|
☑
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
☐
|
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
|
North Dakota
|
|
|
45-0311232
|
|
|
(State or other jurisdiction of incorporation or organization)
|
|
|
(I.R.S. Employer Identification No.)
|
|
|
|
|
|
|
|
1400 31st Avenue SW
|
Suite 60
|
Post Office Box 1988
|
Minot
|
ND
|
58702-1988
|
(Address of principal executive offices)
|
|
|
(Zip code)
|
Yes
|
☑
|
|
No
|
☐
|
Yes
|
☑
|
|
No
|
☐
|
Large Accelerated Filer
|
☑
|
Accelerated filer
|
☐
|
Non-accelerated filer
|
☐
|
Smaller Reporting Company
|
☐
|
Emerging growth company
|
☐
|
|
|
Yes
|
☐
|
|
No
|
☑
|
Title of each class
|
Trading Symbol(s)
|
Name of each exchange on which registered
|
Common Shares of Beneficial Interest, no par value
|
IRET
|
New York Stock Exchange
|
Series C Cumulative Redeemable Preferred Shares
|
IRET-PC
|
New York Stock Exchange
|
|
|
Page
|
|
|
|
|
|
|
|
(in thousands, except per share data)
|
||||||
|
June 30, 2020
|
|
December 31, 2019
|
||||
ASSETS
|
|
|
|
||||
Real estate investments
|
|
|
|
||||
Property owned
|
$
|
1,694,033
|
|
|
$
|
1,643,078
|
|
Less accumulated depreciation
|
(383,917
|
)
|
|
(349,122
|
)
|
||
|
1,310,116
|
|
|
1,293,956
|
|
||
Unimproved land
|
—
|
|
|
1,376
|
|
||
Mortgage loans receivable
|
10,961
|
|
|
16,140
|
|
||
Total real estate investments
|
1,321,077
|
|
|
1,311,472
|
|
||
Cash and cash equivalents
|
52,714
|
|
|
26,579
|
|
||
Restricted cash
|
2,535
|
|
|
19,538
|
|
||
Other assets
|
16,484
|
|
|
34,829
|
|
||
TOTAL ASSETS
|
$
|
1,392,810
|
|
|
$
|
1,392,418
|
|
LIABILITIES, MEZZANINE EQUITY, AND EQUITY
|
|
|
|
||||
LIABILITIES
|
|
|
|
||||
Accounts payable and accrued expenses
|
$
|
54,883
|
|
|
$
|
47,155
|
|
Revolving lines of credit
|
63,000
|
|
|
50,079
|
|
||
Notes payable, net of unamortized loan costs of $845 and $942 respectively
|
269,155
|
|
|
269,058
|
|
||
Mortgages payable, net of unamortized loan costs of $1,525 and $1,712, respectively
|
323,705
|
|
|
329,664
|
|
||
TOTAL LIABILITIES
|
$
|
710,743
|
|
|
$
|
695,956
|
|
COMMITMENTS AND CONTINGENCIES (NOTE 10)
|
|
|
|
||||
SERIES D PREFERRED UNITS (Cumulative convertible preferred units, $100 par value, 166 units issued and outstanding at June 30, 2020 and December 31, 2019, aggregate liquidation preference of $16,560)
|
$
|
16,560
|
|
|
$
|
16,560
|
|
EQUITY
|
|
|
|
||||
Series C Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value, $25 per share liquidation preference, 3,883 shares issued and outstanding at June 30, 2020, aggregate liquidation preference of $97,085 and 4,118 shares issued and outstanding at December 31, 2019, aggregate liquidation preference of $102,971)
|
93,579
|
|
|
99,456
|
|
||
Common Shares of Beneficial Interest (Unlimited authorization, no par value, 12,827 shares issued and outstanding at June 30, 2020 and 12,098 shares issued and outstanding at December 31, 2019)
|
958,292
|
|
|
917,400
|
|
||
Accumulated distributions in excess of net income
|
(421,515
|
)
|
|
(390,196
|
)
|
||
Accumulated other comprehensive income (loss)
|
(18,139
|
)
|
|
(7,607
|
)
|
||
Total shareholders’ equity
|
$
|
612,217
|
|
|
$
|
619,053
|
|
Noncontrolling interests – Operating Partnership (1,022 units at June 30, 2020 and 1,058 units at December 31, 2019)
|
52,558
|
|
|
55,284
|
|
||
Noncontrolling interests – consolidated real estate entities
|
732
|
|
|
5,565
|
|
||
Total equity
|
$
|
665,507
|
|
|
$
|
679,902
|
|
TOTAL LIABILITIES, MEZZANINE EQUITY, AND EQUITY
|
$
|
1,392,810
|
|
|
$
|
1,392,418
|
|
|
(in thousands, except per share data)
|
||||||||||||||
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
REVENUE
|
$
|
43,910
|
|
|
$
|
46,934
|
|
|
$
|
88,316
|
|
|
$
|
92,542
|
|
EXPENSES
|
|
|
|
|
|
|
|
||||||||
Property operating expenses, excluding real estate taxes
|
12,360
|
|
|
13,942
|
|
|
25,828
|
|
|
28,746
|
|
||||
Real estate taxes
|
5,410
|
|
|
5,574
|
|
|
10,875
|
|
|
10,806
|
|
||||
Property management expense
|
1,345
|
|
|
1,445
|
|
|
2,899
|
|
|
2,999
|
|
||||
Casualty loss
|
913
|
|
|
92
|
|
|
1,240
|
|
|
733
|
|
||||
Depreciation and amortization
|
18,156
|
|
|
18,437
|
|
|
36,316
|
|
|
36,548
|
|
||||
General and administrative expenses
|
3,202
|
|
|
3,549
|
|
|
6,630
|
|
|
7,355
|
|
||||
TOTAL EXPENSES
|
$
|
41,386
|
|
|
$
|
43,039
|
|
|
$
|
83,788
|
|
|
$
|
87,187
|
|
Operating income (loss)
|
2,524
|
|
|
3,895
|
|
|
4,528
|
|
|
5,355
|
|
||||
Interest expense
|
(6,940
|
)
|
|
(7,590
|
)
|
|
(13,851
|
)
|
|
(15,486
|
)
|
||||
Loss on extinguishment of debt
|
(17
|
)
|
|
(407
|
)
|
|
(17
|
)
|
|
(409
|
)
|
||||
Interest and other income (loss)
|
538
|
|
|
468
|
|
|
(2,239
|
)
|
|
892
|
|
||||
Income (loss) before gain (loss) on sale of real estate and other investments, and gain (loss) on litigation settlement
|
(3,895
|
)
|
|
(3,634
|
)
|
|
(11,579
|
)
|
|
(9,648
|
)
|
||||
Gain (loss) on sale of real estate and other investments
|
(190
|
)
|
|
615
|
|
|
(190
|
)
|
|
669
|
|
||||
Gain (loss) on litigation settlement
|
—
|
|
|
6,286
|
|
|
—
|
|
|
6,286
|
|
||||
NET INCOME (LOSS)
|
$
|
(4,085
|
)
|
|
$
|
3,267
|
|
|
$
|
(11,769
|
)
|
|
$
|
(2,693
|
)
|
Dividends to preferred unitholders
|
(160
|
)
|
|
(160
|
)
|
|
(320
|
)
|
|
(217
|
)
|
||||
Net (income) loss attributable to noncontrolling interests – Operating Partnership
|
447
|
|
|
(148
|
)
|
|
1,139
|
|
|
595
|
|
||||
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities
|
(5
|
)
|
|
154
|
|
|
140
|
|
|
730
|
|
||||
Net income (loss) attributable to controlling interests
|
(3,803
|
)
|
|
3,113
|
|
|
(10,810
|
)
|
|
(1,585
|
)
|
||||
Dividends to preferred shareholders
|
(1,609
|
)
|
|
(1,706
|
)
|
|
(3,314
|
)
|
|
(3,411
|
)
|
||||
Discount on redemption of preferred shares
|
25
|
|
|
—
|
|
|
298
|
|
|
—
|
|
||||
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS
|
$
|
(5,387
|
)
|
|
$
|
1,407
|
|
|
$
|
(13,826
|
)
|
|
$
|
(4,996
|
)
|
|
|
|
|
|
|
|
|
||||||||
BASIC
|
|
|
|
|
|
|
|
||||||||
NET EARNINGS (LOSS) PER COMMON SHARE – BASIC
|
$
|
(0.44
|
)
|
|
$
|
0.11
|
|
|
$
|
(1.13
|
)
|
|
$
|
(0.43
|
)
|
|
|
|
|
|
|
|
|
||||||||
DILUTED
|
|
|
|
|
|
|
|
||||||||
NET EARNINGS (LOSS) PER COMMON SHARE – DILUTED
|
$
|
(0.44
|
)
|
|
$
|
0.11
|
|
|
$
|
(1.13
|
)
|
|
$
|
(0.43
|
)
|
|
(in thousands)
|
||||||||||||||
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||||||
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||||||
Net income (loss)
|
$
|
(4,085
|
)
|
|
$
|
3,267
|
|
|
$
|
(11,769
|
)
|
|
$
|
(2,693
|
)
|
Other comprehensive income:
|
|
|
|
|
|
|
|
||||||||
Unrealized gain (loss) from derivative instrument
|
(1,696
|
)
|
|
(4,430
|
)
|
|
(11,105
|
)
|
|
(6,712
|
)
|
||||
(Gain) loss on derivative instrument reclassified into earnings
|
917
|
|
|
(29
|
)
|
|
573
|
|
|
(30
|
)
|
||||
Total comprehensive income (loss)
|
$
|
(4,864
|
)
|
|
$
|
(1,192
|
)
|
|
$
|
(22,301
|
)
|
|
$
|
(9,435
|
)
|
Net comprehensive (income) loss attributable to noncontrolling interests – Operating Partnership
|
504
|
|
|
275
|
|
|
1,967
|
|
|
1,255
|
|
||||
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities
|
(5
|
)
|
|
154
|
|
|
140
|
|
|
730
|
|
||||
Comprehensive income (loss) attributable to controlling interests
|
$
|
(4,365
|
)
|
|
$
|
(763
|
)
|
|
$
|
(20,194
|
)
|
|
$
|
(7,450
|
)
|
|
(in thousands, except per share data)
|
||||||||||||||||||||||||
Six Months Ended June 30, 2019
|
PREFERRED
SHARES |
NUMBER
OF
COMMON
SHARES
|
|
COMMON
SHARES
|
|
ACCUMULATED
DISTRIBUTIONS
IN EXCESS OF
NET INCOME
|
|
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
|
|
NONREDEEMABLE
NONCONTROLLING
INTERESTS
|
|
TOTAL
EQUITY
|
|||||||||||||
Balance December 31, 2018
|
$
|
99,456
|
|
11,942
|
|
|
$
|
899,234
|
|
|
$
|
(429,048
|
)
|
|
$
|
(856
|
)
|
|
$
|
74,663
|
|
|
$
|
643,449
|
|
Net income (loss) attributable to controlling interests and nonredeemable noncontrolling interests
|
|
|
|
|
|
(1,585
|
)
|
|
|
|
(1,151
|
)
|
|
(2,736
|
)
|
||||||||||
Change in fair value of derivatives
|
|
|
|
|
|
|
|
(6,742
|
)
|
|
|
|
|
(6,742
|
)
|
||||||||||
Distributions - common shares and units ($0.70 per share and unit)
|
|
|
|
|
|
(16,389
|
)
|
|
|
|
(1,816
|
)
|
|
(18,205
|
)
|
||||||||||
Distributions – Series C preferred shares ($0.4140625 per Series C share)
|
|
|
|
|
|
(3,411
|
)
|
|
|
|
|
|
(3,411
|
)
|
|||||||||||
Share-based compensation, net of forfeitures
|
|
|
3
|
|
|
981
|
|
|
|
|
|
|
|
|
981
|
|
|||||||||
Redemption of units for common shares
|
|
|
8
|
|
|
(521
|
)
|
|
|
|
|
|
521
|
|
|
—
|
|
||||||||
Redemption of units for cash
|
|
|
|
|
|
|
|
|
|
|
|
|
(8,124
|
)
|
|
(8,124
|
)
|
||||||||
Shares repurchased
|
|
(290
|
)
|
|
(15,677
|
)
|
|
|
|
|
|
|
|
(15,677
|
)
|
||||||||||
Acquisition of redeemable noncontrolling interests
|
|
|
|
4,529
|
|
|
|
|
|
|
|
|
4,529
|
|
|||||||||||
Other
|
|
(7
|
)
|
|
(5
|
)
|
|
|
|
|
|
(59
|
)
|
|
(64
|
)
|
|||||||||
Balance June 30, 2019
|
$
|
99,456
|
|
11,656
|
|
|
$
|
888,541
|
|
|
$
|
(450,433
|
)
|
|
$
|
(7,598
|
)
|
|
$
|
64,034
|
|
|
$
|
594,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Six Months Ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance December 31, 2019
|
$
|
99,456
|
|
12,098
|
|
|
$
|
917,400
|
|
|
$
|
(390,196
|
)
|
|
$
|
(7,607
|
)
|
|
$
|
60,849
|
|
|
$
|
679,902
|
|
Net income (loss) attributable to controlling interests and noncontrolling interests
|
|
|
|
|
|
(10,810
|
)
|
|
|
|
(1,279
|
)
|
|
(12,089
|
)
|
||||||||||
Change in fair value of derivatives
|
|
|
|
|
|
|
|
(10,532
|
)
|
|
|
|
(10,532
|
)
|
|||||||||||
Distributions - common shares and units ($0.70 per share and unit)
|
|
|
|
|
|
(17,493
|
)
|
|
|
|
(1,446
|
)
|
|
(18,939
|
)
|
||||||||||
Distributions – Series C preferred shares ($0.4140625 per Series C share)
|
|
|
|
|
|
(3,314
|
)
|
|
|
|
|
|
(3,314
|
)
|
|||||||||||
Share-based compensation, net of forfeitures
|
|
|
19
|
|
|
967
|
|
|
|
|
|
|
|
|
967
|
|
|||||||||
Sale of common shares, net
|
|
674
|
|
|
48,141
|
|
|
|
|
|
|
|
|
48,141
|
|
||||||||||
Redemption of units for common shares
|
|
36
|
|
|
118
|
|
|
|
|
|
|
(118
|
)
|
|
—
|
|
|||||||||
Redemption of units for cash
|
|
|
|
|
|
|
|
|
|
|
|
|
(23
|
)
|
|
(23
|
)
|
||||||||
Shares repurchased
|
(5,877
|
)
|
—
|
|
|
—
|
|
|
298
|
|
|
|
|
|
|
|
(5,579
|
)
|
|||||||
Acquisition of noncontrolling interests
|
|
|
|
(7,584
|
)
|
|
|
|
|
|
(4,637
|
)
|
|
(12,221
|
)
|
||||||||||
Other
|
|
|
—
|
|
|
(750
|
)
|
|
|
|
|
|
(56
|
)
|
|
(806
|
)
|
||||||||
Balance June 30, 2020
|
$
|
93,579
|
|
12,827
|
|
|
$
|
958,292
|
|
|
$
|
(421,515
|
)
|
|
$
|
(18,139
|
)
|
|
$
|
53,290
|
|
|
$
|
665,507
|
|
|
(in thousands, except per share data)
|
||||||||||||||||||||||||
Three Months Ended June 30, 2019
|
PREFERRED
SHARES |
NUMBER
OF
COMMON
SHARES
|
|
COMMON
SHARES
|
|
ACCUMULATED
DISTRIBUTIONS
IN EXCESS OF
NET INCOME
|
|
ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)
|
|
NONREDEEMABLE
NONCONTROLLING
INTERESTS
|
|
TOTAL
EQUITY
|
|||||||||||||
Balance March 31, 2019
|
$
|
99,456
|
|
11,768
|
|
|
$
|
895,381
|
|
|
$
|
(443,661
|
)
|
|
$
|
(3,139
|
)
|
|
$
|
72,355
|
|
|
$
|
620,392
|
|
Net income (loss) attributable to controlling interests and nonredeemable noncontrolling interests
|
|
|
|
|
|
3,113
|
|
|
|
|
(6
|
)
|
|
3,107
|
|
||||||||||
Change in fair value of derivatives
|
|
|
|
|
|
|
|
(4,459
|
)
|
|
|
|
(4,459
|
)
|
|||||||||||
Distributions - common shares and units ($0.70 per share and unit)
|
|
|
|
|
|
(8,179
|
)
|
|
|
|
(859
|
)
|
|
(9,038
|
)
|
||||||||||
Distributions – Series C preferred shares ($0.4140625 per Series C share)
|
|
|
|
|
|
|
|
(1,706
|
)
|
|
|
|
|
|
(1,706
|
)
|
|||||||||
Share-based compensation, net of forfeitures
|
|
|
3
|
|
|
565
|
|
|
|
|
|
|
|
|
565
|
|
|||||||||
Redemption of units for common shares
|
|
|
8
|
|
|
(521
|
)
|
|
|
|
|
|
521
|
|
|
—
|
|
||||||||
Redemption of units for cash
|
|
|
|
|
|
|
|
|
|
|
(7,968
|
)
|
|
(7,968
|
)
|
||||||||||
Shares repurchased
|
|
(116
|
)
|
|
(6,863
|
)
|
|
|
|
|
|
|
|
(6,863
|
)
|
||||||||||
Other
|
|
(7
|
)
|
|
(21
|
)
|
|
|
|
|
|
(9
|
)
|
|
(30
|
)
|
|||||||||
Balance June 30, 2019
|
$
|
99,456
|
|
11,656
|
|
|
$
|
888,541
|
|
|
$
|
(450,433
|
)
|
|
$
|
(7,598
|
)
|
|
$
|
64,034
|
|
|
$
|
594,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Three Months Ended June 30, 2020
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Balance March 31, 2020
|
$
|
96,046
|
|
12,163
|
|
|
$
|
912,653
|
|
|
$
|
(407,150
|
)
|
|
$
|
(17,360
|
)
|
|
$
|
55,527
|
|
|
$
|
639,716
|
|
Net income (loss) attributable to controlling interests and noncontrolling interests
|
|
|
|
|
|
(3,803
|
)
|
|
|
|
(442
|
)
|
|
(4,245
|
)
|
||||||||||
Change in fair value of derivatives
|
|
|
|
|
|
|
|
(779
|
)
|
|
|
|
(779
|
)
|
|||||||||||
Distributions - common shares and units ($0.70 per share and unit)
|
|
|
|
|
|
(8,978
|
)
|
|
|
|
(715
|
)
|
|
(9,693
|
)
|
||||||||||
Distributions – Series C preferred shares ($0.4140625 per Series C share)
|
|
|
|
|
|
(1,609
|
)
|
|
|
|
|
|
(1,609
|
)
|
|||||||||||
Share-based compensation, net of forfeitures
|
|
|
18
|
|
|
502
|
|
|
|
|
|
|
|
|
502
|
|
|||||||||
Sale of common shares, net
|
|
624
|
|
|
44,789
|
|
|
|
|
|
|
|
|
44,789
|
|
||||||||||
Redemption of units for common shares
|
|
22
|
|
|
1,048
|
|
|
|
|
|
|
(1,048
|
)
|
|
—
|
|
|||||||||
Redemption of units for cash
|
|
|
|
|
|
|
|
|
|
|
|
(9
|
)
|
|
(9
|
)
|
|||||||||
Shares repurchased
|
(2,467
|
)
|
|
|
|
|
25
|
|
|
|
|
|
|
|
(2,442
|
)
|
|||||||||
Other
|
|
|
—
|
|
|
(700
|
)
|
|
|
|
|
|
(23
|
)
|
|
(723
|
)
|
||||||||
Balance June 30, 2020
|
$
|
93,579
|
|
12,827
|
|
|
$
|
958,292
|
|
|
$
|
(421,515
|
)
|
|
$
|
(18,139
|
)
|
|
$
|
53,290
|
|
|
$
|
665,507
|
|
|
(in thousands)
|
||||||
|
Six Months Ended
June 30, |
||||||
|
2020
|
|
2019
|
||||
CASH FLOWS FROM OPERATING ACTIVITIES
|
|
|
|
|
|
||
Net income (loss)
|
$
|
(11,769
|
)
|
|
$
|
(2,693
|
)
|
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
|
|
|
|
|
|
||
Depreciation and amortization, including amortization of capitalized loan costs
|
36,829
|
|
|
37,136
|
|
||
(Gain) loss on sale of real estate and other investments
|
190
|
|
|
(669
|
)
|
||
Realized (gain) loss on marketable securities
|
3,378
|
|
|
—
|
|
||
(Gain) loss on litigation settlement
|
—
|
|
|
(2,286
|
)
|
||
Share-based compensation expense
|
967
|
|
|
981
|
|
||
Other, net
|
909
|
|
|
1,350
|
|
||
Changes in other assets and liabilities:
|
|
|
|
|
|
||
Other assets
|
(2,036
|
)
|
|
(1,745
|
)
|
||
Accounts payable and accrued expenses
|
(3,192
|
)
|
|
(3,468
|
)
|
||
Net cash provided by (used by) operating activities
|
$
|
25,276
|
|
|
$
|
28,606
|
|
CASH FLOWS FROM INVESTING ACTIVITIES
|
|
|
|
|
|
||
Proceeds from sale of marketable securities
|
3,856
|
|
|
—
|
|
||
Principal proceeds on mortgage loans receivable
|
10,020
|
|
|
—
|
|
||
Increase in mortgages and notes receivable
|
(11,162
|
)
|
|
(159
|
)
|
||
Proceeds from sale of real estate and other investments
|
1,162
|
|
|
9,882
|
|
||
Payments for acquisitions of real estate assets
|
(22,770
|
)
|
|
(29,918
|
)
|
||
Payments for improvements of real estate assets
|
(12,428
|
)
|
|
(6,317
|
)
|
||
Other investing activities
|
633
|
|
|
282
|
|
||
Net cash provided by (used by) investing activities
|
$
|
(30,689
|
)
|
|
$
|
(26,230
|
)
|
CASH FLOWS FROM FINANCING ACTIVITIES
|
|
|
|
|
|
||
Principal payments on mortgages payable
|
(6,392
|
)
|
|
(74,614
|
)
|
||
Proceeds from revolving lines of credit
|
41,578
|
|
|
146,439
|
|
||
Principal payments on revolving lines of credit
|
(28,656
|
)
|
|
(26,000
|
)
|
||
Payments for acquisition of noncontrolling interests – consolidated real estate entities
|
(12,221
|
)
|
|
(1,260
|
)
|
||
Proceeds from issuance of common shares
|
48,141
|
|
|
—
|
|
||
Repurchase of common shares
|
—
|
|
|
(15,677
|
)
|
||
Repurchase of Series C preferred shares
|
(5,579
|
)
|
|
—
|
|
||
Repurchase of partnership units
|
(23
|
)
|
|
(8,124
|
)
|
||
Distributions paid to common shareholders
|
(16,984
|
)
|
|
(16,583
|
)
|
||
Distributions paid to preferred shareholders
|
(3,314
|
)
|
|
(1,705
|
)
|
||
Distributions paid to preferred unitholders
|
(320
|
)
|
|
(57
|
)
|
||
Distributions paid to noncontrolling interests – Unitholders of the Operating Partnership
|
(1,472
|
)
|
|
(1,914
|
)
|
||
Other financing activities
|
(213
|
)
|
|
(59
|
)
|
||
Net cash provided by (used by) financing activities
|
$
|
14,545
|
|
|
$
|
446
|
|
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH
|
9,132
|
|
|
2,822
|
|
||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD
|
46,117
|
|
|
19,256
|
|
||
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD
|
$
|
55,249
|
|
|
$
|
22,078
|
|
SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
|
|
|
|
|
|
||
Accrued capital expenditures
|
$
|
(458
|
)
|
|
$
|
499
|
|
Distributions declared but not paid to common shareholders
|
9,694
|
|
|
9,038
|
|
||
Distributions declared but not paid to preferred shareholders
|
—
|
|
|
1,706
|
|
||
Distributions declared but not paid to preferred unitholders
|
—
|
|
|
160
|
|
||
Gain on litigation settlement
|
—
|
|
|
2,286
|
|
||
Real estate assets acquired through exchange of note receivable
|
17,663
|
|
|
—
|
|
||
Note receivable exchanged through real estate acquisition
|
(17,663
|
)
|
|
—
|
|
||
Property acquired through issuance of Series D preferred units
|
—
|
|
|
16,560
|
|
||
|
|
|
|
||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
|
|
|
|
|
|
||
Cash paid for interest
|
$
|
13,120
|
|
|
$
|
15,044
|
|
|
(in thousands)
|
||||||||||
Balance sheet description
|
June 30, 2020
|
|
|
December 31, 2019
|
|
|
June 30, 2019
|
|
|||
Cash and cash equivalents
|
$
|
52,714
|
|
|
$
|
26,579
|
|
|
$
|
17,406
|
|
Restricted cash
|
2,535
|
|
|
19,538
|
|
|
4,672
|
|
|||
Total cash, cash equivalents and restricted cash
|
$
|
55,249
|
|
|
$
|
46,117
|
|
|
$
|
22,078
|
|
|
|
(in thousands)
|
||
2020 (remainder)
|
|
$
|
1,490
|
|
2021
|
|
3,044
|
|
|
2022
|
|
3,047
|
|
|
2023
|
|
2,870
|
|
|
2024
|
|
2,339
|
|
|
Thereafter
|
|
5,021
|
|
|
Total scheduled lease income - operating leases
|
|
$
|
17,811
|
|
•
|
Other property revenues: We recognize revenue for rental related income not included as a component of a lease, such as application fees, as earned.
|
•
|
Gains or losses on sales of real estate: A gain or loss is recognized when the criteria for derecognition of an asset are met, including when (1) a contract exists and (2) the buyer obtained control of the nonfinancial asset that was sold.
|
(1)
|
Total consideration is net of commissions and issuance costs.
|
(1)
|
The redemption price is determined using the volume weighted average price for the ten trading days prior to the date a unitholder provides notification of their intent to redeem units.
|
|
(in thousands)
|
|||||
Three Months Ended June 30,
|
Number of Units
|
|
|
Total Book Value
|
|
|
2020
|
22
|
|
|
$
|
1,048
|
|
2019
|
8
|
|
|
$
|
(521
|
)
|
|
|
|
|
|||
Six Months Ended June 30,
|
|
|
|
|||
2020
|
36
|
|
|
$
|
118
|
|
2019
|
8
|
|
|
$
|
(521
|
)
|
|
(in thousands, except per share amounts)
|
||||||||||||
Three Months Ended June 30,
|
Number of Common Shares
|
|
|
Number of Preferred Shares
|
|
|
Aggregate Cost(1)
|
|
|
Average Price Per Share(1)
|
|
||
2020
|
—
|
|
|
99
|
|
|
$
|
2,442
|
|
|
$
|
24.75
|
|
2019
|
116
|
|
|
—
|
|
|
$
|
6,862
|
|
|
$
|
59.12
|
|
|
|
|
|
|
|
|
|
||||||
Six Months Ended June 30,
|
|
|
|
|
|
|
|
||||||
2020
|
—
|
|
|
235
|
|
|
$
|
5,579
|
|
|
$
|
23.73
|
|
2019
|
290
|
|
|
—
|
|
|
$
|
16
|
|
|
$
|
54.03
|
|
(1)
|
Amount includes commissions.
|
(1)
|
Included within notes payable on our condensed consolidated balance sheets.
|
|
(in thousands)
|
||
2020 (remainder)
|
$
|
12,055
|
|
2021
|
40,395
|
|
|
2022
|
37,219
|
|
|
2023
|
45,068
|
|
|
2024
|
73,777
|
|
|
Thereafter
|
386,716
|
|
|
Total payments
|
$
|
595,230
|
|
|
(in thousands)
|
||||||||||||||
|
Total
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
||||
June 30, 2020
|
|
|
|
|
|
|
|
||||||||
Assets
|
|
|
|
|
|
|
|
||||||||
Mortgages and notes receivable
|
$
|
17,535
|
|
|
—
|
|
|
—
|
|
|
$
|
17,535
|
|
||
Liabilities
|
|
|
|
|
|
|
|
||||||||
Derivative instruments - interest rate swaps
|
$
|
18,139
|
|
|
—
|
|
|
—
|
|
|
$
|
18,139
|
|
||
|
|
|
|
|
|
|
|
||||||||
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|||||
Liabilities
|
|
|
|
|
|
|
|
||||||||
Derivative instruments - interest rate swaps
|
$
|
7,607
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7,607
|
|
(1)
|
Excluding the effect of interest rate swap agreements.
|
(2)
|
As of January 1, 2020, we elected the fair value option, as allowed under ASU 2019-05. Fair value for these instruments is discussed within the Fair Value Measurements on a Recurring Basis section above.
|
|
Date
Acquired
|
|
(in thousands)
|
||||||||||||||||||||||||||
|
|
Total
Acquisition
Cost
|
|
|
Form of Consideration
|
|
Investment Allocation
|
||||||||||||||||||||||
Acquisitions
|
|
|
Cash
|
|
|
Other(1)
|
|
|
Land
|
|
|
Building
|
|
|
Intangible
Assets |
|
|
Other(2)
|
|
||||||||||
182 homes - Ironwood Apartments - New Hope, MN
|
March 5, 2020
|
|
$
|
46,263
|
|
|
$
|
28,600
|
|
|
$
|
17,663
|
|
|
$
|
2,165
|
|
|
$
|
36,869
|
|
|
$
|
824
|
|
|
$
|
6,405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Total Acquisitions
|
|
|
$
|
46,263
|
|
|
$
|
28,600
|
|
|
$
|
17,663
|
|
|
$
|
2,165
|
|
|
$
|
36,869
|
|
|
$
|
824
|
|
|
$
|
6,405
|
|
(1)
|
Payoff of note receivable and accrued interest by seller at closing.
|
(2)
|
Consists of TIF note acquired. Refer to Note 2 for further discussion.
|
|
Date
Acquired
|
|
(in thousands)
|
||||||||||||||||||||||
|
|
Total
Acquisition
Cost
|
|
|
Form of Consideration
|
|
Investment Allocation
|
||||||||||||||||||
Acquisitions
|
|
|
Cash
|
|
|
Units(1)
|
|
|
Land
|
|
|
Building
|
|
|
Intangible
Assets
|
|
|||||||||
Multifamily
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
272 homes - SouthFork Townhomes - Lakeville, MN
|
February 26, 2019
|
|
$
|
44,000
|
|
|
$
|
27,440
|
|
|
$
|
16,560
|
|
|
$
|
3,502
|
|
|
$
|
39,950
|
|
|
$
|
548
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Minot 3100 10th St SW - Minot, ND(2)
|
May 23, 2019
|
|
$
|
2,112
|
|
|
$
|
2,112
|
|
|
—
|
|
|
$
|
246
|
|
|
$
|
1,866
|
|
|
—
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Total Acquisitions
|
|
|
$
|
46,112
|
|
|
$
|
29,552
|
|
|
$
|
16,560
|
|
|
$
|
3,748
|
|
|
$
|
41,816
|
|
|
$
|
548
|
|
(1)
|
Value of Series D preferred units at the acquisition date.
|
|
|
|
(in thousands)
|
||||||||||
Dispositions
|
Date
Disposed |
|
Sale Price
|
|
|
Book Value and Sales Cost
|
|
|
Gain/(Loss)
|
|
|||
Unimproved Land
|
|
|
|
|
|
|
|
||||||
Rapid City Land - Rapid City, SD
|
June 29, 2020
|
|
$
|
1,300
|
|
|
$
|
1,490
|
|
|
$
|
(190
|
)
|
|
|
|
|
|
|
|
|
||||||
Total Dispositions
|
|
|
$
|
1,300
|
|
|
$
|
1,490
|
|
|
$
|
(190
|
)
|
|
|
|
(in thousands)
|
||||||||||
Dispositions
|
Date
Disposed |
|
Sale Price
|
|
|
Book Value
and Sale Cost
|
|
|
Gain/(Loss)
|
|
|||
Other
|
|
|
|
|
|
|
|
||||||
Minot 1400 31st Ave SW - Minot, ND
|
May 23, 2019
|
|
$
|
6,530
|
|
|
$
|
6,048
|
|
|
$
|
482
|
|
|
|
|
|
|
|
|
|
||||||
Unimproved Land
|
|
|
|
|
|
|
|
||||||
Creekside Crossing - Bismarck, ND
|
March 1, 2019
|
|
$
|
3,049
|
|
|
$
|
3,205
|
|
|
$
|
(156
|
)
|
Minot 1525 24th Ave SW - Minot, ND
|
April 3, 2019
|
|
725
|
|
|
593
|
|
|
132
|
|
|||
|
|
|
$
|
3,774
|
|
|
$
|
3,798
|
|
|
$
|
(24
|
)
|
|
|
|
|
|
|
|
|
||||||
Total Dispositions
|
|
|
$
|
10,304
|
|
|
$
|
9,846
|
|
|
$
|
458
|
|
|
(in thousands)
|
||||||||||
Three Months Ended June 30, 2019
|
Multifamily
|
|
|
All Other
|
|
|
Total
|
|
|||
Revenue
|
$
|
39,867
|
|
|
$
|
7,067
|
|
|
$
|
46,934
|
|
Property operating expenses, including real estate taxes
|
16,203
|
|
|
3,313
|
|
|
19,516
|
|
|||
Net operating income
|
$
|
23,664
|
|
|
$
|
3,754
|
|
|
$
|
27,418
|
|
Property management
|
|
|
|
|
(1,445
|
)
|
|||||
Casualty gain (loss)
|
|
|
|
|
(92
|
)
|
|||||
Depreciation and amortization
|
|
|
|
|
(18,437
|
)
|
|||||
General and administrative expenses
|
|
|
|
|
(3,549
|
)
|
|||||
Interest expense
|
|
|
|
|
(7,590
|
)
|
|||||
Loss on debt extinguishment
|
|
|
|
|
(407
|
)
|
|||||
Interest and other income
|
|
|
|
|
468
|
|
|||||
Income (loss) before gain (loss) on sale of real estate and other investments and gain (loss) on litigation settlement
|
|
|
|
|
(3,634
|
)
|
|||||
Gain (loss) on sale of real estate and other investments
|
|
|
|
|
615
|
|
|||||
Gain (loss) on litigation settlement
|
|
|
|
|
6,286
|
|
|||||
Net income (loss)
|
|
|
|
|
$
|
3,267
|
|
|
(in thousands)
|
||||||||||
Six Months Ended June 30, 2020
|
Multifamily
|
|
|
All Other
|
|
|
Total
|
|
|||
Revenue
|
$
|
86,823
|
|
|
$
|
1,493
|
|
|
$
|
88,316
|
|
Property operating expenses, including real estate taxes
|
36,099
|
|
|
604
|
|
|
36,703
|
|
|||
Net operating income
|
$
|
50,724
|
|
|
$
|
889
|
|
|
$
|
51,613
|
|
Property management expenses
|
|
|
|
|
(2,899
|
)
|
|||||
Casualty gain (loss)
|
|
|
|
|
(1,240
|
)
|
|||||
Depreciation and amortization
|
|
|
|
|
(36,316
|
)
|
|||||
General and administrative expenses
|
|
|
|
|
(6,630
|
)
|
|||||
Interest expense
|
|
|
|
|
(13,851
|
)
|
|||||
Loss on debt extinguishment
|
|
|
|
|
(17
|
)
|
|||||
Interest and other income
|
|
|
|
|
(2,239
|
)
|
|||||
Income (loss) before gain (loss) on sale of real estate and other investments and gain (loss) on litigation settlement
|
|
|
|
|
(11,579
|
)
|
|||||
Gain (loss) on sale of real estate and other investments
|
|
|
|
|
(190
|
)
|
|||||
Net income (loss)
|
|
|
|
|
$
|
(11,769
|
)
|
|
(in thousands)
|
||||||||||
Six Months Ended June 30, 2019
|
Multifamily
|
|
|
All Other
|
|
|
Total
|
|
|||
Revenue
|
$
|
78,606
|
|
|
$
|
13,936
|
|
|
$
|
92,542
|
|
Property operating expenses, including real estate taxes
|
32,974
|
|
|
6,578
|
|
|
39,552
|
|
|||
Net operating income
|
$
|
45,632
|
|
|
$
|
7,358
|
|
|
$
|
52,990
|
|
Property management expenses
|
|
|
|
|
(2,999
|
)
|
|||||
Casualty gain (loss)
|
|
|
|
|
(733
|
)
|
|||||
Depreciation and amortization
|
|
|
|
|
(36,548
|
)
|
|||||
General and administrative expenses
|
|
|
|
|
(7,355
|
)
|
|||||
Interest expense
|
|
|
|
|
(15,486
|
)
|
|||||
Loss on debt extinguishment
|
|
|
|
|
(409
|
)
|
|||||
Interest and other income
|
|
|
|
|
892
|
|
|||||
Income (loss) before gain (loss) on sale of real estate and other investments and gain (loss) on litigation settlement
|
|
|
|
|
(9,648
|
)
|
|||||
Gain (loss) on sale of real estate and other investments
|
|
|
|
|
669
|
|
|||||
Gain (loss) on litigation settlement
|
|
|
|
|
6,286
|
|
|||||
Net income (loss)
|
|
|
|
|
$
|
(2,693
|
)
|
|
(in thousands)
|
||||||||||
As of December 31, 2019
|
Multifamily
|
|
|
All Other
|
|
|
Total
|
|
|||
Segment assets
|
|
|
|
|
|
|
|
|
|||
Property owned
|
$
|
1,609,471
|
|
|
$
|
33,607
|
|
|
$
|
1,643,078
|
|
Less accumulated depreciation
|
(339,272
|
)
|
|
(9,850
|
)
|
|
(349,122
|
)
|
|||
Total property owned
|
$
|
1,270,199
|
|
|
$
|
23,757
|
|
|
$
|
1,293,956
|
|
Cash and cash equivalents
|
|
|
|
|
26,579
|
|
|||||
Restricted cash
|
|
|
|
|
19,538
|
|
|||||
Other assets
|
|
|
|
|
34,829
|
|
|||||
Unimproved land
|
|
|
|
|
1,376
|
|
|||||
Mortgage loans receivable
|
|
|
|
|
16,140
|
|
|||||
Total Assets
|
|
|
|
|
$
|
1,392,418
|
|
|
2020
|
||
Exercise price
|
$
|
66.36
|
|
Risk-free rate
|
0.978
|
%
|
|
Expected term
|
6.25 years
|
|
|
Expected volatility
|
21.08
|
%
|
|
Dividend yield
|
3.974
|
%
|
•
|
the COVID-19 pandemic and its ongoing effects on our employees, residents, and commercial tenants, third party vendors and suppliers, and apartment communities, as well as our cash flow, business, financial condition, and results of operation;
|
•
|
deteriorating economic conditions and rising unemployment rates in the markets where we own apartment communities or in which we may invest in the future;
|
•
|
government actions or regulations arising out of the COVID-19 pandemic that limit economic and consumer activity or affect the operation of our properties;
|
•
|
rental conditions in our markets, including occupancy levels and rental rates, our potential inability to renew residents or obtain new residents upon expiration of existing leases, changes in tax and housing laws, or other factors, including the impact of the COVID-19-related governmental rules and regulations relating to rental rates, evictions, and other rental conditions;
|
•
|
changes in operating costs, including real estate taxes, utilities, insurance costs, and expenses related to complying with COVID-19 restrictions or otherwise responding to the COVID-19 pandemic;
|
•
|
adverse changes in our markets, including future demand for apartment homes in our markets, barriers of entry into new markets, limitations on our ability to increase rental rates, our inability to identify and consummate attractive acquisitions and dispositions on favorable terms, our inability to reinvest sales proceeds successfully, and our inability to accommodate any significant decline in the market value of real estate serving as collateral for our mortgage obligations;
|
•
|
reliance on a single asset class (multifamily) and certain geographic areas of the U.S.;
|
•
|
inability to expand our operations into new or existing markets successfully;
|
•
|
failure of new acquisitions to achieve anticipated results or be efficiently integrated;
|
•
|
inability to complete lease-up of our projects on schedule and on budget;
|
•
|
inability to sell our non-core properties on terms that are acceptable;
|
•
|
failure to reinvest proceeds from sales of properties into tax-deferred exchanges, which could necessitate special dividend and tax protection payments;
|
•
|
inability to fund capital expenditures out of cash flow;
|
•
|
inability to pay, or need to reduce, dividends on our common shares;
|
•
|
inability to raise additional equity capital;
|
•
|
financing risks, including our potential inability to meet existing covenants in our existing credit facilities or to obtain new debt or equity financing on favorable terms, or at all;
|
•
|
level and volatility of interest or capitalization rates or capital market conditions;
|
•
|
loss contingencies and the availability and cost of casualty insurance for losses;
|
•
|
inability to continue to satisfy complex rules in order to maintain our status as a REIT for federal income tax purposes, inability of the Operating Partnership to satisfy the rules to maintain its status as a partnership for federal income tax purposes, and the risk of changes in laws affecting REITs;
|
•
|
inability to attract and retain qualified personnel;
|
•
|
cyber liability or potential liability for breaches of our privacy or information security systems;
|
•
|
inability to address catastrophic weather, natural events, and climate change;
|
•
|
inability to comply with laws and regulations applicable to our business and any related investigations or litigation; and
|
•
|
other risks identified in this Report, in other SEC reports, or in other documents that we publicly disseminate.
|
•
|
cause our residents or commercial tenants to defer or stop rental payments, and abandon or fail to renew leases, which would reduce our primary source of net operating income and cash flows;
|
•
|
cause the capital markets generally to become restricted or unavailable, thereby limiting our access to any needed debt or equity capital financing;
|
•
|
impact the business of, or cause the loss of, certain critical third-party suppliers or other service providers;
|
•
|
restrict our ability to continue to pay dividends on a quarterly basis at the current rate, or at all, which could hinder our ability to meet the REIT distribution requirements and continue to qualify as a REIT;
|
•
|
impair the value of our tangible or intangible assets;
|
•
|
require us to record loss contingencies and incur additional expenses related to our COVID-19 response; or
|
•
|
cause the U.S. economy to suffer an extended economic slowdown, which could lead to a prolonged recession or even economic depression, which in turn would affect the demand for our apartment communities and could have an adverse impact on our business and operating results.
|
•
|
With respect to capital projects and investments, we continue to monitor changing government rules and regulations related to COVID-19 and continue to abide by the guidelines set forth by the Center for Disease Control and have initiated a review of capital spend to identify projects that can be delayed;
|
•
|
We have eliminated the majority of planned travel expense for our team members through the end of 2020; and
|
•
|
We have moved the meetings of our Board of Trustees to virtual meetings, thereby limiting the expense associated with in-person meetings.
|
|
(in thousands, except percentages)
|
|||||||||||||||||||||||||||||
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||||||
|
2020
|
|
2019
|
|
$ Change
|
|
|
% Change
|
|
|
|
2020
|
|
2019
|
|
$ Change
|
|
|
% Change
|
|
||||||||||
Operating income (loss)
|
$
|
2,524
|
|
|
$
|
3,895
|
|
|
$
|
(1,371
|
)
|
|
(35.2
|
)%
|
|
|
$
|
4,528
|
|
|
$
|
5,355
|
|
|
$
|
(827
|
)
|
|
(15.4
|
)%
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Property management expenses
|
1,345
|
|
|
1,445
|
|
|
(100
|
)
|
|
(6.9
|
)
|
|
|
2,899
|
|
|
2,999
|
|
|
(100
|
)
|
|
(3.3
|
)%
|
||||||
Casualty loss
|
913
|
|
|
92
|
|
|
821
|
|
|
892.4
|
%
|
|
|
1,240
|
|
|
733
|
|
|
507
|
|
|
69.2
|
%
|
||||||
Depreciation and amortization
|
18,156
|
|
|
18,437
|
|
|
(281
|
)
|
|
(1.5
|
)%
|
|
|
36,316
|
|
|
36,548
|
|
|
(232
|
)
|
|
(0.6
|
)%
|
||||||
General and administrative expenses
|
3,202
|
|
|
3,549
|
|
|
(347
|
)
|
|
(9.8
|
)%
|
|
|
6,630
|
|
|
7,355
|
|
|
(725
|
)
|
|
(9.9
|
)%
|
||||||
Net operating income
|
$
|
26,140
|
|
|
$
|
27,418
|
|
|
$
|
(1,278
|
)
|
|
(4.7
|
)%
|
|
|
$
|
51,613
|
|
|
$
|
52,990
|
|
|
$
|
(1,377
|
)
|
|
(2.6
|
)%
|
|
(in thousands, except percentages)
|
|||||||||||||||||||||||||||||
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
||||||||||||||||||||||||||
|
|
|
2020 vs. 2019
|
|
|
|
|
2020 vs. 2019
|
||||||||||||||||||||||
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
|
|
2020
|
|
2019
|
|
$ Change
|
|
% Change
|
||||||||||||||
Revenue
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Same-store
|
$
|
39,335
|
|
|
$
|
38,794
|
|
|
$
|
541
|
|
|
1.4
|
%
|
|
|
$
|
79,155
|
|
|
$
|
77,122
|
|
|
$
|
2,033
|
|
|
2.6
|
%
|
Non-same-store
|
4,157
|
|
|
1,073
|
|
|
3,084
|
|
|
287.4
|
%
|
|
|
7,668
|
|
|
1,484
|
|
|
6,184
|
|
|
416.7
|
%
|
||||||
Other properties and dispositions
|
418
|
|
|
7,067
|
|
|
(6,649
|
)
|
|
(94.1
|
)%
|
|
|
1,493
|
|
|
13,936
|
|
|
(12,443
|
)
|
|
(89.3
|
)%
|
||||||
Total
|
43,910
|
|
|
46,934
|
|
|
(3,024
|
)
|
|
(6.4
|
)%
|
|
|
88,316
|
|
|
92,542
|
|
|
(4,226
|
)
|
|
(4.6
|
)%
|
||||||
Property operating expenses, including real estate taxes
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Same-store
|
16,006
|
|
|
15,726
|
|
|
280
|
|
|
1.8
|
%
|
|
|
33,264
|
|
|
32,327
|
|
|
937
|
|
|
2.9
|
%
|
||||||
Non-same-store
|
1,515
|
|
|
477
|
|
|
1,038
|
|
|
217.6
|
%
|
|
|
2,835
|
|
|
647
|
|
|
2,188
|
|
|
338.2
|
%
|
||||||
Other properties and dispositions
|
249
|
|
|
3,313
|
|
|
(3,064
|
)
|
|
(92.5
|
)%
|
|
|
604
|
|
|
6,578
|
|
|
(5,974
|
)
|
|
(90.8
|
)%
|
||||||
Total
|
17,770
|
|
|
19,516
|
|
|
(1,746
|
)
|
|
(8.9
|
)%
|
|
|
36,703
|
|
|
39,552
|
|
|
(2,849
|
)
|
|
(7.2
|
)%
|
||||||
Net operating income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||
Same-store
|
23,329
|
|
|
23,068
|
|
|
261
|
|
|
1.1
|
%
|
|
|
45,891
|
|
|
44,795
|
|
|
1,096
|
|
|
2.4
|
%
|
||||||
Non-same-store
|
2,642
|
|
|
596
|
|
|
2,046
|
|
|
343.3
|
%
|
|
|
4,833
|
|
|
837
|
|
|
3,996
|
|
|
477.4
|
%
|
||||||
Other properties and dispositions
|
169
|
|
|
3,754
|
|
|
(3,585
|
)
|
|
(95.5
|
)%
|
|
|
889
|
|
|
7,358
|
|
|
(6,469
|
)
|
|
(87.9
|
)%
|
||||||
Total
|
$
|
26,140
|
|
|
$
|
27,418
|
|
|
$
|
(1,278
|
)
|
|
(4.7
|
)%
|
|
|
$
|
51,613
|
|
|
$
|
52,990
|
|
|
$
|
(1,377
|
)
|
|
(2.6
|
)%
|
Property management expenses
|
(1,345
|
)
|
|
(1,445
|
)
|
|
(100
|
)
|
|
(6.9
|
)%
|
|
|
(2,899
|
)
|
|
(2,999
|
)
|
|
(100
|
)
|
|
(3.3
|
)
|
||||||
Casualty gain (loss)
|
(913
|
)
|
|
(92
|
)
|
|
821
|
|
|
892.4
|
%
|
|
|
(1,240
|
)
|
|
(733
|
)
|
|
507
|
|
|
69.2
|
%
|
||||||
Depreciation and amortization
|
(18,156
|
)
|
|
(18,437
|
)
|
|
(281
|
)
|
|
(1.5
|
)%
|
|
|
(36,316
|
)
|
|
(36,548
|
)
|
|
(232
|
)
|
|
(0.6
|
)%
|
||||||
General and administrative expenses
|
(3,202
|
)
|
|
(3,549
|
)
|
|
(347
|
)
|
|
(9.8
|
)%
|
|
|
(6,630
|
)
|
|
(7,355
|
)
|
|
(725
|
)
|
|
(9.9
|
)%
|
||||||
Interest expense
|
(6,940
|
)
|
|
(7,590
|
)
|
|
(650
|
)
|
|
(8.6
|
)%
|
|
|
(13,851
|
)
|
|
(15,486
|
)
|
|
(1,635
|
)
|
|
(10.6
|
)%
|
||||||
Loss on extinguishment of debt
|
(17
|
)
|
|
(407
|
)
|
|
(390
|
)
|
|
(95.8
|
)%
|
|
|
(17
|
)
|
|
(409
|
)
|
|
(392
|
)
|
|
(95.8
|
)%
|
||||||
Interest and other income (loss)
|
538
|
|
|
468
|
|
|
70
|
|
|
15.0
|
%
|
|
|
(2,239
|
)
|
|
892
|
|
|
(3,131
|
)
|
|
(351.0
|
)%
|
||||||
Income (loss) before gain (loss) on sale of real estate and other investments, and gain (loss) on litigation settlement
|
(3,895
|
)
|
|
(3,634
|
)
|
|
(261
|
)
|
|
7.2
|
%
|
|
|
(11,579
|
)
|
|
(9,648
|
)
|
|
(1,931
|
)
|
|
20.0
|
%
|
||||||
Gain (loss) on sale of real estate and other investments
|
(190
|
)
|
|
615
|
|
|
(805
|
)
|
|
(130.9
|
)%
|
|
|
(190
|
)
|
|
669
|
|
|
(859
|
)
|
|
(128.4
|
)%
|
||||||
Gain (loss) on litigation settlement
|
—
|
|
|
6,286
|
|
|
(6,286
|
)
|
|
100.0
|
%
|
|
|
—
|
|
|
6,286
|
|
|
(6,286
|
)
|
|
100.0
|
%
|
||||||
NET INCOME (LOSS)
|
$
|
(4,085
|
)
|
|
$
|
3,267
|
|
|
$
|
(7,352
|
)
|
|
(225.0
|
)%
|
|
|
$
|
(11,769
|
)
|
|
$
|
(2,693
|
)
|
|
$
|
(9,076
|
)
|
|
337.0
|
%
|
Dividends to preferred unitholders
|
(160
|
)
|
|
(160
|
)
|
|
—
|
|
|
—
|
|
|
|
(320
|
)
|
|
(217
|
)
|
|
(103
|
)
|
|
47.5
|
%
|
||||||
Net (income) loss attributable to noncontrolling interests – Operating Partnership
|
447
|
|
|
(148
|
)
|
|
595
|
|
|
(402.0
|
)%
|
|
|
1,139
|
|
|
595
|
|
|
544
|
|
|
91.4
|
%
|
||||||
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities
|
(5
|
)
|
|
154
|
|
|
(159
|
)
|
|
(103.2
|
)%
|
|
|
140
|
|
|
730
|
|
|
(590
|
)
|
|
(80.8
|
)%
|
||||||
Net income (loss) attributable to controlling interests
|
(3,803
|
)
|
|
3,113
|
|
|
(6,916
|
)
|
|
(222.2
|
)%
|
|
|
(10,810
|
)
|
|
(1,585
|
)
|
|
(9,225
|
)
|
|
582.0
|
%
|
||||||
Dividends to preferred shareholders
|
(1,609
|
)
|
|
(1,706
|
)
|
|
97
|
|
|
(5.7
|
)%
|
|
|
(3,314
|
)
|
|
(3,411
|
)
|
|
97
|
|
|
(2.8
|
)%
|
||||||
Redemption of Preferred Shares
|
25
|
|
|
—
|
|
|
25
|
|
|
—
|
|
|
|
298
|
|
|
—
|
|
|
298
|
|
|
—
|
|
||||||
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS
|
$
|
(5,387
|
)
|
|
$
|
1,407
|
|
|
$
|
(6,794
|
)
|
|
(482.9
|
)%
|
|
|
$
|
(13,826
|
)
|
|
$
|
(4,996
|
)
|
|
$
|
(8,830
|
)
|
|
176.7
|
%
|
|
Three Months Ended June 30,
|
|
Six Months Ended June 30,
|
||||||||
Weighted Average Occupancy(1)
|
2020
|
|
2019
|
|
2020
|
|
2019
|
||||
Same-store
|
94.6
|
%
|
|
94.3
|
%
|
|
95.0
|
%
|
|
94.9
|
%
|
Non-same-store
|
93.9
|
%
|
|
94.8
|
%
|
|
93.6
|
%
|
|
94.8
|
%
|
Total
|
94.5
|
%
|
|
94.4
|
%
|
|
94.8
|
%
|
|
94.9
|
%
|
(1)
|
Weighted average occupancy is defined as the percentage resulting from dividing actual rental revenue by scheduled rental revenue. Scheduled rental revenue represents the value of all apartment homes, with occupied homes valued at contractual rental rates pursuant to leases and vacant homes valued at estimated market rents. When calculating actual rents for occupied homes and market rents for vacant homes, delinquencies, and concessions are not taken into account. Market rates are determined using the currently offered effective rates on new leases at the community and are used as the starting point in determination of the market rates of vacant apartment homes. We believe that weighted average occupancy is a meaningful measure of occupancy because it considers the value of each vacant unit at its estimated market rate. Weighted average occupancy may not completely reflect short-term trends in physical occupancy, and our calculation of weighted average occupancy may not be comparable to that disclosed by other REITs.
|
•
|
depreciation and amortization related to real estate;
|
•
|
gains and losses from the sale of certain real estate assets; and
|
•
|
impairment write-downs of certain real estate assets and investments in entities when the impairment is directly attributable to decreases in the value of depreciable real estate held by the entity.
|
|
(in thousands, except per share and unit amounts)
|
|||||||||||||||
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
||||||||||||
|
2020
|
|
2019
|
|
|
2020
|
|
2019
|
||||||||
Net income (loss) available to common shareholders
|
$
|
(5,387
|
)
|
|
$
|
1,407
|
|
|
|
$
|
(13,826
|
)
|
|
$
|
(4,996
|
)
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Noncontrolling interests – Operating Partnership
|
(447
|
)
|
|
148
|
|
|
|
(1,139
|
)
|
|
(595
|
)
|
||||
Depreciation and amortization
|
18,156
|
|
|
18,437
|
|
|
|
36,316
|
|
|
36,548
|
|
||||
Less depreciation – non real estate
|
(88
|
)
|
|
(79
|
)
|
|
|
(181
|
)
|
|
(164
|
)
|
||||
Less depreciation – partially owned entities
|
(33
|
)
|
|
(474
|
)
|
|
|
(315
|
)
|
|
(1,152
|
)
|
||||
(Gain) loss on sale of real estate
|
190
|
|
|
(615
|
)
|
|
|
190
|
|
|
(669
|
)
|
||||
Funds from operations applicable to common shares and Units
|
$
|
12,391
|
|
|
$
|
18,824
|
|
|
|
$
|
21,045
|
|
|
$
|
28,972
|
|
|
|
|
|
|
|
|
|
|
||||||||
Funds from operations applicable to common shares and Units
|
$
|
12,391
|
|
|
$
|
18,824
|
|
|
|
$
|
21,045
|
|
|
$
|
28,972
|
|
Dividends to preferred unitholders
|
160
|
|
|
160
|
|
|
|
320
|
|
|
217
|
|
||||
Funds from operations applicable to common shares and Units - diluted
|
$
|
12,551
|
|
|
$
|
18,984
|
|
|
|
$
|
21,365
|
|
|
$
|
29,189
|
|
|
|
|
|
|
|
|
|
|
||||||||
Per Share Data
|
|
|
|
|
|
|
|
|
||||||||
Earnings (loss) per common share - diluted
|
$
|
(0.44
|
)
|
|
$
|
0.11
|
|
|
|
$
|
(1.13
|
)
|
|
$
|
(0.43
|
)
|
FFO per share and Unit - diluted
|
$
|
0.93
|
|
|
$
|
1.45
|
|
|
|
$
|
1.58
|
|
|
$
|
2.22
|
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average shares and Units - diluted
|
13,558
|
|
|
13,197
|
|
|
|
13,482
|
|
|
13,220
|
|
•
|
At the end of the second quarter, we had $239.7 million of total liquidity on our balance sheet, including $187.0 million available under our unsecured line of credit and $52.7 million of cash and cash equivalents.
|
•
|
We have approximately $9.4 million of debt maturities remaining in 2020 and approximately $35.6 million of debt maturities in 2021.
|
•
|
We have approximately $34.0 million remaining to fund, primarily over the next 12 months, under construction and mezzanine loans we originated for the development of a multifamily community in Minneapolis, Minnesota.
|
•
|
we are unable to make certain representations and warranties, including a certification that, since April 30, 2018, there has been no adverse change in our business, financial condition, operations, performance or properties, taken as a whole, which would reasonably be expected to have a material adverse effect;
|
•
|
changes in our consolidated property NOI or capitalization rates applicable to the properties in our borrowing base reduce or eliminate availability under our credit facility; or
|
•
|
changes in the nature and composition (including occupancy rate) of the properties in our borrowing base cause these properties to become ineligible to be part of our borrowing base, and if we are not able to replace such properties with other qualifying properties, such ineligibility could reduce or eliminate the availability under our credit facility.
|
•
|
credit market deterioration or overall economic conditions affect the ability of one or more of our lenders to meet their funding commitments under our revolving credit facility. If a lender fails to fund its commitment under the revolving credit facility, that portion of the credit facility will be unavailable if the lender’s commitment is not replaced by a new commitment from an alternate lender;
|
•
|
distressed market conditions cause our lenders to transfer their commitments to other institutions, which could result in committed funds not being available, particularly if consolidation of the commitments under our credit facility or among its lenders were to occur; or
|
•
|
we are unable to obtain additional letters of credit due to a default by any lender in meeting its funding obligations.
|
•
|
Receiving $48.3 million in net proceeds from the issuance of approximately 674,000 common shares under our 2019 ATM Program;
|
•
|
Repayment of $10.0 million of note receivables;
|
•
|
Selling $3.9 million of marketable securities; and
|
•
|
Selling a parcel of unimproved land for $1.3 million.
|
•
|
Acquiring Ironwood Apartments, a 182-home apartment community located in New Hope, Minnesota, an inner-ring suburb of Minneapolis, 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 and accrued interest;
|
•
|
Acquiring the noncontrolling interests in 71 France for $12.2 million;
|
•
|
Funding of mezzanine/construction loans of $4.8 million;
|
•
|
Repaying $6.1 million of mortgage principal;
|
•
|
Repurchasing 235,075 Series C preferred shares for an aggregate total cost of approximately $5.6 million; and
|
•
|
Funding capital improvements for apartment communities of approximately $12.4 million.
|
•
|
"Our financial performance is subject to risks associated with the real estate industry and ownership of apartment communities";
|
•
|
"Our property acquisition activities may not produce the cash flows expected and could subject us to various risks that could adversely affect our operating results";
|
•
|
"We may be unable to acquire or develop properties and expand our operations into new or existing markets successfully";
|
•
|
"We are dependent on a concentration of our investments in a single asset class, making our results of operations more vulnerable to a downturn or slowdown in the sector or other economic factors";
|
•
|
"Our operations are concentrated in certain regions of the United States, and we are subject to general economic conditions in the regions in which we operate";
|
•
|
"Because real estate investments are relatively illiquid and various other factors limit our ability to dispose of assets, we may not be able to sell properties when appropriate";
|
•
|
"Inability to manage growth effectively may adversely affect our operating results";
|
•
|
"Future cash flows may not be sufficient to ensure recoverability of the carrying value of our real estate assets";
|
•
|
"The restrictive terms of indebtedness may cause acceleration of debt payments and constrain our ability to conduct certain transactions";
|
•
|
"Our stock price may fluctuate significantly"; and
|
•
|
"Payment of distributions on our common shares is not guaranteed,"
|
•
|
cause our residents or commercial tenants to defer or stop rental payments, and abandon or fail to renew leases, which would reduce our primary source of net operating income and cash flows;
|
•
|
cause us to increase our borrowing and our leverage and/or seek other sources of financing, which may not be available on favorable terms;
|
•
|
cause us to fail to satisfy certain of the covenants under our line of credit or other borrowing facilities, which could limit our access to such financings or even lead to an event of default;
|
•
|
cause the capital markets generally to become restricted or unavailable, thereby limiting our access to any needed debt or equity capital financing;
|
•
|
impact the business of, or cause the loss of, certain critical third-party suppliers or other service providers;
|
•
|
restrict our ability to continue to pay dividends on a quarterly basis at the current rate, or at all;
|
•
|
impair the value of our tangible or intangible assets;
|
•
|
require us to record loss contingencies and incur additional expenses related to our COVID-19 response; or
|
•
|
cause the U.S. economy to suffer an extended economic slowdown, which could lead to a prolonged recession or even economic depression, which in turn would affect the demand for our apartment communities and could have an adverse impact on our business and operating results.
|
•
|
our cash flow will be insufficient to meet required payments of principal and interest, particularly if net operating income is reduced significantly due to the effects of the COVID-19 pandemic;
|
•
|
we will not be able to renew, refinance, or repay our indebtedness when due; and
|
•
|
the terms of any renewal or refinancing are at terms less favorable than the terms of our current indebtedness.
|
|
|
|
|
|
Maximum Dollar
|
||||||
|
|
|
|
Total Number of Shares
|
Amount of Shares That
|
||||||
|
|
Total Number of
|
Average Price
|
Purchased as Part of
|
May Yet Be Purchased
|
||||||
|
|
Shares and Units
|
Paid per
|
Publicly Announced
|
Under the Plans or
|
||||||
Period
|
|
Purchased (1)
|
Share and Unit(2)
|
Plans or Programs
|
Programs(3)
|
||||||
April 1 - 30, 2020
|
|
54,777
|
|
$
|
24.69
|
|
54,777
|
|
$
|
45,510,888
|
|
May 1 - 31, 2020
|
|
43,308
|
|
24.88
|
|
43,218
|
|
44,438,657
|
|
||
June 1 - 30, 2020
|
|
745
|
|
28.08
|
|
700
|
|
44,420,795
|
|
||
Total
|
|
98,830
|
|
$
|
24.80
|
|
98,695
|
|
|
|
(1)
|
Includes a total of 135 Units redeemed for cash pursuant to the exercise of exchange rights. Second quarter purchases included 98,695 Series C Preferred Shares.
|
(2)
|
Amount includes commissions paid.
|
(3)
|
Represents amounts outstanding under our $50 million share repurchase program, which was authorized by our Board of Trustees on December 5, 2019.
|
*
|
Filed herewith
|
**
|
Submitted electronically herewith. Attached as Exhibit 101 are the following materials from our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, formatted in Inline eXtensible Business Reporting Language (“iXBRL”): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations; (ii) the Condensed Consolidated Statements of Equity; (iv) the Condensed Consolidated Statements of Cash Flows; (v) notes to these condensed consolidated financial statements; and (vi) the Cover Page to our Quarterly Report on Form 10-Q.
|
/s/ Mark O. Decker, Jr.
|
|
Mark O. Decker, Jr.
|
|
President and Chief Executive Officer
|
|
|
|
/s/ John A. Kirchmann
|
|
John A. Kirchmann
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
Date: August 3, 2020
|
|
1
|
I have reviewed this quarterly report on Form 10-Q of Investors Real Estate Trust;
|
2
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a)
|
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b)
|
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c)
|
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d)
|
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a)
|
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b)
|
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
By:
|
/s/ Mark O. Decker, Jr.
|
|
|
Mark O. Decker, Jr., President and Chief Executive Officer
|
|
1
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I have reviewed this quarterly report on Form 10-Q of Investors Real Estate Trust;
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2
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4
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The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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a)
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designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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b)
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designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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c)
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evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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d)
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disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5
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The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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a)
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all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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b)
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any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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By:
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/s/ John A. Kirchmann
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John A. Kirchmann, Executive Vice President and Chief Financial Officer
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1.
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
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2.
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ Mark O. Decker, Jr.
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Mark O. Decker, Jr.
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President and Chief Executive Officer
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August 3, 2020
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1.
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The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and
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2.
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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/s/ John A. Kirchmann
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John A. Kirchmann
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Executive Vice President and Chief Financial Officer
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August 3, 2020
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