Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended January 31, 1999
Commission file number 0-14851
INVESTORS REAL ESTATE TRUST
(Exact name of registrant as specified in its charter)
North Dakota 45-0311232
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
12 South Main, Minot, ND 58701
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (701) 852-1756
(Former name, former address and former fiscal year, if
changed since last report.) No change
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes ( X ) No ( )
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date. Applicant is a
North Dakota Real Estate Investment Trust. As of January 31, 1999, it
had 18,134,700 Shares of Beneficial Interest outstanding.
<PAGE>
PART I
Item 1. Financial Statements - Basis of Presentation.
The accompanying condensed consolidated financial statements of
Investors Real Estate Trust, and its subsidiaries and consolidated
partnerships (collectively, the "Company"), included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. In the opinion
of management, all adjustments necessary (of a normal recurring nature
only) to present fairly the financial position of the Company as of
January 31, 1999 and results of operations and cash flows for the
stated periods have been included. The Condensed Consolidated Balance
Sheet at April 30, 1998, contained herein, was derived from audited
financial statements, but does not include all disclosures included
in the 1998 Annual Report and applicable under generally accepted
accounting principles. Certain information and footnote
disclosures normally included in interim financial statements prepared
in accordance with generally accepted accounting principles have been
omitted. The results of operations for the three and nine months ended
January 31, 1999, are not necessarily indicative of operating results
for the entire year.
BALANCE SHEETS
(unaudited)
ASSETS: 01-31-99 04-30-98
-------- --------
Cash $ 6,585,779 $ 2,132,220
Marketable Securities
- GNMA's 3,169,508 3,536,538
- Other REIT's 722,461 720,688
Accounts Receivable 30,452 55,326
Tax & Insurance Escrow 2,573,915 1,254,068
Deferred Charges 1,315,927 1,088,016
Prepaid Insurance 348,819 219,871
Real Estate Deposits 694,963 2,493,713
General Partnerships 0 6,705
------------ ------------
$ 15,441,824 $ 11,507,145
Real Estate Investments
Real Estate Owned $272,827,784 $231,416,322
Less Accumulated Depreciation (24,639,537) (21,516,129)
Net Real Estate Owned 248,188,248 209,900,193
Real Estate Mortgages 1,474,587 3,438,308
Less Unearned Discounts &
Allowances (124,879) (127,132)
Net Mortgages & Contracts 1,349,708 3,311,176
Total Real Estate
Investments $249,537,955 $213,211,369
------------ ------------
TOTAL ASSETS $264,979,779 $224,718,514
============ ============
<PAGE>
LIABILITIES: 01-31-99 04-30-98
-------- --------
Accounts Payable & Other
Liabilities $ 4,254,406 $ 2,847,080
Mortgages Payable 155,942,643 134,059,974
Investment Certificates Payable 12,358,251 10,369,561
Due on Credit Line 0 1,000,000
------------ ------------
TOTAL LIABILITIES $172,555,300 $148,276,615
MINORITY INTERESTS IN OPERATING
PARTNERSHIP: $ 12,619,372 $ 8,289,273
------------ ------------
SHAREHOLDERS' EQUITY
Shares of Beneficial Interest
Outstanding Shares of: 01-31-99 04-30-98
-------- --------
18,134,700 on 01/31/99
16,391,412 on 04/30/98 $ 86,426,032 $ 74,708,559
Accumulated Distributions in
Excess of Net Income (6,552,068) (6,666,555)
Unrealized Gain(Loss) on
Securities Held for Sale (68,857) $ 110,622
------------ ------------
Total Shareholders' Equity $ 79,805,107 $ 68,152,626
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $264,979,779 $224,718,514
============ ============
<PAGE>
STATEMENT OF OPERATIONS
For the Three- and Nine-Month Periods Ended January 31, 1999 & 1998
(unaudited)
<TABLE>
<CAPTION>
3 Months Ended 9 Months Ended
January 31,1999 January 31,1999
OPERATING INCOME: 1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Real Estate Rentals $ 9,930,345 $ 8,286,064 $ 28,359,059 $ 23,121,047
Interest Income 305,785 136,893 754,133 447,214
Mortgage Discount & Fees 667 17,435 62,253 52,156
------------ ------------ ------------ ------------
$ 10,236,797 $ 8,440,634 $ 29,175,445 $ 23,620,417
------------ ------------ ------------ ------------
OPERATING EXPENSE:
Interest $ 3,095,853 $ 2,681,092 $ 8,847,570 $ 7,653,429
Utilities & Maintenance 1,528,599 1,307,348 4,494,113 3,668,313
Property Management 828,598 667,387 2,382,422 1,962,352
Taxes & Insurance 1,154,956 917,211 3,271,700 2,586,960
Advisory & Trustees Fees 170,980 172,552 613,245 485,929
Operating Expenses 166,722 52,755 296,492 167,925
------------ ------------ ------------ ------------
$ 6,945,708 $ 5,798,345 $ 19,905,542 $ 16,524,908
------------ ------------ ------------ ------------
OPERATING INCOME:
(before reserves) $ 3,291,089 $ 2,642,289 $ 9,269,903 $ 7,095,509
------------ ------------ ------------ ------------
DEPRECIATION/AMORTIZATION (1,558,161) (1,283,345) (4,449,057) (3,609,434)
------------ ------------ ------------ ------------
OPERATING INCOME (after
reserves) $ 1,732,928 $ 1,358,944 $ 4,820,846 $ 3,486,075
GAIN ON SALE OF
INVESTMENTS 80,121 326,138 1,788,038 448,786
MINORITY INTEREST PORTION
OF OPERATING PARTNERSHIP
NET INCOME (158,821) (48,438) (580,263) (61,585)
------------ ------------ ------------ ------------
NET INCOME $ 1,654,228 $ 1,636,644 $ 6,028,621 $ 3,873,276
============ ============ ============ ============
NET INCOME PER SHARE:
Operating Income
(after depreciation) .09 .08 .25 .22
Gain on Sale of Investments .00 .02 .10 .03
------------ ----------- ----------- -----------
Total Net Income/Share .09 .10 .35 .25
------------ ----------- ----------- -----------
DIVIDENDS PAID PER SHARE .12 .105 .345 .30925
============ =========== =========== ===========
Average Number of Shares
Outstanding 17,772,327 15,878,436 17,263,056 15,552,844
FUNDS FROM OPERATIONS: *
Operating Income $ 1,732,928 $ 1,358,944 $ 4,820,846 $ 3,486,075
Plus Depreciation and
Amortization 1,558,161 1,283,345 4,449,057 3,609,434
Minus Minority Interest
- Operating Partnership (158,821) (48,438) (580,263) (61,585)
FUNDS FROM OPERATIONS * $ 3,132,268 $ 2,593,851 $ 8,689,640 $ 7,033,924
per share .18 .16 .50 .45
- ----------------------------------------------------------------------------
</TABLE>
* Funds from Operations is defined as income before gains (losses) on sales
of investments, minority interests of unitholders in operating
partnership and extraordinary items, plus depreciation and amortization.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINE-MONTH PERIODS ENDED JANUARY 31, 1999 AND 1998
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES 1999 1998
---- ----
Net Income $ 6,028,621 $ 3,873,276
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 4,336,034 3,364,663
Minority interest portion of operating
partnership income 580,263 61,585
Accretion of discount on contracts (2,253) (4,280)
Gain on Sale of Properties (1,788,038) (448,786)
Interest reinvested in investment
certificates 291,804 244,124
Changes in other assets and liabilities:
(Increase) decrease in real estate deposits 1,494,087 (73,000)
(Increase) decrease in other assets (104,074) (178,038)
(Increase) decrease in tax and insurance
escrow (1,319,847) (342,948)
(Increase) decrease in deferred charges (227,911) (109,348)
Increase (decrease) in accounts payable and
accrued expenses 1,686,559 689,215
------------ ------------
NET CASH PROVIDED FROM OPERATING
ACTIVITIES $ 10,975,245 $ 7,076,463
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of marketable
securities held to maturity $ 367,030 $ 360,758
Principle payments on mortgage loans
receivable 321,484 1,696,188
Proceeds from sale of property 3,045,454 1,345,058
Payments for acquisition and improvements
of properties (36,099,964) (34,552,590)
Purchase of marketable securities available
for sale (181,250) 0
Investment in mortgage loans receivable (46,500) (294,669)
------------ ------------
NET CASH USED FOR INVESTING ACTIVITIES $(32,593,746) $(31,445,255)
------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of shares $ 10,866,530 $ 9,236,005
Proceeds from investment certificates issued 3,064,421 2,430,709
Proceeds from mortgages payable 18,670,909 18,444,138
Proceeds from short-term lines of credit 8,250,000 8,650,000
Proceeds from sale of minority interest 4,245,197 585,334
Repurchase of shares (3,053,729) (1,971,506)
Dividends Paid (2,730,164) (1,738,751)
Redemption of investment certificates (1,403,881) (940,883)
Principal payments on mortgage loans (2,587,223) (2,032,557)
Payments on short-term lines of credit (9,250,000) (8,150,000)
------------ ------------
NET CASH PROVIDED FROM FINANCING
ACTIVITIES $ 26,072,060 $ 24,512,489
------------ ------------
NET INCREASE (DECREASE) IN CASH $ 4,453,559 $ 143,697
CASH AT APRIL 30 $ 2,132,220 $ 1,718,257
------------ ------------
CASH AT JANUARY 31 $ 6,585,779 $ 1,861,954
------------ ------------
<PAGE>
SUPPLEMENTARY SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
1999 1998
---- ----
Dividends reinvested $ 3,925,118 $ 3,149,841
Real estate investment and mortgage loans
receivable acquired through assumption
of mortgage loans payable and accrual
of costs 5,366,292 10,609,107
Mortgage loan receivable transferred to
property owned 1,701,308 1,161,878
Proceeds from sale of properties deposited
directly with escrow agent 2,569,292 0
Properties acquired through the issuance of
minority interest units in the operating
partnership 1,055,525 5,455,265
Mortgages paid directly by owner of contract 0 0
Interest reinvested directly in investment
certificates 291,804 244,124
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the year for:
Interest paid on mortgages $ 7,952,416 $ 6,739,919
Interest paid on margin account and other 41,452 39,045
Interest paid on investment certificates 285,562 224,529
------------ ------------
$ 8,279,430 $ 7,003,493
------------ ------------
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
We are pleased to report excellent operating results for IRET'S Fiscal 1999
Third Quarter which ended January 31, 1999. Revenues, Net Income, Funds
from Operations and Real Estate Owned all reached new highs and we were
successful in finding attractive properties to add to our rapidly expanding
investment portfolio.
FUNDS FROM OPERATIONS. Funds from Operations for the Third Quarter of Fiscal
1999 increased to $3,132,268 from the $2,593,851 reported for the prior year,
an increase of $538,417 or 21%. On a per share basis, Funds from Operations
for the Third Quarter were $.18, compared to $.16 per share earned in the
same period of Fiscal 1998, an increase of 13%. For the first nine months of
Fiscal 1999, Funds from Operations increased to $8,689,640 from the year
earlier figure of $7,033,924, an increase of $1,655,716 or 24%. On a per
share basis, Funds from Operations for the nine month period were $.50 per
share compared to the year earlier figure of $.45 per share, an increase
of 11%.
Occupancy rates continue at a good level and we continue to experience good
results from the new properties we are adding to our portfolio.
NET INCOME. Net Income for the Third Quarter rose slightly from the year
earlier figure to $1,654,228 from $1,636,644. For the nine month period, Net
Income was $6,028,620 compared to $3,873,276. As noted in our prior
quarterly report, the change in Net Income is attributable to the increase in
the Gain on Sale of Investments. In the Third Quarter, the gain was $80,121
compared to the year earlier figure of $326,138. However, for the full nine
month period, capital gain income was $1,788,038 compared to $448,786,
reflecting the large gain from the sale of the 90 Unit Bison Apartment
Complex in Jamestown, ND, in the Second Quarter.
OPERATIONS. The Third Quarter saw a slight increase in vacancies in certain
of our apartment communities. Overall, the occupancy rates for our
apartments are still at or above normal levels and we continue to implement
periodic rental increases as conditions allow. The new properties that we
have been adding to our portfolio are perfoming very well. We continue our
apartment building program in Billings, MT, Bismarck, Jamestown and
Grand Forks, ND. We are also in the process of acquiring land in Rochester,
MN to begin construction of apartments this summer.
SALE OF PROPERTIES. During the Third Quarter, we completed the sale of the
Fairfield Apartment Community in Marshall, MN for $466,000 resulting in a
gain of $80,122. We've also entered into sales agreements for our
Superpumper Convenience Stores and expect to report gains from the sale of
these properties in the Fourth Quarter.
PORTFOLIO ACQUISITIONS. We were successful in acquiring additional investment
properties in the Third Quarter. The following properties were purchased or
completed and added to our portfolio during the Third Quarter and are
producing income:
<PAGE>
Cost
----
- 165 Unit Castle Rock Apartment Complex,
Billings, MT $ 5,600,000
- 67 Unit Cottonwood Apartment II,
Bismarck, ND $ 4,000,000
The following properties are under construction:
- 67 Unit Legacy Apartment Complex with
underground parking, Grand Forks, ND $ 4,750,000
- Great Plains Software Home Office Complex,
Fargo, ND $15,000,000
- 27 Unit The Meadows Apartments,
Jamestown, ND $ 2,000,000
IRET has entered into purchase agreements for the following properties:
- 48,700 sq. ft. Viromed Office Building,
Eden Prairie, MN $ 4,800,000
- 204 Unit Ivy Club Apartment Community,
Vancouver, WA $11,542,000
- 76,000 sq. ft. Home Office Building of
Ameritrade Holding Corporation, Omaha, NE $ 8,200,000
FINANCIAL CONDITION. On January 31, 1998 cash and marketable securities were
$10,477,747, compared to the $6,389,446 on hand at the beginning of the current
fiscal year. Total assets increased to $264,979,779 from $224,718,514 at the
beginning of the current fiscal year. During that same period, liabilities
increased to $172,555,299 compared to $148,276,615. IRET continues to enjoy
a strong inflow of investment funds and is well positioned to continue the
expansion of its investment portfolio.
DIVIDENDS. IRET paid a regular dividend of 12 cents per share on January 15,
1999, to shareholders of record at the close of business on January 4, 1998.
This was an increase from the 11.5 cents per share dividend paid on October
1, 1998, and was the 111th consecutive quarterly dividend paid by IRET.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
None
Item 3. Defaults Upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
None
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
Form 8-K filed 12/09/98 to report sales of Shares of Beneficial Interest
under current registration.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INVESTORS REAL ESTATE TRUST
(Registrant)
/s/ Thomas A. Wentz, Sr.
Date: March 10, 1999 By________________________________
Thomas A. Wentz, Sr.,Vice-President
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-END> JAN-31-1999
<CASH> 6,585,779
<SECURITIES> 3,891,968
<RECEIVABLES> 6,438,664
<ALLOWANCES> (124,879)
<INVENTORY> 0
<CURRENT-ASSETS> 16,791,532
<PP&E> 272,827,784
<DEPRECIATION> (24,639,537)
<TOTAL-ASSETS> 264,979,779
<CURRENT-LIABILITIES> 16,873,778
<BONDS> 168,300,894
0
0
<COMMON> 86,426,032
<OTHER-SE> (6,620,925)
<TOTAL-LIABILITY-AND-EQUITY> 264,979,779
<SALES> 0
<TOTAL-REVENUES> 29,175,445
<CGS> 0
<TOTAL-COSTS> 16,096,062
<OTHER-EXPENSES> 580,263
<LOSS-PROVISION> ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ 8,258,538
<INCOME-PRETAX> 4,240,582
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,240,582
<DISCONTINUED> 1,788,039
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,028,621
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
