-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NdsfcaMWvGia6L2cQm9xFPM3zzJYmPaucaUsvqjRnWzxZ4D732yLu0JIdKNFv8Sk 5xfdSHhHPkNdZpFDqVZjUw== 0000798359-98-000014.txt : 19980803 0000798359-98-000014.hdr.sgml : 19980803 ACCESSION NUMBER: 0000798359-98-000014 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980430 FILED AS OF DATE: 19980730 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INVESTORS REAL ESTATE TRUST CENTRAL INDEX KEY: 0000798359 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 450311232 STATE OF INCORPORATION: ND FISCAL YEAR END: 0430 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: SEC FILE NUMBER: 000-14851 FILM NUMBER: 98674424 BUSINESS ADDRESS: STREET 1: 12 S MAIN CITY: MINOT STATE: ND ZIP: 58701 BUSINESS PHONE: 7018521756 MAIL ADDRESS: STREET 1: 12 S MAIN CITY: MINOT STATE: ND ZIP: 58701 10-K405 1 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. ____________________________________________________________ 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 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. 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 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. 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:
REAL ESTATE OWNED: Fiscal Mortgage 1998 Year Payable Size/Type Occupancy Purchased Cost Interest Rate --------- --------- --------- ---- -------- 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 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% 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 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 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
- 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). - 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% ============ 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: 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 Item 6. SELECTED FINANCIAL DATA
Year Ended April 30 -------------------------------------------------------------------- 1998 1997 1996 1995 1994 (Restated) (Restated) -------------------------------------------------------------------- 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%
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. 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. 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. 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. 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. 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. 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. 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):
Fiscal Fiscal Fiscal Fiscal Fiscal Item 1998 1997 1996 1995(Restated) 1994(Restated) - ---- ---- ---- ---- -------------- -------------- 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
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. 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:
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. 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. 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. 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. 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. (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. 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 INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES Minot, North Dakota Consolidated Financial Statements as of April 30, 1998 and 1997 and Independent Auditor's Report 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 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 ============ ============ 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. 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. 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 ---------- ----------- ------------- ----------- ------------- 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 ========== =========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements. INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES Consolidated Statements of Cash Flows for the Years Ended April 30, 1998, 1997 and 1996
1998 1997 1996 ---- ---- ---- 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 ============ ============ ============ 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 ============ ============ ============
The accompanying notes are an integral part of these financial statements. 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. 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. 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. 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 ============ ============ 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. 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 ========== =========== ============ ========== 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:
1998 1997 -------------------------- ----------------------- Amortized Fair Amortized Fair Cost Value Cost Value ----------- ---------- ---------- ---------- Due after 10 years $ 3,536,538 $3,559,295 $4,055,459 $3,889,428 =========== ========== ========== ==========
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. 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 =========== 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 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. 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:
1998 1997 -------------------------- -------------------------- Carrying Fair Carrying Fair Amount Value Amount Value -------------------------- -------------------------- 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
ADDITONAL INFORMATION 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 INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES April 30, 1998 and 1997 Schedule I MARKETABLE SECURITIES
April 30, 1998 April 30, 1997 ---------------------- ----------------------- Principal Principal Amount Market Amount Market ---------- ---------- ---------- ---------- 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 ========== ========== ========== ========== 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
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES SCHEDULE XI REAL ESTATE AND ACCUMULATED DEPRECIATION
COST CAPITALIZATION SUBSEQUENT TO INITIAL COST TO TRUST ACQUISITION -------------------------- ------------------------ 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 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 ------------ ------------ ------------ ------------ -----------
Schedule XI (Continued)
LIFE ON WHICH BUILDINGS LATEST INCOME AND ACCUMULATED DATE STATEMENT LAND IMPROVEMENTS TOTAL DEPRECIATION ACQUIRED IS COMPUTED ------------ ------------ ------------ ------------ -------- ------------- 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 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 ------------ ------------ ------------ ------------
Schedule XI REAL ESTATE AND ACCUMULATED DEPRECIATION (CONTINUED) COST CAPITALIZATION INITIAL COST TO TRUST SUBSEQUENT TO ACQUISITION -------------------------- ------------------------- BUILDING & CARRYING ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS COSTS ------------ ------------ ------------ ------------ ----------- 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 ============ ============ ============ ============ ===========
Schedule XI (Continued)
LIFE ON WHICH BUILDINGS LATEST INCOME AND ACCUMULATED DATE STATEMENT LAND IMPROVEMENTS TOTAL DEPRECIATION ACQUIRED IS COMPUTED ------------ ------------ ------------ ------------ -------- ------------- 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 ============ ============ ============ ============
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 ============ ============ ============ INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES April 30, 1998 Schedule XII INVESTMENTS IN MORTGAGE LOANS ON REAL ESTATE
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 ---- ---- ----- ----- ---------- ---------- ----------- 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 ==========
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 =========== =========== INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES Selected Financial Data
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%
INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES April 30, 1998, 1997 and 1996 GAIN FROM PROPERTY DISPOSITIONS
Total Original Unrealized Realized Realized Realized Property Gain 4/30/98 4/30/98 4/30/97 4/30/96 - -------- --------- --------- --------- --------- -------- 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 ========= ========= ========= ========
* 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. INVESTORS REAL ESTATE TRUST AND SUBSIDIARIES April 30, 1998 MORTGAGE LOANS PAYABLE
Final Periodic Carrying Delinquent Interest Maturity Payment Face Amount Amount of Principal or Rate Date Terms of Mortage Mortgage Interest -------- ---------- -------- ------------ ------------ ----------- 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
MORTGAGE LOANS PAYABLE (continued) 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 ============ ============ ==========
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. 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. EX-27 2
5 YEAR APR-30-1998 APR-30-1998 2,132,220 4,257,226 8,556,007 (127,132) 0 14,818,321 231,416,322 (21,516,129) 224,718,514 12,136,353 144,429,535 0 0 74,708,559 (6,555,933) 224,718,514 0 32,407,545 0 17,237,243 0 0 10,479,104 4,691,198 0 4,691,198 0 323,711 0 5,014,909 .32 0
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