Good morning, and welcome to the Investors Real Estate Trust Second Quarter Fiscal 2016 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Karleene Knight, Finance Manager. Please go ahead.

IRET's Form 10-Q 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-Q 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, Karleene, and good morning, everyone. Second quarter of fiscal year 2016 was the most active quarter in the company's history. During the quarter, we disposed of 39 office properties, 1 healthcare property and 15 retail properties for gross sales price of $372 million, or approximately 18.5% of our gross asset base as of this time last year, October 31, 2014. That much activity has obviously impacted our reported financials this quarter, and I believe we can provide some additional clarity to our activities this morning. We will continue to execute our strategy of bringing our developments online, acquiring accretive assets and growing NOI in our same-store segments. Although the quarter saw the impact of expenses relating to our continued transformation, our overall performance year-to-date was generally in line with our expectations. For the quarter, our FFO per share was $0.06 and $0.22 for the quarter and year-to-date, respectively, per NAREIT definition, which includes the impact of prepayment penalties on our dispositions and default interest on the CMBS loan. Excluding those nonroutine items, FFO would have been $0.12 and $0.29, respectively. I believe it is important to reiterate that we expected to see an impact on our NOI as we are working hard to replace the income from the assets we sold. And we believe that will be accomplished as we recognize the positive impact from our announced acquisitions and the delivery of our development pipeline. Lost in the discussion surrounding our dispositions were 3 acquisitions we purchased that fit our strategic initiative. We acquired 2 multi-family projects: a 74-unit project in Grand Forks, North Dakota, for $6.5 million and a 276-unit project in Rochester, Minnesota for $56 million, both with a projected initial yield of approximately 6%. We also placed into service a 70,000 square foot medical facility in Brooklyn Park, Minnesota, with an expected cost of $25 million and a 25-year lease with a going-in lease constant of 10%. In light of the continued discussion about the downward slide in oil price, I wanted to provide you with some comments published yesterday from Lynn Helms, Director of the North Dakota Department of Mineral Resources, in the Bismarck Tribune. Helms says he believes North Dakota operators are not in a panic mode, and some are expressing confidence that oil prices may begin to rebound somewhat in the latter half of 2016. Helms states that preliminary numbers show an increase of 6,800 barrels per day from September to October, and an increase in the number of producing wells in the state from 13,036 in September to 13,174 in October of this year. What does this all mean regarding our multi-family supply in some of our energy-impacted markets, specifically Minot and Williston, North Dakota? Ted will touch on the specifics later in the call, but we have seen a pullback in both occupancy and asking scheduled rent. But as I stated last quarter, this is something that we anticipated in our underwriting. On to new topics. As we continue to search for investment opportunities, we did not ignore our existing portfolio. We believe that we have well-located multi-family properties in many of our markets that justify the initiative of a value-add repositioning program with which we can deliver returns in the 8% to 10% range on capital invested. We have identified 23 assets in our portfolio with an expected cash outlay of $12 million to $15 million per year for the next 3 years that we believe will improve the quality of our portfolio and an incremental increase to our NOI. Many of you have inquired in the past regarding our plans to begin offering guidance, and I am pleased to announce that we are planning to offer guidance for fiscal year 2017, which begins May 1, 2016. It is our expectation that as we continue to navigate through our transition, we will be able to shed additional clarity to our changing story. Before I turn the call over to Ted, I would like to touch on a new component of our capital allocation strategy; our authorized $50 million share repurchase program. This past quarter, we deployed approximately $22 million to the buyback as we evaluated our best use for capital. Our Board and our management team is more focused than ever on capital allocation, and we are weighing the best investment alternatives, which include development, acquisitions and share repurchases. In the future, we will continue to weigh all these options and make, what we believe, will be the best use of capital on behalf of you, our fellow shareholders. Thank you, and I will now turn the call over to Ted Holmes, IRET's CFO.

Thank you, Tim. Good morning, everyone. As Tim indicated, IRET completed its busiest quarter of activity in its history. We detail the $372 million of sales that occurred during the quarter on Page 22 of the 10-Q. We expected that these events would have a negative impact on the performance period with regard to the company's short-term operating results and they did. But we anticipated this, with the understanding we are now increasing our focus on our operating platform and company operations to our core real estate segments. To provide some context to our operating results for the quarter, adding back the one-time deduction of loss on extinguishment of debt and default interest carried, FFO per share would have been $0.12 for the quarter. This, again, was expected as the company incurred various expense increases for the quarter compared to the same quarter in the prior year as a result of a reallocation of continuing costs to our same-store multi-family portfolio that were once spread across commercial segment costs as well. I will speak to these in a moment. For the company as a whole, total revenue for the year-to-date 6-month period ending October 31, 2015, was up 2.8% compared to the same period one year ago. Total expenses increased by 4.6%, of which 3.6% was depreciation. Total revenue for the 3-month period ending October 31, 2015, was up 2.1% compared to the same period one year ago. Total expenses increased by 12.6%, led by increases in maintenance, management, insurance and depreciation. Speaking specifically to same-store net operating income performance for all segments: For the 3 months ending October 31, 2015, compared to the same period one year ago, net operating income across all segments experienced a decline of 5.7%; mostly, again, affected by our same-store multi-family operations. Continued growth in nonsame-store results helped reduce this to a 4% decline compared to the prior comparative quarter. Same-store multi-family net operating income for the second quarter ending October 31 compared to the prior year's comparative period was down 10.8%. This was impacted by lower revenues in our energy-related markets. In addition, increased expenses in our maintenance, management, insurance and real estate taxes affected same-store results. Again, we have to consider, this company is now comparing itself to one of its strongest comparative quarter periods in the last 5 years, given the strength of the economy in the region 12 months ago. Its operating margins in multi-family are within the range of historical expectations, and we believe we can grow them again. And again, management was expecting some shifting of cost to our multi-family segment as a result of sales activity, which had an impact on these results. But we are aware, our focus now will be to reverse these trends. These cost escalations included $342,000 in management costs, and to a degree, increased benefit and labor costs as staff was added to create a more scalable management platform. This totaled $295,000 for the quarter. Additional cost increases were in insurance of roughly $307,000 and real estate taxes of roughly $200,000 for the period. With regard to management and maintenance expenses discussed on Page 36 of the 10-Q, we do not expect these same percentage increases going forward. Our historical run rate on these categories in same-store multi-family operations has been 2% per year and we would expect this going forward. We knew these sales events would be disruptive, but as the company is now increasingly focused on multi-family operations, our emphasis on taking advantage of the scalable platform we have built will be our primary objective. We intend these efforts to return our operating margins of net income in our same-store multi-family segment to a growing trend. Our objectives also include adding larger, newer assets, which provide scalability within our operating platform and translate into stronger operating margins and improving cash flow growth. We are now also implementing a number of initiatives for revenue growth in our multi-family operations, including value-add property repositioning to target increases, which we believe can result in estimated 8% to 10% cash on cash returns. We are committing $12 million to $15 million per year for this program. In addition, our utility reimbursement program or RUBS has now been implemented on roughly 25% of the portfolio. Keep in mind, net operating income in our nonsame-store multi-family segment for the 6 months ending 10/31/15 compared to the prior comparative period is up $3.1 million and will eventually be moved to same-store. Nonsame-store NOI growth continues to perform well across the company as we are placing into service our market-leading higher-rent product into our core markets. On Page 30 of the 10-Q, we include a breakdown of the overall year-over-year revenue growth, inclusive of developments placed in service in fiscal year-to-date 2016. Net operating income growth in our healthcare segment remained generally flat for the quarter as compared to the prior comparative year. Our industrial segment saw a slight increase, but is rather immaterial in the scope of the company. As for our capital allocation strategy, rebuilding our portfolio with high-quality real estate as our primary objective, followed by deleveraging the company over time and retaining high functioning and productive employees across the company. During the quarter, we did exercise our authorization to repurchase shares, as we felt this was a beneficial capital allocation strategy, as we believe the price at which we were able to purchase shares was not reflective of the underlying value of the company. During the quarter, we purchased 2.9 million shares at an average share price of $7.69. During the first 6 months of the fiscal year, we did place into service 2 multi-family developments, 2 medical office buildings and 1 retail asset, which was in development before we made the decision to exit our retail segment. These assets totaled $137 million in development costs and -- with a projected initial yield ranging from 6% to 10%. We also expect $174 million in development to be delivered and placed into service in the coming year, with these projects having a projected initial yield of approximately 6%. As for the balance sheet, cash on hand was $55 million as of October 31, 2015 at quarter end as compared to $49 million at the beginning of our fiscal year. Our mortgage debt remains at 43% of real estate assets, down from 47% at the beginning of the fiscal year. And we have sufficient liquidity from our $100 million line of credit, with credit availability of $82.5 million at quarter end to meet our ongoing operations. 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 4.87% at quarter end. This is without any material change in the average maturity length of our debt at roughly 5 years. As the company repositions its portfolio, we believe leverage should remain below 50%, with the goal of driving this lower over time. As we have advised previously, we are mindful that our investors want to be assured we have the credit capacity to manage our obligations and we do. With regard to our real estate holdings in the energy-impacted markets of western North Dakota, we want to remind our investors that we took a careful balanced approach to developing in these markets in the last 5 years, mitigating our investment risk by taking on joint venture partners. We also realize these markets provided outsized returns for 3 to 4 years and are now returning to normalcy and will eventually stabilize. Keep in mind, in our core markets, we are exposed to multiple market demand drivers, including financial services, agriculture, commodities, manufacturing, healthcare, energy, and Minneapolis, Minnesota, home to 17 Fortune 500 companies, the likes of UnitedHealth Group, Target, 3M, General Mills and U.S. Bancorp. As for the debt markets, we are fully aware of the risk to the company, including potential for interest rates to rise and debt markets to be more conservative. We are mitigating these risks by a commitment to deleveraging over time and fixing our debt long. In addition, focusing our portfolio growth in apartments with a best-in-class real estate in mind. We believe this is an exciting time in the real estate in our region, with some of the strongest economic indicators in the country. We continue to deliver on our development pipeline and growth initiatives in general, and our team is increasingly focusing its attention on the asset classes that we believe can provide strong growing cash flow and improved operating margins. In conclusion, IRET had quarterly results representative of a company in transition and we expected this. We are committed to building a portfolio of modern, efficient and high-quality assets that work well within our operating platform and deliver growing predictable cash flow and higher margins. We believe this is attainable as we continue to focus our efforts on asset classes we believe will provide the company better risk-adjusted and faster growing cash flows going forward. Lastly, we recognize there may be some disappointment with our results that management otherwise expected. With the company eventually providing guidance, we want to assure you, we understand you expect a more predictable company and we believe we are building that. Finally, I am pleased to report the IRET Board of Trustees declared a quarterly distribution of $0.13 per common share and unit, to be paid January 15, 2016, to the shareholders of record on January 4, 2016. This will be IRET's 179th consecutive quarterly distribution. Thank you, and I will now turn the call over to the moderator for questions.

[Operator Instructions] The first question comes from Carol Kemple of Hilliard Lyons.

Can you give us any update on your CMBS loan that you have with the special servicer?

Carol, this is Ted. We're in discussions with them, as we speak. There has been some progress and dialogue for the last 30 days, which we're encouraged by. But that loan is still with us and we're in a discussion with them about our options. So we're still in that discussion with them.

Will we see that the default interest related to that loan in future quarters so that's taken care of? Or was that just a one-time item with the second quarter?

Well, that default interest flows through our discontinued operations within our income statement. And our anticipation is when that loan is gone via what we think will be a transfer to the servicer, that interest would be gone and not be part of the income statement going forward.

But until then, we'll see a similar amount in the coming quarters, is that safe to assume?

Well, our anticipation is that this matter with this servicer and lender is completed this quarter. So I don't know that this as something that will go on in future quarters. We expect this to be resolved in the next 30 days.

The next question comes from Drew Babin of Robert W. Baird & Company.

And so looking at your top 5 markets in the multi-family portfolio, Bismarck, North Dakota, Grand Forks, Billings, Montana are all -- I guess, Billings is in the top 5, but they're all very important markets. So can you talk about what's happening with the large occupancy declines in the markets in that area that you do not define as energy-related? The decline in revenues, the expenses aside, is relatively large and we're just wondering what drivers are behind that.

Well, Drew, this is Ted. This part of the country, given the activity with regard to energy and even commodities 5 years ago, with the prices where they were, saw a tremendous amount of supply come into some of these markets from a construction standpoint, and we're now seeing that from a competitive standpoint. So we're having to, on the expense side, we're really having to hire additional high-functioning employees to help maintain occupancy in these markets. And again, we're trying to solve to -- 95%. So if we're at 93%, 94%, we're a little short in those markets, but we're still very competitive. And we've got market-leading product up there that we've built, but it's a pretty competitive market. But you're still looking at a part of the country, for example, Bismarck that it's median household income exceeds the national average by 10%. You've got population growth that's double the national average, if not better than that. You've got a very dynamic economy up there and we were trying to be competitive, but there is a lot of supply that's come on.

Drew, this is...

And as you look forward, is there a certain point in time where that supply begins to sort of taper off as it has in Williston with pretty much everything that's going to be developed sort of out there at this point.

Yes, Drew, this is Tim. As a follow-up to that, we are beginning to see that back off. The supply is starting to reduce and I think we're seeing some stabilization in those markets. And in the markets that you referenced, additionally, we'd seen as high as 97% occupancy in some of those markets. So we've seen the decline on our end as supply has come online.

Okay. And I just had one question on the 71 France development. Percentage leased on that declined about 6% since last quarter. And I was just wondering what's going on with that. That's something I'm not used to seeing.

Yes, that was just additional units that were brought online. So the overall phasing in of the project looked like there was a drop in occupancy when, in essence, there was more units occupied from more units to occupy.

The next question comes from David Daglio of The Boston Company.

Can you be a little more specific about what's happening with rents in the areas that are tangentially related to the oil market? And what type of givebacks, if any, you plan on giving over the next couple of years? And then you made a comment that you believed that it's stabilizing. Why do you think it's stabilizing?

Dave, this is Tim Mihalick. I assume -- are you talking about givebacks regarding rent concessions and those kinds of things?

Yes.

Okay. I think as we just talked about, we continue to see some supply that came on here within the last 12 months. A lot of that now is coming to market and that's certainly causing some competition and some reduction in overall rents. We've been reactive to the market, much as our competitors have and feel that, at this point in time, we're not going to see additional units come online. And as we begin to look out over the next 6 to 8 to 12 months, stabilization will begin to occur and we're comfortable with our position in those markets and being able to maintain the rents that we now are asking, that are part of -- if you're able to see the presentation, we've shown on that.

Okay.

David, one thing to follow-up on that. This is Ted Holmes. We've been operating in these markets for a long time and developing in these markets. And we built really a best-in-class product. And with respect to the western half of North Dakota where we've developed, we've mitigated some of that with our joint venture partners being introduced to our projects. And at this -- and with that, we also know that a lot of the housing out in that part of the state is probably going to go away in the next 12 to 18 months with respect to what they call the man camps. And so those bodies are going to need a place to live. So that's one of the reasons we think it will stabilize. Where that's at is that 75% occupancy, 85% to be determined. But certainly, we've gone down in occupancy in that specific part of the state. But in the balance of the state and in our region in this -- part of the country, we've done quite well in occupancy.

Good. So you expect -- for the rest of Montana, you expect occupancy to be stable the next couple of months? You think it softens a bit?

Dave, this is Tim. I think maybe a little more softening, but relatively stable as we go forward. I wouldn't see -- expect to see much of a drop in our occupancy numbers.

This concludes our question-and-answer session. I would like to turn the conference back over to Timothy Mihalick, CEO, for any closing remarks.

Thank you. And again, thank you for taking your time this morning to hear the update of the IRET story. As we stated earlier, we continue to be in transition as we transform our portfolio. We're excited about the prospects of taking IRET into the future and we appreciate your interest. Merry Christmas and happy holidays to everybody.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.