Press Release

IRET Reports Strong First Quarter 2019 Financial Results

Company Release - 5/8/2019 10:08 PM ET

MINOT, N.D., May 8, 2019 /PRNewswire/ -- IRET (NYSE: IRET) announced today its first quarter 2019 financial and operating results.  Net Income (Loss), Funds from Operations ("FFO"), and Core FFO per share for the three months ended March 31, 2019, are detailed below.

First Quarter 2019 Highlights

  • We reported Net Loss, FFO, and Core FFO of $(6.4) million, $10.1 million, and $10.2 million, respectively, for the quarter ended March 31, 2019, compared to Net Income, FFO, and Core FFO of $6.7 million, $9.2 million, and $9.5 million for the quarter ended March 31, 2018.
  • Same-store revenue increased year-over-year by 4.1%, driven by 2.7% growth in rental revenue;
  • Core FFO grew by 8.5%, driven by NOI growth;
  • Same-store NOI grew by 4.6%, our sixth consecutive quarter of year-over-year NOI growth. NOI expansion has been driven by revenue growth and expense control initiatives;
  • Adverse weather-related events impacted many of our markets, including extreme cold and record-setting snowfall that caused excess ice and snow accumulation, resulting in water damage to some of our apartment communities. As a result, we experienced an increase in same-store expenses of $411,000 for snow removal costs and an increase in casualty losses of $591,000, representing the annual stop-loss under our insurance coverage;
  • We repurchased approximately 174,000 common shares for an aggregate total cost of approximately $8.8 million; and
  • We had revenue growth of 3.0% or more in 9 of our 11 markets.

 



Three Months Ended



March 31,

Per Share


2019


2018

Net Income (Loss)


$

(0.54)



$

0.41


FFO


$

0.77



$

0.68


Core FFO


$

0.77



$

0.71


 



Year-Over-Year

Comparison


Sequential

Comparison

Same-Store Results


1Q19 vs. 1Q18


1Q19 vs. 4Q18

Revenues


4.1

%


0.6

%

Expenses


3.6

%


7.2

%

Net Operating Income ("NOI")


4.6

%


(4.2)

%

 



Three months ended

Multifamily Same-Store Results


March 31, 2019


December 31, 2018


March 31, 2018

Weighted Average Occupancy


95.6

%


94.4

%


94.2

%











"Growth of same-store revenue of 4.1%, same-store NOI of 4.6%, and Core FFO of 8.5% are outstanding results," said Mark O. Decker Jr., IRET's President and CEO. "It's exciting to see our focus on resident experience and margin expansion drive strong financial results.  The progress made to date and the opportunity remaining in our portfolio continues to motivate our team to further improve our business."

Acquisitions and Dispositions

  • On February 26, 2019, we acquired SouthFork Townhomes, a 272-unit 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 convertible preferred units that have a 3.9% coupon and are convertible, at the holders' option, into common units at an exchange rate of $72.50 per common unit. The convertible preferred units also have a put feature that allows the holders to put all or any of the convertible preferred units to IRET for a cash payment equal to the issue price.
  • On March 29, 2019, we acquired the remaining 34.5% noncontrolling interests in the real estate partnership that owns Commons and Landing at Southgate, located in Minot, North Dakota, for $1.2 million.
  • During the first quarter, we sold one parcel of unimproved land for a sale price of $3.0 million.

Balance Sheet

At the end of the first quarter, we had $109.0 million of total liquidity on our balance sheet, including $85.7 million available under our corporate revolver.

Recent Developments

On April 30, 2019, we redeemed a total of approximately 129,000 Units from certain Unitholders for an aggregate purchase price of approximately $7.7 million, representing an average cash payment of $60.03 per Unit.

Subsequent to quarter-end, we repurchased approximately 15,500 shares at an average price of $58.51 per share between April 1, 2019 and April 30, 2019. Since authorization of the share repurchase program in December 2016, we have repurchased approximately 488,000 shares at an average price of $53.87.

Upcoming Events

IRET is scheduled to participate in the National Association of Real Estate Investment Trusts ("Nareit") Institutional Investor Forum in New York from June 4-6, 2019.  IRET's President and Chief Executive Officer, Mark O. Decker, Jr., Chief Financial Officer, John Kirchmann, and Chief Operating Officer, Anne Olson, are scheduled to present at the conference on June 5, 2019 at 8:45 a.m. EDT. The presentation will be webcast and will be available on the Investors section of our website at ir.iretapartments.com.  A copy of any materials provided by IRET at the conference will also be made available on the Investors section of our website.

Quarterly Distributions

On March 5, 2019, IRET's Board of Trustees declared a regular quarterly distribution of $0.70 per share/unit payable on April 1, 2019, to common shareholders and unitholders of record on March 15, 2019.  IRET has paid cash dividends to common shareholders and unitholders every quarter since its initial dividend payment in 1971.

On March 5, 2019, IRET's Board of Trustees also declared a distribution of $0.4140625 per share on the 6.625% Series C Cumulative Redeemable Preferred Shares (NYSE: IRET PRC) payable on April 1, 2019, to holders of record on March 15, 2019.  Series C preferred share distributions are cumulative and payable quarterly in arrears at an annual rate of $1.65625 per share.

On March 7, 2019, IRET's Board of Trustees declared a distribution on the Series D preferred units payable on April 1, 2019, at the rate of 3.862% per annum, pro rated from the date of issuance (February 26, 2019) through March 31, 2019, to holders of record as of March 15, 2019.  Series D preferred unit distributions are cumulative and payable quarterly in arrears at the rate of 3.862% per annum.

Earnings Call

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




Live Conference Call


Conference Call Replay

Thursday, May 9, 2019, at 10:00 AM ET


Replay available until May 23, 2019

USA Toll Free Number

1-877-509-9785


USA Toll Free Number

1-877-344-7529

International Toll Free Number

1-412-902-4132


International Toll Free Number

1-412-317-0088

Canada Toll Free Number

1-855-669-9657


Canada Toll Free Number

1-855-669-9658




Conference Number

10130035

Supplemental Information

Supplemental Operating and Financial Data for the quarter ended March 31, 2019 included herein ("Supplemental Information"), is available in the Investors section on IRET's website at www.iretapartments.com or by calling Investor Relations at 701-837-7104.  Non-GAAP financial measures and other capitalized terms, as used in this earnings release, are defined and reconciled in the Supplemental Information that accompanies this earnings release.

About IRET

IRET is a real estate company focused on the ownership, management, acquisition, redevelopment, and development of apartment communities.  As of March 31, 2019, we owned interests in 88 apartment communities consisting of 13,975 apartment homes.  IRET's common shares and Series C preferred shares are publicly traded on the New York Stock Exchange (NYSE symbols: "IRET" and "IRET PRC," respectively).

Forward-Looking Statements

Certain statements in this press release and the accompanying Supplemental Operating and Financial Data are based on our current expectations and assumptions, and are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.  Forward-looking statements do not discuss historical fact, but instead include statements related to expectations, projections, intentions or other items related to the future.  Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," and variations of those words and similar expressions are intended to identify forward-looking statements.  These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance, or achievements to be materially different from the results of operations, financial conditions, or plans expressed or implied by the forward-looking statements.  Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be achieved.

Such risks, uncertainties, and other factors that might cause such differences include, but are not limited to: intentions and expectations regarding future distributions on common shares and units; changes in operating costs; fluctuations in interest rates; adverse capital and credit market conditions that might affect our access to various sources of capital and cost of capital; our ability to manage our current debt levels and repay or refinance our indebtedness upon maturity or other payment dates; our ability to maintain financial covenant compliance under our debt agreements; adequate insurance coverage; the effect of government regulation; delays or inability to obtain necessary governmental permits and authorizations; changes in general and local economic and real estate market conditions; changes in demand for our properties that may result in lower-than-expected occupancy and/or rental rates; ability to acquire quality properties in targeted markets; ability to successfully acquire or dispose of certain assets; competition for tenants from similar competing properties; ability to attract and retain skilled personnel; cyber-intrusion; delays in completing development, redevelopment and/or lease up of properties and increased costs; ability to maintain effective internal controls over financial reporting and disclosure controls and procedures; and those risks and uncertainties detailed from time to time in our filings with the Securities and Exchange Commission, including the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" contained in our Transition Report on Form 10-KT for the transition period ended December 31, 2018, in our subsequent quarterly reports on Form 10-Q, and in other public reports.  We assume no obligation to update or supplement forward-looking statements that become untrue due to subsequent events.

Contact Information
Jonathan Bishop
Vice President – Finance
Phone: 701-837-7104
E-mail: IR@iret.com

 

Common Share Data (NYSE: IRET)




1st Quarter


4th Quarter


3rd Quarter


2nd Quarter


1st Quarter



Calendar Year
 2019


Calendar Year
 2018


Calendar Year
 2018


Calendar Year 
2018


Calendar Year 
2018

High Closing Price


$

61.50



$

59.10



$

59.80



$

59.40



$

58.20


Low Closing Price


$

49.92



$

47.00



$

53.30



$

51.30



$

46.50


Average Closing Price


$

58.11



$

53.40



$

54.99



$

54.50



$

52.16


Closing Price at end of quarter


$

59.91



$

49.07



$

59.80



$

55.30



$

51.90


Common Share Distributions – annualized


$

2.80



$

2.80



$

2.80



$

2.80



$

2.80


Closing Dividend Yield – annualized


4.7

%


5.7

%


4.7

%


5.1

%


5.4

%

Closing common shares outstanding (thousands)


11,768



11,942



11,961



11,939



11,979


Closing limited partnership units outstanding (thousands)


1,365



1,368



1,379



1,401



1,411


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


$

786,798



$

653,122



$

797,732



$

737,702



$

694,941


 

IRET

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in thousands)




3/31/2019


12/31/2018


9/30/2018


6/30/2018


3/31/2018

ASSETS











Real estate investments











Property owned


$

1,673,158



$

1,627,636



$

1,638,909



$

1,637,991



$

1,692,987


Less accumulated depreciation


(371,672)



(353,871)



(339,515)



(321,468)



(313,763)




1,301,486



1,273,765



1,299,394



1,316,523



1,379,224


Unimproved land


2,252



5,301



6,522



10,726



14,250


Mortgage loans receivable


10,260



10,410



10,530



10,955



10,329


Total real estate investments


1,313,998



1,289,476



1,316,446



1,338,204



1,403,803


Assets held for sale and assets of discontinued operations








33,840




Cash and cash equivalents


23,329



13,792



36,910



20,451



33,817


Restricted cash


4,819



5,464



4,669



4,454



4,053


Other assets


29,166



27,265



28,472



27,882



26,537


TOTAL ASSETS


$

1,371,312



$

1,335,997



$

1,386,497



$

1,424,831



$

1,468,210













LIABILITIES, MEZZANINE EQUITY, AND EQUITY











LIABILITIES











Liabilities held for sale and liabilities of discontinued operations








$

29,624




Accounts payable and accrued expenses


$

40,697



$

40,892



$

38,203



36,288



$

37,350


Revolving line of credit


118,677



57,500



71,000



145,500



134,500


Term loans payable, net of loan costs


144,036



143,991



143,937



69,531



69,504


Mortgages payable, net of loan costs


430,950



444,197



463,052



465,244



511,683


TOTAL LIABILITIES


734,360



686,580



716,192



746,187



753,037













REDEEMABLE NONCONTROLLING INTERESTS – CONSOLIDATED REAL ESTATE ENTITIES




5,968



6,130



6,261



6,706


SERIES D PREFERRED UNITS


16,560










EQUITY











Series C Preferred Shares of Beneficial Interest


99,456



99,456



99,456



99,456



99,456


Common Shares of Beneficial Interest


895,381



899,234



900,368



899,480



901,312


Accumulated distributions in excess of net income


(443,661)



(429,048)



(414,900)



(407,482)



(377,871)


Accumulated other comprehensive income


(3,139)



(856)



2,760



1,748



1,283


Total shareholders' equity


548,037



568,786



587,684



593,202



624,180


Noncontrolling interests – Operating Partnership


66,060



67,916



69,578



71,066



75,161


Noncontrolling interests – consolidated real estate entities


6,295



6,747



6,913



8,115



9,126


Total equity


620,392



643,449



664,175



672,383



708,467


TOTAL LIABILITIES, MEZZANINE EQUITY, AND EQUITY


$

1,371,312



$

1,335,997



$

1,386,497



$

1,424,831



$

1,468,210


 

IRET

RECONCILIATION OF NET OPERATING INCOME TO THE

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands)




Three Months Ended



3/31/19


12/31/2018


9/30/2018


6/30/2018


3/31/18

Revenue











Same-store


$

39,612



$

39,385



$

38,727



$

38,804



$

38,048


Non-same-store


5,202



4,608



4,687



4,345



2,006


Other properties and dispositions


794



1,737



1,992



3,048



2,981


Total revenue


45,608



45,730



45,406



46,197



43,035


Property operating expenses, including real estate taxes











Same-store


17,806



16,617



16,980



16,345



17,191


Non-same-store


1,882



1,403



1,696



1,481



937


Other properties and dispositions


348



370



811



1,111



1,139


Total property operating expenses, including real estate taxes


20,036



18,390



19,487



18,937



19,267


Net operating income (NOI)











Same-store


21,806



22,768



21,747



22,459



20,857


Non-same-store


3,320



3,205



2,991



2,864



1,069


Other properties and dispositions


446



1,367



1,181



1,937



1,842


Net operating income


$

25,572



$

27,340



$

25,919



$

27,260



$

23,768


Property management


(1,554)



(1,447)



(1,269)



(1,444)



(1,377)


Casualty gain (loss)


(641)



(540)



(225)





(50)


Depreciation/amortization


(18,111)



(18,812)



(19,164)



(19,132)



(20,516)


Impairment of real estate investments




(1,221)





(17,809)




General and administrative expenses


(3,806)



(3,769)



(3,147)



(4,348)



(3,619)


Interest expense


(7,896)



(7,682)



(8,193)



(8,562)



(8,296)


Loss on debt extinguishment


(2)



(5)



(540)



(12)



(121)


Interest and other income


424



483



395



460



689


Income (loss) before gain (loss) on sale of real estate and other investments and income (loss) from discontinued operations


(6,014)



(5,653)



(6,224)



(23,587)



(9,522)


Gain (loss) on sale of real estate and other investments


54



612



9,095





2,304


Income (loss) from continuing operations


(5,960)



(5,041)



2,871



(23,587)



(7,218)


Income (loss) from discontinued operations






570



238



13,882


Net income (loss)


$

(5,960)



$

(5,041)



$

3,441



$

(23,349)



$

6,664


Dividends to preferred series D unitholders


(57)










Net (income) loss attributable to noncontrolling interests – Operating Partnership


743



665



(112)



2,580



(580)


Net (income) loss attributable to noncontrolling interests – consolidated real estate entities


576



270



(676)



595



520


Net income (loss) attributable to controlling interests


(4,698)



(4,106)



2,653



(20,174)



6,604


Dividends to preferred shareholders


(1,705)



(1,705)



(1,705)



(1,706)



(1,705)


NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS


$

(6,403)



$

(5,811)



$

948



$

(21,880)



$

4,899













Per Share Data











Earnings (loss) per common share from continuing operations – basic & diluted


$

(0.54)



$

(0.49)



$

0.04



$

(1.85)



$

(0.63)


Earnings (loss) per common share from discontinued operations – basic & diluted






0.04



0.02



1.04


Net income (loss) per common share – basic & diluted


$

(0.54)



$

(0.49)



$

0.08



$

(1.83)



$

0.41













Percentage of Revenues











Property operating expenses, including real estate taxes


43.9

%


40.2

%


42.9

%


41.0

%


44.8

%

General and administrative expenses


8.3

%


8.2

%


6.9

%


9.4

%


8.4

%

Interest


17.3

%


16.8

%


18.0

%


18.5

%


19.3

%

Income (loss) from discontinued operations


%


%


1.3

%


0.5

%


32.3

%

Net income (loss)


(13.1)

%


(11.0)

%


7.6

%


(50.5)

%


15.5

%

 

IRET

RECONCILIATION OF NET INCOME AVAILABLE TO

COMMON SHAREHOLDERS TO FFO AND CORE FFO (unaudited)

(in thousands, except per share and unit amounts)




Three Months Ended



3/31/2019


12/31/2018


9/30/2018


6/30/2018


3/31/2018

Funds From Operations(1)











Net income (loss) available to common shareholders


$

(6,403)



$

(5,811)



$

948



$

(21,880)



$

4,899


Adjustments:











Noncontrolling interests – Operating Partnership


(743)



(665)



112



(2,580)



580


Depreciation and amortization


18,111



18,812



19,164



19,132



20,518


Less depreciation – non real estate


(85)



(76)



(76)



(76)



(79)


Less depreciation – partially owned entities


(678)



(680)



(673)



(719)



(723)


Impairment of real estate




1,221





17,809




Gain on sale of real estate


(54)



(612)



(8,499)



(98)



(16,036)


FFO applicable to common shares and Units


$

10,148



$

12,189



$

10,976



$

11,588



$

9,159













FFO per share and unit – basic and diluted


$

0.77



$

0.92



$

0.82



$

0.87



$

0.68













Adjustments to Core FFO:











Casualty loss write off




43








Loss on extinguishment of debt


2



5



540



12



121


Severance and transition costs








586



225


Core FFO applicable to common shares and Units


$

10,150



$

12,237



$

11,516



$

12,186



$

9,505













Core FFO per share and unit – basic and diluted


$

0.77



$

0.92



$

0.86



$

0.91



$

0.71













Weighted average shares and units


13,130



13,317



13,318



13,335



13,396



(1)

See Definitions section.

 

IRET

RECONCILIATION OF NET INCOME AVAILABLE TO

COMMON SHAREHOLDERS TO ADJUSTED EARNINGS BEFORE INTEREST,

TAXES, DEPRECIATION, AND AMORTIZATION (ADJUSTED EBITDA) (unaudited)

(in thousands)




Three Months Ended



3/31/2019


12/31/2018


9/30/2018


6/30/2018


3/31/2018

Adjusted EBITDA(1)











Net income (loss) available to common shareholders


$

(4,698)



$

(4,106)



$

2,653



$

(20,174)



$

6,604


Adjustments:











Dividends to preferred unitholders


57










Noncontrolling interests – Operating Partnership


(743)



(665)



112



(2,580)



580


Income (loss) before noncontrolling interests – Operating Partnership


(5,384)



(4,771)



2,765



(22,754)



7,184


Adjustments:











Interest expense


7,558



7,336



7,828



8,148



7,881


Loss on extinguishment of debt


2



4



541



11



121


Depreciation/amortization related to real estate investments


17,433



18,133



18,491



18,413



19,795


Impairment of real estate investments




1,221





17,809




Interest income


(407)



(465)



(366)



(429)



(673)


Gain (loss) on sale of real estate and other investments


(54)



(611)



(8,499)



(98)



(16,036)


Adjusted EBITDA


$

19,148



$

20,847



$

20,760



$

21,100



$

18,272













Ratios











Adjusted EBITDA(1)/Interest expense


2.43

x


2.71

x


2.53

x


2.46

x


2.20

x

Adjusted EBITDA(1)/Interest expense plus preferred distributions


1.98

x


2.22

x


2.10

x


2.05

x


1.83

x



(1)

See Definitions.

 

IRET

DEBT ANALYSIS

(in thousands)


 

Debt Maturity Schedule

Annual Expirations




Future Maturities of Debt



Fixed

Debt


Variable

Debt


Total

Debt


Weighted

Average(1)


% of

Total Debt

2019


$

19,068





$

19,068



5.72

%


2.7

%

2020


70,359





70,359



5.43

%


10.1

%

2021


103,702





103,702



5.24

%


14.9

%

2022


38,589





38,589



4.00

%


5.5

%

2023


49,093





49,093



4.02

%


7.1

%

Thereafter


151,777





151,777



3.85

%


21.8

%

Total mortgage debt


$

432,588





$

432,588



4.54

%


62.1

%












Primary line of credit(2)




$

99,200



99,200



3.89

%


14.2

%

Operating line of credit(2)




4,477



4,477



4.40

%


0.7

%

Secured line of credit(2)(3)




15,000



15,000



3.89

%


2.2

%

Term loans(4)


145,000





145,000



3.99

%


20.8

%

Total debt


$

577,588



$

118,677



$

696,265



4.32

%


100.0

%


(1)

Weighted average interest rate of debt that matures during the year.

(2)

Our primary line of credit matures on August 31, 2022.  Our operating line of credit matures on April 1, 2020.

(3)

Our primary 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 which allowed us to offer the seller tax protection upon purchase.

(4)

Term loans have variable interest rates that are fixed with interest rate swaps that mature on January 31, 2023, January 15, 2024, and August 31, 2025.

         



3/31/2019


12/31/2018


9/30/2018


6/30/2018


3/31/2018

Debt Balances Outstanding(1)











Secured fixed rate


$

432,588



$

445,974



$

464,964



$

473,546



$

491,002


Secured variable rate








22,620



22,955


Unsecured lines of credit


103,677



57,500



71,000



145,500



134,500


Secured line of credit(2)


15,000










Unsecured term loans


145,000



145,000



145,000



70,000



70,000


Debt total


$

696,265



$

648,474



$

680,964



$

711,666



$

718,457













Mortgage Debt Weighted Average Interest Rate


4.54

%


4.58

%


4.65

%


4.67

%


4.69

%

Primary Line of Credit Rate


3.89

%


3.72

%


3.67

%


3.76

%


3.47

%

Operating Line of Credit Rate


4.40

%









Term Loan Rate


3.99

%


4.01

%


3.97

%


4.11



4.07



(1)

Includes mortgages on properties held for sale.

(2)

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 which allowed us to offer the seller tax protection upon purchase.

 

IRET

CAPITAL ANALYSIS

(in thousands, except per share and unit amounts)




Three Months Ended



3/31/2019


12/31/2018


9/30/2018


6/30/2018


3/31/2018

Equity Capitalization











Common shares outstanding


11,768



11,942



11,961



11,939



11,979


Operating partnership units outstanding


1,365



1,368



1,379



1,401



1,411


Total common shares and units outstanding


13,133



13,310



13,340



13,340



13,390


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


$

59.91



$

49.07



$

59.80



$

55.30



$

51.90


Equity capitalization-common shares and units


786,798



653,122



797,732



737,702



694,941


Recorded book value of preferred shares


$

99,456



$

99,456



$

99,456



$

99,456



$

99,456


Total equity capitalization


$

886,254



$

752,578



$

897,188



$

837,158



$

794,397













Series D Preferred Units


$

16,560



$



$



$



$













Debt Capitalization











Total debt


$

696,265



$

648,474



$

680,964



$

711,666



$

718,457


Total capitalization


$

1,599,079



$

1,401,052



$

1,578,152



$

1,548,824



$

1,512,854













Total debt to total capitalization


0.44:1



0.46:1



0.43:1



0.46:1



0.47:1






Three Months Ended



3/31/2019


12/31/2018


9/30/2018


6/30/2018


3/31/2018

Debt service coverage ratio(1)


1.86

x


2.07

x


1.96

x


1.83

x


1.36

x












Distribution Data











Common shares and Units outstanding at record date


13,135



13,276



13,340



13,340



13,363


Total common distribution declared


$

9,195



$

9,293



$

9,339



$

9,345



$

9,395


Common distribution per share and Unit


$

0.70



$

0.70



$

0.70



$

0.70



$

0.70


Payout ratio (FFO per share and Unit basis)(1)


90.9

%


76.1

%


85.4

%


80.5

%


102.9

%

Payout ratio (Core FFO per share and Unit basis)(1)


90.9

%


76.1

%


81.4

%


76.9

%


98.6

%


(1)

See Definitions section.

 

IRET

RECONCILIATION OF NET OPERATING INCOME TO THE

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

QUARTERLY COMPARISON

(in thousands)


The following table reconciles NOI and our same-store NOI to net income (loss) (the most directly comparable GAAP financial measure) for the periods shown below:



(in thousands, except percentages)


Three Months Ended March 31,


2019


2018


$ Change


% Change









Real estate revenue








Same-store

$

39,612



$

38,048



$

1,564



4.1

%

Non-same-store

5,202



2,006



3,196



159.3

%

Other properties and dispositions

794



2,981



(2,187)



(73.4)

%

Total

$

45,608



$

43,035



$

2,573



6.0

%









Real estate expenses








Same-store

$

17,806



$

17,191



$

615



3.6

%

Non-same-store

1,882



937



945



100.9

%

Other properties and dispositions

348



1,139



(791)



(69.4)

%

Total

$

20,036



$

19,267



$

769



4.0

%









Net operating income








Same-store

$

21,806



$

20,857



$

949



4.6

%

Non-same-store

3,320



1,069



2,251



210.6

%

Other properties and dispositions

446



1,842



(1,396)



(75.8)

%

Total

$

25,572



$

23,768



$

1,804



7.6

%









Reconciliation of NOI to net income (loss) available to common shareholders








Property management

(1,554)



(1,377)



177



12.9

%

Casualty loss

(641)



(50)



591



1,182.0

%

Depreciation/amortization

(18,111)



(20,516)



(2,405)



(11.7)

%

General and administrative expenses

(3,806)



(3,619)



187



5.2

%

Interest expense

(7,896)



(8,296)



(400)



(4.8)

%

Loss on debt extinguishment

(2)



(121)



(119)



(98.3)

%

Interest and other income

424



689



265



(38.5)

%

Income (loss) before gain (loss) on sale of real estate and other investments and income (loss) from discontinued operations

(6,014)



(9,522)



3,508



36.8

%

Gain (loss) on sale of real estate and other investments

54



2,304



(2,250)



(97.7)

%

Income (loss) from continuing operations

(5,960)



(7,218)



1,258



(17.4)

%

Income (loss) from discontinued operations



13,882



(13,882)



(100.0)

%

Net income (loss)

$

(5,960)



$

6,664



(12,624)



(189.4)

%

Dividends to preferred unitholders

(57)





(57)



100.0

%

Net (income) loss attributable to noncontrolling interests – Operating Partnership

743



(580)



1,323



(228.1)

%

Net (income) loss attributable to noncontrolling interests – consolidated real estate entities

576



520



56



10.8

%

Net income (loss) attributable to controlling interests

(4,698)



6,604



(11,302)



(171.1)

%

Dividends to preferred shareholders

(1,705)



(1,705)





%

NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS

$

(6,403)



$

4,899



$

(11,302)



(230.7)

%

 

IRET

SAME-STORE FIRST QUARTER COMPARISONS

(in thousands, except property data amounts)




Apartment
Homes
Included


Revenues


Expenses


NOI

Regions



CY19Q1


CY18Q1


% Change


CY19Q1


CY18Q1


% Change


CY19Q1


CY18Q1


% Change

Minneapolis, MN


1,796



$

7,689



$

7,184



7.0

%


$

3,148



$

2,964



6.2

%


$

4,541



$

4,220



7.6

%

Rochester, MN


1,711



6,225



6,039



3.1

%


2,454



2,549



(3.7)

%


3,771



3,490



8.1

%

Omaha, NE


1,370



3,754



3,632



3.4

%


1,774



1,626



9.1

%


1,980



2,006



(1.3)

%

Grand Forks, ND


1,555



4,141



4,190



(1.2)

%


2,166



2,041



6.1

%


1,975



2,149



(8.1)

%

Bismarck, ND


1,259



3,602



3,483



3.4

%


1,717



1,568



9.5

%


1,885



1,915



(1.6)

%

St. Cloud, MN


1,190



3,474



3,310



5.0

%


1,808



1,615



12.0

%


1,666



1,695



(1.7)

%

Topeka, KS


1,042



2,556



2,418



5.7

%


1,105



993



11.3

%


1,451



1,425



1.8

%

Sioux Falls, SD


969



2,529



2,442



3.6

%


1,193



1,274



(6.4)

%


1,336



1,168



14.4

%

Billings, MT


770



2,156



1,977



9.1

%


858



826



3.9

%


1,298



1,151



12.8

%

Minot, ND


712



2,118



2,061



2.8

%


1,007



1,186



(15.1)

%


1,111



875



27.0

%

Rapid City, SD


474



1,367



1,312



4.2

%


576



550



4.7

%


791



762



3.8

%

Same-Store Total


12,848



$

39,611



$

38,048



4.1

%


$

17,806



$

17,192



3.6

%


$

21,805



$

20,856



4.6

%

 



Apartment
Homes
Included


Weighted Average Occupancy (1)


Weighted Average Monthly
Rental Rate (2)


Weighted Average Monthly
Revenue per Occupied Home (3)

Regions



CY19Q1


CY18Q1


Growth


CY19Q1


CY18Q1


% Change


CY19Q1


CY18Q1


% Change

Minneapolis, MN


1,796



94.8

%


92.4

%


2.4

%


$

1,408



$

1,367



3.0

%


$

1,505



$

1,443



4.3

%

Rochester, MN


1,711



96.5

%


94.5

%


2.0

%


1,207



1,216



(0.7)

%


1,257



1,244



1.0

%

Omaha, NE


1,370



95.3

%


95.4

%


(0.1)

%


875



857



2.1

%


959



927



3.5

%

Grand Forks, ND


1,555



93.8

%


95.0

%


(1.2)

%


903



908



(0.6)

%


946



945



0.1

%

Bismarck, ND


1,259



96.4

%


93.2

%


3.2

%


942



959



(1.8)

%


990



989



0.1

%

St. Cloud, MN


1,190



95.7

%


94.9

%


0.8

%


939



904



3.9

%


1,016



977



4.0

%

Topeka, KS


1,042



96.7

%


94.4

%


2.3

%


810



799



1.4

%


846



819



3.3

%

Sioux Falls, SD


969



95.3

%


95.7

%


(0.4)

%


850



816



4.2

%


913



878



4.0

%

Billings, MT


770



96.2

%


90.4

%


5.8

%


902



906



(0.4)

%


971



947



2.5

%

Minot, ND


712



95.8

%


95.9

%


(0.1)

%


993



997



(0.4)

%


1,035



1,006



2.9

%

Rapid City, SD


474



96.9

%


96.5

%


0.4

%


931



901



3.3

%


991



956



3.7

%

Same-Store Total


12,848



95.6

%


94.2

%


1.4

%


$

1,013



$

1,001



1.2

%


$

1,075



$

1,048



2.7

%



(1)

Weighted average occupancy is defined as the percentage resulting from dividing actual rental revenue by scheduled rent.

(2)

Weighted average monthly rental rate is scheduled rental revenue divided by the total number of apartment homes.  See definition of scheduled rental revenue in the Definitions section.

(3)

Weighted average monthly revenue per occupied home is defined as total rental revenues divided by the weighted average occupied apartment units for the period.

 

IRET

SAME-STORE SEQUENTIAL QUARTER COMPARISONS

(in thousands, except property data amounts)




Apartment
Homes
Included


Revenues


Expenses


NOI

Regions



CY19Q1


CY18Q4


% Change


CY19Q1


CY18Q4


% Change


CY19Q1


CY18Q4


% Change

Minneapolis, MN


1,796



$

7,689



$

7,542



1.9

%


$

3,148



$

3,026



4.0

%


$

4,541



$

4,516



0.6

%

Rochester, MN


1,711



6,225



6,227



%


2,454



2,367



3.7

%


3,771



3,860



(2.3)

%

Omaha, NE


1,370



3,754



3,771



(0.5)

%


1,774



1,535



15.6

%


1,980



2,236



(11.4)

%

Grand Forks, ND


1,555



4,141



4,125



0.4

%


2,166



1,906



13.6

%


1,975



2,219



(11.0)

%

Bismarck, ND


1,259



3,602



3,520



2.3

%


1,717



1,626



5.6

%


1,885



1,894



(0.5)

%

St. Cloud, MN


1,190



3,474



3,473



%


1,808



1,484



21.8

%


1,666



1,989



(16.2)

%

Topeka, KS


1,042



2,556



2,519



1.5

%


1,105



1,135



(2.6)

%


1,451



1,384



4.8

%

Sioux Falls, SD


969



2,529



2,522



0.3

%


1,193



1,132



5.4

%


1,336



1,390



(3.9)

%

Billings, MT


770



2,156



2,162



(0.3)

%


858



842



1.9

%


1,298



1,320



(1.7)

%

Minot, ND


712



2,118



2,155



(1.7)

%


1,007



1,037



(2.9)

%


1,111



1,118



(0.6)

%

Rapid City, SD


474



1,367



1,371



(0.3)

%


576



527



9.3

%


791



844



(6.3)

%

Same-Store Total


12,848



$

39,611



$

39,387



0.6

%


$

17,806



$

16,617



7.2

%


$

21,805



$

22,770



(4.2)

%

 



Apartment
Homes
Included


Weighted Average Occupancy (1)


Weighted Average Monthly
Rental Rate (2)


Weighted Average Monthly
Revenue per Occupied Home (3)

Regions



CY19Q1


CY18Q4


Growth


CY19Q1


CY18Q4


% Change


CY19Q1


CY18Q4


% Change

Minneapolis, MN


1,796



94.8

%


92.7

%


2.1

%


$

1,408



$

1,418



(0.7)

%


$

1,505



$

1,511



(0.4)

%

Rochester, MN


1,711



96.5

%


95.1

%


1.4

%


1,207



1,212



(0.4)

%


1,257



1,276



(1.5)

%

Omaha, NE


1,370



95.3

%


95.8

%


(0.5)

%


875



876



(0.1)

%


959



958



0.1

%

Grand Forks, ND


1,555



93.8

%


91.8

%


2.0

%


903



913



(1.1)

%


946



964



(1.9)

%

Bismarck, ND


1,259



96.4

%


93.8

%


2.6

%


942



945



(0.3)

%


990



994



(0.4)

%

St. Cloud, MN


1,190



95.7

%


95.2

%


0.5

%


939



945



(0.6)

%


1,016



1,021



(0.5)

%

Topeka, KS


1,042



96.7

%


95.3

%


1.4

%


810



811



(0.1)

%


846



846



%

Sioux Falls, SD


969



95.3

%


95.2

%


0.1

%


850



853



(0.4)

%


913



911



0.2

%

Billings, MT


770



96.2

%


96.3

%


(0.1)

%


902



904



(0.2)

%


971



971



%

Minot, ND


712



95.8

%


96.4

%


(0.6)

%


993



1,001



(0.8)

%


1,035



1,046



(1.1)

%

Rapid City, SD


474



96.9

%


96.7

%


0.2

%


931



933



(0.2)

%


991



996



(0.5)

%

Same-Store Total


12,848



95.6

%


94.4

%


1.2

%


$

1,013



$

1,018



(0.5)

%


$

1,075



$

1,082



(0.6)

%



(1)

Weighted average occupancy is defined as the percentage resulting from dividing actual rental revenue by scheduled rent.

(2)

Weighted average monthly rental rate is scheduled rent divided by the total number of apartment homes.  See definition of scheduled rent in the Definitions section.

(3)

Weighted average monthly revenue per occupied home is defined as total rental revenues divided by the weighted average occupied apartment units for the period.


IRET

PORTFOLIO SUMMARY(1)




Three Months Ended



3/31/2019


12/31/2018


9/30/2018


6/30/2018


3/31/2018

Number of Apartment Homes











Same-Store


12,848



12,847



12,847



12,848



12,844


Non-Same-Store


1,127



855



855



855



855


All Communities


13,975



13,702



13,702



13,703



13,699













Average Scheduled Rent(2) per Apartment Home











Same-Store


$

1,013



$

1,018



$

1,027



$

1,009



$

1,001


Non-Same-Store


1,772



1,797



1,796



1,797



1,783


All Communities


$

1,064



$

1,066



$

1,075



$

1,058



$

1,029













Average Revenue per Occupied Apartment Home(3)











Same-Store


$

1,075



$

1,082



$

1,092



$

1,069



$

1,048


Non-Same-Store


1,943



1,939



1,956



1,941



1,926


All Communities


$

1,134



$

1,136



$

1,146



$

1,123



$

1,079













Weighted Average Occupancy(4)











Same-Store


95.6

%


94.4

%


92.0

%


94.2

%


94.2

%

Non-Same-Store


94.9

%


92.7

%


93.4

%


87.3

%


75.5

%

All Communities


95.5

%


94.2

%


92.2

%


93.5

%


93.0

%












Operating Expenses as a % of Scheduled Rent











Same-Store


45.6

%


42.4

%


42.9

%


42.0

%


44.6

%

Non-Same-Store


37.6

%


30.5

%


36.8

%


32.1

%


36.4

%

All Communities


44.7

%


41.1

%


42.3

%


41.0

%


44.1

%












Capital Expenditures











Total Capital Expenditures per Apartment Home – Same-Store


$

80



$

254



$

274



$

201



$

112




(1)

Previously reported amounts are not revised for changes in the composition of the same-store properties pool.

(2)

See definition of scheduled rent. Average scheduled rent is scheduled rent divided by the total number of units.

(3)

Total revenues divided by the weighted average occupied units for the period.

(4)

See definition of weighted average occupancy in the Definitions section.


 

IRET

SAME-STORE CAPITAL EXPENDITURES

($ in thousands, except per home amounts)




Three Months Ended



3/31/2019


3/31/2018

Total Same-Store Apartment Homes


12,848



12,844







Turnover


$

612



$

701


Furniture & Equipment


60



44


Building – Interior


78



68


Building – Exterior


217



599


Landscaping & Grounds


63



33


Capital Expenditures


$

1,030



$

1,445


Capital Expenditures per Apartment Home


$

80



$

112



IRET
2019 Calendar Year Financial Outlook
(in thousands, except per share amounts)

We are reaffirming our guidance for our 2019 calendar year Net income (loss) available to shareholders, EPS, same-store performance, Core FFO, and Core FFO per share. Our 2019 calendar year guidance, along with our actual results of the three months ended March 31, 2019, is described in the table below.  Please note that FFO, Core FFO, and NOI are non-GAAP measures.  Refer to Key Financial Data in this release for additional information on the use and presentation of these non-GAAP measures and for reconciliation to the most directly comparable GAAP measures.


Three Months Ended


Range for 12 Months Ended December 31, 2019


March 31, 2019


Lower


Mid Point


Upper


Actual Results


Amount

% Change


Amount

% Change


Amount

% Change

Net income available to common shareholders

$

(6,403)



$

(24,491)


(12.10)

%


$

(21,857)


0.10

%


$

(19,224)


12.00

%

EPS(1)

$

(0.54)



$

(1.86)


(1.60)

%


$

(1.66)


9.30

%


$

(1.46)


20.20

%












Same Store Outlook











Revenue

$

39,612



$

158,800


2.50

%


$

160,000


3.25

%


$

161,200


4.00

%

Expenses

$

17,806



$

69,800


4.00

%


$

69,300


3.25

%


$

68,800


2.50

%

NOI

$

21,806



$

89,600


2.00

%


$

90,700


3.25

%


$

91,800


4.50

%












Core FFO

$

10,150



$

46,348


2.00

%


$

47,666


4.90

%


$

48,981


7.80

%

Core FFO per Share

$

0.77



$

3.52


3.30

%


$

3.62


6.30

%


$

3.72


9.30

%

Weighted Average Shares and Units

13,130



13,167




13,167




13,167





(1)

Earnings per share excludes net income attributable to noncontrolling interests.

Reconciliation of Net Income Available to Common Shareholders to Funds From Operations

The following table presents reconciliations of Net income (loss) available to common shareholders to FFO and Core FFO.  FFO and Core FFO are non-GAAP measures.  FFO and Core FFO should not be considered as alternatives to net income or any other GAAP measurement of performance, but rather should be considered as an additional, supplemental measure. FFO also does not represent cash generated from operating activities in accordance with GAAP, and is not necessarily indicative of sufficient cash flow to fund all of our needs or our ability to service indebtedness or make distributions.  The outlook and projections provided below are based on current expectations and are forward-looking.




Outlook


Three Months Ended


12 Months Ended


March 31, 2019


December 31, 2019


Amount


Per Share


Amount


Per Share

Net income (loss) available to common shareholders

$

(6,403)



$

(0.54)



$

(19,884)



$

(1.66)


Noncontrolling interests - Operating Partnership

(743)





(1,961)




Depreciation and amortization

18,111





69,511




Less depreciation-non real estate

(85)








Less depreciation-partially owned entities

(678)








Gain on sale of real estate attributable to controlling interests

(54)








FFO applicable to common shares and Units

$

10,148



$

0.77



$

47,666



$

3.62










Adjustments to Core FFO:








Loss on extinguishment of debt

2








Core FFO applicable to common shares and Units

$

10,150



$

0.77



$

47,666



$

3.62


Definitions
March 31, 2019

Adjusted EBITDA is earnings before interest, taxes, depreciation, amortization, gain/loss on sale of real estate and other investments, impairment of real estate investments, gain/loss on extinguishment of debt and gain/loss from involuntary conversion. We consider Adjusted EBITDA to be an appropriate supplemental performance measure because it permits investors to view income from operations without the effect of depreciation, the cost of debt, or non-operating gains and losses. Adjusted EBITDA is a non-GAAP measure and should not be considered a substitute for operating results determined in accordance with GAAP. Adjusted EBITDA as calculated by us may not be comparable to Adjusted EBITDA reported by other REITs that do not define Adjusted EBITDA exactly as we do.

Core funds from operations (Core FFO) is FFO as adjusted for non-routine items or items not considered core to our business operations. By further adjusting for items that are not considered part of our core business operations, we believe Core FFO provides investors with additional information to compare our core operating and financial performance between periods. Core FFO should not be considered as an alternative to net income as an indication of financial performance, or as an alternative to cash flows from operations as a measure of liquidity, nor is it indicative of funds available to fund our cash needs, including our ability to make distributions to shareholders. Core FFO is a a non-GAAP and non-standardized measure that may be calculated differently by other REITs and that should not be considered a substitute for operating results determined in accordance with GAAP.

Debt to total market capitalization is total debt from the balance sheet divided by the sum of total debt from the balance sheet plus the market value of common shares, operating partnership units, Series C preferred shares, and Series D preferred units outstanding at the end of the period.

Debt service coverage ratio is computed by dividing Adjusted EBITDA by interest expense and principal amortization.

Earnings per shares (EPS) is computed by dividing net income available to our common shareholders by the weighted average number of common shares outstanding during the period.

Funds from operations (FFO) is defined by the National Association of Real Estate Investment Trusts, Inc. (Nareit) as net income (calculated in accordance with GAAP), excluding depreciation and amortization related to real estate, gains and losses from the sale of certain real estate assets, gains and losses from change in control, and impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity. Nareit's FFO White Paper 2018 Restatement clarified that impairment write-downs of land related to a REIT's main business are excluded from FFO and a REIT has the option to exclude impairment write-downs of assets that are incidental to the main business. We use the definition of FFO adopted by Nareit and believe that FFO, which is a standard supplemental measure for equity real estate investment trusts, is helpful to investors in understanding our operating performance, primarily because its calculation excludes depreciation and amortization expense on real estate assets, thereby providing an additional perspective on our operating results.  However, FFO is a non-GAAP measure and should not be considered a substitute for operating results determined in accordance with GAAP. Nevertheless, we believe that GAAP historical cost depreciation of real estate assets generally is not correlated with changes in the value of those assets, whose value does not diminish predictably over time, as historical cost depreciation implies. In addition, the exclusion in Nareit's definition of FFO of impairment write-downs and gains and losses from the sale of real estate assets helps to identify the operating results of the long-term assets that form the base of our investments, and assists management and investors in comparing those operating results between periods.

Net debt to annualized adjusted EBITDA is total debt less cash and cash equivalents and real estate deposits (as reported for the end of the quarter) divided by Adjusted EBITDA (as reported for the end of the quarter), multiplied by 4.  This term is a non-GAAP measure and should not be considered a substitute for operating results determined in accordance with GAAP.

Net operating income (NOI) is a non-GAAP measure which we define as total real estate revenues less real estate expenses.  Real estate expenses consist of property operating expenses and real estate tax expense and do not include property management expense. We believe that NOI is an important supplemental measure of operating performance for a REIT's operating real estate because it provides a measure of core operations that is unaffected by depreciation, amortization, financing, property management overhead, casualty losses, and general and administrative expense. However, NOI is a non-GAAP measure and should not be considered a substitute for operating results determined in accordance with GAAP. 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.

Payout ratio (FFO per share and unit basis) is the ratio of the current quarterly or annual distribution rate per common share and unit divided by quarterly or annual FFO per share and unit.  This term is a non-GAAP measure and should not be considered a substitute for operating results determined in accordance with GAAP.

Payout ratio (Core FFO per share and unit basis) is the ratio of the current quarterly or annual distribution rate per common share and unit divided by quarterly or annual Core FFO per share and unit.  This term is a non-GAAP measure and should not be considered a substitute for operating results determined in accordance with GAAP.

Scheduled rent represents the value of all apartment homes, with occupied apartment homes valued at contractual rates pursuant to leases and vacant apartment homes valued at estimated market rents. When calculating actual rents for occupied apartment homes and market rents for vacant 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.

Same-store properties are properties owned or in service for the entirety of the periods being compared (except for properties classified as held for sale) and which, in the case of development properties, have achieved a stabilized level of occupancy, which is generally 90%. On the first day of each calendar year, we determine the composition of our same-store pool for that year as well as adjust the previous year, which allows us to evaluate full period-over-period operating comparisons for existing apartment communities and their contribution to net income.

GAAP is defined as accounting principles generally accepted in the United States of America.

Weighted average occupancy is the percentage resulting from dividing actual rental revenue by scheduled rent.  We believe that weighted average occupancy is a meaningful measure of occupancy because it considers the value of each vacant unit at its estimated market rate. Weighted average occupancy may not completely reflect short-term trends in physical occupancy and our calculation of weighted average occupancy may not be comparable to that disclosed by other REITs.

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