Hello, everyone, and welcome to the Investors Real Estate Trust Fiscal Third Quarter 2018 Results Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Matt Volpano. Please go ahead.

[Technical Difficulty] Thank you, and good morning. IRET's Form 10-Q was filed with the Securities and Exchange Commission yesterday after the market close. Additionally, our earnings release and supplemental disclosure package have been posted on our website at iretapartments.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 about future events based on current expectations and assumptions. These statements are subject to risks and uncertainties discussed in yesterday's Form 10-Q, during this conference call and in the Risk Factors section of our annual report and other filings with the SEC. Actual results may differ materially, and we do 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 of such non-GAAP financial measures can be found in our most recent supplemental operating and financial data, both of which are available in the Investors section of our website at iretapartments.com. With me today are Mark Decker Jr., President and Chief Executive Officer; John Kirchmann, Executive Vice President and Chief Financial Officer; and Anne Olsen, Executive Vice President and General Counsel. I will now turn the call over to Mark.

Thanks, Matt, and welcome, everyone. This is the most exciting earnings call I've been on. We've all been working hard to instill the core principles of capital allocation, operational excellence and balance sheet strength into our management of the business and it's starting to show in the results. Also, for the first time, these results are focused on our core business. After today, we're finished talking about our transformation. We now have the multifamily business we've been working toward. Going forward, we can talk exclusively about our apartment communities and put behind us the discussions of large noncore asset sales and other events that created uncertainty for our investors and divided our internal resources. And with the portfolio transition behind us, we can focus all of our attention and yours on improving what we have, and I'm confident we can. With that said, I'd like to summarize at a high level what we've done over the past 2 years to bring us to this point. I'd like to start by thanking those of you who've been with us through this process. If you're a new listener, we're glad you're here as well. We communicated our intent to focus exclusively on multifamily in June of 2016, and we moved with purpose and speed to execute on that goal, informed by the view that the plentiful capital, relative economic stability, low interest rates and deep demand for real estate provided opportune conditions to sell non-strategic properties. We've generated almost $800 million through noncore property sales since June of '16 and nearly $1.5 billion since 2013, when we embarked on this transformation. We took that capital and we invested over $860 million in new apartment communities, paid down almost $400 million of debt, repaid over $40 million of high-cost preferred stock and repurchased…

Thank you, Mark. I am pleased to elaborate on how our transformation is reflected in our reported financials as well as on our progress with operating initiatives and balance sheet activities. Last night, we reported core FFO for the third quarter of fiscal 2018 of $0.09 per share, a decrease of $0.03 from the third quarter of fiscal 2017. For the 9 months of fiscal 2018, core FFO was $0.30 per share, a $0.05 decrease from the prior year-to-date period. The decrease was primarily due to a reduction in NOI from the sale of commercial and noncore multifamily assets and our previously announced capitalization policy changes. Moving to our same-store results. Year-over-year, same-store revenues grew 5.2% for the quarter and 4.3% for the 9 months of the year. Revenue growth was driven by increases in occupancy, rental rates and other resident-based rental revenues. Our weighted average occupancy in our same-store portfolio increased 440 basis points to 94% for the quarter and 190 basis points to 93.3% for the 9-month period. Our goal remains to achieve a weighted average occupancy near 95% by April 2018, a goal we believe will increase our efficiency, drive pricing power and expand our margin. As we approach our occupancy goal, we have begun to shift our focal point from occupancy growth to increasing asking rents. Same-store expenses for the quarter increased 4.5% compared to the prior year, resulting in a 5.8% increase in NOI. For the first 9 months, same-store expenses increased 11.3% compared to the prior year, resulting in a 1.2% decrease in same-store NOI. Both the expense and NOI results are in line with our expectations and reflect our strategy to build our operating platform, increase efficiency and improve financial reporting. The primary components of the $4.5 million increase in same-store expense for…

[Operator Instructions] And our first question comes from Rob Stevenson with Janney.

Mark, how many non-apartment assets do you have in the portfolio as of today, after all these transactions have been done?

Good morning, Rob. We have 9 assets left that are not multifamily.

And how significant is the NOI that's being generated off of those these days?

Pretty insignificant, less than 10%, probably closer to 5% actually.

Okay. And I mean, it's from -- as we think about it going forward, is it just opportunity? Is there mortgage debt that has big defeasement issues or anything that prevents you from selling those things tomorrow? Should we expect that by some time in the middle of the next fiscal year or is that a longer process? How should we be thinking about it as you rid yourself of those last 9 assets?

Yes, we're going to work hard to be non-dilutive and opportunistic as much as possible. So we'd like to pair that -- pair some of those sales with value-add or other investments that don't beat up our cash flow, which we've done a lot of in the last 18 months, as you know. But there are no mortgage or any other sort of inhibitors to us acting on those in an opportunistic fashion.

Okay. And then is it -- how significant is investor demand today for the noncore apartment assets, the smaller stuff that you guys want to sell in some of the tertiary markets? Is that a -- given what's going on with the economy, is that -- is there a decent demand there? Or is it sort of hit and miss? How would you sort of characterize that market these days?

Yes, I'd say, for the most part, one, we do have the business we want, and so we'll be focused on enhancing. We will be strategic about selling things that we think are not long-term winners. I think thematically, there has never been a deeper bid for secondary and tertiary market assets. I think the 10-year could affect that a little bit and I think it'll affect that market sooner than it affects the primary markets. Just when you think about the fit and finish of the buyer and their resources and mindset. But I'd say, so far, we haven't seen a big deterioration, although these are markets that are not -- we don't have a lot of data points in terms of trading. So the last noncore assets we've sold in multi or the last pairing we've done at the multifamily portfolio was the Copperfield portfolio, which was in Minot, which is a reasonably tough environment economically. Those were just very really clearly not on strategy for us, as you know. They included a range of sizes from 3 to 60 units. The assets we sold in Rochester last -- late last fall, those were really opportunistic, and I think that's how we'll be going after it. So we look at our NAV, we carry every asset at a price. In our mind, those could be viewed as similar to release prices, and if we get interest that makes sense, we would act on that basis. In the multifamily portfolio, we do have a lot of -- a lot more debt constraints and things like that, that we have to navigate. So we're navigating how do we go to market in the whole submarket? How is it financed? What's our long-term view of the asset? Is there anything we can do to improve it today?

Okay. And then how are you sort of factoring in the comments in terms of not wanting to dilute on either apartment or non-apartment asset sales as well as the purchase of Westend versus buying back your stock, especially with it below $5? I know that you guys did some in the quarter, but how are you prioritizing stock repurchases today at that price, at $4.80-or-so, and even cheaper on some of the weaker days when the REITs are getting clobbered? So how does that -- how do you and the board think about that?

Yes, so we have a lot of discussion about it. And I think it's important to understand that the nature of the capital we deployed at Westend was our gain. It was a rollover of gain. So it wasn't pure free cash. It was, in an essence, restricted cash that had only a few different ways to utilize it. It was our judgment this was the best allocation of capital for the shareholders. So buybacks are absolutely still on the table. And as you noted, we have been active in the last 12 months.

Our next question comes from Alex Kubicek with Baird.

This is Alex on for Drew. We're just looking for a little additional color that you guys could provide on the Westend acquisition. And maybe some just additional commentary on what specifically about the asset made it the right fit for you guys to add to kind of the foundation of your Denver portfolio?

Sure. Thanks, Alex. Good morning. This is Mark. We, as I just noted with Rob, we had to deploy this capital through a 1031 process. So we tried to create the largest funnel we possibly could for ideas. We were centered in Minneapolis and Denver. We felt like it would be important, if possible, to deepen our exposure to Denver. Westend is an asset we're very excited about. It's in downtown. It's 11.5 acres. It's new product. It's stabilized. It has some features we think are very exciting. Specifically, it's pretty differentiated product. It's really garden product in the city. Sits on a 50-acre park on the Platte River. It looks at the city. It looks at the mountains. It's a 10-minute walk to Union Station, 10-minute walk to some of the good stuff on Platte Street. You can walk to LoHi. So there is a lot of good amenities there, and we think it's a great value place. So if you want to spend a little less money and still be in the city, this is a good option. If you want to have a garage to park your car, which is incredibly rare, this is the only option. So for a lot of reasons, we felt like it was great long-term real estate. It is also zoned for 12-storey development, so that is not an immediate plan, but that was something that we found interesting and compelling. It's a large piece of land in the middle of the city.

Great. And do you have any color about cap rates, acquisition price? Can we assume you've spent a majority of the $116 million restricted cash on it or kind of just a little more in that realm?

Yes, we won't be specific until we close, which is a couple of weeks away. But we have deployed -- as John commented, we will deploy all of our $116.8 million of cash, which is a large portion of that $160 million of gain.

Perfect. And just kind of backing out a little bit, just looking at the Denver and Twin Cities markets as a whole. Are you guys seeing additional opportunities kind of available? And especially in a relatively hot market like Denver, would you say you guys are running into much competition on the bidding process now that you guys are 2 properties in?

We -- look, I think the markets are very competitive. We're not seeing a slowdown in the bid. At this point, having deployed the bulk of our gain, we're really turning our attention internally, and we'll be focused on a number of initiatives to move our margin up. So we would love to grow in Denver when the circumstances dictate. I think the signal from the market with respect to our stock price right now is do otherwise, and given our leverage, we'll hold here and improve what we have.

Our next question comes from Carol Kemple with Hilliard Lyons.

How is new supply in your markets? Are you seeing more impact this year than last year or any real changes there?

Yes, I mean, if you look across all of our markets, it really depends. I'd say in Rochester, we do have a lot of supply that we are dealing with that we think will moderate rent growth. I'd say the Dakotas, for the most part, are -- have absorbed the supply and we don't see a lot on the horizon. And we expect some of the markets there will be a little bit weaker, Bismarck, in particular. But on the whole, our existing markets are pretty healthy. Denver, which is obviously a new market for us, does have a lot of supply coming on a historical basis, and obviously they have a lot of jobs coming as well. So we're confident in that market long term. We realize it's a little bit -- could be a little bit choppy this year, but we feel great about it. In Minneapolis, supply continues to be pretty disciplined. I mean, we've been less than 2% of deliveries, I believe, through this whole cycle. The supply does tend to gravitate into a couple of submarkets, so -- and that will affect some of our assets. So in Edina, where we have the 71 France asset, we would expect there's about 1,200 units that have come or will come around that, likewise in the Westend, where we have Arcata. There is about 1,000 units coming in and around that market. That is almost half of the supply of the whole city coming into 2 submarkets. And then likewise, in downtown, where we have Red20, which is a smaller asset, but an important one, there is about 900 units coming in and around that market. Now they're all coming at significantly prior -- higher prices per door, so hopefully, they can drag rents up and we can come in behind them. But in general, we feel really good about the portfolio. Those are the supply areas of concern.

And that concludes our question-and-answer session. I'd like to turn the conference back over to Mark Decker for any closing remarks.

That's all we have. Everybody, thanks very much for joining us today and we'll talk to you next quarter.

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