<PAGE>
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 July 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 North Dakota Real Estate
Investment Trust. As of July 31, 1997, it had 15,297,234
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, 1998. Reference is made to
the footnotes to the Statements prepared by the Trust's
auditors for the Fiscal Year ended April 30, 1997, contained
in the Annual Report for Fiscal 1997. 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, 1997, statements.
BALANCE SHEETS
For the Periods Ended July 31, 1997 & 1996
(unaudited)
<TABLE>
<CAPTION>
ASSETS: 07-31-97 07-31-96
<S> <C> <C>
Cash $ 2,762,500 $ 2,337,764
Marketable Securities
-GNMA's 3,924,643 4,203,355
-Other REIT's 735,118 603,119
Tax & Insurance Escrow 974,933 1,529,646
Deferred Charges 924,543 1,041,141
Prepaid Insurance 235,516 99,962
Real Estate Deposits 100,000 70,000
General Partnerships 78,469 85,576
------------ ------------
$ 9,735,722 $ 9,970,563
============ ============
Real Estate Investments
Real Estate Owned $196,009,759 $137,118,745
Less Accumulated Deprec. (17,989,316) (14,043,454)
------------ ------------
Net Real Estate Owned 178,020,443 123,075,291
------------ ------------
Real Estate Mortgages
(unrelated) 1,940,621 3,282,698
Less Unearned Discounts (9,097) (18,222)
Less Deferred Gain from
Property Dispositions (18,713) (165,074)
Less Reserve for Bad Debts (124,881) (197,096)
------------ ------------
Net Mortgages & Contracts $ 1,787,930 $ 2,902,306
------------ ------------
Total Real Estate Investments $179,808,373 $125,977,597
------------ ------------
TOTAL ASSETS $189,544,095 $135,948,160
============ ============
LIABILITIES:
Accounts Payable & Other
Liabilities $ 2,602,707 $ 1,900,295
Mortgages Payable 115,618,074 74,106,387
Investment Certificates
Payable 9,508,850 6,718,161
------------ ------------
TOTAL LIABILITIES $127,729,630 $ 82,724,843
------------ ------------
MINORITY INTEREST IN OPERATING
PARTNERSHIP $ 1,002 0
------------ ------------
SHAREHOLDERS' EQUITY
Shares of Beneficial Interest
Outstanding Shares of 07-31-97 07-31-96
15,297,234 as of 07/31/97
13,666,570 as of 07/31/96 $ 67,444,949 $ 56,853,298
Undistributed Net Income (5,756,539) (3,629,981)
Unrealized Gain REIT Stock 125,052 0
------------ ------------
Total Shareholders' Equity $ 61,813,462 $ 53,223,317
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $189,544,095 $135,948,160
============ ============
</TABLE>
<PAGE>
STATEMENT OF OPERATIONS
For the Three-Month Periods Ended July 31, 1997 & 1996
(unaudited)
<TABLE>
<CAPTION>
3 Months Ended
July 31
--------------
<S> <C> <C>
1997 1996
OPERATING INCOME: ---- ----
Real Estate Rentals $ 7,007,297 $ 4,750,394
Interest Income 162,705 214,648
Mortgage Discount & Fees 13,759 1,433
----------- -----------
$ 7,183,761 $ 4,966,475
----------- -----------
OPERATING EXPENSE:
Interest $ 2,441,788 $ 1,421,183
Utilities & Maintenance 1,118,751 774,431
Property Management 625,147 377,718
Taxes & Insurance 800,886 552,750
Advisory & Trustees Fees 150,648 129,217
Operating Expenses 53,466 42,709
----------- -----------
$ 5,190,686 $ 3,298,008
----------- -----------
OPERATING INCOME
(before reserves): $ 1,993,075 $ 1,668,467
----------- -----------
DEPRECIATION/AMORTIZATION (1,099,031) (690,360)
----------- -----------
OPERATING INCOME (after reserves): $ 894,044 $ 978,107
GAIN ON SALE OF INVESTMENTS 39,069 254,929
MINORITY INTEREST PORTION OF
OPERATING PARTNERSHIP NET INCOME (7) 0
----------- -----------
NET TAXABLE INCOME $ 933,106 $ 1,233,036
----------- -----------
FUNDS FROM OPERATIONS: *
Operating Income $ 894,044 $ 978,107
Plus Depreciation & Amortization 1,099,031 690,360
Minus Minority Interest -
Operating Partnership (7) 0
----------- -----------
FUNDS FROM OPERATIONS $ 1,993,082 $ 1,668,467
----------- -----------
PER SHARE:
Operating Income
(after depreciation) .06 .07
Gain on Sale of Investments .00 .02
----------- -----------
Total Taxable Income/Share .06 .09
----------- -----------
FUNDS FROM OPERATIONS * .13 .12
----------- -----------
DIVIDENDS PAID PER SHARE .10125 .0975
----------- -----------
Average Number of Shares
Outstanding 15,081,101 13,559,802
----------- -----------
* Funds from Operations is defined as income before
gains (losses) on sales of investments, minority
interests of unitholders in operating partnership
and extraordinary items, plus depreciation and
amortization.
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE-MONTH PERIODS ENDED JULY 31, 1997, AND 1996
(unaudited)
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES 1997 1996
---- ----
<S> <C> <C>
Net Income $ 933,106 $ 1,233,036
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 1,099,030 690,361
Minority interest portion of
operating partnership income 7 0
Accretion of discount on
contracts (1,427) 0
Gain on Sale of Properties (39,069) (254,929)
Interest reinvested in investment
certificates 32,173 18,885
Changes in other assets and
liabilities:
Increase (decrease) in real
estate deposits 0 70,000
(Increase) decrease in other
assets 56,596 (450,258)
(Increase) decrease in tax and
insurance escrow 275,536 378,119
Increase (decrease) in accounts
payable and accrued expenses 113,750 637,650
------------ ------------
NET CASH PROVIDED FROM OPERATING
ACTIVITIES $ 2,469,702 $ 2,322,864
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of
marketable securities held to
maturity $ 130,816 $ 208,502
Principal payments on mortgage
loans receivable 257,634 706,091
Proceeds from sale of property 250,000 0
Payments for acquisition and
improvements of properties (3,975,628) (6,154,468)
Purchase of marketable securities
available for sale (13,105) (600,000)
Investment in mortgage loans
receivable (75,959) (324,780)
------------ ------------
NET CASH USED FOR INVESTING
ACTIVITIES $ (3,426,242) $ (6,164,655)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of shares $ 1,746,029 $ 2,101,871
Proceeds from investment
certificates issued 1,471,889 769,668
Proceeds from mortgages payable 650,000 3,900,000
Proceeds from short-term lines
of credit 400,000 0
Proceeds from sale of minority
interest 0 0
Repurchase of shares (386,062) (400,227)
Dividends paid (531,683) (473,903)
Redemption of invest. certificates (182,517) (132,961)
Principal payments on mortgage
loans (766,873) (1,545,869)
Payments on short-term lines of
credit (400,000) 0
------------ ------------
NET CASH PROVIDED FROM FINANCING
ACTIVITIES $ 2,000,783 $ 4,218,579
------------ ------------
NET INCREASE (DECREASE) IN CASH $ 1,044,243 $ (376,788)
CASH AT APRIL 30 $ 1,718,257 $ 2,714,552
------------ ------------
CASH AT JULY 31 $ 2,762,500 $ 2,337,764
------------ ------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
SUPPLEMENTARY SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES 1997 1996
---- ----
<S> <C> <C>
Dividends reinvested $ 995,407 $ 839,350
Real estate investment and mortgage
loans receivable acquired through
assumption of mortgage loans
payable and accrual of costs 650,000 0
Mortgage loan receivable transferred
to property owned 0 0
Proceeds from sale of properties
deposited directly with escrow
agent 0 0
Mortgages paid directly by owner of
contract 0 0
Interest reinvested directly in
investment certificates 32,173 18,885
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the year for:
Interest paid on mortgages $ 2,310,822 $ 1,478,051 0 0
Interest paid on investment
certificates 53,744 32,815
----------- -----------
$ 2,364,566 $ 2,369,101
----------- -----------
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
RESULTS OF OPERATIONS. Funds from Operations for the first
three months of Fiscal 1998 increased to $1,993,082, compared
to $1,668,467 generated in the same period of the prior
fiscal year. On a per share basis, Funds from Operations
increased to 13 cents per share, compared to 12 cents for the
prior year. Funds from Operations is regarded as the
appropriate measure of performance for Real Estate Investment
Trusts. Operating income declined slightly to $894,044 for
the first quarter compared to $978,107 earned in the same
period last year. The first quarter saw a spike in our vacancy
rate for apartment properties. We are pleased to report that
this was a temporary phenomena and that our vacancy rate has
declined to a normal level during the second quarter.
We look forward to improving results for the remainder of the
current fiscal year. In particular, the second quarter will
see a substantial recognition of capital gain income resulting
from the sale of two properties - a Superpumper convenience
store in Bottineau, North Dakota (approximate $83,500 gain)
and the sale of a 48-unit apartment complex in Scottsbluff,
Nebraska (gain of approximately $325,000).
We continue to be optimistic about our portfolio. We are
encouraged by the recent improvement in occupany rates and
the acceptance of the new apartments we are constructing in
Billings, Bismarck and Grand Forks.
SALE OF PROPERTIES. During the first quarter of Fiscal 1998,
IRET sold the Superpumper convenience store in Newtown,
North Dakota, realizing a gain of $39,000. During the second
quarter of the current fiscal year, two other sales will be
reported - another Superpumper convenience store in Bottineau,
North Dakota (gain of $83,500) and the sale of a 48-unit
apartment complex in Scottsbluff, Nebraska (gain of $325,000).
PORTFOLIO ACQUISITIONS. Construction continues on 67-unit
apartment buildings in Billings, Montana, and Grand Forks
and Bismarck, North Dakota. In addition, IRET has acquired
the Edgewood Vista Retirement Home in Minot, North Dakota,
and Sweetwater Springs Retirement Home in Douglasville, Georgia.
The total investments during the second quarter in new
properties total $4,375,000. We anticipate the addition of a
substantial amount of additional properties during the second
quarter, including a merger with Jenner Properties which will
add 125 apartment units to the IRET portfolio, and the purchase
of the Kirkwood Manor Apartment project in Bismarck which will
add an additional 108 apartment units.
FINANCIAL CONDITION. IRET's financial condition continues to
be very strong. The July 31, 1997, balance sheet shows cash
and marketable securities of $7,422,261, compared to the
$7,144,238 on hand a year earlier. Total assets increased to
$189,544,096 from the July 31, 1996, total of $135,948,160.
Liabilities increased to $127,730,633 versus the year earlier
figure of $82,724,842. Shareholder equity increased to
$61,814,465, from $53,223,317 on July 31, 1996.
<PAGE>
07/31/97 07/31/96
-------- --------
<TABLE>
<S> <C> <C>
Cash and Marketable Securities $ 7,422,261 $ 7,144,238
Net Real Estate Owned 178,020,443 123,075,291
Net Real Estate Mortgages 1,787,930 2,902,306
Total Assets 189,544,095 135,948,160
Total Liabilities 127,730,633 82,724,842
Shareholder Equity 61,814,462 53,223,317
</TABLE>
<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.
DIVIDENDS. IRET paid a regular dividend of 10.125 cents per
share on July 1, 1997, to shareholders of record at the close of
business on June 18, 1997. This was an increase from the 10.0
cents per share dividend paid on April 1, 1997, and was the 105th
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: September 12, 1997 By______________________________
Thomas A. Wentz, Sr.,
Vice-President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> JUL-31-1997
<CASH> 2,762,500
<SECURITIES> 4,659,761
<RECEIVABLES> 1,940,621
<ALLOWANCES> (124,881)
<INVENTORY> 0
<CURRENT-ASSETS> 2,285,651
<PP&E> 196,009,759
<DEPRECIATION> (17,989,316)
<TOTAL-ASSETS> 189,544,095
<CURRENT-LIABILITIES> 2,603,709
<BONDS> 125,126,924
<COMMON> 67,444,949
0
0
<OTHER-SE> (5,631,487)
<TOTAL-LIABILITY-AND-EQUITY> 189,544,095
<SALES> 0
<TOTAL-REVENUES> 7,183,761
<CGS> 0
<TOTAL-COSTS> 2,310,822
<OTHER-EXPENSES> 1,099,031
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,879,864
<INCOME-PRETAX> 894,044
<INCOME-TAX> 0
<INCOME-CONTINUING> 894,044
<DISCONTINUED> 39,069
<EXTRAORDINARY> (7)
<CHANGES> 0
<NET-INCOME> 933,106
<EPS-PRIMARY> .06
<EPS-DILUTED> 0
</TABLE>
