EX-99.1 2 iret9302019exhibit991.htm EXHIBIT 99.1 Exhibit


Exhibit 99.1

q32019.jpg



Earnings Release
iretlogojpeg1200x1080a02.jpg 
 
IRET Reports Third Quarter 2019 Financial Results and Updates 2019 Guidance
MINOT, ND, November 6, 2019 – IRET (NYSE: IRET) announced today its third quarter 2019 financial and operating results. The tables below show Net Income (Loss), Funds from Operations (“FFO”) and Core FFO per share for the three and nine months ended September 30, 2019; same-store revenues, expenses, and net operating income ("NOI") over comparable periods; and same-store weighted-average occupancy for the three months ended September 30, 2019, June 30, 2019, and September 30, 2018.
 
 
Three Months Ended September 30,
 
Nine Months Ended September 30,
Per Share
 
2019
 
2018
 
2019
 
2018
Net Income (Loss) - diluted
 
$
2.54

 
$
0.08

 
$
2.11

 
$
(1.34
)
FFO - diluted
 
$
0.93

 
$
0.82

 
$
3.15

 
$
2.38

Core FFO - diluted
 
$
0.99

 
$
0.86

 
$
2.76

 
$
2.49

 
 
Year-Over-Year
Comparison
 
Sequential
Comparison
 
YTD Comparison
Same-Store Results
 
3Q19 vs. 3Q18
 
3Q19 vs. 2Q19
 
CY19 vs. CY18
Revenues
 
4.0
%
 
0.6
 %
 
3.7
%
Expenses
 
2.2
%
 
2.5
 %
 
2.8
%
NOI
 
5.3
%
 
(0.8
)%
 
4.4
%
 
 
Three months ended
Same-Store Results
 
September 30, 2019
 
June 30, 2019
 
September 30, 2018
Weighted Average Occupancy
 
93.3
%
 
94.3
%
 
91.9
%
Third Quarter 2019 Highlights
•
We reported Net Income of $2.54 per diluted share for the third quarter of 2019, compared to Net Income of $0.08 per share for the same quarter in 2018;
•
Core FFO grew by 15.1%, increasing to $0.99 per diluted share for the third quarter of 2019, compared to $0.86 per share for the same quarter in 2018;
•
Same-store revenue increased year-over-year by 4.0% driven by 2.6% growth in rental revenue and 1.4% growth in occupancy, while same-store operating expenses grew 2.2% year-over-year, primarily due to real estate taxes. The combination of 4.0% 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 5.3%, our eighth consecutive quarter of year-over-year NOI growth;
•
We entered into a $59.9 million mortgage loan and a $150.0 million private shelf agreement. Of the $150.0 million available under the private shelf agreement, we funded $75.0 million of Series A unsecured senior notes and $50.0 million of Series B unsecured senior notes;
•
We updated earnings guidance with respect to projected same-store growth for calendar year 2019 as follows:
◦
raised the midpoint of full-year net income per diluted share guidance from net loss of $(1.22) to net income of $2.77. This increase was due to gains from the sale of real estate assets;
◦
increased the range of full-year Core FFO per diluted share from $3.68 to $3.78, which increased the midpoint from $3.67 to $3.73. This increase is due to better operating results, disposition and redeployment execution, and interest savings from favorable debt refinancing;
◦
raised the midpoint of full-year NOI to 3.75% from 3.50% by narrowing the range from 3.00%-4.00% to 3.50%-4.00%;
◦
narrowed the range of revenue growth from 3.00%-4.00% to 3.25%-3.75%, which left the midpoint unchanged; and
◦
narrowed the range for expenses from 2.75%-3.75% to 3.00%-3.50% and reaffirmed the midpoint of 3.25%.
•
We repurchased approximately 39,000 common shares for an aggregate total cost of $2.3 million, representing an average price of $59.57 per common share.

 
1
 


Acquisitions and Dispositions
During the third quarter, we acquired FreightYard Townhomes and Flats, a 96-home apartment community in Minneapolis, Minnesota, and Lugano at Cherry Creek, a 328-home apartment community in Denver, Colorado, for an aggregate purchase price of $125.3 million. During the third quarter, we sold one apartment community in Billings, Montana and our entire portfolio in Topeka, Kansas for an aggregate sale price of $84.4 million. We also sold one parcel of unimproved land for $600,000.
Balance Sheet
At the end of the third quarter, we had $155.4 million of total liquidity on our balance sheet, including $146.9 million available under our corporate revolver.
2019 Financial Overview
We are raising our earnings guidance for calendar year 2019 based on actual results through September 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 - diluted
$2.72 to $2.82
 
$2.77
 
$(1.22)
 
$3.99
Core FFO per share and Unit- diluted
$3.68 to $3.78
 
$3.73
 
$3.67
 
$0.06
 
 
 
 
 
 
 
 
Same-Store Growth
 
 
 
 
 
 
 
Revenue
3.25% to 3.75%
 
3.50%
 
3.50%
 
—
Expenses
3.00% to 3.50%
 
3.25%
 
3.25%
 
—
NOI
3.50% to 4.00%
 
3.75%
 
3.50%
 
0.25%
Recent Developments
On October 29, 2019, we sold five apartment communities containing 414 apartment homes in Bismarck, North Dakota for a sale price of $24.0 million. These properties included Crestview, Kirkwood Manor, North Pointe, Pebble Springs, and Westwood Park. The sale of these properties enabled us to retire $11.3 million of mortgage debt.
On November 1, 2019, we sold a commercial property in Woodbury, Minnesota for a sale price of $5.8 million.
Upcoming Events
IRET is scheduled to participate in the upcoming National Association of Real Estate Investment Trusts ("Nareit") REITworld: 2019 Annual Conference in Los Angeles, California, from November 12-14, 2019.
Quarterly Distributions
Effective September 5, 2019, IRET’s Board of Trustees declared a regular quarterly distribution of $0.70 per share/unit payable on September 30, 2019, to common shareholders and unitholders of record on September 16, 2019. IRET has paid cash dividends to common shareholders and unitholders every quarter since its initial dividend payment in 1971.
Effective September 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 September 30, 2019, to holders of record on September 16, 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, November 7, 2019, at 10:00 AM ET
 
Replay available until November 21, 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
10135927
Supplemental Information
Supplemental Operating and Financial Data for the quarter ended September 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 September 30, 2019, we owned interests in 84 apartment communities consisting of 13,336 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.
Investor Relations Contact Information
Jonathan Bishop
Vice President - Finance
Phone: 701-837-7104
E-mail: IR@iret.com


 
3
 


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



Common Share Data (NYSE: IRET)
 
 
3rd Quarter
 
2nd Quarter
 
1st Quarter
 
4th Quarter
 
3rd Quarter
 
 
Calendar Year 2019
 
Calendar Year 2019
 
Calendar Year 2019
 
Calendar Year 2018
 
Calendar Year 2018
High closing price
 
$
74.67

 
$
61.28

 
$
61.50

 
$
59.10

 
$
59.80

Low closing price
 
$
59.22

 
$
57.19

 
$
49.92

 
$
47.00

 
$
53.30

Average closing price
 
$
66.83

 
$
59.54

 
$
58.11

 
$
53.40

 
$
54.99

Closing price at end of quarter
 
$
74.67

 
$
58.67

 
$
59.91

 
$
49.07

 
$
59.80

Common share distributions – annualized
 
$
2.80

 
$
2.80

 
$
2.80

 
$
2.80

 
$
2.80

Closing dividend yield – annualized
 
3.8
%
 
4.8
%
 
4.7
%
 
5.7
%
 
4.7
%
Closing common shares outstanding (thousands)
 
11,625

 
11,656

 
11,768

 
11,942

 
11,961

Closing limited partnership units outstanding (thousands)
 
1,223

 
1,224

 
1,365

 
1,368

 
1,379

Closing market value of outstanding common shares, plus imputed closing market value of outstanding limited partnership units (thousands)
 
$
959,360

 
$
755,670

 
$
786,798

 
$
653,122

 
$
797,732



 
S-1
 



IRET
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands)
 
 
Three Months Ended
 
 
Nine months ended
 
 
9/30/2019
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
 
9/30/2019
 
9/30/2018
REVENUE
 
$
47,436

 
$
46,934

 
$
45,608

 
$
45,730

 
$
45,406

 
 
$
139,978

 
$
134,638

EXPENSES
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property operating expenses, excluding real estate taxes
 
14,485

 
13,942

 
14,804

 
13,292

 
14,438

 
 
43,231

 
42,618

Real estate taxes
 
5,425

 
5,574

 
5,232

 
5,098

 
5,049

 
 
16,231

 
15,073

Property management expense
 
1,553

 
1,445

 
1,554

 
1,447

 
1,269

 
 
4,552

 
4,090

Casualty loss
 
178

 
92

 
641

 
540

 
225

 
 
911

 
275

Depreciation/amortization
 
18,751

 
18,437

 
18,111

 
18,812

 
19,164

 
 
55,299

 
58,812

Impairment of real estate investments
 
—

 
—

 
—

 
1,221

 
—

 
 
—

 
17,809

General and administrative expenses
 
3,448

 
3,549

 
3,806

 
3,769

 
3,147

 
 
10,803

 
11,114

TOTAL EXPENSES
 
$
43,840

 
$
43,039

 
$
44,148

 
$
44,179

 
$
43,292

 
 
$
131,027

 
$
149,791

Operating income (loss)
 
3,596

 
3,895

 
1,460

 
1,551

 
2,114

 
 
8,951

 
(15,153
)
Interest expense
 
(7,694
)
 
(7,590
)
 
(7,896
)
 
(7,682
)
 
(8,193
)
 
 
(23,180
)
 
(25,051
)
Loss on extinguishment of debt
 
(1,087
)
 
(407
)
 
(2
)
 
(5
)
 
(540
)
 
 
(1,496
)
 
(673
)
Interest and other income
 
498

 
468

 
424

 
483

 
395

 
 
1,390

 
1,544

Income (loss) before gain (loss) on sale of real estate and other investments, gain (loss) on litigation settlement, and income (loss) from discontinued operations
 
(4,687
)
 
(3,634
)
 
(6,014
)
 
(5,653
)
 
(6,224
)
 
 
(14,335
)
 
(39,333
)
Gain (loss) on sale of real estate and other investments
 
39,105

 
615

 
54

 
612

 
9,095

 
 
39,774

 
11,399

Gain (loss) on litigation settlement
 
300

 
6,286

 
—

 
—

 
—

 
 
6,586

 
—

Income (loss) from continuing operations
 
34,718

 
3,267

 
(5,960
)
 
(5,041
)
 
2,871

 
 
32,025

 
(27,934
)
Income (loss) from discontinued operations
 
—

 
—

 
—

 
—

 
570

 
 
—

 
14,690

Net income (loss)
 
$
34,718

 
$
3,267

 
$
(5,960
)
 
$
(5,041
)
 
$
3,441

 
 
$
32,025

 
$
(13,244
)
Dividends to preferred unitholders
 
(160
)
 
(160
)
 
(57
)
 
—

 
—

 
 
(377
)
 
—

Net (income) loss attributable to noncontrolling interest – Operating Partnership
 
(3,145
)
 
(148
)
 
743

 
665

 
(112
)
 
 
(2,550
)
 
1,888

Net (income) loss attributable to noncontrolling interests – consolidated real estate entities
 
183

 
154

 
576

 
270

 
(676
)
 
 
913

 
439

Net income (loss) attributable to controlling interests
 
31,596

 
3,113

 
(4,698
)
 
(4,106
)
 
2,653

 
 
30,011

 
(10,917
)
Dividends to preferred shareholders
 
(1,705
)
 
(1,706
)
 
(1,705
)
 
(1,705
)
 
(1,705
)
 
 
(5,116
)
 
(5,116
)
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS
 
$
29,891

 
$
1,407

 
$
(6,403
)
 
$
(5,811
)
 
$
948

 
 
$
24,895

 
$
(16,033
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per Share Data - Basic
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) per common share from continuing operations – basic
 
$
2.57

 
$
0.11

 
$
(0.54
)
 
$
(0.49
)
 
$
0.04

 
 
$
2.11

 
$
(2.44
)
Earnings (loss) per common share from discontinued operations – basic
 
—

 
—

 
—

 
—

 
0.04

 
 
—

 
1.10

Net earnings (loss) per common share – basic
 
$
2.57

 
$
0.11

 
$
(0.54
)
 
$
(0.49
)
 
$
0.08

 
 
$
2.11

 
$
(1.34
)
Per Share Data - Diluted
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) per common share from continuing operations – diluted
 
$
2.54

 
$
0.11

 
$
(0.54
)
 
$
(0.49
)
 
$
0.04

 
 
$
2.11

 
$
(2.44
)
Earnings per common share from discontinued operations – diluted
 
—

 
—

 
—

 
—

 
$
0.04

 
 
—

 
$
1.10

Net earnings (loss) per common share – diluted
 
$
2.54

 
$
0.11

 
$
(0.54
)
 
$
(0.49
)
 
$
0.08

 
 
$
2.11

 
$
(1.34
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property operating expenses, excluding real estate taxes
 
30.5
%
 
29.7
%
 
32.5
 %
 
29.1
 %
 
31.8
%
 
 
30.9
%
 
31.7
 %
General and administrative expenses
 
7.3
%
 
7.6
%
 
8.3
 %
 
8.2
 %
 
6.9
%
 
 
7.7
%
 
8.3
 %
Interest
 
16.2
%
 
16.2
%
 
17.3
 %
 
16.8
 %
 
18.0
%
 
 
16.6
%
 
18.6
 %
Income (loss) from discontinued operations
 
—

 
—

 
—

 
—

 
1.3
%
 
 
—

 
10.9
 %
Net income (loss)
 
73.2
%
 
7.0
%
 
(13.1
)%
 
(11.0
)%
 
7.6
%
 
 
22.9
%
 
(9.8
)%

 
S-2
 


IRET
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
 
 
9/30/2019
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
9/30/2018
ASSETS
 
 
 
 
 
 
 
 
 
 
Real estate investments
 
 
 
 
 
 
 
 
 
 
Property owned
 
$
1,720,352

 
$
1,663,539

 
$
1,673,158

 
$
1,627,636

 
$
1,638,909

Less accumulated depreciation
 
(370,492
)
 
(380,321
)
 
(371,672
)
 
(353,871
)
 
(339,515
)
 
 
1,349,860

 
1,283,218

 
1,301,486

 
1,273,765

 
1,299,394

Unimproved land
 
1,376

 
1,746

 
2,252

 
5,301

 
6,522

Mortgage loans receivable
 
10,140

 
10,140

 
10,260

 
10,410

 
10,530

Total real estate investments
 
1,361,376

 
1,295,104

 
1,313,998

 
1,289,476

 
1,316,446

Cash and cash equivalents
 
8,500

 
17,406

 
23,329

 
13,792

 
36,910

Restricted cash
 
3,339

 
4,672

 
4,819

 
5,464

 
4,669

Other assets
 
30,589

 
30,626

 
29,166

 
27,265

 
28,472

TOTAL ASSETS
 
$
1,403,804

 
$
1,347,808

 
$
1,371,312

 
$
1,335,997

 
$
1,386,497

 
 
 
 
 
 
 
 
 
 
 
LIABILITIES, MEZZANINE EQUITY, AND EQUITY
 
 
 
 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
 
 
 
Accounts payable and accrued expenses
 
$
40,546

 
$
44,766

 
$
40,697

 
$
40,892

 
$
38,203

Revolving line of credit
 
103,143

 
177,939

 
118,677

 
57,500

 
71,000

Notes payable, net of loan costs
 
269,006

 
144,082

 
144,036

 
143,991

 
143,937

Mortgages payable, net of loan costs
 
360,886

 
370,461

 
430,950

 
444,197

 
463,052

TOTAL LIABILITIES
 
$
773,581

 
$
737,248

 
$
734,360

 
$
686,580

 
$
716,192

 
 
 
 
 
 
 
 
 
 
 
REDEEMABLE NONCONTROLLING INTERESTS – CONSOLIDATED REAL ESTATE ENTITIES
 
—

 
—

 
—

 
$
5,968

 
$
6,130

SERIES D PREFERRED UNITS
 
$
16,560

 
$
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
 
886,598

 
888,541

 
895,381

 
899,234

 
900,368

Accumulated distributions in excess of net income
 
(428,680
)
 
(450,433
)
 
(443,661
)
 
(429,048
)
 
(414,900
)
Accumulated other comprehensive income (loss)
 
(9,793
)
 
(7,598
)
 
(3,139
)
 
(856
)
 
2,760

Total shareholders’ equity
 
$
547,581

 
$
529,966

 
$
548,037

 
$
568,786

 
$
587,684

Noncontrolling interests – Operating Partnership
 
60,169

 
57,902

 
66,060

 
67,916

 
69,578

Noncontrolling interests – consolidated real estate entities
 
5,913

 
6,132

 
6,295

 
6,747

 
6,913

Total equity
 
$
613,663

 
$
594,000

 
$
620,392

 
$
643,449

 
$
664,175

TOTAL LIABILITIES, MEZZANINE EQUITY, AND EQUITY
 
$
1,403,804

 
$
1,347,808

 
$
1,371,312

 
$
1,335,997

 
$
1,386,497


 
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 September 30,
 
 
Nine Months Ended September 30,
 
2019
 
2018
 
$ Change
 
% Change
 
 
2019
 
2018
 
$ Change
 
% Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating income (loss)
$
3,596

 
$
2,114

 
$
1,482

 
70.1
 %
 
 
$
8,951

 
$
(15,153
)
 
$
24,104

 
(159.1
)%
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property management expenses
1,553

 
1,269

 
284

 
22.4
 %
 
 
4,552

 
4,090

 
462

 
11.3
 %
Casualty loss
178

 
225

 
(47
)
 
(20.9
)%
 
 
911

 
275

 
636

 
231.3
 %
Depreciation and amortization
18,751

 
19,164

 
(413
)
 
(2.2
)%
 
 
55,299

 
58,812

 
(3,513
)
 
(6.0
)%
Impairment
—

 
—

 
—

 
—

 
 
—

 
17,809

 
(17,809
)
 
(100.0
)%
General and administrative expenses
3,448

 
3,147

 
301

 
9.6
 %
 
 
10,803

 
11,114

 
(311
)
 
(2.8
)%
Net operating income
$
27,526

 
$
25,919

 
$
1,607

 
6.2
 %
 
 
$
80,516

 
$
76,947

 
$
3,569

 
4.6
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Revenue
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same-store
$
37,633

 
$
36,198

 
$
1,435

 
4.0
 %
 
 
$
112,052

 
$
108,031

 
$
4,021

 
3.7
 %
Non-same-store
6,283

 
4,687

 
1,596

 
34.1
 %
 
 
17,405

 
11,038

 
6,367

 
57.7
 %
Other properties and dispositions
3,520

 
4,521

 
(1,001
)
 
(22.1
)%
 
 
10,521

 
15,569

 
(5,048
)
 
(32.4
)%
Total
47,436

 
45,406

 
2,030

 
4.5
 %
 
 
139,978

 
134,638

 
5,340

 
4.0
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property operating expenses, including real estate taxes
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same-store
16,147

 
15,795

 
352

 
2.2
 %
 
 
48,561

 
47,227

 
1,334

 
2.8
 %
Non-same-store
2,308

 
1,696

 
612

 
36.1
 %
 
 
6,327

 
4,115

 
2,212

 
53.8
 %
Other properties and dispositions
1,455

 
1,996

 
(541
)
 
(27.1
)%
 
 
4,574

 
6,349

 
(1,775
)
 
(28.0
)%
Total
19,910

 
19,487

 
423

 
2.2
 %
 
 
59,462

 
57,691

 
1,771

 
3.1
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net operating income
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Same-store
21,486

 
20,403

 
1,083

 
5.3
 %
 
 
63,491

 
60,804

 
2,687

 
4.4
 %
Non-same-store
3,975

 
2,991

 
984

 
32.9
 %
 
 
11,078

 
6,923

 
4,155

 
60.0
 %
Other properties and dispositions
2,065

 
2,525

 
(460
)
 
(18.2
)%
 
 
5,947

 
9,220

 
(3,273
)
 
(35.5
)%
Total
$
27,526

 
$
25,919

 
$
1,607

 
6.2
 %
 
 
$
80,516

 
$
76,947

 
$
3,569

 
4.6
 %



 
S-4
 


Same-Store Property Operating Expense Comparison
 
(in thousands, except percentages)
 
Three Months Ended September 30,
 
 
Nine Months Ended September 30,
 
2019
 
2018
 
$ Change
 
% Change
 
 
2019
 
2018
 
$ Change
 
% Change
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Controllable expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Compensation
$
4,368

 
$
4,362

 
$
6

 
0.1
 %
 
 
$
12,889

 
$
13,520

 
$
(631
)
 
(4.7
)%
Repairs and maintenance
3,078

 
3,277

 
(199
)
 
(6.1
)%
 
 
9,296

 
8,987

 
309

 
3.4
 %
Utilities
2,608

 
2,614

 
(6
)
 
(0.2
)%
 
 
8,388

 
8,304

 
84

 
1.0
 %
Administrative and marketing
778

 
810

 
(32
)
 
(4.0
)%
 
 
2,530

 
2,401

 
129

 
5.4
 %
Total
$
10,832

 
$
11,063

 
$
(231
)
 
(2.1
)%
 
 
$
33,103

 
$
33,212

 
$
(109
)
 
(0.3
)%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Non-controllable expenses
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Real estate taxes
$
4,173

 
$
3,973

 
$
200

 
5.0
 %
 
 
$
12,506

 
$
12,032

 
$
474

 
3.9
 %
Insurance
1,142

 
759

 
383

 
50.5
 %
 
 
2,952

 
1,983

 
969

 
48.9
 %
Total
$
5,315

 
$
4,732

 
$
583

 
12.3
 %
 
 
$
15,458

 
$
14,015

 
$
1,443

 
10.3
 %
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total
$
16,147

 
$
15,795

 
$
352

 
2.2
 %
 
 
$
48,561

 
$
47,227

 
$
1,334

 
2.8
 %
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 Nareit FFO definition, we have made certain interpretations in applying this definition. We believe that all such interpretations not specifically identified in the Nareit definition are consistent with this 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 its 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 should not be considered a substitute for operating results determined in accordance with GAAP.

 
S-5
 


 
 
(in thousands, except per share amounts)
 
 
Three Months Ended
 
 
Nine Months Ended
 
 
9/30/2019
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
 
9/30/2019
 
9/30/2018
Funds From Operations
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) available to common shareholders
 
$
29,891

 
$
1,407

 
$
(6,403
)
 
$
(5,811
)
 
$
948

 
 
$
24,895

 
$
(16,033
)
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling interests – Operating Partnership
 
3,145

 
148

 
(743
)
 
(665
)
 
112

 
 
2,550

 
(1,888
)
Depreciation and amortization
 
18,751

 
18,437

 
18,111

 
18,812

 
19,164

 
 
55,299

 
58,814

Less depreciation – non real estate
 
(71
)
 
(79
)
 
(85
)
 
(76
)
 
(76
)
 
 
(235
)
 
(231
)
Less depreciation – partially owned entities
 
(452
)
 
(474
)
 
(678
)
 
(680
)
 
(673
)
 
 
(1,604
)
 
(2,115
)
Impairment of real estate
 
—

 
—

 
—

 
1,221

 
—

 
 
—

 
17,809

(Gain) loss on sale of real estate
 
(39,105
)
 
(615
)
 
(54
)
 
(612
)
 
(8,499
)
 
 
(39,774
)
 
(24,633
)
FFO applicable to common shares and Units
 
$
12,159

 
$
18,824

 
$
10,148

 
$
12,189

 
$
10,976

 
 
$
41,131

 
$
31,723

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments to Core FFO:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Casualty loss write off
 
—

 
—

 
—

 
43

 
—

 
 
—

 
—

Loss on extinguishment of debt
 
1,087

 
407

 
2

 
5

 
540

 
 
1,496

 
673

Gain on litigation settlement
 
(300
)
 
(6,286
)
 
—

 
—

 
—

 
 
(6,586
)
 
—

Severance and transition costs
 
—

 
—

 
—

 
—

 
—

 
 
—

 
811

Core FFO applicable to common shares and Units
 
$
12,946

 
$
12,945

 
$
10,150

 
$
12,237

 
$
11,516

 
 
$
36,041

 
$
33,207

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Funds from operations applicable to common shares and Units
 
$
12,159

 
$
18,824

 
$
10,148

 
$
12,189

 
$
10,976

 
 
$
41,131

 
$
31,723

Dividends to preferred unitholders
 
160

 
160

 
57

 
—

 
—

 
 
377

 
—

Funds from operations applicable to common shares and Units - diluted
 
$
12,319

 
$
18,984

 
$
10,205

 
$
12,189

 
$
10,976

 
 
$
41,508

 
$
31,723

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core funds from operations applicable to common shares and Units
 
$
12,946

 
$
12,945

 
$
10,150

 
$
12,237

 
$
11,516

 
 
$
36,041

 
$
33,207

Dividends to preferred unitholders
 
160

 
160

 
57

 
—

 
—

 
 
377

 
—

Core funds from operations applicable to common shares and Units - diluted
 
$
13,106

 
$
13,105

 
$
10,207

 
$
12,237

 
$
11,516

 
 
$
36,418

 
$
33,207

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per Share Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) per share and Unit - diluted
 
$
2.54

 
$
0.12

 
$
(0.54
)
 
$
(0.49
)
 
$
0.08

 
 
$
2.11

 
$
(1.34
)
FFO per share and Unit - diluted
 
$
0.93

 
$
1.45

 
$
0.77

 
$
0.92

 
$
0.82

 
 
$
3.15

 
$
2.38

Core FFO per share and Unit - diluted
 
$
0.99

 
$
1.00

 
$
0.77

 
$
0.92

 
$
0.86

 
 
$
2.76

 
$
2.49

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares and Units - diluted
 
13,087

 
13,197

 
13,230

 
13,317

 
13,318

 
 
13,174

 
13,351


 
S-6
 


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, gain on litigation settlement, 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
 
 
Nine Months Ended
 
 
9/30/2019
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
 
9/30/2019
 
9/30/2018
Adjusted EBITDA
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) available to common shareholders
 
$
31,596

 
$
3,113

 
$
(4,698
)
 
$
(4,106
)
 
$
2,653

 
 
$
30,011

 
$
(10,917
)
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Dividends to preferred unitholders
 
160

 
160

 
57

 
—

 
—

 
 
377

 
—

Noncontrolling interests – Operating Partnership
 
3,145

 
148

 
(743
)
 
(665
)
 
112

 
 
2,550

 
(1,888
)
Income (loss) before noncontrolling interests – Operating Partnership
 
$
34,901

 
$
3,421

 
$
(5,384
)
 
$
(4,771
)
 
$
2,765

 
 
$
32,938

 
$
(12,805
)
Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
 
7,448

 
7,343

 
7,558

 
7,336

 
7,828

 
 
22,349

 
23,857

Loss on extinguishment of debt
 
1,087

 
407

 
2

 
4

 
541

 
 
1,496

 
673

Depreciation/amortization related to real estate investments
 
18,299

 
17,963

 
17,433

 
18,133

 
18,491

 
 
53,695

 
56,699

Impairment of real estate investments
 
—

 
—

 
—

 
1,221

 
—

 
 
—

 
17,809

Interest income
 
(402
)
 
(402
)
 
(407
)
 
(465
)
 
(366
)
 
 
(1,211
)
 
(1,468
)
(Gain) loss on sale of real estate and other investments
 
(39,105
)
 
(615
)
 
(54
)
 
(611
)
 
(8,499
)
 
 
(39,774
)
 
(24,633
)
Gain on litigation settlement
 
(300
)
 
(6,286
)
 
—

 
—

 
—

 
 
(6,586
)
 
—

Adjusted EBITDA
 
$
21,928

 
$
21,831

 
$
19,148

 
$
20,847

 
$
20,760

 
 
$
62,907

 
$
60,132



 
S-7
 



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

 
—

 
—

 
—

 
—

 
—

2020
 
$
17,550

 
$
—

 
$
293

 
$
17,843

 
2.4
%
 
5.31
%
2021
 
51,876

 
—

 
—

 
51,876

 
7.0
%
 
5.42
%
2022
 
38,093

 
50,000

 
52,850

 
140,943

 
19.2
%
 
3.84
%
2023
 
48,520

 
—

 
—

 
48,520

 
6.6
%
 
4.02
%
Thereafter
 
206,692

 
270,000

 
—

 
476,692

 
64.8
%
 
3.87
%
Total debt
 
$
362,731

 
$
320,000

 
$
53,143

 
$
735,874

 
100.0
%
 
4.02
%
 
(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)
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.

 
 
9/30/2019
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
9/30/2018
Debt Balances Outstanding(1)
 
 
 
 
 
 
 
 
 
 
Secured fixed rate
 
$
362,731

 
$
371,951

 
$
432,588

 
$
445,974

 
$
464,964

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

 
50,000

 
—

 
—

 
—

Secured line of credit(3)
 
—

 
15,000

 
15,000

 
—

 
—

Unsecured variable rate line of credit
 
53,143

 
112,939

 
103,677

 
57,500

 
71,000

Unsecured term loans
 
145,000

 
145,000

 
145,000

 
145,000

 
145,000

Unsecured senior notes
 
125,000

 
—

 
—

 
—

 
—

Debt total
 
$
735,874

 
$
694,890

 
$
696,265

 
$
648,474

 
$
680,964

 
 
 
 
 
 
 
 
 
 
 
Mortgage debt weighted average interest rate
 
4.15
%
 
4.37
%
 
4.54
%
 
4.58
%
 
4.65
%
Lines of credit rate (rate with swap)
 
3.73
%
 
3.91
%
 
3.89
%
 
3.72
%
 
3.67
%
Term loan rate (rate with swap)
 
4.14
%
 
4.14
%
 
3.99
%
 
4.01
%
 
3.97
%
Senior notes rate
 
3.78
%
 
—

 
—

 
—

 
—

 
(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-8
 


IRET 
CAPITAL ANALYSIS 
(in thousands, except per share and unit amounts)
 
 
Three Months Ended
 
 
9/30/2019
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
9/30/2018
Equity Capitalization
 
 
 
 
 
 
 
 
 
 
Common shares outstanding
 
11,625

 
11,656

 
11,768

 
11,942

 
11,961

Operating partnership units outstanding
 
1,223

 
1,224

 
1,365

 
1,368

 
1,379

Total common shares and units outstanding
 
12,848

 
12,880

 
13,133

 
13,310

 
13,340

Market price per common share (closing price at end of period)
 
$
74.67

 
$
58.67

 
$
59.91

 
$
49.07

 
$
59.80

Equity capitalization-common shares and units
 
$
959,360

 
$
755,670

 
$
786,798

 
$
653,122

 
$
797,732

Recorded book value of preferred shares
 
$
99,456

 
$
99,456

 
$
99,456

 
$
99,456

 
$
99,456

Total equity capitalization
 
$
1,058,816

 
$
855,126

 
$
886,254

 
$
752,578

 
$
897,188

 
 
 
 
 
 
 
 
 
 
 
Series D Preferred Units
 
$
16,560

 
$
16,560

 
16,560

 
—

 
—

 
 
 
 
 
 
 
 
 
 
 
Debt Capitalization
 
 
 
 
 
 
 
 
 
 
Total debt
 
$
735,874

 
$
694,889

 
$
696,265

 
$
648,474

 
$
680,964

Total capitalization
 
$
1,811,250

 
$
1,566,575

 
$
1,599,079

 
$
1,401,052

 
$
1,578,152

 
 
 
 
 
 
 
 
 
 
 
Total debt to total capitalization(1)
 
40.6%

 
44.4%

 
43.5%

 
46.3%

 
43.2%

 
(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
 
 
Nine Months Ended
 
 
9/30/2019
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
9/30/2018
 
 
9/30/2019
 
9/30/2018
Debt service coverage ratio(1)
 
2.26
 x
 
2.24
 x
 
1.86
 x
 
2.07
 x
 
1.96
 x
 
 
2.11
 x
 
1.69
 x
Adjusted EBITDA/Interest expense plus preferred distributions and principal amortization
 
1.90
 x
 
1.88
 x
 
1.58
 x
 
1.77
 x
 
1.69
 x
 
 
1.78
 x
 
1.59
 x
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distribution Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common shares and Units outstanding at record date
 
12,848

 
12,914

 
13,135

 
13,276

 
13,340

 
 
12,848

 
13,340

Total common distribution declared
 
$
8,994

 
$
9,039

 
$
9,195

 
$
9,293

 
$
9,339

 
 
$
27,228

 
$
28,079

Common distribution per share and Unit
 
$
0.70

 
$
0.70

 
$
0.70

 
$
0.70

 
$
0.70

 
 
$
2.10

 
$
2.10

Payout ratio (FFO per share and Unit basis)(2)
 
75.3
%
 
48.3
%
 
90.9
%
 
76.1
%
 
85.4
%
 
 
66.7
%
 
88.2
%
Payout ratio (Core FFO per share and Unit basis)(3)
 
70.7
%
 
70.0
%
 
90.9
%
 
76.1
%
 
81.4
%
 
 
76.1
%
 
84.3
%
 
(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-9
 




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

 
 
Apartment Homes Included
 
Revenues
 
Expenses
 
NOI
Regions
 
 
CY19Q3
 
CY18Q3
 
% Change
 
CY19Q3
 
CY18Q3
 
% Change
 
CY19Q3
 
CY18Q3
 
% Change
Minneapolis, MN
 
1,796

 
$
7,774

 
$
7,414

 
4.9
%
 
$
3,360

 
$
3,063

 
9.7
 %
 
$
4,414

 
$
4,351

 
1.4
 %
Rochester, MN
 
1,711

 
6,446

 
6,031

 
6.9
%
 
2,386

 
2,477

 
(3.7
)%
 
4,060

 
3,554

 
14.2
 %
Omaha, NE
 
1,370

 
3,738

 
3,697

 
1.1
%
 
1,740

 
1,686

 
3.2
 %
 
1,998

 
2,011

 
(0.6
)%
Grand Forks, ND
 
1,555

 
4,287

 
4,149

 
3.3
%
 
1,882

 
1,890

 
(0.4
)%
 
2,405

 
2,259

 
6.5
 %
Bismarck, ND
 
1,259

 
3,654

 
3,572

 
2.3
%
 
1,503

 
1,471

 
2.2
 %
 
2,151

 
2,101

 
2.4
 %
St. Cloud, MN
 
1,190

 
3,517

 
3,389

 
3.8
%
 
1,557

 
1,570

 
(0.8
)%
 
1,960

 
1,819

 
7.8
 %
Sioux Falls, SD
 
969

 
2,532

 
2,505

 
1.1
%
 
1,228

 
1,227

 
0.1
 %
 
1,304

 
1,278

 
2.0
 %
Billings, MT
 
749

 
2,144

 
2,040

 
5.1
%
 
882

 
880

 
0.2
 %
 
1,262

 
1,160

 
8.8
 %
Minot, ND
 
712

 
2,117

 
2,051

 
3.2
%
 
1,035

 
960

 
7.8
 %
 
1,082

 
1,091

 
(0.8
)%
Rapid City, SD
 
474

 
1,424

 
1,350

 
5.5
%
 
574

 
571

 
0.5
 %
 
850

 
779

 
9.1
 %
Same-Store Total
 
11,785

 
$
37,633

 
$
36,198

 
4.0
%
 
$
16,147

 
$
15,795

 
2.2
 %
 
$
21,486

 
$
20,403

 
5.3
 %


 
 
% of NOI Contribution
 
Weighted Average Occupancy (1)
 
Weighted Average Monthly
Rental Rate (2)
 
Weighted Average Monthly
Revenue per Occupied Home (3)
Regions
 
 
CY19Q3
 
CY18Q3
 
Growth
 
CY19Q3
 
CY18Q3
 
% Change
 
CY19Q3
 
CY18Q3
 
% Change
Minneapolis, MN
 
20.5
%
 
90.8
%
 
90.3
%
 
0.5
 %
 
$
1,478

 
$
1,428

 
3.5
 %
 
$
1,590

 
$
1,523

 
4.3
%
Rochester, MN
 
18.9
%
 
94.6
%
 
91.3
%
 
3.3
 %
 
1,257

 
1,229

 
2.3
 %
 
1,327

 
1,287

 
3.6
%
Omaha, NE
 
9.3
%
 
93.0
%
 
93.4
%
 
(0.4
)%
 
900

 
879

 
2.4
 %
 
977

 
963

 
1.5
%
Grand Forks, ND
 
11.2
%
 
94.1
%
 
91.3
%
 
2.8
 %
 
908

 
922

 
(1.5
)%
 
977

 
975

 
0.5
%
Bismarck, ND
 
10.0
%
 
93.9
%
 
94.1
%
 
(0.2
)%
 
957

 
961

 
(0.4
)%
 
1,031

 
1,005

 
2.5
%
St. Cloud, MN
 
9.1
%
 
93.8
%
 
92.4
%
 
1.4
 %
 
959

 
950

 
0.9
 %
 
1,050

 
1,027

 
2.4
%
Sioux Falls, SD
 
6.1
%
 
92.2
%
 
92.3
%
 
(0.1
)%
 
867

 
851

 
1.9
 %
 
945

 
934

 
1.2
%
Billings, MT
 
5.9
%
 
95.0
%
 
92.5
%
 
2.5
 %
 
941

 
923

 
2.0
 %
 
1,004

 
981

 
2.6
%
Minot, ND
 
5.0
%
 
93.9
%
 
91.6
%
 
2.3
 %
 
999

 
1,014

 
(1.5
)%
 
1,055

 
1,048

 
0.9
%
Rapid City, SD
 
4.0
%
 
96.1
%
 
93.5
%
 
2.6
 %
 
963

 
939

 
2.6
 %
 
1,042

 
1,016

 
2.9
%
Same-Store Total
 
100.0
%
 
93.3
%
 
91.9
%
 
1.4
 %
 
$
1,062

 
$
1,046

 
1.5
 %
 
$
1,141

 
$
1,114

 
2.6
%
 
(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-10
 



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

 
 
Apartment Homes Included
 
Revenues
 
Expenses
 
NOI
Regions
 
 
CY19Q3
 
CY19Q2
 
% Change
 
CY19Q3
 
CY19Q2
 
% Change
 
CY19Q3
 
CY19Q2
 
% Change
Minneapolis, MN
 
1,796

 
$
7,774

 
$
7,836

 
(0.8
)%
 
$
3,360

 
$
3,172

 
5.9
 %
 
$
4,414

 
$
4,664

 
(5.4
)%
Rochester, MN
 
1,711

 
6,446

 
6,291

 
2.5
 %
 
2,386

 
2,450

 
(2.6
)%
 
4,060

 
3,841

 
5.7
 %
Omaha, NE
 
1,370

 
3,738

 
3,705

 
0.9
 %
 
1,740

 
1,635

 
6.4
 %
 
1,998

 
2,070

 
(3.5
)%
Grand Forks, ND
 
1,555

 
4,287

 
4,218

 
1.6
 %
 
1,882

 
1,909

 
(1.4
)%
 
2,405

 
2,309

 
4.2
 %
Bismarck, ND
 
1,259

 
3,654

 
3,595

 
1.6
 %
 
1,503

 
1,491

 
0.8
 %
 
2,151

 
2,104

 
2.2
 %
St. Cloud, MN
 
1,190

 
3,517

 
3,585

 
(1.9
)%
 
1,557

 
1,525

 
2.1
 %
 
1,960

 
2,060

 
(4.9
)%
Sioux Falls, SD
 
969

 
2,532

 
2,544

 
(0.5
)%
 
1,228

 
1,222

 
0.5
 %
 
1,304

 
1,322

 
(1.4
)%
Billings, MT
 
749

 
2,144

 
2,125

 
0.9
 %
 
882

 
752

 
17.3
 %
 
1,262

 
1,373

 
(8.1
)%
Minot, ND
 
712

 
2,117

 
2,145

 
(1.3
)%
 
1,035

 
1,036

 
(0.1
)%
 
1,082

 
1,109

 
(2.4
)%
Rapid City, SD
 
474

 
1,424

 
1,371

 
3.9
 %
 
574

 
557

 
3.1
 %
 
850

 
814

 
4.4
 %
Same-Store Total
 
11,785

 
$
37,633

 
$
37,415

 
0.6
 %
 
$
16,147

 
$
15,749

 
2.5
 %
 
$
21,486

 
$
21,666

 
(0.8
)%

 
 
% of NOI Contribution
 
Weighted Average Occupancy
 
Weighted Average Monthly
Rental Rate
 
Weighted Average Monthly
Revenue per Occupied Home
Regions
 
 
CY19Q3
 
CY19Q2
 
Growth
 
CY19Q3
 
CY19Q2
 
% Change
 
CY19Q3
 
CY19Q2
 
% Change
Minneapolis, MN
 
20.5
%
 
90.8
%
 
93.4
%
 
(2.6
)%
 
$
1,478

 
$
1,439

 
2.7
 %
 
$
1,590

 
$
1,557

 
1.8
 %
Rochester, MN
 
18.9
%
 
94.6
%
 
95.4
%
 
(0.8
)%
 
1,257

 
1,233

 
1.9
 %
 
1,327

 
1,285

 
3.3
 %
Omaha, NE
 
9.3
%
 
93.0
%
 
93.3
%
 
(0.3
)%
 
900

 
884

 
1.8
 %
 
977

 
966

 
1.2
 %
Grand Forks, ND
 
11.2
%
 
94.1
%
 
93.5
%
 
0.6
 %
 
908

 
912

 
(0.4
)%
 
977

 
967

 
1.0
 %
Bismarck, ND
 
10.0
%
 
93.9
%
 
92.8
%
 
1.1
 %
 
957

 
953

 
0.4
 %
 
1,031

 
1,026

 
0.5
 %
St. Cloud, MN
 
9.1
%
 
93.8
%
 
95.4
%
 
(1.6
)%
 
959

 
951

 
0.8
 %
 
1,050

 
1,053

 
(0.3
)%
Sioux Falls, SD
 
6.1
%
 
92.2
%
 
94.4
%
 
(2.2
)%
 
867

 
858

 
1.0
 %
 
945

 
927

 
1.7
 %
Billings, MT
 
5.9
%
 
95.0
%
 
95.6
%
 
(0.6
)%
 
941

 
924

 
1.8
 %
 
1,004

 
989

 
1.5
 %
Minot, ND
 
5.0
%
 
93.9
%
 
95.0
%
 
(1.1
)%
 
999

 
1,000

 
(0.1
)%
 
1,055

 
1,057

 
(0.2
)%
Rapid City, SD
 
4.0
%
 
96.1
%
 
95.0
%
 
1.1
 %
 
963

 
945

 
1.9
 %
 
1,042

 
1,015

 
2.8
 %
Same-Store Total
 
100.0
%
 
93.3
%
 
94.2
%
 
(0.9
)%
 
$
1,062

 
$
1,047

 
1.4
 %
 
$
1,141

 
$
1,123

 
1.5
 %


 
S-11
 




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

 
$
23,298

 
$
21,884

 
6.5
%
 
$
9,680

 
$
8,983

 
7.8
 %
 
$
13,618

 
$
12,901

 
5.6
 %
Rochester, MN
 
1,711

 
18,962

 
18,155

 
4.4
%
 
7,290

 
7,318

 
(0.4
)%
 
11,672

 
10,837

 
7.7
 %
Omaha, NE
 
1,370

 
11,197

 
11,029

 
1.5
%
 
5,149

 
4,918

 
4.7
 %
 
6,048

 
6,111

 
(1.0
)%
Grand Forks, ND
 
1,555

 
12,646

 
12,566

 
0.6
%
 
5,957

 
5,843

 
2.0
 %
 
6,689

 
6,723

 
(0.5
)%
Bismarck, ND
 
1,259

 
10,852

 
10,662

 
1.8
%
 
4,710

 
4,635

 
1.6
 %
 
6,142

 
6,027

 
1.9
 %
St. Cloud, MN
 
1,190

 
10,577

 
10,090

 
4.8
%
 
4,890

 
4,836

 
1.1
 %
 
5,687

 
5,254

 
8.2
 %
Sioux Falls, SD
 
969

 
7,605

 
7,417

 
2.5
%
 
3,643

 
3,551

 
2.6
 %
 
3,962

 
3,866

 
2.5
 %
Billings, MT
 
749

 
6,373

 
6,010

 
6.0
%
 
2,457

 
2,241

 
9.6
 %
 
3,916

 
3,769

 
3.9
 %
Minot, ND
 
712

 
6,380

 
6,212

 
2.7
%
 
3,078

 
3,178

 
(3.1
)%
 
3,302

 
3,034

 
8.8
 %
Rapid City, SD
 
474

 
4,162

 
4,006

 
3.9
%
 
1,707

 
1,724

 
(1.0
)%
 
2,455

 
2,282

 
7.6
 %
Same-Store Total
 
11,785

 
$
112,052

 
$
108,031

 
3.7
%
 
$
48,561

 
$
47,227

 
2.8
 %
 
$
63,491

 
$
60,804

 
4.4
 %

 
 
% of NOI Contribution
 
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
 
21.4
%
 
93.0
%
 
91.5
%
 
1.5
 %
 
$
1,442

 
$
1,396

 
3.3
 %
 
$
1,550

 
$
1,480

 
5.0
%
Rochester, MN
 
18.4
%
 
95.5
%
 
93.5
%
 
2.0
 %
 
1,232

 
1,219

 
1.1
 %
 
1,289

 
1,261

 
2.4
%
Omaha, NE
 
9.5
%
 
93.9
%
 
94.8
%
 
(0.9
)%
 
886

 
868

 
2.1
 %
 
968

 
944

 
2.4
%
Grand Forks, ND
 
10.5
%
 
93.8
%
 
93.4
%
 
0.4
 %
 
908

 
915

 
(0.8
)%
 
963

 
961

 
0.2
%
Bismarck, ND
 
9.7
%
 
94.3
%
 
94.0
%
 
0.3
 %
 
951

 
958

 
(0.7
)%
 
1,015

 
1,001

 
1.5
%
St. Cloud, MN
 
9.0
%
 
95.0
%
 
94.2
%
 
0.8
 %
 
950

 
924

 
2.8
 %
 
1,040

 
1,000

 
4.0
%
Sioux Falls, SD
 
6.2
%
 
93.9
%
 
94.0
%
 
(0.1
)%
 
858

 
833

 
3.0
 %
 
928

 
904

 
2.6
%
Billings, MT
 
6.2
%
 
95.7
%
 
92.2
%
 
3.5
 %
 
923

 
913

 
1.1
 %
 
988

 
967

 
2.5
%
Minot, ND
 
5.2
%
 
94.9
%
 
94.4
%
 
0.5
 %
 
997

 
1,003

 
(0.6
)%
 
1,049

 
1,027

 
2.2
%
Rapid City, SD
 
3.9
%
 
96.0
%
 
95.3
%
 
0.7
 %
 
946

 
919

 
2.9
 %
 
1,016

 
986

 
3.2
%
Same-Store Total
 
100.0
%
 
94.3
%
 
93.4
%
 
0.9
 %
 
$
1,046

 
$
1,031

 
1.5
 %
 
$
1,120

 
$
1,091

 
2.8
%




 
S-12
 


IRET
PORTFOLIO SUMMARY(1) 
 
 
Three Months Ended
 
 
9/30/2019
 
6/30/2019
 
3/31/2019
 
12/31/2018
 
9/30/2018
Number of Apartment Homes
 
 
 
 
 
 
 
 
 
 
Same-Store
 
11,785

 
12,848

 
12,848

 
12,847

 
12,847

Non-Same-Store
 
1,551

 
1,127

 
1,127

 
855

 
855

All Communities
 
13,336

 
13,975

 
13,975

 
13,702

 
13,702

 
 
 
 
 
 
 
 
 
 
 
Average Scheduled Rent(2) per Apartment Home
 
 
 
 
 
 
 
 
 
 
Same-Store
 
$
1,062

 
$
1,028

 
$
1,013

 
$
1,018

 
$
1,027

Non-Same-Store
 
1,742

 
1,692

 
1,772

 
1,797

 
1,796

All Communities
 
$
1,123

 
$
1,081

 
$
1,064

 
$
1,066

 
$
1,075

 
 
 
 
 
 
 
 
 
 
 
Average Revenue per Occupied Apartment Home(3)
 
 
 
 
 
 
 
 
 
 
Same-Store
 
$
1,141

 
$
1,101

 
$
1,075

 
$
1,082

 
$
1,092

Non-Same-Store
 
1,887

 
1,848

 
1,943

 
1,939

 
1,956

All Communities
 
$
1,210

 
$
1,161

 
$
1,134

 
$
1,136

 
$
1,146

 
 
 
 
 
 
 
 
 
 
 
Weighted Average Occupancy(4)
 
 
 
 
 
 
 
 
 
 
Same-Store
 
93.3
%
 
94.3
%
 
95.6
%
 
94.4
%
 
91.9
%
Non-Same-Store
 
94.2
%
 
94.8
%
 
94.9
%
 
92.7
%
 
93.4
%
All Communities
 
93.4
%
 
94.4
%
 
95.5
%
 
94.2
%
 
92.2
%
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses as a % of Scheduled Rent
 
 
 
 
 
 
 
 
 
 
Same-Store
 
43.0
%
 
42.8
%
 
45.6
%
 
42.4
%
 
42.9
%
Non-Same-Store
 
38.1
%
 
37.4
%
 
37.6
%
 
30.5
%
 
36.8
%
All Communities
 
42.3
%
 
42.2
%
 
44.7
%
 
41.1
%
 
42.3
%
 
 
 
 
 
 
 
 
 
 
 
Capital Expenditures
 
 
 
 
 
 
 
 
 
 
Total Capital Expenditures per Apartment Home – Same-Store
 
$
178

 
$
192

 
$
80

 
$
254

 
$
274

 
(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 apartment homes.
(3)
Total revenues divided by the weighted average occupied apartment homes 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-13
 


IRET
SAME-STORE CAPITAL EXPENDITURES
($ in thousands, except per home amounts)
 
 
Three Months Ended
 
 
9/30/2019
 
9/30/2018
Total Same-Store Apartment Homes
 
11,785

 
11,785

 
 
 
 
 
Turnover
 
$
1,034

 
$
1,331

Furniture & Equipment
 
38

 
79

Building – Interior
 
28

 
130

Building – Exterior
 
553

 
1,055

Landscaping & Grounds
 
446

 
525

Capital Expenditures
 
$
2,099

 
$
3,120

Capital Expenditures per Apartment Home
 
$
178

 
$
265


 
 
Nine Months Ended
 
 
9/30/2019
 
9/30/2018
Total Same-Store Apartment Homes
 
11,785

 
11,785

 
 
 
 
 
Turnover
 
$
2,641

 
$
3,078

Furniture & Equipment
 
205

 
207

Building - Interior
 
182

 
333

Building - Exterior
 
1,196

 
2,324

Landscaping & Grounds
 
1,001

 
856

Capital Expenditures
 
$
5,225

 
$
6,798

Capital Expenditures per Apartment Home
 
$
443

 
$
577








 
S-14
 


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 for the nine months ended September 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.
 
 
 
Range for 12 Months Ended December 31, 2019
 
Nine Months Ended September 30, 2019
 
Full Year Revised Guidance
 
Prior Guidance
 
Change from Prior Midpoint
 
Actual Results
 
Amount
 
Amount
 
Amount
Net income (loss) available to common shareholders
$24,895
 
$32,100 to $33,400
 
$(15,100) to $(13,800)
 
$47,127
Net income (loss) per share - diluted(1)
$2.11
 
$2.72 to $2.82
 
$(1.27) to $(1.17)
 
$3.99
 
 
 
 
 
 
 
 
Same-store growth
 
 
 
 
 
 
 
Revenue
3.72%
 
3.25% to 3.75%
 
3.00% to 4.00%
 
—
Expenses
2.82%
 
3.00% to 3.50%
 
2.75% to 3.75%
 
—
NOI
4.42%
 
3.50% to 4.00%
 
3.00% to 4.00%
 
0.25%
 
 
 
 
 
 
 
 
Core FFO
$36,041
 
$48,400 to $49,700
 
$46,800 to $48,100
 
$1,560
Core FFO per share and Unit - diluted
$2.76
 
$3.68 to $3.78
 
$3.62 to $3.72
 
$0.06
Weighted average shares and Units
13,174
 
13,144
 
12,933
 
211
(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
 
Nine Months Ended
 
12 Months Ended
 
September 30, 2019
 
December 31, 2019
 
Amount
 
Per Share - Diluted
 
Amount
 
Per Share - Diluted
Net income (loss) available to common shareholders
$
24,895

 
$
2.11

 
$
32,715

 
$
2.77

Noncontrolling interests - Operating Partnership
2,550

 
 
 
3,749

 
 
Depreciation and amortization
55,299

 
 
 
74,522

 
 
Less depreciation-non real estate
(235
)
 
 
 
(296
)
 
 
Less depreciation-partially owned entities
(1,604
)
 
 
 
(2,053
)
 
 
Gain on sale of real estate
(39,774
)
 
 
 
(54,775
)
 
 
FFO applicable to common shares and Units
$
41,131

 
$
3.15

 
$
53,862

 
$
4.10

 
 
 
 
 
 
 
 
Adjustments to Core FFO:
 
 
 
 
 
 
 
Loss on extinguishment of debt
1,496

 
 
 
1,749

 
 
Gain on litigation settlement
(6,586
)
 
 
 
(6,586
)
 
 
Core FFO applicable to common shares and Units
$
36,041

 
$
2.76

 
$
49,025

 
$
3.73


 
S-15