"We experienced strong revenue growth this quarter as we continued to increase occupancy across our portfolio," said Mark O. Decker, Jr., IRET's President and CEO. "We also drove growth in our rental rates thanks to the efforts of our operations team. While expenses are significantly higher than last year, these increases were within our expectations and were offset by a decrease in capital expenditures and an increase in revenue growth. With the pending sale of our medical office portfolio and the announced sale of our other non-core assets, we are nearing the completion of our transformation to a focused multifamily REIT, which will enable us to devote management resources to our core business of developing and growing our multifamily properties."
(in millions)
Total
Total
% Leased
Property Name
Location
Units
Cost
as of 10/31/17
Park Place
Plymouth, MN
500
$
92.3
95.6%
Subsequent to quarter-end, we acquired Dylan Apartments, a 274-unit multifamily property in Denver, CO, for $90.6million. Located in the fast-growing River North Art District, Dylan marks IRET's entrance into the Denver MSA where, as previously announced, we expect to establish a sizeable presence over time and benefit from the strong growth and diverse drivers in this dynamic market.
Dispositions
During the quarter, we sold a parcel of unimproved land in Bismarck, ND, for $3.2million, an industrial property in Eagan, MN, for $9.0million, 13 multifamily properties in Minot, ND, for $12.3million, a healthcare property in Eagan, MN, for $2.1million, and two healthcare properties in Hermantown, MN, for $36.9million.
Subsequent to quarter-end, we sold an industrial property in Urbandale, IA, for $16.7million, an industrial property in Roseville, MN, for $18.7million, and two multifamily properties in Rochester, MN, for $6.7million. In addition, we announced on November 30, 2017, that we signed an agreement to sell 28 healthcare properties and one office property for $417.5million.
Balance Sheet
At the end of the second quarter, we had $95.0 million of total liquidity on our balance sheet, including $52.5 million available on our corporate revolver.
During the quarter, we issued 4,118,460 shares of 6.625% Series C Cumulative Redeemable Preferred Shares for gross proceeds of $103.0million and redeemed all 4,600,000 shares of our 7.95% Series B Cumulative Redeemable Preferred Shares for an aggregate cost of $115.8 million. In addition, we repurchased and retired approximately 398,000 common shares and redeemed approximately 40,000 Units for an aggregate cost of approximately $2.6 million, representing an average price of approximately $5.86 per share. Finally, we increased the commitments under our unsecured line of credit by $50 million and, subsequent to quarter-end, obtained a $70 million unsecured term loan that matures in 2023 and executed a swap agreement to synthetically fix the interest rate for the full duration of the loan.
Quarterly Distributions
On December 5, 2017, IRET's Board of Trustees declared a regular quarterly distribution of $0.07 per share/unit payable on January 16, 2018, to common shareholders and unitholders of record on January 2, 2018. This distribution will be the 187th consecutive quarterly distribution paid by IRET since its inception in 1970. It represents an annualized rate of $0.28 per share/unit with an annualized yield of 4.8% based on IRET's closing share price as of December 8, 2017.
The Board of Trustees also declared a distribution of $0.41866 per share on the 6.625% Series C Cumulative Redeemable Preferred Shares (NYSE: PRC) payable on January 2, 2018, to holders of record on December 15, 2017. Series C preferred share distributions are cumulative and payable quarterly in arrears at an annual rate of $1.65625 per share.
Earnings Call
Live webcast and replay:
Live Conference Call
Conference Call Replay
Tuesday, December 12, 2017, at 10:00 AM ET
Replay available until December 26, 2017
USA Toll Free Number 1-877-509-9785
USA Toll Free Number 1-877-344-7529
International Toll Free Number 1-412-902-4132
International Toll Free Number 1-412-317-0088
Canada Toll Free Number 1-855-669-9657
Canada Toll Free Number 1-855-669-9658
Conference Number 10114610
Supplemental Information
Supplemental Operating and Financial Data for the Quarter Ended October 31, 2017 ("Supplemental Information") is available in the Investors section on IRET's website at or by calling Investor Relations at 701-837-7104. Non-GAAP financial measures and other capitalized terms, as used in this earnings release, are defined and reconciled in the Supplemental Information, which accompanies this earnings release.
About IRET
IRET is a real estate company focused on the ownership, management, acquisition, redevelopment, and development of multifamily apartment communities. As of October31,2017, IRET owned interests in 89multifamily properties consisting of 13,576apartment homes and 40commercial properties, including 28healthcare and 12other commercial properties, with a total of 2.5million square feet of leasable space. IRET's common shares and Series C preferred shares are publicly traded on the New York Stock Exchange (NYSE symbols: IRET and IRETPRC, respectively).
Forward Looking Statements
Certain statements in this press release are based on our current expectations and assumptions, and are "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements do not discuss historical fact, but instead include statements related to expectations, projections, intentions or other items related to the future. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates," and variations of those words and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance or achievements to be materially different from projected results. Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, we can give no assurance our expectations will be achieved. Any statements contained herein that are not statements of historical fact should be deemed forward-looking statements. As a result, reliance should not be placed on these forward-looking statements as these statements are subject to known and unknown risks, uncertainties, and other factors beyond our control and could differ materially from our actual results and performance. Such risks and uncertainties those risks and uncertainties detailed from time to time in our filings with the SEC, including the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" contained in our Annual Report on Form 10-K for the fiscal year ended April 30, 2017, in subsequent quarterly reports on Form 10-Q and in other public reports. We assume no obligation to update or supplement forward-looking statements that become untrue due to subsequent events.
IRET
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO
IRET TO FFO AND CORE FFO
(inthousands,exceptpershareamounts)
ThreeMonths Ended October 31,
2017
2016
Per
Per
Weighted
Share
Weighted
Share
AvgShares
And
AvgShares
And
Amount
andUnits(1)
Unit(2)
Amount
andUnits(1)
Unit(2)
Net income attributable to controlling interests
$
12,821
$
$ 11,600
$
Less dividends to preferred shareholders
(2,812)
(2,878)
Less redemption of preferred shares
(3,649)
—
Net loss available to common shareholders
6,360
120,144
0.05
8,722
121,154
0.07
Adjustments:
Noncontrolling interest – Operating Partnership
773
14,623
1,174
16,264
Depreciation and amortization
19,894
12,971
Gains on depreciable property sales attributable to controlling interests
(17,562)
(6,400)
FFO applicable to Common Shares and Units(1)
$
9,465
134,767
$ 0.07
$ 16,467
137,418
$
0.12
Adjustments to Core FFO:
Loss on extinguishment of debt
340
72
Redemption of Preferred Shares
3,649
—
Severance and transition costs
186
—
Core FFO applicable to common shares and Units(1)
$
13,640
134,767
$ 0.10
$ 16,539
137,418
$
0.12
__________________________
(1) Units of the Operating Partnership are exchangeable for cash, or, at our discretion, for Common Shares on a one-for-one basis.
(2) Net income attributable to IRET is calculated on a per Common Share basis. FFO is calculated on a per Common Share and Unit basis.
IRET
RECONCILIATION OF NET INCOME ATTRIBUTABLE TO
IRET TO FFO AND CORE FFO
(inthousands,exceptpershareamounts)
SixMonthsEndedOctober 31,
2017
2016
Per
Per
Weighted
Share
Weighted
Share
AvgShares
And
AvgShares
And
Amount
andUnits(1)
Unit(2)
Amount
andUnits(1)
Unit(2)
Net income (loss) attributable to controlling interests
$
1,557
$
$ (10,043)
$
Less dividends to preferred shareholders
(5,098)
(5,757)
Less redemption of preferred shares
(3,649)
—
Net income available to common shareholders
(7,190)
120,283
(0.06)
(15,800)
121,135
(0.13)
Adjustments:
Noncontrolling interest – Operating Partnership
(871)
14,794
(2,122)
16,276
Depreciation and amortization
48,013
26,408
Impairment of real estate investments attributable to controlling interests
256
39,190
Gains on depreciable property sales attributable to controlling interests
(17,686)
(15,358)
FFO applicable to Common Shares and Units(1)
$
22,522
135,077
$ 0.17
$ 32,318
137,411
$
0.24
Adjustments to Core FFO:
Loss on extinguishment of debt
539
72
Redemption of Preferred Shares
3,649
—
Severance and transition costs
650
—
Core FFO applicable to common shares and Units(1)
$
27,360
135,077
$ 0.20
$ 32,390
137,411
$
0.24
(1) Units of the Operating Partnership are exchangeable for cash, or, at our discretion, for Common Shares on a one-for-one basis.
(2) Net income attributable to IRET is calculated on a per Common Share basis. FFO is calculated on a per Common Share and Unit basis.
IRET
RECONCILIATION OF NET OPERATING INCOME TO THE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(inthousands)
ThreeMonthsEndedOctober 31,2017
Multifamily
Healthcare
AllOther
AmountsNot
AllocatedTo
Segments
Total
Real estate revenue
$
39,734
11,449
2,738
$
—
$
53,921
Real estate expenses
18,888
4,373
698
1,338
25,297
Net operating income (loss)
$
20,846
$
7,076
$
2,040
$
(1,338)
28,624
Depreciation and amortization
(20,694)
General and administrative expenses
(3,118)
Interest expense
(9,666)
Loss on debt extinguishment
(334)
Interest and other income
256
Loss before gain on sale of real estate and other investments
(4,932)
Gain on sale of real estate and other investments
5,324
Income from continuing operations
392
Income from discontinued operations
12,747
Net income
$
13,139
(inthousands)
ThreeMonthsEnded October 31,2016
Multifamily
Healthcare
AllOther
AmountsNot
AllocatedTo
Segments
Total
Real estate revenue
$
36,187
$
11,661
$
2,761
$
—
$
50,609
Real estate expenses
15,566
4,151
730
1,126
21,573
Net operating income (loss)
$
20,621
$
7,510
$
2,031
$
(1,126)
29,036
Depreciation and amortization
(13,531)
General and administrative expenses
(3,522)
Interest expense
(10,626)
Interest and other income
93
Income before loss on sale of real estate and other investments
1,450
Loss on sale of real estate and other investments
(103)
Income from continuing operations
1,347
Income from discontinued operations
10,943
Net income
$
12,290
IRET
RECONCILIATION OF NET OPERATING INCOME TO THE
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(inthousands)
SixMonthsEndedOctober 31,2017
Multifamily
Healthcare
AllOther
AmountsNot
AllocatedTo
Segments
Total
Real estate revenue
$
78,164
$
22,827
$
5,665
—
$ 106,656
Real estate expenses
36,353
8,658
1,491
3,045
49,547
Net operating income (loss)
$
41,811
$
14,169
$
4,174
$
(3,045)
57,109
Depreciation and amortization
(49,621)
Impairment of real estate investments
(256)
General and administrative expenses
(7,120)
Interest expense
(18,961)
Loss on debt extinguishment
(533)
Interest and other income
487
Loss before gain on sale of real estate and other investments and income from discontinued operations
(18,895)
Gain on sale of real estate and other investments
5,448
Loss from continuing operations
(13,447)
Income from discontinued operations
13,307
Net loss
$
(140)
(inthousands)
SixMonthsEndedOctober 31,2016
Multifamily
Healthcare
AllOther
AmountsNot
AllocatedTo
Segments
Total
Real estate revenue
$
71,229
$
23,202
$
5,789
$
—
$
100,220
Real estate expenses
30,445
8,343
1,456
2,963
43,207
Net operating income (loss)
$
40,784
$
14,859
$
4,333
$
(2,963)
57,013
Depreciation and amortization
(27,798)
Impairment of real estate investments
(54,153)
General and administrative expenses
(7,023)
Interest expense
(20,990)
Interest and other income
281
Loss before gain on sale of real estate and other investments
(52,670)
Gain on sale of real estate and other investments
8,855
Loss from continuing operations
(43,815)
Income from discontinued operations
15,511
Net loss
$
(28,304)
Contact Information
Matthew Volpano
Senior Vice President – Capital Markets
Phone: 701-837-7104
E-mail:
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SOURCE IRET
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