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 January 31, 1997
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, 1997, it had 14,571,628 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.
<TABLE>
<CAPTION>
BALANCE SHEETS
For the Periods Ended January 31, 1997 & 1996
(unaudited)
ASSETS: 01-31-97 01-31-96
<S> <C> <C>
Cash $ 1,172,973 $ 3,384,400
Marketable Securities
-GNMA's 4,085,621 4,508,382
-Other REIT's 713,192 0
-Less Unrealized Gain
on REIT Stock (116,232) 0
Tax & Insurance Escrow 1,557,236 1,087,235
Deferred Charges 868,688 490,860
Prepaid Insurance 298,068 153,389
Deposits 75,000 457,500
General Partnerships 70,576 0
$ 8,725,122 $10,081,766
Real Estate Investments
Real Estate Owned $189,830,086 $128,339,454
Less Accumulated Deprec. (15,722,229) (14,245,319)
Net Real Estate Owned 174,107,857 114,094,135
Real Estate Mortgages 1,933,017 3,766,929
Less Unearned Discounts (12,448) (34,792)
Less Deferred Gain from
Property Dispositions (26,445) (219,861)
Less Reserve for Bad Debts (197,096) (267,096)
Net Mortgages & Contracts 1,697,028 3,245,180
Total Real Estate Investments $175,804,885 $117,339,315
TOTAL ASSETS $184,530,007 $127,421,081
LIABILITIES:
Accounts Payable & Other
Liabilities $ 2,876,237 $ 1,443,831
Mortgages Payable 114,157,548 72,332,672
Investment Certificates
Payable 8,042,206 5,994,973
Due on Credit Line 1,000,000 0
TOTAL LIABILITIES $126,075,991 $ 79,771,476
SHAREHOLDERS' EQUITY
Shares of Beneficial Interest
Outstanding Shares of 01-31-97 01-31-96
14,571,628 as of 01/31/97
12,693,198 as of 01/31/96 $ 62,611,138 $ 50,727,029
Accumulated Distributions
in Excess of Undistributed
Net Income (4,157,122) (3,077,424)
Total Shareholders' Equity $ 58,454,016 $ 47,649,605
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $184,530,007 $127,421,081
</TABLE>
<PAGE>
STATEMENT OF OPERATIONS
For the Three- and Nine-Month Periods
Ended January 31, 1997 & 1996
(unaudited)
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended
January 31 January 31
<S> <C> <C> <C> <C>
OPERATING INCOME: 1997 1996 1997 1996
Real Estate Rentals $ 6,171,124 $ 4,892,738 $16,156,762 $12,944,173
Interest Income 153,477 211,671 601,573 657,483
Mortgage Discount & Fees 58,429 0 65,197 0
$ 6,383,030 $ 5,104,409 $16,823,532 $13,601,656
OPERATING EXPENSE:
Interest $ 2,085,103 $ 1,554,110 $ 5,139,772 $ 4,054,522
Utilities & Maintenance 973,831 782,100 2,574,265 2,042,106
Property Management 470,559 365,453 1,256,260 887,034
Taxes & Insurance 703,173 555,031 1,894,781 1,409,370
Advisory & Trustees Fees 139,934 124,801 407,255 337,324
Operating Expenses 21,001 34,408 112,347 111,190
$ 4,393,601 $ 3,415,903 $11,384,680 $ 8,841,546
OPERATING INCOME
(before reserves): $ 1,989,429 $ 1,688,506 $ 5,438,852 $ 4,760,109
DEPRECIATION/AMORTIZATION (962,312) (606,000) (2,385,474) (1,610,000)
OPERATING INCOME
(after reserves): $ 1,027,117 $ 1,082,506 $ 3,053,378 $ 3,150,109
GAIN ON SALE OF INVESTMENTS 138,629 522,001 390,691 522,001
NET INCOME $ 1,165,746 $ 1,604,507 $ 3,444,069 $ 3,672,110
NET INCOME PER SHARE:
Operating Income
(after depreciation) .07 .09 .22 .26
Gain on Sale of Investments .01 .04 .03 .04
Total Net Income/Share .08 .13 .25 .30
DIVIDENDS PAID PER SHARE .0975 .09 .29 .27125
Average Number of Shares
Outstanding 14,254,582 12,382,227 13,898,920 11,940,492
FUNDS FROM OPERATIONS*
Net Income $ 1,165,746 $ 1,604,507 $ 3,444,069 $ 3,672,110
Adjustments
+ depreciation/amortization 962,312 606,000 2,385,474 1,610,000
- (gain) loss on sale of
investments (138,629) (522,001) (390,691) (522,001)
FUNDS FROM OPERATIONS* $ 1,989,429 $ 1,688,506 $ 5,438,852 $ 4,760,109
per share .14 .14 .39 .40
______________________________________________________________________________
</TABLE>
* "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 NINE-MONTH PERIODS ENDED JANUARY 31, 1997, AND 1996
(unaudited)
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES 1997 1996
<S> <C> <C>
Net Income $ 3,444,069 $ 3,672,111
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 2,385,473 1,610,000
Interest reinvested in investment
certificates 173,379 187,266
Changes in other assets and liabilities:
(Increase) decrease in other
assets (802,597) (1,369,242)
Increase in accounts payable and
accrued expenses 68,004 692,751
NET CASH PROVIDED FROM OPERATING
ACTIVITIES $ 5,268,328 $ 4,792,886
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of REIT stock $ (596,961)$ (0)
Proceeds from sale of securities 326,237 321,427
Principal payments on mortgage
loans receivable 2,466,091 691,399
Payments for acquisition of
properties (23,227,215) (34,908,138)
Investment in mortgage loans
receivable (749,630) (0)
NET CASH PROVIDED FROM (USED FOR)
INVESTING ACTIVITIES $(21,781,478)$(33,895,312)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from Line of Credit $ 5,450,000 $ 0
Proceeds from loan financing $ 9,824,192 $ 20,854,211
Proceeds from sale of shares 4,886,218 9,166,442
Dividends paid (1,418,548) (1,226,474)
Proceeds from investment
certificates issued 3,387,650 1,164,989
Loan on margin account 0 0
Redemption of investment
certificates (808,049) (352,595)
Principal payments on mortgage
loans and notes payable (6,350,614) (1,892,489)
Payments on margin account 0 0
NET CASH USED FOR FINANCING
ACTIVITIES $ 14,970,849 $ 27,714,084
NET INCREASE (DECREASE) IN CASH $ (1,542,301)$ (1,388,342)
CASH AT APRIL 30 $ 2,715,274 $ 4,772,742
CASH AT JANUARY 31 $ 1,172,973 $ 3,384,400
</TABLE>
<PAGE>
<TABLE>
SUPPLEMENTARY SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES 1997 1996
<S> <C> <C>
Dividends reinvested $ 3,068,581 $ 1,388,851
Real estate investment and mortgage
loans receivable acquired through
borrowings on margin account and
new originations 29,945,273 34,783,138
Proceeds from Sale of Properties
deposited directly with
escrow agent 456,029 426,352
Mortgages paid directly by owner of
contract 0 238,359
Interest reinvested directly in
investment certificates 173,379 187,266
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the year for:
Interest paid on mortgages $ 4,968,209 $ 3,805,978
Interest paid on margin account
and other 0 0
Interest paid on investment
certificates 162,405 114,132
$ 5,130,614 $ 3,920,110
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
The third quarter of Fiscal Year 1997 was another period of
significant progress for IRET.
- Over $35,000,000 of apartment properties, consisting
of four apartment complexes with a total of 870
apartment units, were added to the IRET portfolio.
- The 1,000,000 share offering of IRET Shares of
Beneficial Interest at $7.00 per share was successfully
completed.
- The quarterly dividend payable April 1, 1997, was
increased to $.10 per share.
Results of Operations. IRET's net operating income for the
third quarter of Fiscal 1997 was $1,027,117, compared to
$1,082,506 for the same period of Fiscal 1996. For the first
nine months of Fiscal 1997, net operating income was
$3,053,378, compared to $3,150,109 in the prior year. Gain
on Sale of Investments was $138,629 for the quarter
(compared to $522,000 last year) and $390,691 for the nine-
month period (compared to $522,000 last 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 third quarter increased to $1,989,429 from
the $1,688,506 recorded in the prior year. For the nine-
month period, Funds from Operations was $5,438,852, compared
to $4,760,109 in Fiscal 1996.
Both operating income and Funds from Operations were reduced
by the continuing vacancy of the Smith Home Furnishings
property in Boise, Idaho. The property is now occupied by
a short-term tenant and serious negotiations with a long-
term tenant are in process.
The performance of IRET's investment portfolio continues at
a satisfactory level and the completion of the aggressive
building and buying program should result in steadily
improving financial results.
Financial Condition. IRET's liquidity and capital resources
remain strong. Shareholder equity has increased nearly
$11,000,000 during the past year. In addition to cash and
marketable securities on hand, IRET has unsecured lines of
credit with Minot banks of $9,500,000. Comparative balance sheet
figures are:
01/31/97 01/31/96
Cash and Marketable Securities $ 5,971,786 $ 7,892,782
Net Real Estate Owned 174,107,857 114,094,135
Net Real Estate Mortgages 1,697,028 3,245,180
Total Assets 175,804,885 117,339,315
Total Liabilities 126,075,991 79,771,476
Shareholder Equity 58,454,016 47,649,605
<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.
Property Dispositions. During the third quarter, IRET did
not sell any of its investments.
Property Acquisitions. The following properties were added
to our portfolio during the third quarter and are producing
income:
Cost
- 360 unit Park Meadows apartment
complex, St. Cloud, MN $10,190,549
- 192 unit Neighborhood apartment
complex, Colorado Springs, CO $10,811,900
- 210 unit Miramont apartment
complex, Fort Collins, CO $14,231,155
- 108 unit Woodridge apartment
complex, Rochester, MN $ 6,394,441
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 a purchase agreement to acquire the
following property:
- Edgewood Vista 24 unit Alzheimer
care facility, East Grand Forks, MN $ 892,500
Dividends. IRET paid a regular dividend of 9.75 cents per
share on January 8, 1997, to shareholders of record at the
close of business on January 3, 1997. This was an increase
from the 9.5 cents per share regular dividend paid on
October 1, 1996, and was the 103rd 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: March 11, 1997 By_______________________________
Thomas A. Wentz, Sr.,
Vice-President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-END> JAN-31-1997
<CASH> 1,172,973
<SECURITIES> 4,682,581
<RECEIVABLES> 1,933,017
<ALLOWANCES> (235,989)
<INVENTORY> 0
<CURRENT-ASSETS> 2,869,568
<PP&E> 189,830,086
<DEPRECIATION> (15,722,229)
<TOTAL-ASSETS> 184,530,007
<CURRENT-LIABILITIES> 118,033,785
<BONDS> 8,042,206
<COMMON> 62,611,138
0
0
<OTHER-SE> (4,157,122)
<TOTAL-LIABILITY-AND-EQUITY> 184,530,007
<SALES> 0
<TOTAL-REVENUES> 16,823,532
<CGS> 0
<TOTAL-COSTS> 8,630,382
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,139,772
<INCOME-PRETAX> 3,053,378
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,053,378
<DISCONTINUED> 390,691
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,444,069
<EPS-PRIMARY> .17
<EPS-DILUTED> 0
</TABLE>
