SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
______________________
FORM 10-K405
Annual Report Pursuant to
Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Fiscal Year Ended Commission File No.
April 30, 1998 0-14851
______________________
INVESTORS REAL ESTATE TRUST
(Exact name of Registrant as specified in its charter)
North Dakota 45-0311232
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
12 South Main, Minot, North Dakota 58701
(Address of principal executive offices) (Zip Code)
701-852-1756
(Registrant's Telephone Number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
Capital Shares of Beneficial Interest NASDAQ - Small Cap Market
______________________
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 by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge,
in definitive proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K. ( X )
The aggregate market value of the Registrant's outstanding Capital Shares
of Beneficial Interest held by non-affiliates is $107,755,595 based on the
last reported sale price on June 11, 1998.
The number of shares outstanding as of June 11, 1998, was 16,416,361
Capital Shares of Beneficial Interest (no par value).
Portions of the Trust's definitive proxy statement for the 1998 annual
meeting of shareholders are incorporated by reference in Part III hereof.
____________________________________________________________
<PAGE>
INVESTORS REAL ESTATE TRUST
(Registrant)
INDEX
Item Page
No. No.
Cover Page . . . . . . . . . . . . . . . . . . 1
Index. . . . . . . . . . . . . . . . . . . . . 3
PART I
1. Business . . . . . . . . . . . . . . . . . . . 4
2. Properties . . . . . . . . . . . . . . . . . . 7
3. Legal Proceedings. . . . . . . . . . . . . . . 13
4. Submission of Matters to a Vote of Security
Holders. . . . . . . . . . . . . . . . . . . . 13
PART II
5. Market for Registrant's Common Stock and
Related Security Holder Matters. . . . . . . . 13
6. Selected Financial Data. . . . . . . . . . . . 14
7. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 15
8. Financial Statements and Supplementary Data. . 25
9. Disagreements on Accounting and Financial
Disclosure . . . . . . . . . . . . . . . . . . 25
PART III
10. Directors and Executive Officers of the
Registrant . . . . . . . . . . . . . . . . . . 25
11. Executive Compensation . . . . . . . . . . . . 26
12. Security Ownership of Certain Beneficial
Owners and Management. . . . . . . . . . . . . 26
13. Certain Relationships and Related
Transactions . . . . . . . . . . . . . . . . . 27
PART IV
14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K. . . . . . . . . . . . . . 27
Exhibit Index. . . . . . . . . . . . . . . . . 28
Signatures . . . . . . . . . . . . . . . . . . 29
Report of Independent Certified Public
Accountants. . . . . . . . . . . . . . . . . . F-1
<PAGE>
PART I
Item 1. BUSINESS
Investors Real Estate Trust (hereinafter "IRET"), a North Dakota Real Estate
Investment Trust, was organized under the laws of the State of North Dakota
on July 31, 1970. IRET has qualified and operated as a "real estate
investment trust" under Sections 856-858 of the Internal Revenue Code since
its inception.
On February 1, 1997, the Trust reorganized its structure in order to
convert to Umbrella Partnership Real Estate Investment Trust (UPREIT) status.
The Trust established an operating partnership (IRET Properties, a
North Dakota Limited Partnership) with a wholly-owned corporate subsidiary
acting as its sole general partner (IRET, Inc., a North Dakota Corporation).
At that date, the Trust transferred all of its assets and liabilities to the
operating partnership in exchange for general partnership units.
The general partner has full and exclusive management responsibility for
the real estate investment portfolio owned by the operating partnership.
The partnership must be operated in a manner that will allow IRET to
continue its qualification as a real estate investment trust under the
Internal Revenue Code.
All limited partners of the operating partnership have "exchange rights"
allowing them, at their option, to exchange their limited partnership units
for shares of the Trust on a one for one basis. The exchange rights are
subject to certain restrictions including no exchanges for at least one year
following the acquisition of the limited partnership units. The operating
partnership distributes cash on a quarterly basis in the amounts determined
by the Trust which will result in each limited partner receiving the same
distributions as an IRET shareholder.
IRET, pursuant to the requirements of Sections 856-858 of Internal Revenue
Code which govern real estate investment trusts, is engaged in the business
of making passive investments in real estate equities and mortgages.
IRET has its only office in Minot, North Dakota, and operates principally
in the northern plains states with its operating partnership owning real
estate investments in the states of North Dakota, Minnesota, South Dakota,
Georgia, Nebraska, Montana, Michigan, Colorado, Idaho and Arizona.
<PAGE>
IRET is also the general partner of six limited partnerships which own
investment real estate. IRET, as the general partner and as a creditor of
said limited partnerships, has a substantial influence over the operation of
the partnerships. Thus, the financial statements of IRET and the six
partnerships are consolidated for financial reporting purposes and all
material intercompany transactions and balances have been eliminated.
The six limited partnerships consolidated with IRET are:
Eastgate Properties, Ltd.
Bison Properties, Ltd.
First Avenue Building, Ltd.
Sweetwater Properties, Ltd.
Hill Park Properties, Ltd.
Colton Heights, Ltd.
On May 1st, 1998, all six of these partnerships were merged into IRET
Properties.
IRET operates on a fiscal year ending April 30. For its past three fiscal
years, its sources of operating revenue, total expenses, net real estate
investment income, capital gain income, total income, and dividend
distributions consolidated with said six limited partnerships are as
follows:
Fiscal Year Ending 4/30
1998 1997 1996
---- ---- ----
REVENUE FROM
OPERATIONS
Real Estate Rentals $31,694,586 $22,972,368 $17,635,297
Interest, Discount &
Fees 712,959 861,613 1,024,368
$32,407,545 $23,833,981 $18,659,665
EXPENSE $27,716,347 $20,334,538 $15,041,858
NET REAL ESTATE
INVESTMENT INCOME $ 4,691,198 $ 3,499,443 $ 3,617,807
GAIN ON SALE OF
INVESTMENTS
(CAPITAL GAIN) 465,499 398,424 994,163
MINORITY INTEREST
OF UNIT HOLDERS
IN OPERATING
PARTNERSHIP (141,788) (18) 0
NET INCOME $ 5,014,909 $ 3,897,849 $ 4,611,970
PER SHARE
Net Income $ .32 $ .28 $ .38
Dividends Paid $ .42 $ .39 $ .36
<PAGE>
As indicated above, IRET's principal source of operating revenue is rental
income from real estate properties owned by the Trust. A minor amount of
revenue is derived from interest income from mortgages and contracts for deed
secured by real estate, interest on short-term investments in government
securities, interest on savings deposits and fees derived from serving as a
general partner of certain limited partnerships. In addition to operating
income, the Trust receives capital gain income when real estate properties
have been sold at a price in excess of the depreciated cost of said
properties.
IRET has no employees. Its business is conducted through the services of an
independent contractor (Odell-Wentz & Associates, LLC, a North Dakota Limited
Liability Company, having as its members Roger R. Odell and Thomas A. Wentz,
Sr.) which serves as the advisor to the Trust. Since the inception of the
Trust and until January 1, 1986, Roger R. Odell, 12 South Main, Minot,
North Dakota, served as advisor to the trust, providing office facilities,
administering day-to-day operations of the Trust, and advising with respect
to investments and investment policy. Effective January 1, 1986, the Trust
entered into a revised advisory agreement with Mr. Odell and Thomas A. Wentz,
Sr.
Mr. Odell is a graduate of the University of Texas, receiving his B.A.
degree in 1947. He has been a resident of Minot, North Dakota since 1947.
From 1947 to 1954, he was employed by Minot Federal Savings & Loan
Association, serving as secretary of the association from 1952 to 1954.
Since 1954, Mr. Odell has been a realtor in Minot, serving as an officer and
stockholder of Watne Realty Company from 1954 to January 1, 1970, and since
that time as the owner of his own realty firm.
Mr. Wentz is a graduate of Harvard College and Harvard Law School,
receiving his A.B. degree in 1957 and his L.L.B. degree in 1960. He has
been a resident of Minot, North Dakota, since 1962. Mr. Wentz' principal
occupation is the practice of law as a partner in the law firm of
Pringle & Herigstad, P.C., counsel to the Trust, and he provides services to
Odell-Wentz & Associates on a part-time basis.
There have been no material changes in the conduct of the Trust's business
since its inception and none are planned.
<PAGE>
Item 2. PROPERTIES
IRET is a qualified "real estate investment trust" under Section 856-858 of
the Internal Revenue Code, and is in the business of making passive
investments in real estate equities and mortgages. These real estate
investments are managed by independent contractors on behalf of IRET.
IRET owned the following properties as of April 30, 1998:
<TABLE>
<CAPTION>
REAL ESTATE OWNED: Fiscal Mortgage
1998 Year Payable
Size/Type Occupancy Purchased Cost Interest
Rate
--------- --------- --------- ---- --------
<S> <C> <C> <C> <C> <C>
APARTMENTS
DAKOTA ARMS 18 Unit 94% 1996 $601,838 $376,788
Minot, ND Apt. Bldg. 8.50%
FAIRFIELD 24 Unit 94% 1988 $421,052 $96,292
Marshall, MN Apt Bldg 9.00%
41 EAST APTS. 41 Unit 87% 1989 $385,779 $226,229
Dickinson, ND Apt. Bldg 8.50
SUNCHASE APTS. 2 18-unit 99% 1988 $1,011,001 $463,021
Fargo, ND Apt Bldgs. 9.04%
BEULAH CONDOS ND 22 Condo 51% 1983 $465,780 -
Beaulah, ND Units
CANDLELIGHT APTS 44 Units 98% 1993 $860,784 $498,299
Fargo, ND Apt. Bldg 8.50%
CENTURY APTS 120 Unit 91% 1986 $1,876,790 $1,522,794
Dickinson, ND Apt Complex 8.00625%
CENTURY APTS 192 Unit 85% 1986 $3,773,835 $2,577,896
Williston, ND Apt Complex 8.00625%
CHATEAU APTS 64 Unit 97% 1998 $2,364,744 $1,670,895
Minot, ND Apt. Complex 8.00625%
COUNTRY MEADOWS 49 Unit Lease - Up 1998 $4,497,893 $2,647,777
Billings, MT Apt Complex 7.51%
COLUMBIA PARK Vacant land N/A Not $1,076,327 -
PHASE II Completed
Grand Forks, ND
COTTONWOOD LAKE 268 Unit Lease - Up 1998 $6,247,996 -
Bismarck, ND Apt Complex
<PAGE>
CRESTVIEW APTS. 152 Unit 94% 1994 $4,760,549 $2,609,063
Bismarck, ND Apt Bldg 8.69%
FOREST PARK 270 Unit 96% 1993 $6,953,499 $3,990,430
ESTATES Apt Complex 7.625%
Grand Forks, ND
JENNER PROP. 125 Units 94% 1997 $2,423,196 $1,357,209
Grand Forks, ND Apt Bldgs 9.50%
Dickinson, ND
Devils Lake, ND
KIRKWOOD MANOR 108 Units 98% 1997 $3,259,951 $2,270,000
Bismarck, ND Apt Bldgs 7.07%
LEGACY APTS 132 Unit 98% 1996 $10,491,463 $3,927,506
Grand Forks, ND Apt Complex 7.07%
MAGIC CITY APTS 248 Units 87% 1997 $5,347,982 $2,728,417
Minot, ND Apt Bldgs 8.50%
MIRAMONT APT 210 Unit 98% 1996 $14,270,961 $11,525,814
Ft. Collins, CO Apt Complex 8.25%
NEIGHBORHOOD APT 192 Unit 96% 1996 $10,979,462 $7,400,220
Colorado Springs, Apt Complex 7.98%
CO
NORTH POINTE 49 49 Unit 99% 1995 $2,401,228 $1,695,893
Bismarck, ND Apt Bldg 7.12%
OAK MANOR APTS 27 Unit 97% 1989 $300,812 $232,111
Dickinson, ND Apt Bldg 8.75%
OAKWOOD ESTATES 160 Unit 87% 1993 $5,423,103 $3,424,949
Sioux Falls, SD Apt Complex 8.00625%
OXBOW APTS 120 Unit 98% 1994 $4,966,017 $3,403,778
Sioux Falls, SD Apt Complex 8.00625%
PARK EAST APTS 122 Units 99% 1997 $4,918,211 $3,500,000
Fargo, ND Apt. Complex 6.82%
PARK MEADOWS APT 360 Unit 88% 1997 $10,709,497 $7,894,811
St. Cloud, MN Apt Complex 8.07%
PARK PLACE 48 Unit 86% 1988 $849,377 -
Waseca, MN Apt Bldg
PINE CONE APTS 195 Unit 94% 1994 $13,170,450 $10,534,209
Ft. Collins, CO Apt Complex 7.125%
<PAGE>
POINTE WEST APTS 90 Unit 89% 1994 $3,860,726 $2,170,254
Rapid City, SD Apt Complex 8.97%
PRAIRIE WINDS APTS 48 Unit 93% 1993 $1,973,834 $1,336,552
Sioux Falls, SD Apt Bldg 7.67%
ROCKY MEADOWS 98 Unit 91% 1996 $6,641,116 $2,876,562
Billings, MT Apt Complex 7.75%
SOUTH POINTE 196 Unit 92% 1995 $10,257,854 $6,484,298
Minot, ND Apt Complex 7.12%
SOUTHVIEW APTS 24 Unit 80% 1994 $690,893 -
Minot, ND Apt Bldg
SOUTHWIND APTS 164 Unit 95% 1996 $5,595,660 $4,090,096
Grand Forks, ND Apt Complex 7.12%
WEST STONEHILL 313 Unit 95% 1995 $11,356,465 $7,912,344
St Cloud, MN Apt Complex 7.93%
WOODRIDGE APTS 108 Unit 99% 1996 $6,480,251 $4,282,154
Rochester, MN Apt Complex 7.85%
Other Properties 81 Units 88% 1987-1991 $842,052 $16,566
- less than 8.75%
$300,000 cost
Total Residential $172,157,297
COMMERCIAL
401 SOUTH MAIN 9,200 sq. 84% 1987 $593,675 -
Minot, ND ft.
Minot, ND Commercial
Bldg
408 1ST STREET SE Rental House 100% 1986 $46,907 -
Minot, ND
CREEKSIDE OFFICE Office Bldgs 93% 1992 $1,656,836 $876,346
BUILDING 8.35%
Billings, MT
LESTER 5,000 sq. 100% 1988 $268,917 -
CHIROPRACTIC ft.
CLINIC Clinic Bldg
Bismarck, ND
WALTERS 214 SO 3,500 sq. 100% 1978 $111,915 $773
MAIN ft. 9.00%
Minot, ND Retail Bldg
<PAGE>
ARROWHEAD SHOPPING 80,000 sq. 99% 1973 $2,692,552 -
CNTR ft.
Minot, ND Shopping
Center
BARNES & NOBLE 30,000 sq. 100% 1994 $3,292,012 $2,135,006
Fargo, ND ft. 7.98%
Retail/Whse.
BARNES & NOBLE 30,000 sq. 100% 1995 $3,699,101 $2,312,924
Omaha, NB ft. 7.98%
Retail/Whse.
CARMIKE THEATRE 28,528 sq. 100% 1994 $2,545,737 $1,989,425
Grand Forks, ND ft. 7.75%
10 screen
threatre
COMPUTER CITY 16,080 sq. 100% 1996 $2,113,574 $1,497,191
Kentwood, MI ft. 7.75%
Strip
Shopping Ctr
EDGEWOOD VISTA 10,314 sq. 100% 1997 $962,428 $641,025
Missoula, MT ft. 9.75%
Assisted
Living
EDGEWOOD VISTA 10,314 sq. 100% 1997 $899,821 $630,608
East Grand Forks, ft. 8.35%
MN Assisted
Living
EDGEWOOD VISTA 77,211 sq. 100% 1997 $6,275,931 $3,617,668
Minot, ND ft. 8.27%
Assisted
Living
HUTCHINSON Manufacturing 100% 1993 $4,429,026 $2,221,843
TECHNOLOGY Plant 8.75%
Sioux Falls, SD
LINDBERG BUILDING Office/Whrse 100% 1992 $1,455,789 $1,195,951
Eden Prairie, MN 8.75%
MINOT PLAZA 11,200 sq. 100% 1993 $508,796 -
Minot, ND ft.
Strip
Shopping Ctr
PETCO WAREHOUSE 18,000 sq. 100% 1994 $1,278,934 $770,318
Fargo, ND ft. 8.50%
Retail/Whrse
PIONEER SEED Office/Whse. 100% 1992 $653,876 $303,622
Moorhead, MN 8.375%
RETAIL WAREHOUSE 70,000 sq. 12% 1994 $5,646,485 $3,518,783
Boise, ID ft. 9.75%
Retail/Whse.
STONE CONTAINER Manufacturing 100% 1995 $4,998,485 $3,024,316
Fargo, ND Plant 8.25%
SUPERPUMPER Gas Station/ 100% 1988 $428,777 -
Crookston, MN Conven.
Store
SUPERPUMPER Gas Station/ 100% 1986 $297,064 -
Emerado, ND Conven.
Store
<PAGE>
SUPERPUMPER Gas Station/ 100% 1991 $485,007 -
Grand Forks, ND Conven.
Store
SUPERPUMPER Gas Station/ 100% 1987 $239,212 -
Langdon, ND Conven.
Store
SUPERPUMPER Gas Station/ 100% 1993 $120,600 -
Sidney, MT Conven.
Store
WEDGEWOOD Assisted 100% 1996 $3,971,879 $1,536,479
RETIREMENT Living 7.795%
Sweetwater, GA Center
Total Commercial $49,673,337
CONSOLIDATED
PARTNERSHIPS:
SWEETWATER 114 Unit 89% 1972 $1,662,855 $194,883
PROPERTIES Apt Bldgs 9.75%
Devils Lake &
Grafton, ND
BISON PROPERTIES 125 Apt 94% 1972 $1,627,361 $71,327
Jamestown, Units 10.00%
Carrington &
Cooperstown, ND
1ST AVENUE 16,500 sq. 78% 1981 $801,622 -
BUILDING ft.
Minot, ND Office Bldg.
EASTGATE 116 Unit 86% 1970 $1,778,628 -
PROPERTIES Apt Complex
Moorhead, MN
COLTON HEIGHTS 18 Unit 72% 1984 $864,800 $338,464
PROPERTIES, Apt Bldg 8.75%
Minot, ND
HILL PARK 92 Unit 94% 1985 $2,850,422 $1,403,790
PROPERTIES Apt Complex 8.00625%
Bismarck, ND
Total Partnerships $9,585,688
Total Real Estate Owned $231,416,322 $134,059,974
Less: Accumulated
Depreciation (21,516,129)
Net Carrying Value $209,900,193
</TABLE>
- TITLE. The title to all of the above properties is
in the name of either IRET Properties, a North Dakota
Limited Partnership, IRET or a wholly-owned subsidiary
of IRET, in fee simple (in each case, IRET has in
its files an attorney's title opinion or a title
insurance policy evidencing its title).
<PAGE>
- INSURANCE. In the opinion of management, all of said
properties are adequately covered by casualty and
liability insurance.
- PLANNED IMPROVEMENTS. There are no plans for
material improvements to any of the above properties.
- CONTRACTS OR OPTIONS TO SELL. As of April 30, 1998,
IRET had not entered into any contracts or options to
sell any of the above properties.
- OCCUPANCY AND LEASES. Occupancy rates shown above are
for the fiscal year ended April 30, 1998. In the
case of apartment properties, lease arrangements with
individual tenants vary from month-to-month to one-year
leases, with the normal term being six months. Leases
on commercial properties vary from one year to 20 years.
MORTGAGE LOANS RECEIVABLE:
Real Estate 4/30/98
Location Security Balance Rate
- -------- -------- ------- ----
GILBERT, AZ
NE 1/4-27-2-6 Commercial Land $ 678,700 8%
FARGO, ND
Great Plains
Software Office Building $ 1,701,308 9.5%
OTHER MORTGAGES
Over $100,000 $ 938,196 7-9%
$50,000 to $99,999 0
$20,000 to $49,999 78,474 8-9%
Less than $20,000 41,630 7-9%
-----------
TOTAL $ 3,438,308
Unearned Discounts (4,818)
Allowance for Losses (120,314)
Deferred Gain (2,000)
-----------
$ 3,311,176
===========
SUMMARY OF REAL ESTATE INVESTMENT PORTFOLIO
REAL ESTATE INVESTMENTS:
Real Estate Owned $231,416,322
Less Depreciation Reserve (21,516,129) $209,900,193 94%
------------
Mortgage Loans 3,438,308
Less unearned discounts
and interest ( 4,818)
Less allowance for losses (120,314)
Less deferred gain (2,000) 3,311,176 1%
------------ ------------
Total Real Estate Investments $213,211,369
============
OTHER ASSETS:
Cash and marketable securities $ 6,389,446
Deposits and accruals 5,117,699
------------
Total Other Assets $ 11,507,145 5%
------------
TOTAL ASSETS $224,718,514 100%
============
<PAGE>
Item 3. LEGAL PROCEEDINGS
IRET is not involved in any legal proceedings or litigation other than
normal collection matters that will not have a material impact on financial
results.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the August 19, 1997 Annual Shareholders' meeting, the only matters
submitted to a vote of security holders were the election of ten Trustees
and ratification of the reappointment of the independent certified public
accountants.
PART II
Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SECURITY HOLDER MATTERS
Since October 17, 1997, IRET Shares of Beneficial Interest have traded on
the NASDAQ Small-Cap market under the symbol IRETS.
Price Range
-----------
Total Total
Fiscal Quarter Ended High Low Volume Trades
- -------------------- ---- --- ------ ------
10-31-97 * $7.125 $6.563 35,154 45
1-31-98 7.313 6.625 339,857 204
4-30-98 7.344 7.031 437,487 196
* From 10-20-98 - First trading day
During Fiscal 1998, IRET also offered primary Shares of Beneficial Interest
for sale to the public under Best Efforts offerings through various brokers
registered with the National Association of Securities Dealers. Primary
shares were sold at $7.20 per share from 5-01-97 and at $7.45 per share from
1-05-98 through the end of Fiscal Year 1998 (4-30-98). IRET also repurchased
its shares during Fiscal 1998. Following is a summary, by quarter-year, of
the sale of primary shares and repurchase of shares by IRET:
<PAGE>
Shares Dollars
------ -------
5/01/97 Beginning Balance 14,940,513 $65,073,951
Quarter Ended 7/31/97
- Shares sold 356,722 $ 2,920,162
- Commissions paid (163,102)
- Shares repurchased (20,393) (386,062)
---------- -----------
15,276,842 $67,444,949
Quarter Ended 10/31/97
- Shares sold 630,937 $ 4,422,125
- Commissions paid (243,432)
- Shares repurchased (101,548) (807,573)
---------- -----------
15,806,231 $70,816,070
Quarter Ended 1/31/98
- Shares sold 340,640 $ 2,415,531
- Commissions paid (99,850)
- Shares repurchased (108,903) (777,871)
---------- -----------
16,037,969 $72,353,880
Quarter Ended 4/30/98
- Shares sold 505,062 $ 3,656,419
- Commissions paid (195,456)
- Shares repurchased (151,618) (1,106,285)
---------- -----------
16,391,412 $74,708,559
========== ===========
As of May 31, 1998, IRET had 3,615 shareholder accounts, compared to 3,075
on the same date in 1997. No shareholder held 5% or more of the 16,391,412
Shares of Beneficial Interest outstanding on 4-30-98. IRET has no other
classes of stock and there were no warrants, stock options or other
contractual arrangements requiring the issuance of its stock.
IRET has paid quarterly dividends since July 1, 1971. Dividends Paid during
the past two fiscal years were as follows:
Fiscal Year
-----------
1997 1998
---- ----
July 1st $.0925 $.10125
October 1st .095 .1030
January 8th (16th) .0975 .105
April 1st .10 .107
<PAGE>
Item 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Year Ended April 30
--------------------------------------------------------------------
1998 1997 1996 1995 1994
(Restated) (Restated)
--------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Consolidated Income Statement Data
Revenue $ 32,407,545 $ 23,833,981 $ 18,659,665 $13,801,123 $11,583,008
Operating Income 4,691,198 3,499,443 3,617,807 3,560,318 3,135,426
Gain on repossession/
sale of investments 465,499 398,424 994,163 407,512 64,962
Minority interest of
unitholders in
operating partner-
ship (141,788) (18) 0 0 0
Net Income 5,014,909 3,897,849 4,611,970 3,967,830 3,200,388
Balance Sheet Data
Total real estate
investments $213,211,369 $177,891,168 $122,377,909 $84,005,635 $63,972,042
Total assets 224,718,514 186,993,943 131,355,638 94,616,744 72,391,548
Shareholders' equity 68,152,626 59,997,619 50,711,920 37,835,654 29,997,189
Consolidated Per Share Data
Net income $ .29 $ .25 $ .30 $ .34 $ .35
Gain on repossession/
sale of investments .03 .03 .08 .04 .01
Dividends .42 .39 .37 .34 .33
Tax status of dividend
capital gain 2.9% 21.0% 1.6% 11.0% 7.40%
Ordinary income 97.1% 79.0% 98.4% 89.0% 92.60%
Return of capital 0.0% 0.0% 0.0% 0.0% 0.00%
</TABLE>
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
GENERAL: IRET has operated as a "real estate investment trust" under Sections
856-858 of the Internal Revenue Code since its formation in 1970 and is in
the business of owning income-producing real estate investments.
On February 1, 1997, IRET restructured itself as an Umbrella Partnership
Real Estate Investment Trust (UPREIT). IRET, through its wholly owned
subsidiary, IRET, Inc., is the general partner of IRET Properties, a North
Dakota limited partnership (the "Operating Partnership"). All business
operations for IRET are conducted through the Operating Partnership. No
other material change in IRET's business is contemplated at this time.
This discussion and analysis should be read in conjunction with the
attached audited financial statements prepared by Brady Martz & Associates,
certified public accountants, who have served as the auditor for IRET since
its inception.
Certain matters included in this discussion are forward-looking statements
within the meaning of federal securities laws. Although IRET believes that
the expectations reflected in such forward-looking statements are based on
reasonable assumptions, it can give no assurance that the expectations
expressed will actually be achieved. Many factors may cause actual results
to differ materially from IRET's current expectations, including general
economic conditions, local real estate conditions, the general level of
interest rates and the availability of financing, timely completion and
lease up of properties under construction, and various other economic risks
inherent in the business of owning and operating investment real estate.
<PAGE>
RESULTS OF OPERATIONS:
Fiscal Year 1998 Compared to Fiscal Year 1997.
OVERVIEW.
An improvement in occupancy rates for IRET's apartment communities and
good results from newly acquired properties resulted in a significant
increase in Funds From Operations and earnings for IRET's 28th year,
which ended April 30, 1998. Total assets and shareholder equity also
increased materially and IRET Shares of Beneficial Interest were listed
on the NASDAQ Small-Cap in October of 1997.
FUNDS FROM OPERATIONS.
Funds From Operations (taxable income increased by noncash deductions
of real estate asset depreciation and amortization, and reduced by
capital gain income and other extraordinary income items) for Fiscal
1998 increased to $9,447,425 ($.60 per share), compared to $7,144,622
($.51 per share) received in Fiscal 1997, and the $5,977,431 ($.49 per
share) recognized in Fiscal 1996.
EARNINGS.
IRET's net taxable earnings for Fiscal Year 1998 increased to $5,014,909
from the $3,897,849 earned in Fiscal 1997 and the $4,611,970 earned in
Fiscal 1996. On a per share basis, net taxable earnings increased to
$.32 per share in Fiscal 1998 from $.28 in Fiscal 1997 (an increase of
14%), but a decline of $.06 per share from the $.38 earnings in Fiscal
1996.
The increase in taxable earnings resulted from increased rental income
which resulted from a higher occupancy level in apartment communities
owned by the Operating Partnership.
<PAGE>
REVENUES.
Total revenues of the Operating Partnership for Fiscal 1998 were
$32,407,545, compared to $23,833,981 in Fiscal 1997 (an increase of
36%) and $18,659,665 in Fiscal 1996. The increase in revenues received
during Fiscal 1998 in excess of the prior year revenues was $8,573,564.
This increase resulted from:
Rent from 7 properties acquired in
Fiscal 1998 $2,658,085
Rent from 11 properties acquired in
Fiscal 1997 in excess of that
received in Fiscal 1997 5,310,670
An increase in rental income on
existing properties 893,976
An increase in rent on Smith Home
Furnishing Building (bankruptcy of
tenant) 54,021
A decrease in rent - properties sold
during 1997 (194,534)
A decrease in interest income (148,654)
----------
$8,573,564
This increase in revenue resulted primarily from the addition of new
real estate properties to the portfolio. Rents received on properties
owned prior to the beginning of Fiscal Year 1998 saw an increase in
scheduled rents of 2%, and the occupancy level for those properties
increased from approximately 90% to slightly over 94% resulting in an
increase in rental income from those properties of $893,976. The new
properties acquired during Fiscal Years 1997 and 1998 generated nearly
$8,000,000 of new revenues.
Interest income continued to decline as IRET completes the repositioning of
its investment portfolio from a mix of real estate equities and mortgage
loans to one consisting entirely of real estate equities. Management is of
the opinion that the long term yields from real estate equity investments
will exceed that available from interest income on mortgage loans but, in
the short run, the switch has resulted in lower immediate revenues and
taxable income.
Capital gain income for Fiscal 1998 was $465,499 resulting from the sale of
three investment properties. This compares to $398,424 of capital gain
income recognized in Fiscal 1997 and the $994,163 recognized in Fiscal
1996.
IRET will continue to seek to market several of its older and smaller
apartment properties.
<PAGE>
NET TAXABLE INCOME. The $1,117,060 increase in net taxable income for
Fiscal 1998 over the net income earned in the prior fiscal year resulted
from:
An increase in gain from sale of
investments $ 67,075
An increase in net rental income
(rents, less utilities, maintenance,
taxes, insurance and management) 5,733,442
A decrease in interest income (148,654)
An increase in interest expense (2,840,328)
An increase in depreciation expense (1,207,316)
An increase in operating expenses
and advisory trustee services (299,869)
An increase in amortization expense (45,520)
An increase in Minority interest of
Operating Partnership Income (141,770)
-----------
$ 1,117,060
===========
PROPERTY ACQUISTIONS. The Operating Partnership added nearly
$40,000,000 of real estate investments to its portfolio during
Fiscal 1998, including:
Commercial:
----------
Edgewood Vista, East Grand Forks,
MN $ 892,500
Edgewood Vista, Minot, ND 6,191,410
Apartments:
----------
Units Description
----- -----------
125 Jenner Properties-Grand Forks
(90), Devils Lake (18) &
Dickinson (17), ND $ 2,350,000
108 Kirkwood Manor-Bismarck, ND 3,175,000
248 Magic City Realty Portfolio 5,270,000
67 Country Meadows-Billings, MT 4,496,134
122 Park East Apartments-Fargo, ND 4,900,000
**67 Legacy Apartments (Phase II)-
Grand Forks, ND 3,489,937
67 Cottonwood Apartments-Bismarck,
ND 4,522,347
64 Chateau Apartments-Minot, ND 2,364,090
*67 Cottonwood Apartments (Phase II)
Bismarck, ND 1,362,804
---- -----------
935 Total $39,014,222
*Property not placed in service at April 30, 1998. Additional costs
are still to be incurred.
**Represents costs to complete a project started in year ended April 30,
1997.
<PAGE>
PROPERTY DISPOSITIONS. During Fiscal 1998, the Operating
Partnership sold three real estate properties -- Superpumper Convenience
Store in New Town, ND; Superpumper Convenience Store in Bottineau, ND;
and a 48-unit apartment complex in Scottsbluff, NE, realizing a total
capital gain of $465,499.
FISCAL YEAR 1997 COMPARED TO FISCAL YEAR 1996. IRET's Fiscal Year 1997,
which ended on April 30, 1997, saw a continuation of IRET's rapid growth
with assets owned increasing by more than 40%. IRET's 27th year ended with
total assets, revenues, funds from operations and shareholder equity all
reaching record levels.
FUNDS FROM OPERATIONS. Funds from Operations (taxable income increased
by noncash deductions of depreciation and amortization, and reduced by
capital gain income and other extraordinary income items) for Fiscal
1997 increased to $7,144,622 ($.51 per share), compared to $5,977,431
($.49 per share) generated by IRET in Fiscal 1996 and the $5,434,244
($.52 per share) recognized in Fiscal 1995.
EARNINGS. IRET's net taxable earnings for Fiscal Year 1997 decreased to
$3,8 97,849 from the $4,611,970 earned in Fiscal 1996 and the $3,967,830
earned in Fiscal 1995. Approximately one-half of the decrease in
earnings from the Fiscal 1996 level resulted from a decrease in capital
gain income. In Fiscal 1997, $398,424 of capital gain income was
recorded, as compared to $994,163 in the prior year.
The other principle reason for the decline in taxable income is the
continuing acquisition by IRET of new real estate investments which
result in an increase in depreciation allowance. In Fiscal 1997,
$3,584,591 of depreciation was recorded as compared to $2,261,724 in the
prior year. This will result in a significant portion of IRET's
dividends being sheltered from income tax by the increased depreciation
allowance.
On a per share basis, net taxable income was $.28 per share for Fiscal
1997, compared to $.38 per share recorded in both Fiscal 1996 and 1995.
<PAGE>
REVENUES. Total revenues for Fiscal 1997 were $23,833,982, compared to
$18,659,665 in Fiscal 1996 (an increase of 28%)and $13,801,123 in Fiscal
1995. The increase in revenues received during Fiscal 1997 in excess of
the prior year revenues was $5,174,317. This increase resulted from:
Rent from 11 properties acquired in
Fiscal 1997 $4,451,266
Rent from 7 properties acquired in
Fiscal 1996 in excess of that
received in Fiscal 1996 1,526,453
A decrease in rental income on
existing properties (-5.4%) (625,949)
An increase in rent on Smith Home
Furnishing Building (bankruptcy
of tenant) 61,892
A decrease in rent - properties sold
during 1996 (76,590)
A decrease in interest income (162,755)
----------
$5,174,317
==========
This increase in revenue resulted primarily from the addition of new real
estate properties to the portfolio. Rents received on properties owned
prior to the beginning of Fiscal Year 1996 saw an increase in scheduled
rents of 2.25%, but the occupancy level for those properties decreased
from approximately 95% to slightly over 90% resulting in a decrease in
rental income from those properties of $625,949. However, the new
properties acquired during Fiscal Years 1996 and 1997 generated nearly
$6,000,000 of new revenues.
Interest income continued to decline as IRET completes the repositioning
of its investment portfolio from a mix of real estate equities and
mortgage loans to one consisting entirely of real estate equities.
Management is of the opinion that the long term yields from real estate
equity investments will exceed that available from interest income on
mortgage loans but, in the short run, the switch does result in lower
immediate revenues and taxable income.
Capital gain income for Fiscal 1997 was $398,424 resulting from the
sale of two older and smaller investment properties. This compares to
$994,163 of capital gain income recognized in Fiscal 1996 and the
$407,512 recognized in Fiscal 1995. IRET will continue to seek to market
several of its older and smaller apartment properties.
<PAGE>
NET TAXABLE INCOME. The $714,121 decrease in net taxable income for
Fiscal 1997 over the net income earned in the prior fiscal year
resulted from:
A decrease in gain from sale of
investments $ (595,739)
An increase in net rental income
(rents, less utilities, maintenance,
taxes, insurance and management) 3,518,152
A decrease in interest income (162,755)
An increase in interest expense (2,091,037)
An increase in depreciation expense (1,322,867)
An increase in operating expenses
and advisory trustee services (97,169)
A decrease in amortization expense 37,312
An increase in Minority interest of
Operating Partnership Income (18)
-----------
$ (714,121)
PROPERTY ACQUISITIONS. IRET added nearly $60,000,000 of real estate
to its portfolio during Fiscal 1997, including:
Commercial: Cost
---------- ----
Computer City, Kentwood, MI $ 2,113,574
Edgewood Vista, Missoula, MT 962,428
Wedgwood Retirement Inns,
Sweetwater, GA 2,810,000
Units Apartments
----- ----------
67 Circle 50, Billings, MT* $ 1,519,855
98 South Pointe II, Minot, ND** 1,024,234
60 Rosewood Court, Sioux Falls,
SD 1,938,245
116 Legacy Apts., Grand Forks, ND** 3,573,057
98 Rocky Meadows, Billings, MT** 2,654,554
210 Miramont Apts., Fort Collins,
CO 14,235,461
192 Neighborhood Apts., Colorado
Springs, CO 10,849,561
108 Woodridge Apts., Rochester, MN 6,398,096
67 Cottonwood Lake, Bismarck, ND* 1,055,862
360 Park Meadows Apts., St. Cloud,
MN 10,242,747
-----------
Total $59,377,674
*Property not placed in service at April 30, 1997. Additional
costs are still to be incurred.
**Represents costs to complete a project started in
the year ending April 30, 1996.
<PAGE>
PROPERTY DISPOSITIONS: During Fiscal 1997, IRET sold a 24 plex apartment
building in Hutchinson, MN, realizing a gain of $252,000. It also
recognized a gain of $138,600 from the previous sale of an 18 plex
apartment building in Mandan, ND.
DIVIDENDS. The following dividends were paid during Fiscal 1998:
Date Per Share Dividend
---- ------------------
July 1, 1997 $.10125
October 1, 1997 $.103
January 16, 1998 $.105
April 1, 1998 $.107
-------
$.41625
The Fiscal 1998 pay-out represented a 6.7% increase over the dividends paid
during the prior Fiscal Year of $.39 per share.
FUNDS FROM OPERATIONS. The funds derived during Fiscal 1998 by the Trust
from its operations increased by 20% over the prior year and by 34% from the
Fiscal 1996 level ($9,447,425 in Fiscal 1998, versus $7,144,604 in 1997 and
$5,977,431 in 1996). On a per share basis, Funds From Operations increased
to $.60 per share from $.51 in Fiscal 1997 (an increase of 18%) and the $.49
generated in Fiscal 1996. (IRET uses the definition of "Funds From
Operations" recommended by the National Association of Real Estate Investment
Trusts to mean "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 of real estate
assets, and after adjustments for unconsolidated partnerships and joint
ventures calculated on the same basis." It is emphasized that funds from
operations as so calculated and presented does not represent cash flows from
operations as defined under generally accepted accounting principles and
should not be considered as an alternative to net income as an indication of
operating performance or to cash flows as a measure of liquidity or ability
to fund all cash needs.) (See the Consolidated Statements of Cash Flows in
the Consolidated Financial Statements attached hereto.)
The following is a comparison of dividends paid during the past five fiscal
years to Funds From Operations (as defined above):
<TABLE>
<CAPTION>
Fiscal Fiscal Fiscal Fiscal Fiscal
Item 1998 1997 1996 1995(Restated) 1994(Restated)
- ---- ---- ---- ---- -------------- --------------
<S> <C> <C> <C> <C> <C>
Net Income (GAAP) $5,014,909 $3,897,849 $4,611,970 $3,967,830 $3,200,388
Adjustments
Gain from Property
Sales (465,499) (398,424) (994,163) (407,512) (64,962)
---------- ---------- ---------- ---------- ----------
Operating Income $4,549,410 $3,499,425 $3,617,807 $3,560,318 $3,135,426
Plus Depreciation 4,791,907 3,584,591 2,261,724 1,767,294 1,323,474
Plus Amortization 106,108 60,588 97,900 20,659 28,199
---------- ---------- ---------- ---------- ----------
Funds from Operations $9,447,425 $7,144,604 $5,977,431 $5,348,271 $4,487,099
Dividends Paid $6,518,627 $5,508,689 $4,439,034 $3,660,986 $3,102,061
---------- ---------- ---------- ---------- ----------
$2,928,798 $1,635,915 $1,538,397 $1,687,285 $1,385,038
</TABLE>
<PAGE>
Management expects that the Funds From Operations (as defined above) will
continue to improve during Fiscal 1998 and will continue to exceed dividends
paid in the coming year.
LIQUIDITY AND CAPITAL RESOURCES. Important investment and Financing events
in Fiscal 1998 were:
- The net proceeds from sale of Shares of Beneficial Interest
under Best Efforts offerings were $8,421,858;
- An additional $8,288,271 of equity capital was contributed to the
Operating Partnership in UPREIT transactions;
- Seven property loans were refinanced. The new loans totalled
$27,000,000, were at a lower interest rate than the old loans and
generated $3,245,000 of additional cash for investment in new properties;
- Nearly $40,000,000 of new real estate investments were acquired by
the Operating Partnership.
IRET's financial condition at the end of Fiscal 1997 continued at the very
strong level of its prior fiscal year.
- IRET's shareholder equity increased to $68,152,626 from
$59,997,619 on April 30, 1997, a gain of $8,155,007 (14%).
Equity capital on April 30, 1996 was $50,711,920. These
increases result from the sale of shares of beneficial interest
and the reinvestment of dividends in new shares.
- Liabilities of the Operating Partnership increased to $148,276,615
from $126,995,322 on April 30, 1997. IRET's liabilities on April 30,
1996, were $80,643,718.
- Total assets of the Operating Partnership increased to $224,718,514
from $186,993,943 on April 30, 1997. IRET's total assets on April 30,
1996, were $131,355,638.
- Cash and marketable securities were $6,389,446 compared to the year
earlier figure of $6,457,182 and $7,127,131 on April 30, 1996.
- In addition to its cash and marketable securities, IRET Properties
has unsecured line of credit agreements with First International Bank &
Trust and First Western Bank & Trust, both of Minot, North Dakota, of
$6,500,000, of which $1,000,000 was in use on April 30, 1998.
<PAGE>
AFFILIATED PARTNERSHIPS. IRET sponsored and served as a general partner of
seven limited partnerships. Because of IRET's position as a general partner
and creditor of these partnerships and because the partnerships (with the
exception of Chateau Properties) did not produce sufficient cash flow to pay
debts due to IRET as scheduled prior to Fiscal Year 1996, the financial
statements of IRET and the seven partnerships were consolidated for financial
reporting purposes to more properly depict the financial status of IRET.
During Fiscal Year 1996, a new mortgage loan was negotiated by Chateau
Properties, Ltd., on its 64-unit apartment building in Minot, North Dakota.
As a result of this refinancing, the partnership paid the balance that it
owed to IRET on the contract for deed under which the apartment building had
been purchased from IRET. Further, IRET was not required to guarantee the
new mortgage loan made by the partnership. Accordingly, for Fiscal 1996 and
1997, IRET is accounting for its partnership interest in Chateau Properties
under the equity method of accounting. Prior financial statements have been
restated to reflect this change. On April 1, 1998, Chateau Properties was
merged into the Operating Partnership.
The six consolidated partnerships are as follows:
<TABLE>
<CAPTION>
Year Property IRET
Name Formed Owned Ownership
Sweetwater Properties, 1981 114 Units 0%
Ltd. Apts.
Bison Properties, 1982 125 Units 20%
Ltd. Apts.
First Avenue Building 1981 16,500 sq. ft. 20%
Ltd. Office Bldg.
Eastgate Properties, 1983 116 Units 18%
Ltd. Apts.
Colton Heights, Ltd. 1984 18 Unit 18.69%
Apt. Bldg.
Hill Park Properties, 1985 96 Units 7.14%
Ltd. Apts.
On May 1, 1998, all six partnerships were merged into the Operating
Partnership.
<PAGE>
CONSOLIDATED FINANCIAL STATEMENTS. The financial statement included in this
Form 10-K405 consolidates the financial statements of IRET and the above six
limited partnerships. All material inter-company transactions and balances
have been eliminated on the consolidated statement. The principal impact of
this consolidation on the statement of operations is to reduce reported
income as a result of increased depreciation. On the balance sheet, related
mortgage loans and the investment in partnerships is reduced and real estate
owned is increased. Also, the deferred income account is decreased and the
retained earnings account is also decreased.
IMPACT OF INFLATION. The costs of utilities and other rental expenses
continue to increase, but in most areas, IRET has been able to increase
rental income sufficiently to cover inflationary increases in rental
expense. Increases in rental income are not precluded by long-term lease
obligations except for a few commercial properties subject to long-term net
lease agreements. Thus, as market conditions allow, rents will be increased
to cover inflationary expenses and to provide a better return to IRET.
ECONOMIC CONDITIONS. Fiscal 1998 saw improved economic conditions in the
northern plains states in which IRET operates. Occupancy rates for
residential properties increased to 94% from the year earlier level of
90.5% and scheduled rent levels for Trust properties improved slightly in
Fiscal 1998 (2%). The mild winter of 1997-98 also impacted earnings by
decreasing snow removal and utility expenses and vacancy rates.
YEAR 2000 COSTS. IRET has requested its principal vendors to inform it of
any anticipated problems associated with the Year 2000 issue for computer
hardware and software. IRET itself does not own or operate computer systems
and will have no direct costs to up-date such systems. However, IRET could
be impacted by computer failures of its third-party vendors. IRET has been
informed by these service providers (including its Advisor - Odell-Wentz &
Associates, LLC) that computer systems will be Year 2000 compliant by the end
of 1998. IRET does not anticipate that the Year 2000 problem will have any
material cost to it.
<PAGE>
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements and supplementary data listed in the accompanying
Index to Financial Statements and Supplementary Data are incorporated
herein by reference and filed as a part of this report.
Item 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers and Trustees of IRET as of April 30, 1998, were:
Name, Age Business Experience During Year Position
and Position Past Five Years Commenced
------------ --------------- ---------
*C. Morris Anderson President of North Hill Bowl, Inc.; 1970
Age 69 Director of Dakota Boys Ranch (25 yrs.);
Trustee Chairman of the Board, International Inn,
Inc. and Director, Norwest Bank - Minot,
N.A.
*Ralph A. Christensen Retired rancher; former 1970
Age 69 Director of First Bank - Minot, N.A.
Trustee and Chairman Chairman of IRET.
*John D. Decker Investor 1970
Age 81
Trustee
*Mike F. Dolan Investor; Vice-Chairman of IRET. 1978
Age 87
Trustee & Vice-Chairman
*J. Norman Ellison, Jr. Businessman; Managing Partner of 1970
Age 75 Ellison Realty Co.; Former Director
Trustee of First Bank - Minot, N.A.
*Daniel L. Feist Realtor; Broker; Real Estate Developer; 1985
Age 66 Builder; General Contractor; President -
Trustee Owner Feist Construction & Realty;
Investor; Businessman, former Director
of First Bank - Minot, N.A.; Director,
N.D. Holdings, Inc. - Minot.
*Patrick G. Jones Investor 1986
Age 50
Trustee
*Jeff L. Miller Investor; Businessman; President of 1985
Age 54 M&S Concessions, Inc. and former
Trustee & Vice-Chairman president of Coca-Cola Bottling Co. of
Minot; former Director of First Bank -
Minot.
Roger R. Odell Realtor; President of IRET; Member in 1970
Age 72 Odell-Wentz & Associates, LLC (Advisor
Trustee, President to IRET); Director of Investors
and Advisor Management & Marketing, Inc. and Inland
National Securities, Inc.
<PAGE>
Thomas A. Wentz, Sr. Attorney, Pringle & Herigstad, P.C.; 1970
Age 63 Member in Odell-Wentz & Associates, LLC
Vice-President (Advisor to IRET).
Thomas A. Wentz, Jr. Attorney, Pringle & Herigstad, P.C.; 1996
Age 32 General Partner of WENCO, a North Dakota
Trustee Limited Partnership.
Timothy P. Mihalick Realtor; Operations Manager of 1988
Age 39 Odell-Wentz & Associates, LLC (Advisor
Vice-President to IRET); Vice-President and Chief
Operating Officer of IRET.
Diane K. Bryantt Controller of Odell-Wentz & Associates, 1997
Age 34 LLC (Advisor to IRET); Secretary of
Secretary IRET.
* Unaffiliated Trustees.
Item 11. EXECUTIVE COMPENSATION
There is hereby incorporated by reference the information under the caption
"Remuneration and Transactions with Trustees and Advisor" in the Registrant's
definitive proxy statement relating to its annual meeting of shareholders to
be held on August 18, 1998.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
As of May 31, 1998, no person, nor any trustee or officer individually was
known by the Trust to own beneficially more than 5% of the outstanding
Shares of Beneficial Interest.
Collectively, the Trustees owned 8.23% of such shares on said date.
Additional information regarding security ownership is to be found in
portions of the Trust's definitive proxy statement for the 1998 annual
meeting of shareholders, incorporated herein by reference.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
There is hereby incorporated by reference the information under the caption
"Remuneration and Transactions with Trustees and Advisor" in the
Registrant's definitive proxy statement relating to its annual meeting of
shareholders to be held August 18, 1998.
<PAGE>
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this report:
1. Financial Statements
See the Table of Contents to Financial Statements and
Supplemental Data.
2. Financial Statement Schedules
The following financial statement schedules should be read in
conjunction with the financial statements incorporated by
reference in Item 8 of this Annual Report on Form 10-K405:
I Marketable Securities - Other Investments
IV Noncurrent Indebtedness of Related Parties -
Mortgage Loans Receivable
X Supplemental Income Statement Information
XI Real Estate Owned and Accumulated
Depreciation
XII Investments in Mortgage Loans on Real Estate
XIII Other Investments - Partnerships
See the Table of Contents to Financial Statements and
Supplemental Data.
3. Documents Incorporated by Reference
Part of Form 10-K405
into which Document
Document is Incorporated
----------------------------- --------------------
Proxy Statement to be filed Part III
in connection with the annual
meeting of shareholders to be
held August 18, 1998
4. Exhibits
See the following list of exhibits.
(b) Reports on Form 8-K - None filed.
<PAGE>
(c) The following is a list of Exhibits to the Registrant's Annual
Report on Form 10-K405 for the fiscal year ended April 30, 1998. The
Registrant will furnish a copy of any exhibit listed below to any security
holder of the Registrant who requests it upon payment of a fee of 15 cents
per page. All Exhibits are either contained in this Annual Report on Form
10-K405 or are incorporated by reference as indicated below.
3(i) Restated Declaration of Trust of Investors Real
Estate Trust, dated October 24, 1996, and filed as Exhibit 3(i)
to Form S-11 Registration Statement effective March 14, 1997
(SEC File No. 333-21945) filed for the Registrant (File No.
0-14851) and incorporated herein by reference.
3(ii) IRET Properties Partnership Agreement filed as
Exhibit 3(ii) to Form S-11 Registration Statement effective
March 14, 1997 (SEC File No. 333-21945) filed for the
Registrant (File No. 0-14851) and incorporated herein by
reference.
10 Advisory Agreement between the Registrant and
Odell-Wentz & Associates, L.L.C., filed as Exhibit 10 to said
Form 10 and incorporated herein by reference.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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
/s/ Thomas A. Wentz, Sr.
Date: July 23, 1998 By:____________________________
Thomas A. Wentz, Sr. Vice-President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated:
Signature Title Date
/s/ Roger R. Odell
___________________________ President, Trustee and July 23, 1998
Roger R. Odell Principal Executive Officer
/s/ Thomas A. Wentz, Sr.
___________________________ Vice-President July 23, 1998
Thomas A. Wentz, Sr.
___________________________ Trustee and Chairman July ___, 1998
Ralph A. Christensen
/s/ Mike F. Dolan
___________________________ Trustee and Vice-Chairman July 27, 1998
Mike F. Dolan
/s/ Jeff L. Miller
___________________________ Trustee and Vice-Chairman July 28, 1998
Jeff L. Miller
/s/ C. Morris Anderson
___________________________ Trustee July 24, 1998
C. Morris Anderson
/s/ J. Norman Ellison, Jr.
___________________________ Trustee July 24, 1998
J. Norman Ellison, Jr.
/s/ Daniel L. Feist
___________________________ Trustee July 24, 1998
Daniel L. Feist
/s/ Patrick G. Jones
___________________________ Trustee July 24, 1998
Patrick G. Jones
/s/ John D. Decker
___________________________ Trustee July 23, 1998
John D. Decker
/s/ Thomas A. Wentz, Jr.
___________________________ Trustee July 24, 1998
Thomas A. Wentz, Jr.
/s/ Timothy P. Mihalick
___________________________ Vice-President July 23, 1998
Timothy P. Mihalick
/s/ Diane K. Bryantt
___________________________ Secretary July 23, 1998
Diane K. Bryantt
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
Minot, North Dakota
Consolidated Financial Statements as of
April 30, 1998 and 1997
and
Independent Auditor's Report
<PAGE>
INDEPENDENT AUDITOR'S REPORT
Board of Trustees
Investors Real Estate Trust and Subsidiaries
Minot, North Dakota
We have audited the accompanying consolidated balance sheets of Investors
Real Estate Trust and Subsidiaries as of April 30, 1998 and 1997, and the
related consolidated statements of operations, shareholders' equity, and
cash flows for the years ended April 30, 1998, 1997 and 1996. These
consolidated financial statements are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the consolidated financial
statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the
consolidated financial statements. An audit also includes assessing the
accounting principles used and significant estimates made by management,
as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial
position of Investors Real Estate Trust and Subsidiaries as of April 30,
1998 and 1997, and the consolidated results of its operations and cash
flows for the years ended April 30, 1998, 1997 and 1996, in conformity
with generally accepted accounting principles.
Brady, Martz & Associates, P.C.
May 27, 1998
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
Consolidated Balance Sheets
April 30,1998 and 1997
ASSETS
1998 1997
---- ----
REAL ESTATE INVESTMENTS
Property owned $231,416,322 $191,884,509
Less accumulated depreciation (21,516,129) (16,948,156)
------------ ------------
$209,900,193 $174,936,353
Mortgage loans receivable 3,438,308 3,108,933
Less discounts and allowances (127,132) (154,118)
------------ ------------
Total real estate investments $213,211,369 $177,891,168
------------ ------------
OTHER ASSETS
Cash $ 2,132,220 $ 1,718,257
Marketable securities - held-to-
maturity 3,536,538 4,055,459
Marketable securities - available-
for-sale 720,688 683,466
Accounts receivable 55,326 332,814
Real estate deposits 2,493,713 100,000
Investment in partnership 6,705 78,469
Prepaid insurance 219,871 248,377
Tax and insurance escrow 1,254,068 1,250,469
Deferred charges 1,088,016 635,464
------------ ------------
TOTAL ASSETS $224,718,514 $186,993,943
============ ============
<PAGE>
LIABILITIES AND SHAREHOLDERS' EQUITY
1998 1997
---- ----
LIABILITIES
Accounts payable and accrued
expenses $ 2,847,080 $ 3,073,071
Notes payable 1,000,000 0
Mortgages payable 134,059,974 115,734,946
Investment certificates issued 10,369,561 8,187,305
------------ ------------
Total liabilities $148,276,615 $126,995,322
MINORITY INTEREST OF UNITHOLDERS IN
OPERATING PARTNERSHIP $ 8,289,273 $ 1,002
------------ ------------
SHAREHOLDERS' EQUITY
Shares of beneficial interest
(unlimited authorization, no
par value, 16,391,412 shares
outstanding in 1998 and
14,940,513 shares outstanding
in 1997) $ 74,708,559 $ 65,073,951
Accumulated distributions in
excess of net income (6,666,555) (5,162,837)
Unrealized gain on securities
available-for-sale 110,622 86,505
------------ ------------
Total shareholders' equity $ 68,152,626 $ 59,997,619
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $224,718,514 $186,993,943
============ ============
The accompanying notes are an integral part of these financial statements.
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
Consolidated Statements of Operations
for the Years Ended April 30, 1998, 1997 and 1996
1998 1997 1996
----------- ----------- -----------
REVENUE
Real estate rentals $31,694,586 $22,972,368 $17,635,297
Interest, discounts and fees 712,959 861,613 1,024,368
----------- ----------- -----------
Total revenue $32,407,545 $23,833,981 $18,659,665
EXPENSES
Interest $10,479,104 $ 7,638,776 $ 5,547,739
Depreciation 4,791,907 3,584,591 2,261,724
Utilities and maintenance 5,142,459 3,741,877 3,167,560
Taxes and insurance 3,536,147 2,720,495 2,065,017
Property management expenses 2,642,977 1,870,435 1,281,311
Advisory and trustee services 745,907 559,149 458,019
Operating expenses 271,738 158,627 162,588
Amortization 106,108 60,588 97,900
----------- ----------- -----------
Total expenses $27,716,347 $20,334,538 $15,041,858
----------- ----------- -----------
OPERATING INCOME $ 4,691,198 $ 3,499,443 $ 3,617,807
GAIN ON SALE OF PROPERTIES 465,499 398,424 994,163
MINORITY INTEREST PORTION OF
OPERATING PARTNERSHIP INCOME (141,788) (18) 0
----------- ----------- -----------
NET INCOME $ 5,014,909 $ 3,897,849 $ 4,611,970
=========== =========== ===========
Net income per share:
Operating income $ 0.29 $ 0.25 $ 0.30
Gain on sale of properties 0.03 0.03 0.08
----------- ----------- -----------
Net income $ 0.32 $ 0.28 $ 0.38
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
for the Years Ended April 30, 1998, 1997 and 1996
Unrealized
Accumulated Gain on
Shares of Distributions Securities Total
Number of Beneficial in excess of Available- Shareholders'
Shares Interest Net Income for-Sale Equity
---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCE MAY 1, 1995 11,187,786 $41,560,587 $(3,724,933) $ 0 $37,835,654
Net income 0 0 4,611,970 0 4,611,970
Dividends distributed 0 0 (4,439,034) 0 (4,439,034)
Dividends reinvested 502,599 3,100,988 0 0 3,100,988
Sale of shares 1,603,159 9,820,470 0 0 9,820,470
Shares repurchased (34,636) (218,128) 0 0 (218,128)
---------- ----------- ----------- ----------- -----------
BALANCE APRIL 30,
1996 13,258,908 $54,263,917 $(3,551,997) $ 0 $50,711,920
Net income 0 0 3,897,849 0 3,897,849
Dividends distributed 0 0 (5,508,689) 0 (5,508,689)
Dividends reinvested 554,681 3,579,744 0 0 3,579,744
Sale of shares 1,403,776 9,025,706 0 0 9,025,706
Shares repurchased (276,852) (1,795,416) 0 0 (1,795,416)
Increase in unrealized
gain on securities
available-for-sale 0 0 0 86,505 86,505
---------- ----------- ----------- ----------- -----------
BALANCE APRIL 30,
1997 14,940,513 $65,073,951 $(5,162,837) $ 86,505 $59,997,619
Net income 0 0 5,014,909 0 5,014,909
Dividends distributed 0 0 (6,518,627) 0 (6,518,627)
Dividends reinvested 636,799 4,290,541 0 0 4,290,541
Sale of shares 1,196,562 8,421,858 0 0 8,421,858
Shares repurchased (382,462) (3,077,791) 0 0 (3,077,791)
Increase in unrealized
gain on securities
available-for-sale 0 0 0 24,117 24,117
---------- ----------- ----------- ----------- -----------
BALANCE APRIL 30,
1998 16,391,412 $74,708,559 $(6,666,555) $ 110,622 $68,152,626
========== =========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
for the Years Ended April 30, 1998, 1997 and 1996
<TABLE>
<CAPTION>
1998 1997 1996
---- ---- ----
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 5,014,909 $ 3,897,849 $ 4,611,970
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 4,898,015 3,645,179 2,359,624
Minority interest portion of
operating partnership income 141,788 18 0
Accretion of discount on contracts (5,706) (7,698) (16,570)
Gain on sale of properties (465,499) (398,424) (994,163)
Interest reinvested in investment
certificates 349,791 288,517 161,813
Changes in other assets and liabilities:
Increase in real estate deposits (350,000) (100,000) 0
(Increase) decrease in other assets 377,758 (415,274) (15,645)
Increase in tax and insurance escrow (3,599) (98,942) (834,007)
Increase in deferred charges (558,660) (180,779) (257,991)
Increase (decrease) in accounts payable
and accrued expenses (225,991) (69,119) 1,219,771
------------ ------------ ------------
Net cash provided from operating
activities $ 9,172,806 $ 6,561,327 $ 6,234,802
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of marketable
securities held-to-maturity $ 518,921 $ 356,398 $ 417,952
Principal payments on mortgage loans
receivable 565,359 1,706,202 2,642,346
Proceeds from sale of property 1,482,046 0 389,784
Payments for acquisition and
improvement of properties (22,894,602) (38,046,177) (32,462,846)
Purchase of marketable securities
available-for-sale 0 (596,961) 0
Investment in mortgage loans receivable (2,061,179) (2,835,212) (1,784,981)
------------ ------------ ------------
Net cash used for investing
activities $(22,389,455) $(39,415,750) $(30,797,745)
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of shares $ 8,421,858 $ 9,025,706 $ 9,820,470
Proceeds from investment certificates
issued 3,283,248 4,225,004 1,695,924
Proceeds from mortgages payable 10,612,652 27,094,270 29,025,001
Proceeds from short-term lines of
credit 12,900,000 8,450,000 0
Proceeds from sale of minority interest 0 1,000 0
Repurchase of shares (3,077,791) (1,795,416) (218,128)
Dividends paid (2,228,086) (1,930,439) (1,338,046)
Distributions paid to minority interest
unit holders (179,185) (16) 0
Redemption of investment certificates (1,450,783) (2,128,686) (917,732)
Principal payments on mortgage loans (2,751,301) (2,634,017) (15,554,717)
Payments on short-term lines of credit (11,900,000) (8,450,000) 0
------------ ------------ ------------
Net cash provided from financing
activities $ 13,630,612 $ 31,857,406 $ 22,512,772
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH $ 413,963 $ (997,017) $ (2,050,171)
CASH AT BEGINNING OF YEAR 1,718,257 2,715,274 4,765,445
------------ ------------ ------------
CASH AT END OF YEAR $ 2,132,220 $ 1,718,257 $ 2,715,274
============ ============ ============
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
1998 1997 1996
---- ---- ----
SUPPLEMENTARY SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
Dividends reinvested $ 4,290,541 $ 3,579,744 $ 3,100,988
Real estate investment and mortgage
loans receivable acquired through
assumption of mortgage loans payable
and accrual of costs 10,463,677 19,575,635 8,232,568
Mortgage loan receivable transferred
to property owned 1,161,878 2,810,000 0
Proceeds from sale of properties
deposited directly with escrow agent 2,870,387 455,329 426,352
Properties acquired through the
issuance of minority interest units
in the operating partnership 8,325,652 0 0
Interest reinvested directly in
investment certificates 349,791 288,517 161,813
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the year for:
Interest paid on mortgages $ 9,613,154 $ 6,773,978 $ 4,661,065
Interest paid on investment
certificates 657,966 508,686 292,660
------------ ------------ ------------
$ 10,271,120 $ 7,282,664 $ 4,953,725
============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
Notes to Consolidated Financial Statements
April 30, 1998, 1997 and 1996
NOTE 1 - NATURE OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
NATURE OF OPERATIONS - Investors Real Estate Trust qualifies under
Section 856 of the Internal Revenue Code as a real estate investment
trust. The Trust has properties located throughout the Upper Midwest,
with principal offices located in Minot, North Dakota. The Company
invests in commercial and residential real estate, real estate
contracts, real estate related governmental backed securities
(GNMA), and equity securities in other real estate investment trusts.
Effective February 1, 1997, the Trust reorganized its structure in
order to convert to Umbrella Partnership Real Estate Investment Trust
(UPREIT) status. The Trust established an operating partnership (IRET
Properties, a North Dakota Limited Partnership) with a wholly owned
corporate subsidiary acting as its sole general partner (IRET, Inc.,
a North Dakota Corporation). At that date, the Trust transferred all
of its assets and liabilities to the operating partnership in exchange
for general partnership units.
The general partner has full and exclusive management responsibility for
the real estate investment portfolio owned by the operating partnership.
The partnership is operated in a manner that allows IRET to continue its
qualification as a real estate investment trust under the Internal
Revenue Code.
All limited partners of the operating partnership have "exchange
rights" allowing them, at their option, to exchange their limited
partnership units for shares of the Trust on a one for one basis. The
exchange rights are subject to certain restrictions including no exchanges
for at least one year following the acquisition of the limited
partnership units. The operating partnership distributes cash on a
quarterly basis in the amounts determined by the Trust which results in
each limited partner receiving the same dividends as a Trust shareholder.
BASIS OF PRESENTATION - The consolidated financial statements include
the accounts of Investors Real Estate Trust and all of its subsidiaries in
which it maintains a controlling interest. The Trust is the sole
shareholder of IRET, Inc. which is the general partner of the operating
partnership, IRET Properties. IRET Properties is a general partner in six
limited partnerships, and due to the immaterial involvement of the limited
partners, has substantial influence over their operations. These limited
partnerships are as follows:
Eastgate Properties, Ltd.
Bison Properties, Ltd
First Avenue Building, Ltd.
Sweetwater Properties, Ltd.
Hill Park Properties, Ltd.
Colton Heights, Ltd.
<PAGE>
NOTE 1 (CONTINUED)
All material intercompany transactions and balances have been eliminated
in the consolidated financial statements.
ACCOUNTING POLICIES
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
PROPERTY OWNED - Real estate is stated at cost. Expenditures for
renewals and improvements that significantly add to the productive
capacity or extend the useful life of an asset are capitalized.
Expenditures for maintenance and repairs which do not add to the value
or extend the useful life are charged to expense as incurred.
DEPRECIATION is provided to amortize the cost of individual assets
over their estimated useful lives using principally the straight-line
method. Useful lives range from 12 years for furniture and fixtures to
20 - 40 years for buildings and improvements.
MORTGAGE LOANS RECEIVABLE are shown at cost less unearned discount.
Discounts on contracts are accreted using the straight-line method over
the term of the contract which approximates the effective interest method.
Deferred gain is recognized as income on the installment method when
principal payments are received. Interest income is accrued and reflected
in the related balance.
ALLOWANCE FOR LOAN LOSSES - The Trust evaluates the need for an
allowance for loan losses periodically. In performing its evaluation,
management assesses the recoverability of individual real estate loans by a
comparison of their carrying amount with their estimated net realizable
value.
MARKETABLE SECURITIES - The Trust's investments in securities are
classified as securities "held-to-maturity" and securities "available-for
-sale." The securities classified as held-to-maturity consist of
Government National Mortgage Association securities for which the Trust
has the positive intent and ability to hold to maturity. They are
reported at cost, adjusted by amortization of premiums and accretion of
discounts which are recognized in interest income using the straightline
method over the period to maturity which approximates the effective
interest method.
The securities classified as "available-for-sale" consist of equity
shares in other real estate investment trusts and are stated at fair
value. Unrealized gains and losses on securities available-for-sale are
recognized as direct increases or decreases in shareholders' equity.
Cost of securities sold are recognized on the basis of specific
identification.
<PAGE>
Note 1 - (CONTINUED)
REAL ESTATE DEPOSITS consist of funds held by an escrow agent to be
applied toward the purchase of real estate qualifying for gain deferral as
a like-kind exchange of property under Section 1031 of the Internal
Revenue Code. It also consists of earnest money, or "good faith
deposits," to be used by the Trust toward the purchase of property or
the payment of loan costs associated with loan refinancing.
INVESTMENT IN PARTNERSHIP - The Trust accounted for its investment in
Chateau Properties, Ltd. under the equity method of accounting, wherein
the appropriate portion of the earnings or loss is recognized currently.
The Operating Partnership had a general partnership interest in the
limited partnership. Chateau Properties, Ltd. had invested in real estate
properties. During 1998, the real estate in Chateau Properties, Ltd. was
acquired through the issuance of operating partnership units. The
remaining balance at April 30, 1998 represents interests in several
partnerships.
MINORITY INTEREST - Capital contributions, distributions and profits
and losses are allocated to minority interests in accordance with the
terms of the operating partnership agreement.
NET INCOME PER SHARE - The Trust adopted Statement of Financial
Accounting Standard No. 128, Earnings Per Share in 1998. Restating the
prior years net income per share to conform to the provisions of this
statement resulted in no changes to previous amounts reported as the
number of outstanding shares used to calculate basic net income per
share are substantially identical to those used in the prior years.
Basic net income per share is computed using the weighted average number
of shares outstanding. The aggregate weighted average shares outstanding
used in computing net income per share was 15,636,214 in 1998,
14,044,467 in 1997 and 12,137,123 in 1996. There is no potential for
dilution of net income per share as no dilutive shares have been
authorized. For this reason, a separate diluted net income per share
has not been disclosed.
INCOME TAXES - The Trust intends to continue to qualify as a real
estate investment trust as defined by the Internal Revenue Code and, as
such, will not be taxed on the portion of the income that is distributed
to the shareholders, provided at least 95% of its real estate investment
trust taxable income is distributed and other requirements are met. The
Trust intends to distribute all of its taxable income and realized
capital gains from property dispositions within the prescribed time
limits and, accordingly, there is no provision or liability for income
taxes shown on the financial statements.
UPREIT status allows non-recognition of gain by an owner of appreciated
real estate if that owner contributes the real estate to a partnership
in exchange for a partnership interest. The UPREIT concept was born when
the non-recognition provisions of Section 721 of the Internal Revenue
Code were combined with "Exchange Rights" which allow the contributing
partner to exchange the limited partnership interest received in
exchange for the appreciated real estate for the Trust stock. Upon
conversion of the partnership units to Trust shares, a taxable event
occurs for that limited partner. Income or loss of the operating
partnership shall be allocated among its partners in compliance with the
provisions of Internal Revenue Code Sections 701 (b) and 704 (c).
REVENUE RECOGNITION - Residential rental properties are leased under
operating leases with terms generally of one year or less. Commercial
properties are leased to tenants for various terms exceeding one year.
Lease terms often include renewal options. In addition, a number of the
commercial leases provide for a base rent plus a percentage rent based
on gross sales in excess of a stipulated amount. Rental income is
recognized as it is earned, which is not materially different than on a
straight-line basis.
<PAGE>
NOTE 1 - (CONTINUED)
Profit on sales of real estate shall be recognized in full when real
estate is sold, provided:
a. The profit is determinable, that is, the collectibility of
the sales price is reasonably assured or the amount that will be
collectible can be estimated.
b. The earnings process is virtually complete, that is, the
seller is not obliged to perform significant activities after the
sale to earn the profit.
Based on the economic climate and the terms of many contracts, the
collectibility of the sales price was not reasonably assured as required
by generally accepted accounting principles. Consequently, the Trust
uses the installment method of accounting for profits on several
property sales as it more fairly reflects earned revenue.
Interest on mortgage loans receivable is recognized in income as it
accrues during the period the loan is outstanding. In the case of non-
performing loans, income is recognized as discussed in Note 4.
INTEREST CAPITALIZATION - Interest is capitalized on accumulated
expenditures relating to the acquisition and development of certain
qualifying properties.
RECLASSIFICATIONS - Certain previously reported amounts have been
reclassified to conform with the current financial statement presentation.
NOTE 2 - OFF-BALANCE-SHEET RISK
The Trust had deposits at Norwest Bank, North Dakota, N.A., and First
American Bank which exceeded Federal Deposit Insurance Corporation limits
by $349,802 and $449,907, respectively, at April 30, 1998.
NOTE 3 - PROPERTY OWNED UNDER LEASE
Property consisting principally of real estate owned under lease is
stated at cost less accumulated depreciation and is summarized as
follows:
April 30, 1998 April 30, 1997
-------------- --------------
Residential $180,986,906 $149,643,413
Less accumulated
depreciation (15,449,736) (11,845,692)
------------ ------------
$165,537,170 $137,797,721
------------ ------------
Commercial $ 50,429,416 $ 42,241,096
Less accumulated
depreciation (6,066,393) (5,102,464)
------------ ------------
$ 44,363,023 $ 37,138,632
------------ ------------
Remaining cost $209,900,193 $174,936,353
============ ============
<PAGE>
NOTE 3 - (CONTINUED)
There were no repossessions during the years ended April 30, 1998 and
1997.
The above cost of residential real estate owned included
construction in progress of $753,680 and $2,482,849 as of April 30,
1998 and 1997, respectively.
Construction period interest of $220,573, $269,513, and $690,665 has
been capitalized for the years ended April 30, 1998, 1997 and 1996,
respectively.
Residential apartment units are rented to individual tenants with lease
terms up to one year. Gross revenues from residential rentals totaled
$27,231,714, $18,935,111, and $12,286,492 for the years ended April 30,
1998, 1997 and 1996, respectively.
Gross revenues from commercial property rentals totaled $4,462,872,
$4,037,258, and $5,348,805 for the years ended April 30, 1998, 1997 and
1996, respectively. Commercial properties are leased to tenants under
terms of leases expiring at various dates through 2013. Lease terms
often include renewal options. In addition, a number of the commercial
leases provide for a base rent plus a percentage rent based on gross
sales in excess of a stipulated amount. Rents based on a percentage of
sales totaled $28,316, $16,517, and $25,054 for the years ended April
30, 1998, 1997 and 1996, respectively.
The future minimum lease payments to be received under these operating
leases for the commercial properties as of April 30, 1998, are as
follows:
Year ending April 30,
1999 $ 6,667,483
2000 6,658,627
2001 6,570,453
2002 5,724,100
2003 5,662,960
Thereafter 54,585,504
-----------
$85,869,127
===========
NOTE 4 - MORTGAGE LOANS RECEIVABLE
Mortgage loans receivable consists of fourteen contracts which are
collateralized by real estate. Contract terms call for monthly payments
of principal and interest. Interest rates range from 7 to 10.25%.
Mortgage loans receivable have been evaluated for possible losses
considering repayment history, market value of underlying collateral,
deferred gains and economic conditions.
<PAGE>
NOTE 4 - (CONTINUED)
Future principal payments due under the mortgage loan contracts as of
April 30, 1998 are as follows:
Year ending April 30,
1999 $ 2,088,754
2000 88,858
2001 85,035
2002 92,040
2003 203,390
Later years 880,231
-----------
$ 3,438,308
===========
Details concerning mortgage loans receivable from related parties can be
found in Note 10.
Non-performing mortgage loans receivable were $0 at April 30, 1998 and
$174,911 at April 30, 1997. These loans are recognized as impaired in
conformity with FASB Statement No. 114, Accounting by Creditors for
Impairment of a Loan. The total allowance for credit losses related to
those loans was approximately $0 and $30,000, respectively. The average
balance of impaired loans for the year ended April 30, 1998 was
approximately $50,000. For impairment recognized in conformity with FASB
Statement No. 114, the entire change in present value of expected cash
flows is reported as bad debt expense in the same manner in which
impairment initially was recognized or as a reduction in the amount of
bad debt expense that otherwise would be reported. Additional interest
income that have been earned on these loans if they had not been
non-performing amounted to approximately $6,000 in 1998 and $33,000 in
1997. There was no interest income on non-performing loans recognized on
a cash basis for 1998 or 1997.
NOTE 5 - MARKETABLE SECURITIES
The amortized cost and estimated market values of marketable securities
held-to-maturity at April 30, 1998 and 1997 are as follows:
1998
---- Gross Gross
Amortized Unrealized Unrealized Fair
Issuer Cost Gains Losses Value
------ ---------- ----------- ------------ ----------
GNMA $3,536,538 $ 22,757 $ - $3,559,295
========== =========== ============ ==========
1997
----
GNMA $4,055,459 $ - $ 166,031 $3,889,428
========== =========== ============ ==========
<PAGE>
NOTE 5 - (CONTINUED)
The amortized cost and estimated market values of marketable securities
available-for-sale at April 30, 1998 and 1997 are as follows:
1998
---- Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
---------- ----------- ----------- -----------
Equity Shares
in other
REIT's $ 610,066 $ 110,622 $ - $ 720,688
========== =========== =========== ===========
1997
----
Equity Shares
in other
REIT's $ 596,961 $ 90,015 $ 3,510 $ 683,466
========== =========== =========== ===========
There were no realized gains or losses on sales of securities for the
years ended April 30, 1998, 1997 and 1996.
Marketable securities held-to-maturity consist of Governmental
National Mortgage Association (GNMA) securities bearing interest from
6.5% to 9.5% with maturity dates ranging from May 15, 2016 to June 15,
2023. The following is a summary of the maturities of securities held-
to-maturity at April 30, 1998 and 1997:
<TABLE>
<CAPTION>
1998 1997
-------------------------- -----------------------
Amortized Fair Amortized Fair
Cost Value Cost Value
----------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Due after 10 years $ 3,536,538 $3,559,295 $4,055,459 $3,889,428
=========== ========== ========== ==========
</TABLE>
NOTE 6 - NOTES PAYABLE
As of April 30, 1998, the Trust had lines of credit available from two
financial institutions. An unsecured line of credit was issued by First
Western Bank & Trust in the amount of $4,000,000 carrying an interest
rate equal to prime and maturing December 1, 1998. A second unsecured
line of credit from First International Bank & Trust was issued in the
amount of $2,500,000 carrying an interest rate equal to prime and
maturing September 12, 1998. Interest payments are due monthly on both
notes. As of April 30, 1998 the Trust had an unpaid balance of
$1,000,000 on the First Western Bank & Trust line of credit and no
unpaid balance on the First International Bank & Trust line of credit.
As of April 30, 1997, the Trust had no unpaid balances on either line of
credit.
<PAGE>
NOTE 7 - MORTGAGES PAYABLE
Mortgages payable as of April 30, 1998, included mortgages on
properties owned totaling $134,012,050, and mortgages of $47,924 on
property sold on contract. The carrying value of the related real estate
owned was $190,827,346 and the carrying value of the related mortgage
loans receivable was $209,260 as of April 30, 1998.
Mortgages payable as of April 30, 1997, included mortgages on
properties owned totaling $115,608,689, and mortgages of $126,257 on
property sold on contract. The carrying value of the related real estate
owned was $165,399,893 and the carrying value of the related mortgage
loans receivable was $353,480 as of April 30, 1997.
Monthly installments are due on the mortgages with interest rates
ranging from 6.80% to 9.75% and with varying maturity dates through
November 30, 2034.
The aggregate amount of required future principal payments on mortgages
payable is as follows:
Years ending April 30,
1999 $ 3,319,048
2000 6,533,758
2001 3,671,496
2002 3,954,021
2003 4,221,911
Later years 112,359,740
------------
Total payments $134,059,974
============
NOTE 8 - INVESTMENT CERTIFICATES ISSUED
The Trust has placed investment certificates with the public. The
interest rates vary from 6.5% to 11% per annum, depending on the term of
the security. Total securities maturing within fiscal years ending April
30 are shown below. Interest is paid annually, semiannually, or
quarterly on the anniversary date of the security.
Due in years ending April 30,
1999 $ 6,444,209
2000 2,322,910
2001 690,822
2002 305,273
2003 567,747
Thereafter 38,600
-----------
$10,369,561
===========
<PAGE>
NOTE 9 - DEFERRED GAIN FROM PROPERTY DISPOSITIONS
Deferred gain represents gain from property dispositions that have
been reported on the installment method. With the installment method of
reporting, the proportionate share of the gain is recognized at the point
cash is received. Deferred gain recognized on the installment basis was
$16,713, $146,361, and $476,913 for the years ended April 30, 1998, 1997
and 1996, respectively.
NOTE 10 - TRANSACTIONS WITH RELATED PARTIES
Mr. Roger R. Odell and Mr. Thomas A. Wentz, Sr., officers and
shareholders of the Trust, are partners in Odell-Wentz & Associates,
the advisor to the Trust. Under the Advisory Contract between the Trust
and Odell-Wentz & Associates, the Trust pays an advisor's fee based on
the net assets of the Trust and a percentage fee for investigating and
negotiating the acquisition of new investments. For the year ended April
30, 1998, Odell-Wentz & Associates received total fees under said
agreement of $740,393. The fees for April 30, 1997 were $667,367, and
for April 30, 1996 were $484,086.
For the years ended April 30, 1998, 1997 and 1996, the Trust has
capitalized $141,468, $177,834, and $115,993, respectively, of these
fees, with the remainder of $598,925, $489,533, and $368,093,
respectively, expensed as advisory and trustee fees on the statement
of operations. The advisor is obligated to provide office space, staff,
office equipment, computer services and other services necessary to
conduct the business affairs of the Trust.
Investors Management and Marketing (IMM) provides property management
services to the Trust. Roger R. Odell is a shareholder in IMM. IMM
received $530,678, $408,904, and $281,717 for services rendered for
years ended April 30, 1998, 1997 and 1996, respectively.
Inland National Securities is a corporation that provides underwriting
services in the sale of additional shares for the Trust. Roger R. Odell
is also a shareholder in Inland National Securities. Fees for services
totaled $171,755 for the year ended April 30, 1998, $291,143 for the
year ended April 30, 1997, and $269,656 for the year ended April 30, 1996.
The Trust paid fees and expense reimbursements to the law firm in
which Thomas A. Wentz, Sr. is a partner totaling $62,293, $36,045, and
$23,488 for the years ended April 30, 1998, 1997 and 1996, respectively.
Investment certificates issued by the Trust to officers and trustees
totaled $1,219,457 and $519,528, at April 30, 1998 and 1997, respectively.
The Trust issued 334,172 limited partnership units at $7.20/unit to
Roger R. Odell and C. Morris Anderson upon the completion of the UPREIT
transaction with Magic City Realty. Mr. Odell and Mr. Anderson owned all
of Magic City Realty. Mr. Anderson is also a trustee of the Trust
<PAGE>
NOTE 11 - MARKET PRICE RANGE OF SHARES
Since October 17, 1997, Investors Real Estate Trust traded shares on
the NASDAQ Small Capital Market. During the period October 17, 1997
through April 30, 1998, a total of 812,498 shares were traded in 445
separate trades. The high trade price during the period was 7.406, low
was 6.563, and the closing price on April 30, 1998 was 7.1888.
Prior to October 17, 1998, Investors Real Estate Trust shares were traded
on the Over-the-Counter Market. The price range is as follows:
Bid Ask
-------------- --------------
Low High Low High
------ ----- ------ -----
1996 $ 5.89 $6.30 $ 6.40 $6.85
1997 6.44 6.62 7.00 7.20
1998 6.62 6.85 7.20 7.45
NOTE 12 - SUBSEQUENT EVENT
The owners of the six limited partnerships, that are consolidated in the
financial statements (as described in Note 1), exchanged properties for
limited partnership units in the operating partnership, effective May 1,
1998. The following summarizes the units exchanged and the dollar amount
attributed to each partnership's property:
Number of
Limited Partnership Dollar Amount
Units Issued of Units Issued
------------ ---------------
Eastgate Properties, Ltd. 12,450 $ 92,753
Bison Properties, Ltd. 11,400 84,930
First Avenue Building, Ltd. 4,200 31,290
Sweetwater Properties, Ltd. 10,500 78,225
Hill Park Properties, Ltd. 19,200 143,040
Colton Heights, Ltd. 6,750 50,288
NOTE 13 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable
to estimate that value:
Mortgage loans receivable - Fair values are based on the
discounted value of future cash flows expected to be received
for a loan using current rates at which similar loans would
be made to borrowers with similar credit risk and the same
remaining maturities.
Cash - The carrying amount approximates fair value because of the
short maturity of those instruments.
Marketable securities - The fair values of these instruments are
estimated based on quoted market prices for these instruments.
<PAGE>
NOTE 13 - (CONTINUED)
Notes payable - The carrying amount approximates fair value
because of the short maturity of those notes.
Mortgages payable - For variable rate loans that reprice
frequently, fair values are based on carrying values. The
fair value of fixed-rate loans is estimated based on the
discounted cash flows of the loans using current market rates.
Investment certificates issued - The fair value is estimated
using a discounted cash flow calculation that applies interest
rates currently being offered on deposits with similar
remaining maturities.
Accrued interest payable - The carrying amount approximates fair
value because of the short-term nature of when interest will be paid.
The estimated fair values of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
1998 1997
-------------------------- --------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
-------------------------- --------------------------
<S> <C> <C> <C> <C>
Financial Assets
- ----------------
Mortgage loan receivable $ 3,438,308 $ 3,438,308 $ 3,108,933 $ 3,108,938
Cash 2,132,220 2,132,220 1,718,257 1,718,257
Marketable securities
held-to-maturity 3,536,538 3,559,295 4,055,459 3,889,428
Marketable securities
available-for-sale 720,688 720,688 683,466 683,466
Financial Liabilities
- ---------------------
Notes payable $ 1,000,000 $ 1,000,000 $ 0 $ 0
Mortgages payable 135,059,974 129,354,699 115,734,946 113,007,861
Investment certificates
issued 10,369,561 10,202,603 8,187,305 8,136,971
Accrued interest payable 1,220,177 1,220,177 1,012,193 1,012,193
</TABLE>
<PAGE>
ADDITONAL INFORMATION
<PAGE>
INDEPENDENT AUDITOR'S REPORT ON ADDITIONAL INFORMATION
Board of Trustees
Investors Real Estate Trust
and Subsidiaries
Minot, North Dakota
Our report on our audit of the basic consolidated financial statements of
Investors Real Estate Trust and Subsidiaries for the years ended April 30,
1998, 1997 and 1996, appears on page 1. Those audits were made for the
purpose of forming an opinion on such consolidated financial statements taken
as a whole. The information on pages 20 through 35 related to the 1998, 1997
and 1996 consolidated financial statements is presented for purposes of
additional anaylsis and is not a required part of the basic consolidated
financial statements. Such information, except for information on page 35
that is marked "unaudited" on which we express no opinion, has been subjected
to the auditing procedures applied in the audits of the basic consolidated
financial statements, and, in our opinion, the information is fairly stated
in all material respects in relation to the basic consolidated financial
statements for the years ended April 30, 1998, 1997 and 1996, taken as a
whole.
We have also previously audited, in accordance with generally accepted
auditing standards, the consolidated balance sheets of Investors Real
Estate Trust and Subsidiaries as of April 30, 1995 and 1994, and the
related consolidated statements of operations, shareholders' equity, and
cash flows for each of the two years ended April 30, 1995 and 1994, none of
which is presented herein, and we expressed unqualified opinions on those
consolidated financial statements. In our opinion, the information on page
30 relating to the 1995 and 1994 consolidated financial statements is fairly
stated in all material respects in relation to the basic consolidated
financial statements from which it has been derived.
BRADY, MARTZ & ASSOCIATES, P.C.
May 27, 1998
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
April 30, 1998 and 1997
Schedule I
MARKETABLE SECURITIES
<TABLE>
<CAPTION>
April 30, 1998 April 30, 1997
---------------------- -----------------------
Principal Principal
Amount Market Amount Market
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
GNMA Pools $3,536,538 $3,559,295 $4,055,459 $3,889,428
========== ========== ========== ==========
Cost Market Cost Market
---------- ---------- ---------- ----------
Equity shares in
other REIT's $ 610,066 $ 720,688 $ 596,961 $ 683,466
========== ========== ========== ==========
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
For the Years Ended April 30, 1998, 1997 and 1996
Schedule X
SUPPLEMENTAL INCOME STATEMENT INFORMATION
Charged to Costs and Expenses
------------------------------------------
1998 1997 1996
----------- ----------- -----------
Item
- ----
Maintenance and repairs $ 2,832,772 $ 1,812,496 $ 1,702,365
Taxes, other than payroll and
income taxes
Property taxes 3,162,656 2,515,631 1,873,720
Royalties * * *
Advertising costs * * *
* Less than 1 percent of total revenues
</TABLE>
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
SCHEDULE XI
REAL ESTATE AND ACCUMULATED DEPRECIATION
<TABLE>
<CAPTION>
COST
CAPITALIZATION
SUBSEQUENT TO
INITIAL COST TO TRUST ACQUISITION
-------------------------- ------------------------
<S> <C> <C> <C> <C> <C>
BUILDING & CARRYING
APARTMENTS ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS COSTS
- ---------- ------------ ------------ ------------ ------------ ----------
32ND AVE SW $ 376,788 $ 50,000 $ 543,147 $ 8,691 $ -
177 10TH AVE E 226,229 40,000 318,109 27,669 -
DICKINSON
405 GRANT AVE - 13,584 157,211 52,551 -
HARVEY, ND
4301-4313 463,021 52,870 908,727 49,404 -
9TH AVE SW FARGO
BEULAH CONDOS - 6,360 336,589 122,830 -
ND
BISON PROPERTIES 71,327 100,210 1,348,127 179,024 -
CANDLELIGHT APTS 498,299 80,040 757,977 22,767 -
FARGO ND
CENTURY APTS 1,522,794 100,000 1,564,598 212,192 -
DICKINSON
CENTURY APTS 2,577,896 200,000 3,166,750 407,084 -
WILLISTON ND
CHATEAU APTS 1,670,895 122,000 2,242,090 654 -
MINOT ND
COUNTRY MEADOWS 2,647,777 491,247 3,701,540 184,284 120,821
BILLINGS MT
COLUMBIA PARK, - 725,277 - - -
GRAND FORKS, ND
COLTON HEIGHTS 338,464 80,000 734,286 50,514 -
PROPERTIES
COTTONWOOD - 1,055,862 5,077,785 - 114,353
LAKE BISMARCK
CRESTVIEW APTS 2,609,063 235,000 4,290,031 235,518 -
BISMARCK
EASTGATE - 23,917 1,490,181 264,530 -
PROPERTIES
FAIRFIELD 96,292 35,000 275,000 111,052 -
APTS,
MARSHALL MN
FOREST PARK 3,990,430 810,000 5,579,164 564,335 -
ESTS, G FORKS
HILL PARK 1,403,790 224,750 2,562,296 63,376 -
PROPERTIES
JENNER PROPERTIES 1,357,209 220,000 2,077,500 125,696 -
KIRKWOOD APTS, 2,270,000 449,290 2,729,745 80,916 -
BISMARCK ND
LEGACY APTS 3,927,506 700,000 5,843,203 46,922 177,896
GRAND FORKS
LEGACY PHASE II, - 661,855 3,015,222 - 46,194
GRAND FORKS, ND
MAGIC CITY 2,728,417 532,000 4,738,000 77,982 -
APTS, MINOT ND
MANDAN APTS, 16,566 20,000 236,750 19,758 -
MANDAN ND
MIRAMONT APT, 11,525,814 1,470,000 12,765,460 35,501 -
FT COLLINS CO
<PAGE>
NEIGHBORHOOD 7,400,220 1,033,592 9,811,600 134,270 -
APT, CO SPRINGS
NORTH POINTE, 1,695,893 143,500 2,120,413 13,628 123,687
BISMARCK
OAK MANOR 232,111 25,000 225,000 50,812 -
APTS, DICKINSON
OAKWOOD ESTATES 2,148,247 342,800 2,783,950 355,918 -
S FALLS SD
OXBOW, SIOUX 3,403,778 404,072 4,494,441 67,504 -
FALLS
PARK EAST 3,500,000 83,000 4,082,665 752,546 -
APTS, FARGO ND
PARK MEADOWS 7,894,811 1,143,450 9,099,297 466,750 -
WAITE PARK MN
PARK PLACE, - 40,000 634,737 174,640 -
WASECA MN
PARKWAY APTS, - 7,000 40,738 70,364 -
BEULAH ND
PINE CONE 10,534,209 904,545 12,167,093 98,812 -
APTS, FT COLLINS
POINTE WEST 2,170,254 240,000 3,537,775 82,951 -
APTS, MINOT
PRAIRIE WINDS 1,336,552 144,097 1,816,011 13,726 -
APTS, S FALLS
ROCKY MEADOWS 2,876,562 655,985 5,588,113 293,640 103,378
96, BILLINGS
ROSEWOOD/ 1,276,702 200,000 1,738,245 2,190 -
OAKWOOD, S FALLS
SOUTH POINTE, 6,484,298 550,000 9,150,975 154,007 402,872
MINOT
SOUTHVIEW - 185,000 468,585 37,308 -
APTS, MINOT
SOUTHWIND 4,090,096 400,000 5,033,683 161,977 -
APTS,
GRAND FORKS
SWEETWATER 194,812 90,767 1,208,847 363,241 -
PROPERTIES
VIRGINIA - 37,600 163,036 23,460 -
APARTMENTS MINOT
WEST STONEHILL 7,912,344 939,000 10,167,355 250,110 -
ST CLOUD MN
WOODRIDGE 4,282,154 370,000 6,028,096 82,155 -
APTS, ROCHESTER MN
------------ ------------ ------------ ------------ -----------
107,751,620 16,438,670 151,742,358 11,381,483 1,089,291
------------ ------------ ------------ ------------ -----------
</TABLE>
<PAGE>
Schedule XI (Continued)
<TABLE>
<CAPTION>
LIFE ON WHICH
BUILDINGS LATEST INCOME
AND ACCUMULATED DATE STATEMENT
LAND IMPROVEMENTS TOTAL DEPRECIATION ACQUIRED IS COMPUTED
------------ ------------ ------------ ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C>
APARTMENTS
- ----------
1112 32ND AVE SW $ 50,000 $ 551,838 $ 601,838 $ 34,521 1996 24-40 years
177 10TH 40,278 345,501 385,778 69,977 1989 24-40 years
AVE E DICKINSON
405 GRANT 14,674 208,672 223,346 31,467 1991 24-40 years
AVE HARVEY ND
4301-4313 68,868 942,133 1,011,001 227,730 1988 5-40 years
9TH AVE SW FARGO
BEULAH CONDOS 78,339 387,441 465,780 313,947 1983 15-40 years
ND
BISON PROPERTIES 100,210 1,527,151 1,627,361 1,124,807 1972 25-40 years
CANDLELIGHT 80,040 780,744 860,800 106,039 1993 24-40 years
APTS FARGO ND
CENTURY APTS 126,738 1,750,052 1,876,790 548,710 1986 35-40 years
DICKINSON,
CENTURY APTS 274,971 3,498,864 3,773,834 1,158,993 1986 35-40 years
WILLISTON ND
CHATEAU 122,000 2,242,744 2,364,744 2,368 1997 12-40 years
APTS,
MINOT ND
COLTON HEIGHTS 80,095 784,705 864,800 341,639 1984 33-40 years
PROPERTIES
COLUMBIA PARK 725,277 0 725,277 - 1996 40 years
PHASE II GF
COUNTRY MEADOWS 491,247 4,006,646 4,497,893 35,249 1996 40 years
BILLINGS, MT
COTTONWOOD 1,055,862 5,192,134 6,247,996 12,850 1997 40 years
LAKE, BISMARCK
CRESTVIEW 235,000 4,525,549 4,760,549 492,494 1994 24-40 years
APTS, BISMARCK
EASTGATE 28,639 1,749,989 1,778,628 1,317,117 1970 33-40 years
PROPERTIES
FAIRFIELD 35,360 385,692 421,052 77,315 1988 24-40 years
APTS,
MARSHALL MN
FOREST PARK 811,954 6,141,545 6,953,499 800,318 1993 24-40 years
ESTS, G FORKS
HILL PARK 245,653 2,604,769 2,850,422 1,129,069 1985 33-40 years
PROPERTIES
JENNER PROP. - 1,357,209 1,065,987 2,423,196 38,925 1996 40 years
UPREIT
KIRKWOOD APTS, 449,290 2,810,661 3,259,951 50,263 1997 12-40 years
BISMARCK ND
LEGACY APTS, 700,000 6,068,111 6,768,111 236,404 1996 24-40 years
GRAND FORKS
LEGACY PHASE 661,855 3,061,416 3,723,271 17,767 1997 12-40 years
II, GRAND FORKS
MAGIC CITY 532,000 4,815,982 5,347,982 57,746 1997 12-40 years
APTS, MINOT ND
MANDAN APTS, 20,000 256,508 276,508 51,204 1989 24-40 years
MANDAN ND
MIRAMONT APTS, 1,470,000 12,800,961 14,270,961 479,779 1996 40 years
FT COLLINS CO
NEIGHBORHOOD 1,033,592 9,945,870 10,979,462 375,371 1996 40 years
APT, CO SPRINGS
NORTH POINTE 143,500 2,257,728 2,401,228 139,188 1995 24-40 years
49, BISMARCK
<PAGE>
OAK MANOR 29,012 271,800 300,812 54,642 1989 24-40 years
APTS, DICKINSON
OAKWOOD ESTATES 342,800 3,139,868 3,482,668 410,452 1993 24-40 years
S FALLS SD
OXBOW, SIOUX 404,073 4,561,944 4,966,017 397,138 1994 24-40 years
FALLS SD
PARK EAST 83,000 4,835,211 4,918,211 38,327 1997 12-40 years
APTS, FARGO ND
PARK MEADOWS 1,143,450 9,566,047 10,709,497 362,425 1997 40 years
WAITE PARK MN
PARK PLACE, 40,000 809,377 849,377 297,433 1988 5-40 years
WASECA MN
PARKWAY APTS, 11,816 106,286 118,102 13,845 1988 5-40 years
BEULAH ND
PINE CONE 904,545 12,265,905 13,170,450 915,217 1994 40 years
APTS, FT COLLINS
POINTE WEST 240,000 3,620,726 3,860,726 401,904 1994 24-40 years
APTS, MINOT
PRAIRIE WINDS 144,097 1,829,737 1,973,834 250,359 1993 24-40 years
APTS, S FALLS
ROCKY MEADOWS 655,985 5,985,131 6,641,116 222,118 1996 40 years
96, BILLINGS
ROSEWOOD/OAKWOOD 200,000 1,740,435 1,940,435 65,223 1996 40 years
S FALLS
SOUTH POINTE, 275,000 9,982,854 10,257,854 473,332 1995 24-40 years
MINOT ND
SOUTHVIEW 185,000 505,893 690,893 45,301 1994 24-40 years
APTS, MINOT
SOUTHWIND 409,892 5,185,768 5,595,660 321,280 1996 24-40 years
APTS, GRAND FORKS
SWEETWATER 94,270 1,568,585 1,662,855 969,529 1972 5-40 years
PROPERTIES
VIRGINIA 37,600 186,496 224,096 63,017 1987 27 1/2-40 years
APARTMENTS,
MINOT
WEST STONEHILL 939,000 10,417,465 11,356,465 646,889 1995 40 years
ST CLOUD MN
WOODRIDGE 370,000 6,110,251 6,480,251 230,048 1996 40 years
APTS, ROCHESTER
------------ ------------ ------------ ------------
17,542,191 163,399,172 180,941,363 15,449,736
------------ ------------ ------------ ------------
</TABLE>
<PAGE>
Schedule XI
REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED)
<TABLE>
COST CAPITALIZATION
INITIAL COST TO TRUST SUBSEQUENT TO ACQUISITION
-------------------------- -------------------------
BUILDING & CARRYING
ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS COSTS
------------ ------------ ------------ ------------ -----------
<S> <C> <C> <C> <C> <C>
OFFICE BUILDINGS
- ----------------
1ST AVENUE $ - $ 30,000 $ 219,496 $ 552,126 $ -
BUILDING
401 SOUTH - 70,600 334,308 188,767 -
MAIN, MINOT
408 1ST STREET - 10,000 34,836 2,071 -
SE, MINOT
CREEKSIDE OFFICE 876,346 311,310 1,088,149 257,377 -
BLD, BILLINGS
LESTER CHIRO- - 25,000 243,916 1 -
PRACTIC CLINIC
WALTERS 214 S 773 27,055 76,076 8,784 -
MAIN, MINOT
------------ ------------ ------------ ------------ -----------
$ 877,119 $ 473,965 $ 1,996,781 $ 1,009,126 $ -
------------ ------------ ------------ ------------ -----------
COMMERCIAL
- ----------
ARROWHEAD $ - $ 100,359 $ 1,063,925 $ 1,528,268 -
SHOPPING
CENTER
BARNES & 2,135,006 540,000 2,752,012 0 -
NOBLE, FARGO
BARNES & NOBLE 2,312,924 600,000 3,099,101 0 -
OMAHA, NE
CARMIKE 1,989,425 183,515 2,292,653 2,501 67,068
THEATRE
GRAND FORKS
COMPUTER CITY, 1,497,191 225,000 1,888,574 0 -
KENTWOOD MI
EDGEWOOD VISTA, 630,608 25,000 874,821 - -
EAST GRAND FORKS
EDGEWOOD 3,617,668 260,000 1,835,335 4,180,596 -
VISTA, MINOT ND
EDGEWOOD 629,178 108,900 853,528 0 -
VISTA,
MISSOULA MT
HUTCHINSON 2,221,843 244,800 4,029,426 154,800 -
TECH, S FALLS SD
LINDBERG BLDG, 1,195,951 198,000 1,154,404 103,385 -
EDEN PRAIRIE
MINOT PLAZA, - 50,000 452,898 5,898 -
MINOT ND
PET FOOD 770,318 324,148 900,325 27,216 27,245
WAREHOUSE, FARGO
PIONEER SEED 303,622 56,925 548,075 48,876 -
MOORHEAD, MN
RETAIL WAREHOUSE, 3,518,783 765,000 4,874,576 6,909 -
BOISE ID
STONE CONTAINER 3,024,316 440,251 4,409,079 59,999 89,156
FARGO
SUPERPUMPER - 13,125 214,153 201,499 -
CROOKSTON MN
SUPERPUMPER - 25,000 225,564 46,500 -
EMERADO ND
SUPERPUMPER - 80,000 405,007 0 -
GRAND FORKS, ND
SUPERPUMPER, - 59,674 151,500 28,038 -
LANGDON ND
SUPERPUMPER, - 12,000 108,600 - -
SIDNEY MT
WEDGEWOOD, 1,536,479 334,346 3,637,534 - -
SWEETWATER GA
------------ ------------ ------------ ------------ -----------
$ 25,383,312 $ 4,646,043 $ 35,771,090 $ 6,394,485 $ 183,469
------------ ------------ ------------ ------------ -----------
TOTALS $134,012,051 $ 21,558,678 $194,588,014 $ 13,996,870 1,272,760
============ ============ ============ ============ ===========
</TABLE>
<PAGE>
Schedule XI (Continued)
<TABLE>
<CAPTION>
LIFE ON WHICH
BUILDINGS LATEST INCOME
AND ACCUMULATED DATE STATEMENT
LAND IMPROVEMENTS TOTAL DEPRECIATION ACQUIRED IS COMPUTED
------------ ------------ ------------ ------------ -------- -------------
<S> <C> <C> <C> <C> <C> <C>
OFFICE BUILDINGS
- ----------------
1ST AVENUE $ 67,710 $ 733,912 $ 801,622 $ 318,171 1981 33-40 years
BUILDING
401 SOUTH 70,722 522,953 593,675 125,147 1987 24-40 years
MAIN MINOT
408 1ST STREET 10,016 36,892 46,907 22,030 1986 19-40 years
SE MINOT
CREEKSIDE OFFICE 311,310 1,345,526 1,656,836 196,251 1992 40 years
BLD, BILLINGS
LESTER CHIRO- 25,000 243,917 268,917 58,108 1988 40 years
PRACTIC CLINIC
WALTERS 214 SO 27,829 84,086 111,915 76,233 1978 20-40 years
MAIN, MINOT
------------ ------------ ------------ ------------
$ 512,587 $ 2,967,285 $ 3,479,872 $ 795,940
------------ ------------ ------------ ------------
COMMERCIAL
- ----------
ARROWHEAD $ 100,411 $ 2,592,141 $ 2,692,552 $ 2,118,570 1973 15 1/2-40 years
SHOPPING
CENTER
BARNES & 540,000 2,752,012 3,292,012 240,801 1994 40 years
NOBLE, FARGO
BARNES & 600,000 3,099,101 3,699,101 193,694 1995 40 years
NOBLE, OMAHA
NE
CARMIKE 183,516 2,362,221 2,545,737 206,632 1994 40 years
THEATRE GRAND FORKS
COMPUTER CITY, 225,000 1,888,574 2,113,574 70,822 1996 40 years
KENTWOOD MI
EDGWOOD VISTA, 630,608 269,213 899,821 17,305 1997 40 years
EAST GRAND FORKS, MN
EDGWOOD VISTA, 260,000 6,015,931 6,275,931 77,509 1997 40 years
MINOT, ND
EDGEWOOD VISTA 108,900 853,528 962,428 32,007 1997 40 years
MISSOULA MT
HUTCHINSON 244,800 4,184,226 4,429,026 567,618 1993 40 years
TECH, S FALLS SD
LINDBERG BLDG, 198,000 1,257,789 1,455,789 195,003 1992 40 years
EDEN PRAIRIE
MINOT PLAZA, 50,000 458,796 508,796 62,494 1993 40 years
MINOT ND
PET FOOD 324,148 954,786 1,278,934 82,809 1994 40 years
WAREHOUSE
FARGO
PIONEER SEED, 56,925 596,951 653,876 92,183 1992 40 years
MOORHEAD MN
RETAIL WAREHOUSE 765,000 4,881,485 5,646,485 548,445 1994 40 years
BOISE ID
STONE CONTAINER 440,251 4,558,235 4,998,485 282,275 1995 40 years
FARGO
SUPERPUMPER, 13,125 415,652 428,777 79,856 1988 40 years
CROOKSTON MN
SUPERPUMPER, 25,000 272,064 297,064 147,396 1986 19-40 years
EMERADO ND
SUPERPUMPER 80,000 405,007 485,007 75,939 1991 40 years
GRAND FORKS ND
SUPERPUMPER 59,674 179,538 239,212 56,553 1987 31 1/2-40 years
LANGDON ND
SUPERPUMPER, 12,000 108,600 120,600 14,933 1993 40 years
SIDNEY MT
WEDGEWOOD, 334,346 3,637,533 3,971,878 108,571 1996 40 years
SWEETWATER GA
------------ ------------ ------------ ------------
$ 5,251,704 $ 41,743,382 $ 46,995,087 $ 5,270,453
------------ ------------ ------------ ------------
$ 23,306,482 $208,109,840 $231,416,322 $ 21,516,129
============ ============ ============ ============
</TABLE>
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
Schedule XI (Continued)
Reconciliations of total real estate carrying value for the three years
ended April 30, 1998, 1997 and 1996 are as follows:
1998 1997 1996
------------ ------------ -----------
Balance at beginning of year $191,884,509 $131,447,734 $90,892,662
Additions during year
- acquisitions 39,014,223 59,377,674 40,660,975
- improvements 1,788,339 1,463,878 635,791
------------ ------------ -----------
$232,687,071 $192,289,286 $132,189,428
Deductions during year
- cost of real estate sold (1,270,749) (404,777) (741,694)
------------ ------------ ------------
Balance at close of year $231,416,322 $191,884,509 $131,447,734
============ ============ ============
Reconciliations of accumulated depreciation for the three years ended April
30, 1998, 1997 and 1996 are as follows:
1998 1997 1996
------------ ------------ ------------
Balance at beginning of year $ 16,948,156 $ 13,551,571 $ 11,732,655
Additions during year
- provisions for depreciation 4,791,907 3,584,591 2,261,724
Deduction during year
- accumulated depreciation
on real estate sold (223,934) (188,006) (442,808)
------------ ------------ ------------
Balance at close of year $ 21,516,129 $ 16,948,156 $ 13,551,571
============ ============ ============
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
April 30, 1998
Schedule XII
INVESTMENTS IN MORTGAGE LOANS ON REAL ESTATE
<TABLE>
<CAPTION>
Princial Amount
Face Carrying of Loans Subject to
Interest Final Maturity Payment Prior Amounts of Amounts of Delinquent Principal
Rate Date Terms Liens Mortgages Mortgages or Interest
---- ---- ----- ----- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Residential
- -----------
Higley Heights,
Phoenix, AZ 8% 3-31-04 Quarterly - $ 809,786 $ 678,700 $ 678,700
Great Plains
Software, Fargo,
ND 9.50% 1-1-99 Balloon Pmt - 15,000,000 1,701,308 -
Melanie Bentsinger 8% 6-1-25 Monthly - 217,761 210,298 -
Rolland Hausman 9% 2-1-16 Monthly - 315,659 302,147 -
Other-over $100,000 7-9% 5-1-03 to
2-1-16 Monthly - 517,325 425,751 -
-from $20,000-
49,999 8-9% 9-1-98 to
1-1-00 Monthly - 1,610,983 78,474 -
-less than
$20,000 7-9% 2-1-99 to
1-1-02 Monthly - 1,481,559 41,630 -
----------- ---------- ---------
Total $19,953,073 $3,438,308 $ 678,700
=========== =========
Less - Unearned discounts (4,818)
- Deferred gain from property dispositions (2,000)
- Allowance for loan losses (120,314)
----------
$3,311,176
==========
</TABLE>
<PAGE>
Schedule XII (Continued)
1998 1997
----------- -----------
MORTGAGE LOANS RECEIVABLE,
BEGINNING OF YEAR $ 3,108,933 $ 4,932,138
New participations in and advances
on mortgage loans 2,061,179 2,835,212
----------- -----------
$ 5,170,112 $ 7,767,350
Collections (1,727,237) (4,516,202)
Write-off through allowance (4,567) (142,215)
----------- -----------
MORTGAGE LOANS RECEIVABLE,
END OF YEAR $ 3,438,308 $ 3,108,933
=========== ===========
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
Selected Financial Data
<TABLE>
<CAPTION
Year Ended April 30
------------------------------------------------------------------
1998 1997 1996 1995 1994
------------ ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
Consolidated Income Statement Data
Revenue $ 32,407,545 $ 23,833,981 $ 18,659,665 $13,801,123 $11,583,008
Operating income 4,691,198 3,499,443 3,617,807 3,560,318 3,135,426
Gain on repossession/sale
of properties 465,499 398,424 994,163 407,512 64,962
Minority interest of
portion of operating
partnership income (141,788) (18) - - -
Net income 5,014,909 3,897,849 4,611,970 3,967,830 3,200,388
Consolidated Balance Sheet Data
Total real estate
investments $213,211,369 $177,891,168 $122,377,909 $84,005,635 $63,972,042
Total assets 224,718,514 186,993,943 131,355,638 94,616,744 72,391,548
Shareholders' equity 68,152,626 59,997,619 50,711,920 37,835,654 29,997,189
Consolidated Per Share Data
Operating income $ .29 $ .25 $ .30 $ .34 $ .35
Gain on sale of properties .03 .03 .08 .04 .01
Dividends .42 .39 .37 .34 .33
Tax status of dividend
Capital gain 2.9% 21.0% 1.6% 11.0% 7.4%
Ordinary income 97.1% 79.0% 98.4% 89.0% 92.6%
Return of capital 0.0% 0.0% 0.0% 0.0% 0.0%
</TABLE>
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
April 30, 1998, 1997 and 1996
GAIN FROM PROPERTY DISPOSITIONS
<TABLE>
<CAPTION>
Total
Original Unrealized Realized Realized Realized
Property Gain 4/30/98 4/30/98 4/30/97 4/30/96
<S> <C> <C> <C> <C> <C>
- -------- --------- --------- --------- --------- --------
Brooklyn Addition * $ 25,000 $ 2,000 $ 1,000 $ 1,000 $ 1,000
1411 South 20th * 34,696 - - - 1,177
1302 South 19 1/2 * 87,669 - 15,713 6,732 6,215
600 Maple * 60,025 - - - 41,253
406 17th Street-Mandan * 233,522 - - 138,629 5,143
Chateau * 684,914 - - - 422,125
108 4th Avenue SE-Minot 173,244 - - - 173,244
Mobridge, SD 293,035 - - - 293,035
Lantern Court 50,971 - - - 50,971
Scottsbluff Estates 326,138 - 326,138
Superpumper - Bottineau 83,579 - 83,579
Superpumper - New Town 25,417 - 25,417
Other gains 13,652 - 13,652
Hutchinson, MN 252,063 - - 252,063 -
--------- --------- --------- --------
$ 2,000 $ 465,499 $ 398,424 $994,163
========= ========= ========= ========
</TABLE>
* The gain from the sale of these properties is being realized based on
the Installment method. The amount of deferred gain realized was $16,713,
$146,361, and $476,913 for the years ended April 30, 1998, 1997 and
1996, respectively.
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
April 30, 1998
MORTGAGE LOANS PAYABLE
<TABLE>
<CAPTION>
Final Periodic Carrying Delinquent
Interest Maturity Payment Face Amount Amount of Principal or
Rate Date Terms of Mortage Mortgage Interest
-------- ---------- -------- ------------ ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
1112 32nd Ave SW Minot 8.50% 7/20/10 Monthly $ 425,000 $ 376,788 $ 0
177 10th Ave E, 8.50% 11/1/18 Monthly 250,963 226,229 0
Dickinson ND
214 South Main 9.00% 5/1/98 Monthly 45,000 773 0
4301 9th Ave 9.04% 9/1/02 Monthly 364,765 153,085 0
Sunchase I
4313 9th Ave 9.04% 2/1/14 Monthly 370,000 309,936 0
Sunchase II
Barnes & Noble Stores 7.98% 11/1/10 Monthly 4,900,000 4,447,930 0
Candelight Apts 8.50% 12/1/99 Monthly 578,000 498,299 0
Carmike - Grand Forks 7.75% 6/5/14 Monthly 1,750,000 1,989,425 0
Century Apts - 8.00625% 3/1/06 Monthly 1,595,000 1,522,794 0
Dickinson
Century Apts - 8.00625% 3/1/06 Monthly 2,700,000 2,577,896 0
Williston
Chateau - Minot 8.00625% 3/1/06 Monthly 1,674,350 1,670,895 0
Country Meadows - 7.51000% 1/1/08 Monthly 2,660,000 2,647,777 0
Billings
Creekside - Billings 8.35% 5/1/13 Monthly 1,023,750 876,346 0
Crestview Apts. - 8.69% 1/1/04 Monthly 3,150,000 2,609,063 0
Bismarck
Computer City 7.75% 2/1/01 Monthly 1,565,361 1,497,191 0
Edgewood Vista - East 8.35% 7/5/12 Monthly 650,000 630,608 0
Grand Forks
Edgewood Vista - Minot 8.27% 9/20/12 Monthly 3,710,000 3,617,668 0
Edgewood Vista - 9.75% 4/15/12 Monthly 647,500 629,178 0
Missoula
Fairfield - Marshall 9.00% 1/1/98 Monthly 275,000 96,292 0
Forest Park Estates 7.625% 5/1/03 Monthly 4,500,000 3,990,430 0
IDS
Hutchinson Technology 8.75% 8/1/08 Monthly 2,800,000 2,221,843 0
Jenner Properties, ND 9.50% 11/1/99 Monthly 1,391,585 1,357,209 0
Kirkwood Manor - 7.07% 10/01/1998 Bond - 2,330,000 2,270,000 0
Bismarck semiannual
Legacy Apts - Grand 7.070% 1/1/04 Monthly 4,000,000 3,927,506 0
Forks
Lindberg Bldg, Eden 7.63% 12/1/08 Monthly 950,000 1,195,951 0
Prairie
</TABLE>
<PAGE>
<TABLE>
MORTGAGE LOANS PAYABLE (continued)
<S> <C> <C> <C> <C> <C> <C>
Magic City Apts, Minot 8.50% 10/10/10 Monthly 2,794,192 2,728,417 0
Mandan Apts - 312 12th 8.75% 8/1/99 Monthly 134,767 16,566 0
Miramont Apts 8.25% 8/1/36 Monthly 11,582,472 11,525,814 0
Neighborhood Apts - 7.98% 12/20/06 Monthly 7,525,000 7,400,220 0
Roch
North Pointe - Bismarck 7.12% 8/1/15 Monthly 1,400,000 1,695,893 0
Oak Manor Apts 27 Plex- 8.75% 2/1/99 Monthly 250,000 232,111 0
Dickinson
Oakwood Estates 8.00625% 3/1/06 Monthly 2,250,000 2,148,247 0
Sioux Falls
Oxbow, Sioux Falls 8.00625% 3/1/06 Monthly 3,565,000 3,403,778 0
Park East, Fargo 6.82000% 4/6/08 Monthly 3,500,000 3,500,000 0
Park Meadows Phase I 8.50% 01/10/07 Monthly 2,600,000 2,529,016 0
Park Meadows Phase II 7.8990% 01/10/07 Monthly 2,214,851 2,170,795 0
Park Meadows Phase III 3.84% 30 yr Monthly 3,235,000 3,195,000 0
bond
Pet Food Warehouse 8.50% 12/1/10 Monthly 840,000 770,318 0
Pinecone, Ft Collins 7.125% 12/1/34 Monthly 10,685,215 10,534,209 0
Pioneer Building - 8.375% 12/1/06 Monthly 425,000 303,622 0
Fargo
Pointe West Apts 8.97% 1/1/04 Monthly 2,625,000 2,170,254 0
Prairie Winds Apts - 7.67% 5/1/18 Monthly 1,470,000 1,336,552 0
Sioux Falls
Retail Warehouse, Boise 9.75% 3/29/03 Monthly 3,750,000 3,518,783 0
ID
Rocky Meadows- Billings 7.75% 8/1/16 Monthly 3,000,000 2,876,562 0
RoseWood Ct - Sioux 7.975% 9/1/96 Monthly 1,323,000 1,276,702 0
Falls
South Pointe, Minot ND 7.12% 6/5/16 Monthly 6,500,000 6,484,298 0
Southwind Apts 7.12% 4/28/10 Monthly 3,780,000 4,090,096 0
Stone Container 8.25% 12/1/10 Monthly 3,300,000 3,024,316 0
Wedgewood Retirement 7.975% 4/23/17 Monthly 1,566,720 1,536,479 0
West Stonehill 7.93% 2/1/98 Monthly 8,232,569 7,912,344 0
Woodridge- Rochester 7.85% 12/1/16 Monthly 4,410,000 4,282,154 0
Colton Heights 8.75% 6/1/07 Monthly 730,000 338,464 0
Grafton 24 Plex 9.75% 3/20/03 Monthly 270,000 82,412 0
Grafton 18 Plex 9.75% 3/20/03 Monthly 198,000 112,399 0
Hill Park Properties 8.00625% 3/1/06 Monthly 1,470,000 1,403,790 0
Jamestown 610 10.00% 6/1/99 Monthly 250,000 30,856 0
Jamestown 611 10.00% 1/1/00 Monthly 230,000 40,471 0
Melton/Olson/Thompson 8.50% 12/1/98 Monthly 400,000 22,196 0
1516 N Bismarck 8.00% 8/1/99 Monthly 246,000 25,728 $ 0
------------ ------------ ----------
TOTALS $141,059,060 $134,059,974 0
============ ============ ==========
</TABLE>
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
April 30, 1998
SIGNIFICANT PROPERTY ACQUISITIONS
Acquisition for cash and assumptions of mortgages
Commercial:
Edgewood Vista, East Grand Forks, MN $ 892,500
Edgewood Vista, Minot, ND 4,900,000
Edgewood Vista Alzheimers, Minot, ND 491,410
Edgewood Vista Phase II, Minot, ND 800,000
-----------
$ 7,083,910
-----------
Apartments:
Jenner Properties, ND $ 2,350,000
Kirkwood Manor, Bismarck, ND 3,175,000
Magic City Apartments, Minot, ND 5,270,000
Country Meadows, Billings, MT*** 4,496,134
Park East Apartments, Fargo, ND 4,900,000
Legacy Phase II, Grand Forks, ND* 3,489,937
Cottonwood Phase I, Bismarck, ND*** 4,522,347
Chateau Apartments, Minot, ND 2,364,090
Cottonwood Phase II, Bismarck, ND** 1,362,805
-----------
$31,930,313
-----------
TOTAL $39,014,223
===========
* Property is placed in service at April 30, 1998. Additional costs
are still to be incurred.
** Property not placed in service at April 30, 1998. Additional costs
are still to be incurred.
*** Represents costs to complete a project started in year ending April
30, 1997.
<PAGE>
INVESTORS REAL ESTATE TRUST
AND SUBSIDIARIES
Quarterly Results of Consolidated Operations (Unaudited)
Quarter Ended
--------------------------------------------------
7-31-97 10-31-97 1-31-98 4-30-98
----------- ----------- ----------- -----------
Revenues $ 7,183,761 $ 7,996,262 $ 8,440,393 $ 8,787,129
Income before gains on
sale of properties 894,045 1,233,451 1,358,752 1,204,950
Net gain on sale of
properties 39,069 3,579 326,138 16,713
Minority interest of unit
holders in operating
partnership (9) (9,423) (64,006) (68,350)
Net income 933,105 1,307,607 1,620,884 1,153,313
Per share
Income before gains on
sale of properties .06 .08 .08 .07
Net gain on sale of
properties - .01 .02 -
Quarter Ended
--------------------------------------------------
7-31-96 10-31-96 1-31-97 4-30-97
----------- ----------- ----------- -----------
Revenues $ 4,966,475 $ 5,474,027 $ 6,383,030 $ 7,010,450
Income before gains on
sale of properties 978,107 1,048,154 1,027,117 446,065
Net gain on sale of
properties 252,062 - 138,629 7,733
Minority interest of unit
holders in operating
partnership - - - (18)
Net income 1,230,169 1,048,154 1,165,746 453,780
Per share
Income before gains on
sale of properties .07 .08 .07 .03
Net gain on sale of
properties .02 - .01 -
Quarter Ended
--------------------------------------------------
7-31-95 10-31-95 1-31-96 4-30-96
----------- ----------- ----------- -----------
Revenues $ 3,782,061 $ 4,715,186 $ 5,104,409 $ 5,058,009
Income before gains on
sale of properties 1,009,468 1,058,136 1,082,506 467,697
Net gain on sale of
properties - - 522,001 472,162
Net income 1,009,468 1,058,136 1,604,507 939,859
Per share
Income before gains on
sale of properties .09 .09 .09 .04
Net gain on sale of
properties - - .04 .04
The above financial information is unaudited. In the opinion of management,
all adjustments (which are of a normal recurring nature) have been included
for a fair presentation.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> APR-30-1998
<PERIOD-END> APR-30-1998
<CASH> 2,132,220
<SECURITIES> 4,257,226
<RECEIVABLES> 8,556,007
<ALLOWANCES> (127,132)
<INVENTORY> 0
<CURRENT-ASSETS> 14,818,321
<PP&E> 231,416,322
<DEPRECIATION> (21,516,129)
<TOTAL-ASSETS> 224,718,514
<CURRENT-LIABILITIES> 12,136,353
<BONDS> 144,429,535
0
0
<COMMON> 74,708,559
<OTHER-SE> (6,555,933)
<TOTAL-LIABILITY-AND-EQUITY> 224,718,514
<SALES> 0
<TOTAL-REVENUES> 32,407,545
<CGS> 0
<TOTAL-COSTS> 17,237,243
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,479,104
<INCOME-PRETAX> 4,691,198
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,691,198
<DISCONTINUED> 0
<EXTRAORDINARY> 323,711
<CHANGES> 0
<NET-INCOME> 5,014,909
<EPS-PRIMARY> .32
<EPS-DILUTED> 0
</TABLE>
