustee,  President, Chief Executive Officer and Chief Investment Officer

Management

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

Corporate Headquarters:	Investor Relations Contact:
1400 31st Avenue SW, Suite 60	Matthew Volpano
Post Office Box 1988	701-837-7104
Minot, North Dakota 58702-1988	IR@iret.com
Trading Symbol for Common Shares:  IRET
Stock Exchange Listing:  NYSE

S-2

Common Share Data (NYSE: IRET)

		1st Quarter			4th Quarter		3rd Quarter			2nd Quarter			1st Quarter			4th Quarter
		Fiscal Year 2018			Fiscal Year 2017		Fiscal Year 2017			Fiscal Year 2017			Fiscal Year 2017			Fiscal Year 2016
High Closing Price	$	6.72		$	6.61		$	7.20		$	6.67		$	6.63		$	7.48
Low Closing Price	$	5.64		$	5.67		$	5.81		$	5.67		$	6.01		$	5.97
Average Closing Price	$	6.07		$	6.09		$	6.65		$	6.21		$	6.35		$	6.71
Closing Price at end of quarter	$	6.22		$	5.91		$	6.44		$	6.07		$	6.62		$	6.02
Common Share Distributions—annualized	$	0.28		$	0.28		$	0.28		$	0.52		$	0.52		$	0.52
Closing Dividend Yield - annualized		4.5	%		4.7	%		4.3	%		8.6	%		7.9	%		8.6	%
Closing common shares outstanding (thousands)		120,587			121,199			121,889			121,701			121,528			121,091
Closing limited partnership units outstanding (thousands)		14,657			15,617			16,034			16,229			16,285			16,285
Closing market value of outstanding common shares, plus imputed closing market value of outstanding limited partnership units (thousands)	$	841,218		$	808,583		$	888,224		$	837,235		$	912,322		$	827,004

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 its indebtedness upon maturity or other payment dates; our ability to maintain financial covenant compliance under its 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; abandonment of development or redevelopment opportunities for which we have already incurred costs; delays in completing development, redevelopment and/or lease up of properties and increased costs; ability to maintain effective internal controls over financial reporting and disclosure controls and procedures; and those risks and uncertainties detailed from time to time in our filings with the Securities and Exchange Commission, including our Form 10-K for the fiscal year ended April 30, 2017 and subsequent quarterly reports on Form 10-Q. 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)

	7/31/2017		4/30/2017		1/31/2017		10/31/2016		7/31/2016
ASSETS
Real estate investments
Property owned	$	1,744,252	$	1,677,481	$	1,685,823	$	1,665,354	$	1,667,442
Less accumulated depreciation		(368,769)		(340,417)		(334,875)		(321,790)		(319,087)
		1,375,483		1,337,064		1,350,948		1,343,564		1,348,355
Development in progress		—		—		11,531		20,921		27,454
Unimproved land		15,195		18,455		19,076		19,069		18,933
Total real estate investments		1,390,678		1,355,519		1,381,555		1,383,554		1,394,742
Assets held for sale and assets of discontinued operations		37,552		37,708		140,226		191,233		215,817
Cash and cash equivalents		23,801		28,819		56,999		68,729		54,438
Receivable arising from straight-lining of rents, net of allowance		7,992		7,822		7,839		7,660		7,683
Accounts receivable, net of allowance		2,184		2,600		3,878		9,815		3,018
Real estate deposits		—		23,659		—		1,370		—
Prepaid and other assets		2,125		3,131		4,060		3,496		2,265
Notes receivable		3,000		—		—		—		—
Intangible assets, net of accumulated amortization		1,249		658		731		842		1,172
Tax, insurance, and other escrow		4,285		5,050		5,724		4,786		4,752
Property and equipment, net of accumulated depreciation		836		901		915		928		977
Goodwill		1,572		1,572		1,645		1,645		1,680
Deferred charges and leasing costs, net of accumulated amortization		7,076		7,075		5,517		5,261		4,999
TOTAL ASSETS	$	1,482,350	$	1,474,514	$	1,609,089	$	1,679,319	$	1,691,543
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND EQUITY
LIABILITIES
Liabilities held for sale and liabilities of discontinued operations	$	29,683	$	30,062	$	54,291	$	69,326	$	76,195
Accounts payable and accrued expenses		36,859		40,350		41,351		40,382		41,797
Revolving line of credit		125,900		57,050		157,000		47,500		17,500
Mortgages payable, net of loan costs		660,753		661,960		688,424		779,568		812,082
Construction debt and other		20,205		41,817		39,524		82,742		78,481
TOTAL LIABILITIES		873,400		831,239		980,590		1,019,518		1,026,055
REDEEMABLE NONCONTROLLING INTERESTS – CONSOLIDATED REAL ESTATE ENTITIES		7,010		7,181		7,300		8,585		7,468
EQUITY
IRET shareholders’ equity
Series A Preferred Shares of Beneficial Interest		—		—		—		27,317		27,317
Series B Preferred Shares of Beneficial Interest		111,357		111,357		111,357		111,357		111,357
Common Shares of Beneficial Interest		912,625		916,121		921,735		920,759		922,698
Accumulated distributions in excess of net income		(488,535)		(466,541)		(486,015)		(489,356)		(482,264)
Total IRET shareholders’ equity		535,447		560,937		547,077		570,077		579,108
Noncontrolling interests – Operating Partnership		64,789		73,233		72,007		71,994		73,071
Noncontrolling interests – consolidated real estate entities		1,704		1,924		2,115		9,145		5,841
Total equity		601,940		636,094		621,199		651,216		658,020
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND EQUITY	$	1,482,350	$	1,474,514	$	1,609,089	$	1,679,319	$	1,691,543

S-4

IRET

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in thousands, except per share data)

	Three Months Ended
OPERATING RESULTS	7/31/2017			4/30/2017			1/31/2017			10/31/2016			7/31/2016
Real estate revenue	$	52,735		$	54,344		$	51,174		$	50,609		$	49,611
Real estate expenses		24,250			22,355			22,793			21,573			21,634
Net operating income		28,485			31,989			28,381			29,036			27,977
Depreciation/amortization		(28,927)			(13,736)			(13,475)			(13,531)			(14,267)
Impairment of real estate investments		(256)			(2,875)			—			—			(54,153)
General and administrative expenses		(4,002)			(4,728)			(4,172)			(3,522)			(3,501)
Development pursuit and other write-offs		—			(3,224)			—			—			—
Interest expense		(9,295)			(9,457)			(10,680)			(10,626)			(10,364)
Loss on extinguishment of debt		(199)			(1,192)			(1,907)			—			—
Interest and other income		231			465			430			93			188
(Loss) income before income (loss) on sale of real estate and other investments and income (loss) from discontinued operations		(13,963)			(2,758)			(1,423)			1,450			(54,120)
Income (loss) on sale of real estate and other investments		124			7,409			2,437			(103)			8,958
(Loss) income from continuing operations		(13,839)			4,651			1,014			1,347			(45,162)
Income from discontinued operations		560			28,989			24,175			10,943			4,568
Net (loss) income	$	(13,279)		$	33,640		$	25,189		$	12,290		$	(40,594)
Net loss (income) attributable to noncontrolling interest – Operating Partnership		1,644			(3,656)			(2,525)			(1,174)			3,296
Net loss attributable to noncontrolling interests – consolidated real estate entities		371			296			446			484			15,655
Net (loss) income attributable to IRET		(11,264)			30,280			23,110			11,600			(21,643)
Dividends to preferred shareholders		(2,286)			(2,286)			(2,503)			(2,878)			(2,879)
Redemption of Preferred Shares		—			—			(1,435)			—			—
NET (LOSS) INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	(13,550)		$	27,994		$	19,172		$	8,722		$	(24,522)
Per Share Data
(Loss) earnings per common share from continuing operations – IRET – basic & diluted	$	(0.11)		$	0.02		$	(0.02)		$	(0.01)		$	(0.23)
Earnings per common share from discontinued operations – IRET – basic & diluted		—			0.21			0.18			0.08			0.03
Net (loss) income per common share – basic & diluted	$	(0.11)		$	0.23		$	0.16		$	0.07		$	(0.20)
Percentage of Revenues
Real estate expenses		46.0	%		41.1	%		44.5	%		42.6	%		43.6	%
Depreciation/amortization		54.9	%		25.3	%		26.3	%		26.7	%		28.8	%
General and administrative expenses		7.6	%		8.7	%		8.1	%		7.0	%		7.0	%
Interest		17.6	%		17.4	%		20.9	%		21.0	%		20.9	%
Income from discontinued operations		1.1	%		53.3	%		47.2	%		21.6	%		9.2	%
Net (loss) income		(25.2)	%		61.9	%		49.2	%		24.3	%		(81.8)	%
Ratios
Adjusted EBITDA(1)/Interest expense		2.45	x		2.45	x		2.47	x		2.54	x		2.52	x
Adjusted EBITDA(1)/Interest expense plus preferred distributions		2.00	x		2.00	x		2.04	x		2.05	x		2.03	x

(1) See Definitions on page S-21.  Adjusted EBITDA is a non-GAAP measure; see page S-7 for  a reconciliation of Adjusted EBITDA to net income.

S-5

IRET 

RECONCILIATION OF NET INCOME ATTRIBUTABLE TO

IRET TO FFO AND CORE FFO(unaudited)

(in thousands, except per share and unit data)

	Three Months Ended
	7/31/2017		4/30/2017		1/31/2017		10/31/2016		7/31/2016
Funds From Operations(1)
Net (loss) income attributable to IRET	$	(11,264)	$	30,280	$	23,110	$	11,600	$	(21,643)
Less dividends to preferred shareholders		(2,286)		(2,286)		(2,503)		(2,878)		(2,879)
Less redemption of preferred shares		—		—		(1,435)		—		—
Net (loss) income available to common shareholders		(13,550)		27,994		19,172		8,722		(24,522)
Adjustments:
Noncontrolling interests – Operating Partnership		(1,644)		3,656		2,525		1,174		(3,296)
Depreciation and amortization of real property		28,119		13,222		12,933		12,971		13,437
Impairment of real estate investments attributable to IRET		256		2,875		—		—		39,189
Gain on depreciable property sales		(124)		(37,517)		(21,972)		(6,400)		(8,958)
FFO applicable to common shares and Units	$	13,057	$	10,230	$	12,658	$	16,467	$	15,850
FFO per share and unit - basic and diluted	$	0.10	$	0.07	$	0.09	$	0.12	$	0.12
Adjustments to Core FFO:
Lease termination fees		—		(3,244)		(7)		—		—
Straight-line rents		(66)		(174)		(292)		162		(697)
Non-real estate depreciation		77		78		69		69		88
Loss on extinguishment of debt		199		2,910		1,907		72		—
Redemption of Preferred Shares		—		—		1,435		—		—
Transition and severance costs		464		1,191		—		—		—
Development pursuit and other write-offs		—		3,224		—		—		—
Core FFO applicable to common shares and Units	$	13,731	$	14,215	$	15,770	$	16,770	$	15,241
Core FFO per share and unit - basic and diluted	$	0.10	$	0.10	$	0.11	$	0.12	$	0.11
Weighted average shares and units		135,549		136,952		137,375		137,418		137,402

(1) See Definitions on page S-21.

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
	7/31/2017		4/30/2017		1/31/2017		10/31/2016		7/31/2016
Adjusted EBITDA(1)
Net (loss) income attributable to IRET	$	(11,264)	$	30,280	$	23,110	$	11,600	$	(21,643)
Adjustments:
Noncontrolling interests – Operating Partnership		(1,644)		3,656		2,525		1,174		(3,296)
Income before noncontrolling interests – Operating Partnership		(12,908)		33,936		25,635		12,774		(24,939)
Add:
Interest expense		9,703		10,303		11,880		12,021		11,738
Loss on extinguishment of debt		199		2,910		1,907		72		—
Depreciation/amortization related to real estate investments		28,215		13,280		12,983		13,014		13,497
Amortization related to real estate revenues(2)		—		20		21		27		27
Impairment of real estate investments attributable to IRET		256		2,875		—		—		39,190
Less:
Interest income		(564)		(557)		(816)		(600)		(572)
Gain on sale of real estate and other investments		(124)		(37,517)		(21,972)		(6,400)		(8,958)
Adjusted EBITDA		24,777		25,250		29,638		30,908		29,983

(1) See Definitions on page S-21.

(2) Included in real estate revenue in the Statement of Operations.

S-7

IRET 

DEBT ANALYSIS

(in thousands)

Debt Maturity Schedule

Annual Expirations

Total Maturing Debt

	Future Maturities of Debt(1)
Fiscal Year	Fixed Debt		Variable Debt		Total Debt		Weighted Average(2)			% of Total Debt
2018	$	5,574	$	23,099	$	28,673		3.86	%		3.5	%
2019		20,094		43,343		63,437		4.17	%		7.7	%
2020		104,779		32,265		137,044		5.59	%		16.5	%
2021		93,553		—		93,553		5.13	%		11.2	%
2022		120,858		1,681		122,539		5.17	%		14.7	%
2023		28,556		—		28,556		4.13	%		3.4	%
2024		50,937		—		50,937		4.02	%		6.1	%
2025		18,738		—		18,738		4.04	%		2.2	%
2026		54,973		—		54,973		3.74	%		6.6	%
2027		92,000		—		92,000		3.56	%		11.1	%
Thereafter		14,966		—		14,966		4.93	%		1.8	%
Total maturing debt	$	605,028	$	100,388	$	705,416		4.62	%		84.8	%
Unsecured line of credit		—		125,900		125,900		2.98	%		15.2	%
Total debt		605,028		226,288		831,316		4.37	%		100.0	%

(1) Includes mortgages on properties held for sale, construction debt, and line of credit.

(2) Weighted average interest rate of debt that matures in fiscal year.

S-8

IRET 

 DEBT ANALYSIS 

(in thousands)

		7/31/2017		4/30/2017			1/31/2017			10/31/2016			7/31/2016
Debt Balances Outstanding(1)
Fixed rate	$	605,028		$	629,535		$	658,224		$	617,694		$	635,251
Variable rate		100,388			99,445			81,314			226,891			249,169
Line of credit		125,900			57,050			157,000			47,500			17,500
Debt total	$	831,316		$	786,030		$	896,538		$	892,085		$	901,920
Weighted Average Interest Rates Secured		4.62	%		4.63	%		4.71	%		4.52	%		4.54	%
Line of Credit Rate		2.98	%		2.74	%		2.55	%		4.75	%		4.75	%

(1) Includes mortgages on properties held for sale.

S-9

IRET

DEBT DETAIL AS OF JULY  31, 2017

(in thousands)

Property	Maturity Date	Fiscal 2018		Fiscal 2019		Fiscal 2020		Fiscal 2021		Thereafter		Total(1)
Multifamily
Evergreen II – Isanti, MN	11/1/2017		1,960		—		—		—		—		1,960
Ponds – Sartell, MN	11/1/2017		3,614		—		—		—		—		3,614
Monticello Crossings - Monticello, MN	5/4/2018		—		20,043		—		—		—		20,043
Homestead Gardens II - Rapid City, SD	6/1/2018		—		3,008		—		—		—		3,008
Cardinal Point - Grand Forks, ND	8/1/2018		—		23,300		—		—		—		23,300
Plaza - Minot, ND	8/1/2018		—		5,031		—		—		—		5,031
Greenfield - Omaha, NE	2/1/2019		—		3,437		—		—		—		3,437
Brooklyn Heights - Minot, ND(2)	4/1/2019		—		557		—		—		—		557
Colton Heights - Minot, ND(2)	4/1/2019		—		313		—		—		—		313
Pines - Minot, ND(2)	4/1/2019		—		89		—		—		—		89
Summit Park - Minot, ND(2)	4/1/2019		—		773		—		—		—		773
Terrace Heights - Minot, ND(2)	4/1/2019		—		129		—		—		—		129
Monticello Village - Monticello, MN	5/28/2019		—		—		2,843		—		—		2,843
Rimrock West - Billings, MT	9/1/2019		—		—		3,143		—		—		3,143
Rocky Meadows - Billings, MT	9/1/2019		—		—		4,873		—		—		4,873
Cimarron Hills - Omaha, NE	10/1/2019		—		—		4,539		—		—		4,539
Cottonwood - Bismarck, ND	10/1/2019		—		—		15,046		—		—		15,046
Forest Park - Grand Forks, ND	10/1/2019		—		—		7,236		—		—		7,236
Renaissance Heights I - Williston, ND	10/1/2019		—		—		23,267		—		—		23,267
Williston Garden - Williston, ND	10/30/2019		—		—		7,274		—		—		7,274
Williston Garden - Williston, ND	10/30/2019		—		—		203		—		—		203
Evergreen - Isanti, MN	11/1/2019		—		—		1,904		—		—		1,904
Pinehurst - Billings, MT	11/1/2019		—		—		110		—		—		110
Northridge - Bismarck, ND	12/1/2019		—		—		5,952		—		—		5,952
Castlerock - Billings, MT	1/1/2020		—		—		6,316		—		—		6,316
Thomasbrook - Lincoln, NE	1/1/2020		—		—		5,659		—		—		5,659
Westwood Park - Bismarck, ND	1/1/2020		—		—		1,870		—		—		1,870
Kirkwood Manor - Bismarck, ND	2/1/2020		—		—		3,130		—		—		3,130
Brookfield Village - Topeka, KS	3/1/2020		—		—		4,999		—		—		4,999
Crown Colony - Topeka, KS	4/1/2020		—		—		7,739		—		—		7,739
Mariposa - Topeka, KS	4/1/2020		—		—		2,801		—		—		2,801
Sherwood - Topeka, KS	4/1/2020		—		—		11,625		—		—		11,625
Deer Ridge	5/1/2020		—		—		—		11,419		—		11,419
Valley Park - Grand Forks, ND	6/1/2020		—		—		—		3,664		—		3,664
Country Meadows II - Billings, MT	10/1/2020		—		—		—		3,338		—		3,338
Olympic Village - Billings, MT	11/1/2020		—		—		—		10,102		—		10,102
Villa West Apartments - Topeka, KS	12/1/2020		—		—		—		11,678		—		11,678
Park Meadows - Waite Park, MN	1/1/2021		—		—		—		8,157		—		8,157
Sunset Trail - Rochester, MN	2/1/2021		—		—		—		7,695		—		7,695
Summary of Debt due after Fiscal 2021			—		—		—		—		344,785		344,785
Sub-Total Multifamily		$	5,574	$	56,680	$	120,529	$	56,053	$	344,785	$	583,621
Healthcare
Edgewood Vista – Hermantown I, MN(2)	8/28/2017		15,869		—		—		—		—		15,869
High Pointe Health Campus – Lake Elmo, MN	4/1/2018		7,230		—		—		—		—		7,230
Denfeld Clinic - Duluth, MN	8/1/2019		—		—		1,147		—		—		1,147
Gateway Clinic - Sandstone, MN	8/1/2019		—		—		664		—		—		664
Mariner Clinic - Superior, WI	8/1/2019		—		—		1,452		—		—		1,452
Pavilion I - Duluth, MN	8/1/2019		—		—		3,826		—		—		3,826
Pavilion II - Duluth, MN	8/1/2019		—		—		7,041		—		—		7,041

S-10

IRET

DEBT DETAIL AS OF JULY  31, 2017

(in thousands)

Property	Maturity Date	Fiscal 2018		Fiscal 2019		Fiscal 2020		Fiscal 2021		Thereafter		Total (1)
Wells Clinic - Hibbing, MN	8/1/2019		—		—		1,013		—		—		1,013
Edina 6525 France SMC II - Edina, MN	12/1/2020		—		—		—		9,340		—		9,340
Edina 6545 France - 2nd Mtg/Parking Ramp - Edina, MN	12/1/2020		—		—		—		880		—		880
Edina 6545 France SMC I - Edina, MN	12/1/2020		—		—		—		27,280		—		27,280
Summary of Debt due after Fiscal 2021			—		—		—		—		35,574		35,574
Sub-Total Healthcare		$	23,099	$	—	$	15,143	$	37,500	$	35,574	$	111,316
Other
Plaza 16 – Minot, ND	8/1/2018		—		6,676		—		—		—		6,676
Lexington Commerce Center - Eagan, MN	2/1/2020		—		—		1,372		—		—		1,372
Summary of Debt due after Fiscal 2021			—		—		—		—		2,350		2,350
Sub-Total All Other		$	—	$	6,676	$	1,372	$	—	$	2,350	$	10,398
Total maturing debt		$	28,673	$	63,356	$	137,044	$	93,553	$	382,709	$	705,335
Unsecured line of credit	1/31/2021		—		—		—		125,900		—		125,900
Total debt		$	28,673	$	63,356	$	137,044	$	219,453	$	382,709	$	831,235

(1) Totals are principal balances of mortgages, construction debt and line of credit as of July 31, 2017.

(2) Property is classified as held for sale at July 31, 2017.

S-11

IRET 

CAPITAL ANALYSIS 

(in thousands, except per share and unit amounts)

		Three Months Ended
		7/31/2017	4/30/2017		1/31/2017		10/31/2016		7/31/2016
Equity Capitalization
Common shares outstanding		120,587		121,199		121,889		121,701		121,528
Operating partnership (OP) units outstanding		14,657		15,617		16,034		16,229		16,285
Total common shares and OP units outstanding		135,244		136,816		137,923		137,930		137,813
Market price per common share (closing price at end of period)	$	6.22	$	5.91	$	6.44	$	6.07	$	6.62
Equity capitalization-common shares and OP units	$	841,218	$	808,583	$	888,224	$	837,235	$	912,322
Recorded book value of preferred shares	$	111,357	$	111,357	$	111,357	$	138,674	$	138,674
Total equity capitalization	$	952,575	$	919,940	$	999,581	$	975,909	$	1,050,996
Debt Capitalization
Total debt	$	839,134	$	793,827	$	943,751	$	982,486	$	988,031
Total capitalization	$	1,791,709	$	1,713,767	$	1,943,332	$	1,958,395	$	2,039,027
Total debt to total capitalization		0.47:1		0.46:1		0.49:1		0.50:1		0.48:1

	Three Months Ended
	7/31/2017			4/30/2017			1/31/2017			10/31/2016			7/31/2016
Earnings to fixed charges(1)		(2)			1.48	x		1.12	x		1.14	x		(5)
Earnings to combined fixed charges and preferred distributions(1)		(2)			1.21			(3)			(4)			(5)
Debt service coverage ratio(1)		1.75	x		1.69	x		1.67	x		1.66	x		1.62	x
Distribution Data
Common shares and units outstanding at record date		135,830			137,723			137,944			137,934			137,376
Total common distribution paid	$	9,509		$	9,641		$	17,929		$	17,931		$	17,859
Common distribution per share and unit	$	0.07		$	0.07		$	0.07		$	0.13		$	0.13
Payout ratio (FFO per share and unit basis)(1)		70.0	%		100.0	%		77.8	%		108.3	%		108.3	%

(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 $13.4 million and $15.7 million, respectively. Excluding non-cash depreciation charges related to a change in depreciable lives of $14.4 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 1.10x and 0.90x, respectively, for the three months ended July 31, 2017.

(3) Earnings were inadequate to cover combined fixed charges and preferred distributions by $1.1 million. The ratio of earnings to combined fixed charges and preferred distributions was .92x for the three months ended January 31, 2017.

(4) Earnings were inadequate to cover combined fixed charges and preferred distributions by $1.1 million.  The ratio of earnings to combined fixed charges and preferred distributions was .92x for the three months ended October 31, 2016.

(5) Earnings were inadequate to cover (a) fixed charges and (b) combined fixed charges and preferred distributions by $29.6 million and $32.5 million, respectively. Excluding non-cash asset impairment charges of $54.2 million in the three months ended July 31, 2016, the ratio of earnings to fixed charges and of earnings to combined fixed charges and preferred distributions would have been 3.06x and 2.47x, respectively, for the three months ended July 31, 2016.

S-12

IRET

NET OPERATING INCOME DETAIL

(in thousands)

	Three Months Ended July 31, 2017
	Reporting Segments
							Corporate and
	Multifamily		Healthcare		All Other		Other		Total
Real estate rental revenue
Same-store	$	31,938	$	10,808	$	2,280	$	—	$	45,026
Non-same-store		6,492		570		647		—		7,709
Total		38,430		11,378		2,927		—		52,735
Real estate expenses(1)
Same-store		14,728		4,080		585		1,520		20,913
Non-same-store		2,737		205		208		187		3,337
Total		17,465		4,285		793		1,707		24,250
Net operating income (NOI)
Same-store		17,210		6,728		1,695		(1,520)		24,113
Non-same-store		3,755		365		439		(187)		4,372
Net operating income (loss)	$	20,965	$	7,093	$	2,134	$	(1,707)	$	28,485
Reconciliation of NOI to net income (loss) available to common shareholders
Depreciation/amortization	$	(22,317)	$	(3,630)	$	(2,903)	$	(77)	$	(28,927)
Impairment of real estate investments		—		—		—		(256)		(256)
General and administrative expenses		—		—		—		(4,002)		(4,002)
Interest expense		(6,880)		(1,164)		(247)		(1,004)		(9,295)
Loss on debt extinguishment		(199)		—		—		—		(199)
Interest and other income		—		—		—		231		231
(Loss) income before gain on sale of real estate and other investments and income from discontinued operations		(8,431)		2,299		(1,016)		(6,815)		(13,963)
Gain on sale of real estate and other investments		—		—		108		16		124
(Loss) income from continuing operations		(8,431)		2,299		(908)		(6,799)		(13,839)
Income from discontinued operations		—		560		—		—		560
Net (loss) income		(8,431)		2,859		(908)		(6,799)		(13,279)
Net loss attributable to noncontrolling interests – Operating Partnership		—		—		—		1,644		1,644
Net loss attributable to noncontrolling interests – consolidated real estate entities		—		—		—		371		371
Net (loss) income attributable to IRET		(8,431)		2,859		(908)		(4,784)		(11,264)
Dividends to preferred shareholders		—		—		—		(2,286)		(2,286)
NET (LOSS) INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	(8,431)	$	2,859	$	(908)	$	(7,070)	$	(13,550)

(1) Offsite costs associated with property management and casualty-related amounts are included in the Corporate and Other column.

S-13

IRET 

NET OPERATING INCOME DETAIL

(in thousands)

	Three Months Ended July 31, 2016
	Reporting Segments
							Corporate and
	Multifamily		Healthcare		All Other		Other		Total
Real estate rental revenue
Same-store	$	30,752	$	10,605	$	2,259	$	—	$	43,616
Non-same-store		4,290		936		769		—		5,995
Total		35,042		11,541		3,028		—		49,611
Real estate expenses(1)
Same-store		12,930		3,886		583		1,727		19,126
Non-same-store		1,949		306		142		111		2,508
Total		14,879		4,192		725		1,838		21,634
Net operating income (NOI)
Same-store		17,822		6,719		1,676		(1,727)		24,490
Non-same-store		2,341		630		627		(111)		3,487
Net operating income (loss)	$	20,163	$	7,349	$	2,303	$	(1,838)	$	27,977
Reconciliation of NOI to net income (loss) available to common shareholders
Depreciation/amortization	$	(10,445)	$	(2,828)	$	(922)	$	(72)	$	(14,267)
Impairment of real estate investments		(51,401)		—		—		(2,752)		(54,153)
General and administrative expenses		—		—		—		(3,501)		(3,501)
Interest expense		(7,642)		(2,019)		(376)		(327)		(10,364)
Interest and other income		—		—		—		188		188
(Loss) income (loss) before gain (loss) on sale of real estate and other investments and income from discontinued operations		(49,325)		2,502		1,005		(8,302)		(54,120)
Gain (loss) gain on sale of real estate and other investments		—		—		8,982		(24)		8,958
(Loss) income from continuing operations		(49,325)		2,502		9,987		(8,326)		(45,162)
Income from discontinued operations		—		4,255		313		—		4,568
Net (loss) income		(49,325)		6,757		10,300		(8,326)		(40,594)
Net loss attributable to noncontrolling interests – Operating Partnership		—		—		—		3,296		3,296
Net loss attributable to noncontrolling interests – consolidated real estate entities		—		—		—		15,655		15,655
Net (loss) income attributable to IRET		(49,325)		6,757		10,300		10,625		(21,643)
Dividends to preferred shareholders		—		—		—		(2,879)		(2,879)
NET (LOSS) INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	(49,325)	$	6,757	$	10,300	$	7,746	$	(24,522)

(1) Offsite costs associated with property management and casualty-related amounts are included in the Corporate and Other column.

S-14

IRET

SAME-STORE MULTIFAMILY COMPARISON

				FY18Q1		FY18Q1		FY18Q1		1st Quarter Increase (Decrease) From Prior Year's 1st Quarter
		Physical		Weighted		% of		Average						Net		Average		Weighted
	Rentable	Occupancy		Average		Actual		Revenue						Operating		Rental		Average
Regions	Units	7/31/2017		Occupancy(1)		NOI		Per Unit(2)		Revenues		Expenses(3)		Income		Rate		Occupancy
Rochester, MN	1,775	92.4	%	90.4	%	21.2	%	$	1,279	3.9	%	23.9	%	(6.5)	%	1.5	%	2.4	%
Omaha, NE	1,370	96.6	%	95.3	%	11.2	%	$	918	4.3	%	5.3	%	3.4	%	5.1	%	(0.9)	%
Grand Forks, ND	1,303	94.5	%	93.7	%	10.4	%	$	918	0.3	%	10.9	%	(7.5)	%	(0.9)	%	1.2	%
St. Cloud, MN	1,187	94.7	%	92.9	%	9.0	%	$	976	10.6	%	14.3	%	6.7	%	10.4	%	0.1	%
Bismarck, ND	977	93.8	%	92.8	%	8.9	%	$	1,024	6.0	%	23.3	%	(4.9)	%	0.3	%	5.6	%
Topeka, KS	1,042	97.8	%	95.2	%	7.9	%	$	823	6.5	%	11.3	%	3.0	%	5.4	%	1.2	%
Minneapolis, MN	688	96.5	%	95.5	%	7.9	%	$	1,171	10.5	%	0.9	%	18.4	%	8.1	%	2.4	%
Billings, MT	770	88.6	%	87.4	%	6.7	%	$	1,017	4.6	%	9.9	%	0.7	%	8.6	%	(4.1)	%
Sioux Falls, SD	969	95.3	%	94.2	%	6.5	%	$	871	1.7	%	11.9	%	(7.6)	%	4.3	%	(2.5)	%
Minot, ND	640	93.8	%	95.1	%	5.2	%	$	1,024	(3.5)	%	26.6	%	(23.3)	%	(5.0)	%	1.5	%
Rapid City, SD	474	94.7	%	94.1	%	4.2	%	$	961	2.7	%	4.6	%	1.2	%	6.1	%	(3.4)	%
Williston, ND	189	95.2	%	86.2	%	0.9	%	$	945	(22.2)	%	26.0	%	(54.7)	%	(32.4)	%	10.1	%
Same-Store Totals	11,384	94.4	%	92.9	%	100.0	%	$	1,007	3.9	%	13.9	%	(3.4)	%	2.7	%	1.2	%

				FY18Q1		FY18Q1		FY18Q1		1st Quarter Increase (Decrease) From 4th Quarter
		Physical		Weighted		% of		Average						Net		Average		Weighted
	Rentable	Occupancy		Average		Actual		Revenue						Operating		Rental		Average
Regions	Units	7/31/2017		Occupancy(1)		NOI		Per Unit(2)		Revenues		Expenses(3)		Income		Rate		Occupancy
Rochester, MN	1,775	92.4	%	90.4	%	21.2	%	$	1,279	2.7	%	(0.8)	%	5.2	%	0.9	%	1.8	%
Omaha, NE	1,370	96.6	%	95.3	%	11.2	%	$	918	2.3	%	7.1	%	(1.5)	%	2.0	%	0.3	%
Grand Forks, ND	1,303	94.5	%	93.7	%	10.4	%	$	918	2.4	%	1.9	%	2.8	%	(0.9)	%	3.2	%
St. Cloud, MN	1,187	94.7	%	92.9	%	9.0	%	$	976	4.9	%	13.2	%	(2.8)	%	2.4	%	2.5	%
Bismarck, ND	977	93.8	%	92.8	%	8.9	%	$	1,024	2.5	%	9.1	%	(2.3)	%	0.1	%	2.4	%
Topeka, KS	1,042	97.8	%	95.2	%	7.9	%	$	823	2.2	%	20.0	%	(8.6)	%	1.4	%	0.8	%
Minneapolis, MN	688	96.5	%	95.5	%	7.9	%	$	1,171	2.2	%	2.8	%	1.7	%	2.2	%	(0.1)	%
Billings, MT	770	88.6	%	87.4	%	6.7	%	$	1,017	0.6	%	4.7	%	(2.4)	%	3.2	%	(2.6)	%
Sioux Falls, SD	969	95.3	%	94.2	%	6.5	%	$	871	2.0	%	10.9	%	(6.4)	%	1.8	%	0.2	%
Minot, ND	640	93.8	%	95.1	%	5.2	%	$	1,024	(0.7)	%	3.5	%	(4.8)	%	(2.7)	%	2.0	%
Rapid City, SD	474	94.7	%	94.1	%	4.2	%	$	961	1.8	%	13.5	%	(5.7)	%	2.3	%	(0.5)	%
Williston, ND	189	95.2	%	86.2	%	0.9	%	$	945	1.2	%	(12.6)	%	43.4	%	(2.9)	%	4.1	%
Same-Store Totals	11,384	94.4	%	92.9	%	100.0	%	$	1,007	2.3	%	6.1	%	(0.8)	%	1.0	%	1.3	%

(1) Weighted average occupancy is defined as scheduled rent less vacancy losses divided by scheduled rent for the period.

(2) Average revenue is defined as total rental revenues divided by the weighted average occupied apartment units for the period.

(3) Same-Store results by region do not include offsite costs associated with property management or casualty-related amounts, which increased by $80,000 and decreased $191,000, respectively, for FY18 Q1 as compared to FY17 Q1, and increased by $141,000 and $502,000, respectively, for FY18 Q1 as compared to FY17 Q4.

S-15

IRET

MULTIFAMILY SUMMARY(1)

	Three Months Ended
		07/31/17			04/30/17			01/31/17			10/31/16			07/31/16
Number of Units
Same-Store		11,384			10,512			10,513			10,513			10,840
Non-Same-Store		2,019			2,693			2,652			2,589			2,196
All Properties		13,403			13,205			13,165			13,102			13,036
Average Investment Per Unit
Same-Store	$	87,876		$	78,996		$	78,499		$	77,814		$	77,371
Non-Same-Store		166,261			164,715			165,367			164,515			196,164
All Properties	$	99,684		$	96,485		$	95,998		$	94,946		$	97,382
Average Scheduled Rent(2) per Unit
Same-Store	$	954		$	906		$	902		$	902		$	888
Non-Same-Store		1,182			1,267			1,289			1,336			1,458
All Properties	$	988		$	980		$	980		$	988		$	984
Average Revenue per Unit(3)
Same-Store	$	1,007		$	955		$	941		$	950		$	928
Non-Same-Store		1,230			1,334			1,325			1,376			1,462
All Properties	$	1,041		$	1,032		$	1,019		$	1,035		$	1,020
Occupancy
Same-Store		94.5	%		94.2	%		92.7	%		92.9	%		93.0	%
Non-Same-Store		89.3	%		88.8	%		86.9	%		84.4	%		77.5	%
All Properties		93.7	%		93.1	%		91.5	%		91.2	%		90.4	%
Operating Expenses as a % of Scheduled Rent
Same-Store		49.7	%		46.6	%		47.7	%		44.9	%		47.0	%
Non-Same-Store		40.8	%		42.1	%		39.2	%		36.4	%		31.2	%
All Properties		48.1	%		45.4	%		45.5	%		42.7	%		43.0	%
Capital Expenditures
Total Capital Expenditures(2) per Unit - Same-Store	$	240		$	281		$	295		$	296		$	305
Value-Add Expenditures per Unit(4)	$	—		$	8,213		$	10,224		$	13,998		$	8,102

(1) Previously reported amounts are not revised for discontinued operations or changes in the composition of the same-store properties pool.

(2) See definition of scheduled rent on page S-21.  Average scheduled rent is scheduled rent divided by the total number of units.

(3) Total revenues divided by the weighted average occupied units for the period.

(4) Cost per unit represents the average amount spent on completed and in-progress units during the period and also includes common area redevelopment costs at properties in the value add program.

S-16

IRET

HEALTHCARE LEASING SUMMARY (Same-Store Properties)

Healthcare Leasing Activity

The total leasing activity for our same-store healthcare properties, expressed in square feet of leases signed during the period, and the resulting occupancy levels, are as follows:

Three Months Ended July 31, 2017 and 2016

					Total
	Square Feet of		Square Feet of		Square Feet of
	New Leases(1)		Leases Renewed(1)		Leases Executed(1)		Occupancy
	2017	2016	2017	2016	2017	2016	2017		2016
Healthcare	—	12,140	39,905	20,084	39,905	32,224	92.5	%	92.6	%

(1) The leasing activity presented is based on leases signed or executed for our same-store rental properties during the period and is not intended to coincide with the commencement of rental revenue in accordance with US GAAP.  Prior periods reflect amounts previously reported and exclude retroactive adjustments for properties reclassified to discontinued operations or non-same-store in the current period.

Healthcare New Leases

The following table sets forth the average effective rents and the estimated costs of tenant improvements and leasing commissions, on a per square foot basis, that we are obligated to fulfill under the new leases signed for our same-store healthcare properties:

Three Months Ended July  31, 2017 and 2016

									Estimated Tenant				Leasing
	Square Feet of		Average Term		Average				Improvement Cost per				Commissions per
	New Leases(1		in Years		Effective Rent(2)				Square Foot(1)				Square Foot(1)
	2017	2016	2017	2016		2017		2016		2017		2016		2017		2016
Healthcare	—	12,140	n/a	15.0		n/a	$	20.30		n/a	$	55.15		n/a	$	8.75

(1) The leasing activity presented is based on leases signed or executed for our same-store rental properties during the period and is not intended to coincide with the commencement of rental revenue in accordance with US GAAP.  Prior periods reflect amounts previously reported and exclude retroactive adjustments for properties reclassified to discontinued operations or non-same-store in the current period. Tenant improvements and leasing commissions presented are based on square feet leased during the period. 

(2) Effective rents represent average annual base rental payments, on a straight-line basis for the term of each lease, excluding operating expense reimbursements. The underlying leases contain various expense structures including gross, modified gross, net and triple net.

S-17

IRET

HEALTHCARE LEASING SUMMARY (Same-Store Properties)

Healthcare Lease Renewals

The following table summarizes our lease renewal activity within our same-store healthcare segment (square feet data in thousands):

Three Months Ended July  31, 2017 and 2016

													Estimated
									Weighted Average				Tenant Improvement				Leasing
	Square Feet of Leases		Percent of Expiring				Average Term		Growth (Decline)				Cost per Square				Commissions per
	Renewed(1)		Leases Renewed(2)				in Years		in Effective Rents(3)				Foot(1)				Square Foot(1)
	2017	2016	2017		2016		2017	2016	2017		2016		2017		2016		2017		2016
Healthcare	39,905	20,084	72.2	%	100.0	%	6.8	3.3	3.3	%	4.7	%	$	15.50	$	4.11	$	5.49	$	2.51

(1) The leasing activity presented is based on leases signed or executed for our same-store rental properties during the period and is not intended to coincide with the commencement of rental revenue in accordance with US GAAP.  Prior periods reflect amounts previously reported and exclude retroactive adjustments for properties reclassified to discontinued operations or non-same-store in the current period. Tenant improvements and leasing commissions are based on square feet leased during the period.

(2) Renewal percentage of expiring leases is based on square footage of renewed leases and not the number of leases renewed. The category of renewed leases does not include leases that have become month-to-month leases, as the month-to-month leases are considered lease amendments.

(3) Represents the percentage change in effective rent between the original leases and the renewal leases. Effective rents represent average annual base rental payments, on a straight-line basis for the term of each lease, excluding operating expense reimbursements. The underlying leases contain various expense structures including gross, modified gross, net and triple net.

Healthcare Lease Expirations

Our ability to maintain and improve occupancy rates, and base rents, primarily depends upon our continuing ability to re-lease expiring space. The following table reflects the in-service portfolio lease expiration schedule of our healthcare properties, including square footage and annualized base rent for expiring leases, as of July  31, 2017. 

			Percentage of Total		Annualized Base				Percentage of Total
		Square Footage of	Healthcare		Rent of Expiring			Average	Healthcare
Fiscal Year of Lease Expiration	# of Leases	Expiring Leases(2)	Leased Square Footage		Leases at Expiration(3)			Rental Rate	Annualized Base Rent
2018(1)	20	82,528	6.7	%	$	1,494,595	$	16.09	5.6	%
2019	18	72,644	5.9	%		1,599,443		22.02	6.0	%
2020	16	93,521	7.6	%		1,936,684		20.71	7.2	%
2021	20	95,575	7.8	%		2,070,790		21.67	7.7	%
2022	17	76,774	6.2	%		1,414,135		18.42	5.3	%
2023	15	73,750	6.0	%		1,454,647		19.72	5.4	%
2024	29	179,460	14.6	%		4,194,579		23.37	15.6	%
2025	6	77,579	6.3	%		1,707,029		22.00	6.4	%
2026	9	103,178	8.4	%		1,802,959		17.47	6.7	%
2027	12	157,842	12.9	%		3,511,179		22.24	13.1	%
Thereafter	14	216,299	17.6	%		5,670,644		26.22	21.0	%
Totals	176	1,229,150	100.0	%	$	26,856,684	$	21.85	100.0	%

(1) Includes month-to-month leases. As of July  31, 2017, month-to-month leases accounted for 19,293 square feet.

(2) Assuming that none of the tenants exercise renewal or termination options, and including leases renewed prior to expiration. Also excludes 1,361 square feet of space occupied by us.

(3) Annualized base rent is monthly scheduled rent as of July 2017, multiplied by 12.

S-18

IRET

10 LARGEST COMMERCIAL TENANTS – BASED ON ANNUALIZED BASE RENT(1)

as of July  31, 2017

		Average	% of Total			% of Aggregate
		Remaining	Commercial		Aggregate	Occupied
	Number of	Lease Term	Minimum		Rentable	Square
Tenant	Properties	in Months	Rents		Square Feet	Feet
Fairview Health Services	8	47	11.7	%	239,203	8.8	%
St. Luke's Hospital of Duluth, Inc.	5	103	8.5	%	186,331	6.8	%
Affiliates of Edgewood Vista	2	53	8.3	%	279,834	10.2	%
PrairieCare Medical LLC	2	117	7.4	%	104,714	3.8	%
Quality Manufacturing Corp	1	66	3.2	%	427,798	15.6	%
Children's Hospitals & Clinics	3	52	2.7	%	54,378	2.0	%
Allina Health	4	45	2.6	%	53,132	1.9	%
Noran Neurological Clinic	1	73	2.3	%	38,506	1.4	%
Amerada Hess	1	108	2.2	%	50,610	1.8	%
Obstetrics and Gynecology Asscociates, P.A.	3	154	2.0	%	39,363	1.4	%
Total/Weighted Average	30	68	50.9	%	1,473,869	53.7	%

(1)Annualized base rent is calculated as monthly base rent (cash basis) per the lease, as of the reporting period, multiplied by 12.

S-19

IRET

FISCAL 2018 ACQUISITIONS SUMMARY

as of July  31, 2017

(dollars in thousands)

Acquisitions

					Occupancy		Occupancy
			Acquisition	Square	At		At		Acquisition
Property	Location	Segment	Date	Feet/Units	Acquisition		7/31/17		Cost
Oxbo(1)	St. Paul, MN	Multifamily	May 26, 2017	191	29.3	%	42.9	%	$	61,500

(1) Property includes 11,477 sq ft of retail space.

S-20

Definitions

July 31, 2017

Adjusted EBITDAis earnings before interest, taxes, depreciation, amortization, gain/loss on sale of real estate and other investments, impairment of real estate investments, gain/loss on extinguishment of debt and gain/loss from involuntary conversion. We consider Adjusted EBITDA to be an appropriate supplemental performance measure because it permits investors to view income from operations without the effect of depreciation, the cost of debt, or non-operating gains and losses. Adjusted EBITDA is a non-GAAP measure. Adjusted EBITDA as calculated by us is not comparable to Adjusted EBITDA reported by other REITs that do not define Adjusted EBITDA exactly as we do.

Core funds from operations (Core FFO) is FFO as adjusted for non-routine items or items not considered core to our business operations as outlined in the table below. By further adjusting for items that are not considered part of our core business operations, we believe Core FFO provides investors with additional information to compare our core operating and financial performance between periods. Core FFO should not be considered as an alternative to net income as an indication of financial performance, or as an alternative to cash flows from operations as a measure of liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions to shareholders. Core FFO is a non-GAAP and non-standardized measure, and may be calculated differently by other REITs.

Debt to total market capitalization is total debt from the balance sheet divided by the sum of total debt from the balance sheet plus the market value of shares outstanding at the end of the period.

Debt service coverage ratio is computed by dividing Adjusted EBITDA by interest expense and principal amortization.

Funds from operations (FFO) - The National Association of Real Estate Investment Trusts, Inc. (NAREIT) defines FFO as “net income (computed in accordance with generally accepted accounting principles, excluding gains (or losses) from sales of property, plus real estate depreciation and amortization, and adjustments for unconsolidated partnerships and joint ventures. Adjustments for unconsolidated partnerships and joint ventures will be calculated to reflect funds from operations on the same basis.” In addition, in October 2011 NAREIT clarified its computation of FFO to exclude impairment charges for all periods presented. FFO is a non-GAAP measure.  We consider FFO, which is a standard supplemental measure for equity real estate investment trusts, helpful to investors because it facilitates an understanding of the operating performance of properties without giving effect to impairment write-downs and to real estate depreciation and amortization, which assumes that the value of real estate assets diminishes predictably over time.  Since real estate values instead historically rise or fall with market conditions, we believe that FFO provides investors and management with a more accurate indication of our financial and operating results.

Net Debt to Annualized Adjusted EBITDA is total debt less cash and cash equivalents and real estate deposits as reported for the end of the quarter divided by Adjusted EBITDA as reported for the end of the quarter multiplied by 4.

Net Operating Income (NOI) is total real estate revenues less real estate expenses (which consist of utilities, maintenance, real estate taxes, insurance and property management expenses).  We believe that NOI is an important supplemental measure of operating performance for a REIT’s operating real estate because it provides a measure of core operations that is unaffected by depreciation, amortization, financing and general and administrative expense. NOI does not represent cash generated by operating activities in accordance with GAAP and should not be considered an alternative to net income, net income available for common shareholders or cash flow from operating activities as a measure of financial performance.

Ratio of earnings to fixed charges - The ratio of earnings to fixed charges is computed by dividing earnings by fixed charges. For this purpose, earnings consist of income from continuing operations plus fixed charges and preferred distributions, less adjustments for noncontrolling interests - consolidated real estate entities, capitalized interest and preferred distributions. Fixed charges consist of mortgage and loan interest expense, whether expensed or capitalized, the amortization of debt expense and capitalized interest.

Ratio of earnings to combined fixed charges and preferred distributions - The ratio of earnings to combined fixed charges and preferred distributions is computed by dividing earnings by combined fixed charges and preferred distributions. For this purpose, earnings consist of income from continuing operations plus fixed charges and preferred distributions, less adjustments for noncontrolling interests - consolidated real estate entities, capitalized interest and preferred distributions. Combined fixed charges and preferred distributions consist of fixed charges (mortgage and loan interest expense, whether expensed or capitalized, the amortization of debt expense and capitalized interest) and preferred distributions.

Scheduled rent revenue is the total possible revenue from all leasable units and square footage, with occupied space valued at contract rates pursuant to leases and vacant units or square footage at market rates.

S-21

Same-store properties are properties owned or in service for the entirety of the periods being compared (except for properties for which significant redevelopment or expansion occurred during either of the periods being compared, and properties sold or classified as held for sale), and, in the case of development or re-development properties, which have achieved a target level of occupancy of 90% for multifamily properties and 85% for office, healthcare, industrial and retail properties.

US GAAP – Accounting principles generally accepted in the United States of America.

S-22