EX-99.1 2 ex-99d1.htm EX-99.1 iret_Ex99_1

Exhibit 99.1

Earnings Release

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IRET Announces Fiscal Second Quarter 2018 Results

 

MINOT, N.D., December 11, 2017 – IRET (NYSE: IRET) announced today its fiscal second quarter 2018 financial and operating results.  Net income and Funds from Operations (“FFO”) per share for the three and six months ended October 31, 2017, are detailed below.  Core FFO adjusts FFO for certain non-routine items, and both FFO and Core FFO are reconciled to net income in the tables accompanying this earnings release. 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Six Months Ended 

 

 

 

October 31,

 

October 31,

 

Per Share

        

2017

  

2016

 

2017

 

2016

 

Net Income

 

$

0.05

 

$

0.07

 

$

(0.06)

 

$

(0.13)

 

FFO

 

$

0.07

 

$

0.12

 

$

0.17

 

$

0.24

 

Core FFO

 

$

0.10

 

$

0.12

 

$

0.20

 

$

0.24

 

 

 

 

 

 

 

 

 

 

 

 

 

Quarterly
Comparison

 

Sequential
Comparison

 

YTD
Comparison

 

Multifamily Same-Store Results

2Q18 vs. 2Q17

 

2Q18 vs. 1Q18

 

2Q18 vs. 2Q17

 

Revenues

3.8

%

 

1.1

%

 

3.8

%

 

Expenses

16.0

%

 

5.8

%

 

15.0

%

 

Net Operating Income ("NOI")

(5.5)

%

 

(2.8)

%

 

(4.5)

%

 

 

 

 

 

 

 

 

 

 

 

 

Multifamily Same Store Results

    2Q18

 

    1Q18

 

    2Q17

 

Physical Occupancy

95.2

%

 

94.4

%

 

92.4

%

 

Weighted Average Occupancy

93.1

%

 

92.9

%

 

91.4

%

 

“We experienced strong revenue growth this quarter as we continued to increase occupancy across our portfolio,” said Mark O. Decker, Jr., IRET’s President and CEO.  “We also drove growth in our rental rates thanks to the efforts of our operations team. While expenses are significantly higher than last year, these increases were within our expectations and were offset by a decrease in capital expenditures and an increase in revenue growth. With the pending sale of our medical office portfolio and the announced sale of our other non-core assets, we are nearing the completion of our transformation to a focused multifamily REIT, which will enable us to devote management resources to our core business of developing and growing our multifamily properties.”

Second Quarter Fiscal Year 2018 Highlights

·

Achieved same store multifamily revenue growth of 3.8% compared to the prior year (3.8% YTD).  Improved performance is due primarily to increases in occupancy in the multifamily portfolio and better-than-anticipated rent growth.

·

Experienced elevated multifamily same-store expense increases year-over-year and sequentially.  The primary drivers of these increases were the previously disclosed change in our capitalization policies and additional costs related to increasing occupancy.  Additionally, we experienced higher labor costs and increased real estate taxes, primarily attributable to stabilizing developments and higher levy rates in select markets.

1

 

·

Closed the previously-announced acquisition of Park Place Apartments, deepening our holdings in the Minneapolis-St. Paul MSA, and, subsequent to quarter end, acquired Dylan Apartments in Denver, CO, our inaugural investment in another top-25 MSA.  Both Minneapolis-St. Paul and Denver have healthy and diverse economies and will be key markets in IRET’s push to achieve portfolio growth and improve operating efficiency. 

·

Closed the acquisition of Park Place using capital from our unsecured line of credit in anticipation of pending non-core asset sales.  Accordingly, the quarter-end debt balances increased over the first quarter.  As dispositions occur during the remainder of the fiscal year, we expect to use a portion of the sales proceeds to pay down debt.

·

Sold $105.4 million of commercial and non-core multifamily assets, including $63.4 million during the quarter and $42.0 million subsequent to quarter-end, and used the proceeds to deploy into targeted multifamily acquisitions.

·

Announced on November 30, 2017, that we signed an agreement to sell 28 healthcare properties and one office property for $417.5 million. While the transaction is subject to standard contingencies, upon closing, IRET will have substantially completed the transformation first announced in fiscal year 2016 to become a focused multifamily REIT. The sale of these assets will be used to fund future multifamily acquisitions and reduce debt.

·

Issued 4,118,460 shares of 6.625% Series C preferred shares for gross proceeds of $103.0 million and redeemed all 4,600,000 shares of 7.95% Series B preferred shares for an aggregate cost, including accrued dividends, of $115.8 million, which will result in a reduction of $2.3 million in annual preferred dividend payments.

·

Increased the commitments to our line of credit by $50 million and, subsequent to quarter-end, entered into a $70 million unsecured term loan.

Acquisitions

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in millions)

 

 

 

 

 

 

 

Total

 

 

Total

 

% Leased

 

Property Name

 

Location

 

Units

 

 

Cost

 

as of 10/31/17

 

Park Place

 

Plymouth, MN

 

500

 

$

92.3      

 
95.6%

 

 

Subsequent to quarter-end, we acquired Dylan Apartments, a 274-unit multifamily property in Denver, CO, for $90.6 million.  Located in the fast-growing River North Art District, Dylan marks IRET’s entrance into the Denver MSA where, as previously announced, we expect to establish a sizeable presence over time and benefit from the strong growth and diverse drivers in this dynamic market.

Dispositions

During the quarter, we sold a parcel of unimproved land in Bismarck, ND, for $3.2 million, an industrial property in Eagan, MN, for $9.0 million, 13 multifamily properties in Minot, ND, for $12.3 million, a healthcare property in Eagan, MN, for $2.1 million, and two healthcare properties in Hermantown, MN, for $36.9 million.

Subsequent to quarter-end, we sold an industrial property in Urbandale, IA, for $16.7 million, an industrial property in Roseville, MN, for $18.7 million, and two multifamily properties in Rochester, MN, for $6.7 million.  In addition, we announced on November 30, 2017, that we signed an agreement to sell 28 healthcare properties and one office property for $417.5 million.

Balance Sheet

At the end of the second quarter, we had $95.0 million of total liquidity on our balance sheet, including $52.5 million available on our corporate revolver. 

During the quarter, we issued 4,118,460 shares of 6.625% Series C Cumulative Redeemable Preferred Shares for gross proceeds of $103.0 million and redeemed all 4,600,000 shares of our 7.95% Series B Cumulative Redeemable Preferred Shares for an aggregate cost of $115.8 million.  In addition, we repurchased and retired approximately 398,000 common shares and redeemed approximately 40,000 Units for an aggregate cost of approximately $2.6 million, representing an average price of approximately $5.86 per share.  Finally, we increased the commitments under our unsecured line of credit by $50 million and, subsequent to quarter-end, obtained a $70 million unsecured term loan that matures in 2023 and executed a swap agreement to synthetically fix the interest rate for the full duration of the loan.

2

 

Quarterly Distributions

On December 5, 2017, IRET’s Board of Trustees declared a regular quarterly distribution of $0.07 per share/unit payable on January 16, 2018, to common shareholders and unitholders of record on January 2, 2018.  This distribution will be the 187th consecutive quarterly distribution paid by IRET since its inception in 1970.  It represents an annualized rate of $0.28 per share/unit with an annualized yield of 4.8%  based on IRET’s closing share price as of December 8, 2017.

The Board of Trustees also declared a distribution of $0.41866 per share on the 6.625% Series C Cumulative Redeemable Preferred Shares (NYSE: IRET PRC) payable on January 2, 2018, to holders of record on December 15, 2017.  Series C preferred share distributions are cumulative and payable quarterly in arrears at an annual rate of $1.65625 per share.

Earnings Call

 

 

 

 

 

Live webcast and replay:  http://ir.iretapartments.com

 

 

 

Live Conference Call

 

Conference Call Replay

Tuesday, December 12, 2017, at 10:00 AM ET

 

Replay available until December 26, 2017

USA Toll Free Number

1-877-509-9785

 

USA Toll Free Number

1-877-344-7529

International Toll Free Number

1-412-902-4132

 

International Toll Free Number

1-412-317-0088

Canada Toll Free Number

1-855-669-9657

 

Canada Toll Free Number

1-855-669-9658

 

 

 

Conference Number

10114610

Supplemental Information

Supplemental Operating and Financial Data for the Quarter Ended October 31, 2017 (“Supplemental Information”) is available in the Investors section on IRET’s website at www.iretapartments.com or by calling Investor Relations at 701-837-7104.  Non-GAAP financial measures and other capitalized terms, as used in this earnings release, are defined and reconciled in the Supplemental Information, which accompanies this earnings release.

About IRET

IRET is a real estate company focused on the ownership, management, acquisition, redevelopment, and development of multifamily apartment communities.  As of October 31, 2017, IRET owned interests in 89 multifamily properties consisting of 13,576 apartment homes and 40 commercial properties, including 28 healthcare and 12 other commercial properties, with a total of 2.5 million square feet of leasable space.  IRET's common shares and Series C preferred shares are publicly traded on the New York Stock Exchange (NYSE symbols: IRET and IRET PRC, respectively).

Forward Looking Statements

Certain statements in this press release are based on our current expectations and assumptions, and are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995.  Forward-looking statements do not discuss historical fact, but instead include statements related to expectations, projections, intentions or other items related to the future. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and variations of those words and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements to be materially different from projected results. Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, we can give no assurance our expectations will be achieved. Any statements contained herein that are not statements of historical fact should be deemed forward-looking statements. As a result, reliance should not be placed on these forward-looking statements as these statements are subject to known and unknown risks, uncertainties, and other factors beyond our control and could differ materially from our actual results and performance.  Such risks and uncertainties those 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 fiscal year ended April 30, 2017, in subsequent quarterly reports on Form 10-Q and in other public reports.  We assume no obligation to update or supplement forward-looking statements that become untrue due to subsequent events. 

 

 

3

 

 

IRET

RECONCILIATION OF NET INCOME ATTRIBUTABLE TO

IRET TO FFO AND CORE FFO

 

z

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except per share amounts)

 

Three Months Ended October 31,

 

 

2017

 

 

2016

 

 

 

 

 

 

 

 

Per

 

 

 

 

 

 

Per

 

 

 

 

 

 

Weighted

 

Share

 

 

 

 

Weighted

 

Share

 

 

 

 

 

 

Avg Shares

 

And

 

 

 

 

Avg Shares

 

And

 

 

  

Amount

  

and Units(1)

  

Unit(2)

  

 

Amount

  

and Units(1)

  

Unit(2)

 

Net income attributable to controlling interests

 

$

12,821

 

 

 

$

 

 

$

11,600

 

 

 

$

 

 

Less dividends to preferred shareholders

 

 

(2,812)

 

 

 

 

 

 

 

(2,878)

 

 

 

 

 

 

Less redemption of preferred shares

 

 

(3,649)

 

 

 

 

 

 

 

 —

 

 

 

 

 

 

Net loss available to common shareholders

 

 

6,360

 

120,144

 

 
0.05

 

 

8,722

 

121,154

 

 
0.07

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling interest – Operating Partnership

 

 

773

 

14,623

 

 

 

 

 

1,174

 

16,264

 

 

 

 

Depreciation and amortization

 

 
19,894

 

 

 

 

 

 

 

12,971

 

 

 

 

 

 

Gains on depreciable property sales attributable to controlling interests

 

 

(17,562)

 

 

 

 

 

 

 

(6,400)

 

 

 

 

 

 

FFO applicable to Common Shares and Units(1)

 

$

9,465

 

134,767

 

$
0.07

 

$

16,467

 

137,418

 

$
0.12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to Core FFO:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on extinguishment of debt

 

 

340

 

 

 

 

 

 

 

72

 

 

 

 

 

 

Redemption of Preferred Shares

 

 

3,649

 

 

 

 

 

 

 

 —

 

 

 

 

 

 

Severance and transition costs

 

 

186

 

 

 

 

 

 

 

 —

 

 

 

 

 

 

Core FFO applicable to common shares and Units(1)

 

$

13,640

 

134,767

 

$
0.10

 

$

16,539

 

137,418

 

$
0.12

 

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

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

4

 

IRET

RECONCILIATION OF NET INCOME ATTRIBUTABLE TO

IRET TO FFO AND CORE FFO

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands, except per share amounts)

 

Six Months Ended October 31,

 

2017

 

2016

 

 

 

 

 

    

 

 

Per

 

 

 

 

 

Per

 

 

 

 

 

 

Weighted

 

Share

 

 

 

Weighted

 

Share

 

 

 

 

 

 

Avg Shares

 

And

 

 

 

Avg Shares

 

And

 

 

    

Amount

 

and Units(1)

    

Unit(2)

    

Amount

    

and Units(1)

    

Unit(2)

 

Net income (loss) attributable to controlling interests

   

$

1,557

 

 

 

$

 

 

$

(10,043)

 

 

 

$

 

 

Less dividends to preferred shareholders

 

 

(5,098)

 

 

 

 

 

 

 

(5,757)

 

 

 

 

 

 

Less redemption of preferred shares

 

 

(3,649)

 

 

 

 

 

 

 

 —

 

 

 

 

 

 

Net income available to common shareholders

 

 

(7,190)

 

120,283

 

 
(0.06)

 

 

(15,800)

 

121,135

 

 
(0.13)

 

Adjustments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Noncontrolling interest – Operating Partnership

 

 

(871)

 

14,794

 

 

 

 

 

(2,122)

 

16,276

 

 

 

 

Depreciation and amortization

 

 

48,013

 

 

 

 

 

 

 

26,408

 

 

 

 

 

 

Impairment of real estate investments attributable to controlling interests

 

 

256

 

 

 

 

 

 

 

39,190

 

 

 

 

 

 

Gains on depreciable property sales attributable to controlling interests

 

 

(17,686)

 

 

 

 

 

 

 

(15,358)

 

 

 

 

 

 

FFO applicable to Common Shares and Units(1)

 

$

22,522

 

135,077

 

$
0.17

 

$

32,318

 

137,411

 

$
0.24

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Adjustments to Core FFO:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss on extinguishment of debt

 

 

539

 

 

 

 

 

 

 

72

 

 

 

 

 

 

Redemption of Preferred Shares

 

 

3,649

 

 

 

 

 

 

 

 —

 

 

 

 

 

 

Severance and transition costs

 

 

650

 

 

 

 

 

 

 

 —

 

 

 

 

 

 

Core FFO applicable to common shares and Units(1)

 

$

27,360

 

135,077

 

$
0.20

 

$

32,390

 

137,411

 

$
0.24

 

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

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

5

 

IRET

RECONCILATION OF NET OPERATING INCOME TO THE

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Three Months Ended October 31, 2017

 

Multifamily

 

Healthcare

 

All Other

 

Amounts Not
Allocated To
Segments

 

Total

 

Real estate revenue

    

$

39,734

 

 

11,449

 

 

2,738

 

$

 —

 

$

53,921

 

Real estate expenses

 

 

18,888

 

 

4,373

 

 

698

 

 

1,338

 

 

25,297

 

Net operating income (loss)

 

$

20,846

 

$

7,076

 

$

2,040

 

$

(1,338)

 

 

28,624

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 
(20,694)

 

General and administrative expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 
(3,118)

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 
(9,666)

 

Loss on debt extinguishment

 

 

 

 

 

 

 

 

 

 

 

 

 

 
(334)

 

Interest and other income

 

 

 

 

 

 

 

 

 

 

 

 

 

 
256

 

Loss before gain on sale of real estate and other investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,932)

 

Gain on sale of real estate and other investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 
5,324

 

Income from continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

392

 

Income from discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 
12,747

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

$

13,139

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Three Months Ended October 31, 2016

 

Multifamily

 

Healthcare

 

All Other

 

Amounts Not
Allocated To
Segments

 

Total

 

Real estate revenue

    

$

36,187

 

$

11,661

 

$

2,761

 

$

 —

 

$

50,609

 

Real estate expenses

 

 

15,566

 

 

4,151

 

 

730

 

 

1,126

 

 

21,573

 

Net operating income (loss)

 

$

20,621

 

$

7,510

 

$

2,031

 

$

(1,126)

 

 

29,036

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 
(13,531)

 

General and administrative expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 
(3,522)

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 
(10,626)

 

Interest and other income

 

 

 

 

 

 

 

 

 

 

 

 

 

 
93

 

Income before loss on sale of real estate and other investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,450

 

Loss on sale of real estate and other investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(103)

 

Income from continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,347

 

Income from discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

10,943

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

$

12,290

 

 

6

 

IRET

RECONCILATION OF NET OPERATING INCOME TO THE

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Six Months Ended October 31, 2017

    

Multifamily

    

Healthcare

    

All Other

    

Amounts Not
Allocated To
Segments

 

Total

 

Real estate revenue

 

$

78,164

 

$

22,827

 

$

5,665

 

 

 —

 

$

106,656

 

Real estate expenses

 

 

36,353

 

 

8,658

 

 

1,491

 

 

3,045

 

 

49,547

 

Net operating income (loss)

 

$

41,811

 

$

14,169

 

$

4,174

 

$

(3,045)

 

 

57,109

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 
(49,621)

 

Impairment of real estate investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 
(256)

 

General and administrative expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 
(7,120)

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 
(18,961)

 

Loss on debt extinguishment

 

 

 

 

 

 

 

 

 

 

 

 

 

 
(533)

 

Interest and other income

 

 

 

 

 

 

 

 

 

 

 

 

 

 
487

 

Loss before gain on sale of real estate and other investments and income from discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(18,895)

 

Gain on sale of real estate and other investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,448

 

Loss from continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,447)

 

Income from discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

13,307

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(140)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(in thousands)

 

Six Months Ended October 31, 2016

 

Multifamily

 

Healthcare

 

All Other

 

Amounts Not
Allocated To
Segments

 

Total

 

Real estate revenue

    

$

71,229

 

$

23,202

 

$

5,789

 

$

 —

 

$

100,220

 

Real estate expenses

 

 

30,445

 

 

8,343

 

 

1,456

 

 

2,963

 

 

43,207

 

Net operating income (loss)

 

$

40,784

 

$

14,859

 

$

4,333

 

$

(2,963)

 

 

57,013

 

Depreciation and amortization

 

 

 

 

 

 

 

 

 

 

 

 

 

 
(27,798)

 

Impairment of real estate investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 
(54,153)

 

General and administrative expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 
(7,023)

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 
(20,990)

 

Interest and other income

 

 

 

 

 

 

 

 

 

 

 

 

 

 
281

 

Loss before gain on sale of real estate and other investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(52,670)

 

Gain on sale of real estate and other investments

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,855

 

Loss from continuing operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(43,815)

 

Income from discontinued operations

 

 

 

 

 

 

 

 

 

 

 

 

 

 

15,511

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

$

(28,304)

 

.

(1)

 

 

 

 

 

 

7