EX-99.1 2 iret6302019exhibit991.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1

q22019a03.jpg



Earnings Release
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IRET Reports Strong Second Quarter 2019 Financial Results and Raises 2019 Guidance
MINOT, ND, August 7, 2019 – IRET (NYSE: IRET) announced today its second quarter 2019 financial and operating results. Net Income (Loss), Funds from Operations (“FFO” and Core FFO per share for the three and six months ended June 30, 2019, are detailed below.
 
 
Three Months Ended June 30,
 
Six Months Ended June 30,
Per Share
 
2019
 
2018
 
2019
 
2018
Net Income (Loss)
 
$
0.11

 
$
(1.83
)
 
$
(0.43
)
 
$
(1.42
)
FFO
 
$
1.45

 
$
0.87

 
$
2.22

 
$
1.55

Core FFO
 
$
1.00

 
$
0.91

 
$
1.77

 
$
1.62

 
 
Year-Over-Year
Comparison
 
Sequential
Comparison
 
YTD Comparison
Same-Store Results
 
2Q19 vs. 2Q18
 
2Q19 vs. 1Q19
 
CY19 vs. CY18
Revenues
 
3.1
%
 
1.0
 %
 
3.6
%
Expenses
 
3.8
%
 
(4.7
)%
 
3.7
%
NOI
 
2.6
%
 
5.7
 %
 
3.6
%
 
 
Three months ended
Same-Store Results
 
June 30, 2019
 
March 31, 2019
 
June 30, 2018
Weighted Average Occupancy
 
94.3
%
 
95.6
%
 
94.2
%
Second Quarter 2019 Highlights
•
We reported Net Income of $0.11 per share for the second quarter of 2019, compared to Net Loss of $(1.83) per share for the same quarter in 2018;
•
Core FFO grew by 9.9%, increasing to $1.00 per share for the second quarter of 2019, compared to $0.91 per share for the same quarter in 2018;
•
Same-store revenue increased year-over-year by 3.1% driven by 3.0% growth in rental revenue, while same-store operating expenses grew 3.8% year-over-year, primarily due to $324,000 of favorable insurance settlements in 2018. The combination of 3.1% revenue growth and expense control initiatives that reduced same-store controllable expenses by 2.1% over the same period in 2018, led to same-store NOI growth of 2.6%, our seventh consecutive quarter of year-over-year NOI growth;
•
We revised our full-year guidance to:
◦
decrease the midpoint of full-year Net Loss per share guidance from $(1.66) to $(1.22);
◦
increase the midpoint of full-year same-store revenue from 3.25% to 3.50% by increasing the lower end of the range from 2.50% to 3.00% (as the overall range changed from 2.50%-4.00% to 3.00%-4.00%);
◦
reaffirm the midpoint of full-year same-store expense guidance of 3.25%, but narrowing the range from 2.50%-4.00% to 2.75%-3.75%;
◦
increase the midpoint of full-year same-store NOI guidance from 3.25% to 3.50% by narrowing the range from 2.00%-4.50% to 3.00%-4.00%; and
◦
raise the midpoint of full-year Core FFO per share guidance by $0.05 to $3.67 per share by increasing the lower end of the range from $3.52 to $3.62 (as the overall range changed from $3.52-$3.72 to $3.62-$3.72);
•
We successfully prevailed in a multi-year litigation claim relating to a construction defect claim, for which we recorded a gain on litigation settlement of $6.3 million; and
•
We repurchased approximately 116,000 common shares for an aggregate total cost of $6.9 million, representing an average price of $59.12 per common share, and approximately 133,000 operating units for an aggregate total cost of $8.0 million, representing an average price of $60.01 per Unit.
“Our Core FFO growth per share of 9.9% and same-store revenue growth of 3.1% are built on strong performance across our markets and operational enhancements that continue to create value," said Mark O. Decker, Jr., IRET's President and CEO.

 
1
 


Acquisitions and Dispositions
During the second quarter, we sold a multi-tenant property that currently houses our Minot corporate office for $6.5 million and purchased an office building in Minot for $2.1 million, which will become our new Minot corporate office.  We also sold one parcel of unimproved land for $725,000.
Balance Sheet
At the end of the second quarter, we had $89.5 million of total liquidity on our balance sheet, including $72.1 million available under our corporate revolver.
2019 Financial Overview
We are raising our earnings guidance for calendar year 2019 based on actual results through June 30, 2019 and expected results through the remainder of the calendar year as specified below.
 
2019 Revised
 
2019 Guidance
 
Range
 
Current Midpoint
 
Prior Midpoint
 
Change
Net income (loss) per share
$(1.27) to $(1.17)
 
$(1.22)
 
$(1.66)
 
$0.44
Core FFO per share
$3.62 to $3.72
 
$3.67
 
$3.62
 
$0.05
 
 
 
 
 
 
 
 
Same-Store Growth
 
 
 
 
 
 
 
Revenue
3.00% to 4.00%
 
3.50%
 
3.25%
 
0.25%
Expenses
2.75% to 3.75%
 
3.25%
 
3.25%
 
—
NOI
3.00% to 4.00%
 
3.50%
 
3.25%
 
0.25%
Recent Developments
Subsequent to quarter-end, we sold a 21-unit multifamily community in Billings, Montana for approximately $1.7 million and a vacant parcel of land in Weston, Wisconsin for approximately $600,000.
Between July 1, 2019 and July 31, 2019, we repurchased approximately 39,000 common shares at an average price of $59.57 per share, including commissions. Between January 1, 2019 and July 31, 2019, we have repurchased approximately 329,000 shares at an average price of $54.69, including commissions, and approximately 135,000 operating units at an average price of $60.00. Since authorization of the share repurchase program in December 2016, we have repurchased approximately 627,000 common shares at an average price of $55.20. As of July 31, 2019, the remaining authorization under our share repurchase program is approximately $15.4 million. In all, we have reduced our share count by 5.2%.
On August 6, 2019, we closed a $59.9 million mortgage loan. This mortgage loan is secured by four multifamily communities and is priced at a fixed rate of 3.88% for the full twelve-year term of the loan. Proceeds from this loan will be used to pay down balances under our line of credit.
Upcoming Events
On October 1, 2019, we will be holding a 2019 shareholder event at the Minot Country Club (Elevation restaurant) in Minot, North Dakota. This gathering will include food, a presentation from management, and an opportunity for shareholders to ask questions of management.  Further details on this event will be provided to all shareholders of record and will be posted on the Company’s website at www.iretapartments.com when it becomes available.
Quarterly Distributions
Effective June 5, 2019, IRET’s Board of Trustees declared a regular quarterly distribution of $0.70 per share/unit payable on July 1, 2019, to common shareholders and unitholders of record on June 17, 2019. IRET has paid cash dividends to common shareholders and unitholders every quarter since its initial dividend payment in 1971.
Effective June 5, 2019, IRET's Board of Trustees also declared a distribution of $0.4140625 per share on the 6.625% Series C Cumulative Redeemable Preferred Shares (NYSE: IRET PRC) payable on July 1, 2019, to holders of record on June 17, 2019. 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
Thursday, August 8, 2019, at 10:00 AM ET
 
Replay available until August 22, 2019
USA Toll Free Number
1-877-509-9785
 
USA Toll Free Number
1-877-344-7529
International Toll Free Number
1-412-902-4132
 
International Toll Free Number
1-412-317-0088
Canada Toll Free Number
1-855-669-9657
 
Canada Toll Free Number
1-855-669-9658
 
 
 
Conference Number
10133436
Supplemental Information
Supplemental Operating and Financial Data for the quarter ended June 30, 2019 included herein (“Supplemental Information”), is available in the Investors section on IRET’s website at www.iretapartments.com or by calling Investor Relations at 701-837-7104.  FFO, Core FFO, NOI, and Adjusted EBITDA are non-GAAP financial measures. These measures and other capitalized terms, as used in this earnings release, are defined and reconciled in the Supplemental Information that accompanies this earnings release.
About IRET
IRET is a real estate company focused on the ownership, management, acquisition, redevelopment, and development of apartment communities.  As of June 30, 2019, we owned interests in 88 apartment communities consisting of 13,975 apartment homes.  IRET's common shares and Series C preferred shares are publicly traded on the New York Stock Exchange (NYSE symbols: "IRET" and "IRET PRC," respectively).
Forward-Looking Statements
Certain statements in this press release and the accompanying Supplemental Operating and Financial Data are based on our current expectations and assumptions, and are “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance, or achievements to be materially different from the results of operations, financial conditions, or plans expressed or implied by the forward-looking statements. Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be achieved. Such risks, uncertainties, and other factors that might cause such differences include, but are not limited to those risks and uncertainties detailed from time to time in our filings with the Securities and Exchange Commission, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” contained in our Transition Report on Form 10-KT for the transition period ended December 31, 2018, in our subsequent quarterly reports on Form 10-Q, and in other public reports. We assume no obligation to update or supplement forward-looking statements that become untrue due to subsequent events.

 
3
 


Supplemental Financial and Operating Data
Table of Contents
June 30, 2019



Common Share Data (NYSE: IRET)
 
 
2nd Quarter
 
1st Quarter
 
4th Quarter
 
3rd Quarter
 
2nd Quarter
 
 
Calendar Year 2019
 
Calendar Year 2019
 
Calendar Year 2018
 
Calendar Year 2018
 
Calendar Year 2018
High closing price
 
$
61.28

 
$
61.50

 
$
59.10

 
$
59.80

 
$
59.40

Low closing price
 
$
57.19

 
$
49.92

 
$
47.00

 
$
53.30

 
$
51.30

Average closing price
 
$
59.54

 
$
58.11

 
$
53.40

 
$
54.99

 
$
54.50

Closing price at end of quarter
 
$
58.67

 
$
59.91

 
$
49.07

 
$
59.80

 
$
55.30

Common share distributions – annualized
 
$
2.80

 
$
2.80

 
$
2.80

 
$
2.80

 
$
2.80

Closing dividend yield – annualized
 
4.8
%
 
4.7
%
 
5.7
%
 
4.7
%
 
5.1
%
Closing common shares outstanding (thousands)
 
11,656

 
11,768

 
11,942

 
11,961

 
11,939

Closing limited partnership units outstanding (thousands)
 
1,224

 
1,365

 
1,368

 
1,379

 
1,401

Closing market value of outstanding common shares, plus imputed closing market value of outstanding limited partnership units (thousands)
 
$
755,670

 
$
786,798

 
$
653,122

 
$
797,732

 
$
737,702



 
S-1
 



IRET
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands)
 
 
Three Months Ended
 
 
Six Months Ended
 
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
 
 
6/30/2019
 
6/30/2018
REVENUE
 
$
46,934

 
$
45,608

 
$
45,730

 
$
45,406

 
$
46,197

 
 
$
92,542

 
$
89,232

EXPENSES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property operating expenses, excluding real estate taxes
 
13,942

 
14,804

 
13,292

 
14,438

 
13,934

 
 
28,746

 
28,180

Real estate taxes
 
5,574

 
5,232

 
5,098

 
5,049

 
5,003

 
 
10,806

 
10,024

Property management expense
 
1,445

 
1,554

 
1,447

 
1,269

 
1,444

 
 
2,999

 
2,821

Casualty loss
 
92

 
641

 
540

 
225

 
—

 
 
733

 
50

Depreciation/amortization
 
18,437

 
18,111

 
18,812

 
19,164

 
19,132

 
 
36,548

 
39,648

Impairment of real estate investments
 
—

 
—

 
1,221

 
—

 
17,809

 
 
—

 
17,809

General and administrative expenses
 
3,549

 
3,806

 
3,769

 
3,147

 
4,348

 
 
7,355

 
7,967

TOTAL EXPENSES
 
$
43,039

 
$
44,148

 
$
44,179

 
$
43,292

 
$
61,670

 
 
$
87,187

 
$
106,499

Operating income (loss)
 
3,895

 
1,460

 
1,551

 
2,114

 
(15,473
)
 
 
5,355

 
(17,267
)
Interest expense
 
(7,590
)
 
(7,896
)
 
(7,682
)
 
(8,193
)
 
(8,562
)
 
 
(15,486
)
 
(16,858
)
Loss on extinguishment of debt
 
(407
)
 
(2
)
 
(5
)
 
(540
)
 
(12
)
 
 
(409
)
 
(133
)
Interest and other income
 
468

 
424

 
483

 
395

 
460

 
 
892

 
1,149

Income (loss) before gain (loss) on sale of real estate and other investments, gain (loss) on litigation settlement, and income (loss) from discontinued operations
 
(3,634
)
 
(6,014
)
 
(5,653
)
 
(6,224
)
 
(23,587
)
 
 
(9,648
)
 
(33,109
)
Gain (loss) on sale of real estate and other investments
 
615

 
54

 
612

 
9,095

 
—

 
 
669

 
2,304

Gain (loss) on litigation settlement
 
6,286

 
—

 
—

 
—

 
—

 
 
6,286

 
—

Income (loss) from continuing operations
 
3,267

 
(5,960
)
 
(5,041
)
 
2,871

 
(23,587
)
 
 
(2,693
)
 
(30,805
)
Income (loss) from discontinued operations
 
—

 
—

 
—

 
570

 
238

 
 
—

 
14,120

Net income (loss)
 
$
3,267

 
$
(5,960
)
 
$
(5,041
)
 
$
3,441

 
$
(23,349
)
 
 
$
(2,693
)
 
$
(16,685
)
Dividends to preferred unitholders
 
(160
)
 
(57
)
 
—

 
—

 
—

 
 
(217
)
 
—

Net (income) loss attributable to noncontrolling interest – Operating Partnership
 
(148
)
 
743

 
665

 
(112
)
 
2,580

 
 
595

 
2,000

Net (income) loss attributable to noncontrolling interests – consolidated real estate entities
 
154

 
576

 
270

 
(676
)
 
595

 
 
730

 
1,115

Net income (loss) attributable to controlling interests
 
3,113

 
(4,698
)
 
(4,106
)
 
2,653

 
(20,174
)
 
 
(1,585
)
 
(13,570
)
Dividends to preferred shareholders
 
(1,706
)
 
(1,705
)
 
(1,705
)
 
(1,705
)
 
(1,706
)
 
 
(3,411
)
 
(3,411
)
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS
 
$
1,407

 
$
(6,403
)
 
$
(5,811
)
 
$
948

 
$
(21,880
)
 
 
$
(4,996
)
 
$
(16,981
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per Share Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) per common share from continuing operations – basic & diluted
 
$
0.11

 
$
(0.54
)
 
$
(0.49
)
 
$
0.04

 
$
(1.85
)
 
 
$
(0.43
)
 
$
(2.48
)
Earnings (loss) per common share from discontinued operations – basic & diluted
 
—

 
—

 
—

 
0.04

 
0.02

 
 
—

 
1.06

Net earnings (loss) per common share – basic & diluted
 
$
0.11

 
$
(0.54
)
 
$
(0.49
)
 
$
0.08

 
$
(1.83
)
 
 
$
(0.43
)
 
$
(1.42
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property operating expenses, excluding real estate taxes
 
29.7
%
 
32.5
 %
 
29.1
 %
 
31.8
%
 
30.2
 %
 
 
31.1
 %
 
31.6
 %
General and administrative expenses
 
7.6
%
 
8.3
 %
 
8.2
 %
 
6.9
%
 
9.4
 %
 
 
7.9
 %
 
8.9
 %
Interest
 
16.2
%
 
17.3
 %
 
16.8
 %
 
18.0
%
 
18.5
 %
 
 
16.7
 %
 
18.9
 %
Income (loss) from discontinued operations
 
—

 
—

 
—

 
1.3
%
 
0.5
 %
 
 
—

 
15.8
 %
Net income (loss)
 
7.0
%
 
(13.1
)%
 
(11.0
)%
 
7.6
%
 
(50.5
)%
 
 
(2.9
)%
 
(18.7
)%

 
S-2
 


IRET
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
 
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
ASSETS
 
 
 
 
 
 
 
 
 
 
Real estate investments
 
 
 
 
 
 
 
 
 
 
Property owned
 
$
1,663,539

 
$
1,673,158

 
$
1,627,636

 
$
1,638,909

 
$
1,637,991

Less accumulated depreciation
 
(380,321
)
 
(371,672
)
 
(353,871
)
 
(339,515
)
 
(321,468
)
 
 
1,283,218

 
1,301,486

 
1,273,765

 
1,299,394

 
1,316,523

Unimproved land
 
1,746

 
2,252

 
5,301

 
6,522

 
10,726

Mortgage loans receivable
 
10,140

 
10,260

 
10,410

 
10,530

 
10,955

Total real estate investments
 
1,295,104

 
1,313,998

 
1,289,476

 
1,316,446

 
1,338,204

Assets held for sale and assets of discontinued operations
 
—

 
—

 
—

 
—

 
33,840

Cash and cash equivalents
 
17,406

 
23,329

 
13,792

 
36,910

 
20,451

Restricted cash
 
4,672

 
4,819

 
5,464

 
4,669

 
4,454

Other assets
 
30,626

 
29,166

 
27,265

 
28,472

 
27,882

TOTAL ASSETS
 
$
1,347,808

 
$
1,371,312

 
$
1,335,997

 
$
1,386,497

 
$
1,424,831

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

 
—

 
—

 
—

 
$
29,624

Accounts payable and accrued expenses
 
$
44,766

 
$
40,697

 
$
40,892

 
$
38,203

 
36,288

Revolving line of credit
 
177,939

 
118,677

 
57,500

 
71,000

 
145,500

Term loans payable, net of loan costs
 
144,082

 
144,036

 
143,991

 
143,937

 
69,531

Mortgages payable, net of loan costs
 
370,461

 
430,950

 
444,197

 
463,052

 
465,244

TOTAL LIABILITIES
 
$
737,248

 
$
734,360

 
$
686,580

 
$
716,192

 
$
746,187

 
 
 
 
 
 
 
 
 
 
 
REDEEMABLE NONCONTROLLING INTERESTS – CONSOLIDATED REAL ESTATE ENTITIES
 
—

 
—

 
5,968

 
6,130

 
6,261

SERIES D PREFERRED UNITS
 
16,560

 
16,560

 
—

 
—

 
—

EQUITY
 
 
 
 
 
 
 
 
 
 
Series C Preferred Shares of Beneficial Interest
 
99,456

 
99,456

 
99,456

 
99,456

 
99,456

Common Shares of Beneficial Interest
 
888,541

 
895,381

 
899,234

 
900,368

 
899,480

Accumulated distributions in excess of net income
 
(450,433
)
 
(443,661
)
 
(429,048
)
 
(414,900
)
 
(407,482
)
Accumulated other comprehensive income
 
(7,598
)
 
(3,139
)
 
(856
)
 
2,760

 
1,748

Total shareholders’ equity
 
$
529,966

 
$
548,037

 
$
568,786

 
$
587,684

 
$
593,202

Noncontrolling interests – Operating Partnership
 
57,902

 
66,060

 
67,916

 
69,578

 
71,066

Noncontrolling interests – consolidated real estate entities
 
6,132

 
6,295

 
6,747

 
6,913

 
8,115

Total equity
 
$
594,000

 
$
620,392

 
$
643,449

 
$
664,175

 
$
672,383

TOTAL LIABILITIES, MEZZANINE EQUITY, AND EQUITY
 
$
1,347,808

 
$
1,371,312

 
$
1,335,997

 
$
1,386,497

 
$
1,424,831


 
S-3
 


IRET
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (unaudited)

This release contains certain non-GAAP financial measures. The non-GAAP measures should not be considered a substitute for operating results determined in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The definitions and calculations of these non-GAAP measures, as calculated by us, may not be comparable to non-GAAP measures reported by other REITs that do not define each of the non-GAAP measures exactly as we do.
We provide certain information on a same-store and non-same-store basis. Same-store apartment communities are owned or in service for the entirety of the periods being compared, and, in the case of development properties, have achieved a target level of physical occupancy of 90%. On the first day of each calendar year, we determine the composition of our same-store pool for that year as well as adjust the previous year, which allows us to evaluate full period-over-period operating comparisons for existing apartment communities and their contribution to net income. We believe that measuring performance on a same-store basis is useful to investors because it enables evaluation of how a fixed pool of our communities are performing year-over-year. We use this measure to assess whether or not we have been successful in increasing NOI, renewing the leases on existing residents, controlling operating costs, and making prudent capital improvements.
Reconciliation of Operating Income (Loss) to Net Operating Income
Net operating income, or NOI, is a non-GAAP measure which we define as total real estate revenues less property operating expenses, including real estate taxes. We believe that NOI is an important supplemental measure of operating performance for real estate because it provides a measure of operations that is unaffected by depreciation, amortization, financing, property management overhead, casualty losses, and general and administrative expenses. 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.
 
(in thousands, except percentages)
 
Three Months Ended June 30,
 
 
Six Months Ended June 30,
 
2019
 
2018
 
$ Change
 
% Change
 
 
2019
 
2018
 
$ Change
 
% Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
$
3,895

 
$
(15,473
)
 
$
19,368

 
(125.2
)%
 
 
$
5,355

 
$
(17,267
)
 
$
22,622

 
(131.0
)%
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property management expenses
1,445

 
1,444

 
1

 
0.1
 %
 
 
2,999

 
2,821

 
178

 
6.3
 %
Casualty loss
92

 
—

 
92

 
100.0
 %
 
 
733

 
50

 
683

 
1,366.0
 %
Depreciation and amortization
18,437

 
19,132

 
(695
)
 
(3.6
)%
 
 
36,548

 
39,648

 
(3,100
)
 
(7.8
)%
Impairment
—

 
17,809

 
(17,809
)
 
(100.0
)%
 
 
—

 
17,809

 
(17,809
)
 
(100.0
)%
General and administrative expenses
3,549

 
4,348

 
(799
)
 
(18.4
)%
 
 
7,355

 
7,967

 
(612
)
 
(7.7
)%
Net operating income
$
27,418

 
$
27,260

 
$
158

 
0.6
 %
 
 
$
52,990

 
$
51,028

 
$
1,962

 
3.8
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same-store
$
40,024

 
$
38,804

 
$
1,220

 
3.1
 %
 
 
$
79,637

 
$
76,852

 
$
2,785

 
3.6
 %
Non-same-store
5,921

 
4,345

 
1,576

 
36.3
 %
 
 
11,122

 
6,351

 
4,771

 
75.1
 %
Other properties and dispositions
989

 
3,048

 
(2,059
)
 
(67.6
)%
 
 
1,783

 
6,029

 
(4,246
)
 
(70.4
)%
Total
46,934

 
46,197

 
737

 
1.6
 %
 
 
92,542

 
89,232

 
3,310

 
3.7
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property operating expenses, including real estate taxes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same-store
16,974

 
16,345

 
629

 
3.8
 %
 
 
34,781

 
33,536

 
1,245

 
3.7
 %
Non-same-store
2,137

 
1,481

 
656

 
44.3
 %
 
 
4,018

 
2,418

 
1,600

 
66.2
 %
Other properties and dispositions
405

 
1,111

 
(706
)
 
(63.5
)%
 
 
753

 
2,250

 
(1,497
)
 
(66.5
)%
Total
19,516

 
18,937

 
579

 
3.1
 %
 
 
39,552

 
38,204

 
1,348

 
3.5
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net operating income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same-store
23,050

 
22,459

 
591

 
2.6
 %
 
 
44,856

 
43,316

 
1,540

 
3.6
 %
Non-same-store
3,784

 
2,864

 
920

 
32.1
 %
 
 
7,104

 
3,933

 
3,171

 
80.6
 %
Other properties and dispositions
584

 
1,937

 
(1,353
)
 
(69.9
)%
 
 
1,030

 
3,779

 
(2,749
)
 
(72.7
)%
Total
$
27,418

 
$
27,260

 
$
158

 
0.6
 %
 
 
$
52,990

 
$
51,028

 
$
1,962

 
3.8
 %



 
S-4
 


Same-Store Expense Comparison
 
(in thousands, except percentages)
 
Three Months Ended June 30,
 
 
Six Months Ended June 30,
 
2019
 
2018
 
$ Change
 
% Change
 
 
2019
 
2018
 
$ Change
 
% Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Controllable expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation
$
4,712

 
$
4,949

 
$
(237
)
 
(4.8
)%
 
 
$
9,236

 
$
9,803

 
$
(567
)
 
(5.8
)%
Repairs and maintenance
3,176

 
3,196

 
(20
)
 
(0.6
)%
 
 
6,596

 
6,033

 
563

 
9.3
 %
Utilities
2,520

 
2,532

 
(12
)
 
(0.5
)%
 
 
5,952

 
5,854

 
98

 
1.7
 %
Administrative and marketing
937

 
910

 
27

 
3.0
 %
 
 
1,901

 
1,712

 
189

 
11.0
 %
Total
$
11,345

 
$
11,587

 
$
(242
)
 
(2.1
)%
 
 
$
23,685

 
$
23,402

 
$
283

 
1.2
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-controllable expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate taxes
$
4,611

 
$
4,400

 
$
211

 
4.8
 %
 
 
$
9,103

 
$
8,805

 
$
298

 
3.4
 %
Insurance
1,018

 
358

 
660

 
184.4
 %
 
 
1,993

 
1,329

 
664

 
50.0
 %
Total
5,629

 
4,758

 
871

 
18.3
 %
 
 
11,096

 
10,134

 
962

 
9.5
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
$
16,974

 
$
16,345

 
$
629

 
3.8
 %
 
 
$
34,781

 
$
33,536

 
$
1,245

 
3.7
 %
Reconciliation of Net Income (Loss) Available to Common Shareholders to Funds From Operations and Core Funds From Operations
We use the definition of FFO adopted by the National Association of Real Estate Investment Trusts, Inc. (“Nareit”). Nareit defines FFO as net income or loss calculated in accordance with GAAP, excluding:
•
depreciation and amortization related to real estate;
•
gains and losses from the sale of certain real estate assets; and
•
impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity.
Due to the limitations of the FFO definition adopted by Nareit, we have made certain interpretations in applying the definition. We believe that all such interpretations not specifically provided for in the Nareit definition are consistent with the definition. Nareit's FFO White Paper 2018 Restatement clarified that impairment write-downs of land related to a REIT's main business are excluded from FFO and a REIT has the option to exclude impairment write-downs of assets that are incidental to the main business.
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 is not correlated with changes in the value of those assets, whose value does not diminish predictably over time, as historical cost depreciation implies. The exclusion in Nareit’s definition of FFO of impairment write-downs and gains and losses from the sale of 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.
While FFO is widely used by us as a primary performance metric, not all real estate companies use the same definition of FFO or calculate FFO in the same way. Accordingly, FFO presented here is not necessarily comparable to FFO presented by other real estate companies. FFO should not be considered as an alternative to net income or any other GAAP measurement of performance, but rather should be considered as an additional, supplemental measure. FFO also does not represent cash generated from operating activities in accordance with GAAP, and is not necessarily indicative of sufficient cash flow to fund all of our needs or our ability to service indebtedness or make distributions.
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 that 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 that may
be calculated differently by other REITs and that should not be considered a substitute for operating results determined in accordance with GAAP.
 
 
(in thousands, except per share amounts)
 
 
Three Months Ended
 
 
Six Months Ended
 
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
 
 
6/30/2019
 
6/30/2018
Funds From Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) available to common shareholders
 
$
1,407

 
$
(6,403
)
 
$
(5,811
)
 
$
948

 
$
(21,880
)
 
 
$
(4,996
)
 
$
(16,981
)
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling interests – Operating Partnership
 
148

 
(743
)
 
(665
)
 
112

 
(2,580
)
 
 
(595
)
 
(2,000
)
Depreciation and amortization
 
18,437

 
18,111

 
18,812

 
19,164

 
19,132

 
 
36,548

 
39,650

Less depreciation – non real estate
 
(79
)
 
(85
)
 
(76
)
 
(76
)
 
(76
)
 
 
(164
)
 
(155
)
Less depreciation – partially owned entities
 
(474
)
 
(678
)
 
(680
)
 
(673
)
 
(719
)
 
 
(1,152
)
 
(1,442
)
Impairment of real estate
 
—

 
—

 
1,221

 
—

 
17,809

 
 
—

 
17,809

Gain on sale of real estate
 
(615
)
 
(54
)
 
(612
)
 
(8,499
)
 
(98
)
 
 
(669
)
 
(16,134
)
FFO applicable to common shares and Units
 
$
18,824

 
$
10,148

 
$
12,189

 
$
10,976

 
$
11,588

 
 
$
28,972

 
$
20,747

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FFO per share and unit – basic and diluted
 
$
1.45

 
$
0.77

 
$
0.92

 
$
0.82

 
$
0.87

 
 
$
2.22

 
$
1.55

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments to Core FFO:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Casualty loss write off
 
—

 
—

 
43

 
—

 
—

 
 
—

 
—

Loss on extinguishment of debt
 
407

 
2

 
5

 
540

 
12

 
 
409

 
133

Gain on litigation settlement
 
(6,286
)
 
—

 
—

 
—

 
—

 
 
(6,286
)
 
—

Severance and transition costs
 
—

 
—

 
—

 
—

 
586

 
 
—

 
811

Core FFO applicable to common shares and Units
 
$
12,945

 
$
10,150

 
$
12,237

 
$
11,516

 
$
12,186

 
 
$
23,095

 
$
21,691

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core FFO per share and unit – basic and diluted
 
$
1.00

 
$
0.77

 
$
0.92

 
$
0.86

 
$
0.91

 
 
$
1.77

 
$
1.62

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares and units
 
12,955

 
13,130

 
13,317

 
13,318

 
13,335

 
 
13,052

 
13,366


 
S-5
 


Reconciliation of Net Income (Loss) Available to Common Shareholders to Adjusted EBITDA
Adjusted EBITDA is 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 and should not be considered a substitute for operating results determined in accordance with GAAP. Adjusted EBITDA as calculated by us may not be comparable to Adjusted EBITDA reported by other REITs that do not define Adjusted EBITDA exactly as we do.
 
 
(in thousands)
 
 
Three Months Ended
 
 
Six Months Ended
 
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
 
 
6/30/2019
 
6/30/2018
Adjusted EBITDA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) available to common shareholders
 
$
3,113

 
$
(4,698
)
 
$
(4,106
)
 
$
2,653

 
$
(20,174
)
 
 
$
(1,585
)
 
$
(13,570
)
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends to preferred unitholders
 
160

 
57

 
—

 
—

 
—

 
 
217

 
—

Noncontrolling interests – Operating Partnership
 
148

 
(743
)
 
(665
)
 
112

 
(2,580
)
 
 
(595
)
 
(2,000
)
Income (loss) before noncontrolling interests – Operating Partnership
 
$
3,421

 
$
(5,384
)
 
$
(4,771
)
 
$
2,765

 
$
(22,754
)
 
 
$
(1,963
)
 
$
(15,570
)
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
 
7,343

 
7,558

 
7,336

 
7,828

 
8,148

 
 
14,901

 
16,029

Loss on extinguishment of debt
 
407

 
2

 
4

 
541

 
11

 
 
409

 
132

Depreciation/amortization related to real estate investments
 
17,963

 
17,433

 
18,133

 
18,491

 
18,413

 
 
35,396

 
38,208

Impairment of real estate investments
 
—

 
—

 
1,221

 
—

 
17,809

 
 
—

 
17,809

Interest income
 
(402
)
 
(407
)
 
(465
)
 
(366
)
 
(429
)
 
 
(809
)
 
(1,102
)
Gain (loss) on sale of real estate and other investments
 
(615
)
 
(54
)
 
(611
)
 
(8,499
)
 
(98
)
 
 
(669
)
 
(16,134
)
Gain on litigation settlement
 
(6,286
)
 
—

 
—

 
—

 
—

 
 
(6,286
)
 
—

Adjusted EBITDA
 
$
21,831

 
$
19,148

 
$
20,847

 
$
20,760

 
$
21,100

 
 
$
40,979

 
$
39,372

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ratios
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA/Interest expense
 
2.88
 x
 
2.43
 x
 
2.71
 x
 
2.53
 x
 
2.46
 x
 
 
2.65
 x
 
2.34
 x
Adjusted EBITDA/Interest expense plus preferred distributions
 
2.31
 x
 
1.98
 x
 
2.22
 x
 
2.10
 x
 
2.05
 x
 
 
2.14
 x
 
1.94
 x

 
S-6
 



IRET
DEBT ANALYSIS
(in thousands)
Debt Maturity Schedule
Annual Expirations
 
 
Future Maturities of Debt
 
 
Secured Fixed
Debt
 
Unsecured Fixed
Debt(1)
 
Secured Variable Debt(2)
 
Unsecured Variable Debt
 
Total
Debt
 
% of
Total Debt
 
Weighted
Average Interest Rate(3)
2019 (remainder)
 
$
6,926

 
$
—

 
$
—

 
$
—

 
$
6,926

 
1.0
%
 
5.59
%
2020
 
35,122

 
—

 
—

 
4,589

 
39,711

 
5.7
%
 
5.26
%
2021
 
95,394

 
—

 
—

 
—

 
95,394

 
13.7
%
 
5.17
%
2022
 
38,343

 
50,000

 
15,000

 
108,350

 
211,693

 
30.5
%
 
3.91
%
2023
 
48,808

 
—

 
—

 
—

 
48,808

 
7.0
%
 
4.02
%
Thereafter
 
147,358

 
145,000

 
—

 
—

 
292,358

 
42.1
%
 
3.90
%
Total debt
 
$
371,951

 
$
195,000

 
$
15,000

 
$
112,939

 
$
694,890

 
100.0
%
 
4.18
%
 
(1)
Term loans have variable interest rates that are fixed with interest rate swaps and $50.0 million of our variable interest, primary line of credit is fixed with an interest rate swap.
(2)
Our primary revolving line of credit consists primarily of unsecured borrowings. A portion of the line was secured in connection with our acquisition of SouthFork Townhomes, under an agreement which allowed us to offer the seller tax protection upon purchase.
(3)
Weighted average interest rate of debt that matures during the year, including the effect of interest rate swaps on the term loans and line of credit.

 
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
Debt Balances Outstanding(1)
 
 
 
 
 
 
 
 
 
 
Secured fixed rate
 
$
371,951

 
$
432,588

 
$
445,974

 
$
464,964

 
$
473,546

Secured variable rate mortgage
 
—

 
—

 
—

 
—

 
22,620

Unsecured fixed rate line of credit(2)
 
50,000

 
—

 
—

 
—

 
—

Secured line of credit(3)
 
15,000

 
15,000

 
—

 
—

 
—

Unsecured variable rate line of credit
 
112,939

 
103,677

 
57,500

 
71,000

 
145,500

Unsecured term loans
 
145,000

 
145,000

 
145,000

 
145,000

 
70,000

Debt total
 
$
694,890

 
$
696,265

 
$
648,474

 
$
680,964

 
$
711,666

 
 
 
 
 
 
 
 
 
 
 
Mortgage Debt Weighted Average Interest Rate
 
4.37
%
 
4.54
%
 
4.58
%
 
4.65
%
 
4.67
%
Primary Line of Credit Rate - Fixed (rate with swap)
 
3.42
%
 
—

 
—

 
—

 
—

Primary Line of Credit Rate - Variable
 
3.99
%
 
3.89
%
 
3.72
%
 
3.67
%
 
3.76
%
Operating Line of Credit Rate
 
4.39
%
 
4.40
%
 
—

 
—

 
—

Term Loan Rate (rate with swap)
 
4.14
%
 
3.99
%
 
4.01
%
 
3.97
%
 
4.11
%
 
(1)
Includes mortgages on properties held for sale.
(2)
A portion of our primary line of credit is fixed through an interest rate swap.
(3)
Our revolving line of credit consists primarily of unsecured borrowings. A portion of the line was secured in connection with our acquisition of SouthFork Townhomes, under an agreement which allowed us to offer the seller tax protection upon purchase.


 
S-7
 


IRET 
CAPITAL ANALYSIS 
(in thousands, except per share and unit amounts)
 
 
Three Months Ended
 
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
Equity Capitalization
 
 
 
 
 
 
 
 
 
 
Common shares outstanding
 
11,656

 
11,768

 
11,942

 
11,961

 
11,939

Operating partnership units outstanding
 
1,224

 
1,365

 
1,368

 
1,379

 
1,401

Total common shares and units outstanding
 
12,880

 
13,133

 
13,310

 
13,340

 
13,340

Market price per common share (closing price at end of period)
 
$
58.67

 
$
59.91

 
$
49.07

 
$
59.80

 
$
55.30

Equity capitalization-common shares and units
 
$
755,670

 
$
786,798

 
$
653,122

 
$
797,732

 
$
737,702

Recorded book value of preferred shares
 
$
99,456

 
$
99,456

 
$
99,456

 
$
99,456

 
$
99,456

Total equity capitalization
 
$
855,126

 
$
886,254

 
$
752,578

 
$
897,188

 
$
837,158

 
 
 
 
 
 
 
 
 
 
 
Series D Preferred Units
 
$
16,560

 
$
16,560

 
—

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
Debt Capitalization
 
 
 
 
 
 
 
 
 
 
Total debt
 
$
694,889

 
$
696,265

 
$
648,474

 
$
680,964

 
$
711,666

Total capitalization
 
$
1,566,575

 
$
1,599,079

 
$
1,401,052

 
$
1,578,152

 
$
1,548,824

 
 
 
 
 
 
 
 
 
 
 
Total debt to total capitalization(1)
 
0.44:1

 
0.44:1

 
0.46:1

 
0.43:1

 
0.46:1

 
(1)
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 common shares, operating partnership units, Series C preferred shares, and Series D preferred units outstanding at the end of the period.

 
 
Three Months Ended
 
 
Six Months Ended
 
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
 
 
6/30/2019
 
6/30/2018
Debt service coverage ratio(1)
 
2.24
 x
 
1.86
 x
 
2.07
 x
 
1.96
 x
 
1.83
 x
 
 
2.04
 x
 
1.58
 x
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distribution Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common shares and Units outstanding at record date
 
12,914

 
13,135

 
13,276

 
13,340

 
13,340

 
 
12,914

 
13,340

Total common distribution declared
 
$
9,039

 
$
9,195

 
$
9,293

 
$
9,339

 
$
9,345

 
 
$
18,234

 
$
18,740

Common distribution per share and Unit
 
$
0.70

 
$
0.70

 
$
0.70

 
$
0.70

 
$
0.70

 
 
$
1.40

 
$
1.40

Payout ratio (FFO per share and Unit basis)(2)
 
48.3
%
 
90.9
%
 
76.1
%
 
85.4
%
 
80.5
%
 
 
63.1
%
 
90.3
%
Payout ratio (Core FFO per share and Unit basis)(3)
 
70.0
%
 
90.9
%
 
76.1
%
 
81.4
%
 
76.9
%
 
 
79.1
%
 
86.4
%
 
(1)
Debt service coverage ratio is computed by dividing Adjusted EBITDA by interest expense and principal amortization.
(2)
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. This term is a non-GAAP measure and should not be considered a substitute for operating results determined in accordance with GAAP.
(3)
Payout ratio (Core FFO per share and unit basis) is the ratio of the current quarterly or annual distribution rate per common share and unit divided by quarterly or annual Core FFO per share and unit. This term is a non-GAAP measure and should not be considered a substitute for operating results determined in accordance with GAAP.

 
S-8
 




IRET
SAME-STORE SECOND QUARTER COMPARISONS
(in thousands, except property data amounts and percentages)

 
 
Apartment Homes Included
 
Revenues
 
Expenses
 
NOI
Regions
 
 
CY19Q2
 
CY18Q2
 
% Change
 
CY19Q2
 
CY18Q2
 
% Change
 
CY19Q2
 
CY18Q2
 
% Change
Minneapolis, MN
 
1,796

 
$
7,835

 
$
7,287

 
7.5
 %
 
$
3,171

 
$
2,958

 
7.2
 %
 
$
4,664

 
$
4,329

 
7.7
 %
Rochester, MN
 
1,711

 
6,291

 
6,086

 
3.4
 %
 
2,450

 
2,292

 
6.9
 %
 
3,841

 
3,794

 
1.2
 %
Omaha, NE
 
1,370

 
3,705

 
3,700

 
0.1
 %
 
1,635

 
1,606

 
1.8
 %
 
2,070

 
2,094

 
(1.1
)%
Grand Forks, ND
 
1,555

 
4,218

 
4,227

 
(0.2
)%
 
1,909

 
1,912

 
(0.2
)%
 
2,309

 
2,315

 
(0.3
)%
Bismarck, ND
 
1,259

 
3,595

 
3,607

 
(0.3
)%
 
1,491

 
1,596

 
(6.6
)%
 
2,104

 
2,011

 
4.6
 %
St. Cloud, MN
 
1,190

 
3,584

 
3,389

 
5.8
 %
 
1,524

 
1,651

 
(7.7
)%
 
2,060

 
1,738

 
18.5
 %
Topeka, KS
 
1,042

 
2,558

 
2,514

 
1.8
 %
 
1,206

 
1,065

 
13.2
 %
 
1,352

 
1,449

 
(6.7
)%
Sioux Falls, SD
 
969

 
2,544

 
2,470

 
3.0
 %
 
1,222

 
1,050

 
16.4
 %
 
1,322

 
1,420

 
(6.9
)%
Billings, MT
 
770

 
2,178

 
2,080

 
4.7
 %
 
773

 
581

 
33.0
 %
 
1,405

 
1,499

 
(6.3
)%
Minot, ND
 
712

 
2,145

 
2,100

 
2.1
 %
 
1,036

 
1,031

 
0.5
 %
 
1,109

 
1,069

 
3.7
 %
Rapid City, SD
 
474

 
1,371

 
1,344

 
2.0
 %
 
557

 
603

 
(7.6
)%
 
814

 
741

 
9.9
 %
Same-Store Total
 
12,848

 
$
40,024

 
$
38,804

 
3.1
 %
 
$
16,974

 
$
16,345

 
3.8
 %
 
$
23,050

 
$
22,459

 
2.6
 %


 
 
Apartment Homes Included
 
Weighted Average Occupancy (1)
 
Weighted Average Monthly
Rental Rate (2)
 
Weighted Average Monthly
Revenue per Occupied Home (3)
Regions
 
 
CY19Q2
 
CY18Q2
 
Growth
 
CY19Q2
 
CY18Q2
 
% Change
 
CY19Q2
 
CY18Q2
 
% Change
Minneapolis, MN
 
1,796

 
93.4
%
 
91.7
%
 
1.7
 %
 
$
1,439

 
$
1,391

 
3.5
 %
 
$
1,557

 
$
1,474

 
5.8
%
Rochester, MN
 
1,711

 
95.4
%
 
94.7
%
 
0.7
 %
 
1,233

 
1,211

 
1.8
 %
 
1,285

 
1,252

 
2.7
%
Omaha, NE
 
1,370

 
93.3
%
 
95.5
%
 
(2.2
)%
 
884

 
869

 
1.7
 %
 
966

 
942

 
2.3
%
Grand Forks, ND
 
1,555

 
93.5
%
 
94.0
%
 
(0.5
)%
 
912

 
916

 
(0.4
)%
 
967

 
964

 
0.3
%
Bismarck, ND
 
1,259

 
92.8
%
 
94.7
%
 
(1.9
)%
 
953

 
954

 
(0.1
)%
 
1,026

 
1,008

 
1.6
%
St. Cloud, MN
 
1,190

 
95.4
%
 
95.3
%
 
0.1
 %
 
951

 
918

 
3.6
 %
 
1,053

 
996

 
5.7
%
Topeka, KS
 
1,042

 
95.6
%
 
95.5
%
 
0.1
 %
 
818

 
804

 
1.7
 %
 
856

 
842

 
1.7
%
Sioux Falls, SD
 
969

 
94.4
%
 
94.2
%
 
0.2
 %
 
858

 
832

 
3.1
 %
 
927

 
902

 
2.8
%
Billings, MT
 
770

 
95.6
%
 
93.0
%
 
2.6
 %
 
921

 
908

 
1.4
 %
 
986

 
968

 
2.1
%
Minot, ND
 
712

 
95.0
%
 
95.8
%
 
(0.8
)%
 
1,000

 
998

 
0.2
 %
 
1,057

 
1,026

 
2.9
%
Rapid City, SD
 
474

 
95.0
%
 
95.9
%
 
(0.9
)%
 
945

 
916

 
3.2
 %
 
1,015

 
986

 
2.9
%
Same-Store Total
 
12,848

 
94.3
%
 
94.2
%
 
0.1
 %
 
$
1,028

 
$
1,009

 
1.9
 %
 
$
1,101

 
$
1,069

 
3.0
%
 
(1)
Weighted average occupancy is defined as the percentage resulting from dividing actual rental revenue by scheduled rent.
(2)
Weighted average monthly rental rate is scheduled rental revenue divided by the total number of apartment homes. Scheduled rental revenue represents the value of all apartment homes, with occupied apartment homes valued at contractual rates pursuant to leases and vacant apartment homes valued at estimated market rents. When calculating actual rents for occupied apartment homes and market rents for vacant homes, delinquencies and concessions are not taken into account. Market rates are determined using the currently offered effective rates on new leases at the community and are used as the starting point in determination of the market rates of vacant apartment homes.
(3)
Weighted average monthly revenue per occupied home is defined as total rental revenues divided by the weighted average occupied apartment units for the period.

 
S-9
 



IRET
SAME-STORE SEQUENTIAL QUARTER COMPARISONS
(in thousands, except property data amounts and percentages)

 
 
Apartment Homes Included
 
Revenues
 
Expenses
 
NOI
Regions
 
 
CY19Q2
 
CY19Q1
 
% Change
 
CY19Q2
 
CY19Q1
 
% Change
 
CY19Q2
 
CY19Q1
 
% Change
Minneapolis, MN
 
1,796

 
$
7,835

 
$
7,689

 
1.9
 %
 
$
3,172

 
$
3,148

 
0.8
 %
 
$
4,664

 
$
4,541

 
2.7
 %
Rochester, MN
 
1,711

 
6,291

 
6,225

 
1.1
 %
 
2,450

 
2,454

 
(0.2
)%
 
3,841

 
3,771

 
1.9
 %
Omaha, NE
 
1,370

 
3,705

 
3,754

 
(1.3
)%
 
1,635

 
1,774

 
(7.8
)%
 
2,070

 
1,980

 
4.5
 %
Grand Forks, ND
 
1,555

 
4,218

 
4,141

 
1.9
 %
 
1,909

 
2,166

 
(11.9
)%
 
2,309

 
1,975

 
16.9
 %
Bismarck, ND
 
1,259

 
3,595

 
3,602

 
(0.2
)%
 
1,491

 
1,717

 
(13.2
)%
 
2,104

 
1,885

 
11.6
 %
St. Cloud, MN
 
1,190

 
3,584

 
3,474

 
3.2
 %
 
1,525

 
1,808

 
(15.7
)%
 
2,060

 
1,666

 
23.6
 %
Topeka, KS
 
1,042

 
2,558

 
2,556

 
0.1
 %
 
1,206

 
1,105

 
9.1
 %
 
1,352

 
1,451

 
(6.8
)%
Sioux Falls, SD
 
969

 
2,544

 
2,529

 
0.6
 %
 
1,222

 
1,193

 
2.4
 %
 
1,322

 
1,336

 
(1.0
)%
Billings, MT
 
770

 
2,178

 
2,156

 
1.0
 %
 
773

 
858

 
(9.9
)%
 
1,405

 
1,298

 
8.2
 %
Minot, ND
 
712

 
2,145

 
2,118

 
1.3
 %
 
1,036

 
1,007

 
2.9
 %
 
1,109

 
1,111

 
(0.2
)%
Rapid City, SD
 
474

 
1,371

 
1,367

 
0.3
 %
 
557

 
576

 
(3.3
)%
 
814

 
791

 
2.9
 %
Same-Store Total
 
12,848

 
$
40,024

 
$
39,611

 
1.0
 %
 
$
16,976

 
$
17,806

 
(4.7
)%
 
$
23,050

 
$
21,805

 
5.7
 %

 
 
Apartment Homes Included
 
Weighted Average Occupancy
 
Weighted Average Monthly
Rental Rate
 
Weighted Average Monthly
Revenue per Occupied Home
Regions
 
 
CY19Q2
 
CY19Q1
 
Growth
 
CY19Q2
 
CY19Q1
 
% Change
 
CY19Q2
 
CY19Q1
 
% Change
Minneapolis, MN
 
1,796

 
93.4
%
 
94.8
%
 
(1.4
)%
 
$
1,439

 
$
1,408

 
2.2
%
 
$
1,557

 
$
1,505

 
3.3
%
Rochester, MN
 
1,711

 
95.4
%
 
96.5
%
 
(1.1
)%
 
1,233

 
1,207

 
2.2
%
 
1,285

 
1,257

 
2.2
%
Omaha, NE
 
1,370

 
93.3
%
 
95.3
%
 
(2.0
)%
 
884

 
875

 
1.0
%
 
966

 
959

 
0.7
%
Grand Forks, ND
 
1,555

 
93.5
%
 
93.8
%
 
(0.3
)%
 
912

 
903

 
1.0
%
 
967

 
946

 
2.2
%
Bismarck, ND
 
1,259

 
92.8
%
 
96.4
%
 
(3.6
)%
 
953

 
942

 
1.2
%
 
1,026

 
990

 
3.4
%
St. Cloud, MN
 
1,190

 
95.4
%
 
95.7
%
 
(0.3
)%
 
951

 
939

 
1.3
%
 
1,053

 
1,016

 
3.5
%
Topeka, KS
 
1,042

 
95.6
%
 
96.7
%
 
(1.1
)%
 
818

 
810

 
1.0
%
 
856

 
846

 
1.2
%
Sioux Falls, SD
 
969

 
94.4
%
 
95.3
%
 
(0.9
)%
 
858

 
850

 
0.9
%
 
927

 
913

 
1.5
%
Billings, MT
 
770

 
95.6
%
 
96.2
%
 
(0.6
)%
 
921

 
902

 
2.1
%
 
986

 
971

 
1.6
%
Minot, ND
 
712

 
95.0
%
 
95.8
%
 
(0.8
)%
 
1,000

 
993

 
0.7
%
 
1,057

 
1,035

 
2.1
%
Rapid City, SD
 
474

 
95.0
%
 
96.9
%
 
(1.9
)%
 
945

 
931

 
1.5
%
 
1,015

 
991

 
2.2
%
Same-Store Total
 
12,848

 
94.3
%
 
95.6
%
 
(1.3
)%
 
$
1,028

 
$
1,013

 
1.5
%
 
$
1,101

 
$
1,075

 
2.3
%


 
S-10
 




IRET
SAME-STORE YEAR-TO-DATE COMPARISONS
(in thousands, except property data amounts and percentages)

 
 
Apartment Homes Included
 
Revenues
 
Expenses
 
NOI
Regions
 
 
CY19
 
CY18
 
% Change
 
CY19
 
CY18
 
% Change
 
CY19
 
CY18
 
% Change
Minneapolis, MN
 
1,796

 
$
15,525

 
$
14,472

 
7.3
 %
 
$
6,321

 
$
5,921

 
6.8
 %
 
$
9,204

 
$
8,551

 
7.6
 %
Rochester, MN
 
1,711

 
12,516

 
12,124

 
3.2
 %
 
4,904

 
4,841

 
1.3
 %
 
7,612

 
7,283

 
4.5
 %
Omaha, NE
 
1,370

 
7,459

 
7,332

 
1.7
 %
 
3,409

 
3,232

 
5.5
 %
 
4,050

 
4,100

 
(1.2
)%
Grand Forks, ND
 
1,555

 
8,359

 
8,417

 
(0.7
)%
 
4,075

 
3,953

 
3.1
 %
 
4,284

 
4,464

 
(4.0
)%
Bismarck, ND
 
1,259

 
7,197

 
7,089

 
1.5
 %
 
3,207

 
3,164

 
1.4
 %
 
3,990

 
3,925

 
1.7
 %
St. Cloud, MN
 
1,190

 
7,059

 
6,700

 
5.4
 %
 
3,333

 
3,266

 
2.1
 %
 
3,726

 
3,434

 
8.5
 %
Topeka, KS
 
1,042

 
5,114

 
4,932

 
3.7
 %
 
2,311

 
2,057

 
12.3
 %
 
2,803

 
2,875

 
(2.5
)%
Sioux Falls, SD
 
969

 
5,073

 
4,912

 
3.3
 %
 
2,415

 
2,324

 
3.9
 %
 
2,658

 
2,588

 
2.7
 %
Billings, MT
 
770

 
4,334

 
4,057

 
6.8
 %
 
1,630

 
1,407

 
15.8
 %
 
2,704

 
2,650

 
2.0
 %
Minot, ND
 
712

 
4,263

 
4,161

 
2.5
 %
 
2,043

 
2,218

 
(7.9
)%
 
2,220

 
1,943

 
14.3
 %
Rapid City, SD
 
474

 
2,738

 
2,656

 
3.1
 %
 
1,133

 
1,153

 
(1.7
)%
 
1,605

 
1,503

 
6.8
 %
Same-Store Total
 
12,848

 
$
79,637

 
$
76,852

 
3.6
 %
 
$
34,781

 
$
33,536

 
3.7
 %
 
$
44,856

 
$
43,316

 
3.6
 %

 
 
Apartment Homes Included
 
Weighted Average Occupancy
 
Weighted Average Monthly
Rental Rate
 
Weighted Average Monthly
Revenue per Occupied Home
Regions
 
 
CY19
 
CY18
 
Growth
 
CY19
 
CY18
 
% Change
 
CY19
 
CY18
 
% Change
Minneapolis, MN
 
1,796

 
94.1
%
 
92.1
%
 
2.0
 %
 
$
1,424

 
$
1,379

 
3.3
 %
 
$
1,531

 
$
1,459

 
5.3
%
Rochester, MN
 
1,711

 
95.9
%
 
94.6
%
 
1.3
 %
 
1,220

 
1,214

 
0.5
 %
 
1,271

 
1,248

 
1.9
%
Omaha, NE
 
1,370

 
94.3
%
 
95.5
%
 
(1.2
)%
 
879

 
863

 
1.9
 %
 
963

 
934

 
2.9
%
Grand Forks, ND
 
1,555

 
93.7
%
 
94.5
%
 
(0.8
)%
 
907

 
912

 
(0.5
)%
 
957

 
955

 
0.1
%
Bismarck, ND
 
1,259

 
94.6
%
 
94.0
%
 
0.6
 %
 
947

 
957

 
(1.0
)%
 
1,007

 
999

 
0.9
%
St. Cloud, MN
 
1,190

 
95.6
%
 
95.1
%
 
0.5
 %
 
945

 
911

 
3.7
 %
 
1,035

 
987

 
4.9
%
Topeka, KS
 
1,042

 
96.1
%
 
95.0
%
 
1.1
 %
 
814

 
801

 
1.6
 %
 
851

 
831

 
2.6
%
Sioux Falls, SD
 
969

 
94.8
%
 
94.9
%
 
(0.1
)%
 
854

 
824

 
3.6
 %
 
920

 
890

 
3.4
%
Billings, MT
 
770

 
95.9
%
 
91.7
%
 
4.2
 %
 
912

 
907

 
0.6
 %
 
978

 
958

 
2.6
%
Minot, ND
 
712

 
95.4
%
 
95.9
%
 
(0.5
)%
 
997

 
997

 
—
 %
 
1,046

 
1,016

 
3.0
%
Rapid City, SD
 
474

 
95.9
%
 
96.2
%
 
(0.3
)%
 
938

 
908

 
3.3
 %
 
1,003

 
971

 
3.4
%
Same-Store Total
 
12,848

 
94.9
%
 
94.2
%
 
0.7
 %
 
$
1,020

 
$
1,005

 
1.5
 %
 
$
1,088

 
$
1,059

 
2.9
%




 
S-11
 


IRET
PORTFOLIO SUMMARY(1) 
 
 
Three Months Ended
 
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
6/30/2018
Number of Apartment Homes
 
 
 
 
 
 
 
 
 
 
Same-Store
 
12,848

 
12,848

 
12,847

 
12,847

 
12,848

Non-Same-Store
 
1,127

 
1,127

 
855

 
855

 
855

All Communities
 
13,975

 
13,975

 
13,702

 
13,702

 
13,703

 
 
 
 
 
 
 
 
 
 
 
Average Scheduled Rent(2) per Apartment Home
 
 
 
 
 
 
 
 
 
 
Same-Store
 
$
1,028

 
$
1,013

 
$
1,018

 
$
1,027

 
$
1,009

Non-Same-Store
 
1,692

 
1,772

 
1,797

 
1,796

 
1,797

All Communities
 
$
1,081

 
$
1,064

 
$
1,066

 
$
1,075

 
$
1,058

 
 
 
 
 
 
 
 
 
 
 
Average Revenue per Occupied Apartment Home(3)
 
 
 
 
 
 
 
 
 
 
Same-Store
 
$
1,101

 
$
1,075

 
$
1,082

 
$
1,092

 
$
1,069

Non-Same-Store
 
1,848

 
1,943

 
1,939

 
1,956

 
1,941

All Communities
 
$
1,161

 
$
1,134

 
$
1,136

 
$
1,146

 
$
1,123

 
 
 
 
 
 
 
 
 
 
 
Weighted Average Occupancy(4)
 
 
 
 
 
 
 
 
 
 
Same-Store
 
94.3
%
 
95.6
%
 
94.4
%
 
92.0
%
 
94.2
%
Non-Same-Store
 
94.8
%
 
94.9
%
 
92.7
%
 
93.4
%
 
87.3
%
All Communities
 
94.4
%
 
95.5
%
 
94.2
%
 
92.2
%
 
93.5
%
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses as a % of Scheduled Rent
 
 
 
 
 
 
 
 
 
 
Same-Store
 
42.8
%
 
45.6
%
 
42.4
%
 
42.9
%
 
42.0
%
Non-Same-Store
 
37.4
%
 
37.6
%
 
30.5
%
 
36.8
%
 
32.1
%
All Communities
 
42.2
%
 
44.7
%
 
41.1
%
 
42.3
%
 
41.0
%
 
 
 
 
 
 
 
 
 
 
 
Capital Expenditures
 
 
 
 
 
 
 
 
 
 
Total Capital Expenditures per Apartment Home – Same-Store
 
$
192

 
$
80

 
$
254

 
$
274

 
$
201

 
(1)
Previously reported amounts are not revised for changes in the composition of the same-store properties pool.
(2)
Scheduled rent represents the value of all apartment homes, with occupied apartment homes valued at contractual rates pursuant to leases and vacant apartment homes valued at estimated market rents. When calculating actual rents for occupied apartment homes and market rents for vacant homes, delinquencies and concessions are not taken into account. Market rates are determined using the currently offered effective rates on new leases at the community and are used as the starting point in determination of the market rates of vacant apartment homes. 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)
Weighted average occupancy is the percentage resulting from dividing actual rental revenue by scheduled rent. We believe that weighted average occupancy is a meaningful measure of occupancy because it considers the value of each vacant unit at its estimated market rate. Weighted average occupancy may not completely reflect short-term trends in physical occupancy and our calculation of weighted average occupancy may not be comparable to that disclosed by other REITs.

 
S-12
 


IRET
SAME-STORE CAPITAL EXPENDITURES
($ in thousands, except per home amounts)
 
 
Three Months Ended
 
 
6/30/2019
 
6/30/2018
Total Same-Store Apartment Homes
 
12,848

 
12,848

 
 
 
 
 
Turnover
 
$
1,141

 
$
1,183

Furniture & Equipment
 
119

 
104

Building – Interior
 
80

 
139

Building – Exterior
 
498

 
770

Landscaping & Grounds
 
624

 
387

Capital Expenditures
 
$
2,462

 
$
2,583

Capital Expenditures per Apartment Home
 
$
192

 
$
201


 
 
Six Months Ended
 
 
6/30/2019
 
6/30/2018
Total Same-Store Apartment Homes
 
12,848

 
12,846

 
 
 
 
 
Turnover
 
$
1,752

 
$
1,884

Furniture & Equipment
 
179

 
148

Building - Interior
 
158

 
206

Building - Exterior
 
715

 
1,369

Landscaping & Grounds
 
688

 
420

Capital Expenditures
 
$
3,492

 
$
4,027

Capital Expenditures per Apartment Home
 
$
272

 
$
313








 
S-13
 


IRET
2019 Calendar Year Financial Outlook
(in thousands, except per share amounts)
The table below provides revised 2019 calendar year guidance for Net income (loss) available to shareholders, EPS, same-store performance, Core FFO, and Core FFO per share. Our 2019 calendar year revised guidance, along with our actual results of the six months ended June 30, 2019, is described in the table below. Please note that FFO, Core FFO, and NOI are non-GAAP measures. Refer to Non-GAAP Financial Measures and Reconciliations in this release for additional information on the use and presentation of these non-GAAP measures and for reconciliation to the most directly comparable GAAP measures.
 
Six Months Ended
 
Range for 12 Months Ended December 31, 2019
 
June 30, 2019
 
Full Year Revised Guidance
 
Prior Guidance
 
Change from Prior Midpoint
 
Actual Results
 
Amount
 
Amount
 
Amount
Net income (loss) available to common shareholders
$(4,996)
 
$(15,100) to $(13,800)
 
$(24,491) to $(19,224)
 
$7,445
Net income (loss) per share(1)
$(0.43)
 
$(1.27) to $(1.17)
 
$(1.86) to $(1.46)
 
$0.44
 
 
 
 
 
 
 
 
Same-Store Growth
 
 
 
 
 
 
 
Revenue
3.60%
 
3.00% to 4.00%
 
2.50% to 4.00%
 
0.25%
Expenses
3.70%
 
2.75% to 3.75%
 
2.50% to 4.00%
 
—
NOI
3.60%
 
3.00% to 4.00%
 
2.00% to 4.50%
 
0.25%
 
 
 
 
 
 
 
 
Core FFO
$23,095
 
$46,800 to $48,100
 
$46,348 to 48,981
 
$(201)
Core FFO per Share
$1.77
 
$3.62 to $3.72
 
$3.52 to $3.72
 
$0.05
Weighted Average Shares and Units
13,052
 
12,933
 
13,167
 
(234)
(1)
Earnings per share excludes net income attributable to noncontrolling interests.
Reconciliation of Net Income Available to Common Shareholders to Funds From Operations and Core Funds From Operations
The following table presents reconciliations of Net income (loss) available to common shareholders to FFO and Core FFO. FFO and Core FFO are non-GAAP measures. FFO and Core FFO should not be considered as alternatives to net income or any other GAAP measurement of performance, but rather should be considered as an additional, supplemental measure. FFO also does not represent cash generated from operating activities in accordance with GAAP, and is not necessarily indicative of sufficient cash flow to fund all of our needs or our ability to service indebtedness or make distributions. The outlook and projections provided below are based on current expectations and are forward-looking.
 
 
 
Revised Midpoint of Outlook for
 
Six Months Ended
 
12 Months Ended
 
June 30, 2019
 
December 31, 2019
 
Amount
 
Per Share
 
Amount
 
Per Share
Net income (loss) available to common shareholders
$
(4,996
)
 
$
(0.43
)
 
$
(14,412
)
 
$
(1.22
)
Noncontrolling interests - Operating Partnership
(595
)
 
 
 
(1,339
)
 
 
Depreciation and amortization
36,548

 
 
 
72,543

 
 
Less depreciation-non real estate
(164
)
 
 
 
(286
)
 
 
Less depreciation-partially owned entities
(1,152
)
 
 
 
(2,494
)
 
 
Gain on sale of real estate attributable to controlling interests
(669
)
 
 
 
(669
)
 
 
FFO applicable to common shares and Units
$
28,972

 
$
2.22

 
$
53,343

 
$
4.12

 
 
 
 
 
 
 
 
Adjustments to Core FFO:
 
 
 
 
 
 
 
Loss on extinguishment of debt
409

 
 
 
409

 
 
Gain on litigation settlement
(6,286
)
 
 
 
(6,286
)
 
 
Core FFO applicable to common shares and Units
$
23,095

 
$
1.77

 
$
47,466

 
$
3.67


 
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