EX-99.1 2 iret01312018exhibit991.htm EXHIBIT 99.1
Exhibit 99.1
Earnings Release
IRET Announces Fiscal Third Quarter 2018 Results
MINOT, N.D., March 12, 2018 – IRET (NYSE: IRET) announced today its fiscal third quarter 2018 financial and operating results. Net income and Funds from Operations (“FFO”) per share for the three and nine months ended January 31, 2018, are detailed below. Core FFO adjusts FFO for certain non-routine items, and both FFO and Core FFO are reconciled to net income in the tables accompanying this earnings release.

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

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

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

“Today marks the moment IRET can be considered a multifamily real estate company,” said Mark O. Decker, Jr., IRET’s President and CEO. “With the previously-announced sales of our healthcare properties, apartment communities now comprise more than 90% of our portfolio, and with the pending acquisition in Denver, our redeployment is nearly finished. Our team completed the transformation we set out to achieve, and we can now focus the full attention of our organization on improving our operational performance and growing and refining our apartment portfolio.”
Third Quarter Fiscal Year 2018 Highlights

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

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

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

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

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

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

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

Subsequent to quarter-end, we entered into a purchase agreement to acquire Westend, another Denver apartment community with 390 homes.
Dispositions
During the quarter, we sold 27 healthcare properties for $400.8 million, two other properties for $35.4 million, and two multifamily properties for $6.7 million.
Subsequent to quarter-end, we sold a commercial property and adjacent parcel of unimproved land in Bismarck, ND, for an aggregate sale price of $5.5 million.
Balance Sheet
At the end of the third quarter, we had $174.8 million of total liquidity on our balance sheet, including $152.2 million available on our corporate revolver.
During the quarter, we repurchased and retired approximately 152,000 common shares and redeemed approximately 450,000 Units for an aggregate cost of approximately $3.5 million, representing an average price of approximately $5.78 per share. We also closed on a $70 million unsecured term loan that matures in 2023 and executed a swap agreement to synthetically fix the interest rate for the full duration of the loan.
Quarterly Distributions
On March 5, 2018, IRET’s Board of Trustees declared a regular quarterly distribution of $0.07 per share/unit payable on April 2, 2018, to common shareholders and unitholders of record on March 15, 2018. This distribution will be the 188th consecutive quarterly distribution paid by IRET since its inception in 1970. It represents an annualized rate of $0.28 per share/unit with an annualized yield of 5.9% based on IRET’s closing share price as of March 9, 2018.
The Board of Trustees also declared a distribution of $0.4140625 per share on the 6.625% Series C Cumulative Redeemable Preferred Shares (NYSE: IRET PRC) payable on April 2, 2018, to holders of record on March 15, 2017. Series C preferred share distributions are cumulative and payable quarterly in arrears at an annual rate of $1.65625 per share.

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Earnings Call

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

Supplemental Information
Supplemental Operating and Financial Data for the Quarter Ended January 31, 2018 (“Supplemental Information”), is available in the Investors section on IRET’s website at www.iretapartments.com or by calling Investor Relations at 701-837-7104. Non-GAAP financial measures and other capitalized terms, as used in this earnings release, are defined and reconciled in the Supplemental Information, which accompanies this earnings release.
About IRET
IRET is a real estate company focused on the ownership, management, acquisition, redevelopment, and development of multifamily apartment communities. As of January 31, 2018, IRET owned interests in 89 multifamily properties consisting of 13,786 apartment homes. IRET's common shares and Series C preferred shares are publicly traded on the New York Stock Exchange (NYSE symbols: IRET and IRET PRC, respectively).
Forward Looking Statements
Certain statements in this press release are based on our current expectations and assumptions, and are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements do not discuss historical fact, but instead include statements related to expectations, projections, intentions or other items related to the future. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and variations of those words and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements to be materially different from the results of operations, financial conditions, or plans expressed or implied by the forward-looking statements. Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, we can give no assurance our expectations will be achieved. Any statements contained herein that are not statements of historical fact should be deemed forward-looking statements. As a result, reliance should not be placed on these forward-looking statements as these statements are subject to known and unknown risks, uncertainties, and other factors beyond our control and could differ materially from our actual results and performance. Such risks and uncertainties are detailed from time to time in our filings with the SEC, including the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Risk Factors” contained in our Annual Report on Form 10-K for the fiscal year ended April 30, 2017, in subsequent quarterly reports on Form 10-Q and in other public reports. We assume no obligation to update or supplement forward-looking statements that become untrue due to subsequent events.

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IRET
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO
IRET TO FFO AND CORE FFO
z

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

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

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

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IRET
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO
IRET TO FFO AND CORE FFO

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

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

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

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IRET
RECONCILIATION OF NET OPERATING INCOME TO THE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

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

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

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

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IRET
RECONCILIATION OF NET OPERATING INCOME TO THE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

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

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

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

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

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