Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
(Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended July 31, 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. Registrant is a
North Dakota Real Estate Investment Trust. As of July 31, 1999, it had
19,923,692 Shares of Beneficial Interest outstanding.
<PAGE>
PART I
Item 1. Financial Statements.
The accompanying condensed consolidated financial statements have been
prepared from the records of Investors Real Estate Trust and its
subsidiaries (collectively, 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 July 31, 1999, and results of operations and cash flows for
the stated periods have been included. The Condensed Consolidated Balance
Sheet at April 30, 1999, contained herein, was derived from audited
financial statements, but does not include all disclosures included in
the 1999 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 months ended July 31, 1999, are not
necessarily indicative of operating results for the entire year.
BALANCE SHEETS
(unaudited)
ASSETS: 07-31-99 04-30-99
-------- --------
Cash $ 5,071,067 $ 3,713,053
Marketable Securities
- GNMA's - held to maturity 2,908,156 2,964,434
- Other REIT's - available for sale 689,111 734,749
Accounts Receivable 248,443 77,438
Tax & Insurance Escrow 2,167,530 1,761,195
Deferred Charges 1,844,868 1,413,752
Prepaid Insurance 107,429 216,348
Real Estate Deposits 836,300 300,900
---------- ----------
$ 13,872,902 $ 11,181,869
========== ==========
Real Estate Investments
Real Estate Owned $332,384,703 $295,825,839
Less Accumulated Depreciation (27,593,926) (26,112,399)
----------- -----------
Net Real Estate Owned 304,790,777 269,713,440
----------- -----------
Real Estate Mortgages 1,535,783 10,721,214
Less Unearned Discounts & Allowances (122,836) (123,212)
----------- -----------
Net Mortgages & Contracts 1,412,947 10,598,002
----------- -----------
Total Real Estate Investments $306,203,725 $280,311,442
----------- -----------
TOTAL ASSETS $320,076,627 $291,493,311
=========== ===========
LIABILITIES:
Accounts Payable & Accrued Expenses $ 3,581,428 $ 4,388,270
Due on Credit Line 0 0
Mortgages Payable 191,282,163 175,071,069
Investment Certificates Payable 12,530,595 11,770,136
----------- -----------
TOTAL LIABILITIES $207,394,186 $191,229,475
----------- -----------
Minority Interest in Operating Ptnrshp $ 21,231,911 $ 14,480,542
----------- -----------
<PAGE>
SHAREHOLDERS' EQUITY
Shares of Beneficial Interest
Outstanding Shares of 07-31-99 04-30-99
-------- --------
19,923,692 on 07/31/99
19,066,954 on 04/30/99 $ 99,396,963 $ 93,095,819
Accumulated Distributions
in Excess of Net Income (7,844,229) (7,255,958)
Unrealized Gain REIT Stock (102,205) (56,567)
----------- ----------
Total Shareholders' Equity $ 91,450,530 $ 85,783,294
----------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $320,076,627 $291,493,311
=========== ===========
(The balance of this page was left blank intentionally.)
<PAGE>
STATEMENT OF OPERATIONS
(unaudited)
3 Months Ended July 31
OPERATING INCOME: 1999 1998
---- ----
Real Estate Rentals $10,808,522 $8,866,408
Interest Income 377,136 212,150
Mortgage Discount & Fees 16,255 23,720
---------- ---------
$11,201,913 $ 9,102,278
========== =========
OPERATING EXPENSE:
Interest $ 3,441,156 $ 2,816,108
Utilities & Maintenance 1,736,997 1,505,146
Property Management 897,038 779,825
Taxes & Insurance 1,109,133 1,005,570
Advisory & Trustees Fees 254,442 195,178
Operating Expenses 177,141 63,358
---------- ----------
$ 7,615,907 $ 6,365,186
========== ==========
OPERATING INCOME:
(before reserves) $ 3,586,006 $ 2,737,092
---------- ----------
DEPRECIATION/AMORTIZATION (1,784,684) (1,409,241)
---------- ----------
OPERATING INCOME (after reserves) 1,801,322 $ 1,327,851
GAIN ON SALE OF INVESTMENTS 257,895 366,017
MINORITY INTEREST PORTION OF
OPERATING PARTNERSHIP NET INCOME (235,935) (133,863)
---------- ----------
NET TAXABLE INCOME $ 1,823,282 $ 1,560,005
---------- ----------
FUNDS FROM OPERATIONS: *
Operating Income $ 1,801,322 $ 1,327,851
Plus Depreciation and Amortization 1,784,684 1,409,241
Minus Minority Interest Portion
of Operating Partnership Net Income (235,935) (133,863)
---------- ----------
FUNDS FROM OPERATIONS $ 3,350,071 $ 2,603,229
---------- ----------
PER SHARE:
Operating Income
(after reserves) .09 .08
Gain on Sale of Investments .01 .02
--------- ---------
Total Taxable Income/Share .10 .10
--------- ---------
FUNDS FROM OPERATIONS * .17 .16
--------- ---------
DIVIDENDS PAID PER SHARE .12 .11
--------- ---------
Average Number of Shares
Outstanding 19,495,323 16,579,390
---------- ----------
* Funds from Operations is defined as income before gains (losses) on sales
of investments, less minority interest of unitholders in operating
partnership and extraordinary items, plus depreciation and amortization.
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE-MONTH PERIODS ENDED JULY 31, 1999 AND 1998
(unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES 1999 1998
---- ----
Net Income $1,823,282 $1,560,006
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 1,741,018 1,409,241
Minority interest portion of
operating partnership income 235,935 133,863
Accretion of discount on contracts (376) (667)
Gain on Sale of Properties (257,895) (366,017)
Interest reinvested in investment
certificates 114,313 97,029
Changes in other assets and liabilities:
(Increase) decrease in real estate
deposits (535,400) (71,250)
(Increase) decrease in other assets (62,086) 122,428
(Increase) decrease in tax and
insurance escrow (406,335) (443,690)
(Increase) decrease in deferred
charges (431,115) (122,535)
Increase (decrease) in accounts
payable and accrued expense 358,537 264,943
--------- ----------
NET CASH PROVIDED FROM OPERATING
ACTIVITIES $2,579,879 $2,583,351
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from maturity of marketable
securities held to maturity $ 56,278 $ 82,656
Principle payments on mortgage loans
receivable 11,836 64,672
Proceeds from sale of property 0 892,349
Payments for acquisition and
improvements of properties (11,465,189) (7,422,457)
Purchase of marketable securities
available for sale 0 0
Investment in mortgage loans
receivable 0 0
---------- ---------
NET CASH USED FOR INVESTING ACTIVITIES $(11,397,075) $(6,382,780)
---------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from sale of shares $6,070,134 $2,721,085
Proceeds from investment certificates
issued 874,236 979,085
Proceeds from mortgages payable 6,995,548 3,769,936
Proceeds from short-term lines of
credit 5,800,000 3,000,000
Proceeds from sale of minority
interest 1,000 1,848,249
Repurchase of shares/minority
interest (1,348,242) (1,389,936)
Dividends/Distributions Paid (1,177,749) (761,784)
Redemption of investment certificates (228,097) (644,627)
Principal payments on mortgage loans (1,011,620) (767,828)
Payments on short-term lines of credit (5,800,000) (4,000,000)
--------- ---------
NET CASH PROVIDED FROM FINANCING
ACTIVITIES $10,175,210 $4,754,181
---------- ---------
NET INCREASE (DECREASE) IN CASH $ 1,358,013 $ 954,752
<PAGE>
CASH AT APRIL 30 $ 3,713,053 $2,132,220
---------- ---------
CASH AT JULY 31 $ 5,071,067 $3,086,972
---------- ---------
SUPPLEMENTARY SCHEDULE OF NON-CASH
INVESTING AND FINANCING ACTIVITIES
1999 1998
---- ----
Dividends reinvested $1,535,640 $1,205,517
Real estate investment and
mortgage loans receivable acquired
through assumption of mortgage
loans payable and accrual of costs 2,122,200 0
Mortgage loan receivable transferred
to property owned 0 1,701,308
Proceeds from sale of properties
deposited directly with escrow agent 1,271,805 0
Properties acquired through the
issuance of minority interest units
in the operating partnership 4,400,000 480,525
Interest reinvested directly in
investment certificates 114,313 97,029
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the year for:
Interest paid on mortgages $3,196,773 $2,511,296
Interest paid on margin account
and other 45,097 15,486
Interest paid on investment
certificates 77,863 86,742
--------- ---------
$3,319,733 $2,613,524
--------- ---------
(The balance of this page was left blank intentionally.)
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Results of Operation. IRET's First Quarter which ended on July 31, 1999,
produced continued good results. Stable occupancy, rent increases, lower
interest rates, and good performances by newly acquired properties contributed
to satisfactory gains in revenues, operating income, and Funds from Operations.
-Funds From Operations. Funds from Operations for the first three months of
Fiscal 2000 increased to $3,350,071, from $2,603,229 for the same period of
the prior fiscal year, an increase of 29%. On a per share basis, Funds from
Operations increased to 17.2 cents from 15.7 cents in the prior year,
an increase of nearly 10%. Funds from Operations is the generally accepted
measure of performance for Real Estate Investment Trusts.
-Operating Income. Operating income increased to $1,801,322 for the First
Quarter of Fiscal 2000, compared to $1,327,851 earned in the same period of
the prior fiscal year, an increase of 36%.
-Capital Gains. Income from the sale of investments declined to $257,895
from the $366,017 gain in the prior fiscal year. This year's gain
resulted from the sale of four Superpumper convenience stores. We have
entered into sales contracts on smaller apartment properties in Devils Lake
and Mandan, ND, and a large commercial property in Sioux Falls, SD, which
should close in the second quarter.
We are optimistic that the remainder of the current fiscal year will see a
continuation of satisfactory operating results. Occupancy rates in our
apartment communities continue to be stable. We anticipate good results from
the new properties that we are adding to our portfolio.
Property Acquisitions. The following properties were acquired by IRET during
the First Quarter and are producing income:
-78-unit Rimrock West Apartment complex
Billings, MT $ 3,750,000
-3 12-unit Alzheimer Care facilities located in
Belgrade, MT, Columbus Island, NE, and
Grand Island, NE 1,400,000
-168-unit Valley Manor Apartment complex,
Grand Forks, ND 4,430,767
-118,397 sq. ft. Maplewood Square retail center
(Best Buy & Rainbow Foods as anchor tenants),
Rochester, MN 11,800,000
----------
$21,380,767
==========
Pending Acquisitions. The following are under construction or under
purchase contract:
-Great Plains Software office building, Fargo, ND $15,000,000
-67-unit apartment building - Cottonwood Lake III,
Bismarck, ND 4,200,000
-67-unit apartment building w/underground parking
(Legacy by IRET), Grand Forks, ND 4,600,000
<PAGE>
-27-unit apartment building (The Meadows by IRET),
Jamestown, ND 1,700,000
-67-unit apartment building (Country Meadows II),
Billings, MT 4,200,000
-73-unit apartment building & community center
(Trail Ridge on 41st by IRET), Rochester, MN 4,750,000
-Edgewood Vista Assisted Living Center, Duluth, MN 4,800,000
-East Grand Forks Convenience Store/Retail Rental
East Grand Forks, MN 1,200,000
-520-unit Amli apartment portfolio in Topeka, KS 26,250,000
-270-unit apartment complex (Thomasbrook
Apartments), Lincoln, NE 9,500,000
-74,500 sq. ft. office building, Eden Prairie, MN 4,900,000
-1/2 interest in Med Park Strip Center,
Grand Forks, ND 2,650,000
----------
$83,750,000
==========
Financial Condition. IRET's financial condition continues to be very strong.
The July 31, 1999, balance sheet shows cash and marketable securities of
$8,668,334, compared to the $7,412,236 on hand three months earlier. Total
assets increased to $320,076,627 from the April 30, 1999, total of
$291,493,311. Liabilities increased to $207,394,186 versus the
April 30, 1999, figure of $191,229,475. Shareholder equity increased to
$91,450,530 from $85,783,294 on April 30, 1999.
Dividends. IRET paid a regular dividend of 12.4 cents per share on
July 1, 1999, to shareholders of record at the close of business on
June 15, 1999. This was an increase from the 12.25 cents per share dividend
paid on April 1, 1999, and was the 113th consecutive quarterly dividend paid
by IRET.
(The balance of this page was left blank intentionally.)
<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.
5/25/99 Sales Report for Best Efforts
Offering Of Shares of Beneficial
Interest
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INVESTORS REAL ESTATE TRUST
(Registrant)
/s/ Thomas A. Wentz, Sr.
Date: September 10, 1999 By________________________________
Thomas A. Wentz, Sr.,Vice-President
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-END> JUL-31-1999
<CASH> 5,071,067
<SECURITIES> 3,597,267
<RECEIVABLES> 6,740,353
<ALLOWANCES> (122,836)
<INVENTORY> 0
<CURRENT-ASSETS> 15,285,850
<PP&E> 332,384,703
<DEPRECIATION> (27,593,926)
<TOTAL-ASSETS> 320,076,627
<CURRENT-LIABILITIES> 24,813,340
<BONDS> 203,812,758
0
0
<COMMON> 99,396,963
<OTHER-SE> (7,946,434)
<TOTAL-LIABILITY-AND-EQUITY> 320,076,627
<SALES> 0
<TOTAL-REVENUES> 11,201,913
<CGS> 0
<TOTAL-COSTS> 5,959,435
<OTHER-EXPENSES> 235,935
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,441,156
<INCOME-PRETAX> 1,565,387
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,565,387
<DISCONTINUED> 257,895
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,823,282
<EPS-BASIC> .10
<EPS-DILUTED> 0
</TABLE>
