Good morning and welcome to the Investors Real Estate Trust Third 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 today's host Steven Swett. Please go ahead.

Thank you and good morning. IRET's Form 10-Q was filed with the Securities and Exchange Commission yesterday after the close. Additionally our earnings release and supplemental disclosure package have been posted on our website at www.iret.com and filed 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 SEC. Investors Real Estate Trust does not undertake any duty to update any forward-looking statements. Please note that our conference call today will contain references to financial measures such as funds from operations or FFO, and net operating income or NOI that are non-GAAP measures. Reconciliations of non-GAAP financial measures are contained in yesterday's press release and definitions as such non-GAAP financial measures can be found in our most recent supplemental operating and financial data both of which are available in the Investor Relations section of our website at www.iret.com. 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.

Thank you, Steve and good morning everyone. Welcome to our fiscal third quarter 2016 earnings conference call. This morning I will begin with the summary of our operating and financial results for the quarter and year to-date. I will then take a few moments to update you on our portfolio repositioning efforts. Ted Holmes, our CFO will follow with more detail on our quarterly results, our disposition and development activity and our balance sheet and capital allocation strategy. We will then open the call for your questions. Let me begin by saying that our third quarter results were in line with expectations and represent continued progress as we transition our portfolio into a focused platform which we believe can drive better growth and create value for our shareholders over time. Yesterday, we reported FFO of $54.5 million or $0.40 per share and unit for the third quarter 2013. While our portfolio was undergoing significant transformation, I would like to note that total revenue increased by $2.8 million or 5.4% for the three months ended January 31, 2016 compared to the same period one year ago. With regards to our same store portfolio, we experienced small decline in same store NOI of 0.3% for the third quarter. As I noted, our results were in line with our expectations as our near performance feels the effects of weakness in Western North Dakota, as well as the impact of shifting costs across our portfolio due to our strategic asset disposition. As we have mentioned in the past, it continue to be impacted by the volatility in the energy sector, which is a key industry in Western North Dakota. This softness coupled with seasonally low leasing volumes that we typically experienced in the winter months did have an expected negative impact on our results this quarter. With the normal seasonal uptick in traffic and leasing in the coming months, we expect to see better demand for our apartments and improved occupancy. However, closing ratios will be critical and will likely remain aggressive on pricing to capture our share of the demand. Every cycle is different. We have decades of experience investing and operating in the upper Midwest and we know these markets well. Volatility in the oil market is not new and the slowdown today is the offset for very strong results we captured in prior years. Further, we're appropriate we have utilized joint ventures to delude risks and maximize return to our shareholders. Currently, Western North Dakota oil markets of Williston and Minot account for just 10% of our same store NOI, the rest of our markets continue to perform well. Most of core market in the upper Midwest benefit from diverse demand drivers including healthcare, financial services, manufacturing and agriculture, and that continue to generate favorable employment growth in recent years. In general, our markets are healthy with occupancy rates in low to mid 90s and we believe that we’re well positioned as we enter the warmer and busier spring and summer months given our best-in-class products. Moving on, I’d like to update you on our strategic goals. We continue to work to refocus our portfolio and transition to our stronger operating platform with a more predictable net income stream. Since May 1 2015, beginning of our fiscal year we have disposed more than $440 million of non-core retail and office properties, representing a 25% reductions in our pre-transition NOI. We have redeployed proceeds into $72 million of multifamily and healthcare acquisitions and invested another $96 million in multifamily and healthcare developments. During the last 12 months, we’ve reduced our outstanding debt by $259 million as our portfolio stabilizes in the next year, we believe we can achieve and maintain a leverage ratio of 6.5 times net debt to EBITDA. At this time, we have largely completed our capital recycling program, having taken advantage of attractive private market valuations, simplified our portfolio and increased our enclosure to more stable multifamily and healthcare asset classes. This large scale transformation has not been without some short-term pain, as we work to replace the loss income from assets sales, we allocate our expenses and deliver on a development pipeline. But we believe we will emerge in a much stronger position with better long-term growth prospects. Along with these portfolio transformations, we're underway implementing changes in our management infrastructure and processes. The transformation of our portfolio is a lot of the shift assets and personnel in commercial property management and maintenance to our multifamily and healthcare divisions. We have successfully repriced our property insurance policy, reduced our annual expenses by about 10%, which should benefit our results in the coming year. We are also modifying our health insurance plans and looking at additional ways to reduce G&A. We have implemented a RUBS program, which we believe will reduce volatility quarter to quarter in our operating results. Currently, the penetration of our RUBS program is about 40% of our units. And again, we expect to be rolled out to substantially all the planned units by the end of third quarter in fiscal 2017. Finally after testing, we commence the implementation of LRO, rental pricing software, which we believe will allow us to better capture demand and more efficiently time explorations within our markets. These changes are exciting and our team is energized. It will take time for us to truly show the benefits of all these efforts. We look forward to communicating our progress and accomplishments in the coming quarters. Thank you. And I would now like to turn the call over to Ted Holmes, IRET's CFO.

Thank you, Tim, and good morning, everyone. I'll start this morning by describing the results for the quarter and year-to-date in a bit more detail. Then I will provide an update on our capital allocation plans and close with a review of our balance sheet and liquidity position. Yesterday, we reported FFO of $54.5 million or $0.40 per share and unit for the third quarter ending January 31, 2016 as compared to $23.4 million or $0.17 per share and unit for the same period of the prior year. The increase in FFO was primarily due to a gain on debt extinguishment of $36.5 million, which was recognized during the quarter. For the nine months ended January 31, 2016 we reported FFO of $84.7 million or $0.61 per share and unit, as compared to $64.6 million or $0.48 per share and unit for the same period of the prior year. Our fiscal year-to-date FFO increased for the same reason as our quarterly FFO. Excluding gain or loss on extinguishment of debt and default interest, FFO would have been $0.14 and $0.44 per share and unit for the three and nine months ended January 31, 2016 respectively. Our total company revenue increased by $2.8 million or 5.4% in the three months ended January 31, 2016 compared to the same period one year ago. Total revenues for the company increased by $5.7 million or 3.7% in the nine months ended January 31, 2016, which can be attributed to development deliveries and accretive acquisitions in our multifamily and healthcare portfolios. Our total portfolio net operating income or NOI in the third quarter 2016 increased by $1.6 million or 4.8% year-over-year, but same store NOI decreased by approximately 0.3% for the same period. Total portfolio NOI for the nine months ended January 31, 2016 increased by $1.6 million or 1.7% year-over-year, but our same store NOI did decrease by $1.3 million or 1.5% for the same period. We had difficult comparables year-over-year as we were impacted by the sales of our office and retail portfolios, and the significant deterioration in the energy-related markets in Western North Dakota. During the quarter, we continued to execute on our strategy to dispose of non-core office and retail assets acquire stronger cash flow multifamily and healthcare properties deliver on our development pipeline and grow NOI in our same-store segments. During the quarter we sold three retail properties for a total of $3.5 million in proceeds. We also transferred nine office buildings secured by $122.6 million non-recourse mortgage loan to the lender. At this time, we have largely completed our announced disposition program with just $22 million remaining of assets held for sale. Also during the quarter, we continued our development program. We have four multifamily developments in progress, with two deliveries expected in the fiscal fourth quarter 2016 and then one, each in the first and second fiscal quarters of 2017. We have spent approximately $157 million of a total budget of $178 million, and we believe these new multifamily assets provide the best opportunity to drive NOI growth going forward. However, bear in mind that the high volumes of deliveries at the current time is likely to trigger higher expensed interest cost as these properties move from under construction to operating, resulting in a short term drag on our results until lease revenue increases as the properties stabilize. Turing to our multifamily same store segment. Our third quarter same store multifamily NOI decreased by approximately 5.1% year-over-year. However, this decrease can largely be attributed to weakness in the energy and packet markets of Minot and Williston, North Dakota. Aside from these markets, multifamily same store NIO growth was up 3.1%. Additionally, we continue to work to improve the quality of our same store portfolio through our value add program. We invested $900,000 in upgrades and remodeling projects in our multifamily portfolio during the quarter, and we anticipate spending approximately $3.5 million each quarter in the year ahead. As we’ve mentioned in the past, we are commencing these projects at least as expire, and our expected return on investment range is from 8% to 10% per year. Finally, as we work through our portfolio transformation, we expect that our operating margins will improve. Our operating margin which is defined as same store multifamily NOI to gross revenues improved by 60 basis points quarter-over-quarter to 53.3% for the third quarter of fiscal 2016. However, for the year-to-date period, our operating margin compressed by 290 basis points. This margin compression is primarily due to revenue declines in our oil impacted markets and the reallocation of resources from our portfolio transformation. However, we expect that margins will strengthen over time from accretive acquisitions and development deliveries. Turning to our balance sheet, as of January 31 2016, we had $47.1 million of cash on hand and availability on our line of credit of $82.5 million for a total liquidity of $129.6 million to fund our growth objectives. We continue to strategically match fund our investments by locking in permanent interest rates on assets that we intend to hold long term, while using variable rate funding for assets we intend to sell, reposition, or align for other strategic initiatives. At quarter end, our weighted average interest rate on mortgage debt was 4.83%, and our weighted average term to maturity was 6.5 years. At quarter end, our leverage ratio was 48% of gross assets at cost. Our policy is to keep leverage below 50%. And looking ahead, we believe we are well positioned given our manageable debt maturity schedule which has no significant maturities until 2020. Additionally during the quarter, we repurchased 1.8 million shares at an average price of $7.30 per share through our existing share repurchase authorization. Since we initiated our repurchased program in the second quarter of 2016, we have bought back approximately $35 million of IRET shares. Finally, on March 08, our Board of Trustees declared a regular quarterly distribution of $0.13 per share and unit payable on April 1, 2016 to common shareholders and unitholders of record at the close of business on March 21, 2016. This will be IRET's 180th consecutive distribution. With that I will turn the call back to Tim.

Thank Ted. We have been very busy here at IRET as we focus on completing our capital recycling program and redeploying the proceeds towards developments, a value-add program, and accretive acquisitions. We believe that our deep market knowledge and local relationships, coupled with less competition from institutional capital for quality assets in the up and Midwest supports us an opportunity for us to create long lasting shareholder value to our portfolio transition. With that, I would like to open the call for questions. Operator?

[Operator Instructions] Our first question comes from Rob Stevenson of Janney. Please go ahead.

Can you talk a little bit about where you are in terms of the apartment portfolio, in terms of the not set up for submetering that you're going to have to do the RUBS program on?

Rob, this is Ted. Maybe rephrase your question. I'm not following what you are specifically asking with respect to our RUBS program. We've implemented that, we're now building properties that are metering individual units and processing that on roughly 40% of our existing portfolio. Rephrase your specific question.

So the 40% is the part of the portfolio that's not already submetered?

It would be 40% of the total portfolio. The plan units so we can submit - Rob, this is Tim, that has been implemented on a 40%.

Okay. And then so the remaining 60% is to be done or is not able to be submetered?

Not able to be submetered. So basically what we were saying is, we believe if I am accurate, it would be 40% of the available units that can be submetered are currently being applied to the RUBS program, but we don’t have the capacity to go to 60% or over 100% of our portfolio under that program, no.

Okay. And then given the demand for industrial assets today, have you thought about expediting potential sale of those seven?

Rob, Tim Mihalick here. That's certainly something more consider to take a look at the repositioning of our portfolio. At this time we continue to focus on what we laid-out is a plan and we'll continue to execute in that fashion but that's under consideration.

Okay. And then just lastly, could you talk about how you are thinking about stock buybacks, versus buying assets, versus starting incremental developments today? And how that is -- where the stock price is today, how that math works in your head?

Lot of questions. As we sit and think about our capital allocation needs from the proceeds of the sales and cash on hand, we really lay out what we think as the best use of that capital whether at this point time its stock buyback or it is an acquisition that may be is for a strategic purpose and look at that in that respect.

Rob this is Ted, I would also point out that we're in a mode where we want to derisk the company. So from a development perspective, we're coming off really nice three year period of development delivering lease-up stabilization. So we are going to tone that down we think a little bit on the development side and to the back side of yours question. With respect to buyback, we still believe that we are well undervalued that we see a long runway for growth and value in our stock price. But we are not going to leverage up the company to buy stock if we have selected sales that occur on non-core assets, non-core being the bottom 20% of our portfolio, we will consider additional buybacks in the future as our Board directs.

Thanks guys.

Our next question comes from Craig Kucera of Wunderlich. Please go ahead.

Hi, good morning guys. You had a pretty sizable lift in your NOIs. Revenue was up, expenses down in your other assets category from last quarter, relative to what we were looking for. Was there a large lease signed? I know the disclosure on that segment is a little lighter than elsewhere. But could you give us color as to what that contributed to?

In the other category - are you referring to a specific reference in the Q or 8-K, Craig? Because on the other category side, I'm not sure what that would be. We did have a large jump in our healthcare revenues for the quarter, because we delivered a new development in recent quarters that's now online. We have had some income from tenant that operates our senior housing that paid a percentage rent clause, a payment. But on the other category, I'm not sure what that would be.

I mean, you can see it if you look at your same-store property on page 13, for example, multi-family was down 5%, healthcare and industrial were flat, but the other was up 90%. And I'm guessing that's probably a little bit of retail lift. I just didn't know if there was -- we should expect that on a recurring basis, or if there are any one-time expense reductions or revenue pickups?

I can see your reference, Craig. This is Tim. And we'll have to research that for you and get back to you. I'm not exactly sure which that is.

Okay. That's fine. Moving on, let's talk about the Rochester, Minnesota acquisition you completed at the end of October. I think that was about $56 million. Since you bought that asset, the occupancy has dropped about 10%. Is there any - I wouldn't think there would be a spill-over with what's going on with oil, but are you seeing any weakness in that market, or are you maybe pushing rent at that asset, to pull back where we saw occupancy back in October?

Craig, this is Ted. There certainly wouldn't be any energy impact in that particular market. This is a market that's in hundreds of miles from the energy impacted parts of country. But I would say that when we bought that asset. When we went into it right at close, there were some tenants that were leaving the property and we had kind of cleanout some of the tendency there and then redeploy our staff to focus on lease up. I don't think there is any issues in that market. We have a very strong portfolio in Rochester, Minnesota. This is a Class A market-leading product and I don't see any issues there, and we are going to continue to focus on Rochester as a market we want to invest in.

Okay. Looking at the developments that you have, you've got four multifamily developments, a couple are in North Dakota. Can you comment? I know that Jamestown and Grand Forks are east of Williston and the energy hot spot. But are you seeing -- when you look at those markets, are they performing as expected, or are you seeing any weakness in those markets?

Craig, this is Tim. You are referencing the Western North Dakota markets?

Yes.

Western or Eastern?

I'm looking at -- I'm referencing Jamestown and Grand Forks, those multi-family developments that are coming on and should be completed next quarter?

There we continue to see operating and performance as we expected as we bring those developments online. The weakness certainly hasn't moved over to that part of the state.

Got it. When you look at the Renaissance Heights, which is I think, since being placed into service has struggled a bit with occupancy and lease-up, are you -- what is market currently as far as rent reductions to try to get, try to get some occupancy?

Craig, this is Ted. You are certainly going to see IRET and other companies try to find stabilization in the western part of the state. There is no question. There is some pain with respect to lease up now that energy has reached trends to price level that we are all witnessing. So we are focusing our efforts on finding stabilization. We know that rents have reset to a more consistent, let's say a level with the balance of the state. I mean there is -- I mean these properties are still producing good income. It's just normalized in that part of the country and that part of the state. I would tell you just touching on the east half of the state, again there has been additional supply in the Grand Forks and the other markets in North Dakota. So again I think it's largely in balance from a demand and supply standpoint, but we are bullish we can lease up in the eastern half of the state and we are bullish that we can find stabilization in Williston at some point.

Okay, great. I'll hop back in the queue.

[Operator Instructions] Our next question comes from Jim Lykins of D.A. Davidson. Please go ahead.

Good morning guys. First I wanted to ask you about your, rehab program. You mentioned 4000 units. I'm just wondering if you can give us sense for the timeline, how that may play out over the next year? And I'm also wondering if those units may perhaps be part of a Phase I and if there could be some -- or if you guys might be thinking of some other units beyond the original 4000 down the road that you maybe able to rehab as well?

Jim, this is Ted. The rehab program or value add program that we haven't place is probably going to stretch out over three years. So we have identified 20 some assets 4000 units that will be in play as leases expire. This is an event that's going to take 12 months. It's going to be longer than that given our turnover ratio, but we are going to aggressively pursue upgrading these units. And at the same time when we are adding our best-in-class, we think, products from development; we are really upgrading the portfolio in a leadership, marketing leading style. So we are going to aggressively pursue updating these properties, many of which we actually built. So you can go back 20 years or so and look at these assets we built them, now we are going to update them.

Okay

But this will take three years.

Okay. So you mentioned $10,000 to $13,000 per unit. I'm wondering historically, if you've gone out and spent that much on a rehab unit. What would that equate to? How much would you be able to push rents?

Jim, Tim. I -- as we look at that and talked about it on the call, our intent is to spend in the neighborhood of $3.5 million per quarter as we go forward with an expected return of 8% to 10%. Now depending on the market and the property, we have been able to push rents anywhere from $75 to $150 a month, just depending on the implementation on the rehab and the value add that we do in the property.

Okay. And regarding the energy-related markets, can you just maybe make some general comments about what you're seeing right now? I'm wondering if maybe there's still maybe some more pain to come, or maybe if you're starting to see a trough? And I also believe there may have been the elimination of some man camps, and if so, how that could potentially help occupancy in those markets?

Yes, Jim, this is Tim again. And you are right, now earlier this week, the City Commission of Williston, which is off to the heart of Bakken, did announce that as of July 1, 2016 they intend to eliminate all man camp units within a mile of radius of the city. That will have some impact on our markets and our apartments. Those aren't typically our tenants. Most of them will be temporary employees, so that will probably push them back to the hotels, which will in essence push those tenants to long-term housing, which should be our apartment. One of the things we continue to see in Minot and Williston is -- in Williston and Minot specifically is continued building. I mean there are still housing under construction there. So we are continuing to focus on finding stabilization in those two markets and finding out where the bottom is and we're still examining that and addressing it.

Great. Thanks guys.

And this concludes our question-and-answer session. I would now like to turn the conference back over to Tim Mihalick for any closing remarks.

Thank you and thank you again, for everybody for taking the time this morning to be updated on IRET story. We are excited about where we at in the transition. It does present some challenges but we believe as we move forward, we're going to come up at the other hand as a much stronger and better company that allows us to create value for our shareholders into the future. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines. Have a great day.