QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||
(Address of principal executive offices) | (Zip code) |
☑ | No | ☐ |
☑ | No | ☐ |
☑ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | |
Smaller Reporting Company | Emerging growth company |
Yes | No | ☑ |
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Page | |
(in thousands, except per share data) | |||||||
June 30, 2019 | December 31, 2018 | ||||||
ASSETS | |||||||
Real estate investments | |||||||
Property owned | $ | $ | |||||
Less accumulated depreciation | ( | ) | ( | ) | |||
Unimproved land | |||||||
Mortgage loans receivable | |||||||
Total real estate investments | |||||||
Cash and cash equivalents | |||||||
Restricted cash | |||||||
Other assets | |||||||
TOTAL ASSETS | $ | $ | |||||
LIABILITIES, MEZZANINE EQUITY, AND EQUITY | |||||||
LIABILITIES | |||||||
Accounts payable and accrued expenses | $ | $ | |||||
Revolving lines of credit | |||||||
Term loans, net of unamortized loan costs of $918 and $1,009, respectively | |||||||
Mortgages payable, net of unamortized loan costs of $1,490 and $1,777, respectively | |||||||
TOTAL LIABILITIES | $ | $ | |||||
COMMITMENTS AND CONTINGENCIES (NOTE 6) | |||||||
REDEEMABLE NONCONTROLLING INTERESTS – CONSOLIDATED REAL ESTATE ENTITIES | $ | ||||||
SERIES D PREFERRED UNITS (Cumulative convertible preferred units, $100 par value, 166 units issued and outstanding at June 30, 2019 and no units issued and outstanding at December 31, 2018, aggregate liquidation preference of $16,560) | $ | ||||||
EQUITY | |||||||
Series C Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value, $25 per share liquidation preference, 4,118 shares issued and outstanding at June 30, 2019 and December 31, 2018, aggregate liquidation preference of $102,971) | |||||||
Common Shares of Beneficial Interest (Unlimited authorization, no par value, 11,656 shares issued and outstanding at June 30, 2019 and 11,942 shares issued and outstanding at December 31, 2018) | |||||||
Accumulated distributions in excess of net income | ( | ) | ( | ) | |||
Accumulated other comprehensive income | ( | ) | ( | ) | |||
Total shareholders’ equity | $ | $ | |||||
Noncontrolling interests – Operating Partnership (1,224 units at June 30, 2019 and 1,368 units at December 31, 2018) | |||||||
Noncontrolling interests – consolidated real estate entities | |||||||
Total equity | $ | $ | |||||
TOTAL LIABILITIES, MEZZANINE EQUITY, AND EQUITY | $ | $ |
(in thousands, except per share data) | |||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
REVENUE | $ | $ | $ | $ | |||||||||||
EXPENSES | |||||||||||||||
Property operating expenses, excluding real estate taxes | |||||||||||||||
Real estate taxes | |||||||||||||||
Property management expense | |||||||||||||||
Casualty loss | |||||||||||||||
Depreciation and amortization | |||||||||||||||
Impairment of real estate investments | |||||||||||||||
General and administrative expenses | |||||||||||||||
TOTAL EXPENSES | $ | $ | $ | $ | |||||||||||
Operating income (loss) | ( | ) | ( | ) | |||||||||||
Interest expense | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Loss on extinguishment of debt | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Interest income | |||||||||||||||
Other income | |||||||||||||||
Income (loss) before gain (loss) on sale of real estate and other investments, gain (loss) on litigation settlement, and income (loss) from discontinued operations | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Gain (loss) on sale of real estate and other investments | |||||||||||||||
Gain (loss) on litigation settlement | |||||||||||||||
Income (loss) from continuing operations | ( | ) | ( | ) | ( | ) | |||||||||
Income (loss) from discontinued operations | |||||||||||||||
NET INCOME (LOSS) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
Dividends to preferred unitholders | ( | ) | ( | ) | |||||||||||
Net (income) loss attributable to noncontrolling interests – Operating Partnership | ( | ) | |||||||||||||
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities | |||||||||||||||
Net income (loss) attributable to controlling interests | ( | ) | ( | ) | ( | ) | |||||||||
Dividends to preferred shareholders | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
Earnings (loss) per common share from continuing operations – basic and diluted | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
Earnings (loss) per common share from discontinued operations – basic and diluted | |||||||||||||||
NET EARNINGS (LOSS) PER COMMON SHARE – BASIC & DILUTED | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) |
(in thousands) | |||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net income (loss) | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
Other comprehensive income: | |||||||||||||||
Unrealized gain (loss) from derivative instrument | ( | ) | ( | ) | |||||||||||
(Gain) loss on derivative instrument reclassified into earnings | ( | ) | ( | ) | |||||||||||
Total comprehensive income (loss) | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||
Net comprehensive (income) loss attributable to noncontrolling interests – Operating Partnership | |||||||||||||||
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities | |||||||||||||||
Comprehensive income (loss) attributable to controlling interests | $ | ( | ) | $ | ( | ) | $ | ( | ) | $ | ( | ) |
(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 | NONREDEEMABLE NONCONTROLLING INTERESTS | TOTAL EQUITY | |||||||||||||||||||
Balance December 31, 2017 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||
Net income (loss) attributable to controlling interests and nonredeemable noncontrolling interests | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Change in fair value of derivatives | |||||||||||||||||||||||||
Distributions - common shares and units ($1.40 per share and unit) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Distributions – Series C preferred shares ($0.8281 per Series C share) | ( | ) | ( | ) | |||||||||||||||||||||
Shares issued and share-based compensation | |||||||||||||||||||||||||
Redemption of units for common shares | ( | ) | |||||||||||||||||||||||
Redemption of units for cash | ( | ) | ( | ) | |||||||||||||||||||||
Shares repurchased | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Cumulative adjustment upon adoption of ASC 606 and ASC 610-20 | |||||||||||||||||||||||||
Other | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Balance June 30, 2018 | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||
Balance December 31, 2018 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||
Net income (loss) attributable to controlling interests and nonredeemable noncontrolling interests | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Change in fair value of derivatives | ( | ) | ( | ) | |||||||||||||||||||||
Distributions – common shares and units ($1.40 per share and unit) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Distributions – Series C preferred shares ($0.8281 per Series C share) | ( | ) | ( | ) | |||||||||||||||||||||
Shares issued and share-based compensation | |||||||||||||||||||||||||
Redemption of units for common shares | ( | ) | |||||||||||||||||||||||
Redemption of units for cash | ( | ) | ( | ) | |||||||||||||||||||||
Shares repurchased | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Acquisition of redeemable noncontrolling interests | |||||||||||||||||||||||||
Other | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Balance June 30, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ |
(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 | NONREDEEMABLE NONCONTROLLING INTERESTS | TOTAL EQUITY | |||||||||||||||||||
Balance March 31, 2018 | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||
Net income (loss) attributable to controlling interests and nonredeemable noncontrolling interests | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Change in fair value of derivatives | |||||||||||||||||||||||||
Distributions - common shares and units ($0.70 per share and unit) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Distributions – Series C preferred shares ($0.4140625 per Series C share) | ( | ) | ( | ) | |||||||||||||||||||||
Shares issued and share-based compensation | |||||||||||||||||||||||||
Redemption of units for cash | ( | ) | ( | ) | |||||||||||||||||||||
Shares repurchased | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Cumulative adjustment upon adoption of ASC 606 and ASC 610-20 | |||||||||||||||||||||||||
Other | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Balance June 30, 2018 | $ | $ | $ | ( | ) | $ | $ | $ | |||||||||||||||||
Balance March 31, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ | |||||||||||||||
Net income (loss) attributable to controlling interests and nonredeemable noncontrolling interests | ( | ) | |||||||||||||||||||||||
Change in fair value of derivatives | ( | ) | ( | ) | |||||||||||||||||||||
Distributions – common shares and units ($0.70 per share and unit) | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Distributions – Series C preferred shares ($0.4140625 per Series C share) | ( | ) | ( | ) | |||||||||||||||||||||
Shares issued and share-based compensation | |||||||||||||||||||||||||
Redemption of units for common shares | ( | ) | |||||||||||||||||||||||
Redemption of units for cash | ( | ) | ( | ) | |||||||||||||||||||||
Shares repurchased | ( | ) | ( | ) | ( | ) | |||||||||||||||||||
Other | ( | ) | ( | ) | ( | ) | ( | ) | |||||||||||||||||
Balance June 30, 2019 | $ | $ | $ | ( | ) | $ | ( | ) | $ | $ |
(in thousands) | |||||||
Six Months Ended June 30, | |||||||
2019 | 2018 | ||||||
CASH FLOWS FROM OPERATING ACTIVITIES | |||||||
Net income (loss) | $ | ( | ) | $ | ( | ) | |
Adjustments to reconcile net income (loss) to net cash provided by operating activities: | |||||||
Depreciation and amortization, including amortization of capitalized loan costs | |||||||
(Gain) loss on sale of real estate, other investments, and discontinued operations | ( | ) | ( | ) | |||
(Gain) loss on litigation settlement | ( | ) | |||||
Share-based compensation expense | |||||||
Impairment of real estate investments | |||||||
Other, net | |||||||
Changes in other assets and liabilities: | |||||||
Other assets | ( | ) | |||||
Accounts payable and accrued expenses | ( | ) | ( | ) | |||
Net cash provided by (used by) operating activities | $ | $ | |||||
CASH FLOWS FROM INVESTING ACTIVITIES | |||||||
Increase in notes receivable | ( | ) | ( | ) | |||
Proceeds from sale of real estate and other investments | |||||||
Payments for acquisitions of real estate assets | ( | ) | ( | ) | |||
Payments for improvements of real estate assets | ( | ) | ( | ) | |||
Other investing activities | |||||||
Net cash provided by (used by) investing activities | $ | ( | ) | $ | ( | ) | |
CASH FLOWS FROM FINANCING ACTIVITIES | |||||||
Principal payments on mortgages payable | ( | ) | ( | ) | |||
Proceeds from revolving lines of credit | |||||||
Principal payments on revolving lines of credit | ( | ) | ( | ) | |||
Principal payments on construction debt | ( | ) | |||||
Payments for acquisition of noncontrolling interests – consolidated real estate entities | ( | ) | |||||
Repurchase of common shares | ( | ) | ( | ) | |||
Repurchase of partnership units | ( | ) | ( | ) | |||
Distributions paid to common shareholders | ( | ) | ( | ) | |||
Distributions paid to preferred shareholders | ( | ) | ( | ) | |||
Distributions paid to preferred unitholders | ( | ) | |||||
Distributions paid to noncontrolling interests – Unitholders of the Operating Partnership | ( | ) | ( | ) | |||
Distributions paid to noncontrolling interests – consolidated real estate entities | ( | ) | ( | ) | |||
Net cash provided by (used by) financing activities | $ | $ | ( | ) | |||
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH | ( | ) | |||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD | |||||||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD | $ | $ |
SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES | |||||||
Accrued capital expenditures | $ | $ | |||||
Distributions declared but not paid to common shareholders | |||||||
Distributions declared but not paid to preferred shareholders | |||||||
Distributions declared but not paid to preferred unitholders | |||||||
Gain on litigation settlement | |||||||
Property acquired through issuance of Series D preferred units | |||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | |||||||
Cash paid for interest | $ | $ |
Standard | Description | Date of Adoption | Effect on the Financial Statements or Other Significant Matters |
ASU 2016-02, Leases; ASU 2018-10, Codification Improvements to Topic 842, Leases; ASU 2018-11, Leases: Targeted Improvements; ASU 2018-20, Leases (Topic 842) - Narrow-Scope Improvements for Leases | These ASUs amend existing accounting standards for lease accounting, including requiring lessees to recognize most leases on the balance sheet and making certain changes to lessor accounting. | These ASUs are effective for annual reporting periods beginning after December 15, 2018. Early adoption is permitted. We adopted these standards using the modified retrospective approach effective January 1, 2019. | Our residential leases, where we are the lessor, will continue to be accounted for as operating leases under the new standards. As a result of adopting these standards, there were no significant changes in the accounting for lease revenue. For leases where we are the lessee, we recognized a right of use asset and lease liability of $889,000 and $1.0 million, respectively, on our consolidated balance sheets. There are also additional disclosures required under the new standard. Refer to the Leases section below for more information regarding the impact of adopting the standards on our condensed consolidated financial statements. |
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 are currently evaluating the impact the new standards will have on our mortgage and note receivables. |
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 condensed consolidated financial statements. |
ASU 2019-01, Leases (Topic 842) - Codification Improvements | This ASU provides clarification on various lease related issues and provides for reduced transition disclosure requirements. | This ASU has two effective dates. The various lease issues are effective for annual reporting periods beginning after December 15, 2019. The transition disclosures are effective with the ASU 2016-02, Leases. We adopted this standard using the modified retrospective approach effective January 1, 2019. | The adoption of the standard did not have a material impact on our condensed consolidated financial statements. Refer to the Leases section below for transition disclosures. |
(in thousands) | |||||||
Balance sheet description | June 30, 2019 | June 30, 2018 | |||||
Cash and cash equivalents | $ | $ | |||||
Restricted cash | |||||||
Total cash, cash equivalents and restricted cash | $ | $ |
(in thousands) | ||||
2019 (remainder) | $ | |||
2020 | ||||
2021 | ||||
2022 | ||||
2023 | ||||
Thereafter | ||||
Total scheduled lease income - operating leases | $ |
• | Other 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 |
(in thousands) | |||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
Revenue Stream | Applicable Standard | 2019 | 2018 | 2019 | 2018 | ||||||||||
Fixed lease income - operating leases | Leases | $ | $ | $ | $ | ||||||||||
Variable lease income - operating leases | Leases | ||||||||||||||
Non-lease components | Revenue from contracts with customers | ||||||||||||||
Other property revenue | Revenue from contracts with customers | ||||||||||||||
Total revenue | $ | $ | $ | $ |
(in thousands, except per share data) | |||||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
NUMERATOR | |||||||||||||||
Income (loss) from continuing operations – controlling interests | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
Income (loss) from discontinued operations – controlling interests | |||||||||||||||
Net income (loss) attributable to controlling interests | ( | ) | ( | ) | ( | ) | |||||||||
Dividends to preferred shareholders | ( | ) | ( | ) | ( | ) | ( | ) | |||||||
Numerator for basic earnings (loss) per share – net income available to common shareholders | ( | ) | ( | ) | ( | ) | |||||||||
Noncontrolling interests – Operating Partnership | ( | ) | ( | ) | ( | ) | |||||||||
Numerator for diluted earnings (loss) per share | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
DENOMINATOR | |||||||||||||||
Denominator for basic earnings per share weighted average shares | |||||||||||||||
Effect of redeemable operating partnership units | |||||||||||||||
Denominator for diluted earnings per share | |||||||||||||||
Earnings (loss) per common share from continuing operations – basic and diluted | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) | |||||
Earnings (loss) per common share from discontinued operations – basic and diluted | |||||||||||||||
NET EARNINGS (LOSS) PER COMMON SHARE – BASIC & DILUTED | $ | $ | ( | ) | $ | ( | ) | $ | ( | ) |
(in thousands, except per Unit amounts) | ||||||||||
Three Months Ended June 30, | Number of Units | Aggregate Cost(1) | Average Price Per Unit | |||||||
2019 | $ | $ | ||||||||
2018 | $ | $ | ||||||||
Six Months Ended June 30, | ||||||||||
2019 | $ | $ | ||||||||
2018 | $ | $ |
(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. |
(in thousands) | ||||||
Three Months Ended June 30, | Number of Units | Total Book Value | ||||
2019 | $ | |||||
2018 | ||||||
Six Months Ended June 30, | ||||||
2019 | $ | |||||
2018 | $ |
(in thousands, except per share amounts) | ||||||||||
Three Months Ended June 30, | Number of Shares | Aggregate Cost(1) | Average Price Per Share(1) | |||||||
2019 | $ | $ | ||||||||
2018 | $ | $ | ||||||||
Six Months Ended June 30, | ||||||||||
2019 | $ | $ | ||||||||
2018 | $ | $ |
(1) | Amount includes commissions. |
(in thousands) | |||
Balance at December 31, 2018 | $ | ||
Net income | ( | ) | |
Acquisition of redeemable noncontrolling interests | ( | ) | |
Balance at June 30, 2019 | $ |
(in thousands) | |||||||||||
Three Months Ended June 30, 2019 | Multifamily | All Other | Total | ||||||||
Revenue | $ | $ | $ | ||||||||
Property operating expenses, including real estate taxes | |||||||||||
Net operating income | $ | $ | $ | ||||||||
Property management | ( | ) | |||||||||
Casualty gain (loss) | ( | ) | |||||||||
Depreciation and amortization | ( | ) | |||||||||
General and administrative expenses | ( | ) | |||||||||
Interest expense | ( | ) | |||||||||
Loss on debt extinguishment | ( | ) | |||||||||
Interest and other income | |||||||||||
Income (loss) before gain (loss) on sale of real estate and other investments and gain (loss) on litigation settlement | ( | ) | |||||||||
Gain (loss) on sale of real estate and other investments | |||||||||||
Gain (loss) on litigation settlement | |||||||||||
Net income (loss) | $ |
(in thousands) | |||||||||||
Three Months Ended June 30, 2018 | Multifamily | All Other | Total | ||||||||
Revenue | $ | $ | $ | ||||||||
Property operating expenses, including real estate taxes | |||||||||||
Net operating income | $ | $ | $ | ||||||||
Property management | ( | ) | |||||||||
Depreciation and amortization | ( | ) | |||||||||
Loss on impairment | ( | ) | |||||||||
General and administrative expenses | ( | ) | |||||||||
Interest expense | ( | ) | |||||||||
Loss on debt extinguishment | ( | ) | |||||||||
Interest and other income | |||||||||||
Income (loss) from continuing operations | ( | ) | |||||||||
Income (loss) from discontinued operations | |||||||||||
Net income (loss) | $ | ( | ) |
(in thousands) | |||||||||||
Six Months Ended June 30, 2019 | Multifamily | All Other | Total | ||||||||
Real estate revenue | $ | $ | $ | ||||||||
Real estate expenses | |||||||||||
Net operating income | $ | $ | $ | ||||||||
Property management expenses | ( | ) | |||||||||
Casualty gain (loss) | ( | ) | |||||||||
Depreciation and amortization | ( | ) | |||||||||
General and administrative expenses | ( | ) | |||||||||
Interest expense | ( | ) | |||||||||
Loss on debt extinguishment | ( | ) | |||||||||
Interest and other income | |||||||||||
Income (loss) before gain (loss) on sale of real estate and other investments and gain (loss) on litigation settlement | ( | ) | |||||||||
Gain (loss) on sale of real estate and other investments | |||||||||||
Gain (loss) on litigation settlement | |||||||||||
Net income (loss) | $ | ( | ) |
(in thousands) | |||||||||||
Six Months Ended June 30, 2018 | Multifamily | All Other | Total | ||||||||
Real estate revenue | $ | $ | $ | ||||||||
Real estate expenses | |||||||||||
Net operating income | $ | $ | $ | ||||||||
Property management expenses | ( | ) | |||||||||
Casualty gain (loss) | ( | ) | |||||||||
Depreciation and amortization | ( | ) | |||||||||
Impairment of real estate investments | ( | ) | |||||||||
General and administrative expenses | ( | ) | |||||||||
Interest expense | ( | ) | |||||||||
Loss on debt extinguishment | ( | ) | |||||||||
Interest and other income | |||||||||||
Income (loss) before gain (loss) on sale of real estate and other investments and income (loss) from discontinued operations | ( | ) | |||||||||
Gain (loss) on sale of real estate and other investments | |||||||||||
Income (loss) from continuing operations | ( | ) | |||||||||
Income (loss) from discontinued operations | |||||||||||
Net income (loss) | $ | ( | ) |
(in thousands) | |||||||||||
As of June 30, 2019 | Multifamily | All Other | Total | ||||||||
Segment assets | |||||||||||
Property owned | $ | $ | $ | ||||||||
Less accumulated depreciation | ( | ) | ( | ) | ( | ) | |||||
Total property owned | $ | $ | $ | ||||||||
Cash and cash equivalents | |||||||||||
Restricted cash | |||||||||||
Other assets | |||||||||||
Unimproved land | |||||||||||
Mortgage loans receivable | |||||||||||
Total Assets | $ |
(in thousands) | |||||||||||
As of December 31, 2018 | Multifamily | All Other | Total | ||||||||
Segment assets | |||||||||||
Property owned | $ | $ | $ | ||||||||
Less accumulated depreciation | ( | ) | ( | ) | ( | ) | |||||
Total property owned | $ | $ | $ | ||||||||
Cash and cash equivalents | |||||||||||
Restricted cash | |||||||||||
Other assets | |||||||||||
Unimproved land | |||||||||||
Mortgage loans receivable | |||||||||||
Total Assets | $ |
(in thousands) | |||||||||||||
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||
REVENUE | $ | $ | |||||||||||
EXPENSES | |||||||||||||
Property operating expenses, excluding real estate taxes | |||||||||||||
Real estate taxes | |||||||||||||
Depreciation and amortization | |||||||||||||
General and administrative | |||||||||||||
TOTAL EXPENSES | $ | $ | |||||||||||
Operating income (loss) | |||||||||||||
Interest expense | ( | ) | |||||||||||
Other income | |||||||||||||
Income (loss) from discontinued operations before gain (loss) on sale of discontinued operations | |||||||||||||
Gain (loss) on sale of discontinued operations | |||||||||||||
INCOME (LOSS) FROM DISCONTINUED OPERATIONS | $ | $ |
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 | $ | $ | $ | $ | $ | $ | ||||||||||||||||||
Other | |||||||||||||||||||||||||
Minot 3100 10th St SW - Minot, ND(2) | May 23, 2019 | ||||||||||||||||||||||||
Total Acquisitions | $ | $ | $ | $ | $ | $ |
(1) | Value of Series D preferred units at the acquisition date. |
(2) | Acquired for use as our new Minot corporate office building after renovations have been completed. |
Date Acquired | (in thousands) | ||||||||||||||||
Total Acquisition Cost(1) | Investment Allocation | ||||||||||||||||
Acquisitions | Land | Building | Intangible Assets | ||||||||||||||
390 homes - Westend - Denver, CO | March 28, 2018 | $ | $ | $ | $ | ||||||||||||
Total Acquisitions | $ | $ | $ | $ |
(1) | Acquisition cost was paid in cash. |
(in thousands) | |||||||||||||
Dispositions | Date Disposed | Sales Price | Book Value and Sale Cost | Gain/(Loss) | |||||||||
Other | |||||||||||||
Minot 1400 31st Ave SW - Minot, ND(1) | May 23, 2019 | $ | $ | $ | |||||||||
Unimproved Land | |||||||||||||
Creekside Crossing - Bismarck, ND | March 1, 2019 | ( | ) | ||||||||||
Minot 1525 24th Ave SW - Minot, ND | April 3, 2019 | ||||||||||||
$ | $ | $ | ( | ) | |||||||||
Total Dispositions | $ | $ | $ |
(1) | This property currently houses our Minot corporate office. During the second quarter of 2019, we purchased an office building which will become our new Minot corporate office after renovations are completed. We will lease space in the Minot 1400 31st Ave SW building until the new office is placed in service. |
(in thousands) | |||||||||||||
Dispositions | Date Disposed | Sale Price | Book Value and Sale Cost | Gain/(Loss) | |||||||||
Other | |||||||||||||
43,404 sq ft Garden View - St. Paul, MN | January 19, 2018 | $ | $ | $ | |||||||||
52,116 sq ft Ritchie Medical - St. Paul, MN | January 19, 2018 | ||||||||||||
22,187 sq ft Bismarck 715 East Broadway - Bismarck, ND | March 7, 2018 | ||||||||||||
Total Dispositions | $ | $ | $ |
(in thousands) | |||||||
June 30, 2019 | December 31, 2018 | Weighted Average Maturity in Years at June 30, 2019 | |||||
Unsecured lines of credit(1) | $ | $ | |||||
Term loans | |||||||
Unsecured debt | |||||||
Secured line of credit(1) | |||||||
Mortgages payable - fixed | |||||||
Total debt | $ | $ | |||||
Weighted average interest rate on primary line of credit (rate with swap) | % | % | |||||
Weighted average interest rate on operating line of credit | % | ||||||
Weighted average interest rate on term loans (rate with swap) | % | % | |||||
Weighted average interest rate on mortgages payable | % | % |
(1) | Our revolving line of credit consists primarily of unsecured borrowings. A portion of the line was secured in connection with our acquisition of SouthFork Townhomes, under an agreement that allowed us to offer the seller tax protection upon purchase. |
(in thousands) | |||
2019 (remainder) | $ | ||
2020 | |||
2021 | |||
2022 | |||
2023 | |||
Thereafter | |||
Total payments | $ |
(in thousands) | (in thousands) | |||||||||||||||||
June 30, 2019 | December 31, 2018 | June 30, 2019 | December 31, 2018 | |||||||||||||||
Balance Sheet Location | Fair Value | Fair Value | Balance Sheet Location | Fair Value | Fair Value | |||||||||||||
Total derivative instruments designated as hedging instruments - interest rate swaps | Other Assets | $ | Accounts Payable and Accrued Expenses | $ | $ |
(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 June 30, | 2019 | 2018 | 2019 | 2018 | |||||||||||||
Total derivatives in cash flow hedging relationships - Interest rate contracts | $ | ( | ) | $ | Interest expense | $ | ( | ) | $ | ||||||||
Six months ended June 30, | |||||||||||||||||
Total derivatives in cash flow hedging relationships - Interest rate contracts | $ | ( | ) | $ | Interest expense | $ | ( | ) | $ |
(in thousands) | |||||||||||||
Total | Level 1 | Level 2 | Level 3 | ||||||||||
December 31, 2018 | |||||||||||||
Real estate investments valued at fair value | $ | $ |
(in thousands) | |||||||||||||||
June 30, 2019 | December 31, 2018 | ||||||||||||||
Carrying Amount | Fair Value | Carrying Amount | Fair Value | ||||||||||||
FINANCIAL ASSETS | |||||||||||||||
Cash and cash equivalents | $ | $ | $ | $ | |||||||||||
Mortgage and note receivable | $ | $ | $ | $ | |||||||||||
FINANCIAL LIABILITIES | |||||||||||||||
Revolving lines of credit(1) | $ | $ | $ | $ | |||||||||||
Term loans(1) | $ | $ | $ | $ | |||||||||||
Mortgages payable | $ | $ | $ | $ |
(1) | Excluding the effect of interest rate swap agreements. |
• | economic conditions in the markets where we own properties or markets in which we may invest in the future; |
• | 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; |
• | adverse changes in real estate markets, including future demand for apartment homes in our significant markets, barriers of entry into new markets, limitations on our ability to increase rental rates, our ability to identify and consummate attractive acquisitions and dispositions on favorable terms, our ability 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 obtain debt or equity financing on favorable terms, or at all; |
• | level and volatility of interest or capitalization rates or capital market conditions; |
• | changes in operating costs, including real estate taxes, utilities, and insurance costs; |
• | the availability and cost of casualty insurance for losses; |
• | inability to continue to satisfy complex rules in order to maintain our status as a REIT for federal income tax purposes, inability of the Operating Partnership to satisfy the rules to maintain its status as a partnership for federal income tax purposes, and the risk of changes in laws affecting REITs; |
• | inability to attract and retain qualified personnel; |
• | 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 environmental laws and regulations; and |
• | other risks identified in this Report, in other SEC reports, or in other documents that we publicly disseminate. |
• | We sold one parcel of land in Minot, North Dakota, for a total sale price of $725,000. |
• | We sold a property in Minot, North Dakota which houses our Minot corporate office for a total sale price of $6.5 million. We also purchased an office building for $2.1 million, which will become our new Minot, North Dakota corporate office building after renovations have been completed. We will lease space in the sold building until the new office is placed in service. |
• | We repurchased approximately 116,000 common shares for an aggregate purchase price of $6.9 million, including commissions, and approximately 133,000 Units for an aggregate total cost of $8.0 million. |
• | We recorded a gain on litigation settlement of $6.3 million from the settlement of a construction defect claim. The gain consisted of $4.0 million of cash received, $937,000 of cash receivable, and $1.4 million of liabilities waived under the terms of the settlement. |
• | We entered into a $50.0 million interest rate swap to fix the rate on a portion of our $250.0 million primary line of credit. This credit facility matures on August 31, 2022, with one twelve-month option to extend the maturity date at our election. |
(in thousands, except percentages) | ||||||||||||||||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||
June 30, | 2019 vs. 2018 | June 30, | 2019 vs. 2018 | |||||||||||||||||||||||||||
2019 | 2018 | $ Change | % Change | 2019 | 2018 | $ Change | % Change | |||||||||||||||||||||||
Revenue | ||||||||||||||||||||||||||||||
Same-store | $ | 40,024 | $ | 38,804 | $ | 1,220 | 3.1 | % | $ | 79,637 | $ | 76,852 | $ | 2,785 | 3.6 | % | ||||||||||||||
Non-same-store | 5,921 | 4,345 | 1,576 | 36.3 | % | 11,122 | 6,351 | 4,771 | 75.1 | % | ||||||||||||||||||||
Other properties and dispositions | 989 | 3,048 | (2,059 | ) | (67.6 | )% | 1,783 | 6,029 | (4,246 | ) | (70.4 | )% | ||||||||||||||||||
Total | 46,934 | 46,197 | 737 | 1.6 | % | 92,542 | 89,232 | 3,310 | 3.7 | % | ||||||||||||||||||||
Property operating expenses, including real estate taxes | ||||||||||||||||||||||||||||||
Same-store | 16,974 | 16,345 | 629 | 3.8 | % | 34,781 | 33,536 | 1,245 | 3.7 | % | ||||||||||||||||||||
Non-same-store | 2,137 | 1,481 | 656 | 44.3 | % | 4,018 | 2,418 | 1,600 | 66.2 | % | ||||||||||||||||||||
Other properties and dispositions | 405 | 1,111 | (706 | ) | (63.5 | )% | 753 | 2,250 | (1,497 | ) | (66.5 | )% | ||||||||||||||||||
Total | 19,516 | 18,937 | 579 | 3.1 | % | 39,552 | 38,204 | 1,348 | 3.5 | % | ||||||||||||||||||||
Net operating income | ||||||||||||||||||||||||||||||
Same-store | 23,050 | 22,459 | 591 | 2.6 | % | 44,856 | 43,316 | 1,540 | 3.6 | % | ||||||||||||||||||||
Non-same-store | 3,784 | 2,864 | 920 | 32.1 | % | 7,104 | 3,933 | 3,171 | 80.6 | % | ||||||||||||||||||||
Other properties and dispositions | 584 | 1,937 | (1,353 | ) | (69.9 | )% | 1,030 | 3,779 | (2,749 | ) | (72.7 | )% | ||||||||||||||||||
Total | $ | 27,418 | $ | 27,260 | $ | 158 | 0.6 | % | $ | 52,990 | $ | 51,028 | $ | 1,962 | 3.8 | % | ||||||||||||||
Property management expenses | (1,445 | ) | (1,444 | ) | 1 | 0.1 | % | (2,999 | ) | (2,821 | ) | 178 | 6.3 | % | ||||||||||||||||
Casualty gain (loss) | (92 | ) | — | 92 | 100.0 | % | (733 | ) | (50 | ) | 683 | 1,366.0 | % | |||||||||||||||||
Depreciation and amortization | (18,437 | ) | (19,132 | ) | (695 | ) | (3.6 | )% | (36,548 | ) | (39,648 | ) | (3,100 | ) | (7.8 | )% | ||||||||||||||
Impairment of real estate investments | — | (17,809 | ) | (17,809 | ) | — | — | (17,809 | ) | (17,809 | ) | — | ||||||||||||||||||
General and administrative expenses | (3,549 | ) | (4,348 | ) | (799 | ) | (18.4 | )% | (7,355 | ) | (7,967 | ) | (612 | ) | (7.7 | )% | ||||||||||||||
Interest expense | (7,590 | ) | (8,562 | ) | (972 | ) | (11.4 | )% | (15,486 | ) | (16,858 | ) | (1,372 | ) | (8.1 | )% | ||||||||||||||
Loss on extinguishment of debt | (407 | ) | (12 | ) | 395 | 3,291.7 | % | (409 | ) | (133 | ) | 276 | 207.5 | % | ||||||||||||||||
Interest income | 402 | 429 | (27 | ) | (6.3 | )% | 809 | 1,102 | (293 | ) | (26.6 | )% | ||||||||||||||||||
Other income | 66 | 31 | 35 | 112.9 | % | 83 | 47 | 36 | 76.6 | % | ||||||||||||||||||||
Income (loss) before gain (loss) on sale of real estate and other investments, gain (loss) on litigation settlement, and income (loss) from discontinued operations | (3,634 | ) | (23,587 | ) | 19,953 | 84.6 | % | (9,648 | ) | (33,109 | ) | 23,461 | 70.9 | % | ||||||||||||||||
Gain (loss) on sale of real estate and other investments | 615 | — | 615 | 100.0 | % | 669 | 2,304 | (1,635 | ) | (71.0 | )% | |||||||||||||||||||
Gain (loss) on litigation settlement | 6,286 | — | 6,286 | 100.0 | % | 6,286 | — | 6,286 | 100.0 | % | ||||||||||||||||||||
Income (loss) from continuing operations | 3,267 | (23,587 | ) | 26,854 | (113.9 | )% | (2,693 | ) | (30,805 | ) | 28,112 | (91.3 | )% | |||||||||||||||||
Income (loss) from discontinued operations | — | 238 | (238 | ) | (100.0 | )% | — | 14,120 | (14,120 | ) | (100.0 | )% | ||||||||||||||||||
NET INCOME (LOSS) | $ | 3,267 | $ | (23,349 | ) | $ | 26,616 | (114.0 | )% | $ | (2,693 | ) | $ | (16,685 | ) | $ | 13,992 | (83.9 | )% | |||||||||||
Dividends to preferred unitholders | (160 | ) | — | 160 | 100.0 | % | (217 | ) | — | 217 | 100.0 | % | ||||||||||||||||||
Net (income) loss attributable to noncontrolling interests – Operating Partnership | (148 | ) | 2,580 | (2,728 | ) | (105.7 | )% | 595 | 2,000 | (1,405 | ) | (70.3 | )% | |||||||||||||||||
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities | 154 | 595 | (441 | ) | (74.1 | )% | 730 | 1,115 | (385 | ) | (34.5 | )% | ||||||||||||||||||
Net income (loss) attributable to controlling interests | 3,113 | (20,174 | ) | 23,287 | (115.4 | )% | (1,585 | ) | (13,570 | ) | 11,985 | (88.3 | )% | |||||||||||||||||
Dividends to preferred shareholders | (1,706 | ) | (1,706 | ) | — | — | (3,411 | ) | (3,411 | ) | — | — | ||||||||||||||||||
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS | $ | 1,407 | $ | (21,880 | ) | $ | 23,287 | (106.4 | )% | $ | (4,996 | ) | $ | (16,981 | ) | $ | 11,985 | (70.6 | )% |
Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||
Weighted Average Occupancy(1) | 2019 | 2018 | 2019 | 2018 | |||||||
Same-store | 94.3 | % | 94.2 | % | 94.9 | % | 94.2 | % | |||
Non-same-store | 94.8 | % | 87.3 | % | 94.8 | % | 81.0 | % | |||
Total | 94.4 | % | 93.5 | % | 94.9 | % | 93.2 | % |
(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 | June 30, 2019 | June 30, 2018 | |||
Same-store | 12,848 | 12,848 | |||
Non-same-store | 1,127 | 855 | |||
Total | 13,975 | 13,703 |
• | 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. |
(in thousands, except per share and unit amounts) | |||||||||||||||||||||
Three Months Ended June 30, | 2019 | 2018 | |||||||||||||||||||
Amount | Weighted Avg Shares and Units(1) | Per Share and Unit(2) | Amount | Weighted Avg Shares and Units(1) | Per Share and Unit(2) | ||||||||||||||||
Net income (loss) available to common shareholders | $ | 1,407 | 11,729 | $ | 0.12 | $ | (21,880 | ) | 11,928 | $ | (1.83 | ) | |||||||||
Adjustments: | |||||||||||||||||||||
Noncontrolling interests – Operating Partnership | 148 | 1,226 | (2,580 | ) | 1,407 | ||||||||||||||||
Depreciation and amortization | 18,437 | 19,132 | |||||||||||||||||||
Less depreciation – non real estate entities | (79 | ) | (76 | ) | |||||||||||||||||
Less depreciation – partially owned entities | (474 | ) | (719 | ) | |||||||||||||||||
Impairment of real estate | — | 17,809 | |||||||||||||||||||
Gains on sale of real estate | (615 | ) | (98 | ) | |||||||||||||||||
Funds from operations applicable to common shares and Units | $ | 18,824 | 12,955 | $ | 1.45 | $ | 11,588 | 13,335 | $ | 0.87 |
(in thousands, except per share and unit amounts) | |||||||||||||||||||||
Six Months Ended June 30, | 2019 | 2018 | |||||||||||||||||||
Amount | Weighted Avg Shares and Units(1) | Per Share and Unit(2) | Amount | Weighted Avg Shares and Units(1) | Per Share and Unit(2) | ||||||||||||||||
Net income (loss) available to common shareholders | $ | (4,996 | ) | 11,746 | $ | (0.42 | ) | $ | (16,981 | ) | 11,950 | $ | (1.42 | ) | |||||||
Adjustments: | |||||||||||||||||||||
Noncontrolling interests – Operating Partnership | (595 | ) | 1,307 | (2,000 | ) | 1,416 | |||||||||||||||
Depreciation and amortization | 36,548 | 39,650 | |||||||||||||||||||
Less depreciation – non real estate entities | (164 | ) | (155 | ) | |||||||||||||||||
Less depreciation – partially owned entities | (1,152 | ) | (1,442 | ) | |||||||||||||||||
Impairment of real estate | — | 17,809 | |||||||||||||||||||
Gains on sale of real estate | (669 | ) | (16,134 | ) | |||||||||||||||||
Funds from operations applicable to common shares and Units | $ | 28,972 | 13,053 | $ | 2.22 | $ | 20,747 | 13,366 | $ | 1.55 |
(2) | Net income (loss) available to common shareholders is calculated on a per common share basis. FFO is calculated on a per common share and Unit basis. |
• | The disposition of two parcels of land and one commercial building, for a total sale price of $10.3 million; and |
• | The receipt of $4.0 million from the settlement of our pursuit of a recovery on a construction defect claim. |
• | Acquiring SouthFork Townhomes, a 272-home residential apartment community located in Lakeville, Minnesota, for a total purchase price of $44.0 million, with $27.4 million paid in cash and $16.6 million paid through the issuance of Series D preferred units; |
• | Repaying $74.0 million of mortgage principal; |
• | Repurchasing 289,988 common shares for an aggregate total cost of approximately $15.7 million and approximately 135,000 Units for an aggregate total cost of $8.1 million; |
• | Acquiring an office building for $2.1 million, which will become our new Minot, North Dakota corporate office building after renovations have been completed; |
• | Acquiring the remaining 34.5% noncontrolling interests in the real estate partnership that owns Commons and Landing at Southgate, located in Minot, North Dakota, for $1.3 million; and |
• | Funding capital expenditures for apartment communities of approximately $6.3 million. |
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) | |||||||
April 1 - 30, 2019 | 144,020 | $ | 59.86 | 15,078 | $ | 23,705,362 | |||||
May 1 - 31, 2019 | 24,263 | 59.26 | 24,263 | 22,267,567 | |||||||
June 1 - 30, 2019 | 80,561 | 59.22 | 76,731 | 17,724,778 | |||||||
Total | 248,844 | $ | 59.60 | 116,072 |
(1) | Includes a total of 132,772 Units redeemed for cash pursuant to the exercise of exchange rights. |
(2) | Amount includes commissions paid. |
(3) | Represents amounts outstanding under our $50 million share repurchase program, which was reauthorized by our Board of Trustees on December 14, 2018 for an additional one-year period. |
* | 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 June 30, 2019, 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. |
/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: August 7, 2019 |
1 | I have reviewed this quarterly report on Form 10-Q of Investors Real Estate Trust; |
2 | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3 | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4 | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5 | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: | /s/ Mark O. Decker, Jr. | |
Mark O. Decker, Jr., President and Chief Executive Officer |
1 | I have reviewed this quarterly report on Form 10-Q of Investors Real Estate Trust; |
2 | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3 | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4 | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5 | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
By: | /s/ John A. Kirchmann | |
John A. Kirchmann, Executive Vice President and Chief Financial Officer | ||
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Mark O. Decker, Jr. | |
Mark O. Decker, Jr. | |
President and Chief Executive Officer | |
August 7, 2019 |
1. | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and |
2. | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ John A. Kirchmann | |
John A. Kirchmann | |
Executive Vice President and Chief Financial Officer | |
August 7, 2019 |
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
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Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
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Statement of Comprehensive Income [Abstract] | ||||
Net income (loss) | $ 3,267 | $ (23,349) | $ (2,693) | $ (16,685) |
Other comprehensive income: | ||||
Unrealized gain (loss) from derivative instrument | (4,430) | (6,712) | ||
Unrealized gain (loss) from derivative instrument | 438 | 2,158 | ||
(Gain) loss on derivative instrument reclassified into earnings | (29) | (30) | ||
(Gain) loss on derivative instrument reclassified into earnings | 27 | 129 | ||
Total comprehensive income (loss) | (1,192) | (22,884) | (9,435) | (14,398) |
Net comprehensive (income) loss attributable to noncontrolling interests – Operating Partnership | 275 | 2,531 | 1,255 | 1,759 |
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities | 154 | 595 | 730 | 1,115 |
Comprehensive income (loss) attributable to controlling interests | $ (763) | $ (19,758) | $ (7,450) | $ (11,524) |
CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (Parenthetical) - $ / shares |
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Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
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Statement of Stockholders' Equity [Abstract] | ||||
Distributions - common share (in dollars per share) | $ 0.70 | $ 0.70 | $ 1.40 | $ 1.40 |
Distributions - preferred shares (in dollars per share) | $ 0.4140625 | $ 0.4140625 | $ 0.8281 | $ 0.8281 |
ORGANIZATION |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
ORGANIZATION | 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, primarily in Midwest markets. As of June 30, 2019, we owned interests in 88 apartment communities consisting of 13,975 apartment homes. |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES |
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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES | 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. On September 20, 2018, our Board of Trustees approved a change in our fiscal year-end from April 30 to December 31, beginning on January 1, 2019. We filed a transition report on Form 10-KT for the transition period ended December 31, 2018, in accordance with SEC rules and regulations. Beginning on January 1, 2019, all fiscal years will be from January 1 to December 31. On December 14, 2018, the Board approved a reverse stock split of our outstanding common shares, no par value per share, and limited partnership units ("Units") at a ratio of 1-for-10. The reverse stock split was effective as of the close of trading on December 27, 2018, with trade commencing on a split-adjusted basis on December 28, 2018. We have adjusted all shares and Units and per share and Unit data for all periods presented. 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. 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 Transition Report on Form 10-KT for the transition period ended December 31, 2018, as filed with the SEC on February 27, 2019. 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”).
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
As of June 30, 2019, restricted cash consisted primarily of loan application deposits and 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 98.0% of our total revenues and includes gross market rent less adjustments for concessions, vacancy loss, and bad debt. Other property revenues represent the remaining 2.0% of our total revenues and are primarily driven by other fee income, which is typically recognized 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. 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 June 30, 2019, was as follows:
REVENUES 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 were 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 to which the company expects to be entitled for those goods and services. Revenue streams that are included in ASU 2014-09 include:
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 and six months ended June 30, 2019:
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 six months ended June 30, 2019, we recorded no impairment charges. During the six months ended June 30, 2018, we recognized $17.8 million of impairment charges on one apartment community, three commercial properties, and three 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; and $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; and $709,000 on a parcel of land in Bismarck, North Dakota. These parcels were written down to estimated fair value based on independent appraisals and market data. 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 June 30, 2019, the balance of the note was $10.1 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 six months ended June 30, 2019 and 2018, we received and recognized approximately $285,000 and $305,000 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. As of July 31, 2018, we had funded the full initial loan balance, which appears in other assets on our Condensed Consolidated Balance Sheets; however, we may fund additional amounts upon satisfaction of certain conditions set forth in the loan agreement. As of June 30, 2019, the balance of the note was $16.6 million. 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. 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. GAIN ON LITIGATION SETTLEMENT During the three months ended June 30, 2019, we recorded a gain on litigation settlement of $6.3 million from the settlement on a construction defect claim. The gain consisted of $4.0 million of cash received, $937,000 of cash receivable, and $1.4 million of liabilities waived under the terms of the settlement.
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EARNINGS PER SHARE |
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EARNINGS PER SHARE | 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 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 37,625 and 9,858 for the three months ended June 30, 2019 and 2018, respectively, and 37,625 and 9,858, respectively, for the six months ended June 30, 2019 and 2018 were excluded from the calculation of diluted earnings per share because the assumed proceeds per share plus the average unearned compensation were greater than the average market price of the common stock for the periods presented and, therefore, 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 and six months ended June 30, 2019 and 2018:
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EQUITY AND MEZZANINE EQUITY | EQUITY AND MEZZANINE EQUITY Operating Partnership Units. The Operating Partnership had 1.2 million and 1.4 million outstanding Units at June 30, 2019 and December 31, 2018, respectively. Common Shares and Equity Awards. Common shares outstanding on June 30, 2019 and December 31, 2018, totaled 11.7 million and 11.9 million, respectively. There were 6,511 shares issued upon the vesting of equity awards under our 2015 Incentive Plan during the three months ended June 30, 2019, with a total grant-date fair value of $447,000. During the six months ended June 30, 2019, we issued 6,718 shares, with a total grant-date fair value $457,000. During the three and six months ended June 30, 2018, we issued 5,142 shares, with a total grant-date fair value of $350,000 and 6,226 shares, with a total grant-date fair value of $412,000, respectively, under our 2015 Incentive Plan. These shares vest based on performance and service criteria. Exchange Rights. Pursuant to the exercise of Exchange Rights, we redeemed Units during the six months ended June 30, 2019 and 2018 as detailed in the table below.
We also redeemed Units in exchange for common shares in connection with Unitholders exercising their Exchange Rights during the six months ended June 30, 2019 and 2018 as detailed in the table below.
Share Repurchase Program. On December 14, 2018, our Board of Trustees reauthorized our $50 million share repurchase program for an additional one-year period. Under this program, we may repurchase common 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 June 30, 2019, $17.7 million remained available under our $50 million authorized share repurchase program. Common shares repurchased during the six months ended June 30, 2019 and 2018 are detailed in the table below.
Series C Preferred Shares. Series C preferred shares outstanding were 4.1 million shares at June 30, 2019 and December 31, 2018. 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 ($103.0 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. The holders of the Series D preferred units do not have any voting rights. Redeemable Noncontrolling Interests (Mezzanine Equity). Redeemable noncontrolling interests on our Condensed Consolidated Balance Sheets represent the noncontrolling interest in joint ventures in which our unaffiliated partner, at its election, could require us to buy its interest at a purchase price to be determined by an appraisal conducted in accordance with the terms of the agreement, or at a negotiated price. During the six months ended June 30, 2019, we acquired the remaining 34.5% noncontrolling interests in the real estate partnership that owns Commons and Landing at Southgate for $1.3 million. Below is a table reflecting the activity of the redeemable noncontrolling interests for the six months ended June 30, 2019.
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COMMITMENTS AND CONTINGENCIES |
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Commitments and Contingencies Disclosure [Abstract] | |
COMMITMENTS AND CONTINGENCIES | 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, 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-five of our properties, consisting of 4,372 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.
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SEGMENT REPORTING |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
SEGMENT REPORTING | 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 and six months ended June 30, 2019 and 2018, 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.
Segment Assets and Accumulated Depreciation Segment assets are summarized as follows as of June 30, 2019, and December 31, 2018, respectively, along with reconciliations to the condensed consolidated financial statements:
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DISCONTINUED OPERATIONS |
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Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DISCONTINUED OPERATIONS | DISCONTINUED OPERATIONS 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 this standard, 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. We classified no new dispositions or properties held for sale as discontinued operations during the three and six months ended June 30, 2019 and 2018. The following information shows the effect on net income and the gains or losses from the sales of properties classified as discontinued operations for the three and six months ended June 30, 2019 and 2018, respectively:
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ACQUISITIONS AND DISPOSITIONS |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
ACQUISITIONS AND DISPOSITIONS | ACQUISITIONS AND DISPOSITIONS ACQUISITIONS We added $2.1 million of new real estate to our portfolio during the three months ended June 30, 2019, compared to no acquisitions in the three months ended June 30, 2018. Our acquisitions during the six months ended June 30, 2019 and 2018 are detailed below. Six Months Ended June 30, 2019
Six Months Ended June 30, 2018
DISPOSITIONS During the three months ended June 30, 2019, we sold one parcel of land and one commercial property for a sale price of $7.3 million. After deductions for closing costs and other costs associated with the dispositions, we recognized a $614,000 gain on sale. During the three months ended June 30, 2018, we had no dispositions. The following tables detail our dispositions for the six months ended June 30, 2019 and 2018: Six Months Ended June 30, 2019
Six Months Ended June 30, 2018
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DEBT |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DEBT | DEBT As of June 30, 2019, we owned 88 apartment communities, of which 39 served as collateral for mortgage loans. Substantially all of these mortgage loans were non-recourse to us other than for standard carve-out obligations. As of June 30, 2019, we believe that there are no material defaults or instances of noncompliance in regards to any of these mortgages payable. As of June 30, 2019, we owned 49 apartment communities that were not encumbered by mortgages, with 35 of those properties providing credit support for our unsecured borrowings. Our primary 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 June 30, 2019, the UAP provided for a borrowing capacity of $250.0 million, with additional borrowing availability of $72.1 million beyond the $177.9 million drawn, including the balance on our operating line of credit (discussed below). This credit facility matures on August 31, 2022, with one twelve-month option to extend the maturity date at our election. We have unsecured term loans of $70.0 million and $75.0 million, 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. Our line of credit and term loans are subject to customary financial covenants and limitations. We believe that we are in compliance with all such financial covenants and limitations as of June 30, 2019. 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. As of June 30, 2019, we had $4.6 million outstanding on this operating line compared to no outstanding balance as of December 31, 2018. The following table summarizes our indebtedness at June 30, 2019:
The aggregate amount of required future principal payments on mortgages payable and term loans as of June 30, 2019, was as follows:
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
DERIVATIVE INSTRUMENTS | 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 $1.0 million will be reclassified as an increase to interest expense. During the three months ended June 30, 2019, we entered into a $50.0 million interest rate swap to fix the interest rate on a portion of our primary line of credit. At June 30, 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 June 30, 2019 and December 31, 2018.
The table below presents the effect of the Company’s derivative financial instruments on the Condensed Consolidated Statements of Operations as of June 30, 2019 and 2018.
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FAIR VALUE MEASUREMENTS |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
FAIR VALUE MEASUREMENTS | 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 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 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). Fair Value Measurements on a Nonrecurring Basis There were no non-financial assets or liabilities measured at fair value on a nonrecurring basis at June 30, 2019. Non-financial assets measured at fair value on a nonrecurring basis at December 31, 2018, consisted of real estate investments that were written-down to estimated fair value during the transition period ended December 31, 2018. The aggregate fair value of these assets by their levels in the fair value hierarchy is as follows:
As of December 31, 2018, we estimated the fair value of our real estate investments using a market offer to purchase. Financial Assets and Liabilities Not Measured at Fair Value The fair value of mortgages payable and mortgage and notes receivable are estimated based on the discounted cash flows of the loans using market research and management estimates of comparable interest rates (Level 3). The estimated fair values of our financial instruments as of June 30, 2019, and December 31, 2018, respectively, are as follows:
(1) Excluding the effect of interest rate swap agreements.
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SHARE-BASED COMPENSATION |
6 Months Ended |
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Jun. 30, 2019 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
SHARE-BASED COMPENSATION | 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 will be 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. 2019 LTIP Awards Awards granted to officers on March 8, 2019, consist of time-based RSU awards for 6,391 shares and performance-based RSU awards based on relative total shareholder return (“TSR”), for 12,781 shares. 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 8, 2020, March 8, 2021, and March 8, 2022. The performance-based RSU awards are earned based on our TSR as compared to the MSCI U.S. REIT Index over a forward-looking three-year period. The maximum number of RSUs eligible to be earned under this performance-based award is 25,562 RSUs, which is 200% of the RSUs granted. Earned awards (if any) will fully vest as of the last day of the measurement period. These awards have market conditions in addition to service conditions that must be met for the awards to vest. We recognize compensation expense ratably based on the grant date fair value, as determined using the Monte Carlo valuation model, regardless of whether the market conditions are achieved and the awards ultimately vest. Therefore, previously recorded compensation expense is not adjusted in the event that the market conditions are not achieved. We based the expected volatility on the historical volatility of our daily closing share price, the risk-free interest rate on the interest rates on U.S. treasury bonds with a maturity equal to the remaining performance period of the award, and the expected term on the performance period of the award. The assumptions used to value the performance RSU awards were an expected volatility of 25.5%, a risk-free interest rate of 2.43%, and an expected life of 2.82 years. The share price at the grant date, March 8, 2019, was $58.06 per share. Awards granted to trustees on May 17, 2019, consist of 812 RSUs which vested immediately and awards granted on June 13, 2019 consist of 7,521 time-based RSU awards which vest on June 13, 2020. All of these awards are classified as equity awards. Total Compensation Expense Share-based compensation expense recognized in the consolidated financial statements for all outstanding share-based awards was $981,000 and $611,000 for the six months ended June 30, 2019 and 2018, 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.
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SUBSEQUENT EVENTS |
6 Months Ended |
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Jun. 30, 2019 | |
Subsequent Events [Abstract] | |
SUBSEQUENT EVENTS | SUBSEQUENT EVENTS On August 6, 2019, we closed a $59.9 million mortgage loan. This mortgage loan is secured by four multifamily communities and is priced at a fixed rate of 3.88% for the full twelve-year term of the loan. Proceeds from this loan will be used to pay down balances under our line of credit.
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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Policies) |
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||
Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||
BASIS OF PRESENTATION | 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. On September 20, 2018, our Board of Trustees approved a change in our fiscal year-end from April 30 to December 31, beginning on January 1, 2019. We filed a transition report on Form 10-KT for the transition period ended December 31, 2018, in accordance with SEC rules and regulations. Beginning on January 1, 2019, all fiscal years will be from January 1 to December 31. On December 14, 2018, the Board approved a reverse stock split of our outstanding common shares, no par value per share, and limited partnership units ("Units") at a ratio of 1-for-10. The reverse stock split was effective as of the close of trading on December 27, 2018, with trade commencing on a split-adjusted basis on December 28, 2018. We have adjusted all shares and Units and per share and Unit data for all periods presented. 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.
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UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS | 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 Transition Report on Form 10-KT for the transition period ended December 31, 2018, as filed with the SEC on February 27, 2019.
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USE OF ESTIMATES | 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.
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RECENT ACCOUNTING PRONOUNCEMENTS | RECENT ACCOUNTING PRONOUNCEMENTS The following table provides a brief description of recent accounting standards updates (“ASUs”).
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LEASES | 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 98.0% of our total revenues and includes gross market rent less adjustments for concessions, vacancy loss, and bad debt. Other property revenues represent the remaining 2.0% of our total revenues and are primarily driven by other fee income, which is typically recognized 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. 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.
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REVENUES | REVENUES 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 were 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 to which the company expects to be entitled for those goods and services. Revenue streams that are included in ASU 2014-09 include:
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. |
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IMPAIRMENT OF LONG-LIVED ASSETS | 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.
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VARIABLE INTEREST ENTITIES | 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.
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BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of New Accounting Pronouncements | The following table provides a brief description of recent accounting standards updates (“ASUs”).
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Schedule of Cash, Cash Equivalents, and Restricted Cash |
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Future Scheduled Lease Income for Operating Leases | 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 June 30, 2019, was as follows:
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Schedule of Disaggregation of Revenue | The following table presents the disaggregation of revenue streams for the three and six months ended June 30, 2019:
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EARNINGS PER SHARE (Tables) |
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Earnings Per Share [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Reconciliation of Numerator and Denominator Used To Calculate Basic and Diluted Earnings per Share | 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 and six months ended June 30, 2019 and 2018:
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EQUITY AND MEZZANINE EQUITY (Tables) |
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Schedule of Conversions of Stock | Pursuant to the exercise of Exchange Rights, we redeemed Units during the six months ended June 30, 2019 and 2018 as detailed in the table below.
We also redeemed Units in exchange for common shares in connection with Unitholders exercising their Exchange Rights during the six months ended June 30, 2019 and 2018 as detailed in the table below.
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Schedule of Repurchase Program | Common shares repurchased during the six months ended June 30, 2019 and 2018 are detailed in the table below.
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Redeemable Noncontrolling Interest | Below is a table reflecting the activity of the redeemable noncontrolling interests for the six months ended June 30, 2019.
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SEGMENT REPORTING (Tables) |
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenues and Net Operating Income for Reportable Segments | The following tables present NOI for the three and six months ended June 30, 2019 and 2018, 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.
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Segment Assets and Accumulated Depreciation | Segment assets are summarized as follows as of June 30, 2019, and December 31, 2018, respectively, along with reconciliations to the condensed consolidated financial statements:
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DISCONTINUED OPERATIONS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Effect on Net Income and Gains or Losses From Sale Of Properties Classified as Discontinued Operations | The following information shows the effect on net income and the gains or losses from the sales of properties classified as discontinued operations for the three and six months ended June 30, 2019 and 2018, respectively:
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ACQUISITIONS AND DISPOSITIONS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Acquisitions | Our acquisitions during the six months ended June 30, 2019 and 2018 are detailed below. Six Months Ended June 30, 2019
Six Months Ended June 30, 2018
(1) Acquisition cost was paid in cash.
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Schedule of Dispositions | The following tables detail our dispositions for the six months ended June 30, 2019 and 2018: Six Months Ended June 30, 2019
Six Months Ended June 30, 2018
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DEBT (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Debt | The following table summarizes our indebtedness at June 30, 2019:
(1) Our revolving line of credit consists primarily of unsecured borrowings. A portion of the line was secured in connection with our acquisition of SouthFork Townhomes, under an agreement that allowed us to offer the seller tax protection upon purchase.
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Aggregate Amount of Required Future Principal Payments on Mortgages Payable | The aggregate amount of required future principal payments on mortgages payable and term loans as of June 30, 2019, was as follows:
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DERIVATIVE INSTRUMENTS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Fair Value of Derivative Instruments | 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 June 30, 2019 and December 31, 2018.
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Schedule of Derivative Instruments | The table below presents the effect of the Company’s derivative financial instruments on the Condensed Consolidated Statements of Operations as of June 30, 2019 and 2018.
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FAIR VALUE MEASUREMENTS (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2019 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements on a Nonrecurring Basis | The aggregate fair value of these assets by their levels in the fair value hierarchy is as follows:
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Estimated Fair Values of Financial Instruments | The estimated fair values of our financial instruments as of June 30, 2019, and December 31, 2018, respectively, are as follows:
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ORGANIZATION (Details) |
Jun. 30, 2019
property
unit
|
---|---|
Real Estate Properties [Line Items] | |
Number of real estate properties | 88 |
Apartment Properties | |
Real Estate Properties [Line Items] | |
Number of real estate properties | 88 |
Number of apartment units | unit | 13,975 |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - Basis Of Presentation (Details) |
Dec. 27, 2018 |
---|---|
Accounting Policies [Abstract] | |
Reverse stock split | 0.10 |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - Recent Accounting Pronouncements (Details) - Accounting Standards Update 2016-02 $ in Thousands |
Jan. 01, 2019
USD ($)
|
---|---|
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Right of use asset | $ 889 |
Lease liability | $ 1,000 |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - Cash, Cash Equivalents, and Restricted Cash (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
Jun. 30, 2018 |
Dec. 31, 2017 |
---|---|---|---|---|
Accounting Policies [Abstract] | ||||
Cash and cash equivalents | $ 17,406 | $ 13,792 | $ 20,451 | |
Restricted cash | 4,672 | 5,464 | 4,454 | |
Total cash, cash equivalents and restricted cash | $ 22,078 | $ 19,256 | $ 24,905 | $ 286,226 |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - Leases (Details) $ in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2019
USD ($)
| |
Lessor, Operating Lease, Payments, Fiscal Year Maturity [Abstract] | |
2019 (remainder) | $ 1,672 |
2020 | 3,014 |
2021 | 3,017 |
2022 | 3,021 |
2023 | 2,895 |
Thereafter | 7,501 |
Total | $ 21,120 |
Minimum | |
Lessor, Lease, Description [Line Items] | |
Term of contract | 3 years |
Maximum | |
Lessor, Lease, Description [Line Items] | |
Term of contract | 15 years |
Rental Income | Revenue | Product Concentration Risk | |
Lessor, Lease, Description [Line Items] | |
Concentration risk | 98.00% |
Fee Income | Revenue | Product Concentration Risk | |
Lessor, Lease, Description [Line Items] | |
Concentration risk | 2.00% |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - Revenue (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
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Disaggregation of Revenue [Line Items] | ||||
Fixed lease income | $ 44,342 | $ 43,193 | $ 88,084 | $ 83,314 |
Variable lease income | 1,548 | 0 | 2,632 | 0 |
Revenues | 46,934 | 46,197 | 92,542 | 89,232 |
Non-Lease Components | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contracts with customers | 0 | 1,335 | 0 | 2,546 |
Other Property Revenue | ||||
Disaggregation of Revenue [Line Items] | ||||
Revenue from contracts with customers | $ 1,044 | $ 1,669 | $ 1,826 | $ 3,372 |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - Mortgage Receivable and Notes Receivable (Details) $ in Thousands |
1 Months Ended | 3 Months Ended | 6 Months Ended | |||
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Aug. 31, 2017
USD ($)
property
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Jun. 30, 2019
USD ($)
community
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Jun. 30, 2018
USD ($)
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Jun. 30, 2019
USD ($)
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Jun. 30, 2018
USD ($)
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Jul. 31, 2017
USD ($)
|
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MORTGAGE RECEIVABLE AND NOTES RECEIVABLE | ||||||
Mortgage loans receivable | $ 11,000 | $ 10,100 | $ 10,100 | |||
Loans receivable, communities remaining in the pool of assets used to secure the mortgage | community | 12 | |||||
Interest income | $ 402 | $ 429 | 809 | $ 1,102 | ||
Multi-Family Residential | ||||||
MORTGAGE RECEIVABLE AND NOTES RECEIVABLE | ||||||
Interest rate | 6.00% | |||||
Loan commitment | $ 16,200 | |||||
Loans receivable | $ 16,600 | 16,600 | ||||
Discontinued Operations, Disposed of by Sale | Multi-Family Residential | ||||||
MORTGAGE RECEIVABLE AND NOTES RECEIVABLE | ||||||
Number of real estate properties sold | property | 13 | |||||
Interest rate | 5.50% | |||||
Interest income | $ 285 | $ 305 |
BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES - Gain on Litigation Settlement (Details) - USD ($) |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Accounting Policies [Abstract] | ||||
Gain (loss) on litigation settlement | $ 6,286,000 | $ 0 | $ 6,286,000 | $ 0 |
Cash received from gain on litigation settlement | 4,000,000.0 | |||
Cash receivable from gain on litigation settlement | 937,000 | |||
Liabilities waived due to litigation settlement | $ 1,400,000 |
EQUITY AND MEZZANINE EQUITY - Schedule of Conversions of Common Stock (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Conversion of Stock [Line Items] | ||||
Number of units converted (in shares) | 133 | 10 | 135 | 49 |
Units converted, aggregate cost | $ 7,968 | $ 510 | $ 8,118 | $ 2,747 |
Average price of shares issued (in dollars per share) | $ 60.01 | $ 52.72 | $ 60.00 | $ 55.84 |
Redemption of units for common shares | $ 0 | $ 0 | $ 0 | |
Exercise of Exchange Rights | ||||
Conversion of Stock [Line Items] | ||||
Redemption of units for common shares (in shares) | 8 | 0 | 8 | 3 |
Redemption of units for common shares | $ 521 | $ 0 | $ 521 | $ 34 |
EQUITY AND MEZZANINE EQUITY - Share Repurchase Program (Details) - Share Repurchase Program - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Share Repurchase Program | ||||
Shares repurchased (in shares) | 116 | 38 | 290 | 67 |
Aggregate cost of common shares repurchased | $ 6,862 | $ 1,972 | $ 15,667 | $ 3,415 |
Average price per share (in dollars per share) | $ 59.12 | $ 52.23 | $ 54.03 | $ 51.26 |
EQUITY AND MEZZANINE EQUITY - Redeemable Noncontrolling Interest (Details) $ in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2019
USD ($)
| |
Increase (Decrease) in Temporary Equity [Roll Forward] | |
December 31, 2018 | $ 5,968 |
Net income | (174) |
Acquisition of redeemable noncontrolling interests | (5,794) |
March 31, 2019 | $ 0 |
COMMITMENTS AND CONTINGENCIES (Details) |
Jun. 30, 2019
property
unit
|
---|---|
Real Estate Properties [Line Items] | |
Number of properties | 88 |
Subject to Restrictions on Taxable Dispositions | |
Real Estate Properties [Line Items] | |
Number of properties | 25 |
Number of apartment units | unit | 4,372 |
DISCONTINUED OPERATIONS - Additional Information (Details) - property |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2019 |
Jun. 30, 2018 |
Jun. 30, 2019 |
Jun. 30, 2018 |
|
Discontinued Operations, Held-for-sale | ||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | ||||
Number of real estate properties classified as held for sale in discontinued operations | 0 | 0 | 0 | 0 |
DEBT - Schedule of future payments (Details) - USD ($) $ in Thousands |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|
Debt Instrument [Line Items] | ||
Total payments | $ 370,461 | $ 444,197 |
Mortgages | ||
Debt Instrument [Line Items] | ||
2019 (remainder) | 10,896 | |
2020 | 42,093 | |
2021 | 97,137 | |
2022 | 40,741 | |
2023 | 48,359 | |
Thereafter | 277,725 | |
Total payments | $ 516,951 |
DERIVATIVE INSTRUMENTS - Additional Information (Details) |
3 Months Ended | |
---|---|---|
Jun. 30, 2019
USD ($)
derivative_instrument
|
Jan. 31, 2023
USD ($)
derivative_instrument
|
|
Derivative [Line Items] | ||
Cash flow hedge gain (loss) to be reclassified within twelve months | $ 1,000,000.0 | |
Interest Rate Swap | Designated as Hedging Instrument | ||
Derivative [Line Items] | ||
Interest rate swap entered into | $ 50,000,000.0 | |
Number of instruments held | derivative_instrument | 3 | |
Notional amount | $ 195,000,000.0 | |
Interest Rate Swap | Designated as Hedging Instrument | Scenario, Forecast | ||
Derivative [Line Items] | ||
Number of instruments held | derivative_instrument | 1 | |
Notional amount | $ 70,000,000.0 |
SUBSEQUENT EVENTS (Details) - USD ($) $ in Thousands |
Aug. 06, 2019 |
Jun. 30, 2019 |
Dec. 31, 2018 |
---|---|---|---|
Subsequent Event [Line Items] | |||
Mortgage loan amount | $ 694,890 | $ 648,474 | |
Mortgages payable - fixed | |||
Subsequent Event [Line Items] | |||
Mortgage loan amount | $ 371,951 | $ 445,974 | |
Mortgages payable - fixed | Subsequent Event | |||
Subsequent Event [Line Items] | |||
Mortgage loan amount | $ 59,900 | ||
Mortgage loan, fixed rate | 3.88% |
Label | Element | Value |
---|---|---|
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (627,000) |
Retained Earnings [Member] | ||
Cumulative Effect of New Accounting Principle in Period of Adoption | us-gaap_CumulativeEffectOfNewAccountingPrincipleInPeriodOfAdoption | $ (627,000) |
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