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, 1998
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 January 31, 1998,
it had 16,037,968 Shares of Beneficial Interest outstanding.
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS - BASIS OF PRESENTATION.
The accompanying condensed consolidated financial statements of
Investors Real Estate Trust, and its subsidiaries and consolidated
partnerships (collectively, the "Company"), included herein have
been prepared by the Company, without audit, pursuant to the
rules and regulations of the Securities and Exchange Commission.
In the opinion of management, all adjustments necessary (of a
normal recurring nature only) to present fairly the financial
position of the Company as of January 31, 1998 and results of
operations and cash flows for the stated periods have been
included. The Condensed Consolidated Balance Sheet at April 30,
1997, contained herein, was derived from audited financial
statements, but does not include all disclosures included in the
1997 Annual Report and applicable under generally accepted
accounting principles. Certain information and footnote
disclosures normally included in interim financial statements
prepared in accordance with generally accepted accounting
principles have been omitted. The results of operations for the
three and nine months ended January 31, 1998, are not
necessarily indicative of operating results for the entire year.
BALANCE SHEETS
(unaudited)
<TABLE>
<CAPTION>
ASSETS: 01-31-98 04-30-97
<S> <C> <C>
Cash $ 1,861,954 $ 1,718,257
Marketable Securities
- GNMA's 3,694,701 4,055,459
- Other REIT's 736,301 683,466
Tax & Insurance Escrow 1,593,417 1,250,469
Deferred Charges 1,233,494 968,278
Prepaid Insurance 288,543 248,377
Sales Proceeds/Tax Deferred 585,334 0
Real Estate Deposits 173,000 100,000
General Partnerships 60,469 78,469
------------ ------------
$ 10,227,213 $ 9,102,775
------------ ------------
Real Estate Investments
Real Estate Owned $226,253,919 $191,884,509
Less Accumulated Depreciation (20,211,271) (16,948,156)
------------ ------------
Net Real Estate Owned 206,042,648 174,936,353
------------ ------------
Real Estate Mortgages (unrelated) 1,860,118 3,108,933
Less Unearned Discounts (6,244) (10,524)
Less Deferred Gain from Property
Dispositions (18,713) (18,713)
Less Reserve for Bad Debts (124,881) (124,881)
------------ ------------
Net Mortgages & Contracts 1,710,280 2,954,815
------------ ------------
Total Real Estate Investments $207,752,928 $177,891,168
------------ ------------
TOTAL ASSETS $217,980,141 $186,993,943
============ ============
LIABILITIES:
Accounts Payable & Other
Liabilities $ 3,762,286 $ 3,073,071
Mortgages Payable 131,907,577 115,734,946
Investment Certificates Payable 9,918,633 8,187,305
Due on Credit Line 500,000 0
------------ ------------
TOTAL LIABILITIES $146,088,496 $126,995,322
------------ ------------
MINORITY INTERESTS IN OPERATING
PARTNERSHIP: $ 5,603,013 $ 1,002
------------ ------------
SHAREHOLDERS' EQUITY
Shares of Beneficial Interest
Outstanding Shares of 01-31-98 04-30-97
-------- --------
16,037,968 on 01/31/98
14,940,513 on 04/30/97 $ 72,353,880 $ 65,073,951
Accumulated Distributions in Excess
of Net Income (6,191,483) (5,162,837)
Unrealized Gain on Securities
Held for Sale $ 126,235 $ 86,505
------------ ------------
Total Shareholders' Equity $ 66,288,632 $ 59,997,619
------------ ------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $217,980,141 $186,993,943
============ ============
</TABLE>
<PAGE>
STATEMENT OF OPERATIONS
For the Three- and Nine-Month Periods Ended January 31, 1998 & 1997
(unaudited)
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended
January 31 January 31
<S> <C> <C> <C> <C>
OPERATING INCOME: 1998 1997 1998 1997
---- ---- ---- ----
Real Estate Rentals $ 8,286,064 $ 6,171,125 $ 23,121,047 $ 16,156,762
Interest Income 136,893 153,477 447,214 601,573
Mortgage Discount & Fees 17,435 58,429 52,156 65,197
------------ ------------ ------------ ------------
$ 8,440,634 $ 6,383,031 $ 23,620,417 $ 16,823,532
------------ ------------ ------------ ------------
OPERATING EXPENSE:
Interest $ 2,681,092 $ 2,140,655 $ 7,653,429 $ 5,195,324
Utilities & Maintenance 1,307,348 973,831 3,668,313 2,574,265
Property Management 667,387 470,559 1,962,352 1,256,260
Taxes & Insurance 917,211 703,173 2,586,960 1,894,781
Advisory & Trustees Fees 172,552 139,937 485,929 407,258
Operating Expenses 52,755 21,000 167,925 112,347
------------ ------------ ------------ ------------
$ 5,798,345 $ 4,449,155 $ 16,524,908 $ 11,440,235
------------ ------------ ------------ ------------
MINORITY INTEREST $ (48,438) $ 0 $ (61,585) $ 0
OPERATING INCOME:
(before reserves) $ 2,593,612 $ 1,933,876 $ 7,033,924 $ 5,383,298
------------ ------------ ------------ ------------
DEPRECIATION/AMORTIZ. (1,283,345) (964,281) (3,609,434) (2,387,443)
------------ ------------ ------------ ------------
OPERATING INCOME (after
reserves) $ 1,310,267 $ 969,594 $ 3,424,490 $ 2,995,856
GAIN ON SALE OF
INVESTMENTS 326,138 138,629 448,786 390,691
------------ ------------ ------------ ------------
NET TAXABLE INCOME $ 1,636,404 $ 1,108,223 $ 3,873,276 $ 3,386,547
============ ============ ============ ============
NET INCOME PER SHARE:
Operating Income
(after depreciation) .08 .07 .22 .22
Gain on Sale of Investments .02 .01 .03 .03
------------ ------------ ------------ ------------
Total Net Income/Share .10 .08 .25 .25
------------ ------------ ------------ ------------
DIVIDENDS PAID PER SHARE .1050 .0975 .30925 .29
============ ============ ============ ============
Average Number of Shares
Outstanding 15,878,436 14,189,624 15,552,844 13,898,920
FUNDS FROM OPERATIONS: *
Net Taxable Income $ 1,636,404 $ 1,108,223 $ 3,873,276 $ 3,386,547
Adjustments
+depeciation of real estate
owned/amortization 1,283,345 964,281 3,609,434 2,387,443
- gain (loss) on sale of
investments (326,138) (138,629) (448,786) (390,691)
------------ ------------ ------------ ------------
FUNDS FROM OPERATIONS * $ 2,593,611 $ 1,933,875 $ 7,033,924 $ 5,383,299
per share .16 .14 .45 .39
------------ ------------ ------------ ------------
</TABLE>
* 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.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE-MONTH PERIODS ENDED JANUARY 31, 1998 AND 1997
(unaudited)
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES 1998 1997
---- ----
<S> <C> <C>
Net Income $ 3,873,276 $ 3,444,069
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 3,364,663 2,385,473
Minority interest portion of operating
partnership income 61,585 0
Accretion of discount on contracts (4,280) 0
Gain on Sale of Properties (448,786) (390,691)
Interest reinvested in investment certificates 244,124 173,379
Changes in other assets and liabilities:
(Increase) decrease in real estate deposits (73,000) 382,500
(Increase) decrease in other assets (287,386) (324,405)
(Increase) decrease in tax and insurance
escrow (342,948) (470,001)
Increase (decrease) in accounts payable and
accrued expenses 689,215 68,004
------------ ------------
NET CASH PROVIDED FROM OPERATING
ACTIVITIES $ 7,076,463 $ 5,268,328
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of marketable
securities held to maturity $ 360,758 $ 326,237
Principle payments on mortgage loans
receivable 1,696,188 2,466,091
Proceeds from sale of property 1,345,058 389,784
Payments for acquisition and improvements
of properties (34,552,590) (23,616,999)
Purchase of marketable securities available
for sale 0 (596,961)
Investment in mortgage loans receivable (294,669) (749,630)
------------ ------------
NET CASH USED FOR INVESTING ACTIVITIES $(31,445,255) $(21,781,478)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of shares $ 9,236,005 $ 5,940,672
Proceeds from investment certificates issued 2,430,709 3,387,650
Proceeds from mortgages payable 18,444,138 9,824,192
Proceeds from short-term lines of credit 8,650,000 5,450,000
Proceeds from sale of minority interest 585,334 0
Repurchase of shares (1,971,506) (1,054,454)
Dividends Paid (1,738,751) (1,418,548)
Redemption of investment certificates (940,883) (808,049)
Principal payments on mortgage loans (2,032,557) (1,900,614)
Payments on short-term lines of credit (8,150,000) (4,450,000)
------------ ------------
NET CASH PROVIDED FROM FINANCING
ACTIVITIES $ 24,512,489 $ 14,970,849
------------ ------------
NET INCREASE (DECREASE) IN CASH $ 143,697 $ (1,542,301)
CASH AT APRIL 30 $ 1,718,257 $ 2,715,274
------------ ------------
CASH AT JANUARY 31 $ 1,861,954 $ 1,172,973
------------ ------------
<PAGE>
SUPPLEMENTARY SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
1998 1997
---- ----
Dividends reinvested $ 3,149,841 $ 3,068,581
Real estate investment and mortgage loans
receivable acquired through assumption
of mortgage loans payable and accrual
of costs 10,609,107 29,945,273
Mortgage loan receivable transferred to
property owned 1,161,878 2,810,000
Proceeds from sale of properties deposited
directly with escrow agent 0 456,029
Mortgages paid directly by owner of contract 0 0
Interest reinvested directly in investment
certificates 244,124 173,379
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the year for:
Interest paid on mortgages $ 6,739,919 $ 4,968,209
Interest paid on margin account and other 39,045 14,696
Interest paid on investment certificates 224,529 162,405
------------ ------------
$ 7,003,493 $ 5,145,310
------------ ------------
</TABLE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
We are pleased to report that IRET's Third Quarter was very productive.
Funds from Operations, Revenues, Real Estate Owned and Dividends all
reached new highs. Of particular note is the attainment of the
$200,000,000 mark in real estate assets owned.
RESULTS OF OPERATION. Funds from Operations for the Third Quarter of
Fiscal 1998 increased to $2,593,611 from the $1,933,875 earned for the
same period of the prior year (an increase of 34%). On a per share basis,
Funds from Operations increased to $.16 vs. the year eariler figure of
$.14 (an increase of 14%). For the nine-month period ended January 31,
1998, Funds from Operations was $7,033,924, compared to the year earlier
figure of $5,383,299 (an increase of 31%). On a per share basis, the nine-
month Funds from Operations was $.45 vs. $.39 (an increase of 16%). These
excellent results stem from strong occupancy rates, decreased utility
expense due to the mild winter, decreased interest rates and a good
performance from the new properties added to our portfolio.
Taxable income for the third quarter was $1,636,404, compared to
$1,108,223 for the prior year. For the nine-month period, it was
$3,873,276, compared to $3,386,547.
Occupancy rates continue to be satisfactory and we continue to adjust
rents upward as market conditions allow.
SALE OF PROPERTIES. A 48-unit apartment complex in Scottsbluff, Nebraska,
was sold during the Third Quarter with a capital gain of $326,138.
PORTFOLIO ACQUISITIONS. The following properties were added to our
investment portfolio during the Third Quarter and are producing income:
Cost
----
- 122 Unit Park East Apartment Complex,
Fargo, ND $ 4,900,000
- 248 Unit Magic City Realty Apartment
portfolio, Minot, ND $ 5,270,000
- Edgewood Vista Alzheimer's Unit, Minot, ND $ 500,000
The following properties are under construction:
- 67 Unit Legacy Apartment Complex,
Grand Forks, ND $ 4,000,000
- 2 - 67 Unit Cottonwood Apartment Buildings,
Bismarck, ND $ 8,000,000
- Office Campus - Great Plains Software,
Fargo, ND $15,000,000
- Edgewood Vista Phase II expansion,
Minot, ND $ 800,000
FINANCIAL CONDITION. IRET continues to enjoy a very strong balance sheet.
During the first three quarters of Fiscal 1998, real estate owned has
increased to $206,042,648 from the $174,936,353 owned on April 30, 1997.
Real estate mortgages owed have increased to $131,907,577 from the
$115,734,946 owed on April 30, 1997. Shareholder equity has increased to
$66,288,632 from the prior fiscal year end figure of $59,997,619. Comparative
balance sheet figures are:
01/31/98 04/30/97
-------- --------
Cash and Marketable Securities $ 6,292,956 $ 6,457,182
Net Real Estate Owned 206,042,648 174,936,353
Net Mortgages and Contracts 1,710,280 2,954,815
Total Assets 217,980,141 186,993,943
Total Liabilities 146,088,496 126,995,322
Shareholder Equity 66,288,632 59,997,619
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 10.5 cents per share on
January 16, 1998, to shareholders of record at the close of business on
January 2, 1998. This was an increase from the 10.3 cents per share
dividend paid on October 1, 1997, and was the 107th 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 10, 1998 By ___________________________________
Thomas A. Wentz, Sr.,Vice-President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> JAN-31-1998
<CASH> 1,861,954
<SECURITIES> 4,431,002
<RECEIVABLES> 3,093,612
<ALLOWANCES> (149,838)
<INVENTORY> 0
<CURRENT-ASSETS> 2,700,763
<PP&E> 226,253,919
<DEPRECIATION> (20,211,271)
<TOTAL-ASSETS> 217,980,141
<CURRENT-LIABILITIES> 9,865,299
<BONDS> 141,826,210
0
0
<COMMON> 72,353,880
<OTHER-SE> (6,065,248)
<TOTAL-LIABILITY-AND-EQUITY> 217,980,141
<SALES> 0
<TOTAL-REVENUES> 23,620,658
<CGS> 0
<TOTAL-COSTS> (9,410,393)
<OTHER-EXPENSES> (3,548,633)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (7,238,675)
<INCOME-PRETAX> 3,422,957
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,422,957
<DISCONTINUED> 448,786
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,871,743
<EPS-PRIMARY> .09
<EPS-DILUTED> 0
</TABLE>
