Exhibit 99.1
INVESTORS REAL ESTATE TRUST
PRO FORMA FINANCIAL INFORMATION
(UNAUDITED)
The accompanying unaudited pro forma condensed consolidated financial statements of Investors Real Estate Trust (the “Company”) have been prepared to provide pro forma financial information with respect to:
· the sale of 34 office properties and 1 parcel of unimproved land (the “Office Portfolio”) for a sale price of $250.0 million in cash, which closed August 3, 2015, as described in Item 2.01 of the Current Report on Form 8-K with which this Exhibit 99.1 is filed and
· the assumption by the buyer of a $17.3 million mortgage loan and the repayment of $89.6 million in mortgage loans that encumbered certain properties in the Office Portfolio.
The unaudited pro forma condensed consolidated balance sheet as of April 30, 2015 gives effect to the transactions described above as if they had occurred on April 30, 2015.
The unaudited pro forma condensed consolidated statements of operations for the fiscal years ended April 30, 2015, 2014 and 2013 give effect to the transactions described above as if they had occurred on May 1, 2012.
In the opinion of the Company’s management, all adjustments necessary to reflect the effects of the transactions described above have been made. The unaudited pro forma financial information is presented for illustrative purposes only and is not necessarily indicative of what the Company’s actual results of operations or financial condition would have been had the transactions described above occurred on the dates indicated, nor does it purport to represent the future results of operations or financial condition of the Company.
The unaudited pro forma consolidated financial statements and accompanying notes should be read in conjunction with the financial statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2015.
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
APRIL 30, 2015
(unaudited)
|
| (in thousands, except share data) |
| |||||||
|
| Historical (a) |
| Office |
| Pro Forma |
| |||
ASSETS |
|
|
|
|
|
|
| |||
Real estate investments |
|
|
|
|
|
|
| |||
Property owned |
| $ | 2,098,037 |
| $ | (300,573 | ) | $ | 1,797,464 |
|
Less accumulated depreciation |
| (448,987 | ) | 84,253 |
| (364,734 | ) | |||
|
| 1,649,050 |
| (216,320 | ) | 1,432,730 |
| |||
Development in progress |
| 153,994 |
| — |
| 153,994 |
| |||
Unimproved land |
| 25,827 |
| (325 | ) | 25,502 |
| |||
Total real estate investments |
| 1,828,871 |
| (216,645 | ) | 1,612,226 |
| |||
Real estate held for sale |
| 22,912 |
| — |
| 22,912 |
| |||
Cash and cash equivalents |
| 48,970 |
| 105,476 |
| 154,446 |
| |||
Other investments |
| 329 |
| — |
| 329 |
| |||
Receivable arising from straight-lining of rents, net of allowance |
| 26,211 |
| (6,043 | ) | 20,168 |
| |||
Accounts receivable, net of allowance |
| 3,675 |
| (208 | ) | 3,467 |
| |||
Real estate deposits |
| 2,489 |
| 23,090 |
| 25,579 |
| |||
Prepaid and other assets |
| 3,907 |
| (418 | ) | 3,489 |
| |||
Intangible assets, net of accumulated amortization |
| 27,267 |
| (929 | ) | 26,338 |
| |||
Tax, insurance, and other escrow |
| 11,249 |
| (277 | ) | 10,972 |
| |||
Property and equipment, net of accumulated depreciation |
| 1,542 |
| — |
| 1,542 |
| |||
Goodwill |
| 1,911 |
| (126 | ) | 1,785 |
| |||
Deferred charges and leasing costs, net of accumulated amortization |
| 18,504 |
| (4,778 | ) | 13,726 |
| |||
TOTAL ASSETS |
| $ | 1,997,837 |
| $ | (100,858 | ) | 1,896,979 |
| |
LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY |
|
|
|
|
|
|
| |||
LIABILITIES |
|
|
|
|
|
|
| |||
Accounts payable and accrued expenses |
| $ | 71,072 |
| $ | (6,448 | ) | 64,624 |
| |
Revolving line of credit |
| 60,500 |
| — |
| 60,500 |
| |||
Mortgages payable |
| 974,828 |
| (122,647 | ) | 852,181 |
| |||
Construction debt and other |
| 144,115 |
| (4 | ) | 144,111 |
| |||
TOTAL LIABILITIES |
| 1,250,515 |
| (129,099 | ) | 1,121,416 |
| |||
COMMITMENTS AND CONTINGENCIES |
|
|
|
|
|
|
| |||
REDEEMABLE NONCONTROLLING INTERESTS — CONSOLIDATED REAL ESTATE ENTITIES |
| 6,368 |
| — |
| 6,368 |
| |||
EQUITY |
|
|
|
|
|
|
| |||
Investors Real Estate Trust shareholders’ equity |
|
|
|
|
|
|
| |||
Series A Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value, 1,150,000 shares issued and outstanding at April 30, 2015, aggregate liquidation preference of $28,750,000) |
| 27,317 |
| — |
| 27,317 |
| |||
Series B Preferred Shares of Beneficial Interest (Cumulative redeemable preferred shares, no par value, 4,600,000 shares issued and outstanding at April 30, 2015, aggregate liquidation preference of $115,000,000) |
| 111,357 |
| — |
| 111,357 |
| |||
Common Shares of Beneficial Interest (Unlimited authorization, no par value, 124,455,624 shares issued and outstanding at April 30, 2015) |
| 951,868 |
| — |
| 951,868 |
| |||
Accumulated distributions in excess of net income |
| (438,432 | ) | 28,241 |
| (410,191 | ) | |||
Total Investors Real Estate Trust shareholders’ equity |
| 652,110 |
| 28,241 |
| 680,351 |
| |||
Noncontrolling interests — Operating Partnership (13,999,725 units at April 30, 2015) |
| 58,325 |
| — |
| 58,325 |
| |||
Noncontrolling interests — consolidated real estate entities |
| 30,519 |
| — |
| 30,519 |
| |||
Total equity |
| 740,954 |
| 28,241 |
| 769,195 |
| |||
TOTAL LIABILITIES, REDEEMABLE NONCONTROLLING INTERESTS AND EQUITY |
| $ | 1,997,837 |
| $ | (100,858 | ) | 1,896,979 |
| |
See accompanying notes to unaudited pro forma financial information.
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 2015
(unaudited)
|
| (in thousands, except per share data) |
| |||||||
|
| Historical (c) |
| Office |
| Pro Forma |
| |||
REVENUE |
|
|
|
|
|
|
| |||
Real estate rentals |
| $ | 235,852 |
| $ | (28,071 | ) | $ | 207,781 |
|
Tenant reimbursement |
| 43,818 |
| (13,761 | ) | 30,057 |
| |||
TRS senior housing revenue |
| 3,520 |
| — |
| 3,520 |
| |||
TOTAL REVENUE |
| 283,190 |
| (41,832 | ) | 241,358 |
| |||
EXPENSES |
|
|
|
|
|
|
| |||
Depreciation/amortization related to real estate investments |
| 67,112 |
| (9,881 | ) | 57,231 |
| |||
Utilities |
| 20,881 |
| (4,137 | ) | 16,744 |
| |||
Maintenance |
| 30,924 |
| (5,399 | ) | 25,525 |
| |||
Real estate taxes |
| 33,945 |
| (7,385 | ) | 26,560 |
| |||
Insurance |
| 5,839 |
| (581 | ) | 5,258 |
| |||
Property management expenses |
| 18,502 |
| (1,792 | ) | 16,710 |
| |||
Other property expenses |
| 906 |
| — |
| 906 |
| |||
TRS senior housing expenses |
| 2,997 |
| — |
| 2,997 |
| |||
Administrative expenses |
| 11,824 |
| — |
| 11,824 |
| |||
Other expenses |
| 2,010 |
| — |
| 2,010 |
| |||
Amortization related to non-real estate investments |
| 3,495 |
| (1,344 | ) | 2,151 |
| |||
Impairment of real estate investments |
| 6,105 |
| (1,442 | ) | 4,663 |
| |||
TOTAL EXPENSES |
| 204,540 |
| (31,961 | ) | 172,579 |
| |||
Operating income |
| 78,650 |
| (9,871 | ) | 68,779 |
| |||
Interest expense |
| (59,020 | ) | 7,917 |
| (51,103 | ) | |||
Interest income |
| 2,238 |
| — |
| 2,238 |
| |||
Other income |
| 723 |
| (1 | ) | 722 |
| |||
Income before gain on sale of real estate and other investments |
| 22,591 |
| (1,955 | ) | 20,636 |
| |||
Gain on sale of real estate and other investments |
| 6,093 |
| — |
| 6,093 |
| |||
Income from continuing operations |
| 28,684 |
| (1,955 | ) | 26,729 |
| |||
Income from continuing operations attributable to noncontrolling interests — Operating Partnership |
| (1,526 | ) | 197 |
| (1,329 | ) | |||
Net income attributable to noncontrolling interests — consolidated real estate entities |
| (3,071 | ) | — |
| (3,071 | ) | |||
Dividends to preferred shareholders |
| (11,514 | ) | — |
| (11,514 | ) | |||
INCOME FROM CONTINUING OPERATIONS AVAILABLE TO COMMON SHAREHOLDERS |
| 12,573 |
| (1,758 | ) | 10,815 |
| |||
INCOME FROM CONTINUING OPERATIONS PER COMMON SHARE — BASIC & DILUTED |
| $ | .11 |
| $ | (.02 | ) | $ | .09 |
|
Weighted average common shares outstanding — basic |
| 118,004 |
| — |
| 118,004 |
| |||
Weighted average common shares outstanding — diluted |
| 134,598 |
| — |
| 134,598 |
| |||
See accompanying notes to unaudited pro forma financial information.
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 2014
(unaudited)
|
| (in thousands, except per share data) |
| |||||||
|
| Historical (c) |
| Office |
| Pro Forma |
| |||
REVENUE |
|
|
|
|
|
|
| |||
Real estate rentals |
| $ | 219,921 |
| $ | (28,084 | ) | $ | 191,837 |
|
Tenant reimbursement |
| 45,561 |
| (14,325 | ) | 31,236 |
| |||
TRS senior housing revenue |
| 1,627 |
| — |
| 1,627 |
| |||
TOTAL REVENUE |
| 267,109 |
| (42,409 | ) | 224,700 |
| |||
EXPENSES |
|
|
|
|
|
|
| |||
Depreciation/amortization related to real estate investments |
| 67,592 |
| (9,850 | ) | 57,742 |
| |||
Utilities |
| 21,864 |
| (4,716 | ) | 17,148 |
| |||
Maintenance |
| 31,158 |
| (5,795 | ) | 25,363 |
| |||
Real estate taxes |
| 32,982 |
| (7,450 | ) | 25,532 |
| |||
Insurance |
| 5,165 |
| (571 | ) | 4,594 |
| |||
Property management expenses |
| 16,961 |
| (1,620 | ) | 15,341 |
| |||
Other property expenses |
| 357 |
| (243 | ) | 114 |
| |||
TRS senior housing expenses |
| 1,331 |
| — |
| 1,331 |
| |||
Administrative expenses |
| 10,743 |
| — |
| 10,743 |
| |||
Other expenses |
| 2,132 |
| (3 | ) | 2,129 |
| |||
Amortization related to non-real estate investments |
| 3,326 |
| (1,336 | ) | 1,990 |
| |||
Impairment of real estate investments |
| 42,566 |
| — |
| 42,566 |
| |||
TOTAL EXPENSES |
| 236,177 |
| (31,584 | ) | 204,593 |
| |||
Gain on involuntary conversion |
| 2,480 |
| — |
| 2,480 |
| |||
Operating income |
| 33,412 |
| (10,825 | ) | 22,587 |
| |||
Interest expense |
| (59,142 | ) | 8,727 |
| (50,415 | ) | |||
Interest income |
| 1,908 |
| (2 | ) | 1,906 |
| |||
Other income |
| 483 |
| — |
| 483 |
| |||
Loss before gain on sale of real estate and other investments |
| (23,339 | ) | (2,100 | ) | (25,439 | ) | |||
Loss on sale of real estate and other investments |
| (51 | ) | — |
| (51 | ) | |||
Loss from continuing operations |
| (23,390 | ) | (2,100 | ) | (25,490 | ) | |||
Loss from continuing operations attributable to noncontrolling interests — Operating Partnership |
| 5,792 |
| 264 |
| 6,056 |
| |||
Net income attributable to noncontrolling interests — consolidated real estate entities |
| (910 | ) | — |
| (910 | ) | |||
Dividends to preferred shareholders |
| (11,514 | ) | — |
| (11,514 | ) | |||
LOSS FROM CONTINUING OPERATIONS AVAILABLE TO COMMON SHAREHOLDERS |
| (30,022 | ) | (1,836 | ) | (31,858 | ) | |||
LOSS FROM CONTINUING OPERATIONS PER COMMON SHARE — BASIC & DILUTED |
| $ | (.28 | ) | $ | (.02 | ) | $ | (.30 | ) |
Weighted average common shares outstanding — basic |
| 105,331 |
| — |
| 105,331 |
| |||
Weighted average common shares outstanding — diluted |
| 127,028 |
| — |
| 127,028 |
| |||
See accompanying notes to unaudited pro forma financial information.
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED APRIL 30, 2013
(unaudited)
|
| (in thousands, except per share data) |
| |||||||
|
| Historical (c) |
| Office |
| Pro Forma |
| |||
REVENUE |
|
|
|
|
|
|
| |||
Real estate rentals |
| $ | 204,719 |
| $ | (27,972 | ) | $ | 176,747 |
|
Tenant reimbursement |
| 43,339 |
| (13,781 | ) | 29,558 |
| |||
TOTAL REVENUE |
| 248,058 |
| (41,753 | ) | 206,305 |
| |||
EXPENSES |
|
|
|
|
|
|
| |||
Depreciation/amortization related to real estate investments |
| 59,306 |
| (9,362 | ) | 49,944 |
| |||
Utilities |
| 18,792 |
| (4,246 | ) | 14,546 |
| |||
Maintenance |
| 28,340 |
| (5,551 | ) | 22,789 |
| |||
Real estate taxes |
| 32,182 |
| (7,315 | ) | 24,867 |
| |||
Insurance |
| 3,734 |
| (499 | ) | 3,235 |
| |||
Property management expenses |
| 15,003 |
| (1,654 | ) | 13,349 |
| |||
Other property expenses |
| 1,008 |
| — |
| 1,008 |
| |||
Administrative expenses |
| 8,494 |
| — |
| 8,494 |
| |||
Other expenses |
| 2,173 |
| (2 | ) | 2,171 |
| |||
Amortization related to non-real estate investments |
| 3,027 |
| (1,167 | ) | 1,860 |
| |||
TOTAL EXPENSES |
| 172,059 |
| (29,796 | ) | 142,263 |
| |||
Gain on involuntary conversion |
| 5,084 |
| — |
| 5,084 |
| |||
Operating income |
| 81,083 |
| (11,957 | ) | 69,126 |
| |||
Interest expense |
| (61,154 | ) | 9,411 |
| (51,743 | ) | |||
Interest income |
| 222 |
| (2 | ) | 220 |
| |||
Other income |
| 526 |
| (8 | ) | 518 |
| |||
Income from continuing operations |
| 20,677 |
| (2,556 | ) | 18,121 |
| |||
Income from continuing operations attributable to noncontrolling interests — Operating Partnership |
| (2,365 | ) | 472 |
| (1,893 | ) | |||
Net income attributable to noncontrolling interests — consolidated real estate entities |
| (809 | ) | — |
| (809 | ) | |||
Dividends to preferred shareholders |
| (9,229 | ) | — |
| (9,229 | ) | |||
INCOME FROM CONTINUING OPERATIONS AVAILABLE TO COMMON SHAREHOLDERS |
| 8,274 |
| (2,084 | ) | 6,190 |
| |||
INCOME FROM CONTINUING OPERATIONS PER COMMON SHARE — BASIC & DILUTED |
| $ | .09 |
| $ | (.02 | ) | $ | .07 |
|
Weighted average common shares outstanding — basic |
| 93,344 |
| — |
| 93,344 |
| |||
Weighted average common shares outstanding — diluted |
| 114,535 |
| — |
| 114,535 |
| |||
See accompanying notes to unaudited pro forma financial information.
Notes to Unaudited Pro Forma Financial Information
The following pro forma adjustments are included in the unaudited pro forma condensed balance sheet and/or the unaudited pro forma condensed consolidated statements of operations:
(a) Reflects the consolidated historical balance sheets of the Company as of April 30, 2015, as contained in the historical consolidated financial statements and notes thereto presented in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2015.
(b) Represents the pro forma adjustments to the Company’s consolidated balance sheet as of April 30, 2015 to reflect the sale of the Office Portfolio as follows:
· The elimination of the assets and liabilities of the Office Portfolio as if the sale had occurred on April 30, 2015.
· The receipt of net proceeds of approximately $105.6 million, which reflects the repayment of mortgage indebtedness secured by the Office Portfolio and the payment of transaction costs and the deposit of approximately $23.1 million of net proceeds that are being held by a qualified intermediary in order to facilitate a potential tax-free exchange under Section 1031 of the Internal Revenue Code in the event the Company identifies an acquisition opportunity.
· A gain of approximately $19.0 million on the sale of the Office Portfolio, which was partially offset by $4.1 million in penalties on the prepayment of indebtedness secured by the Office Portfolio.
(c) Reflects the consolidated statements of operations of the Company for the fiscal years ended April 30, 2015, 2014 and 2013, as contained in the historical financial statements and notes thereto presented in the Company’s Annual Report on Form 10-K for the fiscal year ended April 30, 2015.
(d) Represents the pro forma adjustments to the Company’s consolidated statements of operations for the fiscal years ended April 30, 2015, 2014 and 2013 to reflect the sale of the Office Portfolio as follows:
· The elimination of revenues and expenses of the Office Portfolio for the periods presented.
· The adjustment of interest expense to reflect the Company’s statement of operations as if the repayment of mortgage indebtedness secured by the Office Portfolio occurred on May 1, 2012. The consolidated statements of operations do not assume any interest income on the estimated net cash proceeds from the sale of the Office Portfolio.