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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
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(Address of principal executive offices) |
(Zip code) |
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.
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Applicant is a North Dakota Real Estate Investment Trust. As of July 31, 2000, it had 22,881,766 Shares of Beneficial Interest outstanding.
PART I
Item 1. Financial Statement - Third Quarter Fiscal 2000
The accompanying condensed consolidated financial statements of Investors Real Estate Trust, and its subsidiaries (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 (“SEC”).These unaudited condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and the footnotes thereto contained in the Annual Report on Form 10-K405 for the year ended April 30, 2000, of Investors Real Estate Trust, as filed with the SEC. The Condensed Consolidated Balance Sheet at April 30, 2000, contained herein, was derived from audited financial statements, but does not include all disclosures included in the Form 10-K405 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.
In the opinion of the company, the accompanying unaudited condensed consolidated financial statements contain all adjustments (of a normal recurring nature) necessary for a fair presentation of the financial statements. The results of operations for the three months ended July 31, 2000, are not necessarily indicative of operating results for the entire year.
| ASSETS |
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| Real Estate Investments | ||
| Real Estate Owned |
$ 485,353,07 |
$ 449,919,890 |
| Less Accumulated Depreciation |
- 36,080,794 |
-33,232,952 |
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$ 449,272,28 |
$ 416,686,938 |
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| Mortgage Loan Receivable |
$ 1,151,552 |
$ 1,650,28 |
| Less Discounts and Allowances |
-120,314 |
-120,70 |
| Total Real Estate Investments |
$ 450,303,51 |
$ 418,216,51 |
| OTHER ASSETS |
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| Cash |
$ 8,930,779 |
$ 3,449,264 |
| Marketable Securities – Held to Maturity |
2,524,737 |
2,601,420 |
| Marketable Securities – Available for Sale |
640,788 |
572,811 |
| Accounts Receivable |
433,592 |
467,441 |
| Rent Receivable |
1,185,558 |
1,055,922 |
| Real Estate Deposits |
285,750 |
768,850 |
| Prepaid Insurance |
505,850 |
110,183 |
| Prepaid Dividend |
700,000 |
0 |
| Tax and Insurance Escrow |
3,776,874 |
3,218,603 |
| Deferred Charges |
2,617,068 |
2,517,289 |
| Furniture and Fixtures |
281,412 |
0 |
| Goodwill |
1,641,437 |
0 |
| TOTAL ASSETS |
$ 473,827,363 |
$ 432,978,299 |
| LIABILITIES | ||
| Accounts Payable and Accrued Expenses |
$ 6,941,062 |
$ 6,343,595 |
| Notes Payable |
0 |
6,452,420 |
| Mortgages Payable |
303,612,817 |
265,056,767 |
| Investment Certificates Issued |
10,086,411 |
10,087,256 |
| TOTAL LIABILITIES |
$ 320,640,290 |
$ 287,940,038 |
| Minority Interest in Operating Partnership |
$ 40,624,183 |
$ 35,117,670 |
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SHAREHOLDERS' EQUITY Shares of Beneficial Interest 22,881,766 on 07/31/00 22,452,069 on 04/30/00 |
$ 122,648,884 |
$ 119,233,172 |
| General Partner Investment |
1,000 |
0 |
| Accumulated Distribution in Excess of Net Income |
-9,936,466 |
-9,094,076 |
| Accumulated Other Comprehensive Income/Loss |
-150,528 |
-218,505 |
| Total Shareholders’ Equity |
112,562,891 |
109,920,591 |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY |
$ 473,827,363 |
$ 432,978,299 |
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Ended 07/31/00 |
Ended 07/31/99 |
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| REVENUE* | ||
| Real estate rentals |
$ 17,291,976 |
$ 10,808,522 |
| Interest, discounts and fees |
139,668 |
393,391 |
| Total Revenue |
$ 17,431,644 |
$ 11,201,913 |
| OPERATING EXPENSE | ||
| Interest |
$ 5,677,556 |
$ 3,441,156 |
| Utilities and Maintenance |
2,613,195 |
1,736,997 |
| Taxes |
1,701,654 |
1,020,402 |
| Insurance |
167,281 |
88,731 |
| Property Management Expenses |
1,410,502 |
897,038 |
| Advisory and Trustee Services |
463,960 |
254,442 |
| Operating Expenses |
80,477 |
177,141 |
| Amortization |
95,680 |
43,666 |
| Total Expenses |
$ 12,210,304 |
$ 7,659,573 |
| OPERATING INCOME (before reserves) |
$ 5,221,340 |
$ 3,542,340 |
| DEPRECIATION |
-2,656,209 |
-1,741,018 |
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OPERATING INCOME (after reserves) AND MINORITY INTEREST |
2,565,131 |
1,801,322 |
| GAIN ON SALE OF INVESTMENT |
0 |
257,895 |
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MINORITY INTEREST PORTION OF OPERATING PARTNERSHIP INCOME |
-425,667 |
-235,935 |
| NET INCOME |
$ 2,139,464 |
$ 1,823,282 |
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Ended 07/31/00 |
Ended 07/31/99 |
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| FUNDS FROM OPERATIONS** | ||
| Operating Income |
$ 2,565,131 |
$ 1,801,322 |
| Plus Depreciation |
2,656,209 |
1,741,018 |
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Minus Minority Interest Portion of Operating Partnership Net Income |
-425,667 |
-235,935 |
| Funds From Operations |
$ 4,795,673 |
$ 3,306,405 |
| PER SHARE | ||
| Operating Income (after reserves) |
$ 0.09 |
$ 0.09 |
| Gain on Sale of Investments |
0.00 |
0.01 |
| Total Taxable Income Per Share |
0.09 |
0.11 |
| Funds From Operations |
0.21 |
0.17 |
| Dividends Paid Per Share |
0.1325 |
0.1200 |
| Average Number of Shares Outstanding |
22,631,392 |
19,495,323 |
* includes $354,194 of "straight-line rents."
** includes $354,194 of "straight-line rents" which increased per share FFO by $.015
per share. No "straight-line rents" were included in the prior year results .(The remainder of this page has been left blank intentionally.)
OPERATING SEGMENTS
The following information summarizes the Trust's segment reporting for Residential and Commercial properties along with reconciliations to the consolidated financial statements:
QUARTER ENDING JULY 31, 2000
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| Segment Revenue | |||
| Rental Revenue |
$ 4,401,646 |
$ 12,890,330 |
$ 17,291,976 |
| Segment Expenses | |||
| Mortgage Interest |
1,746,017 |
3,763,147 |
5,509,164 |
| Utilities and Maintenance |
194,590 |
2,418,605 |
2,613,195 |
| Taxes |
259,536 |
1,442,118 |
1,701,654 |
| Insurance |
17,125 |
150,156 |
167,281 |
| Property Management |
83,271 |
1,327,231 |
1,410,502 |
| Total Segment Expense |
$ 2,300,539 |
$ 9,101,257 |
$ 11,401,796 |
| Segment Gross Profit |
$ 2,101,107 |
$ 3,789,073 |
$ 5,890,180 |
| Reconciliation to consolidated operations: | |
| Interest Discounts and Fee Revenue |
139,668 |
| Other Interest Expense |
-168,392 |
| Depreciation |
-2,656,209 |
| Advisory and Trust Fees |
-463,960 |
| Operating Expenses |
-80,477 |
| Amortization |
-95,680 |
| Consolidated Income Before Gain/Loss on Properties and Minority Interest |
$ 2,565,131 |
QUARTER ENDING JULY 31, 1999
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| Segment Revenue | |||
| Rental Revenue |
$ 1,662,373 |
$ 9,146,149 |
$ 10,808,522 |
| Segment Expenses | |||
| Mortgage Interest |
764,672 |
2,543,493 |
3,308,165 |
| Utilities and Maintenance |
65,415 |
1,671,582 |
1,736,997 |
| Taxes |
39,589 |
980,813 |
1,020,402 |
| Insurance |
12,502 |
76,230 |
88,731 |
| Property Management |
13,004 |
884,034 |
897,038 |
| Total Segment Expense |
$ 895,182 |
$ 6,156,151 |
$ 7,051,332 |
| Segment Gross Profit |
$ 767,191 |
$ 2,989,999 |
$ 3,757,190 |
| Reconciliation to consolidated operations: | |
| Interest Discounts and Fee Revenue |
393,391 |
| Other Interest Expense |
-132,991 |
| Depreciation |
-1,741,018 |
| Advisory and Trust Fees |
-254,442 |
| Operating Expenses |
-177,141 |
| Amortization |
-43,667 |
| Consolidated Income Before Gain/Loss on Properties and Minority Interest |
$ 1,801,322 |
QUARTER ENDING JULY 31, 2000
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| Segment Assets | |||
| Property Owned |
$ 151,385,125 |
$ 333,967,950 |
$ 485,353,075 |
| Less Accumulated Depreciation |
- 9,131,023 |
- 26,949,771 |
- 36,080,794 |
| Total Consolidated Property Owned |
$ 142,254,102 |
$ 307,018,179 |
$ 449,272,281 |
YEAR ENDING APRIL 30, 2000
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| Segment Assets | |||
| Property Owned |
$ 120,714,774 |
$ 329,205,116 |
$ 449,919,890 |
| Less Accumulated Depreciation |
-8,203,307 |
-25,029,645 |
-33,232,952 |
| Total Consolidated Property Owned |
$ 112,511,467 |
$ 304,175,471 |
$ 416,686,938 |
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| CASH FLOWS FROM OPERATING ACTIVITIES | ||
| NET INCOME |
$ 2,139,464 |
$ 1,823,282 |
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Adjustments to reconcile net income to net cash provided by operating activities |
||
| Depreciation and Amortization |
2,751,889 |
1,741,018 |
| Minority interest portion of operating partnership income |
425,667 |
235,935 |
| Accretion of discount on contracts |
0 |
-376 |
| Gain on Sale of Properties |
0 |
-257,895 |
| Interest reinvested in investment certificates |
58,574 |
114,313 |
| Changes in other assets and liabilities: | ||
| (Increase) decrease in real estate deposits |
483,100 |
-535,400 |
| (Increase) decrease in other assets |
-361,818 |
-62,086 |
| (Increase) decrease in rent receivable |
-129,636 |
0 |
| (Increase) decrease in tax and insurance escrow |
-558,271 |
-406,335 |
| (Increase) decrease in deferred charges |
-195,459 |
-431,115 |
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Increase (decrease) in accounts payable & accrued expenses |
597,467 |
358,537 |
| Net cash provided from operating activities |
$ 5,210,977 |
$ 2,579,878 |
| CASH FLOWS FROM INVESTING ACTIVITIES | ||
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Proceeds from maturity of marketable securities held to maturity |
$ 76,683 |
$ 56,278 |
| Principle payments on mortgage loans receivable |
606,898 |
11,836 |
| Proceeds from sale of property |
0 |
0 |
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Payments from acquisition and improvements of properties |
-12,012,135 |
-11,465,189 |
| Purchase of marketable securities available for sale |
0 |
0 |
| Investment in Mortgage loan receivable |
0 |
0 |
| Net Cash used for investing activities |
$ -11,328,554 |
$ -11,397,075 |
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| CASH FLOWS FROM FINANCING ACTIVITIES | ||
| Proceeds from sale of shares |
$ 2,258,364 |
$ 6,070,134 |
| Proceeds from investment certificates issued |
646,850 |
874,236 |
| Proceeds from mortgages payable |
20,684,504 |
6,995,548 |
| Proceeds from short-term lines of credit |
2,800,000 |
5,800,000 |
| Proceeds from sale of minority interest |
0 |
1,000 |
| Repurchase of shares/minority interest |
-1,289,035 |
-1,348,242 |
| Dividends/Distributions Paid |
-1,231,597 |
-1,177,749 |
| Prepaid Advances to DRIP |
-700,000 |
0 |
| Redemption of investment certificates |
-706,269 |
-228,097 |
| Principal payments on mortgage loans |
-1,611,305 |
-1,011,620 |
| Payments on short-term lines of credit |
-9,252,420 |
-5,800,000 |
| Net cash provided from financing activities |
$ 11,599,091 |
$ 10,175,210 |
| NET INCREASE (DECREASE) IN CASH |
$ 5,481,515 |
$ 1,358,013 |
| CASH AT BEGINNING OF YEAR |
$ 3,449,264 |
$ 3,713,053 |
| CASH AT END OF 1 ST QUARTER |
$ 8,930,779 |
$ 5,071,066 |
| SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES 2000 and 1999 |
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| Dividends reinvested |
$ 1,746,384 |
$ 1,535,640 |
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Real estate investment and mortgage loans receivable acquired through assumption of mortgage loans payable and accrual of costs |
19,603,741 |
2,122,200 |
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Mortgage loan receivable transferred to property owned |
0 |
0 |
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Proceeds from Sale of Properties deposited directly with escrow agent |
0 |
1,271,805 |
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Properties acquired through the issuance of minority interest units in the operating partnership |
5,981,938 |
4,400,000 |
| Interest reinvested directly in investment certificates |
54,574 |
114,313 |
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Goodwill attributed through the issuance of minority interest units in the operating partnership |
1,641,437 |
0 |
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION | ||
| Cash paid during the year for: | ||
| Interest paid on mortgages |
$ 5,004,812 |
$ 3,196,773 |
| Interest paid on margin account and other |
119,477 |
45,097 |
| Interest paid on investment certificates |
97,723 |
77,863 |
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$ 5,222,012 |
$ 3,319,733 |
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.
IRET’s 1st Quarter which ended July 31, 2000, produced excellent results. The new investments acquired during the past year performed very well and the existing portfolio also continued to do well resulting in new highs for revenues, net operating income and Funds From Operations. We expect the rest of Fiscal 2001 will produce continued good results. We are optimistic about the new apartment community we are building in Rochester, MN which has had a good lease-up prior to completion as well as the rest of our portfolio.
Results of Operations.
IRET's 1st Quarter saw above average operating results which are
summarized below.
* Revenues. Revenues for the quarter increased 56% from the prior year - $17,431,644 compared to $11,201,913 – primarily as a result of the acquisition of new investments. * Operating Income. Operating income before depreciation increased to $5,221,340 from $3,542,340, an increase of 47%. * Net Income. Net income increased to $2,132,464 from $1,828,282. No capital gain income was recorded in the first quarter, compared to $257,895 realized in the prior year. * Funds From Operations. Funds From Operations (net income computed for Generally Accepted Accounting Practices, less capital gain and extraordinary items, plus depreciation) increased to $4,795,673 from $3,306,405, a gain of 45%. On a per share basis, FFO was $.21 per share, compared to $.17 per share for the 1st Quarter of Fiscal 2000, a gain of 23.5%. Of this increase, $354,194 or $.015 per share was due to an accounting rule change which requires us to record as income future revenues (“straight-line rent”) from long-term commercial property leases with periodic rent increases. No straight-line rent was included in prior year FFO. Funds From Operations is the generally accepted measure of performance for Real Estate Investment Trusts.
Property Acquisitions. The following properties were acquired by IRET during the 1 st Quarter and are producing income:
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| 75,815 sq. ft. office building – Rapid City, SD – leased to Conseco Financial |
$ 6,850,000 |
| 11,300 sq. ft. office building – 12 South Main, Minot, ND |
385,000 |
| 6,500 sq. ft. office/apartment building – 17 South Main, Minot, ND |
90,000 |
| TOTAL ACQUISITIONS |
$ 7,325,000 |
Pending Acquisitions . The following properties are under construction or under purchase contract:
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| 67-unit Apartment Building (Cottonwood III Apartments) - Bismarck, ND |
$ 4,200,000 |
| 73-unit apartment building & community center (Sunset Trail by IRET) – Rochester, MN |
5,750,000 |
| Addition to Edgewood Vista Assisted Living Center - Duluth, MN |
2,200,000 |
| 84-unit Prairiewood Meadows apartment community – Fargo, ND |
2,800,000 |
| 4 Edgewood Vista Care Facilities in Hastings, Fremont and Omaha, NE and Kalispell, MT |
1,900,000 |
| 274-unit Olympic Village Apartment Community – Billings, MT |
11,100,000 |
| 30,000 sq. ft. Stone Container distribution warehouse – Waconea, MN |
1,650,000 |
| TOTAL PENDING ACQUISITIONS |
$29,600,000 |
Financial Condition. During the first quarter
of its Fiscal 2001 year, IRET paid off $6,452,420 of short-term
borrowings and increased cash on hand by nearly $5,500,000. This
improvement in liquidity resulted primarily from continued sales
of shares of beneficial interest ($2,715,712) and the placement
of long-term mortgage debt on properties constructed or purchased
in the prior year. Thus, IRET continues to maintain a strong balance
sheet which will allow the acquisition of additional real estate
properties. The relevant balance sheet figures are:
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| Cash on Hand |
$ 8,930,779 |
$ 3,449,264 |
| Real Estate Owned |
$ 485,353,075 |
$ 449,919,890 |
| Notes Payable |
$ 0 |
$ 6,452,420 |
| Mortgages Payable |
$ 303,612,817 |
$ 265,056,767 |
| Shareholder Equity |
$ 112,562,891 |
$ 109,920,591 |
Dividends. IRET paid a regular dividend of 13.25 cents per share on July 1, 2000, to shareholders of record at the close of business on June 15, 2000. This was an increase from 13 cents per share dividend paid on April 1, 2000, and was the 117 th consecutive quarterly dividend paid by IRET.
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 – SALE OF SHARES OF BENEFICIAL INTEREST
IRET files this Report of Sales of Securities and Use of Proceeds therefrom in accordance with Rule 463 (17 CFR 230.463).
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Effective date of the registration statement for which this form is filed: |
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SEC file number assigned to the registration statement: |
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IRET CUSIP Number: |
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The date the offering commenced: |
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As of August 31, 2000, 198,907.888 shares of the 1,000,000 share offering had been sold. |
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The offering continues on the date of this report. |
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The name(s) of the managing underwriter(s) are: |
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American Investment Services, Inc. Berthel Fisher Financial Services, Inc. Eagle One Investments, L.L.C. Fintegra Financial Solutions Garry Pierce Financial Services, L.L.P. Huntingdon Securities Corporation Inland National Securities, Inc., Iron Street Securities, Inc. Invest Financial Investment Centers of America, Inc. ND Capital, Inc. Netcap Preferred Equity, Ltd. Okoboji Financial Services, Inc. Primevest Financial Services, Inc. Proequities, Inc. Protective Group Securities VSR Financial Services, Inc. |
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Title
of Security – (01) Shares of Beneficial Interest |
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The following table shows the amount and aggregate offering price of securities registered and sold for the account of the issuer as of August 31, 2000: |
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Registered |
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Sold |
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The following is the amount of expenses incurred for the issuer’s account in connection with the issuance and distribution of the securities registered for each category listed below as of August 31, 2000. |
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| (01) Underwriting discounts and commissions |
$ 0 |
$117,117 |
| (02) Finders' Fees |
$ 0 |
$ 0 |
| (03) Expenses paid to or for underwriters |
$ 0 |
$ 0 |
| (04) Other expenses |
$ 0 |
$ 13,761 |
| (05) Total Expenses |
$ 0 |
$130,878 |
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The net offering proceeds to the issuer after the total expenses listed above as of August 31, 2000. $1,579,730 |
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The amount of net offering proceeds to the issuer used for each of the purposes listed below as of August 31, 2000. |
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| (01) Construction of plant, building and facilities |
$ 0 |
$ 0 |
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(02) Purchase and installation of machinery and equipment |
$ 0 |
$ 0 |
| (03) Purchase of real estate |
$ 0 |
$ 1,579,730 |
| (04) Acquisition of other business(es) |
$ 0 |
$ 0 |
| (05) Total Expenses |
$ 0 |
$ 0 |
| (06) Working Capital |
$ 0 |
$ 0 |
| Temporary investment (specify) – None. | ||
| Other purposes (specify) – None. |
The use of proceeds shown above does not represent a material change in the use of proceeds described in the prospectus.
Item 6. Exhibits and Reports on Form 8-K.
None
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
INVESTORS REAL ESTATE TRUST
(Registrant)
By: /S/ Thomas A. Wentz, Sr.
Thomas A. Wentz, Sr., President
Date: September 13, 2000
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