Timothy Mihalick – President and Chief Executive Officer Ted Holmes – EVP and Chief Financial Officer Cindy Bradehoft - Director, Investor Relations

Drew Babin - Robert W. Baird Carol Kemple - Hilliard Lyons

Good morning and welcome to the Investors Real Estate Trust Fourth Quarter Fiscal Year-End 2015 conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today’s presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please also note, this event is being recorded. I would now like to turn the conference over to Cindy Bradehoft, Director of Investor Relations. Please go ahead, ma’am.

Good morning. IRET’s Form 10-K was filed with the Securities and Exchange Commission yesterday after the close, and our earnings release and supplemental disclosure package was posted to our website at IRET.com and also furnished yesterday on Form 8-K. Before we begin our remarks this morning, I want to remind you that during the call, we will be making forward-looking statements which are predictions, projections, or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results may materially differ because of factors discussed in yesterday’s Form 10-K and the comments made during this conference call, and in the Risk Factors section of our annual and quarterly reports and other filings with the Securities and Exchange Commission. Investors Real Estate Trust does not undertake any duty to update any forward-looking statements. With me today from management are Tim Mihalick, IRET’s President and Chief Executive Officer, and Ted Holmes, Executive Vice President and Chief Financial Officer. I will now turn the call over to Tim Mihalick.

Thank you, Cindy, and good morning everyone. Three months ago, I updated you on the continued progress we are making on our announced strategic plan. I am happy to inform you that IRET continues to execute on our plan and hone our focus. We believe this enhanced focus will allow our investors to capture the value embedded in IRET while at the same time enabling our team to build a better company with greater earnings power. Last night, we released our fiscal 2015 10-K and 8-K, and I would like to highlight the following. We reported a great fiscal year 2015 which included strong operating results led by 3% same store scheduled rent growth in our 95% occupied multi-family portfolio. We have executed sales agreements on substantially all of our office and retail portfolios, and we expect to close on those transactions within the next 60 to 90 days. In fiscal 2015, we continued to prune our portfolio and realized proceeds of $74 million through the sale of 21 one-off assets. We also accomplished our goal of attaining dividend coverage by posting AFFO of $0.55 over our $0.52 dividend. As I mentioned above, these asset sales are a major milestone for us, and these positives I’m touching on - strong operations, greater focus, and the ability to redeploy the cash we expect to have on hand following asset sales will, we believe, allow us to drive significant value for IRET shareholders. After completion of the above sales and a resolution of the MR9 CMBS debt, IRET will have a much different look. The portfolio will consists of 61% multi-family housing, 32% healthcare, with the remaining 7% primarily consisting of our industrial portfolio. I want to be clear that I am not satisfied with the way the market has reacted or failed to react to these changes. We will continue to execute on our strategy and believe this will close the gap between where our stock is and what we believe it is worth. We are first and foremost laser-focused on maintaining our operating strength and closing these key large portfolio sales. Once we close on the office and retail transactions, we will plan to update you in more detail surrounding our strategy. The significant proceeds from the non-core portfolio sales should provide us with flexibility to strengthen our balance sheet and continue to grow our core segments with strong assets. Ted will touch on this further in his remarks. Most importantly, the sale of substantially all of our office and retail portfolio allows IRET to focus on a more concentrated portfolio that has stronger growth potential and better operating leverage. We believe the enhanced focus will allow us to produce stronger results and make those results easier to understand, as well as compare with peer companies for investors and analysts. As I said earlier this month at REIT Week, IRET is a relevant company in the REIT space, and these series of transactions serves notice to that status. Lastly, I am truly excited with the addition of Jeff Caira to IRET’s Board of Trustees. I believe many of you in the REIT space know of Jeff and his history in this business. I have already benefited from his experience and I believe he will be an asset as we continue with the development and implementation of the company’s strategic plan. Thank you, and I would now like to turn the call over to Ted Holmes, IRET’s CFO.

Thank you, Tim. Good morning everyone. I am pleased to report IRET achieved its number one objective in fiscal 2015 of covering its dividend. We delivered $0.55 of AFFO per share, up 20% from a year ago. AFFO was $0.64 a share and in line with expectations. The company continues to demonstrate its ability to grow top line revenue, manage controllable expenses, deliver on its development pipeline, and dispose of weaker assets. Top line revenue growth was 6% for the year led by multi-family with a 3.4% same store revenue growth, this as a result of continued high occupancy which has allowed us to drive scheduled rents. Revenues also benefited from the contributions of $124 million of new developments that were placed into service during the year. Net operating income from our multi-family assets was 40% of company NOI in fiscal 2015 versus the prior comparative period in fiscal 2014 at 37%. Overall, same store expenses for the company as a whole grew by 0.4% during the year compared to 4.4% for the comparative period one year ago. The company continues to see strong occupancy in same store properties as well as well-leased assets placed into service, which translates into expense ratios we believe are right in line with expectations. Detail on segment reporting can be found on Pages 50 through 55 of the 10-K. In the coming two quarters, we anticipate delivering another $200 million of new developments in medical office and multi-family. They are either entirely pre-leased or have strong pre-leasing. These projects are listed on Page 66 of our 10-K. I have to say, management is very excited about these additions to the portfolio. Lastly, in fiscal 2015 the company was successful in disposing of 21 non-core real estate assets for a sales price of $76 million, resulting in an overall gain of $6.5 million compared to book. This is consistent with the $80 million sold in the prior year for a gain of $7 million compared to book. Our investment team has been diligently reshaping the portfolio to be healthier, newer, more productive, and delivering more predictable earnings and cash flow. As for our recent 8-K releases on the sales agreements for our office and retail-related assets, we are pleased with this progress, and upon the close of these transactions we will be more definitive about how those proceed will be deployed. As for the balance sheet, cash on hand was $49 million as of April 30, 2015 as compared to $47 million at the beginning of the fiscal year. Our outstanding mortgage debt remained in line with expectations, and while our use of our line of credit grew during the year to an outstanding balance of $60.5 million at year-end, we did increase our credit capacity on our credit line with our lead bank to $100 million subsequent to year-end. The company continues to have sufficient cash and credit availability to meet its development obligations. Our earnings 8-K release does provide once again a liquidity profile summary. Our debt policy remains consistent. We are fixing our debt interest rates long on assets we intend to hold long term, and using variable rate debt on assets we intend to sell or reposition. Our weighted average interest rate on our mortgage debt fell to 5.16% at year-end, 21 basis points lower than the comparative period one year ago. This is without any material change in the average maturity length of our debt at roughly five years. As the company repositions its portfolio, leverage should remain in the 40 to 45% range. Over time, management does seek to reduce leverage and build a borrowing base of collateral that can lead to a path of a larger unsecured credit facility. We are mindful that our investors want to be assured we have the credit capacity to manage our obligations, which we do. We do have one large non-CMBS loan maturing in fiscal 2017, which we have discussed on previous calls. The loan was transferred to a special servicer, and we are engaged in discussions with the servicer on various options regarding the loan. On April 6, 2015, the company went into monetary default with the servicer on a non-payment to accelerate these discussions. IRET can make no assurances about any possible outcomes of any discussions with the servicer. Subtraction of this portfolio in its entirety from the company is anticipated to be neutral on our metrics. Moving to one other area of interest, during the course of our fiscal year there was a significant reduction in the market price of oil, which translated into a fear that we were going to be severely impacted. That did not happen. Oil prices did decline and have now reached a near-term equilibrium. Oil-related companies in our region as a result have normalized their cost structures but continue to be active. During the fiscal year, the market of Williston, North Dakota was the only multi-family market of ours to experience a revenue decline at a modest negative 2.5%. Currently, we have 400 units in this market out of a 12,000-unit portfolio. We have top of the market properties in this market and are the rent price leader. Our expectation is that we will reverse this decline in revenue, and I will be talking about positive results from this market a year from now. In conclusion, IRET had a great year. During the fiscal year, we are excited to see the continued completion of our developments in process, closing on our property sales, and our team’s attention turning to the asset classes that we believe will have the most beneficial impact for our shareholders. Finally, I am pleased to report that the IRET Board of Trustees declared a quarterly distribution of $0.13 per common share and unit, to be paid July 1, 2015 to the shareholders of record as of June 15, 2015. This will be IRET’s 177th consecutive quarterly distribution. Thank you, and I will now turn the call over to the moderator for questions.

[Operator instructions] Our first question comes from Drew Babin of Robert W. Baird & Company. Please go ahead.

Morning.

Morning, Drew.

Starting out with the CMBS portfolio, I was hoping you could talk about kind of the general yield, the NOI yield on those assets that may or may not be leaving the portfolio, and how we should think about that from an earnings dilution standpoint, as well as the coupon on the debt that’s going away, and then any other ramifications or costs related to potentially giving back the portfolio, if that is the outcome.

Ted, do you want to take that?

Sure. Drew, this is Ted. The debt coupon on the debt itself is 5.92%. The NOI that’s being generated from that portfolio, it would equate to a cap rate in the event that this was provided via a deed in lieu to a lender in that circumstance would be below what we’re seeing in the marketplace based on the activity we have from a sales side, but we’re still in an exploratory stage with the servicer. We have not determined an exact path of how this debt will be dealt with and these assets will be dealt with, but we do believe that the effect on the company will be neutral with respect to our metrics.

That’s helpful, thank you. Then, I was hoping you could talk about Williston fundamentals. You gave the full-year number for revenue growth - I believe that was the full fiscal year number. Can you maybe talk about how the revenue growth out of that market changed from quarter to quarter the last couple of quarters, as well as how you see things going at the Renaissance asset from a rent standpoint.

Drew, this is Tim. Just to give you an update, we continue in Williston to see pretty good occupancy numbers on average on our units over there 80%, 85%. The rents per square foot range from $1.80 to $2.25 on two bedrooms, and around $2.25 a square foot on one bedrooms in the Williston market. We continue to see walk-in traffic and occupancy down a little from a year ago, but not substantially, as Ted touched on earlier. Overall, the general economy continues to be strong in western North Dakota, and actually there was an article this morning in the Minot paper saying that the Williston economy continues to move along, even in spite of the oil and energy drop. Again, we feel comfortable with what we’re seeing in that part of the state.

Thank you. Last question, just on the medical portfolio, the 1.5% same property NOI growth for fiscal ’15, is that a number that we should think of as sort of a run rate on a net lease sort of business going forward, and how do you think about the significant 2016 renewals with rents expiring at, I think, on average $14 for the lease expirations?

Yes Drew, this is Tim again. I would feel pretty comfortable with that being a run rate number, and to this point we feel pretty comfortable as we continue to engage our MOB tenants that those expirations of the leases will continue on, we’ll be able to negotiate those going forward.

Okay, so you’re pretty confident that market rents likely exceed the $14 expiring rent on average?

I would think they would be right in that neighborhood, maybe a little north of that.

Okay. Thank you, appreciate it.

Thanks, Drew.

[Operator Instructions] Our next question comes from Carol Kemple of Hilliard Lyons. Please go ahead.

Good morning.

Good morning, Carol.

On your portfolio sales, can you just kind of talk about the interest in the portfolios and the pricing relative to your initial expectations?

Carol, this is Tim. Certainly the interest we saw was all types of investors, and I think as I stated earlier, we probably had about 130 CAs initially when it went out to market. We’re right where we hoped to be on the pricing, if not a little better than we expected on the asset sales.

And then considering there could possibly be some initial dilution when these assets are sold, do you think that will affect the dividend?

I guess that’s a decision that the Board makes on a quarterly basis. As we’ve stated in the past, our intent is to continue to cover the dividend. From my perspective, that would allow us to -- we expect it will continue on in the form it is, but again that’s a Board decision.

Okay, thank you.

Okay, thanks.

Thank you. This concludes our question and answer session. I’d like to turn the conference back over to our leaders for any final remarks.

Thank you. Again, thank you for taking the time this morning to get an update on IRET, where we’re at. It’s really an exciting time, we believe, in IRET. The amount of activity that we have in front of us, the number of transactions occurring, but we believe as we sit here today that we’ve [indiscernible] these events that allow us to drive meaningful shareholder value as we look to the future, and we believe as we accelerate the events and close on the sales transactions and redeploy our capital in the numerous ways, that IRET will be a much better company as we move into the future. Thank you, and have a happy Fourth of July.

Thank you, sir. Today’s conference has now concluded and we thank you all for attending today’s presentation. You may now disconnect your lines.