Press Release
 

IRET Reports First Quarter 2020 Financial and Operating Results

Company Release - 5/11/2020 4:35 PM ET

MINOT, N.D., May 11, 2020 /PRNewswire/ -- IRET (NYSE: IRET) announced today its financial and operating results for the quarter ended March 31, 2020.  The tables below show Net Income (Loss), Funds from Operations ("FFO"), and Core FFO, all on a per share basis, for the three months ended March 31, 2020; Same-Store Revenues, Expenses, and Net Operating Income ("NOI") over comparable periods; and Same-Store Weighted-Average Occupancy for the three months ended March 31, 2020, December 31, 2019, and March 31, 2019. We have also included certain operating results for the month ended April 30, 2020.



Three Months Ended March 31,

Per Share


2020


2019

Net Income (Loss) - diluted


$

(0.67)



$

(0.54)


FFO - diluted


$

0.66



$

0.77


Core FFO - diluted


$

0.90



$

0.77


 



Year-Over-Year

Comparison


Sequential

Comparison

Same-Store Results


1Q20 vs. 1Q19


1Q20 vs. 4Q19

Revenues


3.9

%


1.6

%

Expenses


4.0

%


5.7

%

NOI


3.8

%


(1.4)

%

 



Three months ended

Same-Store Results


March 31, 2020


December 31, 2019


March 31, 2019

Weighted Average Occupancy


95.4

%


94.0

%


95.6

%











NOI, FFO, and Core FFO are non-GAAP financial measures.  For more information on their usage and presentation, and a reconciliation to the most directly comparable GAAP measures, refer to "Non-GAAP Financial Measures and Reconciliations" below.

First Quarter 2020 Highlights

  • Our Net Loss was $0.67 per diluted share for the first quarter of 2020, compared to a Net Loss of $0.54 per share for the same quarter in 2019;
  • Core FFO increased by 16.9%, to $0.90 per diluted share for the first quarter of 2020, compared to $0.77 per diluted share for the first quarter of 2019;
  • Same-store revenues increased by 3.9% for the first quarter of 2020 compared to the first quarter of 2019;
  • Same-store NOI increased by 3.8% for the first quarter of 2020 compared to the first quarter of 2019;
  • Same-store weighted average occupancy increased to 95.4% at March 31, 2020 from 94.0% at December 31, 2019;
  • We completed the acquisition of Ironwood Apartments, a 182-home apartment community located in New Hope, Minnesota, an inner-ring suburb of Minneapolis, Minnesota; and
  • We undertook efforts to minimize the impact of COVID-19 on our team, residents, and apartment communities, as described in greater detail under "COVID-19 Developments" below.

Acquisitions and Dispositions

During the first quarter, we acquired Ironwood Apartments, for an aggregate purchase price of $46.3 million, of which $28.6 million was paid in cash and $17.7 million from payoff of a note receivable. We did not have any dispositions during the first quarter of 2020.

Balance Sheet

At the end of the first quarter, we had $193.3 million of total liquidity on our balance sheet, including $167.0 million available under our line of credit.

2020 Financial Outlook

On March 27, 2020, we issued a press release, which was also filed on a Current Report on Form 8-K, indicating that, in light of the impact of the coronavirus (COVID-19) on our business and results of operations, we were withdrawing our 2020 Financial Outlook.  We will not be providing a 2020 Financial Outlook at this time.

Operations Update

Our operating results for the month ended April 30, 2020, included the following:

  • Total rental revenue for same-store communities for the month ended April 30, 2020 was unchanged from the same period of the prior year.
  • Physical occupancy for same-store communities as of April 30, 2020 was 95.5%, compared to 95.1% as of April 30, 2019 and 94.0% as of December 31, 2019.
  • Delinquencies as a percentage of total revenue at all communities for the month ended April 30, 2020 was 1.6%, compared to 0% for the month ended April 30, 2019 and 0.2% for the three months ended March 31, 2020.
  • We entered into 134 rent deferral agreements representing $156,000 in April 2020 rent charges at all communities. Under these agreements, residents experiencing financial hardship due to the effects of the COVID-19 pandemic have committed to payment plans for repayment of deferred amounts on or before October 31, 2020. As of April 30, 2020, approximately $93,000 remained outstanding under the repayment plans.

COVID-19 Developments

The effects of the COVID-19 pandemic, including the associated economic disruptions, has had a profound impact on our business since March 2020 as the pandemic spread to many of the communities in which we own properties. Our first priority continues to be the health and well-being of our residents, team members, and the communities we serve. We are working to care for our team members and modify our practices so that we can continue to service our communities while requiring social distancing and remote work arrangements where possible.

In order to minimize the impact of COVID-19 on our team, residents, and communities, we undertook the following measures in March 2020:

  • We enacted social distancing practices for our team and within our communities in order to do our part to stop the spread of COVID-19, including encouraging residents to use electronic or phone communication when contacting our staff;
  • We closed all common amenity spaces, including on-site fitness centers, community rooms, swimming pools, resident coffee services, and conference facilities, until further notice in an effort to support social distancing and comply with governmental regulations;
  • We enhanced cleaning and disinfecting protocols at our communities;
  • We announced that maintenance requests requiring unit entry would be completed for essential or emergency services only;
  • We closed our offices to the public, and our leasing is being done on-line and through virtual tours;
  • We extended April 2020 rent deadlines;
  • We waived all fees associated with credit card payments;
  • We suspended eviction filings in accordance with government regulations;
  • We started offering rental deferment payment plans to residents experiencing COVID-19-related financial hardship; and
  • We began offering flexible lease renewal terms.

COVID-19 will continue to have a significant impact on our business for the foreseeable future. Ongoing social distancing requirements and stay-at-home directives affect the daily lives of our employees and residents and impact our ability to show apartments homes to potential residents, while the ongoing loss of jobs and rising unemployment levels affect the ability of certain our of residents to pay rent on a timely basis.  Many experts predict that the outbreak will trigger, or has already triggered, a global recession.

The COVID-19 pandemic could have material and adverse effects on our financial condition, results of operations, and cash flows, including the following effects:

  • reduced economic activity and rising unemployment could severely impact our residents' ability to pay rent on a timely basis; and residents may seek lease deferment payment plans or rent reductions, resulting in increases in uncollectible receivables and reductions in rental income, which could reduce NOI and cash flow;
  • the negative financial impact of the pandemic could impact our future compliance with financial covenants in our credit facility and other debt agreements;
  • weaker economic conditions could cause us to recognize impairment in value of our tangible or intangible assets; and
  • we may need to record loss contingencies and increased expenses related to our COVID-19 response.

The extent to which the COVID-19 pandemic impacts our operations and those of our residents will depend on future developments, which are highly uncertain and cannot be predicted with confidence, including the scope, severity, and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among others.

For a more detailed description of the risks and uncertainties affecting our business, see the risk factors presented in  our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, as updated under Item 1A of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020 (which was filed with the SEC on May 11, 2020), and in our subsequent current and periodic reports filed with the Securities and Exchange Commission at www.sec.gov.

Upcoming Events

On May 19, 2020, at 9:00 a.m. CDT, we will be holding our 2020 Annual Meeting of Shareholders, which will be our 50th Annual Meeting.  Due to the effects of COVID-19, this will be a virtual-only meeting.  To participate in and/or vote at the virtual Annual Meeting, shareholders should pre-register by 11:59 p.m. EDT on May 16, 2020 at http://viewproxy.com/iret/2020. Shareholders must enter the control number found in their proxy materials, either on the Notice of Internet Availability of Proxy Materials, the proxy card, or the voting instruction form. IRET urges shareholders to vote and submit proxies in advance of the Annual Meeting by one of the methods described in the proxy materials for the Annual Meeting. To participate in the Annual Meeting, shareholders will need the event passcode provided to them after they have successfully registered. The Annual Meeting will begin promptly at 9:00 a.m. CDT. We encourage shareholders to access the Annual Meeting prior to the start time. Online access will begin at 8:45 a.m. CDT.

Quarterly Distributions

Effective March 5, 2020, IRET's Board of Trustees declared a regular quarterly distribution of $0.70 per share/unit, which was paid on April 9, 2020, to common shareholders and unitholders of record on March 31, 2020.  IRET has paid cash dividends to common shareholders and unitholders every quarter since its initial dividend payment in 1971.

Effective March 5, 2020, 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-PC), which was paid on March 31, 2020, to holders of record on March 16, 2020.  Series C preferred share distributions are cumulative and payable quarterly in arrears at an annual rate of $1.65625 per share.

To maintain our qualification as a REIT, we must pay dividends to our shareholders aggregating annually at least 90% of our REIT taxable income, excluding net capital gains. Under a separate requirement, we must distribute 100% of net capital gains or pay a corporate level tax in lieu thereof. While we have historically satisfied this distribution requirement by making cash distributions to our shareholders, if our cash flow becomes restricted due to the economic disruption caused by COVID-19 or other factors, we may choose to satisfy this requirement by making distributions of other property, including our own common shares as allowed by the REIT rules.

Earnings Call

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




Live Conference Call


Conference Call Replay

Tuesday, May 12, 2020, at 11:00 AM ET


Replay available until May 26, 2020

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

10142637

Supplemental Information

Supplemental Operating and Financial Data for the quarter ended March 31, 2020 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.

About IRET

IRET is a real estate company focused on the ownership, management, acquisition, redevelopment, and development of apartment communities.  As of March 31, 2020, we owned interests in 70 apartment communities consisting of 12,135 apartment homes.  IRET's common shares and Series C preferred shares are publicly traded on the New York Stock Exchange (NYSE symbols: "IRET" and "IRET PC," 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.  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 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 Annual Report on Form 10-K for the year ended December 31, 2019, in our subsequent quarterly reports on Form 10-Q, including the COVID-19 risk factors set forth in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, and in other public reports. We assume no obligation to update or supplement forward-looking statements that become untrue due to subsequent events.

Investor Relations Contact Information

Emily Miller
Investor Relations
Phone: 701-837-7104
E-mail: IR@iret.com

Common Share Data (NYSE: IRET)




1st Quarter


4th Quarter


3rd Quarter


2nd Quarter


1st Quarter



2020


2019


2019


2019


2019

High closing price


$

84.68



$

78.91



$

74.67



$

61.28



$

61.50


Low closing price


$

52.55



$

71.74



$

59.22



$

57.19



$

49.92


Average closing price


$

71.62



$

74.67



$

66.83



$

59.54



$

58.11


Closing price at end of quarter


$

55.00



$

72.50



$

74.67



$

58.67



$

59.91


Common share distributions – annualized


$

2.80



$

2.80



$

2.80



$

2.80



$

2.80


Closing dividend yield – annualized


5.1

%


3.9

%


3.8

%


4.8

%


4.7

%

Closing common shares outstanding (thousands)


12,164



12,099



11,625



11,656



11,768


Closing limited partnership units outstanding (thousands)


1,044



1,058



1,223



1,224



1,365


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


$

726,440



$

953,883



$

959,360



$

755,670



$

786,798


 

IRET

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in thousands)




Three Months Ended



3/31/2020


12/31/2019


9/30/2019


6/30/2019


3/31/2019

REVENUE


$

44,406



$

45,777



$

47,436



$

46,934



$

45,608


EXPENSES











Property operating expenses, excluding real estate taxes


13,468



14,018



14,485



13,942



14,804


Real estate taxes


5,465



4,835



5,425



5,574



5,232


Property management expense


1,554



1,634



1,553



1,445



1,554


Casualty loss


327



205



178



92



641


Depreciation/amortization


18,160



18,972



18,751



18,437



18,111


General and administrative expenses


3,428



3,647



3,448



3,549



3,806


TOTAL EXPENSES


$

42,402



$

43,311



$

43,840



$

43,039



$

44,148


Operating income (loss)


2,004



2,466



3,596



3,895



1,460


Interest expense


(6,911)



(7,357)



(7,694)



(7,590)



(7,896)


Loss on extinguishment of debt




(864)



(1,087)



(407)



(2)


Interest and other income (loss)


(2,777)



702



498



468



424


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


(7,684)



(5,053)



(4,687)



(3,634)



(6,014)


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




57,850



39,105



615



54


Gain (loss) on litigation settlement






300



6,286



Net income (loss)


$

(7,684)



$

52,797



$

34,718



$

3,267



$

(5,960)


Dividends to preferred unitholders


(160)



(160)



(160)



(160)



(57)


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


692



(4,202)



(3,145)



(148)



743


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


145



223



183



154



576


Net income (loss) attributable to controlling interests


(7,007)



48,658



31,596



3,113



(4,698)


Dividends to preferred shareholders


(1,705)



(1,705)



(1,705)



(1,706)



(1,705)


Discount on redemption of preferred shares


273










NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS


$

(8,439)



$

46,953



$

29,891



$

1,407



$

(6,403)













Per Share Data - Basic











Net earnings (loss) per common share – basic


$

(0.69)



$

3.95



$

2.57



$

0.11



$

(0.54)













Per Share Data - Diluted











Net earnings (loss) per common share – diluted


$

(0.67)



$

3.89



$

2.54



$

0.11



$

(0.54)


 

IRET

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

(in thousands)













3/31/2020


12/31/2019


9/30/2019


6/30/2019


3/31/2019

ASSETS











Real estate investments











Property owned


$

1,687,436



$

1,643,078



$

1,720,352



$

1,663,539



$

1,673,158


Less accumulated depreciation


(366,307)



(349,122)



(370,492)



(380,321)



(371,672)




1,321,129



1,293,956



1,349,860



1,283,218



1,301,486


Unimproved land


1,376



1,376



1,376



1,746



2,252


Mortgage loans receivable


16,775



16,140



10,140



10,140



10,260


Total real estate investments


1,339,280



1,311,472



1,361,376



1,295,104



1,313,998


Cash and cash equivalents


26,338



26,579



8,500



17,406



23,329


Restricted cash


2,344



19,538



3,339



4,672



4,819


Other assets


21,124



34,829



30,589



30,626



29,166


TOTAL ASSETS


$

1,389,086



$

1,392,418



$

1,403,804



$

1,347,808



$

1,371,312













LIABILITIES, MEZZANINE EQUITY, AND EQUITY











LIABILITIES











Accounts payable and accrued expenses


$

52,337



$

47,155



$

40,546



$

44,766



$

40,697


Revolving line of credit


83,000



50,079



103,143



177,939



118,677


Notes payable, net of loan costs


269,106



269,058



269,006



144,082



144,036


Mortgages payable, net of loan costs


328,367



329,664



360,886



370,461



430,950


TOTAL LIABILITIES


$

732,810



$

695,956



$

773,581



$

737,248



$

734,360













SERIES D PREFERRED UNITS


$

16,560



$

16,560



$

16,560



16,560



16,560


EQUITY











Series C Preferred Shares of Beneficial Interest


96,046



99,456



99,456



99,456



99,456


Common Shares of Beneficial Interest


912,653



917,400



886,598



888,541



895,381


Accumulated distributions in excess of net income


(407,150)



(390,196)



(428,680)



(450,433)



(443,661)


Accumulated other comprehensive income (loss)


(17,360)



(7,607)



(9,793)



(7,598)



(3,139)


Total shareholders' equity


$

584,189



$

619,053



$

547,581



$

529,966



$

548,037


Noncontrolling interests – Operating Partnership


54,777



55,284



60,169



57,902



66,060


Noncontrolling interests – consolidated real estate entities


750



5,565



5,913



6,132



6,295


Total equity


$

639,716



$

679,902



$

613,663



$

594,000



$

620,392


TOTAL LIABILITIES, MEZZANINE EQUITY, AND EQUITY


$

1,389,086



$

1,392,418



$

1,403,804



$

1,347,808



$

1,371,312


IRET
NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS (unaudited)

This release contains certain non-GAAP financial measures. The non-GAAP measures should not be considered a substitute for operating results determined in accordance with accounting principles generally accepted in the United States of America ("GAAP"). The definitions and calculations of these non-GAAP measures, as calculated by us, may not be comparable to non-GAAP measures reported by other REITs that do not define each of the non-GAAP measures exactly as we do.

We provide certain information on a same-store and non-same-store basis. Same-store apartment communities are owned or in service for the entirety of the periods being compared, and, in the case of development properties, have achieved a target level of physical occupancy of 90%. On the first day of each calendar year, we determine the composition of our same-store pool for that year as well as adjust the previous year, which allows us to evaluate full period-over-period operating comparisons for existing apartment communities and their contribution to net income. We believe that measuring performance on a same-store basis is useful to investors because it enables evaluation of how a fixed pool of our communities are performing year-over-year. We use this measure to assess whether or not we have been successful in increasing NOI, renewing the leases on existing residents, controlling operating costs, and making prudent capital improvements.

Reconciliation of Operating Income (Loss) to Net Operating Income

Net operating income, or NOI, is a non-GAAP measure which we define as total real estate revenues less property operating expenses, including real estate taxes. We believe that NOI is an important supplemental measure of operating performance for real estate because it provides a measure of operations that is unaffected by depreciation, amortization, financing, property management overhead, casualty losses, and general and administrative expenses. NOI does not represent cash generated by operating activities in accordance with GAAP and should not be considered an alternative to net income, net income available for common shareholders, or cash flow from operating activities as a measure of financial performance.


(in thousands, except percentages)


Three Months Ended March 31,


2020


2019


$ Change


% Change









Operating income (loss)

$

2,004



$

1,460



$

544



37.3

%

Adjustments:








Property management expenses

1,554



1,554






Casualty loss

327



641



(314)



(49.0)

%

Depreciation and amortization

18,160



18,111



49



0.3

%

General and administrative expenses

3,428



3,806



(378)



(9.9)

%

Net operating income

$

25,473



$

25,572



$

(99)



(0.4)

%









Revenue








Same-store

$

39,820



$

38,328



$

1,492



3.9

%

Non-same-store

3,511



411



3,100



754.3

%

Other properties and dispositions

1,075



6,869



(5,794)



(84.3)

%

Total

44,406



45,608



(1,202)



(2.6)

%









Property operating expenses, including real estate taxes








Same-store

17,258



16,601



657



4.0

%

Non-same-store

1,320



169



1,151



681.1

%

Other properties and dispositions

355



3,266



(2,911)



(89.1)

%

Total

18,933



20,036



(1,103)



(5.5)

%









Net operating income








Same-store

22,562



21,727



835



3.8

%

Non-same-store

2,191



242



1,949



805.4

%

Other properties and dispositions

720



3,603



(2,883)



(80.0)

%

Total

$

25,473



$

25,572



$

(99)



(0.4)

%

Same-Store Property Operating Expense Comparison


(in thousands, except percentages)


Three Months Ended March 31,


2019


2018


$ Change


% Change









Controllable expenses








On-site compensation(1)

$

4,619



$

4,108



$

511



12.4

%

Repairs and maintenance

2,461



3,070



(609)



(19.8)

%

Utilities

3,032



3,302



(270)



(8.2)

%

Administrative and marketing

895



1,022



(127)



(12.4)

%

Total

$

11,007



$

11,502



$

(495)



(4.3)

%









Non-controllable expenses








Real estate taxes

$

4,909



$

4,285



$

624



14.6

%

Insurance

1,342



814



528



64.9

%

Total

$

6,251



$

5,099



$

1,152



22.6

%









Total

$

17,258



$

16,601



$

657



4.0

%

_________________________________________

(1)

On-site compensation for administration, leasing, and maintenance personnel.

Reconciliation of Net Income (Loss) Available to Common Shareholders to Funds From Operations and Core Funds From Operations

We believe that FFO, which is a standard supplemental measure for equity real estate investment trusts, is helpful to investors in understanding our operating performance, primarily because its calculation does not assume that the value of real estate assets diminishes predictably over time, as implied by the historical cost convention of GAAP and the recording of depreciation.

We use the definition of FFO adopted by the National Association of Real Estate Investment Trusts, Inc. ("Nareit"). Nareit defines FFO as net income or loss calculated in accordance with GAAP, excluding:

  • depreciation and amortization related to real estate;
  • gains and losses from the sale of certain real estate assets; and
  • impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity.

The exclusion in Nareit's definition of FFO of impairment write-downs and gains and losses from the sale of real estate assets helps to identify the operating results of the long-term assets that form the base of our investments, and assists management and investors in comparing those operating results between periods.

Due to the limitations of the Nareit FFO definition, we have made certain interpretations in applying this definition. We believe that all such interpretations not specifically identified in the Nareit definition are consistent with this definition. Nareit's FFO White Paper 2018 Restatement clarified that impairment write-downs of land related to a REIT's main business are excluded from FFO and a REIT has the option to exclude impairment write-downs of assets that are incidental to its main business.

While FFO is widely used by us as a primary performance metric, not all real estate companies use the same definition of FFO or calculate FFO in the same way. Accordingly, FFO presented here is not necessarily comparable to FFO presented by other real estate companies. FFO should not be considered as an alternative to net income or any other GAAP measurement of performance, but rather should be considered as an additional, supplemental measure. FFO also does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of sufficient cash flow to fund all of our needs or our ability to service indebtedness or make distributions.

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 that 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 non-GAAP and non-standardized measure that may be calculated differently by other REITs and should not be considered a substitute for operating results determined in accordance with GAAP.



(in thousands, except per share amounts)



Three Months Ended



3/31/2020


12/31/2019


9/30/2019


6/30/2019


3/31/2019

Funds From Operations











Net income (loss) available to common shareholders


$

(8,439)



$

46,953



$

29,891



$

1,407



$

(6,403)


Adjustments:











Noncontrolling interests – Operating Partnership


(692)



4,202



3,145



148



(743)


Depreciation and amortization


18,160



18,972



18,751



18,437



18,111


Less depreciation – non real estate


(93)



(88)



(71)



(79)



(85)


Less depreciation – partially owned entities


(282)



(454)



(452)



(474)



(678)


Impairment of real estate











(Gain) loss on sale of real estate




(57,850)



(39,105)



(615)



(54)


FFO applicable to common shares and Units


$

8,654



$

11,735



$

12,159



$

18,824



$

10,148













Adjustments to Core FFO:











Loss on extinguishment of debt




864



1,087



407



2


Gain on litigation settlement






(300)



(6,286)




(Gain) loss on marketable securities


3,553



(113)








Discount on redemption of preferred shares


(273)










Core FFO applicable to common shares and Units


$

11,934



$

12,486



$

12,946



$

12,945



$

10,150













Funds from operations applicable to common shares and Units


$

8,654



$

11,735



$

12,159



$

18,824



$

10,148


Dividends to preferred unitholders


160



160



160



160



57


Funds from operations applicable to common shares and Units - diluted


$

8,814



$

11,895



$

12,319



$

18,984



$

10,205













Core funds from operations applicable to common shares and Units


$

11,934



$

12,486



$

12,946



$

12,945



$

10,150


Dividends to preferred unitholders


160



160



160



160



57


Core funds from operations applicable to common shares and Units - diluted


$

12,094



$

12,646



$

13,106



$

13,105



$

10,207













Per Share Data











Earnings (loss) per share and Unit - diluted


$

(0.67)



$

3.89



$

2.54



$

0.12



$

(0.54)


FFO per share and Unit - diluted


$

0.66



$

0.90



$

0.93



$

1.45



$

0.77


Core FFO per share and Unit - diluted


$

0.90



$

0.96



$

0.99



$

1.00



$

0.77













Weighted average shares and Units - diluted


13,401



13,188



13,087



13,197



13,230


Reconciliation of Net Income (Loss) Available to Common Shareholders to Adjusted EBITDA

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, gain on litigation settlement, 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.



(in thousands)



Three Months Ended



3/31/2020


12/31/2019


9/30/2019


6/30/2019


3/31/2019

Adjusted EBITDA











Net income (loss) available to common shareholders


$

(7,007)



$

48,658



$

31,596



$

3,113



$

(4,698)


Adjustments:











Dividends to preferred unitholders


160



160



160



160



57


Noncontrolling interests – Operating Partnership


(692)



4,202



3,145



148



(743)


Income (loss) before noncontrolling interests – Operating Partnership


$

(7,539)



$

53,020



$

34,901



$

3,421



$

(5,384)


Adjustments:











Interest expense


6,764



7,112



7,448



7,343



7,558


Loss on extinguishment of debt




864



1,087



407



2


Depreciation/amortization related to real estate investments


17,878



18,518



18,299



17,963



17,433


Interest income


(597)



(415)



(402)



(402)



(407)


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




(57,850)



(39,105)



(615)



(54)


Gain on litigation settlement






(300)



(6,286)




(Gain) loss on marketable securities


3,553



(113)








Adjusted EBITDA


$

20,059



$

21,136



$

21,928



$

21,831



$

19,148


 

IRET

DEBT ANALYSIS

(in thousands)


Debt Maturity Schedule

Annual Expirations




Future Maturities of Debt



Secured Fixed
Debt


Unsecured
Fixed
Debt(1)


Unsecured
Variable Debt


Total
Debt


% of
Total Debt


Weighted
Average
Interest Rate(2)

2020 (remainder)


$

9,470



$



$



$

9,470



1.4

%


4.85

%

2021


35,827







35,827



5.2

%


5.36

%

2022


34,217



50,000



33,000



117,217



17.2

%


3.63

%

2023


47,929







47,929



7.0

%


4.02

%

2024




70,000





70,000



10.2

%


3.63

%

Thereafter


202,545



200,000





402,545



59.0

%


3.89

%

Total debt


$

329,988



$

320,000



$

33,000



$

682,988



100.0

%


3.92

%

________________________________________

(1)

Term loans have variable interest rates that are fixed with interest rate swaps and $50.0 million of our variable interest, line of credit is fixed with an interest rate swap.

(2)

Weighted average interest rate of debt that matures during the year, including the effect of interest rate swaps on the term loans and line of credit. 

 



3/31/2020


12/31/2019


9/30/2019


6/30/2019


3/31/2019

Debt Balances Outstanding











Secured fixed rate


$

329,988



$

331,376



$

362,731



$

371,951



$

432,588


Unsecured fixed rate line of credit(1)


50,000



50,000



50,000



50,000




Secured line of credit(2)








15,000



15,000


Unsecured variable rate line of credit


33,000



79



53,143



112,939



103,677


Unsecured term loans


145,000



145,000



145,000



145,000



145,000


Unsecured senior notes


125,000



125,000



125,000






Debt total


$

682,988



$

651,455



$

735,874



$

694,890



$

696,265













Mortgage debt weighted average interest rate


4.01

%


4.02

%


4.15

%


4.37

%


4.54

%

Lines of credit rate (rate with swap)


3.18

%


3.52

%


3.73

%


3.91

%


3.89

%

Term loan rate (rate with swap)


4.13

%


4.19

%


4.14

%


4.14

%


3.99

%

Senior notes rate


3.78

%


3.78

%


3.78

%





_______________________________________

(1)

A portion of our primary line of credit is fixed through an interest rate swap.

(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



3/31/2020


12/31/2019


9/30/2019


6/30/2019


3/31/2019

Equity Capitalization











Common shares outstanding


12,164



12,099



11,625



11,656



11,768


Operating partnership units outstanding


1,044



1,058



1,223



1,224



1,365


Total common shares and units outstanding


13,208



13,157



12,848



12,880



13,133


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


$

55.00



$

72.50



$

74.67



$

58.67



$

59.91


Equity capitalization-common shares and units


$

726,440



$

953,883



$

959,360



$

755,670



$

786,798


Recorded book value of preferred shares


$

96,046



$

99,456



$

99,456



$

99,456



$

99,456


Total equity capitalization


$

822,486



$

1,053,339



$

1,058,816



$

855,126



$

886,254













Series D Preferred Units


$

16,560



$

16,560



16,560



16,560



16,560













Debt Capitalization











Total debt


$

682,988



$

651,455



$

735,874



$

694,889



$

696,265


Total capitalization


$

1,522,034



$

1,721,354



$

1,811,250



$

1,566,575



$

1,599,079













Total debt to total capitalization(1)


44.9

%


37.8

%


40.6

%


44.4

%


43.5

%



____________________________________

(1)

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.






Three Months Ended



3/31/2020


12/31/2019


9/30/2019


6/30/2019


3/31/2019

Debt service coverage ratio(1)


2.42

x


2.39

x


2.26

x


2.24

x


1.86

x

Adjusted EBITDA/Interest expense plus preferred distributions and principal amortization


1.97

x


1.98

x


1.90

x


1.88

x


1.58

x

Net debt/Adjusted EBITDA(3)


8.18

x


7.19

x


8.29

x


7.76

x


8.79

x

Net debt and preferred equity/Adjusted EBITDA(3)


9.59

x


8.56

x


9.62

x


9.09

x


10.30

x












Distribution Data











Common shares and Units outstanding at record date


13,208



13,157



12,848



12,914



13,135


Total common distribution declared


$

9,245



$

9,210



$

8,994



$

9,039



$

9,195


Common distribution per share and Unit


$

0.70



$

0.70



$

0.70



$

0.70



$

0.70


Payout ratio (Core FFO per share and Unit basis)(2)


77.8

%


72.9

%


70.7

%


70.0

%


90.9

%

_______________________________________

(1)

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

(2)

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.

(3)

Net debt is the total debt balance less cash and cash equivalents and net tax deferred exchange proceeds (included within restricted cash). For the quarterly period presented, adjusted EBITDA is annualized. Net debt and adjusted EBITDA are non-GAAP measures and should not be considered a substitute for operating results determined in accordance with GAAP. Refer to the Adjusted EBITDA definition included within the Non-GAAP Financial Measures and Reconciliations section.

 

IRET

COVID-19 UPDATE

(in thousands, except property data amounts and percentages)


Impact by State


State

Number of
Communities

Number of
Units

% of Total
Charges

Shelter in
Place Order

Halt of
Evictions

Late Fees
Prohibited

Credit Card
Payment Fee
Waiver

Bad Debt as %
of Total
Revenue

Minnesota

32


5,438


49.9

%

x

1.7

%

Colorado

3


992


12.9

%

3.2

%

Nebraska

6


1,370


8.7

%

x

x

1.1

%

North Dakota

19


3,112


20.3

%

x

x

0.7

%

South Dakota

5


474


3.2

%

x

x

x

1.4

%

Montana

5


749


4.9

%

3.1

%

Total

70


12,135


100.0

%





1.6

%














 

Operating Statistics




April 2020

Q1 2020

April 2019

Bad debt as a % of total revenue


1.6

%

0.2

%


Percent of outstanding rent deferrals to total revenue


0.7

%

N/A

N/A






Same-Store Communities





New lease rates


(2.0)

%

(4.3)

%

4.7

%

Renewal rates


4.1

%

2.9

%

7.1

%






Weighted average occupancy


95.3

%

95.4

%

94.8

%

Physical occupancy, at end of period


95.5

%

96.1

%

95.2

%

 

Liquidity and Near-Term Funding Obligations


Liquidity Profile

April 30, 2020

Unsecured credit facility - committed

$

250,000


Balance outstanding

83,000


Amount available on line of credit

$

167,000


Cash and cash equivalents

21,404


Total liquidity

$

188,404




Near-Term Funding Obligations


Unfunded construction loan and mezzanine loan commitments - 2020 and 2021

$

36,046


2020 Debt maturities

9,470


2021 Debt maturities

35,827


Total

$

81,343


Ratio of liquidity to near-term funding obligations

2.3


 

IRET

SAME-STORE FIRST QUARTER COMPARISONS

(in thousands, except property data amounts and percentages)




Apartment
Homes
Included


Revenues


Expenses


NOI

Regions



CY20Q1


CY19Q1


% Change


CY20Q1


CY19Q1


% Change


CY20Q1


CY19Q1


% Change

Minneapolis, MN


1,987



$

9,112



$

8,781



3.8

%


$

3,911



$

3,639



7.5

%


$

5,201



$

5,142



1.1

%

Rochester, MN


1,711



6,539



6,225



5.0

%


2,824



2,454



15.1

%


3,715



3,771



(1.5)

%

Denver, CO


664



3,927



3,699



6.2

%


1,258



1,222



2.9

%


2,669



2,477



7.8

%

Grand Forks, ND


1,555



4,337



4,141



4.7

%


2,225



2,166



2.7

%


2,112



1,975



6.9

%

Omaha, NE


1,370



3,814



3,754



1.6

%


1,626



1,774



(8.3)

%


2,188



1,980



10.5

%

St. Cloud, MN


1,190



3,611



3,474



3.9

%


1,756



1,808



(2.9)

%


1,855



1,666



11.3

%

Bismarck, ND


845



2,735



2,664



2.7

%


1,169



1,132



3.3

%


1,566



1,532



2.2

%

Billings, MT


749



2,179



2,105



3.5

%


826



823



0.4

%


1,353



1,282



5.5

%

Minot, ND


712



2,125



2,118



0.3

%


1,011



1,007



0.4

%


1,114



1,111



0.3

%

Rapid City, SD


474



1,441



1,367



5.4

%


652



576



13.2

%


789



791



(0.3)

%

Same-Store Total


11,257



$

39,820



$

38,328



3.9

%


$

17,258



$

16,601



4.0

%


$

22,562



$

21,727



3.8

%

 



% of NOI
Contribution


Weighted Average Occupancy (1)


Weighted Average Monthly
Rental Rate (2)


Weighted Average Monthly
Revenue per Occupied Home (3)

Regions



CY20Q1


CY19Q1


Growth


CY20Q1


CY19Q1


% Change


CY20Q1


CY19Q1


% Change

Minneapolis, MN


23.1

%


94.2

%


94.9

%


(0.7)

%


$

1,485



$

1,444



2.8

%


$

1,624



$

1,553



4.5

%

Rochester, MN


16.5

%


97.1

%


96.5

%


0.6

%


1,239



1,207



2.7

%


1,312



1,257



4.4

%

Denver, CO


11.8

%


95.1

%


94.4

%


0.7

%


1,845



1,806



2.2

%


2,072



1,968



5.5

%

Grand Forks, ND


9.4

%


95.4

%


93.8

%


1.6

%


900



903



(0.3)

%


975



946



3.1

%

Omaha, NE


9.7

%


94.3

%


95.3

%


(1.0)

%


893



875



2.1

%


984



959



2.6

%

St. Cloud, MN


8.2

%


94.9

%


95.7

%


(0.8)

%


945



939



0.6

%


1,066



1,016



4.7

%

Bismarck, ND


6.9

%


96.4

%


97.1

%


(0.7)

%


1,044



1,030



1.4

%


1,119



1,082



3.4

%

Billings, MT


6.0

%


95.8

%


96.4

%


(0.6)

%


935



905



3.3

%


1,012



972



4.1

%

Minot, ND


4.9

%


95.1

%


95.8

%


(0.7)

%


990



993



(0.3)

%


1,046



1,035



1.0

%

Rapid City, SD


3.5

%


96.9

%


96.9

%




951



931



2.1

%


1,045



991



5.4

%

Same-Store Total


100.0

%


95.3

%


95.4

%


(0.1)

%


$

1,135



$

1,115



1.8

%


$

1,237



$

1,189



4.0

%

________________________________________

(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. Scheduled rental revenue 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.

(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 and percentages)




Apartment
Homes
Included


Revenues


Expenses


NOI

Regions



CY20Q1


CY19Q4


% Change


CY20Q1


CY19Q4


% Change


CY20Q1


CY19Q4


% Change

Minneapolis, MN


1,987



$

9,112



$

8,866



2.8

%


$

3,911



$

3,908



0.1

%


$

5,201



$

4,958



4.9

%

Rochester, MN


1,711



6,539



6,385



2.4

%


2,824



2,571



9.8

%


3,715



3,814



(2.6)

%

Denver, CO


664



3,927



3,820



2.8

%


1,258



1,134



10.9

%


2,669



2,686



(0.6)

%

Grand Forks, ND


1,555



4,337



4,329



0.2

%


2,225



1,980



12.4

%


2,112



2,349



(10.1)

%

Omaha, NE


1,370



3,814



3,751



1.7

%


1,626



1,721



(5.5)

%


2,188



2,030



7.8

%

St. Cloud, MN


1,190



3,611



3,550



1.7

%


1,756



1,719



2.2

%


1,855



1,831



1.3

%

Bismarck, ND


845



2,735



2,755



(0.7)

%


1,169



982



19.0

%


1,566



1,773



(11.7)

%

Billings, MT


749



2,179



2,182



(0.1)

%


826



816



1.2

%


1,353



1,366



(1.0)

%

Minot, ND


712



2,125



2,123



0.1

%


1,011



921



9.8

%


1,114



1,202



(7.3)

%

Rapid City, SD


474



1,441



1,440



0.1

%


652



577



13.0

%


789



863



(8.6)

%

Same-Store Total


11,257



$

39,820



$

39,201



1.6

%


$

17,258



$

16,329



5.7

%


$

22,562



$

22,872



(1.4)

%

 



% of NOI
Contribution


Weighted Average Occupancy


Weighted Average Monthly
Rental Rate


Weighted Average Monthly
Revenue per Occupied Home

Regions



CY20Q1


CY19Q4


Growth


CY20Q1


CY19Q4


% Change


CY20Q1


CY19Q4


% Change

Minneapolis, MN


23.1

%


94.2

%


92.0

%


2.2

%


$

1,485



$

1,497



(0.8)

%


$

1,624



$

1,616



0.6

%

Rochester, MN


16.5

%


97.1

%


94.5

%


2.6

%


1,239



1,251



(1.0)

%


1,312



1,316



(0.2)

%

Denver, CO


11.8

%


95.1

%


93.2

%


1.9

%


1,845



1,846



(0.1)

%


2,072



2,057



0.9

%

Grand Forks, ND


9.4

%


95.4

%


94.8

%


0.6

%


900



903



(0.3)

%


975



978



(0.4)

%

Omaha, NE


9.7

%


94.3

%


93.5

%


0.8

%


893



897



(0.4)

%


984



977



0.9

%

St. Cloud, MN


8.2

%


94.9

%


94.0

%


0.9

%


945



950



(0.5)

%


1,066



1,058



0.8

%

Bismarck, ND


6.9

%


96.4

%


96.4

%




1,044



1,045



(0.1)

%


1,119



1,127



(0.7)

%

Billings, MT


6.0

%


95.8

%


95.4

%


0.4

%


935



935





1,012



1,017



(0.5)

%

Minot, ND


4.9

%


95.1

%


94.3

%


0.8

%


990



997



(0.7)

%


1,046



1,054



(0.7)

%

Rapid City, SD


3.5

%


96.9

%


96.2

%


0.7

%


951



961



(1.0)

%


1,045



1,052



(0.6)

%

Same-Store Total


100.0

%


95.4

%


93.9

%


1.5

%


$

1,135



$

1,142



(0.6)

%


$

1,237



$

1,236



0.1

%

 

IRET

PORTFOLIO SUMMARY(1)




Three Months Ended



3/31/2020


12/31/2019


9/30/2019


6/30/2019


3/31/2019

Number of Apartment Homes











Same-Store


11,257



10,402



11,785



12,848



12,848


Non-Same-Store


878



1,551



1,551



1,127



1,127


All Communities


12,135



11,953



13,336



13,975



13,975













Average Scheduled Rent(2) per Apartment Home











Same-Store


$

1,135



$

1,085



$

1,062



$

1,028



$

1,013


Non-Same-Store


1,572



1,722



1,742



1,692



1,772


All Communities


$

1,163



$

1,168



$

1,123



$

1,081



$

1,064













Average Revenue per Occupied Apartment Home(3)











Same-Store


$

1,237



$

1,169



$

1,141



$

1,101



$

1,075


Non-Same-Store


1,658



1,869



1,887



1,848



1,943


All Communities


$

1,263



$

1,260



$

1,210



$

1,161



$

1,134













Weighted Average Occupancy(4)











Same-Store


95.4

%


94.0

%


93.3

%


94.3

%


95.6

%

Non-Same-Store


93.3

%


93.0

%


94.2

%


94.8

%


94.9

%

All Communities


95.2

%


93.8

%


93.4

%


94.4

%


95.5

%












Operating Expenses as a % of Scheduled Rent











Same-Store


45.0

%


43.5

%


43.0

%


42.8

%


45.6

%

Non-Same-Store


37.0

%


33.8

%


38.1

%


37.4

%


37.6

%

All Communities


44.3

%


41.6

%


42.3

%


42.2

%


44.7

%












Capital Expenditures











Total Capital Expenditures per Apartment Home – Same-Store


$

151



$

427



$

178



$

192



$

80


________________________________________

(1)

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

(2)

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. Average scheduled rent is scheduled rent divided by the total number of apartment homes.

(3)

Total revenues divided by the weighted average occupied apartment homes for the period.

(4)

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.

 

IRET

CAPITAL EXPENDITURES

($ in thousands, except per home amounts)




Three Months Ended



3/31/2020


3/31/2019

Total Same-Store Apartment Homes


11,257



11,257







Turnover


$

687



$

514


Furniture & Equipment


128



54


Building – Interior


149



78


Building – Exterior


714



208


Landscaping & Grounds


16



6


Capital Expenditures


$

1,694



$

860


Capital Expenditures per Apartment Home


$

150



$

76







Value Add


$

1,562



$

288


Total Capital Spend


$

3,256



$

1,148


Total Capital Spend per Home


$

289



$

102







All Properties - Weighted Average Homes


12,014



13,884







Capital Expenditures


$

1,810



$

1,155


CapEx per Home


$

151



$

83







Value Add


2,031



372


Acquisition Capital


1,478



188


Total Capital Spend


5,319



1,715


Total Capital Spend per Home


$

443



$

124


 

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SOURCE IRET