EX-99.2 3 iret12312018exhibit992.htm EXHIBIT 99.2 Exhibit


Exhibit 99.2

a992cover12312018v2a02.jpg



Supplemental Financial and Operating Data
Table of Contents
December 31, 2018

 
S-1
 


Company Background
Transition Period Ending December 31, 2018
IRET is a real estate company focused on the ownership, management, acquisition, redevelopment, and development of apartment communities. As of December 31, 2018, IRET owned interests in 87 communities consisting of 13,702 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).
Change in Fiscal Year-End
On September 20, 2018, our Board of Trustees approved a change in our fiscal year-end from April 30 to December 31 effective as of January 1, 2019. As a result, we are presenting an eight-month period ended December 31, 2018, as our transition period, which includes the two-month period ended December 31, 2018. We believe that the year-end change is useful to our financial statement users to allow for increased comparability of our performance to our peers.
In addition, various disclosures, including FFO, Core FFO, and NOI in this earnings release, present information for the three months ended December 31, 2018, which is consistent with our new calendar year-end. As such, the data for the three months ended December 31, 2018 includes the results for the month ended October 31, 2018, which has previously been included in the financial results for the three and six months ended October 31, 2018, as included in our Form 10-Q and Form 8-K that were filed with the SEC on December 10, 2018. We believe that the data for the three months ended December 31, 2018 provides our financial statement users valuable information and is not meant to be indicative of results for the three months ended January 31, 2019 or any subsequent period. Furthermore, we believe that the three months ended January 31, 2018 is the most comparable previously reported quarter to the three months ended December 31, 2018. As a result, in some instances we present a comparison between these two quarters.
Company Snapshot
(as of December 31, 2018)
Company Headquarters
Minot, North Dakota
Reportable Segment
Multifamily
Total Apartment Communities
87
Total Apartment Homes
13,702
Common Shares Outstanding (thousands)
11,942
Limited Partnership Units Outstanding (thousands)
1,368
Common Share Distribution – Quarter/Annualized
$0.70/$2.80
Annualized Dividend Yield
5.7%
Total Capitalization
$1.4 billion
Common Shares and Limited Partnership Units outstanding as of February 20, 2019, were 11,768,248 and 1,367,333, respectively.
Investor Information
(as of December 31, 2018)
Board of Trustees
Jeffrey P. Caira
Trustee and Chair
Michael T. Dance
Trustee, Chair of Audit Committee
Mark O. Decker, Jr.
Trustee, President, Chief Executive Officer and Chief Investment Officer
Emily Nagle Green
Trustee, Chair of Nominating and Governance Committee
Linda J. Hall
Trustee, Chair of Compensation Committee
Terrance P. Maxwell
Trustee
John A. Schissel
Trustee
Mary J. Twinem
Trustee






 
S-2
 


Management
Mark O. Decker, Jr.
President, Chief Executive Officer, Chief Investment Officer, and Trustee
John A. Kirchmann
Executive Vice President and Chief Financial Officer
Anne Olson
Executive Vice President and Chief Operating Officer, General Counsel and Secretary
Executive Offices:
Investor Relations Contact:
800 LaSalle Avenue
Jon Bishop
Suite 1600
701-837-7104
Minneapolis, MN 55402
IR@iret.com
 
 
Trading Symbol for Common Shares:  IRET
 
Trading Symbol for Series C Preferred Shares:  IRET PRC
 
Stock Exchange Listing:  NYSE
 
Common Share Data (NYSE: IRET)
 
 
Two Months Ended
 
Three Months Ended
 
 
December 31, 2018
 
October 31, 2018
 
July 31, 2018
 
April 30, 2018
 
January 31, 2018
High Closing Price
 
$
54.70

 
$
59.80

 
$
59.40

 
$
55.80

 
$
60.60

Low Closing Price
 
$
47.00

 
$
53.30

 
$
51.30

 
$
46.50

 
$
55.20

Average Closing Price
 
$
52.45

 
$
55.10

 
$
55.07

 
$
50.88

 
$
58.00

Closing Price at end of quarter
 
$
49.07

 
$
54.30

 
$
54.80

 
$
53.30

 
$
56.70

Common Share Distributions—annualized
 
$
2.80

 
$
2.80

 
$
2.80

 
$
2.80

 
$
2.80

Closing Dividend Yield - annualized
 
5.7
%
 
5.2
%
 
5.1
%
 
5.3
%
 
4.9
%
Closing common shares outstanding (thousands)
 
11,942

 
11,973

 
11,951

 
11,953

 
12,004

Closing limited partnership units outstanding (thousands)
 
1,368

 
1,368

 
1,390

 
1,410

 
1,417

Closing market value of outstanding common shares, plus imputed closing market value of outstanding limited partnership units (thousands)
 
$
653,122

 
$
724,389

 
$
731,043

 
$
712,221

 
$
760,931

This Supplemental Operating and Financial Data contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements do not discuss historical fact, but instead include statements related to expectations, projections, intentions or other items related to the future. Forward-looking statements are typically identified by the use of terms such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and variations of those words and similar expressions. 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: economic conditions in the markets where we own properties or markets in which we may invest in the future; concentration of our investments in a single asset class and certain regions of the U.S.; rental conditions in our markets, including physical occupancy levels and rental rates; our potential inability to renew tenants or obtain new tenants upon expiration of existing leases, changes in tax and housing laws, or other factors; adverse changes in real estate markets, including the extent of future demand for multifamily apartment homes in our significant markets, barriers of entry into new markets, limitations on our ability to increase rental rates, our ability to identify and consummate attractive acquisitions on favorable terms, our ability to consummate any planned dispositions in a timely manner, our ability to reinvest sales proceeds successfully, and our ability to accommodate any significant decline in the market value of real estate serving as collateral for our mortgage obligations; inability to succeed in any new markets we may enter; failure of new acquisitions to achieve anticipated results or be efficiently integrated; inability to complete lease-up of our projects on schedule and on budget; failure to reinvest proceeds from sales of properties into tax-deferred exchanges, which could necessitate special dividend and tax protection payments; the need to fund capital expenditures out of cash flow; the need to reduce the dividends on our common shares; financing risks, including our potential inability to obtain debt or equity financing on favorable terms, or at all; the level and volatility of interest or

 
S-3
 


capitalization rates or capital market conditions, including the effects of rising interest rates and the effects of our interest rate hedging arrangements; changes in our operating costs, including real estate taxes, utilities, and insurance costs; the availability and cost of casualty insurance for losses; inability to continue to satisfy complex rules in order to maintain our status as a REIT for federal income tax purposes, inability of the Operating Partnership to satisfy the rules to maintain its status as a partnership for federal income tax purposes, and the risk of changes in laws affecting REITs; inability to attract and retain qualified personnel and employees; cyber liability or potential liability for breaches of our privacy or information security systems; inability to comply with environmental laws and regulations; the costs associated with complying with laws benefiting disabled persons or other safety regulations and requirements; our ability to address issues regarding catastrophic weather, natural events, and climate change; and those risks and uncertainties detailed from time to time in our filings with the Securities and Exchange Commission, including our Form 10-KT for the transition period ended December 31, 2018, subsequent quarterly reports on Form 10-Q, and other public filings.  We assume no obligation to update or supplement forward-looking statements that become untrue because of subsequent events.

 
S-4
 



IRET
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
(in thousands)
 
 
12/31/2018
 
10/31/2018
 
7/31/2018
 
4/30/2018
 
1/31/2018
ASSETS
 
 
 
 
 
 
 
 
 
 
Real estate investments
 
 
 
 
 
 
 
 
 
 
Property owned
 
$
1,627,636

 
$
1,638,072

 
$
1,636,233

 
$
1,669,764

 
$
1,568,725

Less accumulated depreciation
 
(353,871
)
 
(345,015
)
 
(326,772
)
 
(311,324
)
 
(304,149
)
 
 
1,273,765

 
1,293,057

 
1,309,461

 
1,358,440

 
1,264,576

Unimproved land
 
5,301

 
6,522

 
7,926

 
11,476

 
15,123

Mortgage loans receivable
 
10,410

 
10,530

 
10,530

 
10,329

 
10,329

Total real estate investments
 
1,289,476

 
1,310,109

 
1,327,917

 
1,380,245

 
1,290,028

Cash and cash equivalents
 
13,792

 
12,777

 
16,261

 
11,891

 
22,666

Restricted cash
 
5,464

 
5,085

 
4,103

 
4,225

 
121,337

Other assets
 
27,265

 
29,769

 
27,885

 
30,297

 
21,664

TOTAL ASSETS
 
$
1,335,997

 
$
1,357,740

 
$
1,376,166

 
$
1,426,658

 
$
1,455,695

 
 
 
 
 
 
 
 
 
 
 
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND EQUITY
 
 
 
 
 
 
 
 
 
 
LIABILITIES
 
 
 
 
 
 
 
 
 
 
Liabilities held for sale and liabilities of discontinued operations
 
$
—

 
$
—

 
$
—

 
$
—

 
$
2,016

Accounts payable and accrued expenses
 
40,892

 
27,920

 
28,112

 
29,018

 
33,776

Revolving line of credit
 
57,500

 
69,500

 
130,000

 
124,000

 
67,000

Term loans payable, net of loan costs
 
143,991

 
143,956

 
69,540

 
69,514

 
69,483

Mortgages payable, net of loan costs
 
444,197

 
447,549

 
464,557

 
509,919

 
553,388

TOTAL LIABILITIES
 
686,580

 
688,925

 
692,209

 
732,451

 
725,663

 
 
 
 
 
 
 
 
 
 
 
REDEEMABLE NONCONTROLLING INTERESTS – CONSOLIDATED REAL ESTATE ENTITIES
 
5,968

 
6,078

 
6,230

 
6,644

 
6,644

EQUITY
 
 
 
 
 
 
 
 
 
 
Series C Preferred Shares of Beneficial Interest
 
99,456

 
99,456

 
99,456

 
99,456

 
99,456

Common Shares of Beneficial Interest
 
899,234

 
900,526

 
899,708

 
900,097

 
910,173

Accumulated distributions in excess of net income
 
(429,048
)
 
(416,819
)
 
(402,190
)
 
(395,669
)
 
(364,684
)
Accumulated other comprehensive income
 
(856
)
 
3,321

 
1,987

 
1,779

 
359

Total shareholders’ equity
 
568,786

 
586,484

 
598,961

 
605,663

 
645,304

Noncontrolling interests – Operating Partnership
 
67,916

 
69,334

 
71,390

 
73,012

 
76,915

Noncontrolling interests – consolidated real estate entities
 
6,747

 
6,919

 
7,376

 
8,888

 
1,169

Total equity
 
643,449

 
662,737

 
677,727

 
687,563

 
723,388

TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS, AND EQUITY
 
$
1,335,997

 
$
1,357,740

 
$
1,376,166

 
$
1,426,658

 
$
1,455,695


 
S-5
 


IRET
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands, except per share amounts)
 
 
Three Months Ended
 
 
Eight months ended
OPERATING RESULTS
 
12/31/2018(1)
 
10/31/2018
 
7/31/2018
 
4/30/2018
 
1/31/2018
 
 
12/31/2018
 
12/31/2017
Revenue
 
$
45,730

 
$
45,638

 
$
45,946

 
$
44,185

 
$
42,716

 
 
$
121,871

 
$
111,249

Property operating expenses, including real estate taxes
 
18,390

 
19,336

 
19,529

 
18,734

 
18,055

 
 
50,719

 
47,815

Net operating income
 
27,340

 
26,302

 
26,417

 
25,451

 
24,661

 
 
71,152

 
63,434

Property management expenses
 
(1,447
)
 
(1,319
)
 
(1,367
)
 
(1,411
)
 
(1,387
)
 
 
(3,663
)
 
(3,652
)
Casualty gain (loss)
 
(540
)
 
(225
)
 
(225
)
 
155

 
(55
)
 
 
(915
)
 
(600
)
Depreciation/amortization
 
(18,812
)
 
(19,191
)
 
(18,612
)
 
(21,072
)
 
(18,390
)
 
 
(50,456
)
 
(54,902
)
Impairment of real estate investments
 
(1,221
)
 
—

 
—

 
(17,809
)
 
—

 
 
(1,221
)
 
(256
)
General and administrative expenses
 
(3,769
)
 
(3,374
)
 
(3,870
)
 
(4,123
)
 
(3,011
)
 
 
(9,812
)
 
(9,022
)
Acquisition and investment related costs
 
—

 
—

 
—

 
—

 
—

 
 
—

 
(19
)
Interest expense
 
(7,682
)
 
(7,997
)
 
(8,385
)
 
(8,302
)
 
(9,236
)
 
 
(21,359
)
 
(22,804
)
Loss on extinguishment of debt
 
(5
)
 
(4
)
 
(552
)
 
(122
)
 
(285
)
 
 
(556
)
 
(818
)
Interest and other income
 
483

 
429

 
516

 
592

 
433

 
 
1,233

 
714

Income (loss) before gain on sale of real estate and other investments and income (loss) from discontinued operations
 
(5,653
)
 
(5,379
)
 
(6,078
)
 
(26,641
)
 
(7,270
)
 
 
(15,597
)
 
(27,925
)
Gain (loss) on sale of real estate and other investments
 
612

 
(232
)
 
9,224

 
2,285

 
12,387

 
 
9,707

 
17,816

Income (loss) from continuing operations
 
(5,041
)
 
(5,611
)
 
3,146

 
(24,356
)
 
5,117

 
 
(5,890
)
 
(10,109
)
Income from discontinued operations
 
—

 
—

 
570

 
197

 
146,811

 
 
570

 
150,703

Net income (loss)
 
(5,041
)
 
(5,611
)
 
3,716

 
(24,159
)
 
151,928

 
 
(5,320
)
 
140,594

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net (income) loss attributable to noncontrolling interest – Operating Partnership
 
665

 
722

 
(135
)
 
2,663

 
(16,236
)
 
 
1,032

 
(14,222
)
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities
 
270

 
331

 
(665
)
 
622

 
413

 
 
(110
)
 
1,042

Net income (loss) attributable to controlling interests
 
(4,106
)
 
(4,558
)
 
2,916

 
(20,874
)
 
136,105

 
 
(4,398
)
 
127,414

Dividends to preferred shareholders
 
(1,705
)
 
(1,706
)
 
(1,705
)
 
(1,705
)
 
(1,766
)
 
 
(4,547
)
 
(6,296
)
Redemption of Preferred Shares
 
—

 
—

 
—

 
—

 
(8
)
 
 
—

 
(3,657
)
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS
 
$
(5,811
)
 
$
(6,264
)
 
$
1,211

 
$
(22,579
)
 
$
134,331

 
 
$
(8,945
)
 
$
117,461

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Per Share Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Earnings (loss) per common share from continuing operations – basic & diluted
 
$
(0.49
)
 
$
(0.52
)
 
$
0.06

 
$
(1.90
)
 
$
0.28

 
 
$
(0.79
)
 
$
(1.41
)
Earnings (loss) per common share from discontinued operations – basic & diluted
 
—

 
—

 
0.04

 
0.01

 
10.94

 
 
0.04

 
11.19

Net income (loss) per common share – basic & diluted
 
$
(0.49
)
 
$
(0.52
)
 
$
0.10

 
$
(1.89
)
 
$
11.22

 
 
$
(0.75
)
 
$
9.78

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Percentage of Revenues
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Property operating expenses, including real estate taxes
 
40.2
 %
 
42.4
 %
 
42.5
%
 
42.4
 %
 
42.3
%
 
 
41.6
 %
 
43.0
%
Depreciation/amortization
 
41.1
 %
 
42.1
 %
 
40.5
%
 
47.7
 %
 
43.1
%
 
 
41.4
 %
 
49.4
%
General and administrative expenses
 
8.2
 %
 
7.4
 %
 
8.4
%
 
9.3
 %
 
7.0
%
 
 
8.1
 %
 
8.1
%
Interest
 
16.8
 %
 
17.5
 %
 
18.2
%
 
18.8
 %
 
21.6
%
 
 
17.5
 %
 
20.5
%
Income (loss) from discontinued operations
 
—

 
—

 
1.2
%
 
0.4
 %
 
343.7
%
 
 
0.5
 %
 
135.5
%
Net income (loss)
 
(11.0
)%
 
(12.3
)%
 
8.1
%
 
(54.7
)%
 
355.7
%
 
 
(4.4
)%
 
126.4
%
 
(1)
The three months ended December 31, 2018 includes the month ended October 31, 2018 which was previously included in the financial results for the three and six months ended October 31, 2018 included in our supplemental package filed with the SEC on December 10, 2018.

 
S-6
 


IRET
RECONCILIATION OF NET INCOME AVAILABLE TO COMMON SHAREHOLDERS
TO FFO AND CORE FFO (unaudited)
(in thousands, except per share and unit amounts)
 
 
Three Months Ended
 
 
Eight Months Ended
 
 
12/31/2018(1)
 
10/31/2018
 
7/31/2018
 
4/30/2018(2)
 
1/31/2018
 
 
12/31/2018
 
12/31/2017
Funds From Operations(3)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net (loss) income available to common shareholders
 
(5,811
)
 
(6,264
)
 
1,211

 
(22,579
)
 
134,331

 
 
(8,945
)
 
117,461

Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling interests – Operating Partnership
 
(665
)
 
(722
)
 
135

 
(2,663
)
 
16,236

 
 
(1,032
)
 
14,222

Depreciation and amortization
 
18,056

 
18,446

 
17,837

 
20,269

 
19,017

 
 
48,425

 
61,200

Impairment of real estate
 
1,221

 
—

 
—

 
17,809

 
—

 
 
1,221

 
256

Gain on sale of real estate
 
(612
)
 
232

 
(8,628
)
 
(2,210
)
 
(163,791
)
 
 
(9,110
)
 
(167,553
)
FFO applicable to common shares and Units
 
$
12,189

 
$
11,692

 
$
10,555

 
$
10,626

 
$
5,793

 
 
$
30,559

 
$
25,586

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
FFO per share and unit - basic and diluted
 
$
0.92

 
$
0.88

 
$
0.79

 
$
0.79

 
$
0.43

 
 
$
2.29

 
$
1.90

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjustments to Core FFO:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Casualty loss write off
 
43

 
—

 
—

 
—

 
—

 
 
43

 
—

Loss on extinguishment of debt
 
5

 
4

 
552

 
122

 
6,787

 
 
556

 
7,326

Redemption of Preferred Shares
 
—

 
—

 
—

 
—

 
8

 
 
—

 
3,657

Severance and transitions costs
 
—

 
—

 
510

 
301

 
—

 
 
510

 
650

Core FFO applicable to common shares and Units
 
$
12,237

 
$
11,696

 
$
11,617

 
$
11,049

 
$
12,588

 
 
$
31,668

 
$
37,219

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Core FFO per share and unit - basic and diluted
 
$
0.92

 
$
0.88

 
$
0.87

 
$
0.83

 
$
0.94

 
 
$
2.38

 
$
2.76

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Weighted average shares and units
 
13,317

 
13,319

 
13,327

 
13,370

 
13,417

 
 
13,324

 
13,498

 
(1)
The three months ended December 31, 2018 includes the month ended October 31, 2018 which was previously included in the financial results for the three and six months ended October 31, 2018 included in our supplemental package filed with the SEC on December 10, 2018.
(2)
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. Accordingly, we recast FFO for the three months ended April 30, 2018, to exclude $2.6 million in impairment write-downs of land.
(3)
See Definitions section.

 
S-7
 


IRET
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO
CONTROLLING INTERESTS TO ADJUSTED EARNINGS BEFORE INTEREST,
TAXES, DEPRECIATION, AND AMORTIZATION (ADJUSTED EBITDA) (unaudited)
(in thousands)
 
 
Three Months Ended
 
 
Eight Months Ended
 
 
12/31/2018(1)
 
10/31/2018
 
7/31/2018
 
4/30/2018
 
1/31/2018
 
 
12/31/2018
 
12/31/2017
Adjusted EBITDA(2)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income (loss) attributable to controlling interests
 
$
(4,106
)
 
$
(4,558
)
 
$
2,916

 
$
(20,874
)
 
$
136,105

 
 
$
(4,398
)
 
$
127,414

Adjustments:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Noncontrolling interests – Operating Partnership
 
(665
)
 
(722
)
 
135

 
(2,663
)
 
16,236

 
 
(1,032
)
 
14,222

Income (loss) before noncontrolling interests – Operating Partnership
 
(4,771
)
 
(5,280
)
 
3,051

 
(23,537
)
 
152,341

 
 
(5,430
)
 
141,636

Add:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest expense
 
7,336

 
7,656

 
7,983

 
7,884

 
9,569

 
 
20,381

 
25,867

Loss on extinguishment of debt
 
4

 
4

 
552

 
122

 
6,787

 
 
556

 
7,326

Depreciation/amortization related to real estate investments
 
18,133

 
18,520

 
17,912

 
20,347

 
19,100

 
 
48,628

 
61,434

Impairment of real estate investments
 
1,221

 
—

 
—

 
17,809

 
—

 
 
1,221

 
256

Less:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest income
 
(465
)
 
(410
)
 
(481
)
 
(569
)
 
(408
)
 
 
(1,168
)
 
(1,093
)
Gain on sale of real estate and other investments
 
(611
)
 
232

 
(8,628
)
 
(2,210
)
 
(163,791
)
 
 
(9,110
)
 
(167,553
)
Adjusted EBITDA
 
$
20,847

 
$
20,722

 
$
20,389

 
$
19,846

 
$
23,598

 
 
$
55,078

 
$
67,873

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Ratios
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Adjusted EBITDA(2)/Interest expense
 
2.71
 x
 
2.59
 x
 
2.43
 x
 
2.39
 x
 
2.36
 x
 
 
2.58
 x
 
2.98
 x
Adjusted EBITDA(2)/Interest expense plus preferred distributions
 
2.22
 x
 
2.14
 x
 
1.91
 x
 
1.98
 x
 
2.01
 x
 
 
2.13
 x
 
2.33
 x
 
(1)
The three months ended December 31, 2018 includes the month ended October 31, 2018 which was previously included in the financial results for the three and six months ended October 31, 2018 included in our supplemental package filed with the SEC on December 10, 2018.
(2)
See Definitions section.


 
S-8
 



IRET
DEBT ANALYSIS
(in thousands)
Debt Maturity Schedule
Annual Expirations
 
 
Future Maturities of Debt (1)

 
Fixed
Debt
 
Variable
Debt
 
Total
Debt
 
Weighted
Average (2)
 
% of
Total Debt
2019
 
$
19,184

 
$
—

 
$
19,184

 
5.72
%
 
3.00
%
2020
 
81,767

 
—

 
81,767

 
5.56
%
 
12.60
%
2021
 
104,429

 
—

 
104,429

 
5.24
%
 
16.10
%
2022
 
38,843

 
—

 
38,843

 
4.34
%
 
6.00
%
2023
 
49,381

 
—

 
49,381

 
4.02
%
 
7.60
%
Thereafter
 
152,370

 
—

 
152,370

 
3.71
%
 
23.40
%
Total secured maturing debt
 
445,974

 
—

 
445,974

 
4.58
%
 
68.70
%
 
 
 
 
 
 
 
 
 
 
 
Unsecured line of credit
 
—

 
57,500

 
57,500

 
3.72
%
 
8.9
%
Unsecured term loans (3)
 
145,000

 
—

 
145,000

 
4.01
%
 
22.4
%
Total debt
 
$
590,974

 
$
57,500

 
$
648,474

 
4.25
%
 
100.0
%
 
(1)
Includes line of credit and term loans.
(2)
Weighted average interest rate of debt that matures in year.
(3)
Term loans have variable interest rates that are fixed with interest rate swaps that mature on January 31, 2023, January 15, 2024, and August 31, 2025.
 
 
12/31/2018
 
10/31/2018
 
7/31/2018
 
4/30/2018
 
1/31/2018
Debt Balances Outstanding(1)
 
 
 
 
 
 
 
 
 
 
Secured fixed rate
 
$
445,974

 
$
449,414

 
$
466,555

 
$
489,401

 
$
494,874

Secured variable rate
 
—

 
—

 
—

 
22,739

 
61,001

Unsecured line of credit
 
57,500

 
69,500

 
130,000

 
124,000

 
67,000

Unsecured term loans
 
145,000

 
145,000

 
70,000

 
70,000

 
70,000

Debt total
 
$
648,474

 
$
663,914

 
$
666,555

 
$
706,140

 
$
692,875

 
 
 
 
 
 
 
 
 
 
 
Weighted Average Interest Rate Secured
 
4.58
%
 
4.59
%
 
4.65
%
 
4.69
%
 
4.63
%
Line of Credit Rate
 
3.72
%
 
3.72
%
 
3.83
%
 
3.63
%
 
3.45
%
Term Loan Rate
 
4.01
%
 
3.96
%
 
3.86
%
 
3.86
%
 
4.01
%
 
(1)
Includes mortgages on properties held for sale.


Debt Maturity by Quarter for the Next Two Years
Year
 
First Quarter
 
Second Quarter
 
Third Quarter
 
Fourth Quarter
 
Total
2019
 
$
—

 
$
—

 
$
7,768

 
$
11,416

 
$
19,184

2020
 
21,330

 
36,038

 
—

 
24,399

 
81,767

 
 
 
 
 
 
 
 
 
 
$
100,951




 
S-9
 


IRET 
CAPITAL ANALYSIS 
(in thousands, except per share and unit amounts)
 
 
Three Months Ended
 
 
12/31/2018
 
10/31/2018
 
7/31/2018
 
4/30/2018
 
1/31/2018
Equity Capitalization
 
 

 
 

 
 

 
 

 
 

Common shares outstanding
 
11,942

 
11,972

 
11,950

 
11,953

 
12,004

Operating partnership (OP) units outstanding
 
1,368

 
1,368

 
1,390

 
1,410

 
1,417

Total common shares and OP units outstanding
 
13,310

 
13,340

 
13,340

 
13,363

 
13,421

Market price per common share (closing price at end of period)
 
$
49.07

 
$
54.30

 
$
54.80

 
$
53.30

 
$
56.70

Equity capitalization-common shares and OP units
 
653,122

 
724,389

 
731,043

 
712,221

 
760,931

Recorded book value of preferred shares
 
$
99,456

 
$
99,456

 
$
99,456

 
$
99,456

 
$
99,456

Total equity capitalization
 
$
752,578

 
$
823,845

 
$
830,499

 
$
811,677

 
$
860,387

 
 
 
 
 
 
 
 
 
 
 
Debt Capitalization
 
 
 
 
 
 
 
 
 
 
Total debt
 
648,474

 
663,914

 
666,555

 
706,140

 
692,875

Total capitalization
 
$
1,401,052

 
$
1,487,759

 
$
1,497,054

 
$
1,517,817

 
$
1,553,262

 
 
 
 
 
 
 
 
 
 
 
Total debt to total capitalization
 
0.46:1

 
0.45:1

 
0.45:1

 
0.47:1

 
0.45:1


 
 
Three Months Ended
 
 
Eight Months Ended
 
 
12/31/2018(1)
 
10/31/2018
 
7/31/2018
 
4/30/2018
 
1/31/2018
 
 
12/31/2018
 
12/31/2017
Debt service coverage ratio
 
2.13
x
 
1.99
 x
 
1.88
x
 
1.81
 x
 
1.78
 x
 
 
1.98
x
 
1.75
x
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Distribution Data
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Common shares and units outstanding at record date
 
13,276

 
13,340

 
13,340

 
13,363

 
13,420

 
 
13,276

 
13,457

Total common distribution declared(3)
 
$
9,293

 
$
9,339

 
$
9,345

 
$
9,395

 
$
9,420

 
 
$
27,977

 
$
28,389

Common distribution per share and unit(4)
 
$
0.70

 
$
0.70

 
$
0.70

 
$
0.70

 
$
0.70

 
 
$
1.87

 
$
1.87

Payout ratio (FFO per share and unit basis)(2)(4)
 
76.1
%
 
79.5
%
 
88.6
%
 
88.6
%
 
162.8
%
 
 
81.7
%
 
98.4
%
Payout ratio (Core FFO per share and unit basis)(2)(4)
 
76.1
%
 
79.5
%
 
80.5
%
 
84.3
%
 
74.5
%
 
 
78.6
%
 
67.8
%
 
(1)
The three months ended December 31, 2018 includes the month ended October 31, 2018 which was previously included in the financial results for the three and six months ended October 31, 2018 included in our supplemental package filed with the SEC on December 10, 2018.
(2)
See Definitions section.
(3)
Distributions declared for the three months ended December 31, 2018 does not include the distributions declared and paid in October 2018.
(4)
Common distributions declared in the eight months ended December 31, 2018 and 2017 are intended to cover nine months of FFO and Core FFO. As a result the total common distributions per share and unit were prorated to indicate eight months of distributions and provide for comparable calculations of payout ratios for FFO and Core FFO per share and unit.

 
S-10
 



IRET
NET OPERATING INCOME DETAIL
(in thousands)
 
 
 
 
 
Three Months Ended
 
 
Eight Months Ended
 
 
12/31/18(1)

1/31/18

$ Change

% Change

 
 
12/31/18

12/31/17

$ Change

% Change

Revenue
 
 
 
 
 
 
 
 
 
 
 
Same-store
 
$
37,391

$
35,955

$
1,436

4.0
 %
 
 
$
98,753

$
95,539

$
3,214

3.4
 %
Non-same-store
 
6,602

3,467

3,135

90.4
 %
 
 
17,385

4,044

13,341

329.9
 %
Other properties and dispositions
 
1,737

3,294

(1,557
)
(47.3
)%
 
 
5,733

11,666

(5,933
)
(50.9
)%
Total
 
45,730

42,716

3,014

7.1
 %
 
 
121,871

111,249

10,622

9.5
 %
Property operating expenses, including real estate taxes
 
 
 
 
 
 
 
 
 
 
 
Same-store
 
15,711

15,571

140

0.9
 %
 
 
42,359

42,064

295

0.7
 %
Non-same-store
 
2,309

1,399

910

65.0
 %
 
 
6,537

1,714

4,823

281.4
 %
Other properties and dispositions
 
370

1,085

(715
)
(65.9
)%
 
 
1,823

4,037

(2,214
)
(54.8
)%
Total
 
18,390

18,055

335

1.9
 %
 
 
50,719

47,815

2,904

6.1
 %
Net operating income
 
 
 
 
 
 
 
 
 
 
 
Same-store
 
21,680

20,384

1,296

6.4
 %
 
 
56,394

53,475

2,919

5.5
 %
Non-same-store
 
4,293

2,068

2,225

107.6
 %
 
 
10,848

2,330

8,518

365.6
 %
Other properties and dispositions
 
1,367

2,209

(842
)
(38.1
)%
 
 
3,910

7,629

(3,719
)
(48.7
)%
Total
 
27,340

24,661

2,679

10.9
 %
 
 
71,152

63,434

7,718

12.2
 %
Property management
 
(1,447
)
(1,387
)
 
 
 
 
(3,663
)
(3,652
)
 
 
Casualty gain (loss)
 
(540
)
(55
)
 
 
 
 
(915
)
(600
)
 
 
Depreciation/amortization
 
(18,812
)
(18,390
)
 
 
 
 
(50,456
)
(54,902
)
 
 
Impairment of real estate investments
 
(1,221
)
—

 
 
 
 
(1,221
)
(256
)
 
 
General and administrative expenses
 
(3,769
)
(3,011
)
 
 
 
 
(9,812
)
(9,041
)
 
 
Interest expense
 
(7,682
)
(9,236
)
 
 
 
 
(21,359
)
(22,804
)
 
 
Loss on debt extinguishment
 
(5
)
(285
)
 
 
 
 
(556
)
(818
)
 
 
Interest and other income
 
483

433

 
 
 
 
1,233

714

 
 
Income (loss) before gain on sale of real estate and other investments and income (loss) from discontinued operations
 
(5,653
)
(7,270
)
 
 
 
 
(15,597
)
(27,925
)
 
 
Gain (loss) on sale of real estate and other investments
 
612

12,387

 
 
 
 
9,707

17,816

 
 
Income (loss) from continuing operations
 
(5,041
)
5,117

 
 
 
 
(5,890
)
(10,109
)
 
 
Income (loss) from discontinued operations
 
—

146,811

 
 
 
 
570

150,703

 
 
Net income (loss)
 
$
(5,041
)
$
151,928

 
 
 
 
$
(5,320
)
$
140,594

 
 
 
(1)
The three months ended December 31, 2018 includes the month ended October 31, 2018 which was previously included in the financial results for the three and six months ended October 31, 2018 included in our supplemental package filed with the SEC on December 10, 2018.



 
S-11
 


IRET
SAME-STORE QUARTERLY COMPARISONS
($ in thousands)
 
 
Apartment Homes Included
 
Revenues
 
Expenses
 
NOI
 
 
 
Three months ended
 
 
 
Three months ended
 
 
 
Three months ended
 
 
Regions
 
 
12/31/2018(1)
 
1/31/2018
 
% Change
 
12/31/2018(1)
 
1/31/2018
 
% Change
 
12/31/2018(1)
 
1/31/2018
 
% Change
Rochester, MN
 
1,711

 
$
6,226

 
$
6,025

 
3.3
 %
 
$
2,367

 
$
2,446

 
(3.2
)%
 
$
3,859

 
$
3,579

 
7.8
 %
Minneapolis, MN
 
1,296

 
5,547

 
5,194

 
6.8
 %
 
2,120

 
2,002

 
5.9
 %
 
3,427

 
3,192

 
7.4
 %
Grand Forks, ND
 
1,554

 
4,125

 
4,156

 
(0.7
)%
 
1,906

 
2,009

 
(5.1
)%
 
2,219

 
2,147

 
3.4
 %
Omaha, NE
 
1,370

 
3,771

 
3,591

 
5.0
 %
 
1,535

 
1,551

 
(1.0
)%
 
2,236

 
2,040

 
9.6
 %
Bismarck, ND
 
1,259

 
3,520

 
3,480

 
1.1
 %
 
1,626

 
1,539

 
5.7
 %
 
1,894

 
1,941

 
(2.4
)%
St. Cloud, MN
 
1,190

 
3,473

 
3,311

 
4.9
 %
 
1,484

 
1,590

 
(6.7
)%
 
1,989

 
1,721

 
15.6
 %
Topeka, KS
 
1,042

 
2,519

 
2,435

 
3.4
 %
 
1,135

 
1,073

 
5.8
 %
 
1,384

 
1,362

 
1.6
 %
Sioux Falls, SD
 
969

 
2,522

 
2,386

 
5.7
 %
 
1,132

 
1,143

 
(1.0
)%
 
1,390

 
1,243

 
11.8
 %
Billings, MT
 
770

 
2,162

 
2,022

 
6.9
 %
 
842

 
741

 
13.6
 %
 
1,320

 
1,281

 
3.0
 %
Minot, ND
 
712

 
2,155

 
2,067

 
4.3
 %
 
1,037

 
962

 
7.8
 %
 
1,118

 
1,105

 
1.2
 %
Rapid City, SD
 
474

 
1,371

 
1,289

 
6.4
 %
 
527

 
515

 
2.3
 %
 
844

 
774

 
9.0
 %
Same-Store Total
 
12,347

 
$
37,391

 
$
35,956

 
4.0
 %
 
$
15,711

 
$
15,571

 
0.9
 %
 
$
21,680

 
$
20,385

 
6.4
 %


 
 
Three months ended 12/31/18
% of NOI
 
Weighted Average Occupancy (2)
 
Weighted Average Monthly
Rental Rate (3)
 
Weighted Average Monthly
Revenue per Occupied Home (4)
 
 
 
Three months ended
 
 
 
Three months ended
 
 
 
Three months ended
 
 
Regions
 
 
12/31/2018(1)
 
1/31/2018
 
% Change
 
12/31/2018(1)
 
1/31/2018
 
% Change
 
12/31/2018(1)
 
1/31/2018
 
% Change
Rochester, MN
 
17.8
%
 
95.1
%
 
93.9
%
 
1.2
 %
 
$
1,212

 
$
1,226

 
(1.1
)%
 
$
1,276

 
$
1,249

 
2.2
 %
Minneapolis, MN
 
15.8
%
 
93.8
%
 
91.4
%
 
2.4
 %
 
1,421

 
1,378

 
3.1
 %
 
1,521

 
1,462

 
4.0
 %
Grand Forks, ND
 
10.1
%
 
91.8
%
 
94.5
%
 
(2.7
)%
 
913

 
909

 
0.4
 %
 
964

 
943

 
2.2
 %
Omaha, NE
 
10.3
%
 
95.8
%
 
94.8
%
 
1.0
 %
 
876

 
858

 
2.1
 %
 
958

 
922

 
3.9
 %
Bismarck, ND
 
8.8
%
 
93.8
%
 
91.9
%
 
1.9
 %
 
945

 
967

 
(2.3
)%
 
994

 
1,002

 
(0.8
)%
St. Cloud, MN
 
9.2
%
 
95.2
%
 
94.3
%
 
0.9
 %
 
945

 
907

 
4.2
 %
 
1,021

 
983

 
3.9
 %
Topeka, KS
 
6.4
%
 
95.3
%
 
94.5
%
 
0.8
 %
 
811

 
798

 
1.6
 %
 
846

 
824

 
2.7
 %
Sioux Falls, SD
 
6.4
%
 
95.2
%
 
94.7
%
 
0.5
 %
 
853

 
814

 
4.8
 %
 
911

 
867

 
5.1
 %
Billings, MT
 
6.1
%
 
96.3
%
 
90.0
%
 
6.3
 %
 
904

 
909

 
(0.6
)%
 
971

 
972

 
(0.1
)%
Minot, ND
 
5.2
%
 
96.4
%
 
96.1
%
 
0.3
 %
 
1,001

 
997

 
0.4
 %
 
1,046

 
1,007

 
3.9
 %
Rapid City, SD
 
3.9
%
 
96.7
%
 
96.0
%
 
0.7
 %
 
933

 
900

 
3.7
 %
 
996

 
944

 
5.5
 %
Same-Store Total
 
100.0
%
 
94.7
%
 
93.6
%
 
1.1
 %
 
$
1,002

 
$
990

 
1.2
 %
 
$
1,066

 
$
1,037

 
2.9
 %

(1)
The three months ended December 31, 2018 includes the month ended October 31, 2018 which was previously included in the financial results for the three and six months ended October 31, 2018 included in our supplemental package filed with the SEC on December 10, 2018.
(2)
See definition of weighted average occupancy in the Definitions section.
(3)
Average scheduled rent per apartment home is scheduled rent divided by the total number of apartment homes. See definition of scheduled rent in the Definitions section.
(4)
Average revenue is defined as total rental revenues divided by the weighted average occupied apartment units for the period.


 
S-12
 


IRET
SAME-STORE SEQUENTIAL QUARTER COMPARISONS
($ in thousands)
 
 
Apartment Homes Included
 
Revenues
 
Expenses
 
NOI
 
 
 
Three months ended
 
 
 
Three months ended
 
 
 
Three months ended
 
 
Regions
 
 
12/31/2018(1)
 
9/30/2018
 
% Change
 
12/31/2018(1)
 
9/30/2018
 
% Change
 
12/31/2018(1)
 
9/30/2018
 
% Change
Rochester, MN
 
1,711

 
$
6,226

 
$
6,031

 
3.2
 %
 
$
2,367

 
$
2,477

 
(4.4
)%
 
$
3,859

 
$
3,554

 
8.6
 %
Minneapolis, MN
 
1,296

 
5,547

 
5,501

 
0.8
 %
 
2,120

 
2,080

 
1.9
 %
 
3,427

 
3,421

 
0.2
 %
Grand Forks, ND
 
1,554

 
4,125

 
4,149

 
(0.6
)%
 
1,906

 
1,890

 
0.8
 %
 
2,219

 
2,259

 
(1.8
)%
Omaha, NE
 
1,370

 
3,771

 
3,697

 
2.0
 %
 
1,535

 
1,686

 
(9.0
)%
 
2,236

 
2,011

 
11.2
 %
Bismarck, ND
 
1,259

 
3,520

 
3,572

 
(1.5
)%
 
1,626

 
1,471

 
10.5
 %
 
1,894

 
2,101

 
(9.9
)%
St. Cloud, MN
 
1,190

 
3,473

 
3,389

 
2.5
 %
 
1,484

 
1,570

 
(5.5
)%
 
1,989

 
1,819

 
9.3
 %
Topeka, KS
 
1,042

 
2,519

 
2,484

 
1.4
 %
 
1,135

 
1,154

 
(1.6
)%
 
1,384

 
1,330

 
4.1
 %
Sioux Falls, SD
 
969

 
2,522

 
2,505

 
0.7
 %
 
1,132

 
1,227

 
(7.7
)%
 
1,390

 
1,278

 
8.8
 %
Billings, MT
 
770

 
2,162

 
2,085

 
3.7
 %
 
842

 
911

 
(7.6
)%
 
1,320

 
1,174

 
12.4
 %
Minot, ND
 
712

 
2,155

 
2,051

 
5.1
 %
 
1,037

 
960

 
8.0
 %
 
1,118

 
1,091

 
2.5
 %
Rapid City, SD
 
474

 
1,371

 
1,350

 
1.6
 %
 
527

 
571

 
(7.7
)%
 
844

 
779

 
8.3
 %
Same-Store Total
 
12,347

 
$
37,391

 
$
36,814

 
1.6
 %
 
$
15,711

 
$
15,997

 
(1.8
)%
 
$
21,680

 
$
20,817

 
4.1
 %


 
 
Three months ended 12/31/18
% of NOI
 
Weighted Average Occupancy (2)
 
Weighted Average Monthly
Rental Rate (3)
 
Weighted Average Monthly
Revenue per Occupied Home (4)
 
 
 
Three months ended
 
 
 
Three months ended
 
 
 
Three months ended
 
 
Regions
 
 
12/31/2018(1)
 
9/30/2018
 
% Change
 
12/31/2018(1)
 
9/30/2018
 
% Change
 
12/31/2018(1)
 
9/30/2018
 
% Change
Rochester, MN
 
17.8
%
 
95.1
%
 
91.3
%
 
3.8
 %
 
$
1,212

 
$
1,229

 
(1.4
)%
 
$
1,276

 
$
1,287

 
(0.9
)%
Minneapolis, MN
 
15.8
%
 
93.8
%
 
92.4
%
 
1.4
 %
 
1,421

 
1,427

 
(0.4
)%
 
1,521

 
1,532

 
(0.7
)%
Grand Forks, ND
 
10.1
%
 
91.8
%
 
91.3
%
 
0.5
 %
 
913

 
922

 
(1.0
)%
 
964

 
975

 
(1.1
)%
Omaha, NE
 
10.3
%
 
95.8
%
 
93.4
%
 
2.4
 %
 
876

 
879

 
(0.3
)%
 
958

 
963

 
(0.5
)%
Bismarck, ND
 
8.8
%
 
93.8
%
 
94.1
%
 
(0.3
)%
 
945

 
961

 
(1.7
)%
 
994

 
1,005

 
(1.1
)%
St. Cloud, MN
 
9.2
%
 
95.2
%
 
92.4
%
 
2.8
 %
 
945

 
950

 
(0.5
)%
 
1,021

 
1,027

 
(0.6
)%
Topeka, KS
 
6.4
%
 
95.3
%
 
93.8
%
 
1.5
 %
 
811

 
815

 
(0.5
)%
 
846

 
848

 
(0.2
)%
Sioux Falls, SD
 
6.4
%
 
95.2
%
 
92.3
%
 
2.9
 %
 
853

 
851

 
0.2
 %
 
911

 
934

 
(2.5
)%
Billings, MT
 
6.1
%
 
96.3
%
 
92.3
%
 
4.0
 %
 
904

 
922

 
(2.0
)%
 
971

 
978

 
(0.7
)%
Minot, ND
 
5.2
%
 
96.4
%
 
91.6
%
 
4.8
 %
 
1,001

 
1,014

 
(1.3
)%
 
1,046

 
1,048

 
(0.2
)%
Rapid City, SD
 
3.9
%
 
96.7
%
 
93.5
%
 
3.2
 %
 
933

 
939

 
(0.6
)%
 
996

 
1,016

 
(2.0
)%
Same-Store Total
 
100.0
%
 
94.7
%
 
92.4
%
 
2.3
 %
 
$
1,002

 
$
1,011

 
(0.9
)%
 
$
1,066

 
$
1,075

 
(0.7
)%

(1)
The three months ended December 31, 2018 includes the month ended October 31, 2018 which was previously included in the financial results for the three and six months ended October 31, 2018 included in our supplemental package filed with the SEC on December 10, 2018.
(2)
Weighted average occupancy is defined as scheduled rent less vacancy losses divided by scheduled rent for the period.
(3)
Average scheduled rent per apartment home is scheduled rent divided by the total number of apartment homes. See definition of scheduled rent in the Definitions section.
(4)
Average revenue is defined as total rental revenues divided by the weighted average occupied apartment units for the period.


 
S-13
 


IRET
SAME-STORE YEAR-TO-DATE COMPARISONS
($ in thousands)
 
 
Apartment Homes Included
 
Revenues
 
Expenses
 
NOI
 
 
 
Eight months ended
 
 
 
Eight months ended
 
 
 
Eight months ended
 
 
Regions
 
 
12/31/2018
 
12/31/2017
 
% Change
 
12/31/2018
 
12/31/2017
 
% Change
 
12/31/2018
 
12/31/2017
 
% Change
Rochester, MN
 
1,711

 
$
16,287

 
$
15,918

 
2.3
 %
 
$
6,459

 
$
6,534

 
(1.1
)%
 
$
9,828

 
$
9,384

 
4.7
 %
Minneapolis, MN
 
1,296

 
14,661

 
13,939

 
5.2
 %
 
5,619

 
5,190

 
8.3
 %
 
9,042

 
8,749

 
3.3
 %
Grand Forks, ND
 
1,554

 
11,072

 
11,123

 
(0.5
)%
 
5,048

 
5,048

 
—
 %
 
6,024

 
6,075

 
(0.8
)%
Omaha, NE
 
1,370

 
9,934

 
9,475

 
4.8
 %
 
4,329

 
4,326

 
0.1
 %
 
5,605

 
5,149

 
8.9
 %
Bismarck, ND
 
1,259

 
9,494

 
9,426

 
0.7
 %
 
4,186

 
4,233

 
(1.1
)%
 
5,308

 
5,193

 
2.2
 %
St. Cloud, MN
 
1,190

 
9,117

 
8,647

 
5.4
 %
 
4,195

 
4,384

 
(4.3
)%
 
4,922

 
4,263

 
15.5
 %
Topeka, KS
 
1,042

 
6,674

 
6,461

 
3.3
 %
 
3,010

 
2,853

 
5.5
 %
 
3,664

 
3,608

 
1.6
 %
Sioux Falls, SD
 
969

 
6,666

 
6,273

 
6.3
 %
 
3,141

 
3,115

 
0.8
 %
 
3,525

 
3,158

 
11.6
 %
Billings, MT
 
770

 
5,629

 
5,383

 
4.6
 %
 
2,305

 
2,262

 
1.9
 %
 
3,324

 
3,121

 
6.5
 %
Minot, ND
 
712

 
5,601

 
5,512

 
1.6
 %
 
2,613

 
2,663

 
(1.9
)%
 
2,988

 
2,849

 
4.9
 %
Rapid City, SD
 
474

 
3,618

 
3,382

 
7.0
 %
 
1,454

 
1,455

 
(0.1
)%
 
2,164

 
1,927

 
12.3
 %
Same-Store Total
 
12,347

 
$
98,753

 
$
95,539

 
3.4
 %
 
$
42,359

 
$
42,063

 
0.7
 %
 
$
56,394

 
$
53,476

 
5.5
 %


 
 
Transition Period
% of NOI
 
Weighted Average Occupancy (1)
 
Weighted Average Monthly
Rental Rate (2)
 
Weighted Average Monthly
Revenue per Occupied Home (3)
 
 
 
Eight months ended
 
 
 
Eight months ended
 
 
 
Eight months ended
 
 
Regions
 
 
12/31/2018
 
12/31/2017
 
% Change
 
12/31/2018
 
12/31/2017
 
% Change
 
12/31/2018
 
12/31/2017
 
% Change
Rochester, MN
 
17.3
%
 
93.4
%
 
91.8
%
 
1.6
 %
 
$
1,220

 
$
1,240

 
(1.6
)%
 
$
1,698

 
$
1,688

 
0.6
 %
Minneapolis, MN
 
16.7
%
 
93.2
%
 
93.0
%
 
0.2
 %
 
1,416

 
1,367

 
3.6
 %
 
2,023

 
1,928

 
4.9
 %
Grand Forks, ND
 
10.6
%
 
92.0
%
 
94.4
%
 
(2.4
)%
 
919

 
910

 
1.0
 %
 
1,291

 
1,264

 
2.1
 %
Omaha, NE
 
9.9
%
 
94.7
%
 
94.6
%
 
0.1
 %
 
877

 
850

 
3.2
 %
 
1,276

 
1,218

 
4.8
 %
Bismarck, ND
 
9.3
%
 
94.1
%
 
92.1
%
 
2.0
 %
 
954

 
979

 
(2.6
)%
 
1,336

 
1,355

 
(1.4
)%
St. Cloud, MN
 
8.3
%
 
94.2
%
 
93.4
%
 
0.8
 %
 
941

 
902

 
4.3
 %
 
1,356

 
1,297

 
4.5
 %
Topeka, KS
 
6.7
%
 
94.7
%
 
94.9
%
 
(0.2
)%
 
811

 
793

 
2.3
 %
 
1,127

 
1,089

 
3.5
 %
Sioux Falls, SD
 
6.3
%
 
93.7
%
 
93.8
%
 
(0.1
)%
 
848

 
808

 
5.0
 %
 
1,224

 
1,150

 
6.4
 %
Billings, MT
 
5.9
%
 
93.9
%
 
88.9
%
 
5.0
 %
 
912

 
916

 
(0.4
)%
 
1,297

 
1,311

 
(1.1
)%
Minot, ND
 
5.2
%
 
94.4
%
 
94.7
%
 
(0.3
)%
 
1,006

 
1,016

 
(1.0
)%
 
1,388

 
1,362

 
1.9
 %
Rapid City, SD
 
3.8
%
 
95.2
%
 
94.0
%
 
1.2
 %
 
932

 
899

 
3.7
 %
 
1,336

 
1,265

 
5.6
 %
Same-Store Total
 
100.0
%
 
93.7
%
 
93.1
%
 
0.6
 %
 
$
1,004

 
$
992

 
1.2
 %
 
$
1,422

 
$
1,385

 
2.8
 %

(1)
Weighted average occupancy is defined as scheduled rent less vacancy losses divided by scheduled rent for the period.
(2)
Average scheduled rent per apartment home is scheduled rent divided by the total number of apartment homes. See definition of scheduled rent in the Definitions section.
(3)
Average revenue is defined as total rental revenues divided by the weighted average occupied apartment units for the period.



 
S-14
 


IRET
PORTFOLIO SUMMARY (1) 
 
 
Three Months Ended
 
 
12/31/2018(2)
 
10/31/2018
 
7/31/2018
 
4/30/2018
 
1/31/2018
Number of Units
 
 

 
 

 
 

 
 

 
 

Same-Store
 
12,347

 
12,347

 
12,348

 
11,320

 
11,320

Non-Same-Store
 
1,355

 
1,355

 
1,355

 
2,856

 
2,466

All Properties
 
13,702

 
13,702

 
13,703

 
14,176

 
13,786

 
 
 
 
 
 
 
 
 
 
 
Average Scheduled Rent(3) per Unit
 
 
 
 
 
 

 
 
 
 
Same-Store
 
$
1,002

 
$
1,009

 
$
1,002

 
$
942

 
$
957

Non-Same-Store
 
1,654

 
1,661

 
1,655

 
1,358

 
1,355

All Properties
 
$
1,066

 
$
1,073

 
$
1,066

 
$
1,023

 
$
1,028

 
 
 
 
 
 
 
 
 
 
 
Average Revenue per Unit(4)
 
 
 
 
 
 

 
 
 
 
Same-Store
 
$
1,066

 
$
1,079

 
$
1,061

 
$
992

 
$
1,007

Non-Same-Store
 
1,770

 
1,797

 
1,774

 
1,349

 
1,407

All Properties
 
$
1,136

 
$
1,150

 
$
1,131

 
$
1,064

 
$
1,079

 
 
 
 
 
 
 
 
 
 
 
Physical Occupancy(5)
 
 
 
 
 
 

 
 
 
 
Same-Store
 
95.8
%
 
95.4
%
 
94.0
%
 
96.5
%
 
95.3
%
Non-Same-Store
 
94.2
%
 
92.7
%
 
90.3
%
 
92.1
%
 
90.1
%
All Properties
 
95.7
%
 
95.1
%
 
93.6
%
 
95.6
%
 
94.3
%
 
 
 
 
 
 
 
 
 
 
 
Operating Expenses as a % of Scheduled Rent
 
 
 
 
 
 

 
 
 
 
Same-Store
 
47.3
%
 
46.6
%
 
47.0
%
 
46.6
%
 
47.8
%
Non-Same-Store
 
35.6
%
 
42.1
%
 
37.8
%
 
40.1
%
 
39.1
%
All Properties
 
45.5
%
 
45.9
%
 
45.6
%
 
44.9
%
 
45.7
%
 
 
 
 
 
 
 
 
 
 
 
Capital Expenditures
 
 
 
 
 
 

 
 
 
 
Total Capital Expenditures(2) per Unit – Same-Store
 
$
254

 
$
240

 
$
281

 
$
153

 
$
240


(1)
Previously reported amounts are not revised for discontinued operations or changes in the composition of the same-store properties pool.
(2)
The three months ended December 31, 2018 includes the month ended October 31, 2018 which was previously included in the financial results for the three and six months ended October 31, 2018 included in our supplemental package filed with the SEC on December 10, 2018.
(3)
See definition of scheduled rent in the Definitions section. Average scheduled rent per apartment home is scheduled rent divided by the total number of apartment homes.
(4)
Average revenue per apartment home is total revenues divided by the weighted average occupied homes for the period.
(5)
See definition of physical occupancy in the Definitions section.

 
S-15
 


IRET
SAME-STORE CAPITAL EXPENDITURES
($ in thousands, except per home amounts)
 
 
Three Months Ended
 
 
12/31/2018(1)
 
1/31/2018
Total Multifamily Same-Store Units
 
12,348

 
12,344

 
 
 
 
 
Turnover
 
$
829

 
$
987

Furniture & Equipment
 
175

 
80

Building - Interior
 
257

 
258

Building - Exterior
 
1,381

 
901

Landscaping & Grounds
 
493

 
408

Capital Expenditures
 
$
3,135

 
$
2,633

CapEx per Unit
 
254

 
213

(1)
The three months ended December 31, 2018 includes the month ended October 31, 2018 which was previously included in the financial results for the three and six months ended October 31, 2018 included in our supplemental package filed with the SEC on December 10, 2018.


 
 
Eight Months Ended
 
 
12/31/2018
 
12/31/2017
Total Multifamily Same-Store Units
 
12,348

 
12,344

 
 
 
 
 
Turnover
 
$
2,985

 
$
3,961

Furniture & Equipment
 
323

 
264

Building - Interior
 
459

 
840

Building - Exterior
 
3,085

 
2,726

Landscaping & Grounds
 
1,503

 
1,916

Capital Expenditures
 
$
8,355

 
$
9,707

CapEx per Unit
 
677

 
786





 
S-16
 


IRET
2019 Calendar Year Financial Outlook
($ in thousands, except per share amounts)
We are providing guidance for our 2019 calendar year same-store performance, EPS, and Core FFO per share.
 
12 Months Ended
 
Range for 12 Months Ended December 31, 2019
 
December 31, 2018(1)
 
Lower
 
Mid Point
 
Upper
 
Amount
 
Amount
% Change
 
Amount
% Change
 
Amount
% Change
Net income available to common shareholders
$
(21,844
)
 
$
(24,491
)
12.10
%
 
$
(19,884
)
(9.00
)%
 
$
(19,224
)
(12.00
)%
EPS(2)
$
(1.83
)
 
$
(1.86
)
1.60
%
 
$
(1.66
)
(9.30
)%
 
$
(1.46
)
(20.20
)%
 
 
 
 
 
 
 
 
 
 
 
Same Store Outlook
 
 
 
 
 
 
 
 
 
 
Revenue
$
154,963

 
$
158,800

2.50
%
 
$
160,000

3.25
 %
 
$
161,200

4.00
 %
Expenses
$
67,133

 
$
69,800

4.00
%
 
$
69,300

3.25
 %
 
$
68,800

2.50
 %
NOI
$
87,830

 
$
89,600

2.00
%
 
$
90,700

3.25
 %
 
$
91,800

4.50
 %
 
 
 
 
 
 
 
 
 
 
 
Core FFO
$
45,444

 
$
46,348

2.00
%
 
$
47,666

4.90
 %
 
$
48,981

7.80
 %
Core FFO per Share
$
3.41

 
$
3.52

3.30
%
 
$
3.62

6.30
 %
 
$
3.72

9.30
 %
Weighted Average Shares and Units
13,344

 
13,167

 
 
13,167

 
 
13,167

 
(1)
For comparative purposes, 2018 same-store includes Park Place Apartments - 500 apartment homes (acquired September 2017), which was transferred to the same-store pool effective January 1, 2019.
(2)
Earnings per share excludes net income attributable to noncontrolling interests.
Reconciliation of Net Income Available to Common Shareholders to 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.
 
 
 
Outlook
 
12 Months Ended
 
12 Months Ended
 
December 31, 2018
 
December 31, 2019
 
Amount
 
Per Share
 
Amount
 
Per Share
Net income (loss) available to common shareholders
$
(21,844
)
 
$
(1.83
)
 
$
(19,884
)
 
$
(1.66
)
Noncontrolling interests - Operating Partnership
(2,553
)
 

 
(1,961
)
 
 
Depreciation and amortization
74,524

 

 
69,511

 
 
Impairment of real estate attributable to controlling interests
19,030

 
 
 
—

 
 
Gain on sale of real estate attributable to controlling interests
(25,245
)
 
 
 
—

 
 
FFO applicable to common shares and Units
$
43,912

 
$
3.29

 
$
47,666

 
$
3.62

 
 
 
 
 
 
 
 
Adjustments to Core FFO:
 
 
 
 
 
 
 
Casualty loss write off
43

 
 
 
—

 
 
Loss on extinguishment of debt
678

 
 
 
—

 
 
Severance and transition costs
811

 
 
 
—

 
 
Core FFO applicable to common shares and Units
$
45,444

 
$
3.41

 
$
47,666

 
$
3.62



 
S-17
 


Reconciliation of 2019 Core FFO
Amount
 
Per Share
 
2018 Calendar Year Core FFO
$
45,444

 
$
3.41

 
2018 Calendar Year NOI Reported from Properties Disposed of During 2018
(3,759
)
 
(0.29
)
 
2019 Calendar Year Same-Store NOI Growth
2,870

 
0.22

 
2019 Calendar Non-Same-Store NOI Growth
2,410

 
0.18

 
SouthFork Acquisition (acquired February 26, 2019)
464

 
0.04

 
SouthFork NOI
 
$
1,970

 
$
0.15

SouthFork Interest Expense
 
(930
)
 
(0.07
)
SouthFork Preferred Dividends
 
(576
)
 
(0.04
)
Reduction in Interest Expense
$
1,506

 
$
0.11

 
Other, including G&A, Property Management, and Casualty
(1,269
)
 
(0.10
)
 
Impact of Change in Share Count
 
 
0.05

 
2019 Core FFO Per Share - Mid Point
$
47,666

 
$
3.62

 
Notes:
•
Guidance includes the acquisition of SouthFork Townhomes on February 26, 2019, and the share repurchases described under "Subsequent Events."
•
2019 estimates include $5.1 million of value-add projects. Value-add projects are underwritten at returns of 8%-20%. Our portfolio-wide value-add is projected to be neutral to 2019 FFO due to the initial costs to start the program.

 
S-18
 


Definitions
December 31, 2018
 
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. Adjusted EBITDA as calculated by us is not comparable to Adjusted EBITDA reported by other REITs that do not define Adjusted EBITDA exactly as we do. 
Core funds from operations (Core FFO) is FFO as adjusted for non-routine items or items not considered core to our business operations. By further adjusting for items that are not considered part of our core business operations, we believe Core FFO provides investors with additional information to compare our core operating and financial performance between periods. Core FFO should not be considered as an alternative to net income as an indication of financial performance, or as an alternative to cash flows from operations as a measure of liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions to shareholders. Core FFO is a non-GAAP and non-standardized measure and may be calculated differently by other REITs.
Debt to total market capitalization is total debt from the balance sheet divided by the sum of total debt from the balance sheet plus the market value of shares outstanding at the end of the period.
Debt service coverage ratio is computed by dividing Adjusted EBITDA by interest expense and principal amortization.
Earnings per share (EPS) is computed by dividing net income available to our common shareholders by the weighted average number of common shares outstanding during the period.
Funds from operations (FFO) is defined by the National Association of Real Estate Investment Trusts, Inc. (Nareit) 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, gains and losses from change in control, 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. 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 generally is not correlated with changes in the value of those assets, whose value does not diminish predictably over time, as historical cost depreciation implies. In addition, the exclusion in Nareit’s definition of FFO of impairment write-downs and gains and losses from the sale of real estate assets helps to identify the operating results of the long-term assets that form the base of our investments, and assists management and investors in comparing those operating results between periods.
Net debt to annualized adjusted EBITDA is total debt less cash and cash equivalents and real estate deposits as reported for the end of the quarter divided by Adjusted EBITDA as reported for the end of the quarter multiplied by 4.
Net operating income (NOI) is a non-U.S. GAAP measure which we define as total real estate revenues less property operating expenses, including real estate taxes. We believe that NOI is an important supplemental measure of operating performance for a REIT’s operating real estate because it provides a measure of core operations that is unaffected by depreciation, amortization, financing, property management overhead, and general and administrative expense. NOI does not represent cash generated by operating activities in accordance with U.S. GAAP and should not be considered an alternative to net income, net income available for common shareholders, or cash flow from operating activities as a measure of financial performance.
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.
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.

 
S-19
 


Physical occupancy represents the actual number of apartment homes leased divided by the total number of apartment homes at the end of the period.
Scheduled rent represents the value of all apartment homes, with occupied apartment homes valued at contractual rental 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 apartment homes, delinquencies and concessions are not taken into account. Market rates are determined using the recently signed 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.
Same-store properties are properties owned or in service for the entirety of the periods being compared (except for properties for classified as held for sale), and which, in the case of development properties, which have achieved a stabilized level of physical occupancy, which is generally 90%.
U.S. GAAP is defined as accounting principles generally accepted in the United States of America.
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-20