IRET Announces Financial And Operating Results For The Quarter And Year-To-Date Ended January 31, 2017

MINOT, N.D., March 13, 2017

Third Quarter Fiscal Year 2017 Highlights

• Total revenue was $51.2 million, up 5.7% from the third quarter of fiscal year 2016.
• Net income available to common shareholders was $19.2 million compared to $36.9 million for the third quarter of fiscal year 2016. The decrease was primarily due to gain on extinguishment of debt in discontinued operations that was recognized in the comparable period, net of an increase in gains on sale of discontinued operations.
• Reported Funds from Operations ("FFO") of $12.7 million, or $0.09 per share/unit.
• Excluding one-time items, including a $1.9 million loss on extinguishment of debt primarily related to the new line of credit and $1.4 million of redemption costs for the Series A preferred shares, FFO would have been $0.12 per share/unit.
• Disposed of five senior housing properties for a sale price of $69.9 million with a gain on sale of $19.5 million, netting approximately $56.2 million in proceeds and disposed of a retail property for a sale price of $4.0 million.
• Entered into a new $250.0 million line of credit providing for improved size, terms and flexibility.
• Redeemed all the outstanding Series A preferred shares on December 2, 2016 for $29.2 million.
• Authorized a one-year share repurchase program of up to $50 million worth of common shares and/or Series B preferred shares.

Year to Date Fiscal Year 2017 Highlights

• Total revenue was $151.4 million, up 8.3% from the same period in fiscal year 2016.
• Net income available to common shareholders for the nine months ended January 31, 2017 was $3.4 million compared to $52.4 million for the same period of the prior fiscal year. The decrease was primarily due to net gain on extinguishment of debt in discontinued operations that was recognized in the prior period and an increase in non-cash impairment expense attributable to IRET, net of an increase in gains on sale of real estate.
• Reported FFO of $45.0 million, or $0.33 per share/unit.
• Excluding one-time items, including a $1.9 million loss on extinguishment of debt primarily related to the new line of credit and $1.4 million of redemption costs for the Series A Preferred Shares, FFO would have been $0.35 per share/unit.
• Adjusted the dividend to a level covered by operating cash flow, from an annualized $0.52 to $0.28 per share/unit.
• Completed renovation of 993 units under the value add program, achieving average rental rate increases of 11.5%.

Subsequent Highlights

• Completed the sale of 18 senior housing properties for a total sale price of $115.6 million with a gain on sale of approximately $31.6 million, netting approximately $100.0 million in proceeds, with 3 senior housing properties remaining to be sold pursuant to existing Agreements.
• Line of credit balance was paid down from $157.0 million to $66.2 million and additions to the unencumbered asset pool increased the credit limit on the line from $174.0 million to $206.0 million, bringing available liquidity from $17.0 million to $139.8 million.

Chief Executive Officer Tim Mihalick commented, "Our third fiscal quarter was marked by tremendous progress on our ongoing evolution to a focused multifamily company despite some operational challenges. Our non-same store newly developed and acquired assets continued to drive multifamily portfolio NOI, though our same-store multifamily portfolio felt the impact of supply growth in certain of our markets as well as continued challenges in our energy-impacted markets. Compounding these factors, we experienced near-record snowfall in North Dakota, which affected both revenue and expenses during the quarter. However, our revenue management system as well as our utility reimbursement program helped to drive healthy 3.4% rate growth across our same store multifamily portfolio, excluding our energy impacted markets, and we have an opportunity to drive occupancy as we enter the stronger leasing season in the spring. Further, we are continuing with our value-add program which has resulted in attractive 11.5% rate growth in the 993 units which have been refreshed this fiscal year to date."

Mr. Mihalick continued, "Despite these challenges in our same store multifamily portfolio, which we expect will be mitigated as we execute on our capital recycling plan, our work to strengthen the Company for the long term continued. We are pleased with the execution of our disposition program through which we have netted total proceeds of $178.8 million from the third quarter and subsequent to date, as well as the completion of an unsecured $250 million revolver. The third quarter marked a big step towards simplicity and a higher quality, multifamily focused portfolio, with more stable cash flows, which we expect will result in enhanced long term value creation for our shareholders."

Financial Results for the Three and Nine Months Ended January 31, 2017 Compared to the Prior Year Periods