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): March 12, 2018

INVESTORS REAL ESTATE TRUST

(Exact name of Registrant as specified in its charter)

North Dakota	001-35624	45-0311232
(State or Other Jurisdiction of Incorporation or Organization)	(Commission File Number)	(I.R.S. Employer Identification No.)

1400 31st Avenue SW, Suite 60, Post Office Box 1988, Minot, ND 58702-1988

(Address of principal executive offices) (Zip code)

(701) 837-4738

(Registrant’s telephone number, including area code)

Not Applicable

(Former name or former address, if changed from last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act

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

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

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 or Rule 12b-2 of the Securities Exchange Act of 1934.

Emerging growth company ¨

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Item 2.02. Results of Operations and Financial Condition.

Investors Real Estate Trust (the “Company”) issued an earnings release on March 12, 2018, announcing certain financial and operational results for the three and nine months ended January 31, 2018. A copy of the press release is attached hereto as Exhibit 99.1.

The information in Item 2.02 of this Current Report on Form 8-K, including Exhibit 99.1 furnished pursuant to Item 9.01, shall not be deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities under that Section. Furthermore, the information in this Current Report on Form 8-K, including Exhibit 99.1 hereto, shall not be incorporated by reference into any registration statement or other document pursuant to the Securities Act of 1933.

Item 7.01. Regulation FD Disclosure.

Certain supplemental operating and financial data regarding the Company not included in the earnings release is attached as Exhibit 99.2. The foregoing information is not deemed “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in filings under the Securities Act of 1933.

ITEM 9.01    Financial Statements and Exhibits

Exhibits

Exhibit
Number	Description
99.1	Earnings Release, dated March 12, 2018.
99.2	Supplemental Operating and Financial Data, dated March 12, 2018.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

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

EX-99.1

Exhibit 99.1

Earnings Release

IRET Announces Fiscal Third Quarter 2018 Results

MINOT, N.D., March 12, 2018 – IRET (NYSE: IRET) announced today its fiscal third quarter 2018 financial and operating results. Net income and Funds from Operations (“FFO”) per share for the three and nine months ended January 31, 2018, are detailed below. Core FFO adjusts FFO for certain non-routine items, and both FFO and Core FFO are reconciled to net income in the tables accompanying this earnings release.

	Three Months Ended				Nine Months Ended
	January 31,				January 31,
Per Share	2018		2017		2018		2017
Net Income	$	1.12	$	0.16	$	1.06	$	0.03
FFO	$	0.04	$	0.09	$	0.21	$	0.33
Core FFO	$	0.09	$	0.12	$	0.30	$	0.35

	Quarterly Comparison		Sequential Comparison		YTD Comparison
Multifamily Same-Store Results	3Q18 vs. 3Q17		3Q18 vs. 2Q18		3Q18 vs. 3Q17
Revenues	5.2	%	(0.1	)%	4.3	%
Expenses	4.5	%	(6.7	)%	11.3	%
Net Operating Income (“NOI”)	5.8	%	6.1	%	(1.2	)%

Multifamily Same-Store Results	3Q18		2Q18		3Q17
Physical Occupancy	95.2	%	95.2	%	92.3	%
Weighted Average Occupancy	94.0	%	93.1	%	91.4	%

“Today marks the moment IRET can be considered a multifamily real estate company,” said Mark O. Decker, Jr., IRET’s President and CEO. “With the previously-announced sales of our healthcare properties, apartment communities now comprise more than 90% of our portfolio, and with the pending acquisition in Denver, our redeployment is nearly finished. Our team completed the transformation we set out to achieve, and we can now focus the full attention of our organization on improving our operational performance and growing and refining our apartment portfolio.”

Third Quarter Fiscal Year 2018 Highlights

• Substantially completed our transformation into a focused multifamily company by closing the sale of 27 of our 28 healthcare properties for an aggregate sale price of approximately $400.8 million. The final property remains under contract for sale pending the satisfaction of certain closing conditions. We used the proceeds from the sale of these assets to fund acquisitions and reduce debt.

• Closed the acquisition of Dylan, a 274-home apartment community in Denver, Colorado, completing our inaugural investment in another top-25 MSA. Subsequent to quarter-end, we entered into a purchase agreement to acquire Westend, another Denver apartment community with 390 homes. Denver has a healthy and diverse economy and, together with Minneapolis-St. Paul, will be a key market in IRET’s push to achieve portfolio growth, geographic diversity, and operating efficiencies.

1

• Achieved quarterly same-store NOI growth of 5.8% over the same period in the prior year, representing the first positive result in over two years. This performance was driven by revenue growth of 5.2%, due primarily to a 4.4% increase in occupancy, and expense growth of 4.5%. The reduction in expense growth this quarter compared to the 15.0% increase in first half of fiscal 2018 is due, in part, to a decrease in snow removal costs and a reduction in accruals related to self-funded healthcare costs.

• Reduced debt from $928.0 million to $692.9 million during the quarter and have $116.8 million of restricted cash available to deploy toward future acquisitions.

• Closed a $70 million unsecured term loan that expires in 2023 and executed a swap agreement to synthetically fix the interest rate for the full duration of the loan.

Acquisitions

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

			(in thousands)
Property Name	Location	Total Units	Total Cost		% Occupied as of 1/31/2018
Dylan	Denver, CO	274	$	90,600	81.4	%

Subsequent to quarter-end, we entered into a purchase agreement to acquire Westend, another Denver apartment community with 390 homes.

Dispositions

During the quarter, we sold 27 healthcare properties for $400.8 million, two other properties for $35.4 million, and two multifamily properties for $6.7 million.

Subsequent to quarter-end, we sold a commercial property and adjacent parcel of unimproved land in Bismarck, ND, for an aggregate sale price of $5.5 million.

Balance Sheet

At the end of the third quarter, we had $174.8 million of total liquidity on our balance sheet, including $152.2 million available on our corporate revolver.

During the quarter, we repurchased and retired approximately 152,000 common shares and redeemed approximately 450,000 Units for an aggregate cost of approximately $3.5 million, representing an average price of approximately $5.78 per share. We also closed on a $70 million unsecured term loan that matures in 2023 and executed a swap agreement to synthetically fix the interest rate for the full duration of the loan.

Quarterly Distributions

On March 5, 2018, IRET’s Board of Trustees declared a regular quarterly distribution of $0.07 per share/unit payable on April 2, 2018, to common shareholders and unitholders of record on March 15, 2018. This distribution will be the 188th consecutive quarterly distribution paid by IRET since its inception in 1970. It represents an annualized rate of $0.28 per share/unit with an annualized yield of 5.9% based on IRET’s closing share price as of March 9, 2018.

The Board of Trustees also declared a distribution of $0.4140625 per share on the 6.625% Series C Cumulative Redeemable Preferred Shares (NYSE: IRET PRC) payable on April 2, 2018, to holders of record on March 15, 2017. Series C preferred share distributions are cumulative and payable quarterly in arrears at an annual rate of $1.65625 per share.

2

Earnings Call

Live webcast and replay:  http://ir.iretapartments.com
Live Conference Call		Conference Call Replay
Tuesday, March 13, 2018, at 10:00 AM ET		Replay available until March 27, 2018
USA Toll Free Number	1-877-509-9785	USA Toll Free Number	1-877-344-7529
International Toll Free Number	1-412-902-4132	International Toll Free Number	1-412-317-0088
Canada Toll Free Number	1-855-669-9657	Canada Toll Free Number	1-855-669-9658
		Conference Number	10117418

Supplemental Information

Supplemental Operating and Financial Data for the Quarter Ended January 31, 2018 (“Supplemental Information”), is available in the Investors section on IRET’s website at www.iretapartments.com or by calling Investor Relations at 701-837-7104.  Non-GAAP financial measures and other capitalized terms, as used in this earnings release, are defined and reconciled in the Supplemental Information, which accompanies this earnings release.

About IRET

IRET is a real estate company focused on the ownership, management, acquisition, redevelopment, and development of multifamily apartment communities. As of January 31, 2018, IRET owned interests in 89 multifamily properties consisting of 13,786 apartment homes.  IRET's common shares and Series C preferred shares are publicly traded on the New York Stock Exchange (NYSE symbols: IRET and IRET PRC, respectively).

Forward Looking Statements

Certain statements in this press release are based on our current expectations and assumptions, and are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements do not discuss historical fact, but instead include statements related to expectations, projections, intentions or other items related to the future. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and variations of those words and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements to be materially different from the results of operations, financial conditions, or plans expressed or implied by the forward-looking statements. Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, we can give no assurance our expectations will be achieved. Any statements contained herein that are not statements of historical fact should be deemed forward-looking statements. As a result, reliance should not be placed on these forward-looking statements as these statements are subject to known and unknown risks, uncertainties, and other factors beyond our control and could differ materially from our actual results and performance. Such risks and uncertainties are detailed from time to time in our filings with the SEC, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” contained in our Annual Report on Form 10-K for the fiscal year ended April 30, 2017, in subsequent quarterly reports on Form 10-Q and in other public reports. We assume no obligation to update or supplement forward-looking statements that become untrue due to subsequent events.

3

IRET

RECONCILIATION OF NET INCOME ATTRIBUTABLE TO

IRET TO FFO AND CORE FFO

z

	(inthousands,exceptpershareamounts)
Three Months Ended January 31,	2018						2017
	Amount			Weighted Avg Shares and Units(1)	Per Share And Unit(2)		Amount			Weighted Avg Shares and Units(1)	Per Share And Unit(2)
Net income attributable to controlling interests	$	136,105					$	23,110
Less dividends to preferred shareholders	(1,766		)				(2,503		)
Less redemption of preferred shares	(8		)				(1,435		)
Net loss available to common shareholders	134,331			119,741	$	1.12	19,172			121,255	$	0.16
Adjustments:
Noncontrolling interest – Operating Partnership	16,236			14,434			2,525			16,120
Depreciation and amortization	19,017						12,933
Gains on depreciable property sales attributable to controlling interests	(163,791		)				(21,972		)
FFO applicable to Common Shares and Units(1)	$	5,793		134,175	$	0.04	$	12,658		137,375	$	0.09
Adjustments to Core FFO:
Lease termination fees	—						(7		)
Loss on extinguishment of debt	6,787						1,907
Redemption of Preferred Shares	8						1,435
Core FFO applicable to common shares and Units(1)	$	12,588		134,175	$	0.09	$	15,993		137,375	$	0.12

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

(2) Net income attributable to IRET is calculated on a per Common Share basis. FFO is calculated on a per Common Share and Unit basis.

4

IRET

RECONCILIATION OF NET INCOME ATTRIBUTABLE TO

IRET TO FFO AND CORE FFO

	(in thousands, except per share amounts)
Nine Months Ended January 31,	2018						2017
	Amount			Weighted Avg Shares and Units(1)	Per Share And Unit(2)		Amount			Weighted Avg Shares and Units(1)	Per Share And Unit(2)
Net income (loss) attributable to controlling interests	$	137,662					$	13,067
Less dividends to preferred shareholders	(6,864		)				(8,260		)
Less redemption of preferred shares	(3,657		)				(1,435		)
Net income available to common shareholders	127,141			120,102	$	1.06	3,372			121,175	$	0.03
Adjustments:
Noncontrolling interest – Operating Partnership	15,365			14,768			403			16,229
Depreciation and amortization	67,030						39,341
Impairment of real estate investments attributable to controlling interests	256						39,190
Gains on depreciable property sales attributable to controlling interests	(181,477		)				(37,330		)
FFO applicable to Common Shares and Units(1)	$	28,315		134,870	$	0.21	$	44,976		137,404	$	0.33
Adjustments to Core FFO:
Lease termination fees	—						(7		)
Loss on extinguishment of debt	7,326						1,979
Redemption of Preferred Shares	3,657						1,435
Severance and transition costs	650						—
Core FFO applicable to common shares and Units(1)	$	39,948		134,870	$	0.30	$	48,383		137,404	$	0.35

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

(2) Net income attributable to IRET is calculated on a per Common Share basis. FFO is calculated on a per Common Share and Unit basis.

5

IRET

RECONCILIATION OF NET OPERATING INCOME TO THE

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	(in thousands)
Three Months Ended January 31, 2018	Multifamily		All Other		Amounts Not Allocated To Segments(1)			Total
Real estate revenue	$	41,279	$	1,975	$	—		$	43,254
Real estate expenses	18,231		549		1,255			20,035
Net operating income (loss)	$	23,048	$	1,426	$	(1,255	)	$	23,219
Depreciation and amortization								(18,390		)
General and administrative expenses								(3,011		)
Interest expense								(9,236		)
Loss on debt extinguishment								(285		)
Interest and other income								433
Loss before gain on sale of real estate and other investments and income from discontinued operations								(7,270		)
Gain on sale of real estate and other investments								12,387
Income from continuing operations								5,117
Income from discontinued operations								146,811
Net income								$	151,928

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

	(in thousands)
Three Months Ended January 31, 2017	Multifamily		All Other		Amounts Not Allocated To Segments(1)			Total
Real estate revenue	$	36,171	$	4,057	$	—		$	40,228
Real estate expenses	16,336		1,000		1,283			18,619
Net operating income (loss)	$	19,835	$	3,057	$	(1,283	)	$	21,609
Depreciation and amortization								(10,787		)
General and administrative expenses								(4,172		)
Interest expense								(8,832		)
Loss on debt extinguishment								(458		)
Interest and other income								427
Loss before gain on sale of real estate and other investments and income from discontinued operations								(2,213		)
Gain on sale of real estate and other investments								2,437
Income from continuing operations								224
Income from discontinued operations								24,965
Net income								$	25,189

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

6

IRET

RECONCILIATION OF NET OPERATING INCOME TO THE

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

	(in thousands)
Nine Months Ended January 31, 2018	Multifamily		All Other		Amounts Not Allocated To Segments(1)			Total
Real estate revenue	$	119,444	$	7,936	$	—		$	127,380
Real estate expenses	54,584		2,102		4,204			60,890
Net operating income (loss)	$	64,860	$	5,834	$	(4,204	)	$	66,490
Depreciation and amortization								(60,998		)
Impairment of real estate investments								(256		)
General and administrative expenses								(10,131		)
Interest expense								(25,876		)
Loss on debt extinguishment								(818		)
Interest and other income								916
Loss before gain on sale of real estate and other investments and income from discontinued operations								(30,673		)
Gain on sale of real estate and other investments								17,835
Loss from continuing operations								(12,838		)
Income from discontinued operations								164,626
Net income								$	151,788

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

	(in thousands)
Nine Months Ended January 31, 2017	Multifamily		All Other		Amounts Not Allocated To Segments(1)			Total
Real estate revenue	$	107,400	$	11,307	$	—		$	118,707
Real estate expenses	46,781		2,787		4,002			53,570
Net operating income (loss)	$	60,619	$	8,520	$	(4,002	)	$	65,137
Depreciation and amortization								(33,193		)
Impairment of real estate investments								(54,153		)
General and administrative expenses								(11,195		)
Interest expense								(26,033		)
Loss on debt extinguishment								(458		)
Interest and other income								685
Loss before gain on sale of real estate and other investments and income from discontinued operations								(59,210		)
Gain on sale of real estate and other investments								11,292
Loss from continuing operations								(47,918		)
Income from discontinued operations								44,803
Net loss								$	(3,115	)

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

7

EX-99.2

Exhibit 99.2

Supplemental Financial and Operating Data

Table of Contents

January 31, 2018

	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
Debt and Capital Analysis
Debt Analysis	S-8
Debt Detail	S-9
Capital Analysis	S-10
Portfolio Analysis
Net Operating Income Detail	S-11
Same-Store Comparison	S-15
Portfolio Summary	S-16
Same-Store Capital Expenditures	S-17
Growth Analysis
Fiscal 2018 Acquisition Summary	S-18
Definitions	S-19

S-1

Company Background

Third Quarter Fiscal 2018

We are a multifamily real estate investment trust (REIT) focused on the ownership, management, acquisition, redevelopment, and development of multifamily apartment communities.  As of January 31, 2018, we owned interests in 89 multifamily properties consisting of 13,786 apartment homes. IRET's common shares and Series C preferred shares are publicly traded on the New York Stock Exchange (NYSE symbols: IRET and IRET PRC, respectively).  

Company Snapshot

(as of January 31, 2018)

Company Headquarters	Minot, North Dakota
Fiscal Year-End	April 30
Reportable Segments	Multifamily
Total Multifamily Properties	89
Total Units	13,786
Common Shares Outstanding (thousands)	120,035
Limited Partnership Units Outstanding (thousands)	14,168
Common Share Distribution – Quarter/Annualized	$0.07/$0.28
Annualized Dividend Yield	4.9%
Total Capitalization (see p. S-10 for details)	$1.6 billion

Investor Information

(as of March 12, 2018)

Board of Trustees

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

Management

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

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

S-2

Common Share Data (NYSE: IRET)

	3rd Quarter			2nd Quarter			1st Quarter			4th Quarter			3rd Quarter
	Fiscal Year 2018			Fiscal Year 2018			Fiscal Year 2018			Fiscal Year 2017			Fiscal Year 2017
High Closing Price	$	6.06		$	6.32		$	6.72		$	6.61		$	7.20
Low Closing Price	$	5.52		$	5.81		$	5.64		$	5.67		$	5.81
Average Closing Price	$	5.80		$	6.09		$	6.07		$	6.09		$	6.65
Closing Price at end of quarter	$	5.67		$	5.85		$	6.22		$	5.91		$	6.44
Common Share Distributions – annualized	$	0.28		$	0.28		$	0.28		$	0.28		$	0.28
Closing Dividend Yield – annualized	4.9		%	4.8		%	4.5		%	4.7		%	4.3		%
Closing common shares outstanding (thousands)	$	120,035		$	120,188		$	120,587		$	121,199		$	121,889
Closing limited partnership units outstanding (thousands)	$	14,168		$	14,618		$	14,657		$	15,617		$	16,034
Closing market value of outstanding common shares, plus imputed closing market value of outstanding limited partnership units (thousands)	$	760,931		$	788,615		$	841,218		$	808,583		$	888,224

This Supplemental Operating and Financial Data contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements, which may be identified by the use of words such as “expects,” “plans,” “estimates,” “anticipates,” “projects,” “intends,” “believes,” “outlook” and similar expressions that do not relate to historical matters, specifically including our future plan and anticipated operating results, are based on our expectations, forecasts and assumptions at the time of this earnings release.Such statements involve known and unknown risks, uncertainties and other factors that may cause actual results to differ materially from those expressed or implied in such forward-looking statements.

Such risks, uncertainties and other factors that might cause such differences include, but are not limited to: intentions and expectations regarding future distributions on common shares and units; changes in operating costs; fluctuations in interest rates; adverse capital and credit market conditions that might affect our access to various sources of capital and cost of capital; our ability to manage our current debt levels and repay or refinance our indebtedness upon maturity or other payment dates; our ability to maintain financial covenant compliance under our debt agreements; adequate insurance coverage; the effect of government regulation; delays or inability to obtain necessary governmental permits and authorizations; changes in general and local economic and real estate market conditions; changes in demand for our properties that may result in lower-than-expected occupancy and/or rental rates; ability to acquire quality properties in targeted markets; ability to successfully dispose of certain assets; competition for tenants from similar competing properties; ability to attract and retain skilled personnel; cyber-intrusion; delays in completing development, redevelopment and/or lease up of properties and increased costs; ability to maintain effective internal controls over financial reporting and disclosure controls and procedures; and those risks and uncertainties detailed from time to time in our filings with the Securities and Exchange Commission, including our Form 10-K for the fiscal year ended April 30, 2017 subsequent quarterly reports on Form 10-Q, and other public filings.  We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

S-3

IRET

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in thousands)

	1/31/2018			10/31/2017			7/31/2017			4/30/2017			1/31/2017
ASSETS
Real estate investments
Property owned	$	1,568,725		$	1,510,890		$	1,424,251		$	1,358,529		$	1,367,806
Less accumulated depreciation	(304,149		)	(292,976		)	(280,563		)	(255,599		)	(252,546		)
	1,264,576			1,217,914			1,143,688			1,102,930			1,115,260
Development in progress	—			—			—			—			11,531
Unimproved land	15,123			15,216			15,195			18,455			19,076
Mortgage loans receivable	10,329			10,329			—			—			—
Total real estate investments	1,290,028			1,243,459			1,158,883			1,121,385			1,145,867
Assets held for sale and assets of discontinued operations	—			239,688			280,083			283,023			387,454
Cash and cash equivalents	22,666			42,464			23,801			28,819			56,999
Restricted cash	121,337			3,782			3,713			27,981			5,136
Other assets	21,664			21,634			15,870			13,306			13,633
TOTAL ASSETS	$	1,455,695		$	1,551,027		$	1,482,350		$	1,474,514		$	1,609,089
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND EQUITY
LIABILITIES
Liabilities held for sale and liabilities of discontinued operations	$	—		$	95,193		$	127,413		$	130,904		$	154,528
Accounts payable and accrued expenses	35,792			32,581			34,248			35,566			38,115
Revolving line of credit	67,000			247,500			125,900			57,050			157,000
Term loan payable, net of loan costs	69,483			—			—			—			—
Mortgages payable, net of loan costs	553,388			561,798			565,705			565,978			591,505
Construction debt	—			21,649			20,134			41,741			39,442
TOTAL LIABILITIES	725,663			958,721			873,400			831,239			980,590
REDEEMABLE NONCONTROLLING INTERESTS – CONSOLIDATED REAL ESTATE ENTITIES	6,644			6,812			7,010			7,181			7,300
EQUITY
Series B Preferred Shares of Beneficial Interest	—			—			111,357			111,357			111,357
Series C Preferred Shares of Beneficial Interest	99,456			99,467			—			—			—
Common Shares of Beneficial Interest	910,173			910,683			912,625			916,121			921,735
Accumulated distributions in excess of net income	(364,684		)	(490,612		)	(488,535		)	(466,541		)	(486,015		)
Accumulated other comprehensive income	359			—			—			—			—
Total shareholders’ equity	645,304			519,538			535,447			560,937			547,077
Noncontrolling interests – Operating Partnership	76,915			64,291			64,789			73,233			72,007
Noncontrolling interests – consolidated real estate entities	1,169			1,665			1,704			1,924			2,115
Total equity	723,388			585,494			601,940			636,094			621,199
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND EQUITY	$	1,455,695		$	1,551,027		$	1,482,350		$	1,474,514		$	1,609,089

S-4

IRET

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in thousands, except per share amounts)

	Nine Months Ended						Three Months Ended
OPERATING RESULTS	1/31/2018			1/31/2017			1/31/2018			10/31/2017			7/31/2017			4/30/2017			1/31/2017
Real estate revenue	$	127,380		$	118,707		$	43,254		$	42,557		$	41,569		$	43,569		$	40,228
Real estate expenses	60,890			53,570			20,035			20,896			19,959			18,388			18,619
Net operating income	66,490			65,137			23,219			21,661			21,610			25,181			21,609
Depreciation/amortization	(60,998		)	(33,193		)	(18,390		)	(17,270		)	(25,338		)	(11,060		)	(10,787		)
Impairment of real estate investments	(256		)	(54,153		)	—			—			(256		)	(2,875		)	—
General and administrative expenses	(10,131		)	(11,195		)	(3,011		)	(3,118		)	(4,002		)	(4,728		)	(4,172		)
Development pursuit and other write-offs	—			—			—			—			—			(3,224		)	—
Interest expense	(25,876		)	(26,033		)	(9,236		)	(8,509		)	(8,131		)	(8,281		)	(8,832		)
Loss on extinguishment of debt	(818		)	(458		)	(285		)	(334		)	(199		)	(1,193		)	(458		)
Interest and other income	916			685			433			255			228			461			427
Loss before income on sale of real estate and other investments and income from discontinued operations	(30,673		)	(59,210		)	(7,270		)	(7,315		)	(16,088		)	(5,719		)	(2,213		)
Income on sale of real estate and other investments	17,835			11,292			12,387			5,324			124			7,409			2,437
(Loss) income from continuing operations	(12,838		)	(47,918		)	5,117			(1,991		)	(15,964		)	1,690			224
Income from discontinued operations	164,626			44,803			146,811			15,130			2,685			31,950			24,965
Net income (loss)	$	151,788		$	(3,115	)	$	151,928		$	13,139		$	(13,279	)	$	33,640		$	25,189
Net loss (income) attributable to noncontrolling interest – Operating Partnership	(15,365		)	(403		)	(16,236		)	(773		)	1,644			(3,656		)	(2,525		)
Net loss attributable to noncontrolling interests – consolidated real estate entities	1,239			16,585			413			455			371			296			446
Net income (loss) attributable to controlling interests	137,662			13,067			136,105			12,821			(11,264		)	30,280			23,110
Dividends to preferred shareholders	(6,864		)	(8,260		)	(1,766		)	(2,812		)	(2,286		)	(2,286		)	(2,503		)
Redemption of Preferred Shares	(3,657		)	(1,435		)	(8		)	(3,649		)	—			—			(1,435		)
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS	$	127,141		$	3,372		$	134,331		$	6,360		$	(13,550	)	$	27,994		$	19,172
Per Share Data
(Loss) earnings per common share from continuing operations – basic & diluted	$	(0.16	)	$	(0.30	)	$	0.03		$	(0.06	)	$	(0.13	)	$	—		$	(0.03	)
Earnings per common share from discontinued operations – basic & diluted	1.22			0.33			1.09			0.11			0.02			0.23			0.19
Net (loss) income per common share – basic & diluted	$	1.06		$	0.03		$	1.12		$	0.05		$	(0.11	)	$	0.23		$	0.16
Percentage of Revenues
Real estate expenses	47.8		%	45.1		%	46.3		%	49.1		%	48.0		%	42.2		%	46.3		%
Depreciation/amortization	47.9		%	28.0		%	42.5		%	40.6		%	61.0		%	25.4		%	26.8		%
General and administrative expenses	8.0		%	9.4		%	7.0		%	7.3		%	9.6		%	10.9		%	10.4		%
Interest	20.3		%	21.9		%	21.4		%	20.0		%	19.6		%	19.0		%	22.0		%
Income from discontinued operations	129.2		%	37.7		%	339.4		%	35.6		%	6.5		%	73.3		%	62.1		%
Net (loss) income	119.2		%	(2.6		)%	351.2		%	30.9		%	(31.9		)%	77.2		%	62.6		%

S-5

IRET

RECONCILIATION OF NET INCOME ATTRIBUTABLE TO

IRET TO FFO AND CORE FFO(unaudited)

(in thousands, except per share and unit amounts)

	Nine Months Ended						Three Months Ended
	1/31/2018			1/31/2017			1/31/2018			10/31/2017			7/31/2017			4/30/2017			1/31/2017
Funds From Operations(1)
Net income (loss) attributable to controlling interests	$	137,662		$	13,067		$	136,105		$	12,821		$	(11,264	)	$	30,280		$	23,110
Less dividends to preferred shareholders	(6,864		)	(8,260		)	(1,766		)	(2,812		)	(2,286		)	(2,286		)	(2,503		)
Less redemption of preferred shares	(3,657		)	(1,435		)	(8		)	(3,649		)	—			—			(1,435		)
Net (loss) income available to common shareholders	127,141			3,372			134,331			6,360			(13,550		)	27,994			19,172
Adjustments:
Noncontrolling interests – Operating Partnership	15,365			403			16,236			773			(1,644		)	3,656			2,525
Depreciation and amortization of real property	67,030			39,341			19,017			19,894			28,119			13,222			12,933
Impairment of real estate investments attributable to controlling interests	256			39,190			—			—			256			2,875			—
Gain on depreciable property sales	(181,477		)	(37,330		)	(163,791		)	(17,562		)	(124		)	(37,517		)	(21,972		)
FFO applicable to common shares and Units	$	28,315		$	44,976		$	5,793		$	9,465		$	13,057		$	10,230		$	12,658
FFO per share and unit – basic and diluted	$	0.21		$	0.33		$	0.04		$	0.07		$	0.10		$	0.07		$	0.09
Adjustments to Core FFO:
Lease termination fees	—			(7		)	—			—			—			(3,244		)	(7		)
Loss on extinguishment of debt	7,326			1,979			6,787			340			199			2,910			1,907
Redemption of Preferred Shares	3,657			1,435			8			3,649			—			—			1,435
Severance and transitions costs	650			—			—			186			464			2,612			—
Development pursuit and other write-offs	—			—			—			—			—			3,224			—
Core FFO applicable to common shares and Units	$	39,948		$	48,383		$	12,588		$	13,640		$	13,720		$	15,732		$	15,993
Core FFO per share and unit – basic and diluted	$	0.30		$	0.35		$	0.09		$	0.10		$	0.10		$	0.11		$	0.12
Weighted average shares and units	134,870			137,404			134,175			134,767			135,549			136,952			137,375

(1) See Definitions on page S-19.

S-6

IRET

RECONCILIATION OF NET INCOME ATTRIBUTABLE TO

IRET TO ADJUSTED EARNINGS BEFORE INTEREST,

TAXES, DEPRECIATION, AND AMORTIZATION (ADJUSTED EBITDA) (unaudited)

(in thousands)

	Nine Months Ended						Three Months Ended
	1/31/2018			1/31/2017			1/31/2018			10/31/2017			7/31/2017			4/30/2017			1/31/2017
Adjusted EBITDA(1)
Net income (loss) attributable to controlling interests	$	137,662		$	13,067		$	136,105		$	12,821		$	(11,264	)	$	30,280		$	23,110
Adjustments:
Noncontrolling interests – Operating Partnership	15,365			403			16,236			773			(1,644		)	3,656			2,525
Income (loss) before noncontrolling interests – Operating Partnership	153,027			13,470			152,341			13,594			(12,908		)	33,936			25,635
Add:
Interest expense	28,795			35,639			9,569			9,523			9,703			10,303			11,880
Loss on extinguishment of debt	7,326			1,979			6,787			340			199			2,910			1,907
Depreciation/amortization related to real estate investments	67,292			39,494			19,100			19,977			28,215			13,280			12,983
Amortization related to real estate revenues(2)	—			75			—			—			—			20			21
Impairment of real estate investments attributable to controlling interests	256			39,190			—			—			256			2,875			—
Less:
Interest income	(1,288		)	(1,988		)	(408		)	(316		)	(564		)	(557		)	(816		)
Gain on sale of real estate and other investments	(181,477		)	(37,330		)	(163,791		)	(17,562		)	(124		)	(37,517		)	(21,972		)
Adjusted EBITDA	$	73,931		$	90,529		$	23,598		$	25,556		$	24,777		$	25,250		$	29,638
Ratios
Adjusted EBITDA(1)/Interest expense	2.46		x	2.51		x	2.36		x	2.57		x	2.45		x	2.45		x	2.47		x
Adjusted EBITDA(1)/Interest expense plus preferred distributions	2.00		x	2.04		x	2.01		x	2.00		x	2.00		x	2.00		x	2.04		x

(1) See Definitions on page S-19.

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

S-7

IRET

DEBT ANALYSIS

(in thousands)

Debt Maturity Schedule

Annual Expirations

	Future Maturities of Debt(1)
Fiscal Year	Fixed Debt		Variable Debt		Total Debt		Weighted Average(2)		% of Total Debt
2018	$	—	$	—	$	—	—	%	—	%
2019	14,540		28,503		43,043		4.07	%	6.2	%
2020	87,272		31,798		119,070		5.65	%	17.2	%
2021	55,479		—		55,479		5.05	%	8.0	%
2022	104,664		700		105,364		5.23	%	15.2	%
2023	28,228		—		28,228		4.13	%	4.1	%
2024	50,401		—		50,401		4.02	%	7.3	%
2025	—		—		—		—	%	—	%
2026	54,523		—		54,523		3.74	%	7.9	%
2027	92,000		—		92,000		3.56	%	13.3	%
Thereafter	7,767		—		7,767		5.38	%	1.1	%
Total secured maturing debt	$	494,874	$	61,001	$	555,875	4.63	%	80.3	%
Unsecured line of credit	—		67,000		67,000		3.45	%	9.6	%
Unsecured term loan(3)	70,000		—		70,000		4.01	%	10.1	%
Total debt	$	564,874	$	128,001	$	692,875	4.45	%	100.0	%

(1) Includes line of credit and term loan.

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

(3) Term loan has a variable interest rate that is hedged with an interest rate swap and matures January 31, 2023.

	1/31/2018			10/31/2017			7/31/2017			4/30/2017			1/31/2017
Debt Balances Outstanding(1)
Secured fixed rate	$	494,874		$	593,854		$	605,028		$	629,535		$	658,224
Secured variable rate	61,001			86,672			100,388			99,445			81,314
Unsecured line of credit	67,000			247,500			125,900			57,050			157,000
Unsecured term loan	$	70,000		$	—		$	—		$	—		$	—
Debt total	$	692,875		$	928,026		$	831,316		$	786,030		$	896,538
Weighted Average Interest Rate Secured	4.63		%	4.63		%	4.62		%	4.63		%	4.71		%
Line of Credit Rate	3.45		%	3.08		%	2.98		%	2.74		%	2.55		%
Term Loan Rate	4.01		%	—		%	—		%	—		%	—		%

(1) Includes mortgages on properties held for sale.

S-8

IRET

DEBT DETAIL

as of January 31, 2018

(in thousands)

Property	Maturity Date	Fiscal 2018		Fiscal 2019		Fiscal 2020		Fiscal 2021		Thereafter		Total(1)
Multifamily
Homestead Gardens II – Rapid City, SD	6/1/2018	$	—	$	3,011	$	—	$	—	$	—	$	3,011
Cardinal Point – Grand Forks, ND	8/1/2018	—		23,157		—		—		—		23,157
Plaza – Minot, ND	8/1/2018	—		11,529		—		—		—		11,529
Evergreen II – Isanti, MN	11/1/2018	—		1,936		—		—		—		1,936
Greenfield – Omaha, NE	2/1/2019	—		3,410		—		—		—		3,410
Monticello Village – Monticello, MN	5/28/2019	—		—		2,828		—		—		2,828
Rimrock West – Billings, MT	9/1/2019	—		—		3,110		—		—		3,110
Rocky Meadows – Billings, MT	9/1/2019	—		—		4,822		—		—		4,822
Cimarron Hills – Omaha, NE	10/1/2019	—		—		4,494		—		—		4,494
Cottonwood – Bismarck, ND	10/1/2019	—		—		14,919		—		—		14,919
Forest Park – Grand Forks, ND	10/1/2019	—		—		7,160		—		—		7,160
Renaissance Heights I – Williston, ND	10/1/2019	—		—		22,922		—		—		22,922
Williston Garden – Williston, ND	10/30/2019	—		—		7,190		—		—		7,190
Williston Garden – Williston, ND	10/30/2019	—		—		158		—		—		158
Evergreen – Isanti, MN	11/1/2019	—		—		1,884		—		—		1,884
Northridge – Bismarck, ND	12/1/2019	—		—		5,891		—		—		5,891
Castlerock – Billings, MT	1/1/2020	—		—		6,255		—		—		6,255
Thomasbrook – Lincoln, NE	1/1/2020	—		—		5,604		—		—		5,604
Westwood Park – Bismarck, ND	1/1/2020	—		—		1,851		—		—		1,851
Kirkwood Manor – Bismarck, ND	2/1/2020	—		—		3,099		—		—		3,099
Brookfield Village – Topeka, KS	3/1/2020	—		—		4,948		—		—		4,948
Crown Colony – Topeka, KS	4/1/2020	—		—		7,658		—		—		7,658
Mariposa – Topeka, KS	4/1/2020	—		—		2,772		—		—		2,772
Sherwood – Topeka, KS	4/1/2020	—		—		11,505		—		—		11,505
Deer Ridge – Jamestown, ND	5/1/2020	—		—		—		11,275		—		11,275
Valley Park – Grand Forks, ND	6/1/2020	—		—		—		3,627		—		3,627
Country Meadows II – Billings, MT	10/1/2020	—		—		—		3,305		—		3,305
Olympic Village – Billings, MT	11/1/2020	—		—		—		9,992		—		9,992
Villa West Apartments – Topeka, KS	12/1/2020	—		—		—		11,578		—		11,578
Park Meadows – Waite Park, MN	1/1/2021	—		—		—		8,081		—		8,081
Sunset Trail – Rochester, MN	2/1/2021	—		—		—		7,621		—		7,621
Summary of Debt due after Fiscal 2021		—		—		—		—		336,041		336,041
Sub-Total Multifamily		$	—	$	43,043	$	119,070	$	55,479	$	336,041	$	553,633
Other
Summary of Debt due after Fiscal 2021		—		—		—		—		2,242		2,242
Sub-Total All Other		$	—	$	—	$	—	$	—	$	2,242	$	2,242
Total maturing debt		$	—	$	43,043	$	119,070	$	55,479	$	338,283	$	555,875
Unsecured Line of Credit	1/31/2021	—		—		—		67,000		—		$	67,000
Unsecured Term Loan	1/31/2023	—		—		—		—		70,000		$	70,000
Total debt		$	—	$	43,043	$	119,070	$	122,479	$	408,283	$	692,875

(1) Totals are principal balances of mortgages, line of credit, and unsecured term loan as of January 31, 2018.

S-9

IRET 

CAPITAL ANALYSIS 

(in thousands, except per share and unit amounts)

	Three Months Ended
	1/31/2018		10/31/2017		7/31/2017		4/30/2017		1/31/2017
Equity Capitalization
Common shares outstanding	120,035		120,188		120,587		121,199		121,889
Operating partnership (OP) units outstanding	14,168		14,618		14,657		15,617		16,034
Total common shares and OP units outstanding	134,203		134,806		135,244		136,816		137,923
Market price per common share (closing price at end of period)	$	5.67	$	5.85	$	6.22	$	5.91	$	6.44
Equity capitalization-common shares and OP units	760,931		788,615		841,218		808,583		888,224
Recorded book value of preferred shares	$	99,456	$	99,467	$	111,357	$	111,357	$	111,357
Total equity capitalization	$	860,387	$	888,082	$	952,575	$	919,940	$	999,581
Debt Capitalization
Total debt	$	692,875	$	927,968	$	839,134	$	793,827	$	943,751
Total capitalization	$	1,553,262	$	1,816,050	$	1,791,709	$	1,713,767	$	1,943,332
Total debt to total capitalization	0.45:1		0.51:1		0.47:1		0.46:1		0.49:1

	Nine Months Ended						Three Months Ended
	1/31/2018			1/31/2017			1/31/2018			10/31/2017			7/31/2017			4/30/2017			1/31/2017
Earnings to fixed charges(1)	(2		)	(3		)	1.56		x	1.09		x	(5		)	1.48		x	1.12		x
Earnings to combined fixed charges and preferred distributions(1)	(2		)	(3		)	1.33		x	(4		)	(5		)	1.21		x	(6		)
Debt service coverage ratio(1)	1.79		x	1.65		x	1.78		x	1.84		x	1.75		x	1.69		x	1.67		x
Distribution Data
Common shares and units outstanding at record date	134,867			137,944			134,203			134,806			135,830			137,723			137,944
Total common distribution paid	$	28,389		$	53,719		$	9,420		$	9,462		$	9,509		$	9,641		$	17,929
Common distribution per share and unit(7)	$	0.21		$	0.39		$	0.07		$	0.07		$	0.07		$	0.07		$	0.13
Payout ratio (FFO per share and unit basis)(1)	100.0		%	118.2		%	175.0		%	100.0		%	70.0		%	100.0		%	144.4		%

(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 $6.8 million and $13.7 million, respectively. Excluding non-cash depreciation charges related to a change in depreciable lives of $14.4 million in the nine months ended January 31, 2018, the ratio of earnings to fixed charges and of earnings to combined fixed charges and preferred distributions would have been 1.25x and 1.02x, respectively, for the nine months ended January 31, 2018.

(3) Earnings were inadequate to cover fixed charges and combined fixed charges and preferred distributions by $26.5 million and $34.7 million, respectively.  Excluding non-cash asset impairment and gain on sale charges of $54.1 million in the nine months ended January 31, 2017, the ratio of earnings to fixed charges and of earnings to combined fixed charges and preferred distributions would have been 1.77x and 1.44x, respectively, for the nine months ended January 31, 2017.

(4) Earnings were inadequate to cover combined fixed charges and preferred distributions by $1.9 million. The ratio of earnings to combined fixed charges and preferred distributions was .85x for the three months ended October 31, 2017.

(5) 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.

(6) 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.

(7) Common distribution per share and unit for the three and nine months ended January 31, 2017 includes a special distribution of $0.06.

S-10

IRET

NET OPERATING INCOME DETAIL

(in thousands)

	Three Months Ended January 31, 2018
	Reporting Segments
	Multifamily			All Other			Corporate and Other			Total
Real estate rental revenue
Same-store	$	32,093		$	1,391		$	—		$	33,484
Non-same-store	9,186			584			—			9,770
Total	41,279			1,975			—			43,254
Real estate expenses(1)
Same-store	14,457			359			1,085			15,901
Non-same-store	3,774			190			170			4,134
Total	18,231			549			1,255			20,035
Net operating income (NOI)
Same-store	17,636			1,032			(1,085		)	17,583
Non-same-store	5,412			394			(170		)	5,636
Net operating income (loss)	$	23,048		$	1,426		$	(1,255	)	$	23,219
Reconciliation of NOI to net income (loss) available to common shareholders
Depreciation/amortization	$	(17,543	)	$	(770	)	$	(77	)	$	(18,390	)
General and administrative expenses	—			—			(3,011		)	(3,011		)
Interest expense	(6,882		)	(127		)	(2,227		)	(9,236		)
Loss on debt extinguishment	(285		)	—			—			(285		)
Interest and other income	—			—			433			433
(Loss) income before gain on sale of real estate and other investments and income from discontinued operations	(1,662		)	529			(6,137		)	(7,270		)
Gain on sale of real estate and other investments	2,642			9,726			19			12,387
(Loss) income from continuing operations	980			10,255			(6,118		)	5,117
Income from discontinued operations	—			146,811			—			146,811
Net (loss) income	980			157,066			(6,118		)	151,928
Net loss attributable to noncontrolling interests – Operating Partnership	—			—			(16,236		)	(16,236		)
Net income attributable to noncontrolling interests – consolidated real estate entities	—			—			413			413
Net (loss) income attributable to controlling interests	980			157,066			(21,941		)	136,105
Dividends to preferred shareholders	—			—			(1,766		)	(1,766		)
Redemption of Preferred Shares	—			—			(8		)	(8		)
NET (LOSS) INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	980		$	157,066		$	(23,715	)	$	134,331

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

S-11

IRET

NET OPERATING INCOME DETAIL

(in thousands)

	Three Months Ended January 31, 2017
	Reporting Segments
	Multifamily			All Other			Corporate and Other			Total
Real estate rental revenue
Same-store	$	30,506		$	2,044		$	—		$	32,550
Non-same-store	5,665			2,013			—			7,678
Total	36,171			4,057			—			40,228
Real estate expenses(1)
Same-store	13,829			436			1,138			15,403
Non-same-store	2,507			564			145			3,216
Total	16,336			1,000			1,283			18,619
Net operating income (NOI)
Same-store	16,677			1,608			(1,138		)	17,147
Non-same-store	3,158			1,449			(145		)	4,462
Net operating income (loss)	$	19,835		$	3,057		$	(1,283	)	$	21,609
Reconciliation of NOI to net income (loss) available to common shareholders
Depreciation/amortization	$	(9,651	)	$	(1,067	)	$	(69	)	$	(10,787	)
General and administrative expenses	—			—			(4,172		)	(4,172		)
Interest expense	(7,707		)	(505		)	(620		)	(8,832		)
Loss on debt extinguishment	(249		)	(133		)	(76		)	(458		)
Interest and other income	—			—			427			427
(Loss) income (loss) before gain (loss) on sale of real estate and other investments and income from discontinued operations	2,228			1,352			(5,793		)	(2,213		)
Gain (loss) gain on sale of real estate and other investments	—			2,437			—			2,437
(Loss) income from continuing operations	2,228			3,789			(5,793		)	224
Income from discontinued operations	—			24,965			—			24,965
Net (loss) income	2,228			28,754			(5,793		)	25,189
Net loss attributable to noncontrolling interests – Operating Partnership	—			—			(2,525		)	(2,525		)
Net loss attributable to noncontrolling interests – consolidated real estate entities	—			—			446			446
Net (loss) income attributable to controlling interests	2,228			28,754			(7,872		)	23,110
Dividends to preferred shareholders	—			—			(2,503		)	(2,503		)
Redemption of Preferred Shares	—			—			(1,435		)	(1,435		)
NET (LOSS) INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	2,228		$	28,754		$	(11,810	)	$	19,172

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

S-12

IRET

NET OPERATING INCOME DETAIL

(in thousands)

	Nine Months Ended January 31, 2018
	Reporting Segments
	Multifamily			All Other			Corporate and Other			Total
Real estate rental revenue
Same-store	$	95,961		$	4,311		$	—		$	100,272
Non-same-store	23,483			3,625			—			27,108
Total	119,444			7,936			—			127,380
Real estate expenses(1)
Same-store	44,617			1,028			3,684			49,329
Non-same-store	9,967			1,074			520			11,561
Total	54,584			2,102			4,204			60,890
Net operating income (NOI)
Same-store	51,344			3,283			(3,684		)	50,943
Non-same-store	13,516			2,551			(520		)	15,547
Net operating income (loss)	$	64,860		$	5,834		$	(4,204	)	$	66,490
Reconciliation of NOI to net (loss) income available to common shareholders
Depreciation/amortization	$	(55,971	)	$	(4,806	)	$	(221	)	$	(60,998	)
Impairment of real estate investments	—			—			(256		)	(256		)
General and administrative expenses	—			—			(10,131		)	(10,131		)
Interest expense	(20,688		)	(512		)	(4,676		)	(25,876		)
Loss on extinguishment of debt	(677		)	(141		)	—			(818		)
Interest and other income	—			—			916			916
(Loss) income before (loss) gain on sale of real estate and income from discontinued operations	(12,476		)	375			(18,572		)	(30,673		)
Gain on sale of real estate and other investments	2,717			15,085			33			17,835
(Loss) income from continuing operations	(9,759		)	15,460			(18,539		)	(12,838		)
Income from discontinued operations	—			164,626			—			164,626
Net (loss) income	(9,759		)	180,086			(18,539		)	151,788
Net loss attributable to noncontrolling interests – Operating Partnership	—			—			(15,365		)	(15,365		)
Net income attributable to noncontrolling interests – consolidated real estate entities	—			—			1,239			1,239
Net (loss) income attributable to controlling interests	(9,759		)	180,086			(32,665		)	137,662
Dividends to preferred shareholders	—			—			(6,864		)	(6,864		)
Redemption of Preferred Shares	—			—			(3,657		)	(3,657		)
NET (LOSS) INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	(9,759	)	$	180,086		$	(43,186	)	$	127,141

(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)

	Nine Months Ended January 31, 2017
	Reporting Segments
	Multifamily			All Other			Corporate and Other			Total
Real estate rental revenue
Same-store	$	92,036		$	4,981		$	—		$	97,017
Non-same-store	15,364			6,326			—			21,690
Total	107,400			11,307			—			118,707
Real estate expenses(1)
Same-store	40,077			1,082			3,619			44,778
Non-same-store	6,704			1,705			383			8,792
Total	46,781			2,787			4,002			53,570
Net operating income (NOI)
Same-store	51,959			3,899			(3,619		)	52,239
Non-same-store	8,660			4,621			(383		)	12,898
Net operating income (loss)	$	60,619		$	8,520		$	(4,002	)	$	65,137
Reconciliation of NOI to net income (loss) available to common shareholders
Depreciation/amortization	$	(29,772	)	$	(3,211	)	$	(210	)	$	(33,193	)
Impairment of real estate investments	(51,401		)	—			(2,752		)	(54,153		)
General and administrative expenses	—			—			(11,195		)	(11,195		)
Interest expense	(23,212		)	(1,537		)	(1,284		)	(26,033		)
Loss on extinguishment of debt	(249		)	(133		)	(76		)	(458		)
Interest and other income	—			—			685			685
(Loss) income before gain on sale of real estate and other investments and income from discontinued operations	(44,015		)	3,639			(18,834		)	(59,210		)
Gain (loss) on sale of real estate and other investments	—			11,317			(25		)	11,292
(Loss) income from continuing operations	(44,015		)	14,956			(18,859		)	(47,918		)
Income from discontinued operations	—			44,803			—			44,803
Net (loss) income	(44,015		)	59,759			(18,859		)	(3,115		)
Net loss attributable to noncontrolling interests – Operating Partnership	—			—			(403		)	(403		)
Net income attributable to noncontrolling interests – consolidated real estate entities	—			—			16,585			16,585
Net (loss) income attributable to controlling interests	(44,015		)	59,759			(2,677		)	13,067
Dividends to preferred shareholders	—			—			(8,260		)	(8,260		)
Redemption of Preferred Shares	—			—			(1,435		)	(1,435		)
NET (LOSS) INCOME AVAILABLE TO COMMON SHAREHOLDERS	$	(44,015	)	$	59,759		$	(12,372	)	$	3,372

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

S-14

IRET

SAME-STORE COMPARISON

	Rentable Units	Physical Occupancy 1/31/2018		FY18Q3 Weighted Average Occupancy(1)		FY18Q3 % of Actual NOI		FY18Q3 Average Revenue Per Unit(2)		3rd Quarter Increase (Decrease) From Prior Year's 3rd Quarter
Regions										Revenues		Expenses(3)		Net Operating Income		Average Rental Revenue		Weighted Average Occupancy
Rochester, MN	1,711	95.6	%	94.0	%	20.2	%	$	1,262	5.9	%	8.2	%	4.4	%	(1.5	)%	7.4	%
Omaha, NE	1,370	96.1	%	94.9	%	11.6	%	$	931	5.2	%	10.9	%	1.1	%	4.8	%	0.4	%
St. Cloud, MN	1,187	96.4	%	94.5	%	9.6	%	$	995	13.5	%	6.0	%	21.9	%	7.9	%	5.6	%
Grand Forks, ND	1,303	94.6	%	94.3	%	9.5	%	$	912	3.6	%	11.0	%	(2.9	)%	(3.8	)%	7.5	%
Bismarck, ND	977	92.5	%	91.2	%	8.0	%	$	996	(0.3	)%	(4.4	)%	3.7	%	(5.8	)%	5.4	%
Minneapolis, MN	688	94.9	%	93.5	%	7.9	%	$	1,233	7.7	%	1.4	%	12.7	%	11.3	%	(3.6	)%
Topeka, KS	1,042	95.4	%	94.6	%	7.7	%	$	837	6.4	%	13.1	%	1.5	%	5.5	%	0.9	%
Billings, MT	770	91.3	%	90.1	%	7.3	%	$	994	4.0	%	6.5	%	2.6	%	1.3	%	2.7	%
Sioux Falls, SD	969	97.1	%	94.7	%	7.1	%	$	877	4.2	%	(0.5	)%	9.1	%	0.2	%	4.0	%
Minot, ND	640	96.4	%	96.1	%	5.3	%	$	1,006	(2.0	)%	(7.1	)%	3.7	%	(6.8	)%	4.9	%
Rapid City, SD	474	96.6	%	96.1	%	4.4	%	$	957	7.6	%	6.3	%	8.5	%	1.1	%	6.6	%
Williston, ND	189	96.8	%	95.6	%	1.4	%	$	927	1.9	%	(19.9	)%	44.8	%	(9.2	)%	11.1	%
Same-Store Total	11,320	95.2	%	94.0	%	100.0	%	$	1,006	5.2	%	4.5	%	5.8	%	0.8	%	4.4	%

	Rentable Units	Physical Occupancy 1/31/2018		FY18Q3 Weighted Average Occupancy(1)		FY18Q3 % of Actual NOI		FY18Q3 Average Revenue Per Unit(2)		3rd Quarter Increase (Decrease) From 2nd Quarter
Regions										Revenues		Expenses(3)		Net Operating Income		Average Rental Revenue		Weighted Average Occupancy
Rochester, MN	1,711	95.6	%	94.0	%	20.2	%	$	1,262	0.1	%	(5.5	)%	4.3	%	(1.8	)%	1.8	%
Omaha, NE	1,370	96.1	%	94.9	%	11.6	%	$	931	0.5	%	(11.8	)%	12.8	%	(0.3	)%	0.8	%
St. Cloud, MN	1,187	96.4	%	94.5	%	9.6	%	$	995	1.2	%	(8.2	)%	12.2	%	0.2	%	1.0	%
Grand Forks, ND	1,303	94.6	%	94.3	%	9.5	%	$	912	(2.6	)%	5.5	%	(9.6	)%	(2.1	)%	(0.5	)%
Bismarck, ND	977	92.5	%	91.2	%	8.0	%	$	996	(2.5	)%	(2.1	)%	(2.8	)%	(2.5	)%	0.1	%
Minneapolis, MN	688	94.9	%	93.5	%	7.9	%	$	1,233	2.5	%	(6.6	)%	10.1	%	1.6	%	0.9	%
Topeka, KS	1,042	95.4	%	94.6	%	7.7	%	$	837	—	%	0.3	%	(0.3	)%	—	%	—	%
Billings, MT	770	91.3	%	90.1	%	7.3	%	$	994	(2.0	)%	(21.0	)%	14.9	%	(2.5	)%	0.5	%
Sioux Falls, SD	969	97.1	%	94.7	%	7.1	%	$	877	0.6	%	(7.2	)%	9.2	%	(0.9	)%	1.5	%
Minot, ND	640	96.4	%	96.1	%	5.3	%	$	1,006	1.9	%	(9.3	)%	16.1	%	(0.9	)%	2.8	%
Rapid City, SD	474	96.6	%	96.1	%	4.4	%	$	957	1.5	%	(12.7	)%	14.2	%	(2.0	)%	3.5	%
Williston, ND	189	96.8	%	95.6	%	1.4	%	$	927	(1.9	)%	(19.4	)%	28.6	%	(0.1	)%	(1.8	)%
Same-Store Total	11,320	95.2	%	94.0	%	100.0	%	$	1,006	(0.1	)%	(6.7	)%	6.1	%	(1.1	)%	1.0	%

	Rentable Units	Physical Occupancy 1/31/2018		FY18Q3 YTD Weighted Average Occupancy(1)		FY18Q3 YTD % of Actual NOI		FY18Q3 YTD Average Revenue Per Unit(2)		3rd Quarter YTD Increase (Decrease) From Prior Year's 3rd Quarter YTD
Regions										Revenues		Expenses(3)		Net Operating Income		Average Rental Revenue		Weighted Average Occupancy
Rochester, MN	1,711	95.6	%	92.1	%	20.6	%	$	1,278	4.7	%	14.7	%	(1.4	)%	—	%	4.7	%
Omaha, NE	1,370	96.1	%	94.8	%	11.3	%	$	928	4.4	%	10.2	%	(0.1	)%	5.3	%	(0.9	)%
St. Cloud, MN	1,187	96.4	%	93.7	%	9.3	%	$	988	12.0	%	12.9	%	11.1	%	8.8	%	3.2	%
Grand Forks, ND	1,303	94.6	%	94.2	%	10.3	%	$	920	2.4	%	12.9	%	(5.7	)%	(0.8	)%	3.1	%
Bismarck, ND	977	92.5	%	91.7	%	8.6	%	$	1,014	1.5	%	12.8	%	(6.5	)%	(1.7	)%	3.2	%
Minneapolis, MN	688	94.9	%	93.9	%	7.8	%	$	1,206	8.4	%	4.1	%	11.8	%	8.8	%	(0.4	)%
Topeka, KS	1,042	95.4	%	94.8	%	8.0	%	$	832	6.2	%	11.2	%	2.4	%	5.0	%	1.1	%
Billings, MT	770	91.3	%	89.1	%	6.9	%	$	1,010	4.6	%	14.0	%	(1.6	)%	6.8	%	(2.2	)%
Sioux Falls, SD	969	97.1	%	94.1	%	6.8	%	$	878	2.3	%	8.2	%	(3.3	)%	3.5	%	(1.2	)%
Minot, ND	640	96.4	%	94.9	%	5.1	%	$	1,016	(3.6	)%	9.7	%	(15.1	)%	(5.6	)%	2.0	%
Rapid City, SD	474	96.6	%	94.3	%	4.2	%	$	965	4.3	%	8.8	%	1.0	%	5.4	%	(1.1	)%
Williston, ND	189	96.8	%	93.0	%	1.1	%	$	934	(8.2	)%	8.9	%	(25.8	)%	(20.0	)%	11.8	%
Same-Store Total	11,320	95.2	%	93.3	%	100.0	%	$	1,010	4.3	%	11.3	%	(1.2	)%	2.3	%	1.9	%

(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 $0 and decreased $53,000, respectively, for FY18 Q3 as compared to FY18 Q2, and decrease by $50,000 and increased $6,000, respectively, for FY18 Q3 as compared to FY17 Q3, and decrease by $16,000 and increase by $529,000, respectively, for FY18 Q2 YTD as compared to FY17 Q2 YTD.

S-15

IRET

PORTFOLIO SUMMARY⁽¹⁾ 

	Three Months Ended
	1/31/2018			10/31/2017			7/31/2017			4/30/2017			1/31/2017
Number of Units
Same-Store	11,320			11,384			11,384			10,512			10,513
Non-Same-Store	2,466			2,192			2,019			2,693			2,652
All Properties	13,786			13,576			13,403			13,205			13,165
Average Investment Per Unit
Same-Store	$	88,329		$	88,047		$	87,876		$	78,996		$	78,499
Non-Same-Store	202,277			185,150			166,261			164,715			165,367
All Properties	$	108,681		$	102,760		$	99,684		$	96,485		$	95,998
Average Scheduled Rent(2) per Unit
Same-Store	$	957		$	962		$	954		$	906		$	902
Non-Same-Store	1,355			1,330			1,182			1,267			1,289
All Properties	$	1,028		$	1,018		$	988		$	980		$	980
Average Revenue per Unit(3)
Same-Store	$	1,007		$	1,016		$	1,007		$	955		$	941
Non-Same-Store	1,407			1,276			1,230			1,334			1,325
All Properties	$	1,079		$	1,058		$	1,041		$	1,032		$	1,019
Occupancy
Same-Store	95.3		%	95.2		%	94.5		%	94.2		%	92.7		%
Non-Same-Store	90.1		%	92.4		%	89.3		%	88.8		%	86.9		%
All Properties	94.3		%	94.8		%	93.7		%	93.1		%	91.5		%
Operating Expenses as a % of Scheduled Rent
Same-Store	47.8		%	50.9		%	49.7		%	46.6		%	47.7		%
Non-Same-Store	39.1		%	42.6		%	40.8		%	42.1		%	39.2		%
All Properties	45.7		%	49.2		%	48.1		%	45.4		%	45.5		%
Capital Expenditures
Total Capital Expenditures(2) per Unit – Same-Store	$	240		$	396		$	240		$	281		$	295
Value-Add Expenditures per Unit(4)	$	—		$	—		$	—		$	8,213		$	10,224

(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-19. 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

SAME-STORE CAPITAL EXPENDITURES

($ in thousands, except per unit amounts)

	Three Months Ended
	1/31/2018			1/31/2017
Total Multifamily Same-Store Units	11,320			11,321
Turnover	$	996		$	1,047
Furniture & Equipment	78			96
Building – Interior	253			272
Building – Exterior	833			1,156
Landscaping & Grounds	561			461
Capital Expenditures	$	2,721		$	3,032
CapEx per Unit	$	240		$	268
Value Add	$	—		$	4,262
Unallocated Accruals(1)	$	(1,458	)	$	(630	)
Total Capital Spend	$	1,263		$	6,664
Total Capital Spend per Unit	$	112		$	589

	Nine Months Ended
	1/31/2018			1/31/2017
Total Multifamily Same-Store Units	11,320			11,321
Turnover	$	4,136		$	3,383
Furniture & Equipment	267			373
Building – Interior	833			591
Building – Exterior	2,773			3,172
Landscaping & Grounds	2,036			1,597
Capital Expenditures	$	10,045		$	9,116
CapEx per Unit	$	887		$	805
Value Add	$	368		$	14,083
Unallocated Accruals(1)	(1,691		)	323
Total Capital Spend	$	8,722		$	23,522
Total Capital Spend per Unit	$	771		$	2,078

(1) Amounts represent the change in the balance of unallocated capital accruals. During the quarter ended January 31, 2018, we fully allocated all remaining accruals to their respective capital expenditure categories and, as of January 31, 2018, no capital expenditures remained unallocated.

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IRET

FISCAL 2018 ACQUISITIONS SUMMARY

as of January 31, 2018

($ in thousands)

Property	Location	Segment	Acquisition Date	Apartment Homes	Occupancy At Acquisition		1/31/2018 Occupancy		Acquisition Cost
Oxbo(1)	St. Paul, MN	Multifamily	May 26, 2017	191	29.3	%	67.0	%	$	61,500
Park Place	Plymouth, MN	Multifamily	September 13, 2017	500	94.0	%	94.6	%	$	92,250
Dylan	Denver, CO	Multifamily	November 28, 2017	274	79.9	%	81.4	%	90,600
			Total	965					$	244,350

(1) Property includes 11,477 sq ft of retail space. Retail is 100% leased.

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Definitions

January 31, 2018

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. 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) is defined by the National Association of Real Estate Investment Trusts, Inc. (NAREIT) as net income (computed in accordance with GAAP), excluding gains (or losses) associated with the sale of previously depreciated operating properties, real estate depreciation and amortization, impairments of depreciable assets, and adjustments for unconsolidated joint ventures to reflect FFO on the same basis. We believe that FFO, which is a standard supplemental measure for equity real estate investment trusts, is helpful to investors in understanding our operating performance, primarily because its calculation excludes depreciation and amortization expense on real estate assets, thereby providing an additional perspective on our operating results. We believe that GAAP historical cost depreciation of real estate assets generally is not correlated with changes in the value of those assets, whose value does not diminish predictably over time, as historical cost depreciation implies. In addition, the exclusion in NAREIT’s definition of FFO of impairment write-downs and gains and losses from the sale of previously depreciated operating real estate assets helps to identify the operating results of the long-term assets that form the base of our investments, and assists management and investors in comparing those operating results between periods.

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 a non-U.S. GAAP measure which we define as total real estate revenues less property operating expenses and real estate tax expense.  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 U.S. 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 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 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.

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Same-store properties are properties owned or in service for the entirety of the periods being compared (except for properties classified as held for sale), and which, in the case of development properties, have achieved a stabilized level of occupancy, which is generally 90%.

U.S. GAAP is defined as accounting principles generally accepted in the United States of America.

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