BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

The accompanying 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. Our fiscal year previously ended April 30th. On September 20, 2018, our Board of Trustees approved a change in our fiscal year-end from April 30 to December 31, effective as of January 1, 2019. This transition report on Form 10-KT is for the eight-month period ended December 31, 2018, in accordance with SEC rules and regulations, and all subsequent fiscal years, beginning in 2019, will be from January 1 to December 31.

Our interest in the Operating Partnership was 89.7%, 89.4%, and 88.6%, respectively, of the limited partnership units of the Operating Partnership (“Units”) as of December 31, 2018, April 30, 2018 and April 30, 2017, which includes 100% of the general partnership interest.

On December 14, 2018, the Board approved a reverse stock split of our outstanding common shares and Units, no par value per share, at a ratio of 1-for-10. The reverse stock split was effective as of the close of trading on December 27, 2018, with trading commencing on a split-adjusted basis on December 28, 2018. The number of common shares and Units was reduced from 119.4 million to 11.9 million and 13.7 million to 1.4 million, respectively. We have retroactively restated all shares and Units and per share and Unit data for all periods presented.

The consolidated financial statements also reflect the ownership by the Operating Partnership of certain joint venture entities in which the Operating Partnership has a general partner's or controlling interest. These entities are consolidated into our other operations with noncontrolling interests reflecting the noncontrolling partners’ share of ownership, income, and expenses.

PRIOR PERIOD FINANCIAL STATEMENT CORRECTION OF AN IMMATERIAL MISSTATEMENT

In the first quarter of the transition period ended December 31, 2018, we identified certain adjustments required to correct balances within total equity related to noncontrolling interests in our joint venture entities. Related to our acquisition of additional ownership interest in the joint venture entities, noncontrolling interest - consolidated real estate entities was understated and common shares of beneficial interest was overstated beginning in fiscal year 2017. The adjustments did not impact total assets, total liabilities, revenue, net income, net income available to common shareholders, number of common shares, or earnings per share.

Based on an analysis of Accounting Standards Codification (“ASC”) 250 - “Accounting Changes and Error Corrections” (“ASC 250”), Staff Accounting Bulletin 99 - “Materiality” (“SAB 99”) and Staff Accounting Bulletin 108 - "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements" (“SAB 108”), we determined that these errors were immaterial to the previously-issued financial statements. The misstatement was corrected in the consolidated balance sheets as of April 30, 2017 and April 30, 2018 and the consolidated statements of equity as of April 30, 2018 and April 30, 2017.

The effect of these revisions on our condensed consolidated balance sheet is as follows:



	(in thousands)
	As previously reported at April 30, 2017		Adjustment			As revised at April 30, 2017
Common shares of beneficial interest	$	916,121	$	(7,216	)	$	908,905
Noncontrolling interests - consolidated real estate entities	1,924		7,280			9,204
Redeemable noncontrolling interests - consolidated real estate entities	7,181		(64		)	7,117



	(in thousands)
	As previously reported at April 30, 2018		Adjustment			As revised at April 30, 2018
Common shares of beneficial interest	$	907,843	$	(7,746	)	$	900,097
Noncontrolling interests - consolidated real estate entities	1,078		7,810			8,888
Redeemable noncontrolling interests - consolidated real estate entities	6,708		(64		)	6,644

The effect of these revisions on our condensed consolidated statements of equity is as follows:



	(in thousands)
	As previously reported at April 30, 2017		Adjustment			As revised at April 30, 2017
Common shares of beneficial interest	$	916,121	$	(7,216	)	$	908,905
Nonredeemable noncontrolling interests	75,157		7,280			82,437



	(in thousands)
	As previously reported at April 30, 2018		Adjustment			As revised at April 30, 2018
Common shares of beneficial interest	$	907,843	$	(7,746	)	$	900,097
Nonredeemable noncontrolling interests	74,090		7,810			81,900

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 GAAP accounting standards updates (“ASUs”).



Standard	Description	Date of Adoption	Effect on the Financial Statements or Other Significant Matters
ASU 2014-09, Revenue from Contracts with Customers	This ASU will eliminate the transaction- and industry-specific revenue recognition guidance under current GAAP and replace it with a principle based approach for determining revenue recognition. The standard outlines a five-step model whereby revenue is recognized as performance obligations within a contract are satisfied.	This ASU is effective for annual reporting periods beginning after December 15, 2017, as a result of a deferral of the effective date arising from the issuance of ASU 2015-14, Revenue from Contracts with Customers - Deferral of the Effective Date. Early adoption is permitted. We adopted the new standard effective May 1, 2018 using the modified retrospective approach.	The majority of our revenue is derived from rental income, which is scoped out from this standard and will be accounted for under ASC 840, Leases. Our other revenue streams, which were evaluated under this ASU, include but are not limited to other income from residents determined not to be within the scope of ASC 840 and gains and losses from real estate dispositions. Refer to the Revenues section below for information regarding the impact of adopting the standard on our consolidated financial statements.
ASU 2016-02, Leases	This ASU amends existing accounting standards for lease accounting, including by requiring lessees to recognize most leases on the balance sheet and making certain changes to lessor accounting.	This ASU is effective for annual reporting periods beginning after December 15, 2018. Early adoption is permitted.	Our residential leases, where we are the lessor, will continue to be accounted for as operating leases under the new standard. As a result, there is not a significant change in the accounting for lease revenue. For leases where we are the lessee, we will recognize a right of use asset and related lease liability on our consolidated balance sheets upon adoption. The adoption of this standard will not have a material impact on our consolidated financial statements.
ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments	This ASU addresses eight specific cash flow issues with the objective of reducing diversity in practice. The cash flow issues include debt prepayment or debt extinguishment costs and proceeds from the settlement of insurance claims.	This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. We adopted the new standard effective May 1, 2018.	The standard requires we present combined inflows and outflows of cash, cash equivalents, and restricted cash in the consolidated statement of cash flows. See additional disclosures regarding the required change below.
ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash	This ASU requires the statement of cash flows to explain the change in total cash, cash equivalents, and amounts generally described as restricted cash. It also requires that restricted cash be included when reconciling the beginning and end of period amounts on the statement of cash flows.	This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. We adopted the new standard effective May 1, 2018.	The standard requires we present combined inflows and outflows of cash, cash equivalents, and restricted cash in the consolidated statement of cash flows. See additional disclosures regarding the required change below.
ASU 2017-05, Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets	This ASU clarifies the definition of an in-substance nonfinancial asset and changes the accounting for partial sales of nonfinancial assets to be more consistent with the accounting for a sale of a business pursuant to ASU 2017-01. This ASU allows for either a retrospective or modified retrospective approach.	This ASU is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. We adopted the new standard effective May 1, 2018 using the modified retrospective approach.	Refer to the Revenues section below for information regarding the impact of adopting the standard on our condensed consolidated financial statements.
ASU 2018-10, Codification Improvements to Topic 842, Leases	This ASU was issued to increase shareholders' awareness of narrow aspects of the guidance issued in the amendments and to expedite the improvements under ASU 2016-02.	This ASU is effective for annual reporting periods beginning after December 15, 2018. Early adoption is permitted.	The adoption of this standard will not have a material impact on our consolidated financial statements.



Standard	Description	Date of Adoption	Effect on the Financial Statements or Other Significant Matters
ASU 2018-11, Leases: Targeted Improvements	This ASU allows lessors to account for lease and non-lease components, by class of underlying assets, as a single lease component if certain criteria are met. The new standard also indicates that companies are permitted to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption in lieu of the modified retrospective approach and provides other practical expedients.	This ASU is effective for annual reporting periods beginning after December 15, 2018. Early adoption is permitted.	The adoption of this standard will not have a material impact on our consolidated financial statements.
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.	We are currently evaluating the impact the new standard may have on our disclosures.
ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Topic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract	This ASU reduces the complexity for the accounting for costs of implementing a cloud computing service arrangement. The standard aligns various requirements for capitalizing implementation costs.	This ASU is effective for annual reporting periods beginning after December 15, 2019. Early adoption is permitted.	We are currently evaluating the impact the new standard may have on our consolidated financial statements.
ASU 2018-20, Leases (Topic 842) - Narrow-Scope Improvements for Lessors	This ASU reduces a lessor's implementation and ongoing costs associated with applying the new leases standard. The ASU also clarifies a specific lessor accounting requirements.	This ASU is effective for annual reporting periods beginning after December 15, 2018. Early adoption is permitted.	The adoption of this standard will not have a material impact on our consolidated financial statements.

RECLASSIFICATIONS

Certain previously reported amounts have been reclassified to conform to the current financial statement presentation. These reclassifications had no impact on net income as reported in the consolidated statement of operations, total assets, liabilities or equity as reported in the consolidated balance sheets and total shareholder’s equity. We report in discontinued operations the results of operations and the related gains or losses of properties that have either been disposed or classified as held for sale and for which the disposition represents a strategic shift that has or will have a major effect on our operations and financial results.

REAL ESTATE INVESTMENTS

Real estate investments are recorded at cost less accumulated depreciation and an adjustment for impairment, if any. Property, consisting primarily of real estate investments, totaled $1.3 billion, $1.4 billion, and $1.1 billion as of December 31, 2018, April 30, 2018, and April 30, 2017, respectively. We allocate the purchase price based on the relative fair values of the tangible and intangible assets of an acquired property (which includes the land, building, and personal property) which are determined by valuing the property as if it were vacant and fair value of the intangible assets (which include in-place leases). The as-if-vacant value is allocated to land, buildings, and personal property based on management’s determination of the relative fair values of these assets. The estimated fair value of the property is the amount that would be recoverable upon the disposition of the property. Techniques used to estimate fair value include discounted cash flow analysis and reference to recent comparable transactions. A land value is assigned based on the purchase price if land is acquired separately or based on estimated fair value if acquired in a single or portfolio acquisition.

Acquired above- and below-market lease values are recorded as the difference between the contractual amounts to be paid pursuant to the in-place leases and management’s estimate of fair market value lease rates for the corresponding in-place leases. The capitalized above- and below-market lease values are amortized as adjustments to rental revenue over the remaining terms of the respective leases.

Other intangible assets acquired include amounts for in-place lease values that are based upon our evaluation of the specific characteristics of the leases. Factors considered in the fair value analysis include an estimate of carrying costs and foregone rental income during hypothetical expected lease-up periods, considering current market conditions, and costs to execute similar leases. We also consider information about each property obtained during pre-acquisition due diligence, marketing, and leasing activities in estimating the relative fair value of the tangible and intangible assets acquired.

Depreciation is computed on a straight-line basis over the estimated useful lives of the assets. We use a 10-37 year estimated life for buildings and improvements and a 5-10 year estimated life for furniture, fixtures, and equipment.

We follow the real estate project costs guidance in ASC 970, Real Estate – General, in accounting for the costs of development and redevelopment projects. As real estate is undergoing development or redevelopment, all project costs directly associated with and attributable to the development and construction of a project, including interest expense and real estate tax expense, are capitalized to the cost of the real property. The capitalization period begins when development activities and expenditures begin and are identifiable to a specific property and ends upon completion, which is when the asset is ready for its intended use. Generally, rental property is considered substantially complete and ready for its intended use, which is generally upon issuance of a certificate of occupancy (in the case of apartment communities). General and administrative costs are expensed as incurred. Interest of approximately $4,000, $431,000, and $4.9 million has been capitalized in continuing and discontinue operations for the years ended April 30, 2018, 2017, and 2016, respectively. We did not capitalize interest during the transition period ended December 31, 2018.

Expenditures for ordinary maintenance and repairs are expensed to operations as incurred. Renovations and improvements that improve and/or extend the useful life of the asset are capitalized and depreciated over their estimated useful life, generally five to ten years. Property sales or dispositions are recorded when control of the assets transfers to the buyer and we have no significant continuing involvement with the property sold.

We periodically evaluate our long-lived assets, including real estate investments, for impairment indicators. 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. If the sum of the estimated undiscounted cash flows is less than the carrying amount of the asset, 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 physical occupancy, rental rates, and capital requirements that could differ materially from actual results. Plans to hold properties over longer periods decrease the likelihood of recording impairment losses.

During the transition period ended December 31, 2018, we incurred a loss of $1.2 million due to impairment of a parcel of land in Bismarck, North Dakota. The parcel was written-down to estimated fair value based on receipt of a market offer to purchase and our intent to dispose of the property.

During fiscal year 2018, we incurred a loss of $18.1 million due to impairment of one apartment community, three other commercial properties, and four parcels of land. We recognized impairments of $12.2 million on one apartment community in Grand Forks, North Dakota; $1.4 million on an industrial property in Bloomington, Minnesota; $922,000 on an industrial property in Woodbury, Minnesota; $630,000 on a retail property in Minot, North Dakota. These properties were written-down to estimated fair value based on independent appraisals and market data or, in the case of the retail property, receipt of a market offer to purchase and our intent to dispose of the property. We recognized impairments of $428,000 on a parcel of land in Williston, North Dakota; $1.5 million on a parcel of land in Grand Forks, North Dakota; $256,000 and $709,000 on two parcels of land in Bismarck, North Dakota. These parcels were written down to estimated fair value based on independent appraisals and market data.

During fiscal year 2017, we incurred a loss of $57.0 million due to impairment of 16 apartment communities and two parcels of unimproved land. We recognized impairments of $40.9 million, $5.8 million, $4.7 million, and $2.8 million, respectively, on three apartment communities and one parcel of unimproved land in Williston, North Dakota, due to deterioration of this energy-impacted market, which resulted in poor leasing activity and declining rental rates during the three months ended July 31, 2016, which should generally be a strong leasing period. These properties were written down to estimated fair value based on an independent appraisal in the case of one property and management cash flow estimates and market data in the case of the remaining assets. The properties impaired for $40.9 million, $4.7 million, and $2.8 million are owned by joint venture entities in which, at the time of impairment, we had an approximately 70%, 60%, and 70% interest, respectively, but which are consolidated in our consolidated financial statements. We recognized impairments of $2.9 million on 13 properties and one parcel of land in Minot, North Dakota. These properties were written down to estimated fair value based on management cash flow estimates and market data and, in the case of the 13 properties, our intent to dispose of the properties.

During fiscal year 2016, we incurred a loss of $6.0 million due to impairment of one office property, one healthcare property, two parcels of land, and eight apartment communities, of which approximately $440,000 is reflected in discontinued operations. See Note 10 for additional information on discontinued operations. We recognized impairments of approximately $440,000 on an office property in Eden Prairie, Minnesota; $1.9 million on a healthcare property in Sartell, Minnesota; $1.6 million on a parcel of land in Grand Chute, Wisconsin; $1.9 million on eight apartment communities in St. Cloud, Minnesota; and $162,000 on a parcel of land in River Falls, Wisconsin. These properties were written down to estimated fair value during fiscal year 2016 based on receipt of individual market offers to purchase and our intent to dispose of the properties or, in the case of the Grand Chute, Wisconsin, the sale listing price and our intent to dispose of the property. The Sartell, Minnesota property was classified as held for sale at April 30, 2016.

CHANGE IN DEPRECIABLE LIVES OF REAL ESTATE ASSETS

Effective May 1, 2017, we changed the estimated useful lives of our real estate assets to better reflect the estimated periods during which they will be of economic benefit. Generally, the estimated lives of buildings and improvements that previously were 20-40 years have been decreased to 10-37 years, while those that were previously nine years were changed to 5-10 years. The effect of this change in estimate for the fiscal year ended April 30, 2018, was to increase depreciation expense by approximately $29.3 million, decrease net income by $29.3 million, and decrease earnings per share by $0.22.

REAL ESTATE HELD FOR SALE

Real estate held for sale is stated at the lower of its carrying amount or estimated fair value less disposal costs. Our determination of fair value is based on inputs management believes are consistent with those that market participants would use. Estimates are significantly impacted by estimates of sales price, selling velocity, and other factors. Due to uncertainties in the estimation process, actual results could differ from such estimates. Depreciation is not recorded on assets classified as held for sale.

We classify properties as held for sale when they meet the GAAP criteria, which include: (a) management commits to and initiates a plan to sell the asset (disposal group); (b) the sale is probable and expected to be completed within one year under terms that are usual and customary for sales of such assets (disposal groups); and (c) actions required to complete the plan indicate that it is unlikely that significant changes to the plan will be made or that the plan will be withdrawn. We generally consider these criteria met when the transaction has been approved by our Board of Trustees, there are no known significant contingencies related to the sale, and management believes it is probable that the sale will be completed within one year. We had no properties classified as held for sale at December 31, 2018 and April 30, 2018. Thirteen apartment communities, two healthcare properties, and two retail properties were classified as held for sale at April 30, 2017.

We report in discontinued operations the results of operations and the related gains or losses on the sales of properties that have either been disposed of or classified as held for sale and meet the classification of a discontinued operation as described in ASC 205 - Presentation of Financial Statements and ASC 360 - Property, Plant, and Equipment: Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity. Under these standards, a disposal (or classification as held for sale) of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

Effective May 1, 2018, we adopted ASU 2016-15, Classification of Certain Cash Receipts and Cash Payments and ASU 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash, which affects the presentation and disclosure of the statements of cash flows. Previously our consolidated statements of cash flows presented transfers between restricted cash and unrestricted cash as operating, financing, and investing cash activities based upon the required or intended purpose for the restricted cash. We revised our consolidated statements of cash flows for the years ended April 30, 2018 , 2017, and 2016 to conform to this presentation, and the effect of the revisions to net cash flows from operating and investing activities as previously reported for the years ended April 30, 2018, 2017, and 2016 are summarized in the following table:



	(in thousands)
	As previously reported			Impact of ASUs			As adjusted and currently reported
	April 30, 2018			2016-15 and 2016-18			April 30, 2018
Net cash provided by operating activities	$	48,035		$	7,160		$	55,195
Net cash provided by (used by) investing activities	104,189			(24,077		)	80,112
Net cash provided by (used by) financing activities	(169,152		)	(6,839		)	(175,991		)

Net increase (decrease) in cash, cash equivalents	(16,928		)	16,928			—
Net increase (decrease) in cash, cash equivalents, and restricted cash	—			(40,684		)	(40,684		)

Cash and cash equivalents at beginning of period	28,819			(28,819		)	—
Cash, cash equivalents, and restricted cash at beginning of period	—			56,800			56,800
Cash and cash equivalents at end of period	$	11,891
Cash, cash equivalents, and restricted cash at end of period				$	4,225		$	16,116



	(in thousands)
	As previously reported			Impact of ASUs			As adjusted and currently reported
	April 30, 2017			2016-15 and 2016-18			April 30, 2017
Net cash provided by operating activities	$	73,930		$	5,122		$	79,052
Net cash provided by (used by) investing activities	202,263			21,897			224,160
Net cash provided by (used by) financing activities	(314,072		)	(3,848		)	(317,920		)

Net increase (decrease) in cash, cash equivalents	(37,879		)	37,879			—
Net increase (decrease) in cash, cash equivalents, and restricted cash	—			(14,708		)	(14,708		)

Cash and cash equivalents at beginning of period	66,698			(66,698		)	—
Cash, cash equivalents, and restricted cash at beginning of period	—			71,508			71,508
Cash and cash equivalents at end of period	$	28,819
Cash, cash equivalents, and restricted cash at end of period				$	27,981		$	56,800



	(in thousands)
	As previously reported			Impact of ASUs			As adjusted and currently reported
	April 30, 2016			2016-15 and 2016-18			April 30, 2016
Net cash provided by operating activities	$	66,493		$	5,768		$	72,261
Net cash provided by (used by) investing activities	134,252			(5,700		)	128,552
Net cash provided by (used by) financing activities	(183,017		)	(6,321		)	(189,338		)

Net increase (decrease) in cash, cash equivalents	17,728			(17,728		)	—
Net increase (decrease) in cash, cash equivalents, and restricted cash	—			11,475			11,475

Cash and cash equivalents at beginning of period	48,970			(48,970		)	—
Cash, cash equivalents, and restricted cash at beginning of period	—			60,033			60,033
Cash and cash equivalents at end of period	$	66,698
Cash, cash equivalents, and restricted cash at end of period				$	4,810		$	71,508



	(in thousands)
Balance sheet description	December 31, 2018		April 30, 2018		April 30, 2017
Cash and cash equivalents	$	13,792	$	11,891	$	28,819
Restricted cash	5,464		4,225		27,981
Total cash, cash equivalents and restricted cash	$	19,256	$	16,116	$	56,800

Cash and cash equivalents include all cash and highly liquid investments purchased with maturities of three months or less. Cash and cash equivalents consist of our bank deposits, short-term investment certificates acquired subject to repurchase agreements, and our deposits in a money market mutual fund. We are potentially exposed to credit risk for cash deposited with FDIC-insured financial institutions in accounts which, at times, may exceed federally insured limits. We have not experienced any losses in such accounts.

As of December 31, 2018, April 30, 2018, and April 30, 2017, restricted cash consisted of $5.5 million, $4.2 million, and $4.3 million, respectively, of escrows held by lenders for real estate taxes, insurance, and capital additions. As of April 30, 2017, we held $23.7 million of net tax-deferred exchange proceeds remaining from the sale of properties. Tax, insurance, and other escrows include funds deposited with a lender for payment of real estate taxes and insurance and reserves for funds to be used for replacement of structural elements and mechanical equipment of certain projects. The funds are under the control of the lender. Disbursements are made after supplying written documentation to the lender.

REVENUE

We adopted ASU 2014-09, Revenue from Contracts with Customers, as of May 1, 2018, using the modified retrospective approach. We elected to apply the new standard to contracts that are not complete as of May 1, 2018. We also elected to omit disclosing the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. Under the new standard, revenue is recognized in accordance with the transfer of goods and services to customers at an amount that reflects the consideration the company expects to be entitled for those goods and services.

We primarily lease multifamily apartments under operating leases generally with terms of one year or less. Rental revenues are recognized in accordance with ASC 840, Leases, using a method that represents a straight-line basis over the term of the lease. Rental income represents approximately 96.5% of our total revenues and includes gross market rent less adjustments for concessions, vacancy loss, and bad debt. Other property revenues represent the remaining 3.5% of our total revenue and are primarily driven by utility reimbursement from our residents and other fee income, which is typically recognized at a point in time. Revenue streams that are included in ASU 2014-09 include:


•	Other property revenues: We recognize revenue for rental related income not included as a component of a lease, such as other transactional fees, when the services are transferred to our customers for an amount which reflects the consideration we expect to receive in exchange for those services. These fees are charged to residents monthly and recognized as the performance obligation is satisfied.

•

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.

We concluded that the adoption of the new standard required a cumulative adjustment of $627,000 to the opening balance of retained earnings as of May 1, 2018, due to the sale of a group of properties in the prior fiscal year. The sale of properties was previously accounted for using the installment method. Under the installment method, we recorded a mortgage receivable net of the deferred gain on sale, which was to be recognized as payments were received. The gain on sale under the new revenue standard is recognized when control of the assets is transferred to the buyer. As a result of our adoption of the new standard, we recorded a cumulative adjustment to retained earnings and increased the mortgage receivable by $627,000 to recognize the previously deferred gain on sale.

The following table presents the disaggregation of revenue streams of our rental income for the transition period ended December 31, 2018:



		(in thousands, except percentages)
		Eight Months Ended December 31, 2018
Revenue Stream	Applicable Standard	Amount of Revenue		Percent of Revenue
Rental revenue	Leases	$	117,575	96.5	%
Other property revenue	Revenue Recognition	4,296		3.5	%
		$	121,871	100.0	%

INCOME TAXES

We operate in a manner intended to enable us to continue to qualify as a REIT under Sections 856-860 of the Internal Revenue Code of 1986, as amended. Under those sections, a REIT which distributes at least 90% of its REIT taxable income, excluding capital gains, as a dividend to its shareholders each year and which meets certain other conditions will not be taxed on that portion of its taxable income which is distributed to shareholders. For the transition period ended December 31, 2018 and the fiscal years ended April 30, 2018, 2017, and 2016, we distributed in excess of 90% of our taxable income and realized capital gains from property dispositions within the prescribed time limits. Accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements. If we fail to qualify as a REIT in any taxable year, we will be subject to federal income tax on our taxable income at regular corporate rates (including any alternative minimum tax) and may not be able to qualify as a REIT for the four subsequent taxable years. Even as a REIT, we may be subject to certain state and local income and property taxes, and to federal income and excise taxes on undistributed taxable income. In general, however, if we qualify as a REIT, no provisions for federal income taxes are necessary except for taxes on undistributed REIT taxable income and taxes on the income generated by a taxable REIT subsidiary (TRS).

We have one TRS, acquired during the second quarter of fiscal year 2014, which is subject to corporate federal and state income taxes on its taxable income at regular statutory rates. For the transition period ended December 31, 2018, we estimate that the TRS will have no taxable income. There were no income tax provisions or material deferred income tax items for our TRS for the transition period ended December 31, 2018 and the fiscal years ended April 30, 2018, 2017, and 2016.

We conduct our business activity as an Umbrella Partnership Real Estate Investment Trust (“UPREIT”) through our Operating Partnership. UPREIT status allows us to accept the contribution of real estate in exchange for Units. Generally, such a contribution to a limited partnership allows for the deferral of gain by an owner of appreciated real estate.

Distributions for the calendar year ended December 31, 2018, were characterized, for federal income tax purposes, as 100.00% capital gain. Distributions for the calendar year ended December 31, 2017, were characterized, for federal income tax purposes, as 14.59% ordinary income, 48.87% capital gain, and 36.54% return of capital. Distributions for the calendar year ended December 31, 2016 were characterized, for federal income tax purposes, as 12.43% ordinary income and 87.57% capital gain.

VARIABLE INTEREST ENTITY

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.

OTHER ASSETS

As of December 31, 2018, April 30, 2018, and April 30, 2017, other assets consisted of the following amounts:



	in thousands
	December 31, 2018		April 30, 2018		April 30, 2017
Receivable arising from straight line rents	$	1,145	$	1,458	$	2,145
Accounts receivable, net of allowance	71		81		476
Fair value of interest rate swaps	818		1,779		—
Loans receivable	16,399		15,480		—
Prepaid and other assets	3,802		5,334		4,891
Intangible assets	498		1,469		202
Property and equipment, net of accumulated depreciation	686		820		901
Goodwill	1,546		1,553		1,572
Deferred charges and leasing costs	2,300		2,323		3,119
Total Other Assets	$	27,265	$	30,297	$	13,306

PROPERTY AND EQUIPMENT

Property and equipment consists primarily of office equipment contained at our headquarters in Minot, North Dakota, corporate office in Minneapolis, Minnesota, and additional property management offices located in the states where we own properties. The Consolidated Balance Sheets reflects these assets at cost, net of accumulated depreciation and are included within Other Assets. As of December 31, 2018, April 30, 2018, and April 30, 2017, property and equipment cost was $2.2 million, $2.1 million, and $2.1 million, respectively. Accumulated depreciation was $1.4 million, $1.3 million, and $1.2 million as of December 31, 2018, April 30, 2018, and April 30, 2017, respectively, and are included within other assets in the Consolidated Balance Sheets.

MORTGAGE LOANS RECEIVABLE AND NOTES RECEIVABLE

In August 2017, we sold 13 apartment communities in exchange for cash and a note secured by a mortgage on the assets. As of December 31, 2018 and April 30, 2018, the remaining balance on the mortgage was $10.4 million and $11.0 million . 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. We received and recognized approximately $448,000 and $372,000 of interest income during the transition period ended December 31, 2018 and the fiscal year ended April 30, 2018, respectively. During the transition period ended December 31, 2018, we received a payment of $545,000 to pay down the balance of the mortgage receivable and released one of the 13 properties from the assets used to secure the mortgage.

In July 2017, we originated a $16.2 million loan in a multifamily development located in New Hope, MN, a Minneapolis suburb. As of July 31, 2018, we had funded the full initial loan balance, which appears in our Consolidated Balance Sheets; however, we may fund additional amounts upon satisfaction of certain conditions set forth in the loan agreement. The note bears an interest rate of 6%, matures in July 2023, and provides us an option to purchase the development prior to the loan maturity date.

GAIN ON BARGAIN PURCHASE

During fiscal year 2016, we acquired an apartment community in Rochester, MN, which had a fair value at acquisition of approximately $36.3 million, as appraised by a third party. The consideration exchanged for the property consisted of $15.0 million cash and approximately 250,000 Units, valued at approximately $17.8 million. The fair value of the Units transferred was based on the closing market price of our common shares on the acquisition date of $70.90 per share. The acquisition resulted in a gain on bargain purchase because the fair value of assets acquired exceeded the total of the fair value of the consideration paid by approximately $3.4 million. The seller accepted consideration below the fair value of the property in order to do a partial tax-deferred exchange for Units.