Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
(Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended October 31, 1996
Commission file number 0-14851
INVESTORS REAL ESTATE TRUST
(Exact name of registrant as specified in its charter)
North Dakota 45-0311232
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12 South Main, Minot, ND 58701
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area
code: (701) 852-1756
(Former name, former address and former fiscal year,
if changed since last report.) No change
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of
the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes ( X ) No ( )
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date. Applicant is a Business Trust. As of
October 31, 1996, it had 13,994,747 Shares of Beneficial Interest
outstanding.
<PAGE>
PART I
Item 1. Financial Statements.
The following financial statements have been prepared from
the records of Investors Real Estate Trust and its six
affiliated limited partnerships and have not been audited or
reviewed by the Trust's independent certified public
accountants. Accordingly, these statements are subject to
adjustments upon audit, which audit will be conducted for
the Fiscal Year ending April 30, 1997. Reference is made to
the footnotes to the Statements prepared by the Trust's
auditors for the Fiscal Year ended April 30, 1996, contained
in the Annual Report for Fiscal 1996. In the opinion of the
Trust, there have been no developments requiring footnote
disclosure for the periods covered by the Financial
Statements set forth below that are not adequately disclosed
in the footnotes to the April 30, 1996, statements.
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEETS
For the Periods Ended October 31, 1996 & 1995
(unaudited)
ASSETS: 10-31-96 10-31-95
<S> <C> <C>
Cash $ 1,344,519 $ 747,787
Marketable Securities
-GNMA's 4,157,371 4,615,430
-Other REIT's 596,961 0
Tax & Insurance Escrow 1,414,320 968,399
Deferred Charges 748,770 414,551
Prepaid Insurance 172,432 159,356
Deposits 320,000 50,000
General Partnerships 85,576 0
$ 8,839,949 $ 6,955,523
Real Estate Investments
Real Estate Owned $147,288,224 $123,515,461
Less Accumulated Deprec. (14,773,341) (14,088,483)
Net Real Estate Owned 132,514,883 109,426,978
Real Estate Mortgages (related) 0 117,235
Real Estate Mortgages
(unrelated) 2,791,154 3,336,992
Less Unearned Discounts (14,373) (34,792)
Less Deferred Gain from
Property Dispositions (165,074) (219,861)
Less Reserve for Bad Debts (197,096) (267,096)
Net Mortgages & Contracts 2,414,610 2,932,478
Total Real Estate Investments $134,929,494 $112,359,456
TOTAL ASSETS $143,769,442 $119,313,979
LIABILITIES:
Accounts Payable & Other
Liabilities $ 2,534,382 $ 4,302,183
Mortgages Payable 79,214,615 61,972,317
Investment Certificates
Payable 6,991,458 5,440,733
Due on Margin Account 0 3,981,937
TOTAL LIABILITIES $88,740,456 $75,697,170
SHAREHOLDERS' EQUITY
Shares of Beneficial Interest
Outstanding Shares of 10-31-96 10-31-95
13,994,747 as of 10/31/96
12,071,256 as of 10/31/95 $ 58,950,599 $ 47,142,109
Undistributed Net Income (3,921,613) (3,525,300)
Total Shareholders' Equity $ 55,028,986 $ 43,616,809
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $143,769,442 $119,313,979
</TABLE>
<PAGE>
STATEMENT OF OPERATIONS
For the Three- and Six-Month Periods
Ended October 31, 1996 & 1995
(unaudited)
<TABLE>
<CAPTION>
3 Months Ended 6 Months Ended
October 31 October 31
<S> <C> <C> <C> <C>
OPERATING INCOME: 1996 1995 1996 1995
Real Estate Rentals $ 5,235,244 $ 4,508,952 $ 9,985,638 $ 8,051,435
Interest Income 233,448 183,034 448,096 398,212
Mortgage Discount & Fees 5,335 23,200 6,768 47,600
$ 5,474,027 $ 4,715,186 $10,440,502 $ 8,497,247
OPERATING EXPENSE:
Interest $ 1,633,486 $ 1,384,224 $ 3,054,669 $ 2,500,412
Utilities & Maintenance 826,003 764,719 1,600,434 1,260,006
Property Management 407,983 357,718 785,701 521,581
Taxes & Insurance 638,858 482,777 1,191,608 854,339
Advisory & Trustees Fees 138,104 114,340 267,321 212,523
Operating Expenses 48,637 45,272 91,346 76,782
$ 3,693,071 $ 3,149,050 $ 6,991,079 $ 5,425,643
OPERATING INCOME
(before reserves): $ 1,780,956 $ 1,566,136 $ 3,449,423 $ 3,071,604
DEPRECIATION/AMORTIZATION (732,802) (508,000) (1,423,162) (1,004,000)
OPERATING INCOME
(after reserves): $ 1,048,154 $ 1,058,136 $ 2,026,261 $ 2,067,604
GAIN ON SALE OF INVESTMENTS (2,867) 0 252,062 0
NET INCOME $ 1,045,287 $ 1,058,136 $ 2,278,323 $ 2,067,604
NET INCOME PER SHARE:
Operating Income
(after depreciation) .08 .09 .15 .18
Gain on Sale of Investments .00 0 .02 0
Total Net Income/Share .08 .09 .17 .18
DIVIDENDS PAID PER SHARE .0950 .08875 .1925 .18125
Average Number of Shares
Outstanding 13,882,377 11,958,672 13,721,089 11,668,888
FUNDS FROM OPERATIONS*
Net Taxable Income $ 1,045,287 $ 1,058,136 $ 2,278,323 $ 2,067,604
Adjustments
- depreciation of real
estate owned 732,802 508,000 1,423,162 1,004,000
- gain (loss) on sale of
investments 2,867 0 (252,062) 0
FUNDS FROM OPERATIONS* $ 1,780,956 $ 1,566,136 $ 3,449,423 $ 3,071,604
per share .13 .13 .25 .26
</TABLE>
<PAGE>
* "Funds from Operations" is defined as net income
(computed in accordance with generally accepted
accounting principles), excluding gains (or losses)
from debt restructuring and sales of property,
plus depreciation and amortization, and after
adjustments for unconsolidated partnerships and
joint ventures calculated on the same basis.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX-MONTH PERIODS ENDED OCTOBER 31, 1996, AND 1995
(unaudited)
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES 1996 1995
<S> <C> <C>
Net Income $ 2,278,323 $ 2,067,604
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 1,423,163 1,004,000
Interest reinvested in investment
certificates 61,471 55,706
Changes in other assets and liabilities:
(Increase) decrease in other assets (903,345) (358,230)
Increase in accounts payable and
accrued expenses 824,265 185,280
NET CASH PROVIDED FROM OPERATING
ACTIVITIES $ 3,329,857 $ 2,954,360
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of REIT stock $ (596,961)$ 0
Proceeds from sale of securities 255,861 154,190
Principal payments on mortgage
loans receivable 1,419,511 1,586,110
Payments for acquisition of
properties (12,565,971) (32,123,437)
Investment in mortgage loans
receivable (559,450) (164,516)
NET CASH PROVIDED FROM (USED FOR)
INVESTING ACTIVITIES $(11,994,784)$(30,547,653)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Line of Credit $ 900,000 $ 3,000,000
Proceeds from loan refinance $ 5,835,467 $ 12,857,569
Proceeds from sale of shares 2,960,557 5,195,392
Dividends paid (934,150) (809,331)
Proceeds from investment
certificates issued 1,639,602 517,813
Loan on margin account 0 6,473,437
Redemption of investment
certificates (506,542) (221,701)
Principal payments on mortgage
loans and notes payable (2,259,365) (1,008,857)
Payments on margin account 0 (2,436,984)
NET CASH USED FOR FINANCING
ACTIVITIES $ 7,635,569 $ 23,567,338
NET INCREASE (DECREASE) IN CASH $(1,003,245) $ (4,025,955)
CASH AT APRIL 30 $ 2,337,764 $ 4,772,742
CASH AT OCTOBER 31 $ 1,334,519 $ 746,787
</TABLE>
<PAGE>
<TABLE>
SUPPLEMENTARY SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES 1996 1995
<S> <C> <C>
Dividends reinvested $ 2,151,724 $ 1,321,080
Real estate investment and mortgage
loans receivable acquired through
borrowings on margin account and
new originations 0 18,557,569
Mortgages paid directly by owner of
contract 0 0
Interest reinvested directly in
investment certificates 61,471 55,706
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the year for:
Interest paid on mortgages $ 2,996,724 $ 2,351,452
Interest paid on margin account
and other 0 54,136
Interest paid on investment
certificates 93,967 73,243
$ 5,303,886 $22,413,186
</TABLE>
(The balance of this page was left blank intentionally.)
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations. IRET's net taxable earnings for the
second quarter of Fiscal 1997 were $1,045,287, compared to
$1,058,136 for the same period of Fiscal 1996. For the first
six months of Fiscal 1997, net taxable earnings were
$2,278,323, compared to $2,067,604 in the prior year. The
most important performance measure, Funds from Operations
(taxable income increased by non-cash deductions of
depreciation and amortization, less extraordinary income
items) for the second quarter increased to $1,780,956 from
the $1,566,136 recorded in the prior year. For the six-month
period, Funds from Operations was $3,449,423, compared to
$3,071,604 in Fiscal 1996.
Both taxable income and Funds from Operations were reduced
by the continuing vacancy of the Smith Home Furnishings
property in Boise, Idaho. We continue to seek a replacement
tenant for this property. There are several prospects, but
no firm rental offer is yet in hand.
On the positive side, IRET continued to experience
satisfactory occupancy of its apartment properties; the
program of instituting modest rental rate increases is on
target and the new properties being added to the portfolio
are performing well.
Overall, we continue to be pleased with the performance of
our investment portfolio and look for improving financial
results upon the completion of our aggressive building and
buying program.
Financial Condition. IRET's liquidity and capital resources
remain strong. During the past year, real estate owned by
IRET has increased by 23 million dollars. This growth in
real estate investments will continue as the Trust has
agreed to purchase a substantial amount of real estate
investments which will come on line during the balance of
this fiscal year. Comparative balance sheet figures are:
10/31/96 10/31/95
Cash and Marketable Securities $ 6,098,851 $ 5,362,217
Net Real Estate Owned 132,514,883 109,426,978
Net Real Estate Mortgages 2,414,610 2,932,478
Total Assets 143,769,442 119,313,979
Total Liabilities 88,740,456 75,697,170
Shareholder Equity 55,028,986 43,616,809
<PAGE>
Consolidated Financial Reports. The Financial Statements
shown in this report consolidate IRET's financial report
with those of the six limited partnerships of which IRET
is the General Partner and creditor.
Sale of Properties. During the second quarter, IRET did not
sell any of its investments.
The following properties were added to our portfolio during
the second quarter and are producing income:
Cost
- Edgewood Vista 24 unit Alzheimers
center, Missoula, MT $ 950,000
- 16,000 sq. ft. Computer City
retail commercial building,
Grand Rapids, MI $ 2,100,000
- 98 unit apartment complex in
Billings, MT $ 6,100,000
- 67 unit Legacy Apartment complex
in Grand Forks, ND $ 6,465,000
- Sweetwater Springs Retirement
Home, Phase I, Douglasville, GA $ 2,810,000
The following properties are under construction:
- 67 unit Circle 50 apartment
complex in Billings, MT $ 3,900,000
- Sweetwater Springs Retirement
Home, Phase II, Douglasville, GA $ 1,540,000
<PAGE>
IRET has entered into purchase agreements to acquire the
following properties:
- 360 unit Park Meadows apartment
complex, St. Cloud, MN $10,120,000
- 192 unit Neighborhood apartment
complex, Colorado Springs, CO $10,750,000
- 210 unit Miramont apartment
complex, Fort Collins, CO $14,200,000
- 108 unit Woodridge apartment
complex, Rochester, MN $ 6,300,000
Dividends. IRET paid a regular dividend of 9.5 cents per
share on October 1, 1996, to shareholders of record at the
close of business on September 20, 1996. This was an
increase from the 9.25 cents per share regular dividend paid
on July 1, 1996 (a special dividend of .5 cents per share
was also paid with the July dividend for a total dividend of
9.75 cents), and was the 102nd consecutive quarterly
dividend paid by IRET.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
None
Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly
authorized.
INVESTORS REAL ESTATE TRUST
(Registrant)
/s/ Thomas A. Wentz, Sr.
Date: December 9, 1996 By_______________________________
Thomas A. Wentz, Sr.,
Vice-President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> OCT-31-1996
<CASH> 1,344,518
<SECURITIES> 4,754,332
<RECEIVABLES> 2,791,154
<ALLOWANCES> (376,543)
<INVENTORY> 0
<CURRENT-ASSETS> 2,741,098
<PP&E> 147,288,224
<DEPRECIATION> (14,773,341)
<TOTAL-ASSETS> 143,769,442
<CURRENT-LIABILITIES> 81,748,998
<BONDS> 6,991,458
<COMMON> 58,950,599
0
0
<OTHER-SE> (3,921,613)
<TOTAL-LIABILITY-AND-EQUITY> 143,769,442
<SALES> 0
<TOTAL-REVENUES> 10,188,440
<CGS> 0
<TOTAL-COSTS> 3,936,410
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,054,669
<INCOME-PRETAX> 3,197,361
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,197,361
<DISCONTINUED> 252,062
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,278,323
<EPS-PRIMARY> .17
<EPS-DILUTED> 0
</TABLE>
