SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~October~~March 31, ~~2018~~2019

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ____________ to ____________

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate web site, if any,~~ every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Securities registered pursuant to Section 12(b) of the Exchange Act:



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-C	New York Stock Exchange

The number of common shares of beneficial interest outstanding as of ~~December 3, 2018,~~April 29, 2019, was ~~119,709,471.~~11,754,251.

~~ITEM~~Item 1. ~~FINANCIAL STATEMENTS - SECOND QUARTER - FISCAL 2019~~Financial Statements.

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

Term loans, net of unamortized loan costs of $1,044 and $486, respectively

Mortgages payable, net of unamortized loan costs of $1,865 and $2,221, respectively

Term loans, net of unamortized loan costs of $964 and $1,009, respectively

Mortgages payable, net of unamortized loan costs of $1,637 and $1,777, respectively

SERIES D PREFERRED UNITS (Cumulative convertible preferred units, $100 par value, 166 units issued and outstanding at March 31, 2019 and no units issued and outstanding at December 31, 2018, aggregate liquidation preference of $16,560)

Series C Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value, $25 per share liquidation preference, 4,118 shares issued and outstanding at October 31, 2018 and April 30, 2018, aggregate liquidation preference of $102,971)

Common Shares of Beneficial Interest (Unlimited authorization, no par value, 119,727 shares issued and outstanding at October 31, 2018 and 119,526 shares issued and outstanding at April 30, 2018)

Series C Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value, $25 per share liquidation preference, 4,118 shares issued and outstanding at March 31, 2019 and December 31, 2018, aggregate liquidation preference of $102,971)

Common Shares of Beneficial Interest (Unlimited authorization, no par value, 11,768 shares issued and outstanding at March 31, 2019 and 11,942 shares issued and outstanding at December 31, 2018)

Noncontrolling interests – Operating Partnership (13,678 units at October 31, 2018 and 14,099 units at April 30, 2018)

Noncontrolling interests – Operating Partnership (1,365 units at March 31, 2019 and 1,368 units at December 31, 2018)

See accompanying Notes to Condensed Consolidated Financial Statements.

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

See accompanying Notes to Condensed Consolidated Financial Statements.

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

See accompanying Notes to Condensed Consolidated Financial Statements.

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF EQUITY (unaudited)

PREFERRED
SHARES
NUMBER
OF
COMMON
SHARES

COMMON
SHARES

ACCUMULATED
DISTRIBUTIONS
IN EXCESS OF
NET INCOME
ACCUMULATED OTHER COMPREHENSIVE INCOME
NONREDEEMABLE
NONCONTROLLING
INTERESTS

TOTAL
EQUITY
Balance April 30, 2017 $ 111,357
121,199
$ 908,905
$ (466,541 ) —
$ 82,437
$ 636,158
Net income (loss) attributable to controlling interests and nonredeemable noncontrolling interests 1,557
(1,328 ) 229
Distributions – common shares and units (16,881 ) (2,089 ) (18,970 )
Distributions – Series B preferred shares (4,571 ) (4,571 )
Distributions – Series C preferred shares (527 ) (527 )
Shares issued and share-based compensation
75
844
844
Series C preferred shares issued 99,467
99,467
Redemption of units for cash

(5,982 ) (5,982 )
Shares repurchased (111,357 ) (1,080 ) (6,253 ) (3,649 ) (121,259 )
Contributions from nonredeemable noncontrolling interests – consolidated real estate entities 239
239
Distributions to nonredeemable noncontrolling interests – consolidated real estate entities (41 ) (41 )
Other (5 ) (29 )

(29 )
Balance October 31, 2017 $ 99,467
120,189
$ 903,467
$ (490,612 ) —
$ 73,236
$ 585,558

Balance April 30, 2018 $ 99,456
119,526
$ 900,097
$ (395,669 ) $ 1,779
$ 81,900
$ 687,563
Cumulative adjustment upon adoption of ASC 606 and ASC 610-20 627
627
Balance on May 1, 2018 $ 99,456
119,526
$ 900,097
$ (395,042 ) $ 1,779
$ 81,900
$ 688,190
Net income (loss) attributable to controlling interests and nonredeemable noncontrolling interests (1,642 ) 79
(1,563 )
Other comprehensive income - derivative instrument 1,542
1,542
Distributions – common shares and units (16,724 ) (1,960 ) (18,684 )
Distributions – Series C preferred shares (3,411 ) (3,411 )
Shares issued and share-based compensation
27
777
777
Redemption of units for common shares

331
649
(649 ) —
Redemption of units for cash

(482 ) (482 )
Shares repurchased

(119 ) (615 )
(615 )
Distributions to nonredeemable noncontrolling interests – consolidated real estate entities (2,374 ) (2,374 )
Other
(38 ) (382 ) (261 ) (643 )
Balance October 31, 2018 $ 99,456
119,727
$ 900,526
$ (416,819 ) $ 3,321
$ 76,253
$ 662,737



	(in thousands, except per share data)
	PREFERRED SHARES		NUMBER OF COMMON SHARES		COMMON SHARES			ACCUMULATED DISTRIBUTIONS IN EXCESS OF NET INCOME			ACCUMULATED OTHER COMPREHENSIVE INCOME			NONREDEEMABLE NONCONTROLLING INTERESTS			TOTAL EQUITY
Balance December 31, 2017	$	99,456	12,004		$	902,305		$	(374,365	)	$	(539	)	$	87,186		$	714,043
Net income (loss) attributable to controlling interests and nonredeemable noncontrolling interests								6,604						281			6,885
Change in fair value of derivatives											1,822						1,822
Distributions - common shares and units ($0.70 per share and unit)								(8,405		)				(990		)	(9,395		)
Distributions – Series C preferred shares ($0.4140625 per Series C share)								(1,705		)							(1,705		)
Shares issued and share-based compensation			2		441												441
Redemption of units for common shares			2		34									(34		)	—
Redemption of units for cash														(2,237		)	(2,237		)
Shares repurchased			(29	)	(1,442		)										(1,442		)
Other					(26		)							81			55
Balance March 31, 2018	$	99,456	11,979		$	901,312		$	(377,871	)	1,283			$	84,287		$	708,467


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								(4,698		)				(1,145		)	(5,843		)
Change in fair value of derivatives											(2,283		)				(2,283		)
Distributions – common shares and units ($0.70 per share and unit)								(8,210		)				(957		)	(9,167		)
Distributions – Series C preferred shares ($0.4140625 per Series C share)								(1,705		)							(1,705		)
Shares issued and share-based compensation					436												436
Redemption of units for cash														(156		)	(156		)
Shares repurchased			(174	)	(8,815		)										(8,815		)
Acquisition of redeemable noncontrolling interests					4,549												4,549
Other					(23		)							(50		)	(73		)
Balance March 31, 2019	$	99,456	11,768		$	895,381		$	(443,661	)	$	(3,139	)	$	72,355		$	620,392

See accompanying Notes to Condensed Consolidated Financial Statements.

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands)
Six Months Ended
October 31,
2018 2017
CASH FLOWS FROM OPERATING ACTIVITIES

Net income (loss) $ (1,895 ) $ (140 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Depreciation and amortization, including amortization of capitalized loan costs 38,522
43,176
Depreciation and amortization from discontinued operations, including amortization of capitalized loan costs —
7,077
(Gain) loss on sale of real estate, land, other investments and discontinued operations (9,562 ) (17,686 )
Share-based compensation expense 580
751
Other, net 956
1,164
Changes in other assets and liabilities:

Other assets (725 ) (1,853 )
Accounts payable and accrued expenses (662 ) (4,756 )
Net cash provided by operating activities $ 27,214
$ 27,733
CASH FLOWS FROM INVESTING ACTIVITIES

Principal proceeds on mortgage loans receivable 425
—
Increase in notes receivable (736 ) (6,126 )
Proceeds from sale of discontinued operations —
35,775
Proceeds from sale of real estate and other investments 52,156
18,039
Insurance proceeds received 1,266
530
Payments for acquisitions of real estate assets (837 ) (154,122 )
Payments for development and re-development of real estate assets —
(2,817 )
Payments for improvements of real estate assets (8,547 ) (10,178 )
Payments for improvements of real estate assets from discontinued operations —
(803 )
Net cash provided by (used by) investing activities $ 43,727
$ (119,702 )
CASH FLOWS FROM FINANCING ACTIVITIES

Principal payments on mortgages payable, including prepayment penalties (63,481 ) (52,143 )
Proceeds from revolving lines of credit 53,017
293,350
Principal payments on revolving lines of credit (107,517 ) (102,900 )
Proceeds from term loan 74,352
—
Proceeds from construction debt —
3,124
Payment on financing liability —
(7,900 )
Repurchase of common shares (615 ) (6,253 )
Proceeds from issuance of Series C preferred shares, net of issue costs —
99,467
Repurchase of Series B preferred shares —
(115,005 )
Repurchase of partnership units (482 ) (5,982 )
Distributions paid to common shareholders (16,724 ) (16,881 )
Distributions paid to preferred shareholders (3,411 ) (5,333 )
Distributions paid to noncontrolling interests – Unitholders of the Operating Partnership (1,960 ) (2,089 )
Distributions paid to noncontrolling interests – consolidated real estate entities (2,374 ) (40 )
Net cash provided by (used by) financing activities $ (69,195 ) $ 81,415
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH 1,746
(10,554 )
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD 16,116
56,800
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD $ 17,862
$ 46,246

~~See accompanying Notes to Condensed Consolidated Financial Statements.~~

~~INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES~~

~~CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS(unaudited, continued)~~



	(in thousands)
	Three Months Ended March 31,
	2019			2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(5,960	)	$	6,664
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization, including amortization of capitalized loan costs	18,413			20,859
(Gain) loss on sale of real estate, land, other investments and discontinued operations	(54		)	(16,036		)
Share-based compensation expense	416			425
Other, net	374			835
Changes in other assets and liabilities:
Other assets	(1,542		)	(5,026		)
Accounts payable and accrued expenses	(5,355		)	(3,972		)
Net cash provided by operating activities	$	6,292		$	3,749
CASH FLOWS FROM INVESTING ACTIVITIES
Increase in notes receivable	—			(4,493		)
Proceeds from sale of real estate and other investments	2,912			34,732
Payments for acquisitions of real estate assets	(27,741		)	(128,934		)
Payments for improvements of real estate assets	(801		)	(2,504		)
Other investing activities	109			24
Net cash provided by (used by) investing activities	$	(25,521	)	$	(101,175	)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgages payable	(13,503		)	(42,804		)
Proceeds from revolving lines of credit	79,677			72,000
Principal payments on revolving lines of credit	(18,500		)	(153,000		)
Principal payments on construction debt	—			(21,689		)
Payments for acquisition of noncontrolling interests – consolidated real estate entities	(1,239		)	—
Repurchase of common shares	(8,815		)	(1,442		)
Repurchase of partnership units	(156		)	(2,237		)
Distributions paid to common shareholders	(8,336		)	(8,405		)
Distributions paid to preferred shareholders	—			(1,705		)
Distributions paid to noncontrolling interests – Unitholders of the Operating Partnership	(957		)	(990		)
Distributions paid to noncontrolling interests – consolidated real estate entities	(50		)	(53		)
Net cash provided by (used by) financing activities	$	28,121		$	(160,325	)
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	8,892			(257,751		)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD	19,256			286,226
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD	$	28,148		$	28,475

(in thousands)
Six Months Ended
October 31,
2018 2017
SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

Operating partnership units converted to shares $ 649
$ —
Decrease to accounts payable included within real estate investments (329 ) (2,106 )
Notes and accounts receivable converted to equity 670
—
Construction debt reclassified to mortgages payable —
23,300

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Cash paid for interest $ 17,059
$ 17,122



SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Accrued capital expenditures	$	1,167	$	(222	)
Distributions declared but not paid	1,705		—
Property acquired through issuance of Series D preferred units	16,560		—

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest	$	7,350	$	8,114

See accompanying Notes to Condensed Consolidated Financial Statements.

INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

for the ~~six~~three months ended ~~October~~March 31, ~~2018~~2019 and ~~2017~~2018

NOTE 1 • ORGANIZATION

Investors Real Estate Trust, collectively with our consolidated subsidiaries (“IRET,” “we,” “us,” or “our”), is a real estate investment trust (“REIT”) focused on the ownership, management, acquisition, redevelopment, and development of apartment communities. As of ~~October~~March 31, ~~2018,~~2019, we owned interests in 8788 apartment communities consisting of ~~13,702~~13,975 apartment homes.

NOTE 2 • BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION

We conduct a majority of our business activities through our consolidated operating partnership, IRET Properties, A North Dakota Limited Partnership (the “Operating Partnership”), as well as through a number of other consolidated subsidiary entities. The accompanying condensed consolidated financial statements include our accounts and the accounts of all our subsidiaries in which we maintain a controlling interest, including the Operating Partnership. All intercompany balances and transactions are eliminated in consolidation. ~~Our fiscal year currently ends on April 30.~~ On September 20, 2018, our Board of Trustees approved a change in our fiscal year-end ~~beginning January 1, 2019,~~ from April 30 to December ~~31.~~31, beginning on January 1, 2019. We ~~will file~~filed a transition report on Form ~~10-K~~10-KT for the transition period ended December 31, 2018, in accordance with SEC rules and ~~regulations, and~~regulations. Beginning on January 1, 2019, all ~~subsequent~~ fiscal years ~~beginning in 2019,~~ will be from January 1 to December 31. ~~Our Sixth Restated Trustee's Regulations (Bylaws) reflecting this change in fiscal year-end is attached hereto~~

On December 14, 2018, the Board approved a reverse stock split of our outstanding common shares, no par value per share, and limited partnership units ("Units") at a ratio of 1-for-10. The reverse stock split was effective as ~~Exhibit 3.3.~~of the close of trading on December 27, 2018, with trade commencing on a split-adjusted basis on December 28, 2018. We have adjusted all shares and Units and per share and Unit data for all periods presented.

The condensed consolidated financial statements also reflect the Operating Partnership's ownership of certain joint venture entities in which the Operating Partnership has a general partner or controlling interest. These entities are consolidated into our operations, with noncontrolling interests reflecting the noncontrolling partners’ share of ownership, income, and expenses.

~~PRIOR PERIOD FINANCIAL STATEMENT CORRECTION OF AN IMMATERIAL MISSTATEMENT~~

During the first quarter of fiscal year 2019, we identified certain adjustments required to correct balances within total equity related to noncontrolling interests in our joint venture entities. Related to our acquisition of additional ownership interest in the joint venture entities, noncontrolling interest - consolidated real estate entities was understated and common shares of beneficial interest was overstated beginning in fiscal year 2017. The adjustments did not impact total assets, total liabilities, revenue, net income, net income available to common shareholders, number of common shares, or earnings per share.

Based on an analysis of Accounting Standards Codification (“ASC”) 250 - “Accounting Changes and Error Corrections” (“ASC 250”), Staff Accounting Bulletin 99 - “Materiality” (“SAB 99”) and Staff Accounting Bulletin 108 - "Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements" (“SAB 108”), we determined that these errors were immaterial to the previously-issued financial statements. The misstatement was corrected in the condensed consolidated balance sheets as of April 30, 2018 and the condensed consolidated statements of equity as of April 30, 2017, October 31, 2017 and April 30, 2018.

~~The effect of these revisions on our condensed consolidated balance sheet is as follows:~~

(in thousands)
As previously reported at April 30, 2018 Adjustment As revised at April 30, 2018
Common shares of beneficial interest $ 907,843
$ (7,746 ) $ 900,097
Noncontrolling interests - consolidated real estate entities 1,078
7,810
8,888
Redeemable noncontrolling interests - consolidated real estate entities 6,708
(64 ) 6,644

~~The effect of these revisions on our condensed consolidated statements of equity is as follows:~~

(in thousands)
As previously reported at April 30, 2017 Adjustment As revised at April 30, 2017
Common shares of beneficial interest $ 916,121
$ (7,216 ) $ 908,905
Nonredeemable noncontrolling interests 75,157
7,280
82,437

(in thousands)
As previously reported at October 31, 2017 Adjustment As revised at October 31, 2017
Common shares of beneficial interest $ 910,683
$ (7,216 ) $ 903,467
Nonredeemable noncontrolling interests 65,956
7,280
73,236

(in thousands)
As previously reported at April 30, 2018 Adjustment As revised at April 30, 2018
Common shares of beneficial interest $ 907,843
$ (7,746 ) $ 900,097
Nonredeemable noncontrolling interests 74,090
7,810
81,900

UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

Our interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“~~U.S.~~ GAAP”) for interim financial information and the applicable rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain disclosures accompanying annual consolidated financial statements prepared in accordance with ~~U.S.~~ GAAP are omitted. The year-end balance sheet data was derived from audited consolidated financial statements, but does not include all disclosures required by ~~U.S.~~ GAAP. In the opinion of management, all adjustments, consisting solely of normal recurring adjustments necessary for the fair presentation of our financial position, results of operations, and cash flows for the interim periods, have been included.

The current period’s results of operations are not necessarily indicative of results which ultimately may be achieved for the year. The interim condensed consolidated financial statements and accompanying notes thereto should be read in conjunction with the consolidated financial statements and accompanying notes included in our ~~Annual~~Transition Report on Form ~~10-K~~10-KT for the ~~fiscal year~~transition period ended ~~April 30,~~December 31, 2018, as filed with the SEC on ~~June 28, 2018.~~February 27, 2019.

The preparation of financial statements in conformity with ~~U.S.~~ GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

~~TAX CUTS AND JOBS ACT OF 2017~~

The Tax Cuts and Jobs Act of 2017 was passed on December 22, 2017. This Act includes a number of changes to the corporate income tax system, including (1) a reduction in the statutory federal corporate income tax rate from 35% to 21% for non-REIT “C” corporations, (2) changes to deductions for certain pass-through business income, and (3) potential limitations on interest expense, depreciation, and the deductibility of executive compensation. As a REIT, we generally will not be subject to federal income tax on our taxable income at the corporate level and do not believe that any of the changes from the 2017 Tax Cut and Jobs Act of 2007 will have a material impact on our consolidated financial statements. However, the impact of this Act is not yet fully known, and there can be no assurance that it will not have an adverse impact on our results of operations.

RECENT ACCOUNTING PRONOUNCEMENTS

The following table provides a brief description of recent accounting standards updates (“ASUs”).



Standard	Description	Date of Adoption	Effect on the Financial Statements or Other Significant Matters
ASU ~~2014-09,~~ ~~Revenue from Contracts with Customers~~	This ASU will eliminate the transaction- and industry-specific revenue recognition guidance under current GAAP and replace it with a principle-based approach for determining revenue recognition. The standard outlines a five-step model whereby revenue is recognized as performance obligations within a contract are satisfied.	~~This ASU is effective for annual reporting periods beginning after December 15, 2017, as a result of a deferral of the effective date arising from the issuance of ASU 2015-14,~~ ~~Revenue from Contracts with Customers - Deferral of the Effective Date. We adopted the new standard effective May 1, 2018 using the modified retrospective approach.~~	~~The majority of our revenue is derived from rental income, which is scoped out from this standard and will be accounted for under ASC 840,~~ ~~Leases.~~ Our other revenue streams, which were evaluated under this ASU, include but are not limited to other income from residents determined not to be within the scope of ASC 840 and gains and losses from real estate dispositions. Refer to the Revenues section below for information regarding the impact of adopting the standard on our condensed consolidated financial statements.
~~ASU~~ 2016-02, Leases; ASU 2018-10, Codification Improvements to Topic 842, Leases; ASU 2018-11, Leases: Targeted Improvements; ASU 2018-20, Leases (Topic 842) - Narrow-Scope Improvements for Leases	~~This ASU amends~~These ASUs amend existing accounting standards for lease accounting, including by requiring lessees to recognize most leases on the balance sheet and making certain changes to lessor accounting.	~~This ASU is~~These ASUs are effective for annual reporting periods beginning after December 15, 2018. Early adoption is permitted. We adopted these standards using the modified retrospective approach effective January 1, 2019.	~~We expect our~~Our residential leases, where we are the lessor, will continue to be accounted for as operating leases under the new ~~standard.~~standards. As a result ~~we do not expect~~of adopting these standards, there were no significant changes in the accounting for lease revenue. For leases where we are the lessee, we ~~will recognize~~recognized a right of use asset and ~~related~~ lease liability of $889,000 and $1.0 million, respectively, on our consolidated balance ~~sheets upon adoption. We~~sheets. There are ~~continuing to evaluate the impact~~also additional disclosures required under the new ~~standard may have on our consolidated financial statements.~~
~~ASU 2016-15,~~ ~~Classification of Certain Cash Receipts and Cash Payments~~	This ASU addresses eight specific cash flow issues with the objective of reducing diversity in practice. The cash flow issues include debt prepayment or debt extinguishment costs and proceeds from the settlement of insurance claims.	~~This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. We adopted the new standard effective May 1, 2018.~~	The standard requires we present combined inflows and outflows of cash, cash equivalents, and restricted cash in the consolidated statement of cash flows. See additional disclosures regarding the required change below.
~~ASU 2017-05,~~ Other Income – Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic 610-20): Clarifying the Scope of Asset Derecognition Guidance and Accounting for Partial Sales of Nonfinancial Assets	This ASU clarifies the definition of an in-substance nonfinancial asset and changes the accounting for partial sales of nonfinancial assets to be more consistent with the accounting for a sale of a business pursuant to ASU 2017-01. This ASU allows for either a retrospective or modified retrospective approach.	This ASU is effective for annual reporting periods beginning after December 15, 2017, including interim reporting periods within that reporting period. We adopted the new standard effective May 1, 2018 using the modified retrospective approach.	standard. Refer to the ~~Revenues~~Leases section below for more information regarding the impact of adopting the ~~standard~~standards on our condensed consolidated financial statements.
~~ASU 2018-10,~~ ~~Codification Improvements to Topic 842, Leases~~	~~This ASU was issued to increase shareholders' awareness of narrow aspects of the guidance issued in the amendments and to expedite the improvements under ASU 2016-02.~~	~~This ASU is effective for annual reporting periods beginning after December 15, 2018. Early adoption is permitted.~~	~~We are currently evaluating the impact the new standard may have on our consolidated financial statements.~~
~~ASU 2018-11,~~ ~~Leases: Targeted Improvements~~	This ASU allows lessors to account for lease and non-lease components, by class of underlying assets, as a single lease component if certain criteria are met. The new standard also indicates that companies are permitted to recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption in lieu of the modified retrospective approach and provides other practical expedients.	~~This ASU is effective for annual reporting periods beginning after December 15, 2018. Early adoption is permitted.~~	~~We are currently evaluating the impact the new standard may have on our consolidated financial statements.~~



~~Standard~~	~~Description~~	~~Date of Adoption~~	~~Effect on the Financial Statements or Other Significant Matters~~
ASU 2018-13, Fair Value Measurements (Topic 820) - Disclosure Framework - Changes to the Disclosure Requirement for Fair Value Measurements	This ASU eliminates certain disclosure requirements affecting all levels of measurement, and modifies and adds new disclosure requirements for Level 3 measurements.	This ASU is effective for annual reporting periods beginning after December 15, 2019. Early adoption is permitted.	We are currently evaluating the impact the new standard may have on our disclosures.
ASU 2018-15, Intangibles - Goodwill and Other - Internal-Use Software (Topic 350-40): Customer's Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That is a Service Contract	This ASU reduces the complexity for the accounting for costs of implementing a cloud computing service arrangement. The standard aligns various requirements for capitalizing implementation costs.	This ASU is effective for annual reporting periods beginning after December 15, 2019. Early adoption is permitted.	We are currently evaluating the impact the new standard may have on our condensed consolidated financial statements.
ASU 2019-01, Leases (Topic 842) - Codification Improvements	This ASU provides clarification on various lease related issues and provides for reduced transition disclosure requirements.	This ASU has two effective dates. The various lease issues are effective for annual reporting periods beginning after December 15, 2019. The transition disclosures are effective with the ASU 2016-02, Leases. We adopted this standard using the modified retrospective approach effective January 1, 2019.	The adoption of the standard did not have a material impact on our condensed consolidated financial statements. Refer to the Leases section below for transition disclosures.

~~RECLASSIFICATIONS~~

Certain previously reported amounts have been reclassified to conform to the current financial statement presentation. These reclassifications had no impact on net income as reported in the condensed consolidated statement of operations, total assets, liabilities, or equity as reported in the condensed consolidated balance sheets and total shareholders' equity. We report in discontinued operations the results of operations and the related gains or losses of properties that have either been disposed or classified as held for sale and for which the disposition represents a strategic shift that has or will have a major effect on our operations and financial results.

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

~~Effective May 1, 2018, we adopted ASU 2016-15,~~ ~~Classification of Certain Cash Receipts and Cash Payments~~ which affects the presentation and disclosure of the statements of cash flows. Previously our consolidated statements of cash flows presented transfers between restricted cash and unrestricted cash as operating, financing, and investing cash activities based upon the required or intended purpose for the restricted cash. We revised our condensed consolidated statements of cash flows for the six months ended October 31, 2017 to conform to this presentation, and the effect of the revisions to net cash flows from operating and investing activities as previously reported for the six months ended October 31, 2017 are summarized in the following table:



	(in thousands)
Balance sheet description	March 31, 2019		March 31, 2018
Cash and cash equivalents	$	23,329	$	24,422
Restricted cash	4,819		4,053
Total cash, cash equivalents and restricted cash	$	28,148	$	28,475

(in thousands)
As previously reported Impact of ASU As adjusted and currently reported
October 31, 2017 2016-15 October 31, 2017
Net cash provided by operating activities $ 26,932
$ 801
$ 27,733
Net cash provided by (used by) investing activities (95,112 ) (24,590 ) (119,702 )
Net cash provided by (used by) financing activities 81,825
(410 ) 81,415

Net increase (decrease) in cash, cash equivalents 13,645
(13,645 ) —
Net increase (decrease) in cash, cash equivalents, and restricted cash —
(10,554 ) (10,554 )

Cash and cash equivalents at beginning of period 28,819
(28,819 ) —
Cash, cash equivalents, and restricted cash at beginning of period —
56,800
56,800
Cash and cash equivalents at end of period $ 42,464

Cash, cash equivalents, and restricted cash at end of period $ 3,782
$ 46,246

(in thousands)
Balance sheet description October 31, 2018 October 31, 2017
Cash and cash equivalents 12,777
42,464
Restricted cash 5,085
3,782
Total cash, cash equivalents and restricted cash 17,862
46,246

As of ~~October~~March 31, ~~2018,~~2019, restricted cash consisted of ~~$5.1~~$4.8 million of escrows held by lenders for real estate taxes, insurance, and capital additions.

Effective January 1, 2019, we adopted ASUs 2016-02, 2018-10, 2018-11, 2018-20, and 2019-01 related to leases using the modified retrospective approach. We elected to adopt the package of practical expedients permitted under the transition guidance, which permits us not to reassess prior conclusions about lease identification, classification, and initial direct costs under the new standard, and the practical expedient related to land easements, which allows us to not evaluate existing or expired land easements that were not previously accounted for under ASC 840. We made an accounting policy election to exclude leases in which we are a lessee with a term of 12 months or less from the balance sheet.

As a lessor, we primarily lease multifamily apartment homes which qualify as operating leases with terms that are generally one year or less. Some of our apartment communities have commercial spaces available for lease. Lease terms for these spaces typically range from three to fifteen years. The leases for commercial spaces generally include options to extend the lease for additional terms.

Many of our leases contain non-lease components for utility reimbursement from our residents and common area maintenance from our commercial tenants. We have elected the practical expedient to combine lease and non-lease components for all asset classes. The combined components are included in lease income and are accounted for under ASC 842. The following table shows the lease income recognized during the three months ended March 31, 2019 and 2018.



	(in thousands)
	March 31, 2019		March 31, 2018
Lease income - operating leases	$	44,826	$	40,225
Non-lease components	—		1,211
Total lease income - included in Revenue	$	44,826	$	41,436

The aggregate amount of future scheduled lease income on our operating leases for commercial spaces, excluding any variable lease income and non-lease components, as of March 31, 2019, was as follows:



Year	(in thousands)
2019 (remainder)	$	2,751
2020	3,349
2021	3,356
2022	3,344
2023	3,108
Thereafter	7,967
Total scheduled lease income - operating leases	$	23,875

We adopted ASU 2014-09, Revenue from Contracts with Customers, as of May 1, ~~2018.~~2018, using the modified retrospective approach. We elected to apply the new standard to contracts that ~~are~~were not complete as of May 1, 2018. We also elected to omit disclosing the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. Under the new standard, revenue is recognized in accordance with the transfer of goods and services to customers at an amount that reflects the consideration the company expects to be entitled for those goods and services.

We primarily lease multifamily apartments under operating leases generally with terms of one year or less. Rental revenues are recognized in accordance with ASC ~~840,~~842, Leases, using a method that represents a straight-line basis over the term of the lease. Rental income represents approximately ~~94.3%~~98.3% of our total revenues and includes gross market rent less adjustments for concessions, vacancy loss, and bad debt. Other property revenues represent the remaining ~~5.7%~~1.7% of our total revenue and are primarily driven by ~~utility reimbursement from our residents and~~ other fee income, which is typically recognized at a point in time.

Revenue streams that are included in ASU 2014-09 include:

Other property revenues: We recognize revenue for rental related income not included as a component of a lease, such as ~~utility reimbursement and~~ application fees, as earned, and have concluded that this is appropriate under the new standard.

We concluded that the adoption of the new standard required a cumulative adjustment of $627,000 to the opening balance of retained earnings as of May 1, 2018, due to the sale of a group of properties in the prior fiscal year. The sale of properties was

previously accounted for using the installment method. Under the installment method, we recorded a mortgage receivable net of the deferred gain on sale, which was to be recognized as payments were received. The gain on sale under the new revenue standard is recognized when control of the assets is transferred to the buyer. As a result of our adoption of the new standard, we recorded a cumulative adjustment to retained earnings and increased the mortgage receivable by $627,000 to recognize the previously deferred gain on sale.

The following table presents the disaggregation of revenue streams ~~of our rental income~~ for the ~~six~~three months ended ~~October~~March 31, ~~2018:~~2019:

IMPAIRMENT OF LONG-LIVED ASSETS

We periodically evaluate our long-lived assets, including investments in real estate, for impairment indicators. The impairment evaluation is performed on assets by property such that assets for a property form an asset group. The judgments regarding the existence of impairment indicators are based on factors such as operational performance, market conditions, expected holding period of each asset group, and legal and environmental concerns. If indicators exist, we compare the expected future undiscounted cash flows for the long-lived asset group against the carrying amount of that asset group. If the sum of the estimated undiscounted cash flows is less than the carrying amount of the asset group, an impairment loss is recorded for the difference between the estimated fair value and the carrying amount of the asset group. If our anticipated holding period for properties, the estimated fair value of properties, or other factors change based on market conditions or otherwise, our evaluation of impairment charges may be different and such differences could be material to our consolidated financial statements. The evaluation of anticipated cash flows is subjective and is based, in part, on assumptions regarding future occupancy, rental rates, and capital requirements that could differ materially from actual results. Reducing planned property holding periods may increase the likelihood of recording impairment losses.

During the ~~six~~three months ended ~~October~~March 31, 2019 and 2018, we recorded no impairment charges.

During the six months ended October 31, 2017, we recognized impairment charges of $256,000 on a parcel of land in Bismarck, ND. This property was written down to estimated fair value during the first quarter of fiscal year 2018 based on receipt of a market offer to purchase and our intent to dispose of the property. We disposed of the property during the second quarter of fiscal year 2018.

~~CHANGE IN DEPRECIABLE LIVES OF REAL ESTATE ASSETS~~

We review the estimated useful lives of our real estate assets on an ongoing basis. Prior to our strategic shift to become a multifamily-focused REIT, which began in fiscal year 2016, we operated in five segments (office, retail, industrial, healthcare and multifamily). Accordingly, our estimated useful lives represented a blend of these segments.

During fiscal years 2016, 2017, and 2018, we disposed of the bulk of our office, retail, industrial, and healthcare portfolios. In the first quarter of fiscal year 2018, we determined it was appropriate to review and adjust our estimated useful lives to be specific to our remaining asset portfolio. Effective May 1, 2017, we changed the estimated useful lives of our real estate assets to better reflect the estimated periods during which they will be of economic benefit. Generally, the estimated lives of buildings and improvements that previously were 20-40 years have been decreased to 10-37 years, while those that were previously nine years were changed to 5-10 years. The effect of this change in estimate for the six months ended October 31, 2017, was to increase depreciation expense by approximately $20.3 million, decrease net income by $20.3 million, and decrease earnings per share by $0.15. Of the expense increase, $9.0 million, or $0.07 per share, represented depreciation on assets that were fully depreciated under the new estimated useful lives in the first quarter of fiscal year 2018.

MORTGAGE RECEIVABLE AND NOTES RECEIVABLE

In August 2017, we sold 13 multifamily ~~properties~~communities in exchange for cash and aan $11.0 million note secured by a mortgage on the assets. As of ~~October~~March 31, ~~2018,~~2019, the balance of the note was $10.3 million, with 12 communities remaining ~~balance on~~in the ~~mortgage was $10.5 million.~~pool of assets used to secure the mortgage. The note bears an interest rate of 5.5% and matures in August 2020. Monthly payments are interest-only, with the principal balance payable at maturity. During the ~~six~~

three months ended ~~October~~March 31, ~~2018~~2019 and ~~2017,~~2018, we received and recognized approximately ~~$350,000~~$143,000 and ~~$119,000~~$151,000 of interest income, respectively. During the six months ended October 31, 2018, we received a payment of $425,000 to pay down the balance of the mortgage receivable and released one of the 13 properties from the assets used to secure the mortgage.

In July 2017, we originated a $16.2 million loan in a multifamily development located in New Hope, MN, a Minneapolis suburb. As of July 31, 2018, we had funded the full initial loan balance, which appears in other assets on our Condensed Consolidated Balance Sheets; however, we may fund additional amounts upon satisfaction of certain conditions set forth in the loan agreement. The note bears an interest rate of 6%, matures in July 2023, and provides us an option to purchase the development prior to the loan maturity date.

VARIABLE INTEREST ENTITIES

We have determined that our Operating Partnership and each of our less-than-wholly owned real estate partnerships is a variable interest entity (“VIE”), as the limited partners or the functional equivalent of limited partners lack substantive kick-out rights and substantive participating rights. We are the primary beneficiary of the VIEs, and the VIEs are required to be consolidated on our balance sheet because we have a controlling financial interest in the VIEs and have both the power to direct the activities of the VIEs that most significantly impact the economic performance of the VIEs as well as the obligation to absorb losses or the right to receive benefits from the VIEs that could potentially be significant to the VIEs. Because our Operating Partnership is a VIE, all of our assets and liabilities are held through a VIE.

NOTE 3 • EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income available to common shareholders by the weighted average number of our common shares of beneficial interest (“~~Common Shares”~~common shares”) outstanding during the period. We have issued restricted stock units (“RSUs”) under our 2015 Incentive Plan and Series D Convertible Preferred Units ("Series D preferred

units"), which could have a dilutive effect on our earnings per share upon exercise of the ~~RSUs.~~RSUs or upon conversion of the Series D preferred units (refer to Note 4 for further discussion of the preferred units). Other than the issuance of RSUs and Series D preferred units, we have no outstanding options, warrants, convertible stock or other contractual obligations requiring issuance of additional shares that would result in dilution of earnings. Under the terms of the Operating Partnership’s Agreement of Limited Partnership, limited partners have the right to require the Operating Partnership to redeem their limited partnership units (“Units”) any time following the first anniversary of the date they acquired such Units (“Exchange Right”). Upon the exercise of Exchange Rights, and in our sole discretion, we may issue ~~Common Shares~~common shares in exchange for Units on a one-for-one basis. The following table presents a reconciliation of the numerator and denominator used to calculate basic and diluted earnings per share reported in the condensed consolidated financial statements for the three and six months ended October 31, 2018 and 2017:

(in thousands, except per share data)
Three Months Ended
October 31, Six Months Ended October 31,
2018 2017 2018 2017
NUMERATOR

Income (loss) from continuing operations – controlling interests $ (4,558 ) $ (679 ) $ (2,153 ) $ (14,330 )
Income (loss) from discontinued operations – controlling interests —
13,500
511
15,887
Net income (loss) attributable to controlling interests (4,558 ) 12,821
(1,642 ) 1,557
Dividends to preferred shareholders (1,706 ) (2,812 ) (3,411 ) (5,098 )
Redemption of preferred shares —
(3,649 ) —
(3,649 )
Numerator for basic earnings (loss) per share – net income available to common shareholders (6,264 ) 6,360
(5,053 ) (7,190 )
Noncontrolling interests – Operating Partnership (722 ) 773
(587 ) (871 )
Numerator for diluted earnings (loss) per share $ (6,986 ) $ 7,133
$ (5,640 ) $ (8,061 )
DENOMINATOR

Denominator for basic earnings per share weighted average shares 119,396
120,144
119,320
120,282
Effect of redeemable operating partnership units 13,789
14,623
13,924
14,912
Denominator for diluted earnings per share 133,185
134,767
133,244
135,194
Earnings (loss) per common share from continuing operations – basic and diluted $ (0.05 ) $ (0.06 ) $ (0.04 ) $ (0.19 )
Earnings (loss) per common share from discontinued operations – basic and diluted —
0.11
—
0.13
NET EARNINGS (LOSS) PER COMMON SHARE – BASIC & DILUTED $ (0.05 ) $ 0.05
$ (0.04 ) $ (0.06 )

~~Performance-based restricted stock awards of 253,000 and 115,000 for~~For the three months ended ~~October~~March 31, 2019 and 2018, respectively, 38,000 and ~~2017, respectively,~~10,000 performance-based restricted stock awards and ~~253,000 and 115,000 for the six months ended October 31, 2018 and 2017, respectively,~~RSUs were excluded from the calculation of diluted earnings per share because the assumed proceeds per share plus the average unearned compensation were greater than the average market price of the common stock for the periods presented and, therefore, were anti-dilutive. ~~Refer to Note 13 - Share-Based Compensation for discussion~~

The following table presents a reconciliation of the ~~terms~~numerator and denominator used to calculate basic and diluted earnings per share reported in the condensed consolidated financial statements for ~~these awards.~~the three months ended March 31, 2019 and 2018:



	(in thousands, except per share data)
	Three Months Ended March 31,
	2019			2018
NUMERATOR
Income (loss) from continuing operations – controlling interests	$	(4,698	)	$	(5,813	)
Income (loss) from discontinued operations – controlling interests	—			12,417
Net income (loss) attributable to controlling interests	(4,698		)	6,604
Dividends to preferred shareholders	(1,705		)	(1,705		)
Numerator for basic earnings (loss) per share – net income available to common shareholders	(6,403		)	4,899
Noncontrolling interests – Operating Partnership	(743		)	580
Numerator for diluted earnings (loss) per share	$	(7,146	)	$	5,479
DENOMINATOR
Denominator for basic earnings per share weighted average shares	11,763			11,972
Effect of redeemable operating partnership units	1,367			1,424
Denominator for diluted earnings per share	13,130			13,396
Earnings (loss) per common share from continuing operations – basic and diluted	$	(0.54	)	$	(0.63	)
Earnings (loss) per common share from discontinued operations – basic and diluted	—			1.04
NET EARNINGS (LOSS) PER COMMON SHARE – BASIC & DILUTED	$	(0.54	)	$	0.41

NOTE 4 • EQUITY AND MEZZANINE EQUITY

Operating Partnership Units. ~~Outstanding Units in the~~The Operating Partnership ~~were 13.7~~had 1.4 million outstanding Units at ~~October~~March 31, ~~2018~~2019 and ~~14.1 million Units at April 30,~~December 31, 2018.

Common Shares and Equity Awards. Common ~~Shares~~shares outstanding on ~~October~~March 31, 2019 and December 31, 2018, ~~and April 30, 2018,~~ totaled ~~119.7~~11.8 million and ~~119.5~~11.9 million, respectively. There were ~~13,000~~207 shares issued upon the vesting of equity awards under our 2015 Incentive ~~Award~~ Plan during the three months ended ~~October~~March 31, ~~2018,~~2019, with a total grant-date fair value of ~~$83,000.~~$10,000. During the ~~six~~three months ended ~~October~~March 31, 2018, we issued ~~56,000 restricted common~~1,084 shares, with a total grant date fair value of $347,000. During fiscal year 2018, there were no shares issued during the three months ended October 31, 2017. During the six months ended October 31, 2017, we issued 75,000 restricted Common Shares, with a total grant-date fair value of ~~$445,000. These shares are issued~~$62,000 under our 2015 Incentive ~~Award Plan for executive officer and trustee share-based compensation.~~Plan. These shares vest based on performance and service criteria.

Exchange Rights. Pursuant to the exercise of Exchange Rights, we redeemed Units during the ~~six~~three months ended ~~October~~March 31, 2019 and 2018 weas detailed in the table below.



	(in thousands, except per Unit amounts)
Three months ended March 31,	Number of Units	Aggregate Cost⁽¹⁾		Average Price Per Unit
2019	3	$	156	$	58.95
2018	40	$	2,237	$	56.60

We also redeemed ~~91,000~~ Units for an aggregate cost of $482,000, at an average price per Unit of $5.30. During the six months ended October 31, 2017, we redeemed 999,500 Units for an aggregate cost of $6.0 million, at an average price per Unit of $5.98. During the three and six months ended October 31, 2018, we redeemed 217,000 and 331,000 Units, respectively, in exchange for common shares in connection with Unitholders exercising their Exchange Rights ~~with a total book value of $358,000 and $649,000, respectively. During~~during the three ~~and six~~ months ended ~~October~~March 31, ~~2017, we redeemed no Units~~2019 and 2018 as detailed in ~~exchange for common shares.~~the table below.

Share Repurchase Program. On December ~~7, 2016, our Board of Directors authorized a share repurchase program to repurchase up to $50 million of our Common Shares over a one-year period. On December 5, 2017,~~14, 2018, our Board of Trustees reauthorized ~~this~~our $50 million share repurchase program for an additional one-year period. ~~See Note 15 - Subsequent Events for additional information regarding our recent reauthorization of the share repurchase program.~~ Under this program, we may repurchase ~~Common Shares~~common shares in open-market purchases, including pursuant to Rule 10b5-1 and Rule 10b-18 plans, as determined by management and in accordance with the requirements of the SEC. The extent to which we repurchase our shares, and the timing of repurchases, will depend on a variety of factors, including market conditions, regulatory requirements, and other corporate considerations, as determined by the executive management team. This program may be suspended or discontinued at any time. During the six months ended October 31, 2018, we repurchased and retired 118,000 common shares for an aggregate cost of $615,000, including commissions, at an average price per share of $5.20. During the six months ended October 31, 2017, we repurchased and retired 1.1 million common shares for an aggregate cost of $6.3 million, including commissions, at an average price per share of $5.79. As of ~~October~~March 31, ~~2018, $34.9~~2019, $24.6 million remained available under ~~the~~our $50 million authorized share repurchase program. Common shares repurchased during the three months ended March 31, 2019 and 2018 are detailed in the table below.



	(in thousands, except per share amounts)
Three months ended March 31,	Number of Shares	Aggregate Cost⁽¹⁾		Average Price Per Share
2019	174	$	8,804	$	50.54
2018	29	$	1,442	$	49.79

Series C Preferred Shares. Series C preferred shares outstanding were 4.1 million shares at March 31, 2019 and December 31, 2018. The Series C preferred shares are nonvoting and redeemable for cash at $25.00 per share at our option after October 2, 2022. Holders of these shares are entitled to cumulative distributions, payable quarterly (as and if declared by the Board of Trustees). Distributions accrue at an annual rate of $1.65625 per share, which is equal to 6.625% of the $25.00 per share liquidation preference ($103.0 million liquidation preference in the aggregate).

Series D Preferred Units (Mezzanine Equity). During the three months ended March 31, 2019 we issued 165,600 newly created Series D preferred units at an issuance price of $100 per preferred unit as partial consideration for the acquisition of SouthFork Townhomes. The Series D preferred unit holders receive a preferred distribution at the rate of 3.862% per year. The Series D preferred units have a put option which allows the holder to redeem any or all of the Series D preferred units for cash equal to the issue price. Each Series D preferred unit is convertible, at the holder's option, into 1.37931 Units, representing a conversion exchange rate of $72.50 per unit. The holders of the Series D preferred units do not have any voting rights.

Redeemable Noncontrolling Interests (Mezzanine Equity). Redeemable noncontrolling interests on our Condensed Consolidated Balance Sheets represent the noncontrolling interest in joint ventures in which our unaffiliated partner, at its election, could require us to buy its interest at a purchase price to be determined by an appraisal conducted in accordance with the terms of the agreement, or at a negotiated price. During the three months ended March 31, 2019, we acquired the remaining 34.5% noncontrolling interests in the real estate partnership that owns Commons and Landing at Southgate for $1.2 million . Below is a table reflecting the activity of the redeemable noncontrolling interests for the three months ended March 31, 2019.



	(in thousands)
Balance at December 31, 2018	$	5,968
Net income	(174		)
Acquisition of redeemable noncontrolling interests	(5,794		)
Balance at March 31, 2019	$	—

NOTE 5 • SEGMENT REPORTING

We operate in a single reportable segment which includes the ownership, management, development, redevelopment, and acquisition of apartment communities. Each of our operating properties is considered a separate operating segment because each property earns revenues, incurs expenses, and has discrete financial information. Our chief operating decision-makers evaluate each property's operating results to make decisions about resources to be allocated and to assess performance. We do not group our operations based on geography, size, or type. Our apartment communities have similar long-term economic characteristics and provide similar products and services to our residents. No apartment community comprises more than 10% of consolidated revenues, profits, or assets. Accordingly, our apartment communities are aggregated into a single reportable segment.

Prior to the third quarter of fiscal year 2018, we reported our results in two reportable segments: multifamily and healthcare. We sold substantially all of our healthcare portfolio during the third quarter of fiscal year 2018 and classified it as discontinued operations (see Note 7 for additional information). Healthcare no longer meets the quantitative thresholds for reporting as a separate reportable segment and therefore is included in “all other” with other non-multifamily properties. As of July 31, 2018, we no longer owned any healthcare properties.

Our executive management team comprises our chief operating decision-makers. This team measures the performance of our reportable segment based on net operating income (“NOI”), which we define as total real estate revenues less ~~real estate~~

~~expenses. Real estate expenses consist of~~ property operating expenses, ~~and~~including real estate ~~tax expense and do not include property management expense.~~taxes. We believe that NOI is an important supplemental measure of operating performance for ~~a REIT’s operating~~ real estate because it provides a measure of operations that is unaffected by depreciation, amortization, financing, property management overhead, casualty losses, and general and administrative ~~expenses.~~expense. NOI does not represent cash generated by operating activities in accordance with ~~U.S.~~ 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.

The ~~revenues and~~following tables present NOI for the ~~multifamily reportable segment are summarized as follows for the three and six month~~three-month periods ended ~~October~~March 31, ~~2018~~2019 and ~~2017,~~2018, respectively, along with reconciliations to net income in the condensed consolidated financial statements. Segment assets are also reconciled to total assets as reported in the condensed consolidated financial statements.

(in thousands)
Three Months Ended October 31, 2018 Multifamily
All Other
Total
Real estate revenue $ 43,874
$ 1,764
$ 45,638
Real estate expenses 18,768
568
19,336
Net operating income $ 25,106
$ 1,196
$ 26,302
Property management expenses (1,319 )
Casualty loss (225 )
Depreciation and amortization (19,191 )
General and administrative expenses (3,374 )
Interest expense (7,997 )
Loss on debt extinguishment (4 )
Interest and other income 429
Income (loss) before gain on sale of real estate and other investments and income (loss) from discontinued operations (5,379 )
Gain (loss) on sale of real estate and other investments (232 )
Income (loss) from continuing operations (5,611 )
Income (loss) from discontinued operations —
Net income (loss) $ (5,611 )

(in thousands)
Six Months Ended October 31, 2018 Multifamily
All Other
Total
Real estate revenue $ 86,963
$ 4,621
$ 91,584
Real estate expenses 37,254
1,611
38,865
Net operating income $ 49,709
$ 3,010
$ 52,719
Property management expenses (2,686 )
Casualty loss (450 )
Depreciation and amortization (37,803 )
Impairment of real estate investments —
General and administrative expenses (7,244 )
Interest expense (16,382 )
Loss on debt extinguishment (556 )
Interest and other income 945
Income (loss) before gain on sale of real estate and other investments and income (loss) from discontinued operations (11,457 )
Gain (loss) on sale of real estate and other investments 8,992
Income (loss) from continuing operations (2,465 )
Income (loss) from discontinued operations 570
Net income (loss) $ (1,895 )

Segment Assets and Accumulated Depreciation

Segment assets are summarized as follows as of ~~October~~March 31, ~~2018,~~2019, and ~~April 30,~~December 31, 2018, respectively, along with reconciliations to the condensed consolidated financial statements:



	(in thousands)
As of March 31, 2019	Multifamily			All Other			Total
Segment assets
Property owned	$	1,628,195		$	44,963		$	1,673,158
Less accumulated depreciation	(357,420		)	(14,252		)	(371,672		)
Total property owned	$	1,270,775		$	30,711		$	1,301,486
Cash and cash equivalents							23,329
Restricted cash							4,819
Other assets							29,166
Unimproved land							2,252
Mortgage loans receivable							10,260
Total Assets							$	1,371,312

~~Table of Contents~~

(in thousands)
As of October 31, 2018 Multifamily
All Other
Total
Segment assets

Property owned $ 1,580,260
$ 57,812
$ 1,638,072
Less accumulated depreciation (328,075 ) (16,940 ) (345,015 )
Total property owned $ 1,252,185
$ 40,872
$ 1,293,057
Cash and cash equivalents 12,777
Restricted cash 5,085
Other assets 29,769
Unimproved land 6,522
Mortgage loans receivable 10,530
Total Assets $ 1,357,740


	(in thousands)									(in thousands)
As of April 30, 2018	Multifamily			All Other			Total
As of December 31, 2018										Multifamily			All Other			Total
Segment assets
Property owned	$	1,606,421		$	63,343		$	1,669,764		$	1,582,917		$	44,719		$	1,627,636
Less accumulated depreciation	(294,477		)	(16,847		)	(311,324		)	(340,081		)	(13,790		)	(353,871		)
Total property owned	$	1,311,944		$	46,496		$	1,358,440		$	1,242,836		$	30,929		$	1,273,765
Cash and cash equivalents							11,891									13,792
Restricted cash							4,225									5,464
Other assets							30,297									27,265
Unimproved land							11,476									5,301
Mortgage loans receivable							10,329									10,410
Total Assets							$	1,426,658								$	1,335,997

NOTE 6 • COMMITMENTS AND CONTINGENCIES

Litigation. ~~We are subject to a variety of legal actions for personal injury or property damage arising in~~In the ordinary course of our ~~business, most~~operations, we become involved in litigation. At this time, we know of which are covered by liability insurance. Various resident claims are also brought periodically, most of which are covered by insurance. While resolution of these matters cannot be predicted with certainty, management believes that the final outcome of these claims andno material pending or threatened legal proceedings, ~~will not~~or other proceedings contemplated by governmental authorities, that would have a material ~~effect~~impact on ~~our liquidity, financial position, cash flows, or results~~us.

Environmental Matters. Under various federal, state, and local laws, ordinances, and regulations, a current or previous owner or operator of real estate may be liable for the costs of removal of, or remediation of, certain hazardous or toxic substances in, on, around, or under the property. While we currently have no knowledge of any material violation of environmental laws, ordinances, or regulations at any of our properties, there can be no assurance that areas of contamination will not be identified at any of our properties or that changes in environmental laws, regulations, or cleanup requirements would not result in material costs to us.

Restrictions on Taxable Dispositions. ~~Twenty-four~~Twenty-five of our properties, consisting of ~~4,099~~4,372 apartment ~~units,~~homes, are subject to restrictions on ~~our ability to resell in~~ taxable ~~transactions. These restrictions are contained in~~dispositions under agreements we entered into with some of the sellers or contributors of the properties and are effective for varying periods. ~~The real estate investment amount of these properties (net of accumulated depreciation) was $536.9 million at October 31, 2018.~~ We do not believe that ~~these~~the agreements materially affect the conduct of our business or our decisions whether to dispose of restricted properties during the restriction period because we generally hold these and our other properties for investment purposes rather than for sale. In addition, where we deem it to be in our shareholders' best interests to dispose of such properties, we generally seek to structure ~~sale~~sales of such properties as tax deferred transactions under Section 1031 of the Internal Revenue Code (the "Code").

~~If we decide to sell one or more of these properties and are unable to structure sales of such properties as tax deferred transactions under Section 1031 of the Code,~~ Otherwise, we may be required to provide tax indemnification payments to the parties to these agreements.

~~Table of Contents~~

NOTE 7 • DISCONTINUED OPERATIONS

We report in discontinued operations the results of operations and the related gains or losses on the sales of properties that have either been disposed of or classified as held for sale and meet the classification of a discontinued operation as described in ASC 205, "Presentation of Financial Statements," and ASC 360, "Property, Plant, and Equipment: Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity." Under this standard, a disposal (or classification as held for sale) of a component of an entity or a group of components of an entity is required to be reported in discontinued operations if the disposal represents a strategic shift that has (or will have) a major effect on an entity’s operations and financial results.

We classified no new dispositions or properties held for sale as discontinued operations during the three ~~and six~~ months ended ~~October~~March 31, ~~2018~~2019 and ~~2017.~~2018.

The following information shows the effect on net income and the gains or losses from the sales of properties classified as discontinued operations for the three ~~and six~~ months ended ~~October~~March 31, ~~2018~~2019 and ~~2017,~~2018, respectively:

(in thousands)
Three Months Ended October 31, Six Months Ended October 31,
2018 2017 2018 2017
REVENUE $ —
$ 12,047
$ —
$ 24,002
EXPENSES

Property operating expenses, excluding real estate taxes —
2,387
—
4,644
Real estate taxes —
1,946
—
3,907
Property management —
68
—
140
Depreciation and amortization —
3,424
—
7,013
General and administrative —
15
—
15
TOTAL EXPENSES $ —
$ 7,840
$ —
$ 15,719
Operating income (loss) —
4,207
—
8,283
Interest expense —
(1,436 ) —
(3,421 )
Loss on extinguishment of debt —
(6 ) —
(6 )
Interest income —
117
—
661
Other income —
10
—
60
Income (loss) from discontinued operations before gain (loss) on sale —
2,892
—
5,577
Gain (loss) on sale of discontinued operations —
12,238
570
12,238
INCOME (LOSS) FROM DISCONTINUED OPERATIONS $ —
$ 15,130
$ 570
$ 17,815

~~As of October 31, 2018 and April 30, 2018, we had no assets or liabilities classified as held for sale.~~



	(in thousands)
	Three Months Ended March 31,
	2019	2018
REVENUE	—	$	196
EXPENSES
Property operating expenses, excluding real estate taxes	—	7
Real estate taxes	—	35
Depreciation and amortization	—	2
General and administrative	—	5
TOTAL EXPENSES	—	$	49
Operating income (loss)	—	147
Interest expense	—	(1		)
Other income	—	4
Income (loss) from discontinued operations before gain (loss) on sale of discontinued operations	—	150
Gain (loss) on sale of discontinued operations	—	13,732
INCOME (LOSS) FROM DISCONTINUED OPERATIONS	—	$	13,882

NOTE 8 • ACQUISITIONS AND DISPOSITIONS

~~PROPERTY~~ ACQUISITIONS

We added no$44.0 million of new real estate to our portfolio ~~through property~~during the three months ended March 31, 2019, compared to $128.7 million in the three months ended March 31, 2018. Our acquisitions during the three ~~and six~~ months ended ~~October~~March 31, 2019 and 2018 ~~compared to $153.8 million in the six months ended October 31, 2017. Our acquisitions during the six months ended October 31, 2017~~ are detailed below.

Table of Contents

~~Six~~Three Months Ended ~~October~~March 31, ~~2017~~2019

Date
Acquired
(in thousands)

Total
Acquisition
Cost

Investment Allocation
Acquisitions Land
Building

Intangible
Assets

Multifamily
191 unit - Oxbo - St. Paul, MN⁽¹⁾
May 26, 2017 $ 61,500
$ 5,809
$ 54,910
$ 781
500 unit - Park Place - Plymouth, MN September 13, 2017 92,250
10,609
80,711
930

Total Property Acquisitions $ 153,750
$ 16,418
$ 135,621
$ 1,711



	Date Acquired	(in thousands)
		Total Acquisition Cost		Form of Consideration				Investment Allocation
Acquisitions		Total Acquisition Cost		Cash		Units⁽¹⁾		Land		Building		Intangible Assets
272 homes - SouthFork Townhomes- Lakeville, MN	February 26, 2019	$	44,000	$	27,440	$	16,560	$	3,502	$	39,950	$	548

Total Acquisitions		$	44,000	$	27,440	$	16,560	$	3,502	$	39,950	$	548


(1)	~~Property includes 11,477 square feet~~Value of ~~retail space.~~Series D preferred units at the acquisition date.

~~PROPERTY~~ Three Months Ended March 31, 2018



	Date Acquired	(in thousands)
		Total Acquisition Cost⁽¹⁾		Investment Allocation
Acquisitions		Total Acquisition Cost⁽¹⁾		Land		Building		Intangible Assets
390 homes - Westend - Denver, CO	March 28, 2018	$	128,700	$	25,525	$	102,101	$	1,074

Total Acquisitions		$	128,700	$	25,525	$	102,101	$	1,074


(1)	Acquisition cost was paid in cash.

DISPOSITIONS

During the three months ended ~~October~~March 31, ~~2018,~~2019, we sold ~~one commercial property and~~ one parcel of land for a ~~total~~ sale price of ~~$3.1~~$3.0 million. During the three months ended ~~October~~March 31, ~~2017,~~2018, we sold ~~13 apartment communities,~~ three ~~healthcare~~commercial properties ~~one industrial property, and one parcel of unimproved land~~ for ~~a total~~an aggregate sale price of ~~$63.4~~$36.0 million. The following ~~table details~~tables detail our dispositions for the ~~six~~three months ended ~~October~~March 31, ~~2018~~2019 and ~~2017:~~2018:

~~Six~~Three Months Ended ~~October~~March 31, ~~2018~~2019

(in thousands)
Dispositions Date
Disposed Sales Price
Book Value
and Sale Cost
Gain/(Loss)
Multifamily
44 unit - Dakota Commons - Williston, ND July 26, 2018 $ 4,420
$ 3,878
$ 542

145 unit - Williston Garden - Williston, ND⁽¹⁾
July 26, 2018 12,310
11,313
997

288 unit - Renaissance Heights - Williston, ND⁽²⁾
July 26, 2018 24,770
17,856
6,914

41,500
33,047
8,453

Other
7,849 sq ft Minot Southgate Retail - Minot, ND July 12, 2018 1,925
2,056
(131 )
9,052 sq ft Fresenius - Duluth, MN July 27, 2018 1,900
1,078
822

15,000 sq ft Minot 2505 16th St SW - Minot, ND October 12, 2018 1,710
1,814
(104 )
5,535
4,948
587

Unimproved Land
Grand Forks - Grand Forks, ND July 16, 2018 3,000
2,986
14

Renaissance Heights - Williston, ND⁽³⁾
July 26, 2018 750
684
66

Badger Hills Unimproved - Rochester, MN August 29, 2018 1,400
1,528
(128 )
5,150
5,198
(48 )

Total Property Dispositions $ 52,185
$ 43,193
$ 8,992


~~(1)~~	~~This apartment community was owned by a joint venture entity in which we had an interest of approximately 74.11%. The joint venture was consolidated in our financial statements at October 31, 2018.~~


~~(2)~~	~~This apartment community was owned by a joint venture entity in which we had an interest of approximately 87.14%. The joint venture was consolidated in our financial statements at October 31, 2018.~~


~~(3)~~	~~This parcel of land was owned by a joint venture entity in which we had an interest of approximately 70.00%. The joint venture was consolidated in our financial statements at October 31, 2018.~~

~~Table of Contents~~



		(in thousands)
Dispositions	Date Disposed	Sales Price		Book Value and Sale Cost		Gain/(Loss)
Unimproved Land
Creekside Crossing - Bismarck, ND	March 1, 2019	$	3,049	$	3,205	$	(156	)

Total Dispositions		$	3,049	$	3,205	$	(156	)

~~Six~~Three Months Ended ~~October~~March 31, ~~2017~~2018

(in thousands)
Dispositions
Date
Disposed
Sale Price
Book Value
and Sale Cost
Gain/(Loss)
Multifamily
327 unit - 13 Multifamily properties - Minot, ND⁽¹⁾
August 22, 2017 $ 12,263
$ 11,562
$ 701

Other
4,998 sq ft Minot Southgate Wells Fargo Bank - Minot, ND May 15, 2017 3,440
3,332
108

90,260 sq ft Lexington Commerce Center - Eagan, MN August 22, 2017 9,000
3,963
5,037

17,640 sq ft 1440 Duckwood Medical - Eagan, MN August 24, 2017 2,100
1,886
214

279,834 sq ft Edgewood Vista Hermantown I & II - Hermantown, MN October 19, 2017 36,884
24,697
12,187

51,424
33,878
17,546

Unimproved Land
Bismarck 4916 Unimproved Land - Bismarck, ND August 8, 2017 3,175
3,188
(13 )

Total Property Dispositions $ 66,862
$ 48,628
$ 18,234



		(in thousands)
Dispositions	Date Disposed	Sale Price		Book Value and Sale Cost		Gain/(Loss)
Other
43,404 sq ft Garden View - St. Paul, MN	January 19, 2018	$	14,000	$	6,191	$	7,809
52,116 sq ft Ritchie Medical - St. Paul, MN	January 19, 2018	16,500		10,419		6,081
22,187 sq ft Bismarck 715 East Broadway - Bismarck, ND	March 7, 2018	5,500		3,215		2,285

Total Dispositions		$	36,000	$	19,825	$	16,175


~~(1)~~	These properties include: 4th Street 4 Plex, 11th Street 3 Plex, Apartments on Main, Brooklyn Heights, Colton Heights, Fairmont, First Avenue (Apartments and Office), Pines, Southview, Summit Park, Temple (including 17 South Main Retail), Terrace Heights and Westridge.

NOTE 9 • DEBT

As of ~~October~~March 31, ~~2018,~~2019, we owned ~~93 properties,~~88 apartment communities, of which ~~52 multifamily and other properties~~48 served as collateral for mortgage loans. The majority of these mortgage loans were non-recourse to us other than for standard carve-out obligations. As of ~~October~~March 31, ~~2018,~~2019, we believe that there are no material defaults or ~~compliance issues with respect~~instances of noncompliance in regards to any of these mortgages payable.

~~The aggregate amount~~

Table of ~~required future principal payments on mortgages payable as of October 31, 2018, was as follows:~~

Contents

(in thousands)
Year Ended April 30, Mortgage Loans
2019 $ 4,870
2020 71,833
2021 92,177
2022 70,506
2023 27,494
Thereafter 182,534
Total payments $ 449,414

As ~~noted above, as~~ of ~~October~~March 31, ~~2018,~~2019, we owned ~~41 multifamily and other properties~~40 apartment communities that were not encumbered by mortgages, with 3230 of those properties providing credit support for our unsecured borrowings. Our primary unsecured credit facility is a revolving, multi-bank line of credit, with the Bank of Montreal serving as administrative agent. Our line of credit has total commitments of $250.0 million, with borrowing capacity based on the value of properties contained in the unencumbered asset pool ("UAP"). ~~The~~As of March 31, 2019, the UAP ~~currently provides~~provided for a borrowing capacity of ~~$246.0~~$204.4 million, ~~providing~~with additional borrowing availability of ~~$176.5~~$85.7 million beyond the ~~$69.5~~$118.7 million drawn, asincluding the balance on our operating line of ~~October 31, 2018.~~credit (discussed below). This credit facility matures on August 31, 2022, , with one twelve-month option to extend the maturity date at our election.

~~During the three months ended October 31, 2018, we amended our primary~~We have unsecured ~~credit facility. We extended the maturity date on our existing~~term loans of $70.0 million ~~unsecured term loan,~~and $75.0 million, which ~~now matures~~mature on January 15, ~~2024. We also added a new $75.0 million, seven-year term loan which matures~~2024 and on August 31, ~~2025.~~

~~Table of Contents~~

2025, respectively.

The interest rates on the line of credit and term loans are based, at our option, on either the lender's base rate plus a margin, ranging from 35-85 basis points, or the London Interbank Offered Rate ("LIBOR"), plus a margin that ranges from 135-190 basis points based on our consolidated leverage. Our line of credit and term ~~loan~~loans are subject to customary financial covenants and limitations. We believe that we are in compliance with all such financial covenants and limitations as of ~~October~~March 31, ~~2018.~~2019.

We also have a $6.0 million operating line of credit. This operating line of credit is designated to enhance treasury management activities and more effectively manage cash balances. This operating line has a one-year term, with pricing based on a market spread plus the one-month LIBOR index rate. As of ~~October~~March 31, ~~2018 and April 30, 2018,~~2019, we ~~have~~had $4.5 million outstanding on this operating line compared to no outstanding balance ~~on this operating line.~~as of December 31, 2018.

The following table summarizes our indebtedness at ~~October~~March 31, ~~2018:~~2019:

(in thousands)
October 31, 2018 April 30, 2018 Weighted Average Maturity in Years at October 31, 2018
Unsecured line of credit $ 69,500
$ 124,000
3.8
Term loan A 70,000
70,000
5.2
Term loan B 75,000
—
6.8
Unsecured debt 214,500
194,000

Mortgages payable - fixed 449,414
489,401
4.5
Mortgages payable - variable —
22,739

Total debt $ 663,914
$ 706,140
4.8
Weighted average interest rate on unsecured line of credit 3.72 % 3.35 %
Weighted average interest rate on term loan A (rate with swap) 3.75 % 3.86 %
Weighted average interest rate on term loan B (rate with swap) 4.60 %

Weighted average interest rate on mortgages payable 4.59 % 4.69 %



	(in thousands)
	March 31, 2019			December 31, 2018			Weighted Average Maturity in Years at March 31, 2019
Unsecured lines of credit⁽¹⁾	$	103,677		$	57,500		3.3
Term loans	145,000			145,000			5.6
Unsecured debt	248,677			202,500
Secured line of credit⁽¹⁾	15,000			—			3.4
Mortgages payable - fixed	432,587			445,974			4.2
Total debt	$	696,264		$	648,474		4.3
Weighted average interest rate on primary line of credit	3.90		%	3.72		%
Weighted average interest rate on operating line of credit	4.40		%	—
Weighted average interest rate on term loans (rate with swap)	3.99		%	4.01		%
Weighted average interest rate on mortgages payable	4.54		%	4.58		%


(1)	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 that allowed us to offer the seller tax protection upon purchase.

The aggregate amount of required future principal payments on mortgages payable and term loans as of March 31, 2019, was as follows:



	(in thousands)
2019 (remainder)	$	25,926
2020	76,873
2021	104,547
2022	40,917
2023	48,546
Thereafter	280,778
Total payments	$	577,587

NOTE 10 • DERIVATIVE INSTRUMENTS

Our objective in using interest rate derivatives is to add stability to interest expense and to manage our exposure to interest rate fluctuations. To accomplish this objective, we primarily use interest rate swap contracts to fix the variable interest rate on our term loans. The interest rate swap contracts qualify as cash flow hedges.

Under ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, ~~which we adopted on November 1, 2017,~~ the ineffective portion of a hedging instrument is ~~no longer~~not required to be recognized currently in earnings or disclosed. Changes in the

Table of Contents

fair value of cash flow hedges are recorded in accumulated other comprehensive income and subsequently reclassified into earnings in the period that the hedged transaction affects earnings. Amounts reported in accumulated other comprehensive income for our interest rate swap will be reclassified to interest expense as interest expense is incurred on our term loans. During the next twelve months, we estimate an additional ~~$320,000~~$164,000 will be reclassified as ~~a decrease~~an increase to interest expense.

At ~~October~~March 31, ~~2018,~~2019, we had two interest rate swap contracts in effect with a notional amount of $145.0 million and one additional interest rate swap that becomes effective on January 31, 2023 with a notional amount of $70.0 million.

The table below presents the fair value of our derivative financial instruments as well as their classification on our Condensed Consolidated Balance Sheets as of ~~October~~March 31, ~~2018~~2019 and ~~April 30,~~December 31, 2018.

(in thousands)
October 31, 2018 April 30, 2018
Balance Sheet Location Fair Value Fair Value
Derivative instruments - interest rate swaps Other Assets $ 3,321
$ 1,779

Total derivatives designated as hedging instruments $ 3,321
$ 1,779

~~Table of Contents~~

(in thousands)

March 31, 2019

December 31, 2018

March 31, 2019

December 31, 2018

Balance Sheet Location

Fair Value

Balance Sheet Location

Fair Value

Total derivative instruments designated as hedging instruments - interest rate swaps

Other Assets

818

Accounts Payable and Accrued Expenses

3,165

1,675

The table below presents the effect of the Company’s derivative financial instruments on the Condensed Consolidated Statements of Operations as of ~~October~~March 31, ~~2018~~2019 and ~~2017.~~2018.

(in thousands)
Gain (Loss) Recognized in OCI Location of Gain (Loss) Reclassified from Accumulated OCI into Income Gain (Loss) Reclassified from Accumulated OCI into Income
2018 2017 2018 2017
Three months ended October 31,
Interest rate contracts $ 1,247
—
Interest expense $ 90
—

Total derivatives in cash flow hedging relationships $ 1,247
—
$ 90
—

Six months ended October 31,
Interest rate contracts $ 1,455
—
Interest expense $ 119
—

Total derivatives in cash flow hedging relationships $ 1,455
—
$ 119
—



	(in thousands)
	Gain (Loss) Recognized in OCI					Location of Gain (Loss) Reclassified from Accumulated OCI into Income	Gain (Loss) Reclassified from Accumulated OCI into Income
Three months ended March 31,	2019			2018			2019		2018
Total derivatives in cash flow hedging relationships - Interest rate contracts	$	(2,282	)	$	1,720	Interest expense	$	1	$	(102	)

NOTE 11 • FAIR VALUE MEASUREMENTS

Cash and cash equivalents, restricted cash, accounts payable, accrued expenses, and other liabilities are carried at amounts that reasonably approximate their fair value due to their short-term nature. For variable rate line of credit debt that re-prices frequently, fair values are based on carrying values. ~~The fair values of our financial instruments approximate their carrying amount in the consolidated financial statements except for fixed rate debt.~~

In determining the fair value of other financial instruments, we apply FASB ASC 820, "Fair Value Measurement and Disclosures," or ASC 820. ASC 820 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. Fair value hierarchy under ASC 820 distinguishes between market participant assumptions based on market data obtained from sources independent of the reporting entity (Levels 1 and 2) and the reporting entity’s own assumptions about market participant assumptions (Level 3). Fair value estimates may differ from the amounts that may ultimately be realized upon sale or disposition of the assets and liabilities.

Fair Value Measurements on a Recurring Basis

The fair value of our interest rate swaps ~~are~~is determined using the market standard methodology of netting discounted expected variable cash payments and receipts. The variable cash payments and receipts are based on an expectation of future interest rates (a forward curve) derived from observable market interest rate curves. We also consider both our own nonperformance risk and the counterparty's nonperformance risk in the fair value measurement.

Table of Contents

Fair Value Measurements on a Nonrecurring Basis

There were no non-financial assets or liabilities measured at fair value on a nonrecurring basis at ~~October~~March 31, ~~2018.~~2019. Non-financial assets measured at fair value on a nonrecurring basis at ~~April 30,~~December 31, 2018, consisted of real estate investments that were written-down to estimated fair value during ~~fiscal year 2018. See Note 2 for additional information on impairment losses recognized during fiscal year~~the transition period ended December 31, 2018. The aggregate fair value of these assets by their levels in the fair value hierarchy is as follows:

(in thousands)
Total
Level 1
Level 2
Level 3
April 30, 2018

Real estate investments $ 52,145
—
—
$ 52,145



	(in thousands)
	Total		Level 1	Level 2	Level 3
December 31, 2018
Real estate investments valued at fair value	$	3,049	—	—	$	3,049

As of ~~April 30,~~December 31, 2018, we estimated the fair value of our real estate investments using ~~appraisals,~~ a market offer to ~~purchase, market comparisons, and other market data.~~purchase.

Financial Assets and Liabilities Not Measured at Fair Value

~~For mortgages payable, the~~The fair value of ~~fixed rate loans is~~mortgages payable and mortgage and notes receivable are estimated based on the discounted cash flows of the loans using market research and management estimates of comparable interest rates (Level 3).

~~Table of Contents~~

The estimated fair values of our financial instruments as of ~~October~~March 31, ~~2018,~~2019, and ~~April 30,~~December 31, 2018, respectively, are as follows:


	(in thousands)								(in thousands)
	October 31, 2018				April 30, 2018				March 31, 2019				December 31, 2018
	Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value		Carrying Amount		Fair Value
FINANCIAL ASSETS
Cash and cash equivalents	$	12,777	$	12,777	$	11,891	$	11,891	$	23,329	$	23,329	$	13,792	$	13,792
Mortgage and note receivable									$	26,659	$	26,659	$	26,809	$	26,809
FINANCIAL LIABILITIES
Revolving line of credit	$	69,500	$	69,500	$	124,000	$	124,000
Term loan A⁽¹⁾	$	70,000	$	70,000	$	70,000	$	70,000
Term loan B⁽¹⁾	$	75,000	$	75,000	$	—	$	—
Revolving lines of credit									$	118,677	$	118,677	$	57,500	$	57,500
Term loans⁽¹⁾									$	145,000	$	145,000	$	145,000	$	145,000
Mortgages payable	$	449,414	$	446,360	$	509,919	$	510,803	$	432,587	$	433,844	$	445,974	$	444,241


(1)	Excluding the effect of ~~the~~ interest rate swap ~~agreement.~~agreements.

NOTE 12 ~~• REDEEMABLE NONCONTROLLING INTERESTS~~

Redeemable noncontrolling interests on our Condensed Consolidated Balance Sheets represent the noncontrolling interest in joint ventures in which our unaffiliated partner, at its election, could require us to buy its interest at a purchase price to be determined by an appraisal conducted in accordance with the terms of the agreement, or at a negotiated price. Below is a table reflecting the activity of the redeemable noncontrolling interests.

(in thousands)
Balance at April 30, 2018 $ 6,644
Net income (566 )
Balance at October 31, 2018 $ 6,078

~~NOTE 13~~ • SHARE-BASED COMPENSATION

Share-based awards are provided to officers, non-officer employees, and trustees under our 2015 Incentive Plan approved by shareholders on September 15, 2015, which allows for awards in the form of cash, unrestricted and restricted common shares, and restricted stock units ("RSUs") up to an aggregate of ~~4,250,000~~425,000 shares over the ten-year period in which the plan will be in effect. Under our 2015 Incentive Plan, officers and non-officer employees may earn share awards under a ~~revised~~ long-term incentive plan, which is a forward-looking program that measures long-term performance over the stated performance period. These awards are payable to the extent deemed earned in shares. The terms of the long-term incentive awards granted under the revised program may vary from year to year.

~~Fiscal Year~~ 2019 LTIP Awards

Awards granted to ~~trustees~~officers on ~~July 20, 2018, consist of 64,972 time-based RSU awards. All of these awards are classified as equity awards. The time-based RSUs vest on July 20, 2019.~~

~~Awards granted to management on July 20, 2018,~~March 8, 2019, consist of time-based RSU awards for ~~74,920~~6,391 shares and ~~performance~~performance-based RSU awards based on relative total shareholder return (“TSR”), for ~~149,846~~12,781 shares. All of these awards are classified as equity awards. The time-based RSU awards vest as to one-third of the shares on each of ~~July 20, 2019, April 30,~~March 8, 2020, March 8, 2021, and ~~April 30, 2021.~~

Awards granted on August 10, 2018, consist of 2,368 time-based RSU awards that vest as to one-third on each of August 10, 2019, April 30, 2020, and April 30, 2021; 4,736 performance RSU awards based on TSR; and 5,535 time-based RSU awards that vest as to one-third on each of August 10, 2019, August 10, 2020, and August 10, 2021. All of these awards are classified as equity awards.March 8, 2022.

The ~~TSR performance~~performance-based RSU awards are earned based on our TSR as compared to the MSCI U.S. REIT Index over a forward-looking three-year period. The maximum number of RSUs eligible to be earned under this ~~performance based~~performance-based award is ~~299,692~~25,562 RSUs, which is 200% of the RSUs granted. Earned awards (if any) will fully vest as of the last day of the measurement period. These awards have market conditions in addition to service conditions that must be met for the awards to vest. We recognize compensation expense ratably based on the grant date fair value, as determined using the Monte Carlo valuation model, regardless of whether the market conditions are achieved and the awards ultimately vest. Therefore, previously recorded compensation expense is not adjusted in the event that the market conditions are not achieved. We based the expected volatility

Table of Contents

on the historical volatility of our daily closing share price, the risk-free interest rate on the interest rates on U.S. treasury bonds with a maturity equal to the remaining performance period of the award, and the expected term on the performance period of the award. The assumptions used to value the performance RSU awards were an expected volatility of ~~28.6%~~25.5%, a risk-free interest rate of ~~2.66%~~2.43%, and an expected life of ~~2.78~~2.82 years. The share price at the grant date, ~~July 20, 2018,~~March 8, 2019, was ~~$5.36~~$58.06 per share.

Total Compensation Expense

Share-based compensation expense recognized in the consolidated financial statements for all outstanding share-based awards was ~~$579,811~~$416,000 and ~~$751,000~~$404,000 for the ~~six~~three months ended ~~October~~March 31, ~~2018~~2019 and ~~2017,~~2018, respectively.

~~NOTE 14 • RELATED PARTY TRANSACTIONS~~

~~Transactions with BMO Capital Markets~~

~~We have an historical~~Item 2. Management's Discussion and ~~ongoing relationship with BMO Capital Markets (“BMO”). On July 17, 2017, we engaged BMO to provide financial advisory services in connection with the proposed disposition~~Analysis of ~~our healthcare property portfolio. A family member~~Financial Conditions and Results of Mark O. Decker, Jr., our President and Chief Executive Officer, is an employee of BMO and could have an indirect material interest in any such engagement and related transaction(s). The Board pre-approved the engagement of BMO. During the quarter ended January 31, 2018, we completed the disposition of 27 healthcare properties and paid BMO a transaction fee of $1.8 million in connection with this engagement.

~~NOTE 15 • SUBSEQUENT EVENTS~~

~~Completed Disposition.~~ ~~On November 30, 2018 we sold a commercial property in Minot, ND for a sale price of $6.6 million.~~

~~Share Repurchase Program.~~ ~~On December 5, 2018, our Board of Trustees reauthorized our common share repurchase program for an additional one-year period.~~

~~Table of Contents~~

~~ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS~~

~~OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS~~Operations

The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements included in this report, our audited financial statements for the ~~fiscal year~~transition period ended ~~April 30,~~December 31, 2018, which are included in our Form ~~10-K~~10-KT filed with the SEC on ~~June 28, 2018,~~February 27, 2019, and the risk factors in Item 1A., “Risk Factors,” of our Form ~~10-K~~10-KT for the ~~fiscal year~~transition period ended ~~April 30,~~December 31, 2018.

We consider this and other sections of this Report to contain 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 (the “Exchange Act”), with respect to our expectations for future periods. Forward-looking statements do not discuss historical fact, but instead include statements related to expectations, projections, intentions or other items related to the future. Words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “seeks,” “estimates,” and variations of those words and similar expressions are intended to identify forward-looking statements. These forward-looking statements involve known and unknown risks, uncertainties, and other factors that may cause the actual results, performance, or achievements to be materially different from the results of operations, financial conditions, or plans expressed or implied by the forward-looking statements. Although we believe the expectations reflected in our forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be achieved. 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.

The following factors, among others, could cause our future results to differ materially from those expressed in the forward-looking statements:

economic conditions in the markets where we own properties or markets in which we may invest in the future;

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;

adverse changes in real estate markets, including future demand for apartment homes in our significant markets, barriers of entry into new markets, limitations on our ability to increase rental rates, our ability to identify and consummate attractive acquisitions and dispositions on favorable terms, our ability 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 (Midwest and West regions) of the U.S.;

inability to succeed in any new markets we enter;

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 obtain debt or equity financing on favorable terms, or at all;

level and volatility of interest or capitalization rates or capital market conditions;

changes in operating costs, including real estate taxes, utilities, and insurance costs;

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;

Table of Contents

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 environmental laws and regulations; and

other risks identified in this Report, in other SEC reports, or in other documents that we publicly disseminate.

New factors may also arise from time to time that could have a material adverse effect on our business and results of operations. Except as otherwise required by law, we undertake no obligation to publicly update or revise these forward-looking statements to reflect events, circumstances, or changes in expectations after the date on which this Report is filed. Readers also should review the 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~~Transition Report on Form ~~10-K~~10-KT for the ~~fiscal year~~transition period ended ~~April 30,~~December 31, 2018.

~~Table of Contents~~

Executive Summary

We own, manage, acquire, redevelop, and develop apartment communities. We primarily focus on investing in markets characterized by stable and growing economic conditions, strong employment, and an attractive quality of life that we believe, in combination, lead to higher demand for our apartment homes and retention of our residents. As of ~~October~~March 31, ~~2018,~~2019, we owned interests in 8788 apartment communities consisting of ~~13,702~~13,975 apartment homes. Property owned, as presented in the condensed consolidated balance sheets, was $1.7 billion at March 31, 2019, compared to $1.6 billion at ~~October~~December 31, ~~2018, compared to $1.7 billion at April 30,~~ 2018.

Renting apartment homes is our primary source of revenue, and our business objective is to provide great homes for our residents. We strive to maximize resident satisfaction and retention by investing in high-quality assets in desirable locations and creating vibrant apartment communities through service-oriented operations. We believe that delivering superior resident experiences will enhance resident satisfaction while also driving profitability for our business and our shareholders. We have paid quarterly distributions continuously since our first distribution in 1971.

Overview of the Three Months Ended ~~October~~March 31, ~~2018~~2019

For the three months ended ~~October~~March 31, ~~2018,~~2019, revenues increased by ~~$3.7~~$2.6 million to $45.6 million, compared to ~~$41.9~~$43.0 million for the three months ended ~~October~~March 31, ~~2017.~~2018. Expenses ~~increased~~decreased by ~~$2.8 million~~$681,000 to ~~$43.4~~$44.1 million for the three months ended ~~October~~March 31, ~~2018,~~2019, compared to ~~$40.6~~$44.8 million for the three months ended ~~October~~March 31, ~~2017.~~2018. The drivers of these changes are discussed in more detail in the “Results of Operations” section below.

~~Summarized below are significant~~In keeping with our focus on target markets with strong fundamentals and our execution of strategic priorities, we completed the following transactions ~~that occurred~~ during the ~~second~~first quarter of ~~our fiscal year~~ 2019:

~~On August 31, 2018, we amended our credit agreement to:~~


◦	increase the overall unsecured facility from $370 million to $395 million, reallocating the commitment for the revolving line of credit to $250 million and the remaining $145 million between two term loans;


◦	~~extend the maturity of the revolving line of credit to August 2022;~~


◦	~~extend the existing $70 million unsecured term loan maturity to January 2024; and~~


◦	~~add a new $75 million, 7-year unsecured term loan maturing in August 2025.~~

~~Under~~We acquired SouthFork Townhomes, a 272-home apartment community located in Lakeville, Minnesota, for a total purchase price of $44.0 million, with $27.4 million paid in cash and $16.6 million paid through the ~~amendment,~~issuance of Series D preferred units that have a 3.862% coupon and are convertible, at the ~~interest~~holders' option, into Units at an exchange rate ~~on our existing facilities decreased by 25-35 basis points (depending on our overall leverage). We~~of $72.50 per Unit. The Series D preferred units also ~~entered into~~have a ~~swap agreement for~~put feature that allows the ~~entire $75 million and full term~~holders to put all or any of the ~~new unsecured 7-year term loan~~Series D preferred units to IRET for a cash payment equal to the issue price.

We acquired the remaining 34.5% noncontrolling interests in ~~our ongoing effort to reduce floating interest rate exposure.~~the real estate partnership that owns Commons and Landing at Southgate, located in Minot, North Dakota, for $1.2 million.

On September 10, 2018, we entered into a swap agreement covering the extension of the $70 million term loan from January 2023 to January 2024, resulting in both term loans being covered by swap agreements for the duration of the terms.

We sold one ~~commercial property and one~~ parcel of land in Bismarck, North Dakota, for a total sale price of ~~$3.1~~$3.0 million.

~~On November 30, 2018, we sold a commercial property~~See Note 8 of the Notes to Condensed Consolidated Financial Statements in ~~Minot, North Dakota~~this Report for a ~~sale price of $6.6 million.~~table detailing our acquisitions and dispositions during the three-month periods ended March 31, 2019 and 2018.

~~RESULTS OF OPERATIONS~~Results of Operations

Consolidated Results of Operations for the Three ~~and Six~~ Months Ended ~~October~~March 31, ~~2018~~2019 and ~~2017~~2018

The discussion that follows is based on our consolidated results of operations for the three ~~and six~~ months ended ~~October~~March 31, ~~2018~~2019 and ~~2017. Information about our same-store property results is contained in the Net Operating Income section below.~~2018.



	(in thousands, except percentages)
	Three Months Ended
	March 31,						2019 vs. 2018
	2019			2018			$ Change			% Change
Revenue
Same-store	$	39,612		$	38,048		$	1,564		4.1	%
Non-same-store	5,202			2,006			3,196			159.3	%
Other properties and dispositions	794			2,981			(2,187		)	(73.4	)%
Total	45,608			43,035			2,573			6.0	%

Property operating expenses, including real estate taxes
Same-store	17,806			17,191			615			3.6	%
Non-same-store	1,882			937			945			100.9	%
Other properties and dispositions	348			1,139			(791		)	(69.4	)%
Total	20,036			19,267			769			4.0	%

Net operating income
Same-store	21,806			20,857			949			4.6	%
Non-same-store	3,320			1,069			2,251			210.6	%
Other properties and dispositions	446			1,842			(1,396		)	(75.8	)%
Total	$	25,572		$	23,768		$	1,804		7.6	%
Property management expenses	(1,554		)	(1,377		)	177			12.9	%
Casualty gain (loss)	(641		)	(50		)	591			1,182.0	%
Depreciation and amortization	(18,111		)	(20,516		)	(2,405		)	(11.7	)%
General and administrative expenses	(3,806		)	(3,619		)	187			5.2	%
Interest expense	(7,896		)	(8,296		)	(400		)	(4.8	)%
Loss on extinguishment of debt	(2		)	(121		)	(119		)	(98.3	)%
Interest income	407			673			(266		)	(39.5	)%
Other income	17			16			1			6.3	%
Income (loss) before gain (loss) on sale of real estate and other investments and income (loss) from discontinued operations	(6,014		)	(9,522		)	3,508			36.8	%
Gain (loss) on sale of real estate and other investments	54			2,304			(2,250		)	(97.7	)%
Income (loss) from continuing operations	(5,960		)	(7,218		)	1,258			(17.4	)%
Income (loss) from discontinued operations	—			13,882			(13,882		)	(100.0	)%
NET INCOME (LOSS)	$	(5,960	)	$	6,664		$	(12,624	)	(189.4	)%
Dividends to preferred unitholders	(57		)	—			57			n/a
Net (income) loss attributable to noncontrolling interests – Operating Partnership	743			(580		)	1,323			(228.1	)%
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities	576			520			56			10.8	%
Net income (loss) attributable to controlling interests	(4,698		)	6,604			(11,302		)	(171.1	)%
Dividends to preferred shareholders	(1,705		)	(1,705		)	—			—	%
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS	$	(6,403	)	$	4,899		$	(11,302	)	(230.7	)%

(in thousands, except percentages)
Three Months Ended Six Months Ended October 31,
October 31, 2018 vs. 2017 October 31, 2018 vs. 2017
2018 2017 $ Change % Change 2018 2017 $ Change % Change
REVENUE $ 45,638
$ 41,866
$ 3,772
9.0 % $ 91,584
$ 82,844
$ 8,740
10.5 %
Property operating expenses, excluding real estate taxes 14,247
14,108
139
1.0 % 28,706
26,982
1,724
6.4 %
Real estate taxes 5,089
4,610
479
10.4 % 10,159
9,263
896
9.7 %
Property management expenses 1,319
1,372
(53 ) (3.9 )% 2,686
2,728
(42 ) (1.5 )%
Casualty loss 225
115
110
95.7 % 450
600
(150 ) (25.0 )%
Depreciation and amortization 19,191
17,270
1,921
11.1 % 37,803
42,608
(4,805 ) (11.3 )%
Impairment of real estate investments —
—
—
n/a
—
256
(256 ) n/a
General and administrative expenses 3,374
3,118
256
8.2 % 7,244
7,120
124
1.7 %
TOTAL EXPENSES $ 43,445
$ 40,593
$ 2,852
7.0 % $ 87,048
$ 89,557
$ (2,509 ) (2.8 )%
Operating income (loss) 2,193
1,273
920
72.3 % 4,536
(6,713 ) 11,249
(167.6 )%
Interest expense (7,997 ) (8,509 ) 512
(6.0 )% (16,382 ) (16,640 ) 258
(1.6 )%
Loss on extinguishment of debt (4 ) (334 ) 330
(98.8 )% (556 ) (533 ) (23 ) 4.3 %
Interest income 410
199
211
106.0 % 891
220
671
305.0 %
Other income 19
56
(37 ) (66.1 )% 54
263
(209 ) (79.5 )%
Income (loss) before gain on sale of real estate and other investments and income (loss) from discontinued operations (5,379 ) (7,315 ) 1,936
(26.5 )% (11,457 ) (23,403 ) 11,946
(51.0 )%
Gain (loss) on sale of real estate and other investments (232 ) 5,324
(5,556 ) (104.4 )% 8,992
5,448
3,544
65.1 %
Income (loss) from continuing operations (5,611 ) (1,991 ) (3,620 ) 181.8 % (2,465 ) (17,955 ) 15,490
(86.3 )%
Income (loss) from discontinued operations —
15,130
(15,130 ) (100.0 )% 570
17,815
(17,245 ) (96.8 )%
NET INCOME (LOSS) $ (5,611 ) $ 13,139
$ (18,750 ) (142.7 )% $ (1,895 ) $ (140 ) $ (1,755 ) 1,253.6 %
Net (income) loss attributable to noncontrolling interests – Operating Partnership 722
(773 ) 1,495
(193.4 )% 587
871
(284 ) (32.6 )%
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities 331
455
(124 ) (27.3 )% (334 ) 826
(1,160 ) (140.4 )%
Net income (loss) attributable to controlling interests (4,558 ) 12,821
(17,379 ) (135.6 )% (1,642 ) 1,557
(3,199 ) (205.5 )%
Dividends to preferred shareholders (1,706 ) (2,812 ) 1,106
(39.3 )% (3,411 ) (5,098 ) 1,687
(33.1 )%
Redemption of Preferred Shares —
(3,649 ) 3,649
(100.0 )% —
(3,649 ) 3,649
(100.0 )%
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS $ (6,264 ) $ 6,360
$ (12,624 ) (198.5 )% $ (5,053 ) $ (7,190 ) $ 2,137
(29.7 )%



Weighted Average Occupancy⁽¹⁾	March 31, 2019		March 31, 2018
Same-store	95.6	%	94.2	%
Non-same-store	94.9	%	75.5	%
Total	95.5	%	93.0	%



Number of Apartment Homes	March 31, 2019	March 31, 2018
Same-store	12,848	12,844
Non-same-store	1,127	855
Total	13,975	13,699

We have provided 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. Management believes that measuring performance on a same-store basis is useful to investors because it enables evaluation of how our communities are performing year-over-year. Management uses this measure to assess whether or not it has been successful in increasing net operating income ("NOI"), renewing the leases on existing residents, controlling operating costs, and making prudent capital improvements. The discussion below focuses on the main factors affecting real estate revenue and expenses from same-store apartment communities because changes from one year to another in real estate revenue and expenses from non-same-store apartment communities are due to the addition of those properties to or from our real estate portfolio, and accordingly provide less useful information for evaluating ongoing operational performance of our real estate portfolio.

For the comparison of the three months ended March 31, 2019 and 2018, one community (Park Place) moved into the same-store pool and four apartment communities were non-same-store. Sold communities are included in "Other," which also includes non-multifamily properties and the non-multifamily components of mixed-use properties.

Revenues. ~~Revenues~~Revenue increased by 6.0% to $45.6 million for the three months ended ~~October~~March 31, ~~2018, were $45.6 million,~~2019 compared to ~~$41.9~~$43.0 million in the three months ended ~~October~~March 31, ~~2017, an~~2018. Four non-same-store communities contributed $3.2 million to the increase, ~~of $3.8~~offset by a $2.2 million decrease from dispositions and other properties. Revenue from same-store communities increased 4.1% or ~~9.0%. The increase in revenue for the three months ended October 31, 2018, resulted primarily from properties acquired in fiscal year 2018 and same-store properties, as shown in the table below.~~

(in thousands)
Increase in Total Revenue Three Months Ended
October 31, 2018
Increase in revenue from non-same-store apartment communities $ 5,119
Increase in revenue from same-store apartment communities 1,298
Decrease in revenue from other properties and dispositions (2,645 )
Net increase in total revenue $ 3,772

Revenues for the six months ended October 31, 2018, were $91.6 million, compared to $82.8 million in the six months ended October 31, 2017, an increase of $8.7 million or 10.5%. The increase in revenue for the six months ended October 31, 2018, resulted primarily from properties acquired in fiscal year 2018 and same-store properties, as shown in the table below.

(in thousands)
Increase in Total Revenue Six Months Ended October 31, 2018
Increase in revenue from non-same-store apartment communities $ 11,140
Increase in revenue from same-store apartment communities 2,368
Decrease in revenue from other properties and dispositions (4,768 )
Net increase in total revenue $ 8,740

~~Property Operating Expenses, Excluding Real Estate Taxes. Property operating expenses, excluding real estate taxes, increased by 1.0% to $14.2~~$1.6 million in the three months ended ~~October~~March 31, ~~2018,~~2019, compared to ~~$14.1~~the same period in the prior year. The increase was attributable to 2.7% growth in average rental revenue, including approximately $291,000 due to an adjustment in our estimation of bad debt allowance in the prior year comparable period, and 1.4% growth in occupancy as weighted average occupancy increased to 95.6% from 94.2% for the three months ended March 31, 2019 and 2018, respectively.

Property operating expenses, including real estate taxes. Property operating expenses, including real estate taxes, increased by 4.0% to $20.0 million in the three months ended March 31, 2019, compared to $19.3 million in the same period of the prior ~~fiscal~~ year. An increase of ~~$1.4 million~~$945,000 at non-same-store ~~properties was offset by decreases of $517,000 at same-store properties and $769,000 from sold properties.~~

~~Property operating expenses, excluding real estate taxes, increased by 6.4% to $28.7 million in the~~ six months ended October 31, 2018, compared to $27.0 million in the same period of the prior fiscal year. An increase of $3.0 million at non-same-store properties was partially offset by decreases of $188,000 at same-store properties and $1.1 million from sold properties.

~~Real Estate Taxes.~~ Real estate taxes increased by 10.4% to $5.1 million in the three months ended October 31, 2018, compared to $4.6 million in the same period of the prior fiscal year. An increase of $584,000 at non-same-store properties and $123,000 at same-store propertiescommunities was partially offset by a decrease of ~~$228,000~~$791,000 from ~~sold~~other properties and ~~other properties.~~

~~Real~~dispositions. Property operating expenses, including real estate taxes, at same-store communities increased by 9.7% to $10.2 million in the six months ended October 31, 2018, compared to $9.3 million in the same period of the prior fiscal year. An increase of $1.2 million at non-same-store properties and $309,000 at same-store properties was partially offset by a decrease of $794,000 from sold properties.

~~Property Management Expenses. Property management expense decreased by 3.9% to $1.3 million~~3.6% or $615,000 in the three months ended ~~October~~March 31, ~~2018,~~2019, compared to ~~$1.4 million in~~ the same period in the prior year. Utilities, insurance, and real estate taxes comprised $201,000 of the ~~prior fiscal year. Property management expense was $2.7 million~~increase and rose by 2.3%, despite a reduction of $158,000 in ~~each~~real estate taxes due to the receipt of ~~the~~ ~~six months ended October~~2018 tax invoices which were at amounts less than provided for as of December 31, ~~2018~~2018. Controllable operating expenses, which exclude utilities, insurance, and ~~2017.~~

~~Depreciation and Amortization.~~ ~~Depreciation and amortization~~real estate taxes, increased by ~~11.1% to $19.2 million in the three months ended October 31, 2018, compared to $17.3 million in the same period of the prior fiscal year, primarily attributable to non-same-store properties.~~

~~Depreciation and amortization decreased by 11.3% to $37.8 million in the six months ended October 31, 2018, compared to $42.6 million in the same period of the prior fiscal year. This decrease was~~$414,000 or 4.9%, primarily due to an increase of $411,000 in snow removal costs as a ~~change in the estimated useful lives~~result of our assets in the prior fiscal year, offset by increased depreciation from non-same-store properties.. In the six months ended October 31, 2017, we recognized an additional $9.0 million in depreciation expense due to a one-time adjustment for

~~assets that were fully depreciated under the new estimated useful lives. See Note 2 of the Notes to the Condensed Consolidated Financial Statements in this report for additional information.~~

~~Impairment of Real Estate Investments.~~ We recognized no impairment in the six months ended October 31, 2018, compared to $256,000 in the same period of the prior fiscal year. See Note 2 of the Notes to the Condensed Consolidated Financial Statements in this report for additional information.snowfall impacting certain markets.

~~General and Administrative Expenses.~~Net operating income. General and administrative expenses increased by 8.2% to $3.4 million in the three months ended October 31, 2018, compared to $3.1 million in the same period of the prior fiscal year, due primarily to higher estimated incentive compensation related to the expected achievement of certain financial metric targets. General and administrative expenses increased by 1.7% to $7.2 million in the six months ended October 31, 2018, compared to $7.1 million in the same period of the prior fiscal year.

~~Interest Expense.~~ Interest expense decreased by 6.0% to $8.0 million in the three months ended October 31, 2018, compared to $8.5 million in the same period of the prior fiscal year, due primarily to a decrease in average debt outstanding. Interest expense decreased by 1.6% to $16.4 million in the six months ended October 31, 2018, compared to $16.6 million in the same period of the prior fiscal year, due primarily to a decrease in debt outstanding.

~~Gain (loss) on Sale of Real Estate and Other Investments.~~ We recorded a net loss of $232,000 and a net gain of $5.3 million in continuing operations in the three months ended October 31, 2018 and 2017, respectively. We recorded net gains of $9.0 million and $5.4 million in continuing operations in the six months ended October 31, 2018 and 2017, respectively. Properties sold in the three and six months ended October 31, 2018 and 2017, are detailed below in the section captioned “Property Acquisitions and Dispositions.”

~~Income from Discontinued Operations.~~ We recorded no income from discontinued operations in the three months ended October 31, 2018, compared to $15.1 million in the same period of the prior fiscal year. We recorded income from discontinued operations of $570,000 and $17.8 million , respectively, in the six months ended October 31, 2018 and 2017. See Note 7 of the Notes to the Condensed Consolidated Financial Statements in this report for further information on discontinued operations.

Net Operating Income, ~~(“NOI”)~~or NOI, is a ~~non-U.S. GAAP~~non-GAAP measure, which we define as total real estate revenues less ~~real estate expenses. Real estate expenses consist of~~ property operating expenses, ~~and~~including real estate ~~tax expense and do not include property management expense.~~taxes. We believe that NOI is an important supplemental measure of operating performance for ~~a REIT’s operating~~ real estate because it provides a measure of 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 ~~U.S.~~ 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.

Property management expenses. Property management expense, consisting of property management overhead and property management fees paid to third parties, was $1.6 million in the three months ended March 31, 2019, compared to $1.4 million in the same period of the prior year. The ~~following table shows real estate revenue, real estate operating~~increase in property management expenses is primarily due to technology initiatives and

compensation costs, including severance. Generally, we expect higher property management expenses in 2019 as we implement new technology solutions.

Casualty gain (loss). Casualty loss was $641,000 in the three months ended March 31, 2019, an increase of $591,000 from the same period of the prior year. During the three months ended March 31, 2019, many of our markets were impacted by a series of adverse weather-related events. These events included extreme cold and ~~NOI~~record-setting snowfall, which caused excess ice and snow accumulation resulting in water damage to some of our apartment communities. We believe that the damages will be covered by insurance and have recorded casualty losses of $641,000 during the quarter, representing the aggregate annual stop loss under our insurance coverage.

Depreciation and amortization. Depreciation and amortization decreased by 11.7% to $18.1 million in the three months ended March 31, 2019, compared to $20.5 million in the same period of the prior year, primarily attributable to an adjustment in the prior comparable period due to shortening the estimated useful life of a non-multifamily property, which elevated depreciation expense in the three months ended March 31, 2018.

General and administrative expenses. General and administrative expenses increased by 5.2% to $3.8 million in the three months ended March 31, 2019, compared to $3.6 million in the same period of the prior year, primarily attributable to increases of $316,000 in legal costs related to our pursuit of recovery under a construction defect claim and $193,000 in audit and tax fees which resulted from the acceleration of costs in conjunction with our new fiscal year end. These increases were partially offset by a decrease of $117,000 in severance costs.

Interest expense. Interest expense decreased by 4.8% to $7.9 million in the three months ended March 31, 2019, compared to $8.3 million in the same period of the prior year, due primarily to a decrease in the average balance of our outstanding indebtedness and the replacement of maturing debt with term loans at lower rates.

Interest and other income. We recorded interest income in the three months ended March 31, 2019 and 2018 of $407,000 and $673,000, respectively. The decrease for the three ~~and six~~ months ended ~~October~~March 31, ~~2018 and~~2019 compared to the same period of the prior year was due to a lower balance of cash on hand as proceeds received in December 2017 ~~respectively, for~~from the disposition of our ~~multifamily~~medical office portfolio were not deployed until the end of March 2018.

Gain (loss) on sale of real estate and other ~~properties. For a reconciliation~~investments. We recorded net gains of ~~NOI~~$54,000 and $2.3 million in continuing operations in the three months ended March 31, 2019 and 2018, respectively.

Income from discontinued operations. We recorded no income from discontinued operations in the three months ended March 31, 2019, compared to ~~net income as reported, see~~$13.9 million in the same period of the prior year. See Note 57 of the Notes to the Condensed Consolidated Financial Statements in this ~~report.~~report for further information on discontinued operations.

~~The table also shows multifamily NOI on a same-store and non-same-store properties basis. Same-store properties are properties owned or in service~~Net income (loss) available to shareholders. Net loss available to shareholders was $6.4 million for the ~~entirety of the periods being compared, and, in the case of development or re-development properties, those that have achieved a target level of occupancy of 90%. For comparison of the six~~three months ended ~~October~~March 31, ~~2018 and 2017, four apartment communities were categorized as non-same-store.~~

~~This comparison allows us to evaluate the performance of existing properties and their contribution~~2019 compared to net ~~income. Management believes that measuring performance on a same-store property basis is useful to investors because it enables evaluation~~income of how our properties are performing year-over-year. Management uses this measure to assess whether or not it has been successful in increasing NOI and controlling operating costs. The discussion below focuses on the main factors affecting real estate revenue and real estate expenses from same-store properties.

(in thousands, except percentages)
Three Months Ended October 31, Six Months Ended October 31,
2018 2017 $ Change % Change 2018 2017 $ Change % Change

Real estate revenue
Same-store $ 37,208
$ 35,910
$ 1,298
3.6 % $ 73,946
$ 71,578
$ 2,368
3.3 %
Non-same-store 6,666
1,547
5,119
330.9 % 13,017
1,877
11,140
593.5 %
Other properties and dispositions 1,764
4,409
(2,645 ) (60.0 )% 4,621
9,389
(4,768 ) (50.8 )%
Total $ 45,638
$ 41,866
$ 3,772
9.0 % $ 91,584
$ 82,844
$ 8,740
10.5 %

Real estate expenses
Same-store $ 16,079
$ 16,473
$ (394 ) (2.4 )% $ 32,172
$ 32,051
$ 121
0.4 %
Non-same-store 2,689
728
1,961
269.4 % 5,082
883
4,199
475.5 %
Other properties and dispositions 568
1,517
(949 ) (62.6 )% 1,611
3,311
(1,700 ) (51.3 )%
Total $ 19,336
$ 18,718
$ 618
3.3 % $ 38,865
$ 36,245
$ 2,620
7.2 %

Net operating income
Same-store $ 21,129
$ 19,437
$ 1,692
8.7 % $ 41,774
$ 39,527
$ 2,247
5.7 %
Non-same-store 3,977
819
3,158
385.6 % 7,935
994
6,941
698.3 %
Other properties and dispositions 1,196
2,892
(1,696 ) (58.6 )% 3,010
6,078
(3,068 ) (50.5 )%
Total $ 26,302
$ 23,148
$ 3,154
13.6 % $ 52,719
$ 46,599
$ 6,120
13.1 %

Reconciliation of NOI to net income (loss) available to common shareholders
Property management $ (1,319 ) $ (1,372 ) $ (2,686 ) $ (2,728 )
Casualty loss (225 ) (115 ) (450 ) (600 )
Depreciation/amortization (19,191 ) (17,270 ) (37,803 ) (42,608 )
Impairment of real estate investments —
—
—
(256 )
General and administrative expenses (3,374 ) (3,118 ) (7,244 ) (7,120 )
Interest expense (7,997 ) (8,509 ) (16,382 ) (16,640 )
Loss on debt extinguishment (4 ) (334 ) (556 ) (533 )
Interest and other income 429
255
945
483

Income (loss) before gain on sale of real estate and other investments and income (loss) from discontinued operations (5,379 ) (7,315 ) (11,457 ) (23,403 )
Gain (loss) on sale of real estate and other investments (232 ) 5,324
8,992
5,448

Income (loss) from continuing operations (5,611 ) (1,991 ) (2,465 ) (17,955 )
Income (loss) from discontinued operations —
15,130
570
17,815

Net income (loss) $ (5,611 ) $ 13,139
$ (1,895 ) $ (140 )

Occupancy⁽¹⁾
October 31, 2018 October 31, 2017
Same-store 95.4 % 95.2 %
Non-same-store 92.7 % 92.4 %
Total 95.1 % 94.8 %

Number of Units October 31, 2018 October 31, 2017
Same-store 12,347
11,384

Non-same-store 1,355
2,192

Total 13,702
13,576

~~Real estate revenue from same-store properties increased by 3.6% or $1.3~~$4.9 million in the three months ended ~~October~~March 31, ~~2018, compared~~2018. The decrease in net income available to ~~the same period~~shareholders was driven by decreases in ~~the prior fiscal year, due to growth in average rental revenue.~~

~~Real~~income from discontinued operations and gains on sale of real estate, ~~revenue from same-store properties~~partially offset by increased by 3.3% or $2.4 million in the six months ended October 31, 2018, compared to the same period in the prior fiscal year. Approximately 3.0% of the increase was attributable to growth in average rental revenue and ~~0.3% of the increase was attributable~~decreased depreciation expense.

Funds from Operations. FFO applicable to ~~higher average occupancy.~~

~~Real estate expenses at same-store properties decreased by 2.4% or $394,000 in~~common shares and Units for the three months ended ~~October~~March 31, 2019, increased to $10.1 million compared to $9.2 million for the comparable period ended March 31, 2018, ~~compared to the same period in the prior fiscal year. The decrease~~an increase of 10.8%. This increase was primarily ~~attributable to lower property operating expenses~~ due to ~~cost containment initiatives implemented~~higher net operating income at ~~the end of the first quarter of fiscal year 2019~~same-store and ~~lower insurance costs due to favorable loss experience,~~non-same-store communities and a reduction in interest expense. The increase was partially offset by ~~an increase in real estate taxes due to~~ increases in ~~levy rates in select markets.~~



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)



Large accelerated filer þ	Accelerated filer ☐	Non-accelerated filer ☐	Smaller Reporting Company ☐	Emerging growth company ☐



	Page
Part I. Financial Information
Item 1. Financial Statements - ~~Second~~First Quarter - ~~Fiscal~~ 2019:	3
Condensed Consolidated Balance Sheets (unaudited) ~~October~~March 31, ~~2018,~~2019, and ~~April 30,~~December 31, 2018	3
Condensed Consolidated Statements of Operations (unaudited) For the Three ~~and Six~~ Months ended ~~October~~March 31, ~~2018~~2019 and ~~2017~~ 2018	4
Condensed Consolidated Statements of Comprehensive Income (unaudited) ~~for~~For the Three ~~and Six~~ Months ended ~~October~~March 31, ~~2018~~2019 and ~~2017~~2018	5
Condensed Consolidated Statements of Equity (unaudited) For the ~~Six~~Three Months ended ~~October~~March 31, ~~2018~~2019 and ~~2017~~2018	6
Condensed Consolidated Statements of Cash Flows (unaudited) For the ~~Six~~Three Months ended ~~October~~March 31, ~~2018~~2019 and ~~2017~~ 2018	7
Notes to Condensed Consolidated Financial Statements (unaudited)	98
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	2721
Item 3. Quantitative and Qualitative Disclosures About Market Risk	3729
Item 4. Controls and Procedures	3830

Part II. Other Information
Item 1. Legal Proceedings	3931
Item 1A. Risk Factors	3931
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	3931
Item 3. Defaults Upon Senior Securities	3931
Item 4. Mine Safety Disclosures	3931
Item 5. Other Information	3931
Item 6. Exhibits	4032
Signatures	4133


	(in thousands, except per share data)												(in thousands, except per share data)
	Three Months Ended October 31,						Six Months Ended October 31,						Three Months Ended March 31,
	2018			2017			2018			2017			2019			2018
REVENUE	$	45,638		$	41,866		$	91,584		$	82,844		$	45,608		$	43,035
EXPENSES
Property operating expenses, excluding real estate taxes	14,247			14,108			28,706			26,982			14,804			14,246
Real estate taxes	5,089			4,610			10,159			9,263			5,232			5,021
Property management expense	1,319			1,372			2,686			2,728			1,554			1,377
Casualty loss	225			115			450			600			641			50
Depreciation and amortization	19,191			17,270			37,803			42,608			18,111			20,516
Impairment of real estate investments	—			—			—			256
General and administrative expenses	3,374			3,118			7,244			7,120			3,806			3,619
TOTAL EXPENSES	$	43,445		$	40,593		$	87,048		$	89,557		$	44,148		$	44,829
Operating income (loss)	2,193			1,273			4,536			(6,713		)	1,460			(1,794		)
Interest expense	(7,997		)	(8,509		)	(16,382		)	(16,640		)	(7,896		)	(8,296		)
Loss on extinguishment of debt	(4		)	(334		)	(556		)	(533		)	(2		)	(121		)
Interest income	410			199			891			220			407			673
Other income	19			56			54			263			17			16
Income (loss) before gain on sale of real estate and other investments and income (loss) from discontinued operations	(5,379		)	(7,315		)	(11,457		)	(23,403		)
Income (loss) before gain (loss) on sale of real estate and other investments and income (loss) from discontinued operations													(6,014		)	(9,522		)
Gain (loss) on sale of real estate and other investments	(232		)	5,324			8,992			5,448			54			2,304
Income (loss) from continuing operations	(5,611		)	(1,991		)	(2,465		)	(17,955		)	(5,960		)	(7,218		)
Income (loss) from discontinued operations	—			15,130			570			17,815			—			13,882
NET INCOME (LOSS)	$	(5,611	)	$	13,139		$	(1,895	)	$	(140	)	$	(5,960	)	$	6,664
Dividends to preferred unitholders													(57		)	—
Net (income) loss attributable to noncontrolling interests – Operating Partnership	722			(773		)	587			871			743			(580		)
Net (income) loss attributable to noncontrolling interests – consolidated real estate entities	331			455			(334		)	826			576			520
Net income (loss) attributable to controlling interests	(4,558		)	12,821			(1,642		)	1,557			(4,698		)	6,604
Dividends to preferred shareholders	(1,706		)	(2,812		)	(3,411		)	(5,098		)	(1,705		)	(1,705		)
Redemption of preferred shares	—			(3,649		)	—			(3,649		)
NET INCOME (LOSS) AVAILABLE TO COMMON SHAREHOLDERS	$	(6,264	)	$	6,360		$	(5,053	)	$	(7,190	)	$	(6,403	)	$	4,899
Earnings (loss) per common share from continuing operations – basic and diluted	$	(0.05	)	$	(0.06	)	$	(0.04	)	$	(0.19	)	$	(0.54	)	$	(0.63	)
Earnings (loss) per common share from discontinued operations – basic and diluted	—			$	0.11		—			0.13			—			1.04
NET EARNINGS (LOSS) PER COMMON SHARE – BASIC & DILUTED	$	(0.05	)	$	0.05		$	(0.04	)	$	(0.06	)	$	(0.54	)	$	0.41
DIVIDENDS PER COMMON SHARE	$	0.07		$	0.07		$	0.14		$	0.14



	(in thousands)
	Six Months Ended October 31,
	2018			2017
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	(1,895	)	$	(140	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Depreciation and amortization, including amortization of capitalized loan costs	38,522			43,176
Depreciation and amortization from discontinued operations, including amortization of capitalized loan costs	—			7,077
(Gain) loss on sale of real estate, land, other investments and discontinued operations	(9,562		)	(17,686		)
Share-based compensation expense	580			751
Other, net	956			1,164
Changes in other assets and liabilities:
Other assets	(725		)	(1,853		)
Accounts payable and accrued expenses	(662		)	(4,756		)
Net cash provided by operating activities	$	27,214		$	27,733
CASH FLOWS FROM INVESTING ACTIVITIES
Principal proceeds on mortgage loans receivable	425			—
Increase in notes receivable	(736		)	(6,126		)
Proceeds from sale of discontinued operations	—			35,775
Proceeds from sale of real estate and other investments	52,156			18,039
Insurance proceeds received	1,266			530
Payments for acquisitions of real estate assets	(837		)	(154,122		)
Payments for development and re-development of real estate assets	—			(2,817		)
Payments for improvements of real estate assets	(8,547		)	(10,178		)
Payments for improvements of real estate assets from discontinued operations	—			(803		)
Net cash provided by (used by) investing activities	$	43,727		$	(119,702	)
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on mortgages payable, including prepayment penalties	(63,481		)	(52,143		)
Proceeds from revolving lines of credit	53,017			293,350
Principal payments on revolving lines of credit	(107,517		)	(102,900		)
Proceeds from term loan	74,352			—
Proceeds from construction debt	—			3,124
Payment on financing liability	—			(7,900		)
Repurchase of common shares	(615		)	(6,253		)
Proceeds from issuance of Series C preferred shares, net of issue costs	—			99,467
Repurchase of Series B preferred shares	—			(115,005		)
Repurchase of partnership units	(482		)	(5,982		)
Distributions paid to common shareholders	(16,724		)	(16,881		)
Distributions paid to preferred shareholders	(3,411		)	(5,333		)
Distributions paid to noncontrolling interests – Unitholders of the Operating Partnership	(1,960		)	(2,089		)
Distributions paid to noncontrolling interests – consolidated real estate entities	(2,374		)	(40		)
Net cash provided by (used by) financing activities	$	(69,195	)	$	81,415
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH	1,746			(10,554		)
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT BEGINNING OF PERIOD	16,116			56,800
CASH, CASH EQUIVALENTS, AND RESTRICTED CASH AT END OF PERIOD	$	17,862		$	46,246



	(in thousands)
	As previously reported at April 30, 2018		Adjustment			As revised at April 30, 2018
Common shares of beneficial interest	$	907,843	$	(7,746	)	$	900,097
Noncontrolling interests - consolidated real estate entities	1,078		7,810			8,888
Redeemable noncontrolling interests - consolidated real estate entities	6,708		(64		)	6,644



	(in thousands)
	As previously reported at April 30, 2017		Adjustment			As revised at April 30, 2017
Common shares of beneficial interest	$	916,121	$	(7,216	)	$	908,905
Nonredeemable noncontrolling interests	75,157		7,280			82,437



	(in thousands)
	As previously reported at October 31, 2017		Adjustment			As revised at October 31, 2017
Common shares of beneficial interest	$	910,683	$	(7,216	)	$	903,467
Nonredeemable noncontrolling interests	65,956		7,280			73,236



	(in thousands)
	As previously reported			Impact of ASU			As adjusted and currently reported
	October 31, 2017			2016-15			October 31, 2017
Net cash provided by operating activities	$	26,932		$	801		$	27,733
Net cash provided by (used by) investing activities	(95,112		)	(24,590		)	(119,702		)
Net cash provided by (used by) financing activities	81,825			(410		)	81,415

Net increase (decrease) in cash, cash equivalents	13,645			(13,645		)	—
Net increase (decrease) in cash, cash equivalents, and restricted cash	—			(10,554		)	(10,554		)

Cash and cash equivalents at beginning of period	28,819			(28,819		)	—
Cash, cash equivalents, and restricted cash at beginning of period	—			56,800			56,800
Cash and cash equivalents at end of period	$	42,464
Cash, cash equivalents, and restricted cash at end of period				$	3,782		$	46,246


		(in thousands, except percentages)				(in thousands, except percentages)
		Six Months Ended October 31, 2018				Three Months Ended March 31, 2019
Revenue Stream	Applicable Standard	Amount of Revenue	Percent of Revenue		Applicable Standard	Amount of Revenue		Percent of Revenue
Rental revenue	Leases	86,394	94.3	%	Leases	$	44,826	98.3	%
Other property revenue	Revenue Recognition	5,190	5.7	%	Revenue from contracts with customers	782		1.7	%
		91,584	100.0	%
Total Revenue						$	45,608	100.0	%



	(in thousands, except per share data)
	Three Months Ended October 31,						Six Months Ended October 31,
	2018			2017			2018			2017
NUMERATOR
Income (loss) from continuing operations – controlling interests	$	(4,558	)	$	(679	)	$	(2,153	)	$	(14,330	)
Income (loss) from discontinued operations – controlling interests	—			13,500			511			15,887
Net income (loss) attributable to controlling interests	(4,558		)	12,821			(1,642		)	1,557
Dividends to preferred shareholders	(1,706		)	(2,812		)	(3,411		)	(5,098		)
Redemption of preferred shares	—			(3,649		)	—			(3,649		)
Numerator for basic earnings (loss) per share – net income available to common shareholders	(6,264		)	6,360			(5,053		)	(7,190		)
Noncontrolling interests – Operating Partnership	(722		)	773			(587		)	(871		)
Numerator for diluted earnings (loss) per share	$	(6,986	)	$	7,133		$	(5,640	)	$	(8,061	)
DENOMINATOR
Denominator for basic earnings per share weighted average shares	119,396			120,144			119,320			120,282
Effect of redeemable operating partnership units	13,789			14,623			13,924			14,912
Denominator for diluted earnings per share	133,185			134,767			133,244			135,194
Earnings (loss) per common share from continuing operations – basic and diluted	$	(0.05	)	$	(0.06	)	$	(0.04	)	$	(0.19	)
Earnings (loss) per common share from discontinued operations – basic and diluted	—			0.11			—			0.13
NET EARNINGS (LOSS) PER COMMON SHARE – BASIC & DILUTED	$	(0.05	)	$	0.05		$	(0.04	)	$	(0.06	)


(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 October 31, 2018	Multifamily		All Other		Total
Real estate revenue	$	43,874	$	1,764	$	45,638
Real estate expenses	18,768		568		19,336
Net operating income	$	25,106	$	1,196	$	26,302
Property management expenses					(1,319		)
Casualty loss					(225		)
Depreciation and amortization					(19,191		)
General and administrative expenses					(3,374		)
Interest expense					(7,997		)
Loss on debt extinguishment					(4		)
Interest and other income					429
Income (loss) before gain on sale of real estate and other investments and income (loss) from discontinued operations					(5,379		)
Gain (loss) on sale of real estate and other investments					(232		)
Income (loss) from continuing operations					(5,611		)
Income (loss) from discontinued operations					—
Net income (loss)					$	(5,611	)



Yes þ		No ☐



Yes þ		No ☐



Yes ☐		No þ


	(in thousands)							(in thousands)
Three Months Ended October 31, 2017	Multifamily		All Other		Total
Real estate revenue	$	37,457	$	4,409	$	41,866
Real estate expenses	17,201		1,517		18,718
Three Months Ended March 31, 2019								Multifamily		All Other		Total
Revenue								$	44,814	$	794	$	45,608
Property operating expenses, including real estate taxes								19,688		348		20,036
Net operating income	$	20,256	$	2,892	$	23,148		$	25,126	$	446	$	25,572
Property management expenses					(1,372		)
Casualty loss					(115		)
Property management												(1,554		)
Casualty gain (loss)												(641		)
Depreciation and amortization					(17,270		)					(18,111		)
General and administrative expenses					(3,118		)					(3,806		)
Interest expense					(8,509		)					(7,896		)
Loss on debt extinguishment					(334		)					(2		)
Interest and other income					255							424
Income (loss) before gain on sale of real estate and other investments and income (loss) from discontinued operations					(7,315		)
Income (loss) before gain (loss) on sale of real estate and other investments												(6,014		)
Gain (loss) on sale of real estate and other investments					5,324							54
Income (loss) from continuing operations					(1,991		)
Income (loss) from discontinued operations					15,130
Net income (loss)					$	13,139						$	(5,960	)


	(in thousands)							(in thousands)
Six Months Ended October 31, 2017	Multifamily		All Other		Total
Real estate revenue	$	73,455	$	9,389	$	82,844
Real estate expenses	32,934		3,311		36,245
Three Months Ended March 31, 2018								Multifamily		All Other		Total
Revenue								$	40,054	$	2,981	$	43,035
Property operating expenses, including real estate taxes								18,128		1,139		19,267
Net operating income	$	40,521	$	6,078	$	46,599		$	21,926	$	1,842	$	23,768
Property management expenses					(2,728		)
Casualty loss					(600		)
Property management												(1,377		)
Casualty gain (loss)												(50		)
Depreciation and amortization					(42,608		)					(20,516		)
Impairment of real estate investments					(256		)
General and administrative expenses					(7,120		)					(3,619		)
Interest expense					(16,640		)					(8,296		)
Loss on debt extinguishment					(533		)					(121		)
Interest and other income					483							689
Income (loss) before gain on sale of real estate and other investments and income (loss) from discontinued operations					(23,403		)
Income (loss) before gain (loss) on sale of real estate and other investments and income (loss) from discontinued operations												(9,522		)
Gain (loss) on sale of real estate and other investments					5,448							2,304
Income (loss) from continuing operations					(17,955		)					(7,218		)
Income (loss) from discontinued operations					17,815							13,882
Net income (loss)					$	(140	)					$	6,664



	(in thousands)
As of October 31, 2018	Multifamily			All Other			Total
Segment assets
Property owned	$	1,580,260		$	57,812		$	1,638,072
Less accumulated depreciation	(328,075		)	(16,940		)	(345,015		)
Total property owned	$	1,252,185		$	40,872		$	1,293,057
Cash and cash equivalents							12,777
Restricted cash							5,085
Other assets							29,769
Unimproved land							6,522
Mortgage loans receivable							10,530
Total Assets							$	1,357,740



	(in thousands)
Year Ended April 30,	Mortgage Loans
2019	$	4,870
2020	71,833
2021	92,177
2022	70,506
2023	27,494
Thereafter	182,534
Total payments	$	449,414



	(in thousands)
Balance at April 30, 2018	$	6,644
Net income	(566		)
Balance at October 31, 2018	$	6,078



	(in thousands)
Increase in Total Revenue	Three Months Ended October 31, 2018
Increase in revenue from non-same-store apartment communities	$	5,119
Increase in revenue from same-store apartment communities	1,298
Decrease in revenue from other properties and dispositions	(2,645		)
Net increase in total revenue	$	3,772



Occupancy⁽¹⁾	October 31, 2018		October 31, 2017
Same-store	95.4	%	95.2	%
Non-same-store	92.7	%	92.4	%
Total	95.1	%	94.8	%



	(in thousands, except per share and unit amounts)
Three Months Ended October 31,	2018							2017
	Amount			Weighted Avg Shares and Units⁽¹⁾	Per Share and Unit⁽²⁾			Amount			Weighted Avg Shares and Units⁽¹⁾	Per Share and Unit⁽²⁾
Net income (loss) attributable to controlling interests	$	(4,558	)					$	12,821
Less dividends to preferred shareholders	(1,706		)					(2,812		)
Less redemption of preferred shares	—							(3,649		)
Net income (loss) available to common shareholders	(6,264		)	119,396	$	(0.05	)	6,360			120,144	$	0.05
Adjustments:
Noncontrolling interests – Operating Partnership	(722		)	13,789				773			14,623
Depreciation and amortization	18,446							19,894
Impairment of real estate attributable to controlling interests	—							—
Gains on depreciable property sales attributable to controlling interests	232							(17,562		)
Funds from operations applicable to common shares and Units	$	11,692		133,185	$	0.09		$	9,465		134,767	$	0.07


(2)	Net income ~~attributable~~(loss) available to ~~Investors Real Estate Trust~~common shareholders is calculated on a per common share basis. FFO is calculated on a per common share and Unit basis.



	(in thousands, except for interest rates)
	Remaining Fiscal 2019			Fiscal 2020			Fiscal 2021			Fiscal 2022			Fiscal 2023			Thereafter		Total		Fair Value
Debt
Fixed Rate	$	4,870		$	71,833		$	92,177		$	70,506		$	27,494		$	182,534	$	449,414	$	446,360
Average Interest Rate⁽¹⁾	4.60		%	5.28		%	5.03		%	4.51		%	4.12		%
Variable Rate⁽²⁾	—			—			—			—			$	69,500		$	145,000	$	214,500	$	214,500
Average Interest Rate⁽¹⁾	—			—			—			—			3.72		%


~~(2)~~	~~Excludes the effect of the interest rate swap agreement.~~



					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		Plans or Programs	Programs⁽²⁾
January 1 - 31, 2019	174,085	$	50.54	173,916	$	24,587,276
February 1 - 28, 2019	30	57.89		—	24,587,276
March 1 - 31, 2019	2,443	59.56		—	24,587,276
Total	176,558	$	50.67	173,916


(1)	Includes a total of 2,642 Units redeemed for cash pursuant to the exercise of exchange rights.


(2)	Represents amounts outstanding under our $50 million share repurchase program, which was reauthorized by our Board of Trustees on December 14, 2018.



Exhibit No.	Description
1.1	Underwriting Agreement, dated September 26, 2017, by and among Investors Real Estate Trust, IRET Properties, A North Dakota Limited Partnership, and the several Underwriters listed on Schedule I attached thereto, for whom BMO Capital Markets Corp. and Raymond James & Associates, Inc. are acting as representatives (incorporated by reference to Exhibit 1.1 to the Registrant’s Current Report on Form 8-K filed on October 2, 2017).
3.1	Articles Supplementary to the Registrant’s Articles of Amendment and Third Restated Declaration of Trust designating the Registrant’s 6.625% Series C Cumulative Redeemable Preferred Shares, no par value per share (incorporated by reference to Exhibit 3.2 to the Registrant’s Registration Statement on Form 8-A filed on September 28, 2017).
3.2	Third Amendment to the Agreement of Limited Partnership of IRET Properties, A North Dakota Limited Partnership (incorporated by reference to Exhibit 3.2 to the Registrant’s Current Report on Form 8-K filed on October 2, 2017).
3.3*3.3	Sixth Restated Trustee's Regulations (Bylaws) of Investors Real Estate Trust, adopted on September 20, ~~2018.~~
~~10.1~~	~~Second Amended and Restated Credit Agreement, dated as of August 31,~~ 2018 among IRET Properties, A North Dakota Limited Partnership, as Borrower, the Guarantors from time to time party thereto, the Lenders from time to time party thereto, KeyBank, National Association and PNC Bank, National Association, as Syndication Agents, and Bank of Montreal, as Administrative Agent (incorporated by reference to Exhibit ~~10.1~~3.3 to the Registrant's ~~Current~~Quarterly Report on Form ~~8-K~~10-Q, filed on ~~September 6,~~December 10, 2018).
31.1*	Section 302 Certification of Chief Executive Officer
31.2*	Section 302 Certification of Executive Vice President and Chief Financial Officer
32.1*	Section 906 Certifications of Chief Executive Officer
32.2*	Section 906 Certifications of Executive Vice President and Chief Financial Officer
101 INS**	INSTANCE DOCUMENT
101 SCH**	SCHEMA DOCUMENT
101 CAL**	CALCULATION LINKBASE DOCUMENT
101 LAB**	LABELS LINKBASE DOCUMENT
101 PRE**	PRESENTATION LINKBASE DOCUMENT
101 DEF**	DEFINITION LINKBASE DOCUMENT



/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: ~~December 10, 2018~~May 8, 2019

(in thousands)

Three months ended March 31,

Number of Units

Total Book Value