<PAGE>
Form 10-Q
Amendment 2
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 January 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
January 31, 1996, it had 12,693,198 Shares of Beneficial
Interest outstanding.
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PART I
Item 1. Financial Statements.
The following financial statements have been prepared from
the records of Investors Real Estate Trust and its seven
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, 1996. Reference is made to
the footnotes to the Statements prepared by the Trust's
auditors for the Fiscal Year ended April 30, 1995, contained
in the Annual Report for Fiscal 1995. 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, 1995, statements.
<TABLE>
<CAPTION>
BALANCE SHEETS
For the Periods Ended January 31, 1996 & 1995
(unaudited)
<S> <C> <C>
ASSETS: 01-31-96 01-31-95
Cash $ 3,384,400 $ 5,729,487
Marketable Securities 4,508,382 4,906,239
Accounts Receivable 0 0
Tax & Insurance Escrow 1,087,235 459,445
Deferred Charges 490,860 243,196
Prepaid Insurance 153,389 87,287
Deposits 457,500 176,000
$10,081,766 $11,601,654
Real Estate Investments
Real Estate Owned $128,339,454 $77,053,428
Less Accumulated Deprec. (14,245,319) (12,656,411)
Net Real Estate Owned 114,094,135 64,397,017
Real Estate Mortgages (related) 0 122,535
Real Estate Mortgages
(unrelated) 3,766,929 5,382,536
Less Unearned Discounts (34,792) (49,462)
Less Deferred Gain from
Property Dispositions (219,861) (235,360)
Less Reserve for Bad Debts (267,096) (293,366)
Net Mortgages & Contracts 3,245,180 4,926,883
Total Real Estate Investments $117,339,315 $69,323,900
TOTAL ASSETS $127,421,081 $80,925,554
LIABILITIES:
Accounts Payable & Other
Liabilities $ 1,443,831 $ 1,258,775
Mortgages Payable 72,332,672 39,193,387
Investment Certificates
Payable 5,994,973 4,512,463
Due on Margin Account 0 0
TOTAL LIABILITIES $79,771,476 $44,964,625
SHAREHOLDERS' EQUITY
Shares of Beneficial Interest
Outstanding Shares of 01-31-96 01-31-95
12,693,198 on 01/31/96
10,763,881 on 01/31/95 $50,727,029 $39,064,436
Undistributed Net Income (3,077,424) (3,103,507)
Total Shareholders' Equity $47,649,605 $35,960,929
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $127,421,081 $80,925,554
</TABLE>
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<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS
For the Three- and Nine-Month Periods Ended January 31,
1996 and 1995
(unaudited)
3 Months Ended
January 31
<S> <C> <C>
OPERATING INCOME: 1996 1995
Real Estate Rentals $4,892,738 $3,245,354
Interest Income & Fees 211,671 328,714
$5,104,409 $3,574,068
OPERATING EXPENSE:
Interest $1,554,110 $ 865,806
Utilities & Maintenance 782,100 622,300
Property Management 365,453 191,261
Taxes & Insurance 555,031 295,334
Advisory & Trustees Fees 124,801 83,930
Operating Expenses 34,408 16,426
$3,415,903 $2,075,057
OPERATING INCOME
(before reserves): $1,688,506 $1,499,011
DEPRECIATION (606,000) (435,000)
RESERVE FOR BAD DEBTS 0 0
OPERATING INCOME (after reserves): $1,082,506 $1,064,011
GAIN ON SALE OF INVESTMENTS 522,001 0
NET TAXABLE INCOME $1,604,507 $1,064,011
NET INCOME PER SHARE:
Operating Income
(after depreciation) .09 .10
Gain on Sale of Investments .04 0
Total Taxable Income/Share .13 .10
DIVIDENDS PAID PER SHARE .09 .085
Average Number of Shares
Outstanding 12,382,227 10,559,744
</TABLE>
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<TABLE>
<CAPTION>
9 Months Ended
January 31
<S> <C> <C>
OPERATING INCOME:
Real Estate Rentals $12,944,173 $ 9,508,065
Interest Income & Fees 657,483 1,011,768
13,601,656 $10,519,833
OPERATING EXPENSE:
Interest $ 4,054,522 $ 2,534,221
Utilities & Maintenance 2,042,106 1,836,204
Property Management 887,034 583,236
Taxes & Insurance 1,409,370 872,336
Advisory & Trustees Fees 337,324 246,239
Operating Expenses 111,190 67,602
$ 8,841,546 $ 6,139,838
OPERATING INCOME
(before reserves): $ 4,760,109 $ 4,379,995
LESS DEPRECIATION RESERVE (1,610,000) (1,355,000)
RESERVE FOR BAD DEBTS 0 0
NET INCOME (after reserves): $ 3,150,109 $ 3,024,995
GAIN ON SALE OF INVESTMENTS 522,001 305,543
NET TAXABLE INCOME $ 3,672,110 $ 3,330,538
NET INCOME PER SHARE:
Operating Income
(after depreciation) .26 .30
Gain on Sale of Investments .04 .03
Total Taxable Income/Share .30 .33
DIVIDENDS PAID PER SHARE .27125 .2555
Average Number of Shares
Outstanding 11,940,492 10,254,494
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE-MONTH PERIODS ENDED JANUARY 31, 1996, AND 1995
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES 1996 1995
<S> <C> <C>
Net Income $ 3,672,111 $ 3,330,538
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 1,610,000 1,355,000
Reserve for Bad Debts 0 0
Interest reinvested in investment
certificates 187,266 151,820
Changes in other assets and liabilities:
(Increase) decrease in other
assets (1,369,242) (224,035)
Increase in accounts payable and
accrued expenses 692,751 220,565
NET CASH PROVIDED FROM OPERATING
ACTIVITIES $ 4,792,886 $ 4,833,888
CASH FLOWS FROM INVESTING ACTIVITIES
Real Estate Deposits $ (125,000) $ 0
Proceeds from principal payments
on GNMA Securities 321,427 365,214
Principal payments on mortgage
loan receivables 691,399 3,071,625
Payments for acquisition of
properties (34,783,138) (6,142,793)
Investment in mortgage loan
receivables 0 (539,824)
NET CASH PROVIDED FROM (USED FOR)
INVESTING ACTIVITIES $(33,895,312) $(3,245,778)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from mortgage loans 20,854,211 1,447,779
Proceeds from sale of shares 9,166,442 3,433,591
Dividends paid (1,226,474) (1,042,471)
Proceeds from investment
certificates issued 1,164,989 554,108
Loan on margin account 0 0
Redemption of investment
certificates (352,595) (599,410)
Principal payments on mortgage
loans and notes payable (1,892,489) (1,643,798)
Payments on margin account 0 0
NET CASH PROVIDED BY FINANCING
ACTIVITIES $ 27,714,084 $ 2,149,799
NET INCREASE (DECREASE) IN CASH $ (1,388,342) $ 3,737,909
CASH AT APRIL 30, 1995 $ 4,772,742 $ 1,991,578
CASH AT JANUARY 31, 1996 $ 3,384,400 $ 5,729,487
</TABLE>
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<TABLE>
<CAPTION>
SUPPLEMENTARY SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES 1996 1995
<S> <C> <C>
Dividends reinvested $ 1,388,851 $ 1,604,294
Real estate investment and mortgage
loans receivable acquired through
borrowings on margin account and
new originations 34,783,138 4,141,521
Mortgages paid directly by owner of
contract 238,359 292,071
Interest reinvested directly in
investment certificates 187,266 151,820
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period for:
Interest paid on mortgages $ 3,805,978 $ 2,264,221
Interest paid on margin account
and other 0 0
Interest paid on investment
certificates 114,132 128,410
$40,517,724 $ 8,582,337
</TABLE>
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<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations. We are pleased to report the results
of IRET's Third Quarter which ended on January 31, 1996.
Earnings. IRET had net taxable earnings for the Third
Quarter of Fiscal 1996 of $1,604,507, compared to $1,064,011
earned in the Third Quarter of the prior fiscal year. This
year's results include $522,001 of capital gain income while
no capital gain income was included in the prior year's
results.
For the first nine months of Fiscal 1996, net taxable income
was $3,672,110, compared to $3,330,538 in the prior year.
The 1996 results include $522,001 of capital gain compared
to $305,543 of capital gain income in the prior year.
On a per share basis, net income was $.13 for the Third
Quarter (compared to $.10 last year) and $.30 for the nine-
month period (compared to $.33 in the prior year).
Funds from Operations. Funds from Operations (taxable income
increased by non-cash deductions of depreciation and
amortization, less extraordinary income items) for the
Third Quarter increased to $1,688,506, from the $1,499,011
received in the prior year. For the nine-month period, funds
from operations increased to $4,760,109 from $4,379,995 in
the prior period. These changes in net taxable earnings and
funds from operations resulted from:
- A continuing strong rental environment in the cities
in which we operate. We are experiencing a strong
demand for our rental properties and have been able
to increase rents at a rate greater than the
inflation in our operating expenses.
- The new properties that we have purchased and
constructed are performing very well. We continue
to see a rapid rent-up of our new properties at or
above our projected rents.
- A considerable amount of our capital continues to
be invested in constructing new apartment buildings.
During this construction period, our investment is
not earning income and will continue to hold down
our earnings for financial reporting purposes.
- The Smith Home Furnishings property in Boise, Idaho,
has not been re-rented. We do have a temporary tenant
in part of the building, but we will continue to have
a rent shortfall of approximately $45,000 a month
until a new permanent tenant can be found.
- We are in the process of refinancing many of our
existing properties. Interest rates are declining
and we expect to see lower interest expense in the
months ahead.
We continue to be pleased with the performance of our
portfolio. We project a continuation of our earnings at the
current level.
Financial Condition. IRET's liquidity and capital
resources remain strong and will enable IRET to continue
its rapid expansion of real estate owned. Comparative
balance sheet figures are:
<TABLE>
01/31/96 01/31/95
<S> <C> <C>
Cash and Marketable Securities $ 7,892,782 $10,635,726
Net Real Estate Owned 114,094,135 64,397,017
Net Real Estate Mortgages 3,245,180 4,926,883
Total Assets 127,421,081 80,925,554
Total Liabilities 79,771,476 44,964,625
Shareholder Equity 47,649,605 35,960,929
Consolidated Financial Reports. The Financial Statements
shown in this report consolidate IRET's financial report
with those of the seven limited partnerships of which IRET
is the General Partner and creditor.
Sale of Properties. During the Third Quarter, IRET sold
properties from its portfolio resulting in a capital gain
for financial reporting purposes of $522,001. For income
tax purposes, IRET has elected to reinvest the proceeds of
these sales to acquire like-kind real estate.
New Investments. Since our last report to you, IRET has
finished the construction of the following property.
Construction has been completed and it is now producing
rental income:
Stone Container Commercial Building, Fargo, ND
($4,880,000 cost)
The following properties are under construction:
- Douglasville, Georgia, Retirement Center
($2,810,000 estimated cost)
- 98 unit Apartment Complex - Minot, ND
($4,500,000 estimated cost)
- 116 unit Apartment Complex - Grand Forks, ND
($5,225,000 estimated cost)
- 98 unit Apartment Complex - Billings, MT
($5,000,000 estimated cost)
Dividends. IRET paid its 99th consecutive quarterly
dividend on January 5, 1996, of $.09 per share. This was an
increase from the $.08875 per share dividend paid on October 1, 1995.
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<CAPTION>
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)
Date: February 27, 1996 By_______________________________
Thomas A. Wentz, Vice-President
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<RESTATED>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1996
<PERIOD-END> JAN-31-1996
<CASH> 3,384,400
<SECURITIES> 4,508,382
<RECEIVABLES> 3,766,929
<ALLOWANCES> 267,096
<INVENTORY> 0
<CURRENT-ASSETS> 10,081,766
<PP&E> 128,339,454
<DEPRECIATION> 14,245,319
<TOTAL-ASSETS> 127,421,081
<CURRENT-LIABILITIES> 1,443,831
<BONDS> 72,332,672
5,994,973
0
<COMMON> 50,727,029
<OTHER-SE> (3,077,424)
<TOTAL-LIABILITY-AND-EQUITY> 127,421,081
<SALES> 0
<TOTAL-REVENUES> 13,601,656
<CGS> 0
<TOTAL-COSTS> 5,948,510
<OTHER-EXPENSES> 448,514
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,054,522
<INCOME-PRETAX> 3,150,109
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,150,109
<DISCONTINUED> 0
<EXTRAORDINARY> 522,001
<CHANGES> 0
<NET-INCOME> 3,672,110
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
</TABLE>
