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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q

☑ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020
or

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________
Commission File Number 001-35624
INVESTORS REAL ESTATE TRUST
(Exact name of registrant as specified in its charter)

| North Dakota |  |  | 45-0311232
| (State or other jurisdiction of incorporation or organization) |  |  | (I.R.S. Employer Identification No.)
1400 31st Avenue SW | Suite 60 | Post Office Box 1988 | Minot | ND | 58702-1988
(Address of principal executive offices) |  |  | (Zip code)

(701) 837-4738
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to the filing requirements for at least the past 90 days.

Yes | ☑ |  | No | ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes | ☑ |  | No | ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer | ☑ | Accelerated filer | ☐ | Non-accelerated filer | ☐
Smaller Reporting Company | ☐ | Emerging growth company | ☐ |  |

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes | ☐ |  | No | ☑

Securities registered pursuant to Section 12(b) of the Exchange Act:

Title of each class | Trading Symbol(s) | Name of each exchange on which registered
Common Shares of Beneficial Interest, no par value | IRET | New York Stock Exchange
Series C Cumulative Redeemable Preferred Shares | IRET-PC | New York Stock Exchange

The number of common shares of beneficial interest outstanding as of May 4, 2020, was 12,165,896.

Table of Contents
TABLE OF CONTENTS

| Page
Part I. Financial Information |
Item 1. Financial Statements - First Quarter - 2020: | 3
Condensed Consolidated Balance Sheets (unaudited) March 31, 2020 and December 31, 2019 | 3
Condensed Consolidated Statements of Operations (unaudited) For the Three Months ended March 31, 2020 and 2019 | 4
Condensed Consolidated Statements of Comprehensive Income (unaudited) For the Three Months ended March 31, 2020 and 2019 | 5
Condensed Consolidated Statements of Equity (unaudited) For the Three Months ended March 31, 2020 and 2019 | 6
Condensed Consolidated Statements of Cash Flows (unaudited) For the Three Months ended March 31, 2020 and 2019 | 7
Notes to Condensed Consolidated Financial Statements (unaudited) | 8
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 20
Item 3. Quantitative and Qualitative Disclosures About Market Risk | 31
Item 4. Controls and Procedures | 32
Part II. Other Information |
Item 1. Legal Proceedings | 33
Item 1A. Risk Factors | 33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 35
Item 3. Defaults Upon Senior Securities | 35
Item 4. Mine Safety Disclosures | 35
Item 5. Other Information | 35
Item 6. Exhibits | 36
Signatures | 37

2

Table of Contents
PART I
Item 1. Financial Statements.
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

| (in thousands, except per share data)
| March 31, 2020 |  | December 31, 2019
ASSETS |  |  |
Real estate investments |  |  |
Property owned | $ | 1,687,436 |  |  | $ | 1,643,078 |
Less accumulated depreciation | (366,307 | ) |  | (349,122 | )
| 1,321,129 |  |  | 1,293,956 |
Unimproved land | 1,376 |  |  | 1,376 |
Mortgage loans receivable | 16,775 |  |  | 16,140 |
Total real estate investments | 1,339,280 |  |  | 1,311,472 |
Cash and cash equivalents | 26,338 |  |  | 26,579 |
Restricted cash | 2,344 |  |  | 19,538 |
Other assets | 21,124 |  |  | 34,829 |
TOTAL ASSETS | $ | 1,389,086 |  |  | $ | 1,392,418 |
LIABILITIES, MEZZANINE EQUITY, AND EQUITY |  |  |
LIABILITIES |  |  |
Accounts payable and accrued expenses | $ | 52,337 |  |  | $ | 47,155 |
Revolving lines of credit | 83,000 |  |  | 50,079 |
Notes payable, net of unamortized loan costs of $894 and $942 respectively | 269,106 |  |  | 269,058 |
Mortgages payable, net of unamortized loan costs of $1,621 and $1,712, respectively | 328,367 |  |  | 329,664 |
TOTAL LIABILITIES | $ | 732,810 |  |  | $ | 695,956 |
COMMITMENTS AND CONTINGENCIES (NOTE 10) |  |  |
SERIES D PREFERRED UNITS (Cumulative convertible preferred units, $100 par value, 166 units issued and outstanding at March 31, 2020 and December 31, 2019, aggregate liquidation preference of $16,560) | $ | 16,560 |  |  | $ | 16,560 |
EQUITY |  |  |
Series C Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value, $25 per share liquidation preference, 3,982 shares issued and outstanding at March 31, 2020, aggregate liquidation preference of $99,552 and 4,118 shares issued and outstanding at December 31, 2019, aggregate liquidation preference of $102,971) | 96,046 |  |  | 99,456 |
Common Shares of Beneficial Interest (Unlimited authorization, no par value, 12,163 shares issued and outstanding at March 31, 2020 and 12,098 shares issued and outstanding at December 31, 2019) | 912,653 |  |  | 917,400 |
Accumulated distributions in excess of net income | (407,150 | ) |  | (390,196 | )
Accumulated other comprehensive income (loss) | (17,360 | ) |  | (7,607 | )
Total shareholders’ equity | $ | 584,189 |  |  | $ | 619,053 |
Noncontrolling interests – Operating Partnership (1,043 units at March 31, 2020 and 1,058 units at December 31, 2019) | 54,777 |  |  | 55,284 |
Noncontrolling interests – consolidated real estate entities | 750 |  |  | 5,565 |
Total equity | $ | 639,716 |  |  | $ | 679,902 |
TOTAL LIABILITIES, MEZZANINE EQUITY, AND EQUITY | $ | 1,389,086 |  |  | $ | 1,392,418 |

See accompanying Notes to Condensed Consolidated Financial Statements.
3

Table of Contents
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

| (in thousands, except per share data)
| Three Months Ended March 31,
| 2020 |  | 2019
REVENUE | $ | 44,406 |  |  | $ | 45,608 |
EXPENSES |  |  |
Property operating expenses, excluding real estate taxes | 13,468 |  |  | 14,804 |
Real estate taxes | 5,465 |  |  | 5,232 |
Property management expense | 1,554 |  |  | 1,554 |
Casualty loss | 327 |  |  | 641 |
Depreciation and amortization | 18,160 |  |  | 18,111 |
General and administrative expenses | 3,428 |  |  | 3,806 |
TOTAL EXPENSES | $ | 42,402 |  |  | $ | 44,148 |
Operating income (loss) | 2,004 |  |  | 1,460 |
Interest expense | (6,911 | ) |  | (7,896 | )
Loss on extinguishment of debt | — |  |  | (2 | )
Interest and other income (loss) | (2,777 | ) |  | 424 |
Income (loss) before gain (loss) on sale of real estate and other investments, gain (loss) on litigation settlement, and income (loss) from discontinued operations | (7,684 | ) |  | (6,014 | )
Gain (loss) on sale of real estate and other investments | — |  |  | 54 |
NET INCOME (LOSS) | $ | (7,684 | ) |  | $ | (5,960 | )
Dividends to preferred unitholders | (160 | ) |  | (57 | )
Net (income) loss attributable to noncontrolling interests – Operating Partnership | 692 |  |  | 743 |
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities | 145 |  |  | 576 |
Net income (loss) attributable to controlling interests | (7,007 | ) |  | (4,698 | )
Dividends to preferred shareholders | (1,705 | ) |  | (1,705 | )
Discount on redemption of preferred shares | 273 |  |  | — |
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS | $ | (8,439 | ) |  | $ | (6,403 | )
BASIC |  |  |
NET EARNINGS (LOSS) PER COMMON SHARE – BASIC | $ | (0.69 | ) |  | $ | (0.54 | )
DILUTED |  |  |
NET EARNINGS (LOSS) PER COMMON SHARE – DILUTED | $ | (0.67 | ) |  | $ | (0.54 | )

See accompanying Notes to Condensed Consolidated Financial Statements.
4

Table of Contents
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

| (in thousands)
| Three Months Ended March 31,
| 2020 |  | 2019
Net income (loss) | $ | (7,684 | ) |  | $ | (5,960 | )
Other comprehensive income: |  |  |
Unrealized gain (loss) from derivative instrument | (9,408 | ) |  | (2,282 | )
(Gain) loss on derivative instrument reclassified into earnings | (345 | ) |  | (1 | )
Total comprehensive income (loss) | $ | (17,437 | ) |  | $ | (8,243 | )
Net comprehensive (income) loss attributable to noncontrolling interests – Operating Partnership | 1,463 |  |  | 980 |
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities | 145 |  |  | 576 |
Comprehensive income (loss) attributable to controlling interests | $ | (15,829 | ) |  | $ | (6,687 | )

See accompanying Notes to Condensed Consolidated Financial Statements.
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INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (unaudited)

| (in thousands, except per share data)
| PREFERRED SHARES | NUMBER OF COMMON SHARES |  | COMMON SHARES |  | ACCUMULATED DISTRIBUTIONS IN EXCESS OF NET INCOME |  | ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS) |  | NONREDEEMABLE NONCONTROLLING INTERESTS |  | TOTAL EQUITY
Balance December 31, 2018 | $ | 99,456 |  | 11,942 |  |  | $ | 899,234 |  |  | $ | (429,048 | ) |  | $ | (856 | ) |  | $ | 74,663 |  |  | $ | 643,449 |
Net income (loss) attributable to controlling interests and nonredeemable noncontrolling interests |  |  |  |  |  | (4,698 | ) |  |  |  | (1,145 | ) |  | (5,843 | )
Change in fair value of derivatives |  |  |  |  |  |  |  | (2,283 | ) |  |  |  |  | (2,283 | )
Distributions - common shares and units ($0.70 per share and unit) |  |  |  |  |  | (8,210 | ) |  |  |  | (957 | ) |  | (9,167 | )
Distributions – Series C preferred shares ($0.4140625 per Series C share) |  |  |  |  |  | (1,705 | ) |  |  |  |  |  | (1,705 | )
Shares issued and share-based compensation |  |  |  |  |  | 436 |  |  |  |  |  |  |  |  | 436 |
Redemption of units for cash |  |  |  |  |  |  |  |  |  |  |  |  | (156 | ) |  | (156 | )
Shares repurchased |  | (174 | ) |  | (8,815 | ) |  |  |  |  |  |  |  | (8,815 | )
Acquisition of redeemable noncontrolling interests |  |  |  | 4,549 |  |  |  |  |  |  |  |  | 4,549 |
Other |  |  |  |  | (23 | ) |  |  |  |  |  | (50 | ) |  | (73 | )
Balance March 31, 2019 | $ | 99,456 |  | 11,768 |  |  | $ | 895,381 |  |  | $ | (443,661 | ) |  | $ | (3,139 | ) |  | $ | 72,355 |  |  | $ | 620,392 |
Balance December 31, 2019 | $ | 99,456 |  | 12,098 |  |  | $ | 917,400 |  |  | $ | (390,196 | ) |  | $ | (7,607 | ) |  | $ | 60,849 |  |  | $ | 679,902 |
Net income (loss) attributable to controlling interests and nonredeemable noncontrolling interests |  |  |  |  |  | (7,007 | ) |  |  |  | (837 | ) |  | (7,844 | )
Change in fair value of derivatives |  |  |  |  |  |  |  | (9,753 | ) |  |  |  | (9,753 | )
Distributions - common shares and units ($0.70 per share and unit) |  |  |  |  |  | (8,515 | ) |  |  |  | (731 | ) |  | (9,246 | )
Distributions – Series C preferred shares ($0.4140625 per Series C share) |  |  |  |  |  | (1,705 | ) |  |  |  |  |  | (1,705 | )
Share-based compensation, net of forfeitures |  |  | 1 |  |  | 465 |  |  |  |  |  |  |  |  | 465 |
Sale of common shares, net |  | 50 |  |  | 3,352 |  |  |  |  |  |  |  |  | 3,352 |
Redemption of units for common shares |  | 14 |  |  | (930 | ) |  |  |  |  |  | 930 |  |  | — |
Redemption of units for cash |  |  |  |  |  |  |  |  |  |  |  |  | (14 | ) |  | (14 | )
Shares repurchased | (3,410 | ) | — |  |  | — |  |  | 273 |  |  |  |  |  |  |  | (3,137 | )
Acquisition of redeemable noncontrolling interests |  |  |  | (7,584 | ) |  |  |  |  |  | (4,637 | ) |  | (12,221 | )
Other |  |  | — |  |  | (50 | ) |  |  |  |  |  | (33 | ) |  | (83 | )
Balance March 31, 2020 | $ | 96,046 |  | 12,163 |  |  | $ | 912,653 |  |  | $ | (407,150 | ) |  | $ | (17,360 | ) |  | $ | 55,527 |  |  | $ | 639,716 |

See accompanying Notes to Condensed Consolidated Financial Statements.
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INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

| (in thousands)
| Three Months Ended March 31,
| 2020 |  | 2019
CASH FLOWS FROM OPERATING ACTIVITIES |  |  |  |  |
Net income (loss) | $ | (7,684 | ) |  | $ | (5,960 | )
Adjustments to reconcile net income (loss) to net cash provided by operating activities: |  |  |  |  |
Depreciation and amortization, including amortization of capitalized loan costs | 18,424 |  |  | 18,413 |
Realized (gain) loss on marketable securities | 1,227 |  |  | — |
Unrealized (gain) loss on marketable securities | 2,326 |  |  | — |
Share-based compensation expense | 465 |  |  | 416 |
Other, net | 206 |  |  | 320 |
Changes in other assets and liabilities: |  |  |  |  |
Other assets | (3,602 | ) |  | (1,542 | )
Accounts payable and accrued expenses | (5,127 | ) |  | (5,355 | )
Net cash provided by (used by) operating activities | $ | 6,235 |  |  | $ | 6,292 |
CASH FLOWS FROM INVESTING ACTIVITIES |  |  |  |  |
Proceeds from sale of marketable securities | 1,679 |  |  | — |
Increase in notes receivable | (6,956 | ) |  | — |
Proceeds from sale of real estate and other investments | — |  |  | 2,912 |
Payments for acquisitions of real estate assets | (23,712 | ) |  | (27,741 | )
Payments for improvements of real estate assets | (2,841 | ) |  | (801 | )
Other investing activities | (115 | ) |  | 109 |
Net cash provided by (used by) investing activities | $ | (31,945 | ) |  | $ | (25,521 | )
CASH FLOWS FROM FINANCING ACTIVITIES |  |  |  |  |
Principal payments on mortgages payable | (1,513 | ) |  | (13,503 | )
Proceeds from revolving lines of credit | 41,578 |  |  | 79,677 |
Principal payments on revolving lines of credit | (8,656 | ) |  | (18,500 | )
Payments for acquisition of noncontrolling interests – consolidated real estate entities | (12,221 | ) |  | (1,239 | )
Proceeds from issuance of common shares | 3,352 |  |  | — |
Repurchase of common shares | — |  |  | (8,815 | )
Repurchase of Series C preferred shares | (3,137 | ) |  | — |
Repurchase of partnership units | (14 | ) |  | (156 | )
Distributions paid to common shareholders | (8,469 | ) |  | (8,336 | )
Distributions paid to preferred shareholders | (1,705 | ) |  | — |
Distributions paid to preferred unitholders | (160 | ) |  | — |
Distributions paid to noncontrolling interests – Unitholders of the Operating Partnership | (741 | ) |  | (957 | )
Other financing activities | (39 | ) |  | (50 | )
Net cash provided by (used by) financing activities | $ | 8,275 |  |  | $ | 28,121 |
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | (17,435 | ) |  | 8,892 |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD | 46,117 |  |  | 19,256 |
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD | $ | 28,682 |  |  | $ | 28,148 |

SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES |  |  |  |  |
Accrued capital expenditures | $ | 1,286 |  |  | $ | 1,167 |
Operating partnership units converted to shares | (930 | ) |  | — |
Distributions declared but not paid to common shareholders | 9,245 |  |  | — |
Distributions declared but not paid to preferred shareholders | — |  |  | 1,705 |
Unrealized gain (loss) on marketable securities | (2,326 | ) |  | — |
Real estate assets acquired through exchange of note receivable | 17,663 |  |  | — |
Note receivable exchanged through real estate acquisition | (17,663 | ) |  | — |
Property acquired through issuance of Series D preferred units | — |  |  | 16,560 |
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION |  |  |  |  |
Cash paid for interest | $ | 6,481 |  |  | $ | 7,350 |

See accompanying Notes to Condensed Consolidated Financial Statements.
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INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)
for the three months ended March 31, 2020 and 2019
NOTE 1 • ORGANIZATION
Investors Real Estate Trust, collectively with our consolidated subsidiaries (“IRET,” “we,” “us,” or “our”), is a real estate investment trust (“REIT”) focused on the ownership, management, acquisition, redevelopment, and development of apartment communities. As of March 31, 2020, we owned interests in 70 apartment communities consisting of 12,135 apartment homes.
NOTE 2 • BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
We conduct a majority of our business activities through our consolidated operating partnership, IRET Properties, A North Dakota Limited Partnership (the “Operating Partnership”), as well as through a number of other consolidated subsidiary entities. The accompanying condensed consolidated financial statements include our accounts and the accounts of all our subsidiaries in which we maintain a controlling interest, including the Operating Partnership. All intercompany balances and transactions are eliminated in consolidation.
The condensed consolidated financial statements also reflect the Operating Partnership's ownership of certain joint venture entities in which the Operating Partnership has a general partner or controlling interest. These entities are consolidated into our operations, with noncontrolling interests reflecting the noncontrolling partners’ share of ownership, income, and expenses.
SIGNIFICANT RISKS AND UNCERTAINTIES
The COVID-19 pandemic is one of the most significant risks and uncertainties that may have an adverse impact on our business. COVID-19 could cause or has already caused an economic decline which could have a material and adverse effect on our financial condition, results of operations, and cash flows. Due to the ongoing uncertainty, we cannot predict the future impact COVID-19 may have on our financial condition, results of operations, or cash flows.
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
Our interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain disclosures accompanying annual consolidated financial statements prepared in accordance with GAAP are omitted. The year-end balance sheet data was derived from audited consolidated financial statements, but does not include all disclosures required by GAAP. In the opinion of management, all adjustments, consisting solely of normal recurring adjustments necessary for the fair presentation of our financial position, results of operations, and cash flows for the interim periods, have been included.
The current period’s results of operations are not necessarily indicative of results which ultimately may be achieved for the year. The interim condensed consolidated financial statements and accompanying notes thereto should be read in conjunction with the consolidated financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC on February 19, 2020.
USE OF ESTIMATES
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
RECENT ACCOUNTING PRONOUNCEMENTS
The following table provides a brief description of recent accounting standards updates (“ASUs”).
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Standard | Description | Date of Adoption | Effect on the Financial Statements or Other Significant Matters
ASU 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments; ASU 2018-19, Codification Improvements to Topic 326; ASU 2019-05, Financial Instruments - Credit Losses - Targeted Transition Relief | These ASUs require entities to estimate a lifetime expected credit loss for most financial assets, such as loans and other financial instruments, and to present the net amount expected to be collected. In 2018, another ASU was issued to amend ASU 2016-13, which clarifies that it does not apply to operating lease receivables. In 2019, an additional ASU was issued to provide transition relief in which an entity is allowed to elect the fair value option on an instrument-by-instrument basis for eligible instruments, upon adoption of Topic 326. | These ASUs are effective for annual reporting periods beginning after December 15, 2019. Early adoption is permitted. | We elected the fair value option for all of our mortgages and notes receivable at January 1, 2020, as allowed by ASU 2019-05. As a result, we do not have any receivables or other financial instruments to which we are applying this standard.
ASU 2018-13, Fair Value Measurements (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirement for Fair Value Measurements | This ASU eliminates certain disclosure requirements affecting all levels of measurement, and modifies and adds new disclosure requirements for Level 3 measurements. | This ASU is effective for annual reporting periods beginning after December 15, 2019. Early adoption is permitted. | The new standard did not have a material impact on our condensed consolidated financial statements but did require additional disclosures.
ASU 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting | This ASU contains practical expedients for reference rate reform related activities that impact debt, leases, derivatives and other contracts. The guidance in ASU 2020-04 is optional and may be elected over time as reference rate reform activities occur. | This ASU is optional and may be elected over time. | We are currently evaluating the practical expedients and the impact they may have on our condensed consolidated financial statements.

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

| (in thousands)
Balance sheet description | March 31, 2020 |  |  | March 31, 2019 |
Cash and cash equivalents | $ | 26,338 |  |  | $ | 23,329 |
Restricted cash | 2,344 |  |  | 4,819 |
Total cash, cash equivalents and restricted cash | $ | 28,682 |  |  | $ | 28,148 |

As of March 31, 2020, restricted cash consisted primarily of escrows held by lenders for real estate taxes, insurance, and capital additions.
LEASES
Effective January 1, 2019, we adopted ASUs 2016-02, 2018-10, 2018-11, 2018-20, and 2019-01 related to leases using the modified retrospective approach. We elected to adopt the package of practical expedients permitted under the transition guidance, which permits us to not reassess prior conclusions about lease identification, classification, and initial direct costs under the new standard, and the practical expedient related to land easements, which allows us to not evaluate existing or expired land easements that were not previously accounted for under ASC 840. We made an accounting policy election to exclude leases in which we are a lessee with a term of 12 months or less from the balance sheet.
As a lessor, we primarily lease multifamily apartment homes which qualify as operating leases with terms that are generally one year or less. Rental revenues are recognized in accordance with ASC 842, Leases, using a method that represents a straight-line basis over the term of the lease. Rental income represents approximately 98.4% of our total revenues and includes gross market rent less adjustments for concessions, vacancy loss, and bad debt. Other property revenues represent the remaining 1.6% of our total revenues and are primarily driven by other fee income, which is typically recognized when earned, at a point in time.
Some of our apartment communities have commercial spaces available for lease. Lease terms for these spaces typically range from three to fifteen years. The leases for commercial spaces generally include options to extend the lease for additional terms.
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Many of our leases contain non-lease components for utility reimbursement from our residents and common area maintenance from our commercial tenants. We have elected the practical expedient to combine lease and non-lease components for all asset classes. The combined components are included in lease income and are accounted for under ASC 842.
The aggregate amount of future scheduled lease income on our operating leases for commercial spaces, excluding any variable lease income and non-lease components, as of March 31, 2020, was as follows:

|  | (in thousands)
2020 (remainder) |  | $ | 2,267 |
2021 |  | 3,044 |
2022 |  | 3,047 |
2023 |  | 2,870 |
2024 |  | 2,339 |
Thereafter |  | 5,021 |
Total scheduled lease income - operating leases |  | $ | 18,588 |

REVENUES
Revenue is recognized in accordance with the transfer of goods and services to customers at an amount that reflects the consideration to which the company expects to be entitled for those goods and services. We elected to omit disclosing the value of unsatisfied performance obligations for contracts with an original expected length of one year or less.
Revenue streams that are included in revenues from contracts with customers include:

• | O ther property revenues: We recognize revenue for rental related income not included as a component of a lease, such as application fees, as earned, and have concluded that this is appropriate under the new standard.

• | Gains or losses on sales of real estate: Subsequent to the adoption of the new standard, a gain or loss is recognized when the criteria for derecognition of an asset are met, including when (1) a contract exists and (2) the buyer obtained control of the nonfinancial asset that was sold. As a result, we may recognize a gain on real estate disposition transactions that previously did not qualify as a sale or for full profit recognition under the previous accounting standard.

The following table presents the disaggregation of revenue streams for the three months ended March 31, 2020:

|  |  | (in thousands)
|  |  | Three Months Ended March 31,
Revenue Stream | Applicable Standard |  | 2020 | 2019
Fixed lease income - operating leases | Leases |  | $ | 41,934 |  | $ | 43,743 |
Variable lease income - operating leases | Leases |  | 1,780 |  | 1,083 |
Other property revenue | Revenue from contracts with customers |  | 692 |  | 782 |
Total revenue |  |  | $ | 44,406 |  | $ | 45,608 |

IMPAIRMENT OF LONG-LIVED ASSETS
We periodically evaluate our long-lived assets, including investments in real estate, for impairment indicators. The impairment evaluation is performed on assets by property such that assets for a property form an asset group. The judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions, expected holding period of each asset group, and legal and environmental concerns. If indicators exist, we compare the expected future undiscounted cash flows for the long-lived asset group against the carrying amount of that asset group. If the sum of the estimated undiscounted cash flows is less than the carrying amount of the asset group, an impairment loss is recorded for the difference between the estimated fair value and the carrying amount of the asset group. If our anticipated holding period for properties, the estimated fair value of properties, or other factors change based on market conditions or otherwise, our evaluation of impairment charges may be different and such differences could be material to our consolidated financial statements. The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates, and capital requirements that could differ materially from actual results. Reducing planned property holding periods may increase the likelihood of recording impairment losses.
During the three months ended March 31, 2020 and 2019, we recorded no impairment charges.
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MORTGAGE RECEIVABLE AND NOTES RECEIVABLE
In August 2017, we sold 13 multifamily communities in exchange for cash and an $11.0 million note secured by a mortgage on the assets. As of March 31, 2020 and December 31, 2019, the balance of the note was $10.0 million, with 12 communities remaining in the pool of assets used to secure the mortgage. The note bears an interest rate of 5.5% and matures in August 2020. Monthly payments are interest-only, with the principal balance payable at maturity. During the three months ended March 31, 2020 and 2019, we received and recognized approximately $139,000 and $151,000 of interest income, respectively.
In July 2017, we originated a $16.2 million loan in a multifamily development located in New Hope, MN, a Minneapolis suburb. We funded an additional $341,000 upon satisfaction of certain conditions set forth in the loan agreement. The note bears an interest rate of 6.0%, matures in July 2023, and provides us an option to purchase the development prior to the loan maturity date. Interest payments are due when the note matures. During the three months ended March 31, 2020, we executed the purchase option for the apartment community (refer to Note 8 for details on acquisition). This note was paid in full as part of our acquisition of this apartment community. As of December 31, 2019, the balance of the note was $16.6 million.
In December 2019, we originated a $29.9 million construction loan and a $15.3 million mezzanine loan for the development of a multifamily development located in Minneapolis, Minnesota. In conjunction with the loans, we received a guaranty for the substantial completion of the project improvements from an investment grade guarantor. The construction and mezzanine loans bear interest at 4.5% and 11.5%, respectively. As of March 31, 2020 and December 31, 2019, we had funded $6.8 million and $6.2 million, respectively, of the construction loan, which appears within mortgages receivable in our condensed consolidated balance sheets. The loans are secured by mortgages and mature on December 31, 2023, and the agreement provides us with an option to purchase the development. The loans represent an investment in an unconsolidated variable interest entity. We are not the primary beneficiary of the VIE as we do not have the power to direct the activities which most significantly impact the entity’s economic performance nor do we have significant influence over the entity.
In March 2020, in connection with our acquisition of Ironwood, an apartment community in New Hope, MN, we acquired a tax increment financing note receivable ("TIF") with a principal balance of $6.6 million. The note bears an interest rate of 4.5% with payments due in February and August of each year.
VARIABLE INTEREST ENTITIES
We have determined that our Operating Partnership and each of our less-than-wholly owned real estate partnerships is a variable interest entity (“VIE”), as the limited partners or the functional equivalent of limited partners lack substantive kick-out rights and substantive participating rights. We are the primary beneficiary of the VIEs, and the VIEs are required to be consolidated on our balance sheet because we have a controlling financial interest in the VIEs and have both the power to direct the activities of the VIEs that most significantly impact the economic performance of the VIEs as well as the obligation to absorb losses or the right to receive benefits from the VIEs that could potentially be significant to the VIEs. Because our Operating Partnership is a VIE, all of our assets and liabilities are held through a VIE.
During the three months ended March 31, 2020, we acquired the 47.4% noncontrolling interests in the real estate partnership that owns 71 France for $12.2 million.
MARKETABLE SECURITES
As of March 31, 2020, marketable securities consisted of equity securities. We report equity securities at fair value based on quoted market prices (Level 1 inputs). Any unrealized gains or losses are included in interest and other income on the consolidated statements of operations.

| (in thousands)
As of March 31, 2020 | Cost |  | Gross Unrealized Gain (Loss) |  | Carrying Value
Marketable securities | $ | 4,264 |  |  | $ | (2,261 | ) |  | $ | 2,003 |
As of December 31, 2019 |  |  |  |  |
Marketable securities | $ | 6,942 |  |  | $ | 113 |  |  | $ | 7,055 |

NOTE 3 • EARNINGS PER SHARE
Basic earnings per share is computed by dividing net income available to common shareholders by the weighted average number of our common shares of beneficial interest (“common shares”) outstanding during the period. We have issued restricted stock units (“RSUs”) under our 2015 Incentive Plan and Series D Convertible Preferred Units ("Series D preferred
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units"), which could have a dilutive effect on our earnings per share upon exercise of the RSUs or upon conversion of the Series D preferred units (refer to Note 4 for further discussion of the Series D preferred units). Other than the issuance of RSUs and Series D preferred units, we have no outstanding options, warrants, convertible stock or other contractual obligations requiring issuance of additional shares that would result in dilution of earnings. Under the terms of the Operating Partnership’s Agreement of Limited Partnership, limited partners have the right to require the Operating Partnership to redeem their limited partnership units (“Units”) any time following the first anniversary of the date they acquired such Units (“Exchange Right”). Upon the exercise of Exchange Rights, and in our sole discretion, we may issue common shares in exchange for Units on a one-for-one basis.
Performance-based restricted stock awards and RSUs of 37,822 and 37,822 for the three months ended March 31, 2020 and 2019, respectively, were excluded from the calculation of diluted earnings per share because they were anti-dilutive.
The following table presents a reconciliation of the numerator and denominator used to calculate basic and diluted earnings per share reported in the condensed consolidated financial statements for the three months ended March 31, 2020 and 2019:

| (in thousands, except per share data)
| Three Months Ended March 31,
| 2020 |  | 2019
NUMERATOR |  |  |
Net income (loss) attributable to controlling interests | $ | (7,007 | ) |  | $ | (4,698 | )
Dividends to preferred shareholders | (1,705 | ) |  | (1,705 | )
Redemption of preferred shares | 273 |  |  | — |
Numerator for basic earnings (loss) per share – net income available to common shareholders | (8,439 | ) |  | (6,403 | )
Noncontrolling interests – Operating Partnership | (692 | ) |  | (743 | )
Dividends to preferred unitholders | 160 |  |  | 57 |
Numerator for diluted earnings (loss) per share | $ | (8,971 | ) |  | $ | (7,089 | )
DENOMINATOR |  |  |  |  |
Denominator for basic earnings per share weighted average shares | 12,103 |  |  | 11,763 |
Effect of redeemable operating partnership units | 1,054 |  |  | 1,367 |
Effect of Series D preferred units | 228 |  |  | 85 |
Effect of dilutive restricted stock awards and restricted stock units | 16 |  |  | 14 |
Denominator for diluted earnings per share | 13,401 |  |  | 13,229 |
Earnings (loss) per common share from continuing operations – basic | $ | (0.69 | ) |  | $ | (0.54 | )
Earnings (loss) per common share from discontinued operations – basic | — |  |  | — |
NET EARNINGS (LOSS) PER COMMON SHARE – BASIC | $ | (0.69 | ) |  | $ | (0.54 | )
Earnings (loss) per common share from continuing operations – diluted | $ | (0.67 | ) |  | $ | (0.54 | )
Earnings (loss) per common share from discontinued operations – diluted | — |  |  | — |
NET EARNINGS (LOSS) PER COMMON SHARE – DILUTED | $ | (0.67 | ) |  | $ | (0.54 | )

NOTE 4 • EQUITY AND MEZZANINE EQUITY
Operating Partnership Units. The Operating Partnership had 1.0 million and 1.1 million outstanding Units at March 31, 2020 and December 31, 2019, respectively.
Common Shares and Equity Awards. Common shares outstanding on March 31, 2020 and December 31, 2019, totaled 12.2 million and 12.1 million, respectively. There were 1,193 shares issued upon the vesting of equity awards under our 2015 Incentive Plan during the three months ended March 31, 2020, with a total grant-date fair value of $125,000. During the three months ended March 31, 2019, we issued 207 shares, with a total grant-date fair value of $10,000, under our 2015 Incentive Plan. These shares vest based on performance and service criteria.
Equity Distribution Agreement. We have an equity distribution agreement in connection with an at-the-market offering ("2019 ATM Program") through which we may offer and sell common shares having an aggregate sales price of up to $150.0 million, in amounts and at times as we determine. The proceeds from the sale of common shares under the 2019 ATM Program are intended to be used for general purposes, which may include the funding of future acquisitions, community renovations, and the repayment of indebtedness. During the three months ended March 31, 2020, we issued approximately 50,000 common
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shares under the 2019 ATM Program at an average price of $68.04 per share, net of commissions. Total consideration, net of commissions and issuance costs, was approximately $3.4 million. As of March 31, 2020, we had remaining capacity in terms of common shares having an aggregate offering price of up to $124.3 million remaining available under the 2019 ATM Program.
Exchange Rights. Pursuant to the exercise of Exchange Rights, we redeemed Units for cash during the three months ended March 31, 2020 and 2019 as detailed in the table below.

| (in thousands, except per Unit amounts)
Three Months Ended March 31, | Number of Units |  |  | Aggregate Cost(1) |  |  | Average Price Per Unit |
2020 | — |  |  | $ | 14 |  |  | $ | 74.45 |
2019 | 3 |  |  | $ | 156 |  |  | $ | 58.95 |

(1) | The redemption price is determined using the volume weighted average price for the ten trading days prior to the date a unitholder provides notification of their intent to redeem units.

We also redeemed Units in exchange for common shares in connection with Unitholders exercising their Exchange Rights during the three months ended March 31, 2020 and 2019 as detailed in the table below.

| (in thousands)
Three Months Ended March 31, | Number of Units |  |  | Total Book Value |
2020 | 14 |  |  | $ | 930 |
2019 | — |  |  | — |

Share Repurchase Program. On December 5, 2019, our Board of Trustees terminated the existing share repurchase program and authorized a new share repurchase program to repurchase up to $50 million of our common or preferred shares over a one-year period. Under this new repurchase program, we may repurchase common or preferred shares in open-market purchases, including pursuant to Rule 10b5-1 and Rule 10b-18 plans, as determined by management and in accordance with the requirements of the SEC. The extent to which we repurchase our shares, and the timing of repurchases, will depend on a variety of factors, including market conditions, regulatory requirements, and other corporate considerations, as determined by the executive management team. This program may be suspended or discontinued at any time. As of March 31, 2020, $46.9 million remained available under our share repurchase program. Common shares and Series C Preferred Shares repurchased during the three months ended March 31, 2020 and 2019 are detailed in the table below.

| (in thousands, except per share amounts)
Three Months Ended March 31, | Number of Common Shares |  |  | Number of Preferred Shares |  |  | Aggregate Cost(1) |  |  | Average Price Per Share(1) |
2020 | — |  |  | 136 |  |  | $ | 3,137 |  |  | $ | 23.00 |
2019 | 174 |  |  | — |  |  | $ | 8,804 |  |  | $ | 50.54 |

(1) | Amount includes commissions.

Series C Preferred Shares. Series C preferred shares outstanding were 4.0 million and 4.1 million shares at March 31, 2020 and December 31, 2019, respectively. The Series C preferred shares are nonvoting and redeemable for cash at $25.00 per share at our option after October 2, 2022. Holders of these shares are entitled to cumulative distributions, payable quarterly (as and if declared by the Board of Trustees). Distributions accrue at an annual rate of $1.65625 per share, which is equal to 6.625% of the $25.00 per share liquidation preference ($99.6 million liquidation preference in the aggregate).
Series D Preferred Units (Mezzanine Equity). On February 26, 2019, we issued 165,600 newly created Series D preferred units at an issuance price of $100 per preferred unit as partial consideration for the acquisition of SouthFork Townhomes. The Series D preferred unit holders receive a preferred distribution at the rate of 3.862% per year. The Series D preferred units have a put option which allows the holder to redeem any or all of the Series D preferred units for cash equal to the issue price. Each Series D preferred unit is convertible, at the holder's option, into 1.37931 Units, representing a conversion exchange rate of $72.50 per unit. Changes in the redemption value are charged to common shares on our condensed consolidated balance sheets from period to period. The holders of the Series D preferred units do not have any voting rights. Distributions to Series D unitholders are presented in the condensed consolidated statements of equity within net income (loss) attributable to controlling interests and noncontrolling interests.
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NOTE 5 • DEBT
As of March 31, 2020, we owned 70 apartment communities, of which 24 served as collateral for mortgage loans. All of these mortgage loans were non-recourse to us other than for standard carve-out obligations. As of March 31, 2020, we believe that there are no material defaults or instances of noncompliance in regards to any of these mortgages payable.
As of March 31, 2020, we owned 46 apartment communities that were not encumbered by mortgages, with 45 of those properties providing credit support for our unsecured borrowings. Our primary unsecured credit facility ("unsecured credit facility") is a revolving, multi-bank line of credit, with the Bank of Montreal serving as administrative agent. Our line of credit has total commitments of $250.0 million, with borrowing capacity based on the value of properties contained in the unencumbered asset pool ("UAP"). As of March 31, 2020, the UAP provided for a borrowing capacity of $250.0 million, with additional borrowing availability of $167.0 million beyond the $83.0 million drawn, including the balance on our operating line of credit (discussed below). The unsecured credit facility matures on August 31, 2022, with one twelve-month option to extend the maturity date at our election.
We have a private shelf agreement for the issuance of up to $150.0 million of unsecured senior promissory notes ("unsecured senior notes"). Under this agreement, we issued $75.0 million of Series A notes due September 13, 2029 bearing interest at a rate of 3.84% annually and $50.0 million of Series B notes due September 30, 2028 bearing interest at a rate of 3.69% annually. We have $25.0 million remaining available under the private shelf agreement.
Under our unsecured credit facility, we also have unsecured term loans of $70.0 million and $75.0 million, included within notes payable on the condensed consolidated balance sheets, which mature on January 15, 2024 and on August 31, 2025, respectively.
The interest rates on the line of credit and term loans are based, at our option, on either the lender's base rate plus a margin, ranging from 35-85 basis points, or the London Interbank Offered Rate ("LIBOR"), plus a margin that ranges from 135-190 basis points based on our consolidated leverage ratio, as defined under our Second Amended and Restated Credit Agreement. Our unsecured credit facility and unsecured senior notes are subject to customary financial covenants and limitations. We believe that we are in compliance with all such financial covenants and limitations as of March 31, 2020.
We also have a $6.0 million operating line of credit. This operating line of credit is designed to enhance treasury management activities and more effectively manage cash balances. This operating line matures on June 30, 2020 and has a one-year rolling commitment, with pricing based on a market spread plus the one-month LIBOR index rate.
The following table summarizes our indebtedness at March 31, 2020:

| (in thousands) |
| March 31, 2020 |  | December 31, 2019 |  | Weighted Average Maturity in Years at March 31, 2020
Lines of credit | $ | 83,000 |  | $ | 50,079 |  | 2.4
Term loans (1) | 145,000 |  | 145,000 |  | 4.6
Unsecured senior notes (1) | 125,000 |  | 125,000 |  | 9.1
Unsecured debt | 353,000 |  | 320,079 |  | 5.7
Mortgages payable - fixed | 329,988 |  | 331,376 |  | 5.5
Total debt | $ | 682,988 |  | $ | 651,455 |  | 5.6
Weighted average interest rate on lines of credit (rate with swap) | 3.18 | % | 3.81 | % |
Weighted average interest rate on term loans (rate with swap) | 4.13 | % | 4.11 | % |
Weighted average interest rate on unsecured senior notes | 3.78 | % | 3.78 | % |
Weighted average interest rate on mortgages payable | 4.01 | % | 4.02 | % |

(1) | Included within notes payable on our condensed consolidated balance sheets.

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The aggregate amount of required future principal payments on mortgages payable, term loans, and unsecured senior notes as of March 31, 2020, was as follows:

| (in thousands)
2020 (remainder) | $ | 13,509 |
2021 | 40,523 |
2022 | 37,352 |
2023 | 48,111 |
2024 | 73,777 |
Thereafter | 386,716 |
Total payments | $ | 599,988 |

NOTE 6 • DERIVATIVE INSTRUMENTS
Our objective in using interest rate derivatives is to add stability to interest expense and to manage our exposure to interest rate fluctuations. To accomplish this objective, we primarily use interest rate swap contracts to fix the variable interest rate on our term loans and a portion of our revolving line of credit. The interest rate swap contracts qualify as cash flow hedges.
Under ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, the ineffective portion of a hedging instrument is not required to be recognized currently in earnings or disclosed. Changes in the fair value of cash flow hedges are recorded in accumulated other comprehensive income and subsequently reclassified into earnings in the period that the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income for our interest rate swap will be reclassified to interest expense as interest expense is incurred on our term loans. During the next twelve months, we estimate an additional $4.0 million will be reclassified as an increase to interest expense.
At March 31, 2020 and December 31, 2019, we had a $50.0 million interest rate swap to fix the interest rate on a portion of our primary line of credit.
At March 31, 2020 and December 31, 2019, we had three interest rate swap contracts in effect with a notional amount of $195.0 million and one additional interest rate swap that becomes effective on January 31, 2023, with a notional amount of $70.0 million.
The table below presents the fair value of our derivative financial instruments as well as their classification on our Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019.

|  |  | (in thousands)
|  |  | March 31, 2020 |  | December 31, 2019
| Balance Sheet Location |  | Fair Value |  | Fair Value
Total derivative instruments designated as hedging instruments - interest rate swaps | Accounts Payable and Accrued Expenses |  | $ | 17,360 |  |  | $ | 7,607 |

The table below presents the effect of the Company’s derivative financial instruments on the Condensed Consolidated Statements of Operations as of March 31, 2020 and 2019.

| (in thousands)
| Gain (Loss) Recognized in OCI |  | Location of Gain (Loss) Reclassified from Accumulated OCI into Income |  | Gain (Loss) Reclassified from Accumulated OCI into Income
Three months ended March 31, | 2020 |  | 2019 |  |  |  | 2020 |  | 2019
Total derivatives in cash flow hedging relationships - Interest rate contracts | $ | (9,408 | ) |  | $ | (2,282 | ) |  | Interest expense |  | $ | (345 | ) |  | $ | (1 | )

NOTE 7 • FAIR VALUE MEASUREMENTS
Cash and cash equivalents, restricted cash, accounts payable, accrued expenses, and other liabilities are carried at amounts that reasonably approximate their fair value due to their short-term nature. For variable rate line of credit debt that re-prices frequently, fair values are based on carrying values.
In determining the fair value of other financial instruments, we apply FASB ASC 820, "Fair Value Measurement and Disclosures." Fair value hierarchy under ASC 820 distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (Levels 1 and 2) and the reporting entity’s own assumptions about
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market participant assumptions (Level 3). Fair value estimates may differ from the amounts that may ultimately be realized upon sale or disposition of the assets and liabilities.
Fair Value Measurements on a Recurring Basis

| (in thousands)
| Total |  |  | Level 1 |  |  | Level 2 |  |  | Level 3 |
March 31, 2020 |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |
Mortgages and notes receivable | $ | 26,697 |  |  | — |  |  | — |  |  | $ | 26,697 |
Liabilities |  |  |  |  |  |  |
Derivative instruments - interest rate swaps | $ | 17,360 |  |  | — |  |  | — |  |  | $ | 17,360 |
December 31, 2019 |  |  |  |  |  |  |  |  |  |
Liabilities |  |  |  |  |  |  |
Derivative instruments - interest rate swaps | $ | 7,607 |  |  | $ | — |  |  | $ | — |  |  | $ | 7,607 |

The fair value of our interest rate swaps is determined using the market standard methodology of netting discounted expected variable cash payments and receipts. The variable cash payments and receipts are based on an expectation of future interest rates (a forward curve) derived from observable market interest rate curves. We also consider both our own nonperformance risk and the counterparty's nonperformance risk in the fair value measurement (Level 3).
Effective January 1, 2020, we elected the fair value option for our mortgage loans receivable and notes receivable, as allowed under ASU 2019-05 which provided transition relief upon adoption of ASU 2016-13, Financial Instruments - Credit Losses. We utilize an income approach with level 3 inputs based on expected future cash flows to value these instruments. The inputs include market transactions for similar instruments, instrument specific credit risk (range of 0.5% to 1.0%), and management estimates of comparable interest rates (range of 3.75% to 5.0%). Changes in the fair value of these receivables from period to period are reported in interest and other income on our condensed consolidated statements of operations.

| (in thousands)
| Fair Value Measurement at March 31, 2020 |  | Other Gains (Losses) |  | Interest Income |  | Total Changes in Fair Value Included in Current-Period Earnings
Mortgage loans and notes receivable | $ | 26,697 |  |  | $ | 1 |  |  | $ | 527 |  |  | $ | 528 |

Fair Value Measurements on a Nonrecurring Basis
There were no non-financial assets or liabilities measured at fair value on a nonrecurring basis at March 31, 2020 and December 31, 2019.
Financial Assets and Liabilities Not Measured at Fair Value
The fair value of mortgages payable are estimated based on the discounted cash flows of the loans using market research and management estimates of comparable interest rates (Level 3).
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The estimated fair values of our financial instruments as of March 31, 2020 and December 31, 2019, respectively, are as follows:

| (in thousands)
| March 31, 2020 |  | December 31, 2019
| Carrying Amount |  | Fair Value |  | Carrying Amount |  | Fair Value
FINANCIAL ASSETS |  |  |  |  |  |  |  |  |  |  |
Cash and cash equivalents | $ | 26,338 |  |  | $ | 26,338 |  |  | $ | 26,579 |  |  | $ | 26,579 |
Restricted cash | $ | 2,344 |  |  | $ | 2,344 |  |  | $ | 19,538 |  |  | $ | 19,538 |
Mortgage and note receivable(2) | $ | — |  |  | $ | — |  |  | $ | 32,810 |  |  | $ | 32,810 |
FINANCIAL LIABILITIES |  |  |  |  |  |  |  |  |  |  |
Revolving lines of credit(1) | $ | 83,000 |  |  | $ | 83,000 |  |  | $ | 50,079 |  |  | $ | 50,079 |
Notes payable(1) | $ | 270,000 |  |  | $ | 270,000 |  |  | $ | 270,000 |  |  | $ | 270,000 |
Mortgages payable | $ | 329,988 |  |  | $ | 333,416 |  |  | $ | 331,376 |  |  | $ | 332,471 |

(1) | Excluding the effect of interest rate swap agreements.

(2) | As of January 1, 2020, we elected the fair value option, as allowed under ASU 2019-05. Fair value for these instruments is discussed within the Fair Value Measurements on a Recurring Basis section above.

NOTE 8 • ACQUISITIONS AND DISPOSITIONS
ACQUISITIONS
We acquired $46.3 million of new real estate during the three months ended March 31, 2020, compared to $44.0 million acquisitions in the three months ended March 31, 2019. Our acquisitions during the three months ended March 31, 2020 and 2019 are detailed below.
Three Months Ended March 31, 2020

| Date Acquired |  | (in thousands)
|  | Total Acquisition Cost |  |  | Form of Consideration |  | Investment Allocation
Acquisitions |  |  | Cash |  |  | Other(1) |  |  | Land |  |  | Building |  |  | Intangible Assets |  |  | Other(2) |
182 homes - Ironwood Apartments - New Hope, MN | March 5, 2020 |  | $ | 46,263 |  |  | $ | 28,600 |  |  | $ | 17,663 |  |  | $ | 2,165 |  |  | $ | 36,869 |  |  | $ | 824 |  |  | 6,405 |
Total Acquisitions |  |  | $ | 46,263 |  |  | $ | 28,600 |  |  | $ | 17,663 |  |  | $ | 2,165 |  |  | $ | 36,869 |  |  | $ | 824 |  |  | $ | 6,405 |

(1) | Payoff of note receivable and accrued interest by seller at closing.

(2) | Consists of TIF note acquired. Refer to Note 2 for further discussion.

Three Months Ended March 31, 2019

| Date Acquired |  | (in thousands)
|  | Total Acquisition Cost |  |  | Form of Consideration |  | Investment Allocation
Acquisitions |  |  | Cash |  |  | Units(1) |  |  | Land |  |  | Building |  |  | Intangible Assets |
Multifamily |  |  |  |  |  |  |  |  |  |  |  |  |
272 homes - SouthFork Townhomes - Lakeville, MN | February 26, 2019 |  | $ | 44,000 |  |  | $ | 27,440 |  |  | $ | 16,560 |  |  | $ | 3,502 |  |  | $ | 39,950 |  |  | $ | 548 |
Total Acquisitions |  |  | $ | 44,000 |  |  | $ | 27,440 |  |  | $ | 16,560 |  |  | $ | 3,502 |  |  | $ | 39,950 |  |  | $ | 548 |

(1) | Value of Series D preferred units at the acquisition date.

DISPOSITIONS
During the three months ended March 31, 2020, we had no dispositions. During the three months ended March 31, 2019, we sold one parcel of unimproved land for a total sale price of $3.0 million. The following tables detail our dispositions for the three months ended March 31, 2019:
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Three Months Ended March 31, 2019

|  |  | (in thousands)
Dispositions | Date Disposed |  | Sale Price |  |  | Book Value and Sale Cost |  |  | Gain/(Loss) |
Unimproved Land |  |  |  |  |  |  |
Creekside Crossing - Bismarck, ND | March 1, 2019 |  | $ | 3,049 |  |  | $ | 3,205 |  |  | $ | (156 | )
Total Dispositions |  |  | $ | 3,049 |  |  | $ | 3,205 |  |  | $ | (156 | )

NOTE 9 • SEGMENT REPORTING
We operate in a single reportable segment which includes the ownership, management, development, redevelopment, and acquisition of apartment communities. Each of our operating properties is considered a separate operating segment because each property earns revenues, incurs expenses, and has discrete financial information. Our chief operating decision-makers evaluate each property's operating results to make decisions about resources to be allocated and to assess performance. We do not group our operations based on geography, size, or type. Our apartment communities have similar long-term economic characteristics and provide similar products and services to our residents. No apartment community comprises more than 10% of consolidated revenues, profits, or assets. Accordingly, our apartment communities are aggregated into a single reportable segment.
Our executive management team comprises our chief operating decision-makers. This team measures the performance of our reportable segment based on net operating income (“NOI”), 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 expense. 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.
The following tables present NOI for the three months ended March 31, 2020 and 2019, respectively, along with reconciliations to net income in the condensed consolidated financial statements. Segment assets are also reconciled to total assets as reported in the condensed consolidated financial statements.

| (in thousands)
Three Months Ended March 31, 2020 | Multifamily |  |  | All Other |  |  | Total |
Revenue | $ | 43,331 |  |  | $ | 1,075 |  |  | $ | 44,406 |
Property operating expenses, including real estate taxes | 18,578 |  |  | 355 |  |  | 18,933 |
Net operating income | $ | 24,753 |  |  | $ | 720 |  |  | $ | 25,473 |
Property management |  |  |  |  | (1,554 | )
Casualty gain (loss) |  |  |  |  | (327 | )
Depreciation and amortization |  |  |  |  | (18,160 | )
General and administrative expenses |  |  |  |  | (3,428 | )
Interest expense |  |  |  |  | (6,911 | )
Interest and other income |  |  |  |  | (2,777 | )
Net income (loss) |  |  |  |  | $ | (7,684 | )

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| (in thousands)
Three Months Ended March 31, 2019 | Multifamily |  |  | All Other |  |  | Total |
Revenue | $ | 38,739 |  |  | $ | 6,869 |  |  | $ | 45,608 |
Property operating expenses, including real estate taxes | 16,770 |  |  | 3,266 |  |  | 20,036 |
Net operating income | $ | 21,969 |  |  | $ | 3,603 |  |  | $ | 25,572 |
Property management |  |  |  |  | (1,554 | )
Casualty gain (loss) |  |  |  |  | (641 | )
Depreciation and amortization |  |  |  |  | (18,111 | )
General and administrative expenses |  |  |  |  | (3,806 | )
Interest expense |  |  |  |  | (7,896 | )
Loss on debt extinguishment |  |  |  |  | (2 | )
Interest and other income |  |  |  |  | 424 |
Income (loss) before gain (loss) on sale of real estate and other investments and income (loss) from discontinued operations |  |  |  |  | (6,014 | )
Gain (loss) on sale of real estate and other investments |  |  |  |  | 54 |
Net income (loss) |  |  |  |  | $ | (5,960 | )

Segment Assets and Accumulated Depreciation
Segment assets are summarized as follows as of March 31, 2020, and December 31, 2019, respectively, along with reconciliations to the condensed consolidated financial statements:

| (in thousands)
As of March 31, 2020 | Multifamily |  |  | All Other |  |  | Total |
Segment assets |  |  |  |  |  |  |  |
Property owned | $ | 1,653,829 |  |  | $ | 33,607 |  |  | $ | 1,687,436 |
Less accumulated depreciation | (356,045 | ) |  | (10,262 | ) |  | (366,307 | )
Total property owned | $ | 1,297,784 |  |  | $ | 23,345 |  |  | $ | 1,321,129 |
Cash and cash equivalents |  |  |  |  | 26,338 |
Restricted cash |  |  |  |  | 2,344 |
Other assets |  |  |  |  | 21,124 |
Unimproved land |  |  |  |  | 1,376 |
Mortgage loans receivable |  |  |  |  | 16,775 |
Total Assets |  |  |  |  | $ | 1,389,086 |

| (in thousands)
As of December 31, 2019 | Multifamily |  |  | All Other |  |  | Total |
Segment assets |  |  |  |  |  |  |  |
Property owned | $ | 1,609,471 |  |  | $ | 33,607 |  |  | $ | 1,643,078 |
Less accumulated depreciation | (339,272 | ) |  | (9,850 | ) |  | (349,122 | )
Total property owned | $ | 1,270,199 |  |  | $ | 23,757 |  |  | $ | 1,293,956 |
Cash and cash equivalents |  |  |  |  | 26,579 |
Restricted cash |  |  |  |  | 19,538 |
Other assets |  |  |  |  | 34,829 |
Unimproved land |  |  |  |  | 1,376 |
Mortgage loans receivable |  |  |  |  | 16,140 |
Total Assets |  |  |  |  | $ | 1,392,418 |

NOTE 10 • COMMITMENTS AND CONTINGENCIES
Litigation. In the ordinary course of our operations, we become involved in litigation. At this time, we know of no material pending or threatened legal proceedings, or other proceedings contemplated by governmental authorities, that would have a material impact on us.
Environmental Matters. Under various federal, state, and local laws, ordinances, and regulations, a current or previous owner or operator of real estate may be liable for the costs of removal of, or remediation of, certain hazardous or toxic substances in, on, around, or under the property. While we currently have no knowledge of any material violation of environmental laws,
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ordinances, or regulations at any of our properties, there can be no assurance that areas of contamination will not be identified at any of our properties or that changes in environmental laws, regulations, or cleanup requirements would not result in material costs to us.
Restrictions on Taxable Dispositions. Twenty-four of our properties, consisting of 4,560 apartment homes, are subject to restrictions on taxable dispositions under agreements entered into with some of the sellers or contributors of the properties and are effective for varying periods. We do not believe that the agreements materially affect the conduct of our business or our decisions whether to dispose of restricted properties during the restriction period because we generally hold these and our other properties for investment purposes rather than for sale. In addition, where we deem it to be in our shareholders' best interests to dispose of such properties, we generally seek to structure sales of such properties as tax deferred transactions under Section 1031 of the Internal Revenue Code (the "Code"). Otherwise, we may be required to provide tax indemnification payments to the parties to these agreements.
NOTE 11 • SHARE-BASED COMPENSATION
Share-based awards are provided to officers, non-officer employees, and trustees under our 2015 Incentive Plan approved by shareholders on September 15, 2015, which allows for awards in the form of cash, unrestricted and restricted common shares, and restricted stock units ("RSUs") up to an aggregate of 425,000 shares over the ten-year period in which the plan is in effect. Under our 2015 Incentive Plan, officers and non-officer employees may earn share awards under a long-term incentive plan, which is a forward-looking program that measures long-term performance over the stated performance period. These awards are payable to the extent deemed earned in shares. The terms of the long-term incentive awards granted under the revised program may vary from year to year.
2020 LTIP Awards
Awards granted to officers on March 13, 2020, consist of for 8,806 time-based RSU awards. All of these awards are classified as equity awards. The time-based RSU awards vest as to one-third of the shares on each of March 13, 2021, March 13, 2022, and March 13, 2023.
Share-Based Compensation Expense
Share-based compensation expense recognized in the consolidated financial statements for all outstanding share-based awards was $465,000 and $416,000 for the three months ended March 31, 2020 and 2019, respectively. The increase in expense was primarily due to the timing of award grants in connection with the change in our fiscal year end, additional officers included in award grants, and a decrease in forfeitures in the current period compared to the prior period.
Item 2. Management's Discussion and Analysis of Financial Conditions and Results of Operations
The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements included in this report, our audited financial statements for the year ended December 31, 2019, which are included in our Form 10-K filed with the SEC on February 19, 2020, and the risk factors in Item 1A, “Risk Factors,” of our Form 10-K for the year ended December 31, 2019. Currently, one of the most significant factors is the potential adverse effects of the current COVID-19 pandemic and its associated economic impact on the financial condition, results of operations, and cash flows of IRET and our residents and commercial tenants, the real estate market generally and the global economy and financial markets. The extent to which COVID-19 impacts us and our residents and commercial tenants will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity, and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures. Moreover, you should interpret many of the risks identified in this report, as well as the risks set forth below, as being heightened as a result of the ongoing and numerous adverse impacts of COVID-19.
We consider this and other sections of this Report to contain 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 (the “Exchange Act”), with respect to our expectations for future periods. 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 that 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.
The following factors, among others, could cause our future results to differ materially from those expressed in the forward-looking statements:

• | the COVID-19 pandemic and its ongoing effects on our employees, residents, and commercial tenants, third party vendors and suppliers, and apartment communities, as well as our cash flow, business, financial condition, and results of operation;

• | deteriorating economic conditions and rising unemployment rates in the markets where we own apartment communities or in which we may invest in the future;

• | government actions arising out of the COVID-19 pandemic that limit economic and consumer activity;

• | rental conditions in our markets, including occupancy levels and rental rates, our potential inability to renew residents or obtain new residents upon expiration of existing leases, changes in tax and housing laws, or other factors, including the impact of the COVID-19-related governmental rules and regulations relating to rental rates, evictions, and other rental conditions;

• | changes in operating costs, including real estate taxes, utilities, insurance costs, and expenses related to complying with COVID-19 restrictions or otherwise responding to the COVID-19 pandemic;

• | adverse changes in our markets, including future demand for apartment homes in our markets, barriers of entry into new markets, limitations on our ability to increase rental rates, our inability to identify and consummate attractive acquisitions and dispositions on favorable terms, our inability to reinvest sales proceeds successfully, and our inability to accommodate any significant decline in the market value of real estate serving as collateral for our mortgage obligations;

• | reliance on a single asset class (multifamily) and certain geographic areas (Midwest and West regions) of the U.S.;

• | inability to succeed in any new markets we 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;

• | inability to sell our non-core properties on terms that are acceptable;

• | failure to reinvest proceeds from sales of properties into tax-deferred exchanges, which could necessitate special dividend and tax protection payments;

• | inability to fund capital expenditures out of cash flow;

• | inability to pay, or need to reduce, dividends on our common shares;

• | inability to raise additional equity capital;

• | financing risks, including our potential inability to meet existing covenants in our existing credit facilities or to obtain new debt or equity financing on favorable terms, or at all;

• | level and volatility of interest or capitalization rates or capital market conditions;

• | loss contingencies and the availability and cost of casualty insurance for losses;

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• | 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;

• | cyber liability or potential liability for breaches of our privacy or information security systems;

• | inability to address catastrophic weather, natural events, and climate change;

• | inability to comply with laws and regulations applicable to our business and any related investigations or litigation; and

• | other risks identified in this Report, in other SEC reports, or in other documents that we publicly disseminate.

New factors may also arise from time to time that could have a material adverse effect on our business and results of operations. Except as otherwise required by law, we undertake no obligation to publicly update or revise these forward-looking statements to reflect events, circumstances, or changes in expectations after the date on which this Report is filed. Readers also should review the risks and uncertainties 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 year ended December 31, 2019, as they are updated and supplemented in this Report.
Executive Summary
We own, manage, acquire, redevelop, and develop apartment communities. We primarily focus on investing in markets characterized by stable and growing economic conditions, strong employment, and an attractive quality of life that we believe, in combination, lead to higher demand for our apartment homes and retention of our residents. As of March 31, 2020, we owned interests in 70 apartment communities consisting of 12,135 apartment homes. Property owned, as presented in the condensed consolidated balance sheets, was $1.7 billion at March 31, 2020, compared to $1.6 billion at December 31, 2019.
Renting apartment homes is our primary source of revenue, and our business objective is to provide great homes for our residents. We strive to maximize resident satisfaction and retention by investing in high-quality assets in desirable locations and creating vibrant apartment communities through service-oriented operations. We believe that delivering superior resident experiences will enhance resident satisfaction while also driving profitability for our business and our shareholders. We have paid quarterly distributions continuously since our first distribution in 1971.
COVID-19 Developments
The COVID-19 pandemic has had a profound impact on our business since March 2020, when it spread to many of the communities in which we own properties. Our first priority continues to be the health and well-being of our residents, team members, and the communities we serve.
In order to minimize the impact of COVID-19 on our team, residents, and communities, we undertook the following measures in March 2020:

• | We enacted social distancing practices for our team and within our communities in order to do our part to stop the spread of COVID-19, including encouraging residents to use electronic or phone communication when contacting our staff;

• | We closed all common amenity spaces, including on-site fitness centers, community rooms, swimming pools, resident coffee services, and conference facilities, until further notice in an effort to support social distancing and comply with governmental regulations;

• | We implemented enhanced cleaning and disinfecting protocols at our communities;

• | We announced that maintenance requests requiring unit entry would be completed for essential or emergency services only;

• | We closed our offices to the public, and our leasing is being done on-line and through virtual tours;

• | We extended April 2020 rent deadlines;

• | We waived all fees associated with credit card payments;

• | We suspended eviction filings in accordance with government regulations;

• | We started offering rental deferment payment plans to residents experiencing COVID-19-related financial hardship; and

• | We began offering flexible lease renewal terms.

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COVID-19 will continue to have a significant impact on our business for the foreseeable future, but it is difficult to predict the magnitude of the effects of COVID-19 due to the uncertainties regarding the scope, severity, and duration of the pandemic, the nature and extent of actions taken to combat the pandemic and mitigate its effects, and the direct and indirect economic effects of the pandemic and associated containment measures. The outbreak of COVID-19 in many countries, including the United States, has significantly adversely impacted global economic activity and has contributed to significant volatility and negative pressure in financial markets.
In addition to the general effects of the COVID-19 pandemic on the U.S. economy, the pandemic is also expected to have a material adverse effect on our business. Certain states and cities, including some of those in which our apartment communities are located, have reacted by instituting quarantines, restrictions on travel, shelter-in-place or stay-at-home directives, restrictions on types of businesses that may continue to operate, and restrictions on the types of construction projects that may continue. We cannot predict if additional states and cities will implement similar restrictions or when restrictions currently in place will expire. Many experts predict that the pandemic will trigger, or has already triggered, a global recession. In addition, ongoing social distancing requirements and stay-at-home directives affect the daily lives of our employees and residents and impact our ability to show apartment homes to potential residents, while the ongoing loss of jobs, rising unemployment levels, and closing of certain commercial businesses affect the ability of certain of our residents and commercial tenants to pay rent on a timely basis, renew existing leases or enter into new leases.
Financial Impact of the COVID-19 Pandemic
Because most of our revenue is derived from rental payments that we receive from our residents, which payments are typically due at the beginning of each month, and because most of the physical distancing and shelter-in-place directives did not take effect in the communities in which we operate until the second half of March 2020, the economic disruption caused by COVID-19 did not have a material impact on our business or results of operations for the three months ended March 31, 2020. However, because the COVID-19 pandemic is ongoing, the economic effect of this pandemic is likely to adversely impact our financial condition, results of operations, and cash flows for the foreseeable future.
The economic impact of the ongoing COVID-19 pandemic could have the following effects, among others:

• | cause our residents or commercial tenants to defer or stop rental payment, and abandon or fail to renew leases, which would reduce our primary source of net operating income and cash flows;

• | cause us to increase our borrowing and our leverage and/or seek other sources of financing, which may not be available on favorable terms;

• | cause us to fail to satisfy certain of the covenants under our line of credit or other borrowing facilities, which could limit our access to such financings or even lead to an event of default;

• | cause the capital markets generally to become restricted or unavailable, thereby limiting our access to any needed debt or equity capital financing;

• | impact the business of, or cause the loss of, certain critical third-party suppliers or other service providers;

• | restrict our ability to continue to pay dividends on a quarterly basis at the current rate, or at all, which could hinder our ability to meet the REIT distribution requirements and continue to qualify as a REIT;

• | impair the value of our tangible or intangible assets;

• | require us to record loss contingencies and incur additional expenses related to our COVID-19 response; or

• | cause the U.S. economy to suffer an extended economic slowdown, which could lead to a prolonged recession or even economic depression, which in turn would affect the demand for our apartment communities and could have an adverse impact on our business and operating results.

We have taken the following actions in order to manage expenses and to preserve cash flow:

• | We have halted, canceled, or delayed, as appropriate or necessary given governmental restrictions and Center for Disease Control recommendations, certain capital projects and investments;

• | We have suspended certain of our value-add initiatives to renovate apartment homes or community amenity areas;

• | We have eliminated the majority of planned travel expense for our team members through the end of 2020;

• | We have moved the meetings of our Board of Trustees to remote meetings, thus limiting the expense associated with an in-person meeting; and

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• | We have initiated a review of capital spend to identify projects which can be delayed.

The extent to which the economic disruption associated with the COVID-19 pandemic impacts our business and financial results will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity, and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others.
Despite our efforts to manage our response to the effects of the COVID-19 pandemic, the ultimate impact of COVID-19 on our rental revenue for the second quarter of 2020 and thereafter cannot be determined at present. The situation surrounding the COVID-19 pandemic remains fluid, and we are actively managing our response in collaboration with residents, commercial tenants, government officials and business partners and assessing potential impacts to our financial position and operating results, as well as potential adverse impacts on our business. Our management remains committed to ensuring the safety of our team members, residents, and communities, and to maintaining the financial stability of our business enterprise for the duration of the COVID-19 pandemic. For further information regarding the impact of COVID-19 on our business, see Part II, Item 1A titled “Risk Factors.”
Overview of the Three Months Ended March 31, 2020
For the three months ended March 31, 2020, revenue decreased by $1.2 million to $44.4 million, compared to $45.6 million for the three months ended March 31, 2019, primarily due to dispositions. Total expenses decreased by $1.7 million to $42.4 million for the three months ended March 31, 2020, compared to $44.1 million for the three months ended March 31, 2019. Funds from Operations ("FFO") applicable to common shares and Units for the three months ended March 31, 2020 decreased to $8.7 million compared to $10.1 million for the comparable period ended March 31, 2019, primarily due to loss on marketable securities, offset by reductions in interest expense. general and administrative expense, and casualty loss. The drivers of these changes are discussed in more detail in the “Results of Operations” section below.
In our ongoing efforts to improve the quality of our portfolio and balance sheet, we completed the following transactions during the first quarter of 2020:

• | Acquired the remaining noncontrolling interests in 71 France for $12.2 million;

• | Completed the acquisition of Ironwood Apartments, an apartment community with 182 homes located in New Hope, Minnesota, an inner-ring suburb of Minneapolis, Minnesota, for an aggregate purchase price of $46.3 million, of which $28.6 million was paid in cash and $17.7 million from payoff of a note receivable.

See Note 8 of the Notes to Condensed Consolidated Financial Statements in this Report for a table detailing our acquisitions and dispositions during the three-month periods ended March 31, 2020 and 2019.
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Results of Operations
Reconciliation of Operating Income (Loss) to Net Operating Income
The following table provides a reconciliation of operating income (loss) to net operating income ("NOI"), which is defined below.

| (in thousands, except percentages)
| Three Months Ended March 31,
| 2020 |  | 2019 |  | $ Change |  |  | % Change |
Operating income (loss) | $ | 2,004 |  |  | $ | 1,460 |  |  | $ | 544 |  |  | 37.3 | %
Adjustments: |  |  |  |  |  |  |
Property management expenses | 1,554 |  |  | 1,554 |  |  | — |  |  | — |
Casualty loss | 327 |  |  | 641 |  |  | (314 | ) |  | (49.0 | )%
Depreciation and amortization | 18,160 |  |  | 18,111 |  |  | 49 |  |  | 0.3 | %
General and administrative expenses | 3,428 |  |  | 3,806 |  |  | (378 | ) |  | (9.9 | )%
Net operating income | $ | 25,473 |  |  | $ | 25,572 |  |  | $ | (99 | ) |  | (0.4 | )%

Consolidated Results of Operations
The following consolidated results of operations cover the three months ended March 31, 2020 and 2019.

| (in thousands, except percentages)
| Three Months Ended
| March 31, |  | 2020 vs. 2019
| 2020 |  | 2019 |  | $ Change |  | % Change
Revenue |  |  |  |  |  |  |
Same-store | $ | 39,820 |  |  | $ | 38,328 |  |  | $ | 1,492 |  |  | 3.9 | %
Non-same-store | 3,511 |  |  | 411 |  |  | 3,100 |  |  | 754.3 | %
Other properties and dispositions | 1,075 |  |  | 6,869 |  |  | (5,794 | ) |  | (84.3 | )%
Total | 44,406 |  |  | 45,608 |  |  | (1,202 | ) |  | (2.6 | )%
Property operating expenses, including real estate taxes |  |  |  |  |  |  |
Same-store | 17,258 |  |  | 16,601 |  |  | 657 |  |  | 4.0 | %
Non-same-store | 1,320 |  |  | 169 |  |  | 1,151 |  |  | 681.1 | %
Other properties and dispositions | 355 |  |  | 3,266 |  |  | (2,911 | ) |  | (89.1 | )%
Total | 18,933 |  |  | 20,036 |  |  | (1,103 | ) |  | (5.5 | )%
Net operating income |  |  |  |  |  |  |
Same-store | 22,562 |  |  | 21,727 |  |  | 835 |  |  | 3.8 | %
Non-same-store | 2,191 |  |  | 242 |  |  | 1,949 |  |  | 805.4 | %
Other properties and dispositions | 720 |  |  | 3,603 |  |  | (2,883 | ) |  | (80.0 | )%
Total | $ | 25,473 |  |  | $ | 25,572 |  |  | $ | (99 | ) |  | (0.4 | )%
Property management expenses | (1,554 | ) |  | (1,554 | ) |  | — |  |  | — |
Casualty gain (loss) | (327 | ) |  | (641 | ) |  | (314 | ) |  | (49.0 | )%
Depreciation and amortization | (18,160 | ) |  | (18,111 | ) |  | 49 |  |  | 0.3 | %
General and administrative expenses | (3,428 | ) |  | (3,806 | ) |  | (378 | ) |  | (9.9 | )%
Interest expense | (6,911 | ) |  | (7,896 | ) |  | (985 | ) |  | (12.5 | )%
Loss on extinguishment of debt | — |  |  | (2 | ) |  | (2 | ) |  | (100.0 | )%
Interest and other income (loss) | (2,777 | ) |  | 424 |  |  | (3,201 | ) |  | (755.0 | )%
Income (loss) before gain (loss) on sale of real estate and other investments, gain (loss) on litigation settlement, and income (loss) from discontinued operations | (7,684 | ) |  | (6,014 | ) |  | (1,670 | ) |  | (27.8 | )%
Gain (loss) on sale of real estate and other investments | — |  |  | 54 |  |  | (54 | ) |  | (100.0 | )%
NET INCOME (LOSS) | $ | (7,684 | ) |  | $ | (5,960 | ) |  | $ | (1,724 | ) |  | 28.9 | %
Dividends to preferred unitholders | (160 | ) |  | (57 | ) |  | 217 |  |  | 100.0 | %
Net (income) loss attributable to noncontrolling interests – Operating Partnership | 692 |  |  | 743 |  |  | (51 | ) |  | (6.9 | )%
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities | 145 |  |  | 576 |  |  | (431 | ) |  | (74.8 | )%
Net income (loss) attributable to controlling interests | (7,007 | ) |  | (4,698 | ) |  | (2,309 | ) |  | 49.1 | %
Dividends to preferred shareholders | (1,705 | ) |  | (1,705 | ) |  | — |  |  | — |
Redemption of Preferred Shares | 273 |  |  | — |  |  | 273 |  |  | — |
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS | $ | (8,439 | ) |  | $ | (6,403 | ) |  | $ | (2,036 | ) |  | 31.8 | %

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| Three Months Ended March 31,
Weighted Average Occupancy(1) | 2020 |  | 2019
Same-store | 95.4 | % |  | 95.6 | %
Non-same-store | 93.3 | % |  | 94.9 | %
Total | 95.2 | % |  | 95.5 | %

(1) | Weighted average occupancy is defined as the percentage resulting from dividing actual rental revenue by scheduled rental revenue. Scheduled rental revenue represents the value of all apartment homes, with occupied homes valued at contractual rental rates pursuant to leases and vacant homes valued at estimated market rents. When calculating actual rents for occupied 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. 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.

Number of Apartment Homes | March 31, 2020 |  |  | March 31, 2019 |
Same-store | 11,257 |  |  | 11,257 |
Non-same-store | 878 |  |  | 272 |
Total | 12,135 |  |  | 11,529 |

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.
We have provided 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. The discussion below focuses on the main factors affecting real estate revenue and expenses from same-store apartment communities because changes from one year to another in real estate revenue and expenses from non-same-store apartment communities are generally due to the addition of those properties to our real estate portfolio, and accordingly provide less useful information for evaluating ongoing operational performance of our real estate portfolio.
For the comparison of the three months ended March 31, 2020 and 2019, four apartment communities were non-same-store. Sold communities are included in "Other," which also includes non-multifamily properties and the non-multifamily components of mixed-use properties.
Revenue. Revenue decreased by 2.6% to $44.4 million for the three months ended March 31, 2020, compared to $45.6 million in the three months ended March 31, 2019. Dispositions and other properties decreased by $5.8 million, offset by a $3.1 million increase from non-same-store communities. Revenue from same-store communities increased 3.9% or $1.5 million in the three months ended March 31, 2020, compared to the same period in the prior year. The increase was attributable to 4.0% growth in average rental revenue and offset by a 0.1% decrease in occupancy as weighted average occupancy decreased to 95.3% from 95.4% for the three months ended March 31, 2020 and 2019, respectively.
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Property operating expenses, including real estate taxes. Property operating expenses, including real estate taxes, decreased by 5.5% to $18.9 million in the three months ended March 31, 2020, compared to $20.0 million in the same period of the prior year. A decrease of $2.9 million from dispositions and other properties was offset by an increase of $1.2 million at non-same-store communities. Property operating expenses, including real estate taxes, at same-store communities increased by 4.0% or $657,000 in the three months ended March 31, 2020, compared to the same period in the prior year. At same-store communities, real estate taxes increased by $625,000. Insurance expense at same-store properties increased by $528,000. These same-store increases were partially offset by a decrease in controllable operating expenses (which exclude insurance and real estate taxes) of $495,000, primarily due to lower snow removal and utility costs.
Property management expenses. Property management expense, consisting of property management overhead and property management fees paid to third parties, was $1.6 million in each of the three months ended March 31, 2020 and 2019.
Casualty gain (loss). Casualty loss was $327,000 in the three months ended March 31, 2020, compared to $641,000 in the same period of the prior year. During the three months ended March 31, 2019, many of our markets were impacted by a series of adverse weather-related events. These events included extreme cold and record-setting snowfall, which caused excess ice and snow accumulation, resulting in water damage to some of our apartment communities. We did not incur such losses in the current period.
Depreciation and amortization. Depreciation and amortization increased by 0.3% to $18.2 million in the three months ended March 31, 2020, compared to $18.1 million in the same period of the prior year, attributable to an increase of $2.0 million from non-same-store properties, offset by a decrease from sold properties.
General and administrative expenses. General and administrative expenses decreased by 9.9% to $3.4 million in the three months ended March 31, 2020, compared to $3.8 million in the same period of the prior year, primarily attributable to decreases in legal fees related to our successful pursuit of a recovery on a construction defect claim and severance costs in the prior year. These decreases were partially offset by an increase in consulting and health insurance costs in the current period.
Interest expense. Interest expense decreased by 12.5% to $6.9 million in the three months ended March 31, 2020, compared to $7.9 million in the same period of the prior year, primarily due to the replacement of maturing debt with lower rate debt and lower average balances on our lines of credit.
Interest and other income (loss). We recorded a loss in interest and other income (loss) of $2.8 million in the three months ended March 31, 2020, compared to income of $424,000 in the same period of the prior year. The decrease was primarily due to a loss in the value of our marketable securities of $3.6 million.
Gain (loss) on sale of real estate and other investments. We had no gain or loss in continuing operations in the three months ended March 31, 2020, compared to $54,000 in the same period of the prior year.
Net income (loss) available to common shareholders. Net loss available to common shareholders was $8.4 million for the three months ended March 31, 2020, compared to net income of $6.4 million in the three months ended March 31, 2019.
Funds from Operations.
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 does not assume the value of real estate assets diminishes predictably over time, as implied by the historical cost convention of GAAP and the recording of depreciation.
We use the definition of Funds from Operations ("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.

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.
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Due to limitations of the Nareit FFO definition, we have made certain interpretations in applying this definition. We believe that all such interpretations not specifically provided for 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 the main business.
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 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.
FFO applicable to common shares and Units for the three months ended March 31, 2020, decreased to $8.7 million compared to $10.1 million for the comparable period ended March 31, 2019, a decrease of 14.7%. This decrease was primarily due to loss on marketable securities, offset by reductions in interest expense. general and administrative expense, and casualty loss.
Reconciliation of Net Income Available to Common Shareholders to Funds from Operations

| (in thousands, except per share and unit amounts)
| Three Months Ended March 31,
| 2020 | 2019
Net income (loss) available to common shareholders | $ | (8,439 | ) |  | $ | (6,403 | )
Adjustments: |  |  |  |  |
Noncontrolling interests – Operating Partnership | (692 | ) |  | (743 | )
Depreciation and amortization | 18,160 |  |  | 18,111 |
Less depreciation – non real estate | (93 | ) |  | (85 | )
Less depreciation – partially owned entities | (282 | ) |  | (678 | )
(Gain) loss on sale of real estate | — |  |  | (54 | )
Funds from operations applicable to common shares and Units | $ | 8,654 |  |  | $ | 10,148 |
Funds from operations applicable to common shares and Units | $ | 8,654 |  |  | $ | 10,148 |
Dividends to preferred unitholders | 160 |  |  | 57 |
Funds from operations applicable to common shares and Units - diluted | $ | 8,814 |  |  | $ | 10,205 |
Per Share Data |  |  |
Earnings (loss) per common share - diluted | $ | (0.67 | ) |  | $ | (0.54 | )
FFO per share and Unit - diluted | $ | 0.66 |  |  | $ | 0.77 |
Weighted average shares and Units - diluted | 13,401 |  |  | 13,230 |

Acquisitions and Dispositions
During the first quarter of 2020, we acquired a 182-home apartment community in New Hope, Minnesota for an aggregate purchase price of $46.3 million, compared to $44.0 million acquisitions in the same period of the prior year. During the first quarter of 2020, we had no dispositions, compared to one dispositions in the first quarter of 2019. See Note 8 of the Notes to Condensed Consolidated Financial Statements in this report for a table detailing our acquisitions and dispositions during the three-month periods ended March 31, 2020 and 2019.
Distributions Declared
Distributions of $0.70 per common share and Unit were declared during the three months ended March 31, 2020 and 2019. Distributions of $0.4140625 per Series C preferred share were declared during the three months ended March 31, 2020 and 2019. Distributions of $0.9655 per Series D preferred unit were declared during the three months ended March 31, 2020 and 2019, respectively.
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Liquidity and Capital Resources
Overview
We desire to create and maintain a strong balance sheet that offers financial flexibility and enables us to pursue and acquire apartment communities that enhance our portfolio composition, operating metrics, and cash flow growth prospects. We intend to strengthen our capital and liquidity positions by continuing to focus on improving our core fundamentals, which include generating positive cash flows from operations, maintaining appropriate debt levels and leverage ratios, and controlling overhead costs.
Our primary sources of liquidity are cash and cash equivalents on hand and cash flows generated from operations. Other sources include availability under our unsecured lines of credit, proceeds from property dispositions, including restricted cash related to net tax deferred proceeds, offerings of preferred and common shares under our shelf registration statement, including offerings of common shares under our 2019 ATM Program, and unsecured debt or long-term secured mortgages.
Our primary liquidity demands are normally-recurring operating and overhead expenses, debt service and repayments, capital improvements to our communities, distributions to the holders of our preferred shares, common shares, Series D preferred units, and Units, value-add redevelopment, common share buybacks and Unit redemptions, and acquisitions of additional communities.
Although we believe that our financial condition and liquidity are sufficient to meet our reasonably anticipated liquidity demands during 2020, factors that could impact our future liquidity include, but are not limited to, volatility in capital and credit markets, our ability to access capital and credit markets, the effects of the COVID-19 pandemic, the minimum REIT dividend requirements, and our ability to complete asset purchases, sales, or developments.
As of March 31, 2020, we had total liquidity of approximately $193.3 million, which included $167.0 million available on our line of credit and $26.3 million of cash and cash equivalents. As of December 31, 2019, we had total liquidity of approximately $226.5 million, which included $199.9 million on our line of credit and $26.6 million of cash and cash equivalents.
Effects of COVID-19
We anticipate that our primary sources of liquidity will continue to be cash and cash equivalents on hand, cash flows generated from operations, although cash flows may be reduced as a result of lower monthly collections of rent as well as the potential for lower occupancy or reduced rental rates during and after the COVID-19 pandemic, and availability under our unsecured lines of credit.

• | At the end of the first quarter, we had $193.3 million of total liquidity on our balance sheet, including $167.0 million available under our unsecured line of credit and $26.3 million of cash and cash equivalents.

• | We have approximately $9.5 million of debt maturities remaining in 2020 and approximately $35.8 million of debt maturities in 2021.

• | We have approximately $38.4 million remaining to fund, primarily over the next 15 months, under construction and mezzanine loans we originated for the development of a multifamily community in Minneapolis, Minnesota.

Other available sources of liquidity proceeds from property dispositions, including restricted cash related to net tax deferred proceeds; offerings of preferred and common shares under our shelf registration statement, including offerings of common shares under our 2019 ATM Program; and unsecured term loans or long-term secured mortgages. However, due to the economic disruption caused by COVID-19, the terms of future debt and equity issuances likely will not be as favorable for the foreseeable future as they have been in recent years. For a discussion of our debt facilities and the impact of COVID-19 thereon, see "Debt" and "Potential Impact of COVID-19 on Continuing Debt Availability" below.
Debt
We have an unsecured credit facility for $395.0 million, with the commitment allocated to a revolving line of credit for $250.0 million and the remaining $145.0 million allocated between two term loans: a $70.0 million unsecured term loan that matures on January 15, 2024 and a $75.0 million unsecured term loan that matures on August 31, 2025.
As of March 31, 2020, our line of credit had total commitments of $250.0 million, with borrowing capacity based on the value of properties contained in an unencumbered asset pool ("UAP"). The UAP provided for a borrowing capacity of approximately $250.0 million at quarter-end, offering additional borrowing availability of $167.0 million beyond the $83.0 million drawn, including the balance on our operating line of credit, as of March 31, 2020. At December 31, 2019, the line of credit borrowing capacity was $250.0 million based on the UAP, of which $50.1 million was drawn on the line, including the balance on our
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operating line of credit. This credit facility matures on August 31, 2022, with one twelve-month option to extend the maturity date at our election.
As of March 31, 2020, we had a private shelf agreement for the issuance of up to $150.0 million of unsecured senior promissory notes. In September 2019, we issued $75.0 million of Series A notes due September 13, 2029, bearing interest at a rate of 3.84% annually, and $50.0 million of Series B notes due September 30, 2028, bearing interest at a rate of 3.69% annually, under this facility. An additional $25.0 million remains available under this agreement.
We also have a $6.0 million operating line of credit. This operating line of credit is designed to enhance treasury management activities and more effectively manage cash balances. This operating line has a one-year term, with pricing based on a market spread plus the one-month LIBOR index rate.
Mortgage loan indebtedness was $330.0 million and $331.4 million on March 31, 2020 and December 31, 2019, respectively. All of our mortgage debt is at fixed rates of interest, with staggered maturities. This decreases the exposure to changes in interest rates, which reduces the effect of interest rate fluctuations on our results of operations and cash flows. As of March 31, 2020, the weighted average interest rate on our mortgage debt was 4.01%.
Potential Impact of COVID-19 on Continuing Debt Availability
Although we are in compliance with our covenants under all of our debt facilities, there can be no assurance that we will continue to remain in compliance with those covenants or be able to access these funds depending on the length of the COVID-19 pandemic and the breadth of its impact on the U.S. economy generally and the credit markets in particular. Under the terms of our credit facility, we may be unable to obtain advances under our credit facility if:

• | we are unable to make certain representations and warranties, including a certification that, since April 30, 2018, there has been no change in our business, financial condition, operations, performance or properties , taken as a whole, which would reasonably be expected to have a material adverse effect;

• | changes in our consolidated property NOI or capitalization rates applicable to the properties in our borrowing base reduce or eliminate availability under our credit facility; or

• | changes in the nature and composition (including occupancy rate) of the properties in our borrowing base cause these properties to become ineligible to be part of our borrowing base -- which could occur if, among other reasons, the occupancy rate of our eligible properties drops below 70% or tenants under "significant leases" (defined as any lease that comprises 30% or more of all base rent revenue of such property) are more than 60 days in arrears on base rental or other similar payments due under their leases -- and if we are not able to replace such properties with other qualifying properties, such ineligibility could reduce or eliminate the availability under our credit facility.

Even if we remain in compliance with the foregoing representations, warranties and covenants, we may be unable to access the full amount available under our credit facilities if our lenders fail to fund their commitments, which could occur if:

• | credit market deterioration or overall economic conditions affect the ability of one or more of our lenders to meet their funding commitments under our revolving credit facility. If a lender fails to fund its commitment under the revolving credit facility, that portion of the credit facility will be unavailable if the lender’s commitment is not replaced by a new commitment from an alternate lender;

• | distressed market conditions cause our lenders to transfer their commitments to other institutions, which could result in committed funds not being available, particularly if consolidation of the commitments under our credit facility or among its lenders were to occur; or

• | we are unable to obtain additional letters of credit due to a default by any lender in meeting its funding obligations.

Equity
We have an equity distribution agreement in connection with the 2019 ATM Program through which we may offer and sell common shares having an aggregate gross sales price of up to $150.0 million, in amounts and at times that we determine. The proceeds from the sale of common shares under the 2019 ATM program are intended to be used for general corporate purposes, which may include the funding of future acquisitions and the repayment of indebtedness. During the three months ended March 31, 2020, we issued approximately 50,000 common shares under the 2019 ATM program at an average price of $68.04 per share, net of commissions. Total consideration, net of commissions and issuance costs, was approximately $3.4 million. As of March 31, 2020, common shares having an aggregate offering prices of up to $124.3 million remained available under the 2019 ATM Program.
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Changes in Cash, Cash Equivalents, and Restricted Cash
The following discussion relates to changes in consolidated cash, cash equivalents, and restricted cash which are presented in our Condensed Consolidated Statements of Cash Flows in Part I, Item 1 above.
In addition to cash flow from operations, during the three months ended March 31, 2020, we generated capital from various activities, including:

• | Receiving $3.4 million from the issuance of approximately 50,000 common shares under our 2019 ATM Program; and

• | Selling $1.7 million of marketable securities.

During the three months ended March 31, 2020, we used capital for various activities, including:

• | Acquiring Ironwood Apartments, a 182-home apartment community located in New Hope, Minnesota, an inner-ring suburb of Minneapolis, for an aggregate purchase price of $46.3 million, of which $28.6 million was paid in cash and $17.7 million from payoff of a note receivable and accrued interest;

• | Acquiring the noncontrolling interests in 71 France for $12.2 million;

• | Repaying $1.5 million of mortgage principal;

• | Repurchasing 136,380 Series C preferred shares for an aggregate total cost of approximately $3.1 million; and

• | Funding capital improvements for apartment communities of approximately $2.8 million.

Contractual Obligations and Other Commitments
Contractual obligations and other commitments were disclosed in our Form 10-K for the year ended December 31, 2019. There have been no material changes to our contractual obligations and other commitments since that report was filed.
Off-Balance Sheet Arrangements
As of March 31, 2020, we had no significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.
Critical Accounting Policies
In preparing the condensed consolidated financial statements, management has made estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. A summary of our critical accounting policies is included in our Form 10-K for the year ended December 31, 2019, filed with the SEC on February 19, 2020 under the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Refer to Note 2 of the Notes to Condensed Consolidated Financial Statements in this report for additional information. There have been no other significant changes to our critical accounting policies during the three months ended March 31, 2020.
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Item 3. Quantitative and Qualitative Disclosures About Market Risk
Our exposure to market risk is primarily related to fluctuations in the general level of interest rates on our current and future fixed and variable rate debt obligations. We currently use interest rate swaps to offset the impact of interest rate fluctuations on our variable-rate term loans. We do not enter into derivative instruments for trading or speculative purposes. The interest rate swaps expose us to credit risk in the event of non-performance by the counterparties under the terms of the agreements.
See our Annual Report on Form 10-K for the year ended December 31, 2019 under the heading "Item 7A. Quantitative and Qualitative Disclosures About Market Risk" for a more complete discussion of our interest rate sensitivity. As of March 31, 2020, our exposure to market risk has not changed materially since our Annual Report on Form 10-K for the year ended December 31, 2019.
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Item 4. Controls and Procedures
Disclosure Controls and Procedures:
Management, with the participation of the Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act), as of the end of the period covered by this report. Based on such evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that, as of March 31, 2020, such disclosure controls and procedures were effective to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and is accumulated and communicated to management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
Internal Control Over Financial Reporting:
In connection with the evaluation required by Rule 13a-15(d), management, with the participation of the Chief Executive Officer and Chief Financial Officer, has identified no changes in our internal controls over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during that quarter ended March 31, 2020 and that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II — OTHER INFORMATION
Item 1. Legal Proceedings
In the ordinary course of our operations, we become involved in litigation. At this time, we know of no material pending legal proceedings, other than ordinary routine litigation incidental to the business, to which we or any of our subsidiaries is a party or of which any of our property is the subject.
Item 1A. Risk Factors
The COVID-19 pandemic could have the effect of heightening many of the risks described in Item 1A of our Form 10-K for the year ended December 31, 2019, including, without limitation, the following:

• | "Our financial performance is subject to risks associated with the real estate industry and ownership of apartment communities";

• | "Our property acquisition activities may not produce the cash flows expected and could subject us to various risks that could adversely affect our operating results";

• | "We may be unable to acquire or develop properties and expand our operations into new or existing markets successfully";

• |

• | "We are dependent on a concentration of our investments in a single asset class, making our results of operations more vulnerable to a downturn or slowdown in the sector or other economic factors";

• | "Our operations are concentrated in certain regions of the United States, and we are subject to general economic conditions in the regions in which we operate";

• | "Because real estate investments are relatively illiquid and various other factors limit our ability to dispose of assets, we may not be able to sell properties when appropriate";

• | "Inability to manage growth effectively may adversely affect our operating results";

• | "Future cash flows may not be sufficient to ensure recoverability of the carrying value of our real estate assets";

• | "The restrictive terms of indebtedness may cause acceleration of debt payments and constrain our ability to conduct certain transactions";

• | "Our stock price may fluctuate significantly"; and

• | "Payment of distributions on our common shares is not guaranteed,"

In addition to the risk factors listed above and those risk factors previously disclosed in Item 1A in our Annual Report on Form 10-K for the year ended December 31, 2019, we are presenting the following updated and additional risk factors to help investors understand the potential impact of the COVID-19 pandemic on our business:
The COVID-19 Pandemic Could Have a Material Adverse Effect on Our Business and Our Financial Results
If our employees or their family members become ill, it could affect the operation of our business and the maintenance of our properties. Ongoing social distancing requirements and stay-at-home directives affect the daily lives of our employees and residents and impact our ability to show apartment homes to potential residents, while the ongoing loss of jobs and rising unemployment levels affect the ability of some of our residents to pay rent on a timely basis, renew existing leases or enter into new leases. Certain states and cities, including where our apartment communities are located, have reacted by instituting quarantines, restrictions on travel, shelter-in-place or stay-at-home directives, restrictions on types of business that may continue to operate, and restrictions on the types of construction projects that may continue. We cannot predict if additional states and cities will implement similar restrictions or when restrictions currently in place will be lifted. Many experts predict that the pandemic will trigger, or has already triggered, a global recession.
The COVID-19 pandemic could have material and adverse effects on our financial condition, results of operations, and cash flows for the foreseeable future. The effects of the ongoing COVID-19 pandemic could:

• | cause our residents or commercial tenants to defer or stop rental payments, and abandon or fail to renew leases, which would reduce our primary source of net operating income and cash flows;

• | cause us to increase our borrowing and our leverage and/or seek other sources of financing, which may not be available on favorable terms;

• | cause us to fail to satisfy certain of the covenants under our line of credit or other borrowing facilities, which could limit our access to such financings or even lead to an event of default;

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• | cause the capital markets generally to become restricted or unavailable, thereby limiting our access to any needed debt or equity capital financing;

• | impact the business of, or cause the loss of, certain critical third-party suppliers or other service providers;

• | restrict our ability to continue to pay dividends on a quarterly basis at the current rate, or at all;

• | impair the value of our tangible or intangible assets;

• | require us to record loss contingencies and incur additional expenses related to our COVID-19 response; or

• | cause the U.S. economy to suffer an extended economic slowdown, which could lead to a prolonged recession or even economic depression, which in turn would affect the demand for our apartment communities and could have an adverse impact on our business and operating results.

Any of the foregoing factors, or others, could have a material adverse effect on our business and results of operations for so long as COVID-19 continues to impact the U.S. economy in general and multifamily apartment communities in particular.
The extent to which the economic disruption associated with the COVID-19 pandemic impacts our business and financial results will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity, and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others.
A terrorism attack, other geopolitical crisis, or widespread outbreak of an illness or other health issue, such as the COVID-19 pandemic, could negatively affect various aspects of our business, including our workforce and supply chains, and could make it more difficult and expensive to meet our obligations to our residents.
Our operations are susceptible to national or international events, including acts or threats of war or terrorism, political instability, natural disasters, and health epidemics or pandemics. These risks include a widespread outbreak of an illness or other health issue, such as the COVID-19 pandemic, resulting in a worldwide pandemic that has affected hundreds of countries around the world, including the U.S. The COVID-19 pandemic has resulted in travel bans, quarantines, and work restrictions that prohibit many employees from going to work. As a result of pandemics, including COVID-19, businesses can be shut down, supply chains can be interrupted, slowed, or rendered inoperable, and individuals can become ill, quarantined, or otherwise unable to work and/or travel due to health reasons or governmental restrictions. Governmental mandates may require dramatic changes at our apartment communities or could impact the availability of goods or services from many of our suppliers for extended or indefinite periods of time.
Our business depends on our ability to continue to provide high quality housing and consistent operation of our apartment communities, the failure of which could adversely affect our business and results of operations.
Our business depends on providing our residents with quality housing and reliable services (including utilities), along with the consistent operation of our communities and their associated amenities, including covered parking, swimming pools, clubhouses with fitness facilities, playground areas, and other similar features. We may be required to undertake significant capital expenditures to renovate or reconfigure our communities in order to attract new residents and retain existing residents. The delayed delivery, material reduction, or prolonged interruption in any of these services, including as a result of social distancing policies enforced during the COVID-19 pandemic, may cause our residents to terminate their leases, may result in the reduction of rents and/or may result in an increase in our costs. In addition, we may fail to provide quality housing and continuous access to amenities as a result of other factors, including mechanical failure, power failure, inclement weather, physical or electronic security breaches, vandalism or acts of terrorism, or other similar events. Any of these issues could cause our residents to terminate or fail to renew their leases, could expose us to additional costs or liability claims, and could damage our reputation, any of which could impact our ability to provide quality housing and consistent operation of our apartment communities, which in turn could materially affect our business and results of operations.
Our inability to renew, repay, or refinance our debt may result in losses. We incur a significant amount of debt in the ordinary course of our business and in connection with acquisitions of real properties. Because we have a limited ability to retain earnings as a result of the REIT distribution requirements, we will generally be required to refinance debt that matures with additional debt or equity. We are subject to the normal risks associated with debt financing, including the risks that:

• | our cash flow will be insufficient to meet required payments of principal and interest, particularly if net operating income is reduced significantly due to the effects of the COVID-19 pandemic;

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• | we will not be able to renew, refinance, or repay our indebtedness when due; and

• | the terms of any renewal or refinancing are at terms less favorable than the terms of our current indebtedness.

These risks increase when credit markets are tight, as they may be during the COVID-19 pandemic. In general, when the credit markets are tight, we may encounter resistance from lenders when we seek financing or refinancing for properties or proposed acquisitions, and the terms of such financing or refinancing are likely to be less favorable to us than the terms of our current indebtedness.
We anticipate that we will need to refinance a significant portion of our outstanding debt as it matures. We cannot guarantee that any refinancing of debt with other debt will be possible on terms that are favorable or acceptable to us. If we cannot refinance, extend, or pay principal payments due at maturity with the proceeds of other capital transactions, our cash flows may not be sufficient in all years to repay debt as it matures. If we are unable to refinance our indebtedness on acceptable terms, or at all, we may be forced to dispose of one or more properties on disadvantageous terms, which may result in losses. These losses could have a material adverse effect on our business, our ability to make distributions to our shareholders, and our ability to pay amounts due on our debt. If a property is mortgaged to secure payment of indebtedness and we are unable to meet mortgage payments or refinance the debt at maturity, the mortgagor could foreclose upon the property, appoint a receiver, and receive an assignment of rents and leases or pursue other remedies, including taking ownership of the property, all with a consequent loss of revenues and asset value. Foreclosures also could affect our ability to obtain new debt and could create taxable income without accompanying cash proceeds, thereby hindering our ability to meet the REIT distribution requirements of the Code and impeding our ability to obtain financing for our other properties.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Sales of Securities
During the first quarter of 2020, we issued 10,579 unregistered Common Shares to limited partners of the Operating Partnership in exchange for their Units, in reliance on the private offering exemption under Section 4(a)(2) of the Securities Act of 1933, as amended.
Issuer Purchases of Equity Securities

|  |  |  |  | Maximum Dollar
|  |  |  | Total Number of Shares | Amount of Shares That
|  | Total Number of | Average Price | Purchased as Part of | May Yet Be Purchased
|  | Shares and Units | Paid per | Publicly Announced | Under the Plans or
Period |  | Purchased (1) | Share and Unit(2) | Plans or Programs | Programs(3)
January 1 - 31, 2020 |  | 76 |  | $ | 74.96 |  | — |  | $ | 50,000,000 |
February 1 - 29, 2020 |  | 76 |  | 71.12 |  | — |  | 50,000,000 |
March 1 - 31, 2020 |  | 136,410 |  | 23.01 |  | 136,380 |  | 46,863,182 |
Total |  | 136,562 |  | $ | 23.07 |  | 136,380 |  |  |

(1) | Includes a total of 182 Units redeemed for cash pursuant to the exercise of exchange rights. March purchases included 136,380 Series C Preferred Shares.

(2) | Amount includes commissions paid.

(3) | Represents amounts outstanding under our $50 million share repurchase program, which was authorized by our Board of Trustees on December 5, 2019.

Item 3. Defaults Upon Senior Securities
None
Item 4. Mine Safety Disclosures
Not Applicable
Item 5. Other Information
None
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Item 6. Exhibits
The following exhibits are filed as part of this Report.
EXHIBIT INDEX

Exhibit No. | Description
3.1 | Seventh Restated Trustees' Regulations (Bylaws) (incorporated by reference to Exhibit 3.1 to the Company's Current Report on Form 8-K filed with the Commission on May 1, 2020).
31.1* | Section 302 Certification of Chief Executive Officer
31.2* | Section 302 Certification of Executive Vice President and Chief Financial Officer
32.1* | Section 906 Certifications of Chief Executive Officer
32.2* | Section 906 Certifications of Executive Vice President and Chief Financial Officer
101 INS** | INSTANCE DOCUMENT
101 SCH** | SCHEMA DOCUMENT
101 CAL** | CALCULATION LINKBASE DOCUMENT
101 LAB** | LABELS LINKBASE DOCUMENT
101 PRE** | PRESENTATION LINKBASE DOCUMENT
101 DEF** | DEFINITION LINKBASE DOCUMENT
104** | COVER PAGE

* | Filed herewith

** | Submitted electronically herewith. Attached as Exhibit 101 are the following materials from our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, formatted in Inline eXtensible Business Reporting Language (“iXBRL”): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations; (ii) the Condensed Consolidated Statements of Equity; (iv) the Condensed Consolidated Statements of Cash Flows; (v) notes to these condensed consolidated financial statements; and (vi) the Cover Page to our Quarterly Report on Form 10-Q.

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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
INVESTORS REAL ESTATE TRUST
(Registrant)

/s/ Mark O. Decker, Jr. |
Mark O. Decker, Jr. |
President and Chief Executive Officer |
/s/ John A. Kirchmann |
John A. Kirchmann |
Executive Vice President and Chief Financial Officer |
Date: May 11, 2020 |

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