-----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, P11FcA8XUlqAPGQCsk/QHNfx1czwiAe1h02Ibj7KtvbGjo26O8ROjRCgYHF525lW 0ADxGou2BRWWnfDAteklCA== 0000798359-96-000012.txt : 19960729 0000798359-96-000012.hdr.sgml : 19960729 ACCESSION NUMBER: 0000798359-96-000012 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960430 FILED AS OF DATE: 19960726 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-14851 FILM NUMBER: 96599271 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-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ______________________ FORM 10-K 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, 1996 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 Not Listed ______________________ 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 $85,060,870 based on the last reported sale price on June 21, 1996. The number of shares outstanding as of June 21, 1996, was 13,501,725 Capital Shares of Beneficial Interest (no par value). Portions of the Trust's definitive proxy statement for the 1996 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 . . . . . . . . . . . . . . . . . . 6 3. Legal Proceedings. . . . . . . . . . . . . . . 12 4. Submission of Matters to a Vote of Security Holders. . . . . . . . . . . . . . . . . . . . 12 PART II 5. Market for Registrant's Common Stock and Related Security Holder Matters. . . . . . . . 12 6. Selected Financial Data. . . . . . . . . . . . 13 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. 14 8. Financial Statements and Supplementary Data. . 23 9. Disagreements on Accounting and Financial Disclosure . . . . . . . . . . . . . . . . . . 23 PART III 10. Directors and Executive Officers of the Registrant . . . . . . . . . . . . . . . . . . 23 11. Executive Compensation . . . . . . . . . . . . 24 12. Security Ownership of Certain Beneficial Owners and Management. . . . . . . . . . . . . 24 13. Certain Relationships and Related Transactions . . . . . . . . . . . . . . . . . 25 PART IV 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K. . . . . . . . . . . . . . 25 Exhibit Index. . . . . . . . . . . . . . . . . 26 Signatures . . . . . . . . . . . . . . . . . . 27 Report of Independent Certified Public Accountants. . . . . . . . . . . . . . . . . . F-1 PART I Item 1. BUSINESS Investors Real Estate Trust (hereinafter "IRET"), an unincorporated business 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. 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 within the confines of the State of North Dakota, although it has some real estate investments in the states of Minnesota, South Dakota, Nebraska, Montana, Colorado, Wisconsin, Idaho and Arizona. IRET is the general partner of seven 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, prior to its Fiscal Year 1996, the financial statements of IRET and the seven partnerships were consolidated for financial reporting purposes and all material intercompany transactions and balances have been eliminated. During IRET's Fiscal Year ended April 30, 1996, Chateau Properties refinanced its 64 unit apartment complex resulting in the payment in full of its contract for deed obligation to IRET. IRET was not required to guarantee Chateau's new mortgage loan. Thus, under generally accepted accounting rules, Chateau's financial statement is not to be consolidated with that of IRET. Prior year's results shown in this report have been restated to reflect the removal of Chateau from the consolidated statement. (See Note 11 to the Financial Statements.) 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. 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 1996 1995 Restated 1994 Restated REVENUE FROM OPERATIONS Real Estate Rentals $17,635,297 $12,280,738 $ 9,765,701 Interest, Discount & Fees 1,024,368 1,520,385 1,817,307 $18,659,665 $13,801,123 $11,583,008 EXPENSE $15,041,858 $10,240,805 $ 8,447,582 NET REAL ESTATE INVESTMENT INCOME $ 3,617,807 $ 3,560,318 $ 3,135,426 GAIN ON SALE OF INVESTMENTS (CAPITAL GAIN) 994,163 407,512 64,962 NET INCOME $ 4,611,970 $ 3,967,830 $ 3,200,388 PER SHARE Net Income $ .38 $ .38 $ .36 Dividends Paid $ .36 $ .35 $ .33
As indicated above, IRET has two principal sources of operating revenue: rental income from real estate properties owned by the Trust and interest income from mortgages and contracts for deed secured by real estate. A minor amount of revenue is derived from 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 has received 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, 1996: INVESTMENT PORTFOLIO - INVESTORS REAL ESTATE TRUST AS OF APRIL 30, 1996 REAL ESTATE OWNED:
Fiscal Mortgages 1996 Year Payable Location Size/Type Occupancy Purchased Cost (rate) Apartments: 155 High St. 24 Unit 95% 1977 403,336 0 Hutchinson, MN Apt. Bldg. Century Apartments 192 Unit 89% 1986 3,565,505 2,700,000 Williston, ND Apt. Complex (7.5%) Century Condos 22 Condo 94% 1983 421,683 0 Beulah, ND Apt. Units & 1989 Century Apartments 120 Unit 98% 1986 1,741,619 1,595,000 Dickinson, ND Apt. Complex (7.5%) 201-301 17th Ave NE 2 24-Unit 92% 1987 806,694 0 Waseca, MN Apt. Bldgs. Virginia Apts. 14 Unit 95% 1988 217,083 2,377 Minot, ND Apt. Bldg. (10%) 1305 Birch St. 24 Unit 94% 1989 399,278 135,871 Marshall, MN Apt. Bldg. (9.0%) Oak Manor Apts. 27 Unit 99% 1989 285,917 238,264 Dickinson, ND Apt. Bdg. (9.75%) 4301-13 9th Ave SW 2 18-Unit 97% 1988 997,642 218,330 Fargo, ND Apt. Bldgs. (8.65%) Parkway Apts. 2 18-Unit 93% 1989 82,386 0 Beulah, ND Apt. Bldgs. Scottsbluff Estates 2 24-Unit 96% 1988 710,039 196,024 Scottsbluff, NE Apt. Bldgs. (10.25%) 177 10th Ave. E 41 Unit 86% 1989 360,877 234,660 Dickinson, ND Apt. Bldg. (8.75%) 312 12th Ave NW 18 Unit 97% 1989 256,750 45,670 Mandan, ND Apt. Bldg. (8.75%) 405 Grant Ave 12 Unit 80% 1990 171,884 0 Harvey, ND Apt. Bldg. Candlelight Apts. 66 Unit 97% 1992 838,017 539,961 Fargo, ND (2/3rds) Apt. Complex (8.25%) Forest Park 270 Unit 97% 1993 6,596,264 4,177,577 Grand Forks, ND Apt. Complex (9.75%) Oakwood Estates 100 Unit 95% 1993 3,323,305 2,250,000 Sioux Falls, SD Apt. Complex (7.5%) Prairie Winds 48 Unit 98% 1993 1,960,108 1,388,452 Sioux Falls, SD Apt. Complex (7.19%) Crestview Apts. 152 Unit 92% 1994 4,572,879 2,880,049 Bismarck, ND Apt. Complex (8.30%) Pointe West 90 Unit 86% 1994 3,812,603 2,395,789 Rapid City, SD Apt. Complex (8.34%) Oxbow Apts. 120 Unit 98% 1994 4,942,650 3,565,000 Sioux Falls, SD Apt. Complex (7.5%) Pine Cone 195 Unit 92% 1995 13,071,638 10,645,576 Ft. Collins, CO Apt. Complex (7.125%) Southview 24 Unit 98% 1995 653,948 0 Minot, ND Apt. Complex North Pointe 49 Unit 96% 1996 2,387,600 1,382,528 Bismarck, ND Apt. Complex (8.18%) South Pointe - 98 Unit N/A 1996 4,789,552 2,775,212 Phase I Apt. Complex Completed (8.01%) Minot, ND Stonehill 313 Unit 96% 1995 11,106,355 8,186,235 St. Cloud, MN Apt. Complex (9.21%) 1112 32nd Ave. SW 18 Unit 99% 1995 593,147 414,283 Minot, ND Apt. Complex (9.0%) South Winds 164 Unit N/A 1995 5,433,683 3,721,568 Grand Forks, ND Apt. Complex (7.84%) South Pointe - 98 Unit N/A Not 4,290,062 0 Phase II Apt. Complex Completed Minot, ND Billings, MT 98 Unit N/A Not 3,754,088 0 Apt. Complex Completed Columbia Park 116 Unit N/A Not 4,035,609 0 Grand Forks, ND Apt. Complex Completed Circle 50 49 Unit N/A Not 491,247 0 Billings, MT Apt. Complex Completed Commercial: 114 S. Main 3,500 sq. ft. 100% 1978 103,905 18,389 Minot, ND Retail Bldg. (9%) 408 1st St. SE Rental House 100% 1986 46,873 0 Minot, ND Arrowhead Center 80,000 sq. ft. 97% 1973 2,397,414 145,277 Minot, ND Shopping Center (10%) Superpumper Gas Station/ 100% 1986 297,064 0 Emerado, ND Conven. Store Superpumper Gas Station/ 100% 1987 239,212 0 Langdon, ND Conven. Store 401 South Main 9,200 sq. ft. 96% 1988 474,686 0 Minot, ND Commercial Bldg. Lester Chiropractic 5,000 sq. ft. 100% 1988 268,916 0 Clinic Clinic Bldg. Bismarck, ND (1/2 int.) Superpumper Gas Station/ 100% 1988 301,013 0 Bottineau, ND Conven. Store Superpumper Gas Station/ 100% 1988 428,778 0 Crookston, MN Conven. Store Superpumper Gas Station/ 100% 1991 485,007 0 Grand Forks, ND Conven. Store Superpumper Gas Station/ 100% 1991 250,000 0 New Town, ND Conven. Store Pioneer Hi-Bred Office/Whse. 100% 1991 653,876 350,023 Moorhead, MN (8.625%) Lindberg Office/Whse. 100% 1991 1,455,789 851,838 Eden Prairie, MN (8.5%) Creekside Office Bldgs. 91% 1991 1,571,135 946,482 Billings, MT (8.35%) Superpumper Gas Station/ 100% 1992 120,600 0 Sidney, MT Conven. Store Hutchinson Tech. Manufacturing 100% 1992 4,429,026 2,470,548 Sioux Falls, SD Plant (8.5%) Minot Plaza 11,200 sq. ft. 100% 1993 502,898 0 Minot, ND Strip Shopping Center Retail Warehouse 70,000 sq. ft. 58% 1994 5,639,576 3,629,797 Boise, ID Retail Warehouse (9.75%) Midco Theatre 28,528 sq. ft. 100% 1994 2,545,736 1,703,009 Grand Forks, ND 10-screen theatre (8.65%) 30 Year Lease Pet Foods 18,000 sq. ft. 100% 1995 1,276,776 834,130 Fargo, ND Retail/Whse. (8.31%) Barnes and Noble 30,000 sq. ft. 100% 1995 3,292,012 2,317,499 Fargo, ND Retail/Whse. (7.98%) Stone Container Currently Under N/A 1995 4,938,486 3,271,632 Fargo, ND Construction (8.25%) Barnes and Noble Currently Under 100% 1995 3,699,101 2,510,624 Omaha, NE Construction __________ (7.98%) TOTAL COMMERCIAL 35,417,879
Consolidated Partnerships: Sweetwater Properties 114 Apt. 79% 1972 1,354,230 251,014 Devils Lake & Units (9.75%) Grafton, ND Bison Properties 125 Apt. 90% 1972 1,490,135 152,946 Jamestown, Units (10%) Carrington & Cooperstown, ND First Avenue Building 16,500 sq. ft. 93% 1981 779,817 0 Minot, ND Office Bldg. Eastgate Properties 116 Unit 81% 1970 1,693,189 0 Moorhead, MN Apt. Complex Colton Heights 18 Unit 97% 1984 816,561 381,682 Minot, ND Apt. Bldg. (9.5%) Hill Park Properties 92 Unit 86% 1985 2,822,476 1,470,000 Bismarck, ND Apt. Complex ___________ (7.5%) TOTAL PARTNERSHIPS 8,956,408 ____________________________ Total Real Estate Owned $131,447,734 $71,321,337 Less Accumulated Depreciation (13,551,571) ____________ Net Carrying Value $117,896,163 Other Properties Sold Contract For Deed $ 377,722 $71,699,059
- TITLE. The title to all of the above properties is in the name 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, 1996, IRET had not entered into any contracts or options to sell any of the above properties, other than an agreement to sell the 24 unit apartment complex in Hutchinson, Minnesota, for $500,000. - OCCUPANCY AND LEASES. Occupancy rates shown above are for the fiscal year ended April 30, 1996. 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. The tenant occupying the retail warehouse in Boise, Idaho, declared bankruptcy. The lease has been terminated and the Trust is seeking a new tenant. MORTGAGE LOANS RECEIVABLE - UNRELATED:
Real Estate 4/30/96 Location Security Balance Rate BILLINGS, MT Colton Heights Apts.-144 Units $ 320,938 9% DENVER, CO Westminister- Writer Corp. Residential Lots 618,810 14% Centrebrooke Homes Residential Lots 205,517 12% GILBERT, AZ NE(-27-2-6 Commercial Land 681,032 8% BISMARCK, ND M. Knutt Apts. 236,880 11% DOUGLAS, GA Sweetwater Springs Retirement Center 1,254,810 9% OTHER MORTGAGES Over $100,000 $ 978,893 8-10 1/4% $50,000 to $99,999 360,998 8-12% $20,000 to $49,999 252,315 8-12% Less than $20,000 21,950 7-12% TOTAL $ 4,932,138 Unearned Discounts (18,222) Allowance for Losses (165,074) Deferred Gain (267,096) $ 4,481,746
TO INVEST IN THE SECURITIES OF OTHER ISSUERS FOR THE PURPOSE OF EXERCISING CONTROL. The Trust has not invested in such securities in the past. The decision to do so is vested solely in the Board of Trustees and may be changed without a vote of the shareholders. SUMMARY OF REAL ESTATE INVESTMENT PORTFOLIO
REAL ESTATE INVESTMENTS: Real Estate Owned $131,447,734 Less Depreciation Reserve (13,551,571) $117,896,163 90% Mortgage Loans 4,932,138 Less unearned discounts and interest (18,222) Less allowance for losses (165,074) Less deferred gain (267,096) 4,481,746 3% Total Real Estate Investments $122,377,909 OTHER ASSETS: Cash and marketable securities $ 7,127,131 Deposits and accruals 1,850,598 Total Other Assets $ 8,977,729 7% TOTAL ASSETS $131,355,638 100%
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 9, 1995 Annual Shareholders' meeting, the only matters submitted to a vote of security holders were the election of ten Trustees and ratification of the re- appointment of the independent certified public accountants. PART II Item 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED SECURITY HOLDER MATTERS The shares of Beneficial Interest of IRET are traded in the over-the-counter market only within the State of North Dakota by Inland National Securities, Inc., 21 South Main, Minot, ND 58701, and Financial Advantage Brokerage Services, Inc., 17 South Main, Minot, ND 58701. Set forth below, by quarter-year, are the total number of IRET shares traded, the high and low reported sales prices and the per share dividend paid for the past three years:
Calendar No. of Bid Asked Per Share Year Months Shares Sold Low High Low High Dividend 1993 July-September 140,339 5.10 5.19 5.90 5.90 .0815 1993 October-December 181,613 5.16 5.28 5.90 6.00 .082 1994 January-March 250,167 5.20 5.37 6.00 6.10 .0825 1994 April-June 163,347 5.20 5.37 6.10 6.10 .083 1994 July-September 134,529 5.37 5.63 6.10 6.25 .084 1994 October-December 335,518 5.63 5.89 6.25 6.40 .085 1995 January-March 210,106 5.89 5.89 6.40 6.40 .08625 1995 April-June 137,766 5.89 6.03 6.40 6.55 .0875 1995 July-September 452,665 6.03 6.16 6.55 6.70 .0925 1995 October-December 466,447 6.16 6.16 6.70 6.70 .08875 1996 January-March 451,383 6.16 6.30 6.70 6.85 .09 1996 April-June 551,418 6.30 6.30 6.85 6.85 .09125
As of May 31, 1996, IRET had 2,884 shareholders. No shareholder held more than 5% of the 13,365,393 shares outstanding and there were no warrants or stock options outstanding. Dividends are paid on January 5, April 1, July 1, and October 1 of each year. IRET shares are sold on the primary market only for cash to bona fide residents of the State of North Dakota by Inland National Securities, Inc., and Financial Advantage Brokerage Services, Inc., which are securities dealers registered with the State of North Dakota. IRET claims exemption from the registration of its shares of Beneficial Interest under the Securities Act of 1933 under Section 3(a)(11) of said Act. Item 6. SELECTED FINANCIAL DATA
Year Ended April 30 1996 1995 1994 1993 1992 (Restated) (Restated) Consolidated Income Statement Data Revenue $ 18,659,665 $ 13,801,123 $11,583,008 $ 8,316,643 $ 7,206,054 Operating Income 3,617,807 3,560,318 3,135,426 2,231,092 1,628,155 Gain on repossession/ sale of investments 994,163 407,512 64,962 132,610 22,858 Net Income 4,611,970 3,967,830 3,200,388 2,363,702 1,651,013 Balance Sheet Data Total real estate investments $122,377,909 $ 84,005,635 $64,089,476 $50,041,059 $34,302,341 Total assets 131,355,638 94,616,744 72,391,548 54,658,569 38,997,080 Shareholders' equity 50,711,920 37,835,654 29,997,189 23,745,443 18,849,635 Consolidated Per Share Data Net income $ .38 $ .38 $ .36 $ .29 $ .23 Gain on repossession/ sale of investments .08 .04 .01 .01 .00 Dividends .36 .35 .33 .32 .31 Tax status of dividend capital gain 1.6% 11.0% 7.37% 4.08% 1.0% Ordinary income 98.4% 89.0% 92.63% 74.04% 68.0% Return of capital 0.0% 0.0% 0.00% 21.88% 31.0%
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. IRET is in the business of owning income producing real estate investments. No major changes in IRET's business has occurred from the organization of the Trust in 1970 to the date of this Prospectus, and none are planned at this time. RESULTS OF OPERATIONS: FISCAL YEAR 1996 COMPARED TO FISCAL YEAR 1995. IRET's Fiscal Year 1996, which ended on April 30, 1996, produced very favorable results, including a substantial increase in IRET's investment portfolio and satisfactory increases in earnings and funds from operations. EARNINGS. IRET's net taxable earnings for Fiscal Year 1996 increased to $4,611,970, compared to $3,967,830 earned in Fiscal 1995 and $3,200,388 earned in Fiscal 1994. Fiscal 1996 taxable income includes $994,163 of capital gain income from the sale of assets from the investment portfolio, compared to $407,512 of capital gain income in Fiscal 1995 and $64,962 of capital gain income in Fiscal 1994. On a per share basis, net taxable income was $.38 per share for Fiscal 1996, the same as earned in Fiscal 1995. Per share taxable income in Fiscal 1994 was $.36 per share. As noted in prior reports, as IRET repositions its investment portfolio by replacing high yielding mortgage loans with equity investments in real estate properties, taxable earnings are depressed. FUNDS FROM OPERATIONS. Funds from operations (taxable income increased by non-cash deductions of depreciation and amortization, and reduced by capital gain income and other extraordinary income items) for Fiscal 1996 increased to $5,977,431 ($.49 per share) from the $5,434,244 ($.52 per share) generated in Fiscal 1995 and the $4,607,708 ($.52 per share) generated in Fiscal 1994. REVENUES. Total revenues for Fiscal 1996 were $18,659,665, compared to $13,801,123 in Fiscal 1995 and $11,583,008 in Fiscal 1994. The increase in revenues received during Fiscal 1996 in excess of Fiscal 1995 revenues was $4,858,542. This increase resulted from:
Rent from 6 properties acquired in Fiscal 1996 $3,272,078 Rent from 6 properties acquired in Fiscal 1995 in excess of that received in Fiscal 1994 2,094,922 An increase in rental rates on existing properties (2.5%) 259,084 A decrease in rent on Smith Home Furnishing Building (bankruptcy of tenant) (348,310) A decrease in rent - properties sold during 1996 (178,888) A decrease in interest income (240,344) $4,858,542
The increase in revenue during Fiscal Year 1996 resulted primarily from the addition of new real estate properties to the portfolio. Rents received on properties acquired prior to the beginning of Fiscal 1995 increased by 2.5%. Overall occupancy was stable at 95%. The decline in operating income per share (from $.35 per share in Fiscal 1994, to $.34 in 1995 and $.30 in 1996) reflects the continuing repositioning of the investment portfolio from a mix of real estate equities and mortgage loans to one consisting entirely of real estate equities. The income on the mortgage loans made by the Trust was immediately reflected in operating income. Many of these mortgage loans earned interest at 14% per annum and several produced additional participation income. These mortgages have now been largely paid off and have been replaced with equity investments in apartments and triple net leased commercial property. The initial operating and taxable income on the equity investments is lower than what was being earned on the mortgage loans, but management is of the opinion that these new investments will produce very satisfactory investment returns in the years ahead. Capital gain income, on the other hand, has been increasing ($.01 per share in Fiscal 1994 compared to $.04 per share in Fiscal 1995 and $.08 per share in Fiscal 1996). IRET is marketing its older and smaller apartment investments and will continue to reposition its portfolio into newer and larger properties. The $644,140 increase in net income for Fiscal 1996 over the net income earned in the prior fiscal year resulted from:
An increase in gain from sale of investments $ 586,651 An increase in net rental income (rents, less utilities, maintenance, taxes, insurance and management) 3,193,087 A decrease in interest income (496,017) An increase in interest expense (2,063,429) An increase in depreciation expense (494,430) A decrease in bad debt expense 200,000 An increase in operating expenses and advisory trustee services (204,481) An increase in amortization expense (77,241) $ 644,140
PROPERTY ACQUISITIONS. IRET acquired over $40,000,000 of new properties during Fiscal 1996. They were: COMMERCIAL: Cost - Barnes & Noble Superbookstore, Omaha, NE (15 year net lease) $ 3,627,206** - Stone Container Manufacturing Plant, Fargo, ND $ 4,042,217** APARTMENTS: - 96 units, Billings, MT $ 3,727,440* - 49 units, North Pointe, Bismarck, ND $ 927,450** - 98 units, South Pointe, Phase I, Minot, ND $ 2,727,085** - 313 units, West Stonehill, St. Cloud, MN $10,765,830** - 18 units, Minot, ND $ 593,147 - 49 units, Grand Forks, ND $ 3,373,754* - 164 units, South Winds, Grand Forks, ND $ 5,433,683 - 98 units, South Pointe II, Minot, ND $ 4,290,061* - 49 units, Circle 50, Billings, MT $ 491,247* - 67 units, Columbia Park II, Grand Forks, ND $ 661,855* $40,660,975 * Property not placed in service at April 30, 1996. Additional costs are still to be incurred. ** Represents costs to complete a project started in the year ending April 30, 1995. PROPERTY DISPOSITIONS: During Fiscal 1996, IRET sold several older and smaller apartment buildings. In addition, a contract for deed receivable from Chateau Properties, Ltd., was paid in full, resulting in the recognition of deferred capital gain. The total gain recognized from the sale of properties (both current and deferred) was $994,163 for Fiscal 1996, compared to $407,512 in Fiscal 1995, and $64,962 in Fiscal 1994. It is management's intention to continue to market IRET's older and smaller apartment projects. FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994: (This comparative report is reproduced as it was submitted for Fiscal Year 1995. The Fiscal 1995 results were restated in the Fiscal 1996 Financial Report because of the removal of Chateau Properties from the consolidated Financial Report resulting in small changes to the Fiscal 1995 results. See Note 11 to the attached Financial Report for an explanation of these changes.) Net income for Fiscal 1995 increased to $3,971,108, compared to $3,243,063 for Fiscal 1994 and $2,363,702 for Fiscal 1993. On a per share basis, net income was $.38 for Fiscal 1995, an increase of 6% over the $.36 earned in the prior year and 31% more than the $.29 earned in Fiscal 1993. Gain from the sale of real estate investments constituted $403,094 ($.04 per share) of the Fiscal 1995 net income, compared to $64,962 ($.01 per share) included in the Fiscal 1994 net income and $132,610 ($.01 per share) for Fiscal 1993. Total revenues were $14,117,694 in Fiscal 1995, compared to $11,884,579 in 1994 and $8,316,643 in 1993. The Fiscal 1995 revenue increase of $2,233,115 consisted of:
Rent from 4 properties acquired in Fiscal 1995 $ 534,013 Rent from 4 properties acquired in Fiscal 1994 in excess of that received in Fiscal 1993 1,860,429 An increase in rental rates on existing properties (3%) 213,973 An increase in occupancy rates on existing properties (1/2%) 52,171 A decrease in rent - property sold during 1995 (Yankton) (131,995) A decrease in interest income (260,001) Net revenue increase (1995 over (1994) $2,233,115
Thus, the increase in revenue resulted primarily from the addition of new real estate properties to the portfolio. Scheduled rents on existing properties increased by 3%, while occupancy increased to 95.5% from 95% in the prior year. The $728,045 increase in net income for Fiscal 1995 over the amount earned in the prior year resulted from: An increase in gain from sale of investments $ 338,132 An increase in net rental income (rents, less utilities, maintenance, taxes, insurance and management) 1,999,032 A decrease in interest income (295,476) An increase in interest expense (832,073) An increase in depreciation expense (441,163) A decrease in bad debt expense 50,000 An increase in operating expenses & other items (87,407) $ 728,045
IRET purchased some $27,000,000 of real estate properties during Fiscal 1995 and has contracted to acquire approximately $25,000,000 of additional real estate properties in the coming year. Thus, the Trust's portfolio will shift rapidly from a significant investment in high-yielding mortgage loans to a portfolio consisting primarily of equity positions in real estate. This change in the portfolio will result in a decrease in net income because of increased depreciation. We expect earnings in Fiscal 1996 to exceed this year's level. Occupancy, rental rates and interest rates are expected to remain at present levels and the new properties that are being added to the portfolio will enhance net income. DIVIDENDS. The following dividends were paid during Fiscal 1996:
Date Per Share Dividend July 1, 1995 $.09* October 1, 1995 $.0875 January 5, 1996 $.09 April 1, 1996 $.09125 $.35875 * Includes $.005 special dividend.
FUNDS FROM OPERATIONS. The funds derived during Fiscal 1996 by the Trust from its operations increased by 12% over the prior year and by 33% from the Fiscal 1994 level ($5,977,431 in Fiscal 1996, versus $5,348,271 in 1995 and $4,487,099 in 1994). (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, 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 1996 1995 (Restated) 1994 (Restated) 1993 1992 Net Income (GAAP) $4,611,970 $3,967,830 $3,200,388 $2,363,702 $1,651,073 Less Gains (Losses from Property Sales 994,163 407,512 64,962 132,610 22,858 Operating Income $3,617,807 $3,560,318 $3,135,426 $2,231,092 $1,628,155 Plus Depreciation 2,261,724 1,767,294 1,323,474 1,051,370 824,369 Plus Amortization 97,900 20,659 28,199 16,364 11,289 Funds from Operations $5,977,431 $5,348,271 $4,487,099 $3,298,826 $2,463,813 Dividends Paid $4,439,034 $3,660,986 $3,102,061 $2,633,799 $2,257,303 $1,538,397 $1,687,285 $1,385,038 $ 665,027 $ 206,510
Management expects that the Funds From Operations (as defined above) will continue to improve during Fiscal 1997 and will exceed dividends paid in the coming year. LIQUIDITY AND CAPITAL RESOURCES. IRET's financial condition at the end of Fiscal 1996 continued at the very strong level of its prior fiscal year. - Equity capital increased to $50,711,920 from $37,835,654 on April 30, 1995, a gain of $12,876,266 (34%). Equity capital on April 30, 1994, was $30,320,401. These increases result from the sale of shares of beneficial interest and the reinvestment of dividends in new shares. - Liabilities increased to $80,643,718 from $56,781,090 on April 30, 1995, and $42,409,447 on April 30, 1994. - Total assets increased to $131,355,638 from $94,616,744 on April 30, 1995, and $72,729,848 on April 30, 1994. - Cash and marketable securities were $7,127,131 compared to the year earlier figure of $9,595,254, and $7,263,031 on April 30, 1994. - In addition to its cash and marketable securities, IRET has an unsecured line of credit agreement with First American Bank West, Minot, North Dakota, of $5,000,000, none of which was in use on April 30, 1996. AFFILIATED PARTNERSHIPS. IRET has sponsored and serves 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 have been consolidated for financial reporting purposes to more properly depict the financial status of IRET. (It is emphasized that the consolidation of the financial reports does not change the legal relationship between IRET and the partnerships, nor the income tax reporting by IRET or the partnerships.) 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, IRET is accounting for its partnership interest in Chateau Properties under the equity method of accounting. Prior financial statements included in the audited financial statement and this report have been restated to reflect this change. See Note 11 in the attached financial report for a detail of the effect of this accounting change. The seven affiliated partnerships are as follows:
Year Property IRET Name Formed Owned Ownership Chateau Properties, 1979 64 Unit 26.7% Ltd. Apt. Bldg. 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.
CONSOLIDATED FINANCIAL STATEMENTS. The financial statement included in this Form 10-K consolidates the financial statements of IRET and six of the above seven limited partnerships. (Chateau Properties is excluded.) 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 1996 saw continued good economic conditions in the northern plains states in which the Trust operates. The economy was strong, due to adequate rainfall and higher commodity prices and a moderate improvement in energy activity. Occupancy rates were stable at 95% and rent levels for Trust properties improved only slightly in Fiscal 1996 (2 1/2%). 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, 1996, 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 67 Director of Dakota Boys Ranch (25 yrs.); Trustee Director of International Inn, Inc. and Norwest Bank - Minot, N.A. and a Partner in Magic City Realty, Ltd. *Ralph A. Christensen Retired rancher; 1970 Age 67 Director of First Bank - Minot, N.A. Trustee and Chairman Chairman of IRET. *John D. Decker Investor 1970 Age 79 Trustee *Mike F. Dolan Investor; Vice-Chairman of IRET. 1978 Age 84 Trustee & Vice-Chairman *J. Norman Ellison, Jr. Businessman; Managing Partner of 1970 Age 73 Ellison Realty Co.; Former Director Trustee of First Bank - Minot, N.A. *Daniel L. Feist Realtor; Broker; Real Estate Developer; 1985 Age 64 Builder; General Contractor; President - Trustee Owner Feist Construction & Realty; Investor; Businessman, Director of First Bank System - Minot, N.A.; Director N.D. Holdings, Inc. - Minot. *Patrick G. Jones Investor; Former President of Central 1986 Age 48 Venture Capital, Inc.; Former Manager Trustee and Director of the Minot Daily News. *Jeff L. Miller Investor; Businessman; President of 1985 Age 52 M&S Concessions, Inc. and former Trustee & Vice-Chairman president of Coca-Cola Bottling Co. of Minot; Director of First Bank - Minot. Roger R. Odell Realtor; President of IRET; Partner in 1970 Age 70 Odell-Wentz & Associates (Advisor to Trustee, President IRET); Director of Investors Management and Advisor & Marketing, Inc. and Inland National Securities, Inc.; Partner in Magic City Realty, Ltd. Thomas A. Wentz Attorney, Pringle & Herigstad, P.C.; 1970 Age 61 Vice-President of IRET; Partner in Trustee & Vice-President Odell-Wentz & Associates (Advisor to the Trust). Timothy P. Mihalick Realtor; Operations Manager of 1988 Age 37 Odell-Wentz & Associates (Advisor to Secretary the Trust); Secretary of 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 21, 1996. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT As of May 31, 1996, 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 8.38% 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 1996 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 21, 1996. 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-K: 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-K 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 21, 1996 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-K for the fiscal year ended April 30, 1996. 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-K or are incorporated by reference as indicated below. 3. Declaration of Trust, dated July 31, 1970, and First Amendment thereto dated August 26, 1970, and Second Amendment thereto dated July 11, 1974, filed as Exhibit 3 to Form 10 filed for the Registrant (File No. 0-14851) and incorporated herein by reference. 10. Advisory Agreement between the Registrant and Odell-Wentz & Associates, 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 Date: July 24, 1996 By: /S/ Thomas A. Wentz, Sr. ___________________________ Thomas A. Wentz, Sr. Vice-President and Trustee 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 24, 1996 _________________________ Principal Executive Officer Roger R. Odell /s/ Thomas A. Wentz, Sr. ___________________________ Vice-President and Trustee July 24, 1996 Thomas A. Wentz, Sr. /s/ Ralph A. Christensen ___________________________ Trustee and Chairman July 24, 1996 Ralph A. Christensen /s/ Mike F. Dolan ___________________________ Trustee and Vice-Chairman July 24, 1996 Mike F. Dolan /s/ Jeff L. Miller ___________________________ Trustee and Vice-Chairman July 26, 1996 Jeff L. Miller /s/ C. Morris Anderson ___________________________ Trustee July 24, 1996 C. Morris Anderson /s/ J. Norman Ellison, Jr. ___________________________ Trustee July 24, 1996 J. Norman Ellison, Jr. /s/ Daniel L. Feist ___________________________ Trustee July 24, 1996 Daniel L. Feist /s/ Patrick G. Jones ___________________________ Trustee July 24, 1996 Patrick G. Jones /s/ John D. Decker ___________________________ Trustee July 24, 1996 John D. Decker /s/ Timothy P. Mihalick ___________________________ Secretary July 24, 1996 Timothy P. Mihalick INVESTORS REAL ESTATE TRUST AND AFFILIATED PARTNERSHIPS MINOT, NORTH DAKOTA CONSOLIDATED FINANCIAL STATEMENTS as of April 30, 1996 and 1995 and INDEPENDENT AUDITOR'S REPORT INVESTORS REAL ESTATE TRUST AND AFFILIATED PARTNERSHIPS TABLE OF CONTENTS Pages INDEPENDENT AUDITOR'S REPORT 3 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Balance Sheets 4-5 Consolidated Statements of Operations 6 Consolidated Statements of Shareholders' Equity 7-8 Consolidated Statements of Cash Flows 9-11 Notes to Consolidated Financial Statements 12-25 ADDITIONAL INFORMATION Independent Auditor's Report on Additional Information 26 Marketable Securities 27 Noncurrent Indebtedness of Related Parties - Mortgage Loans Receivable 28 Supplemental Income Statement Information 29 Real Estate and Accumulated Depreciation 30-38 Investments in Mortgage Loans on Real Estate 39-41 Selected Financial Data 42 Gain from Property Dispositions 43 Mortgage Loans 44-47 Significant Property Acquisitions 48 Quarterly Results of Consolidated Operations (Unaudited) 49 Other schedules are omitted due to inapplicability INDEPENDENT AUDITOR'S REPORT Board of Trustees Investors Real Estate Trust and Affiliated Partnerships Minot, North Dakota We have audited the accompanying consolidated balance sheets of Investors Real Estate Trust and Affiliated Partnerships as of April 30, 1996 and 1995,and the related consolidated statements of operations, shareholders' equity and cash flows for the years ended April 30, 1996, 1995 and 1994. 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 Affiliated Partnerships at April 30, 1996 and 1995, and the consolidated results of its operations and cash flows for the years ended April 30, 1996, 1995 and 1994, in conformity with generally accepted accounting principles. BRADY, MARTZ & ASSOCIATES, P.C. Minot, North Dakota May 20, 1996 INVESTORS REAL ESTATE TRUST AND AFFILIATED PARTNERSHIPS CONSOLIDATED BALANCE SHEETS APRIL 30, 1996 AND 1995 ASSETS
1995 1996 (Restated) REAL ESTATE INVESTMENTS Property owned $131,447,734 $ 90,892,662 Less accumulated depreciation (13,551,571 (11,732,655) $117,896,163 $ 79,160,007 Mortgage loans receivable - related parties - 1,449,312 - other 4,932,138 4,366,460 Less - unearned discounts and deferred interest (18,222) (34,792) - deferred gain from property dispositions (165,074) (641,987) - allowance for loan losses (267,096) (293,365) Total real estate investments $122,377,909 $ 84,005,635 OTHER ASSETS Cash $ 2,715,274 $ 4,765,445 Marketable securities 4,411,857 4,829,809 Accounts receivable 30,269 60,260 Real estate deposits - 175,000 Investment in partnership 85,576 166,955 Prepaid insurance 128,541 99,426 Tax and insurance escrow 1,151,527 317,520 Deferred charges 454,685 196,694 TOTAL ASSETS $131,355,638 $ 94,616,744
LIABILITIES AND SHAREHOLDERS' EQUITY
1995 1996 (Restated) LIABILITIES Accounts payable and accrued expenses $ 3,142,190 $ 1,922,419 Mortgages payable 71,699,059 49,996,207 Investment certificates issued 5,802,469 4,862,464 Total liabilities $ 80,643,718 $ 56,781,090 SHAREHOLDERS' EQUITY Shares of beneficial interest (unlimited authorization, no par value, 13,258,908 shares outstanding in 1996 and 11,187,786 shares outstanding in 1995) $ 54,263,917 $ 41,560,587 Accumulated distributions in excess of net income (3,551,997) (3,724,933) Total shareholders' equity $ 50,711,920 $ 37,835,654 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $131,355,638 $ 94,616,744
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS INVESTORS REAL ESTATE TRUST AND AFFILIATED PARTNERSHIPS CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEARS ENDED APRIL 30, 1996, 1995 AND 1994
1995 1994 1996 (Restated (Restated) REVENUE Real estate rentals $17,635,297 $12,280,738 $ 9,765,701 Interest, discounts and fees 1,024,368 1,520,385 1,817,307 Tot al revenue $18,659,665 $13,801,123 $11,583,008 EXPENSES Interest $ 5,547,739 $ 3,484,310 $ 2,652,400 Depreciation 2,261,724 1,767,294 1,323,474 Utilities and maintenance 3,167,560 2,352,968 2,146,120 Taxes and insurance 2,065,017 1,220,434 1,054,880 Property management expenses 1,281,311 779,024 641,054 Advisory and trustee services 458,019 336,142 304,898 Operating expenses 162,588 79,974 46,557 Amortization 97,900 20,659 28,199 Provision for loan losses - 200,000 250,000 Total expenses $15,041,858 $10,240,805 $ 8,447,582 OPERATING INCOME $ 3,617,807 $ 3,560,318 $ 3,135,426 GAIN ON SALE OF PROPERTIES 994,163 407,512 64,962 NET INCOME $ 4,611,970 $ 3,967,830 $ 3,200,388 Net income per share: Operating income $ .30 $ .34 $ .35 Gain on sale of investments .08 .04 .01 Net income $ .38 $ .38 $ .36
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS INVESTORS REAL ESTATE TRUST AND AFFILIATED PARTNERSHIPS CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEARS ENDED APRIL 30, 1996, 1995 AND 1994
Accumulated Shares of Distributions Total Beneficial in Excess of Shareholders' Interest Net Income Equity BALANCE, MAY 1, 1993, AS PREVIOUSLY REPORTED $27,663,010 $(3,917,567) $23,745,443 Adjustment for the cumulative effect on prior years of a change in the reporting entity - $ (361,537) $ (361,537) BALANCE, MAY 1, 1993, AS RESTATED $27,663,010 $(4,279,104) $23,383,906 Net income - 3,200,388 3,200,388 Dividends distributed - (3,021,061) (3,021,061) Dividends reinvested 1,853,356 - 1,853,356 Sale of shares 4,580,600 - 4,580,600 BALANCE, APRIL 30, 1994 $34,096,966 $(4,099,777) $29,997,189 BALANCE, MAY 1, 1994, AS PREVIOUSLY REPORTED $34,096,966 $(3,776,565) $30,320,401 Adjustment for the cumulative effect on prior years of a change in the reporting entity - $ (323,212) $ (323,212) BALANCE, MAY 1, 1994, AS RESTATED $34,096,966 $(4,099,777) $29,997,189 Net income - 3,967,830 3,967,830 Dividends distributed - (3,592,986) (3,592,986) Dividends reinvested 2,175,278 - 2,175,278 Sale of Shares 5,288,343 - 5,288,343 BALANCE, APRIL 30, 1995 $41,560,587 $(3,724,933) $37,835,654 BALANCE, MAY 1, 1995, AS PREVIOUSLY REPORTED $41,560,587 $(3,466,443) $38,094,144 Adjustment for the cumulative effect on prior years of a change in the reporting entity - $ (258,490) $ (258,490) BALANCE, MAY 1, 1995, AS RESTATED $41,560,587 $(3,724,933) $37,835,654 Net income - 4,611,970 4,611,970 Dividends distributed - (4,439,034) (4,439,034) Dividends reinvested 3,100,988 - 3,100,988 Sale of shares 9,820,470 - 9,820,470 Shares repurchased (218,128) - (218,128) BALANCE, APRIL 30, 1996 $54,263,917 $(3,551,997) $50,711,920
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS INVESTORS REAL ESTATE TRUST AND AFFILIATED PARTNERSHIPS CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED APRIL 30, 1996, 1995 AND 1994
1995 1994 1996 (Restated) (Restated) CASH FLOWS FROM OPERATING ACTIVITIES Net income $ 4,611,970 $ 3,967,830 $ 3,200,388 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,359,624 $ 1,787,953 $ 1,351,673 Provision for loan losses - - 250,000 Accretion of discount on contracts (16,570) (14,670) (120,485) Gain on sale of properties (994,163) (407,512) (64,962) Interest reinvested in investment certifi- cates 161,813 205,491 237,415 Changes in other assets and liabili- ties: Increase in other assets (273,636) (119,685) (39,067) Increase in tax and insurance escrow (834,007) (3,603) (49,720) Increase (decrease) in accounts payable & accrued expenses 1,219,771 (108,444) 163,195 Net cash provided from operating activities $ 6,234,802 $ 5,307,360 $ 4,928,437 CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from maturity of invest- ment securities $ 417,952 $ 441,644 $ 992,872 Principal payments on mortgage loans receivable 2,642,346 $ 4,059,328 $ 4,808,981 Proceeds from sale of other assets 389,784 - - Payments for acqui- sition and improve- ment of properties (32,462,846)$(10,584,694)$(8,372,346) Purchase of invest- ment securities - - (3,035,142) Investment in mortgage loans receivable (1,784,981) (653,952) (3,159,230) Net cash used for in- vesting activities $(30,797,745)$ (6,737,674)$(8,764,865) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from sale of shares $ 9,820,470 $ 5,288,343 $ 4,580,600 Repurchase of shares (218,128) - - Proceeds from invest- ment certificates issued 1,695,924 947,093 896,657 Proceeds from mort- gages payable 29,025,001 2,092,266 3,453,849 Loan on margin account - - 2,250,000 Dividends paid (1,338,046) (1,417,708) (1,167,705) Redemption of invest- ment certificates (917,732) (695,803) (1,488,070) Principal payments on mortgage loans (15,554,717) (1,979,111) (1,355,233) Payments on margin account - - (2,250,000) Net cash provided from financing activities $ 22,512,772 $ 4,235,080 $ 4,920,098 NET INCREASE (DECREASE) IN CASH $ (2,050,171)$ 2,804,766 $ 1,083,670 CASH AT BEGINNNING OF YEAR 4,765,445 1,960,679 877,009 CASH AT END OF YEAR $ 2,715,274 $ 4,765,445 $ 1,960,679
CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)
1996 1995 1994 SUPPLEMENTARY SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES Dividends reinvested $ 3,100,988 $ 2,175,278 $ 1,853,356 Real estate invest- ment and mortgage loans receivable acquired through assumption of mort- gage loans payable and accrual of costs 8,232,568 15,917,788 9,510,351 Proceeds from sale of properties deposited directly with escrow agent 426,352 940,258 - Mortgages paid directly by owner of contract - 543,598 18,826 Interest reinvested directly in invest- ment certificates 161,813 205,491 237,415 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid during the year for: Interest paid on mortgages $ 4,642,186 $ 3,109,727 $ 2,215,752 Interest paid on investment certifi- cates 292,660 157,233 192,450 $ 4,934,846 $ 3,266,960 $ 2,408,202
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS INVESTORS REAL ESTATE TRUST AND AFFILIATED PARTNERSHIPS NOTES TO CONSOLIDATED FINANCIAL STATEMENTS APRIL 30, 1996, 1995 AND 1994 NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF OPERATIONS - Investors Real Estate Trust qualifies under Section 856 of the Internal Revenue Code of 1954 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 and real estate related governmental backed securities (GNMA). PRINCIPALS OF CONSOLIDATION - The consolidated financial statements include the accounts of Investors Real Estate Trust and all limited partnerships in which Investors Real Estate Trust is a general partner and maintains a controlling interest. Due to the immaterial involvement of the limited partners, the trust's general partnership interest provides it with substantial influence over operations of the partnerships. 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. All material intercompany transactions and balances have been eliminated in the consolidated financial statements. NOTE 1 - (CONTINUED) 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 15 to 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. NOTE 1 - (CONTINUED) MARKETABLE SECURITIES - The Trust's investments in securities are classified as securities to be held to maturity. These securities 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 straight line method over the period to maturity which approximates the effective interest method. Gains or losses on marketable securities are recognized on the basis of specific identification. INVESTMENT IN PARTNERSHIP - As described in Note 11, the Trust is accounting 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 Trust has a general partnership interest in the limited partnership. Chateau Properties, Ltd. has invested in real estate properties. NET INCOME PER SHARE of beneficial interest has been computed based on the weighted average number of shares outstanding during the year. 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. NOTE 1 - (CONTINUED) INCOME RECOGNITION - In accordance with Statement of Financial Accounting Standards No. 66, "Accounting for Sales of Real Estate", profit 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 is not reasonably assured as required by Statement of Financial Accounting Standards No. 66. 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 in conformity with FASB Statement No. 114, as discussed in Note 4. Rent from leases of real estate is recognized in income as it accrues on the straight-line basis. Advance rental deposits are recorded as deferred income. 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 $1,286,202 and $779,367, respectively, at April 30, 1996. 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, 1995 April 30, 1996 (Restated) Residential $ 96,029,855 $ 62,241,542 Less accumulated depreciation (9,620,990) (8,065,367) $ 86,408,865 $ 54,176,175 Commercial $ 35,417,879 $ 28,651,120 Less accumulated depreciation (3,930,581) (3,667,288) $ 31,487,298 $ 24,983,832 Remaining cost $117,896,163 $ 79,160,007
There were no repossessions during the years ended April 30, 1996 and 1995. The above cost of residential real estate owned included construction in progress of $12,544,357 and $3,863,141 as of April 30, 1996 and 1995, respectively. The above cost of commercial real estate owned included construction in progress of $968,163 as of April 30, 1995. Construction period interest of $690,665 has been capitalized for the year ended April 30, 1996. Construction period interest of $94,313 was capitalized for the year ended April 30, 1995. Residential apartment units are rented to individual tenants with lease terms up to one year. Gross revenues from residential rentals totaled $12,286,492, $9,076,477 and $7,313,780 for the years ended April 30, 1996, 1995 and 1994, respectively. NOTE 3 - (CONTINUED) Commercial properties are leased to tenants under terms of leases expiring at various dates through 2015. 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 $25,054, $16,586 and $22,943 for the years ended April 30, 1996, 1995 and 1994, respectively. The future minimum lease payments to be received under these operating leases for the commercial properties as of April 30, 1996, are as follows:
Year ending April 30, 1997 $ 3,155,683 1998 2,817,310 1999 2,621,910 2000 2,564,304 2001 2,540,964 Thereafter 18,461,882 $32,162,053
NOTE 4 - MORTGAGE LOANS RECEIVABLE Mortgage loans receivable consists of approximately thirty contracts which are collateralized by real estate. Contract terms call for monthly payments of principal and interest. Interest rates range from 7 to 14%. Mortgage loans receivable have been evaluated for possible losses considering repayment history, market value of underlying collateral, deferred gains and economic conditions. Future principal payments due under the mortgage loan contracts as of April 30, 1996 are as follows: NOTE 4 - (CONTINUED)
Year ending April 30, 1997 $ 2,722,999 1998 1,002,768 1999 195,884 2000 104,529 2001 71,943 Later years 834,015 $ 4,932,138
Details concerning mortgage loans receivable from related parties can be found in Note 9. Non-performing mortgage loans receivable were $377,464 at April 30, 1996. 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 $151,800 at April 30, 1996. The average balance of impaired loans for the year ended April 30, 1996 was approximately $447,600. 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 would have been earned on these loans if they had not been non-performing amounted to approximately $31,600 in 1996. Interest income on non-performing loans recognized on a cash basis amounted to approximately $18,600 in 1996. NOTE 5 - MARKETABLE SECURITIES Marketable securities 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 details of the amortized cost and approximate market value of marketable securities at April 30, 1996 and 1995 are as follows: NOTE 5 - (CONTINUED)
1996 1995 Amortized Fair Amortized Fair Cost Value Cost Value GNMA Due after 10 yrs $4,411,857 $4,282,445 $4,829,809 $4,588,905
The amortized cost and estimated market values with unrealized gains and losses of marketable securities at April 30, 1996 and 1995 are as follows:
1996 Gross Gross Amortized Unrealized Unrealized Fair Issuer Cost Gains Losses Value GNMA $4,411,857 $ - $ 129,412 $4,282,445
1995 Gross Gross Amortized Unrealized Unrealized Fair Issuer Cost Gains Losses Value GNMA $4,829,809 $ - $ 240,904 $4,588,905
There were no realized gains or losses on sales of securities for the years ended April 30, 1996, 1995 and 1994. NOTE 6 - MORTGAGES PAYABLE Mortgages payable as of April 30, 1996, included mortgages on properties owned totaling $71,327,918, and mortgages of $371,141 on property sold on contract. The carrying value of the related real estate owned was $106,653,490 and the carrying value of the related mortgage loans receivable was $905,752 as of April 30, 1996. Mortgages payable as of April 30, 1995, included mortgages on properties owned totaling $48,134,856, and mortgages of $1,861,351 on property sold on contract. The carrying value of the related real estate owned was $74,840,061 and the carrying value of the related mortgage loans receivable was $1,990,167 as of April 30, 1995. NOTE 6 - (CONTINUED) Monthly installments are due on the mortgages with interest rates ranging from 7.19% to 10.25% and with varying maturity dates thru November 30, 2034. The aggregate amount of required future principal payments on mortgages payable is as follows:
Years ending April 30, 1997 $ 2,165,211 1998 2,155,476 1999 2,223,016 2000 2,193,352 2001 2,302,104 Later years 60,659,900 Total payments $71,699,059
NOTE 7 - INVESTMENT CERTIFICATES ISSUED The Trust has placed investment certificates with the public. The interest rates vary from 7% 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 1997 $ 3,111,167 1998 672,693 1999 930,624 2000 1,008,839 2001 79,146 $ 5,802,469
NOTE 8 - 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 NOTE 8 - (CONTINUED) $54,788, $15,499, and $69,380 for the years ended April 30, 1996, 1995 and 1994, respectively. NOTE 9 - 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, 1996, Odell-Wentz & Associates received total fees under said agreement of $484,086. The fees for April 30, 1995 were $339,128, and for April 30, 1994 were $350,812. For the years ended April 30, 1996, 1995 and 1994, the Trust has capitalized $115,993, $49,323 and $95,772, respectively, of these fees, with the remainder of $368,093, $289,805 and $255,040, respectively, expensed as advisory and trustee fees on the statement of operations. The advisor is obligated to provide office space, staff, office equipment and 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 $281,717, $212,018 and $170,870 for services rendered for years ended April 30, 1996, 1995 and 1994, respectively. In addition, IMM owed the Trust $118,137 at April 30, 1995. This receivable was paid in November, 1995. 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 $269,656 for the year NOTE 9 - (CONTINUED) ended April 30, 1996, $272,615 for the year ended April 30, 1995, and $507,036 for the year ended April 30, 1994. The Trust paid fees and expense reimbursements to the law firm in which Thomas A. Wentz, Sr. is a partner totaling $23,488, $4,890 and $4,692 for the years ending April 30, 1996, 1995 and 1994, respectively. The Trust had a mortgage loan receivable from Jenner Properties 1978, a limited partnership in which Roger R. Odell and Thomas A. Wentz, Sr. are investors. This contract was paid off during the year ended April 30, 1995. The Trust had a mortgage loan receivable from Chateau Properties, Ltd., a limited partnership, in which the Trust is a general partner as described in Note 1 and Note 11. This contract was paid off during the year ended April 30, 1996. The contract balance at April 30, 1995 was $1,331,175. Investment certificates issued by the Trust to officers and trustees totaled $1,258,133 at April 30, 1996, and $1,179,324 at April 30, 1995. NOTE 10 - MARKET PRICE RANGE OF SHARES Investors Real Estate Trust shares are traded on the Over-The-Counter-Market, with sales handled by Inland National Securities, Inc., 21 South Main, Minot, North Dakota and Financial Advantage Brokerage Services, Inc., 17 South Main, Minot North Dakota. The price range is as follows:
Bid Ask Low High Low High 1994 $5.22 $5.49 $ 5.80 $ 6.10 1995 5.49 5.89 6.10 6.40 1996 5.89 6.30 6.40 6.85
NOTE 11 - CHANGE IN THE REPORTING ENTITY The consolidated financial statements have previously included the accounts of Investors Real Estate Trust and all limited partnerships in which the Trust was a general partner and maintained a controlling interest. Due to the control exerted by the Trust in their position as general partner and the limited liability of the other partners involved, all limited partnerships were included in the consolidated financial statements. For the current year ended April 30, 1996, the control exerted over Chateau Properties, Ltd. has been reduced to a level not requiring consolidation under current accounting guidelines. As of April 30, 1996, the Trust is accounting for its interest in Chateau Properties, Ltd. under the equity method of accounting. Prior period financial statements included in this report have been restated to properly reflect this change in the reporting entity. The effect of the change in the reporting entity on income previously reported is shown as follows:
Increase (Decrease) 1995 1994 Assets $ (274,250) $ (338,300) Liabilities (15,760) (15,088) Shareholders' equity (258,490) (323,212) Income before extraordinary item and net income (3,278) (42,675) Earnings per share - -
NOTE 12 - FAIR VALUE OF FINANCIAL INSTRUMENTS The following methods and assumptions were used to establish 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 NOTE 12 - (CONTINUED) 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. 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:
1995 Carrying Fair Amount Value FINANCIAL ASSETS Mortgage loans receivable $ 4,932,138 $ 4,949,278 Cash 2,715,274 2,715,274 Marketable securities 4,411,857 4,282,445 NOTE 12 - (CONTINUED) FINANCIAL LIABILITIES Mortgages payable $71,699,059 $70,694,035 Investment certificates issued 5,802,469 5,692,317 Accrued interest payable 656,080 656,080
ADDITIONAL INFORMATION INDEPENDENT AUDITOR'S REPORT ON ADDITIONAL INFORMATION Board of Trustees Investors Real Estate Trust and Affiliated Partnerships Minot, North Dakota Our report on our audit of the basic consolidated financial statements of Investors Real Estate Trust and Affiliated Partnerships for the years ended April 30, 1996, 1995 and 1994, 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 18 through 31 related to the 1996, 1995 and 1994 consolidated financial statements is presented for purposes of additional analysis and is not a required part of the basic consolidated financial statements. Such information, except for information on page 31 that is market "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, 1996, 1995 and 1994, taken as a whole. We also have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheets of Investors Real Estate Trust and Affiliated Partnerships as of April 30, 1993, and 1992, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the two years ended April 30, 1993, and 1992, none of which is presented herein, and we expressed unqualified opinions on those consolidated financial statements. In our opinion, the information on page 26 relating to the 1993 and 1992 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 20, 1996 INVESTORS REAL ESTATE TRUST AND AFFILIATED PARTNERSHIPS APRIL 30, 1996 AND 1995 Schedule I MARKETABLE SECURITIES
April 30, 1996 April 30, 1995 Principal Principal Amount Market Amount Market GNMA Pools $4,411,857 $4,282,445 $4,829,809 $4,588,905
INVESTORS REAL ESTATE TRUST AND AFFILIATED PARTNERSHIPS APRIL 30, 1996 AND 1995 Schedule IV NONCURRENT INDEBTEDNESS OF RELATED PARTIES
Mortgage loans receivable Year ended April 30, Beginning Ending 1996 Balance Additions Deductions Balance Chateau Properties, Ltd. $1,331,175 $ - $1,331,175 $ - Investors Management and Marketing 118,137 - 118,137 - $1,449,312 $ - $1,449,312 $ - Year ended April 30, 1995 (Restated) Chateau Properties, Ltd. $1,358,413 $ - $ (27,238) $1,331,175 Jenner Properties 1978, Ltd. 543,598 - (543,598) - Investors Management and Marketing 119,793 - (1,656) 118,137 $2,021,804 $ $ 572,492 $1,449,312
INVESTORS REAL ESTATE TRUST AND AFFILIATED PARTNERSHIPS FOR THE YEARS ENDED APRIL 30, 1996, 1995 AND 1994 Schedule X SUPPLEMENTAL INCOME STATEMENT INFORMATION
Charged to Costs and Expenses 1996 1995 1994 Item Maintenance and repairs $ 1,702,365 $ 1,338,236 $1,236,251 Taxes, other than payroll and income taxes Property taxes 1,873,720 1,078,712 928,600 Royalties * * * Advertising costs * * * *Less than 1 percent of total revenues
INVESTORS REAL ESTATE TRUST AND AFFILIATED PARTNERSHIPS APRIL 30, 1996
Schedule XI REAL ESTATE AND ACCUMULATED DEPRECIATION Initial Cost to Trust Buildings and Description Encumbrances Land Improvements Apartments: Hutchinson 6,577 24,772 332,250 Century-Williston 2,700,000 200,000 3,166,750 Beulah 0 6,360 336,589 Century-Dickinson 1,595,000 100,000 1,564,598 Waseca, MN 0 40,000 634,737 Virginia 2,378 37,600 163,036 Parkway 0 7,000 40,738 4301-4313 9th Ave. 546,353 52,870 908,727 Marshall 135,872 35,000 275,000 Scottsbluff 196,024 60,000 570,000 Oak Manor 238,264 25,000 225,000 177 10th Ave. E 234,661 40,000 318,109 312 12th Ave. NW 45,670 20,000 236,750 405 Grand Avenue 0 13,584 157,211 Sweetwater 251,014 90,767 1,208,847 Bison 152,946 100,210 1,348,127 Eastgate 0 23,917 1,490,181 Colton Heights 381,682 80,000 734,286 Hill Park 1,470,000 224,750 2,562,296 Candlelight Apts. 539,961 80,040 757,977 Forest Park 4,177,577 810,000 5,579,164 Oakwood Estates 2,250,000 342,800 2,783,950 Prairie Winds 1,388,480 144,097 1,816,011 Crestview Apts. 2,880,049 235,000 4,290,031 Pointe West 2,395,789 240,000 3,537,775 Oxbow Apts. 3,565,000 404,072 4,494,441 96 Units, Billings, MT 0 655,985 3,098,103 49 units, Bismarck, ND 1,382,528 143,500 2,244,100 South Pointe, Minot, ND 0 275,000 4,514,552 Stonehill, St. Cloud, MN 8,186,235 939,000 10,167,355 Pine Cone, Ft. Collins, CO 10,645,576 904,545 12,167,093 South View, Minot, ND 0 185,000 468,585 1112 32nd Ave. S 414,283 50,000 543,147 South Winds 3,721,568 400,000 5,033,683 Columbia Park-G.F. Phase I 0 700,000 2,673,754 South Pointe, Minot Phase II 2,775,212 275,000 4,015,062 Circle 50-Billings, MT 0 491,247 0 Columbia Park-G.F. Phase II 0 661,855 0 Office Buildings: 114 S. Main 18,389 27,055 76,076 408 1st St. SE 0 10,000 34,836 401 South Main 0 70,600 334,308 Lester Building 0 25,000 243,916 First Avenue 0 30,000 219,496 Creekside 946,452 311,310 1,088,149 Commercial: Arrowhead Shopping Center $ 145,277 $ 100,359 $ 1,063,925 Superpumper, Emerado, ND 0 25,000 225,564 Superpumper, Langdon, ND 0 59,674 151,500 Superpumper, Bottineau, ND 0 15,000 186,013 Superpumper, Crookston, MN 0 13,125 214,152 Superpumper, Grand Forks, ND 0 80,000 405,007 Superpumper, New Town, ND 0 69,900 180,100 Pioneer Hi-Bred 350,023 56,925 548,075 Lindberg Building 851,838 198,000 1,154,404 Superpumper, Sidney, MT 0 12,000 108,600 Hutchinson Tech 2,470,548 244,800 4,029,426 Minot Plaza 0 50,000 452,898 Smith's, Boise, ID 3,629,797 765,000 4,874,576 Midco Theatre, Grand Forks, ND 1,703,010 183,515 2,359,721 Pet Foods, Fargo, ND 834,130 324,148 927,570 Barnes & Noble, Fargo, ND 4,828,123 540,000 2,752,012 Stone Container, Fargo, ND 3,271,632 440,251 4,498,235 Barnes & Noble, Omaha, NE 0 600,000 3,099,101 $ 71,327,918 $13,370,633 $113,685,675
Schedule XI (Continued)
Cost Capitalized Subsequent To Acquisition Carrying Description Improvements Costs Apartments: Hutchinson 46,314 0 Century-Williston 198,755 0 Beulah 78,734 0 Century-Dickinson 77,021 0 Waseca, MN 131,957 0 Virginia 16,447 0 Parkway 34,648 0 4301-4313 9th Ave. 36,045 0 Marshall 89,278 0 Scottsbluff 80,039 0 Oak Manor 35,917 0 177 10th Ave. E 2,768 0 312 12th Ave. NW 0 0 405 Grand Avenue 1,089 0 Sweetwater 54,616 0 Bison 41,798 0 Eastgate 179,091 0 Colton Heights 2,275 0 Hill Park 35,430 0 Candlelight Apts. 0 0 Forest Park 207,100 0 Oakwood Estates 196,555 0 Prairie Winds 0 0 Crestview Apts. 47,848 0 Pointe West 34,828 0 Oxbow Apts. 44,137 0 96 units, Billings, MT 0 0 49 units, Bismarck, ND 0 0 South Pointe, Minot, ND 0 0 Stonehill, St. Cloud, MN 0 0 Pine Cone, Ft. Collins, CO 0 0 South View, Minot, ND 363 0 1112 32nd Ave. S 0 0 South Winds 0 0 Columbia Park-G.F. Phase I 0 0 South Pointe, Minot Phase II 0 0 Circle 50-Billings, MT 0 0 Columbia Park-G.F. Phase II 0 0 Office Buildings: 114 S. Main 774 0 408 1st St. SE 2,037 0 401 South Main 69,778 0 Lester Building 0 0 First Avenue 530,321 0 Creekside 171,676 0 Commercial: Arrowhead Shopping Center 1,233,130 0 Superpumper, Emerado, ND 46,500 0 Superpumper, Langdon, ND $ 28,038 $ 0 Superpumper, Bottineau, ND 100,000 0 Superpumper, Crookston, MN 201,500 0 Superpumper, Grand Forks, ND 0 0 Superpumper, New Town, ND 0 0 Pioneer Hi-Bred 48,876 0 Lindberg Building 103,385 0 Superpumper, Sidney, MT 0 0 Hutchinson Tech 154,800 0 Minot Plaza 0 0 Smith's, Boise, ID 0 0 Midco Theatre, Grand Forks, ND 2,500 0 Pet Foods, Fargo, ND 25,058 0 Barnes & Noble, Fargo, ND 0 0 Stone Container, Fargo, ND 0 0 Barnes & Noble, Omaha, NE 0 0 $ 4,391,426 $ 0
Schedule XI (Continued)
Gross Amount at Which Carried at Close of Period Buildings and Description Land Improvements Total Apartments: Hutchinson 25,551 377,785 403,336 Century-Williston 274,970 3,290,535 3,565,505 Beulah 78,327 343,356 421,683 Century-Dickinson 126,738 1,614,881 1,741,619 Waseca, MN 40,000 766,694 806,694 Virginia 37,600 179,483 217,083 Parkway 11,446 70,940 82,386 4301-4313 9th Ave. 66,912 930,730 997,642 Marshall 35,360 363,918 399,278 Scottsbluff 60,000 650,039 710,039 Oak Manor 29,012 256,905 285,917 177 10th Ave. E 40,218 320,659 360,877 312 12th Ave. NW 20,000 236,750 256,750 405 Grand Avenue 14,674 157,210 171,884 Sweetwater 94,270 1,259,960 1,354,230 Bison 100,210 1,389,925 1,490,135 Eastgate 28,638 1,664,551 1,693,189 Colton Heights 80,000 736,561 816,561 Hill Park 245,653 2,576,823 2,822,476 Candlelight Apts. 80,040 757,977 838,017 Forest Park 811,954 5,784,310 6,596,264 Oakwood Estates 342,800 2,980,505 3,323,305 Prairie Winds 144,097 1,816,011 1,960,108 Crestview Apts. 235,000 4,337,879 4,572,879 Pointe West 240,000 3,572,603 3,812,603 Oxbow Apts. 404,072 4,538,578 4,942,650 96 units, Billings, MT 655,985 3,098,103 3,754,088 49 units, Bismarck, ND 143,500 2,244,100 2,387,600 South Pointe, Minot, ND 275,000 4,514,552 4,789,552 Stonehill, St. Cloud, MN 939,000 10,167,355 11,106,355 Pine Cone, Ft. Collins, CO 904,545 12,167,093 13,071,638 South View, Minot, ND 185,000 468,948 653,948 1112 32nd Ave. SW 50,000 543,147 593,147 South Winds 400,000 5,033,683 5,433,683 Columbia Park-G.F. Phase I 700,000 2,673,754 3,373,754 South Pointe, Minot Phase II 275,000 4,015,062 4,290,062 Circle 50-Billings, MT 491,247 0 491,247 Columbia Park-G.F. Phase II 661,855 0 661,855 Office Buildings: 114 S. Main 27,829 76,076 103,905 408 1st St. SE 10,016 36,857 46,873 401 South Main 70,722 403,964 474,686 Lester Building 25,000 243,916 268,916 First Avenue 67,711 712,106 779,817 Creekside 311,310 1,259,825 1,571,135 Commercial: Arrowhead Shopping Ctr. $ 100,412 $ 2,297,002 $ 2,397,414 Superpumper, Emerado, ND 25,000 272,064 297,064 Superpumper, Langdon, ND 59,674 179,538 239,212 Superpumper, Bottineau, ND 15,000 286,013 301,013 Superpumper, Crookston, MN 13,125 415,652 428,777 Superpumper, Grand Forks, ND 80,000 405,007 485,007 Superpumper, New Town, ND 69,900 180,100 250,000 Pioneer Hi-Bred 56,925 596,951 653,876 Lindberg Building 198,000 1,257,789 1,455,789 Superpumper, Sidney, MT 12,000 108,600 120,600 Hutchinson Tech 244,800 4,184,226 4,429,026 Minot Plaza 50,000 452,898 502,898 Smith's, Boise, ID 765,000 4,874,576 5,639,576 Midco Theatre, Grand Forks, ND 183,515 2,362,221 2,545,736 Pet Foods, Fargo, ND 324,148 952,628 1,276,776 Barnes & Noble, Fargo, ND 540,000 2,752,012 3,292,012 Stone Container, Fargo, ND 440,251 4,498,235 4,938,486 Barnes & Noble, Omaha, NE 600,000 3,099,101 3,699,101 $13,639,012 $117,808,722 $131,447,734
Schedule XI (Continued)
Life on Which Latest Income Accumulated Date Statement Description Depreciation Acquired is Computed Apartments: Hutchinson 188,006 1977 33 1/2-40 years Century-Williston 964,800 1985 35-40 years Beulah 269,854 1983 15-40 years Century-Dickinson 450,420 1986 35-40 years Waseca, MN 241,601 1987 27 1/2-40 years Virginia 51,821 1987 27 1/2-40 years Parkway 8,762 1988 5-40 years 4301-4313 9th Ave. 180,492 1988 40 years Marshall 58,166 1988 40 years Scottsbluff 118,134 1988 40 years Oak Manor 41,121 1989 40 years 177 10th Ave. E 52,012 1989 40 years 312 12th Ave. NW 38,472 1989 40 years 405 Grand Avenue 21,579 1991 40 years Sweetwater 897,854 1972 20-33 years Bison 1,029,078 1972 25-33 years Eastgate 1,214,428 1970 33 years Colton Heights 300,453 1984 33 years Hill Park 982,436 1985 33 years Candlelight Apts. 66,323 1993 40 years Forest Park 497,045 1993 40 years Oakwood Estates 254,287 1993 40 years Prairie Winds 158,901 1993 40 years Crestview Apts. 268,725 1994 40 years Pointe West 221,546 1994 40 years Oxbow Apts. 169,094 1994 40 years 96 units, Billings, MT 0 49 units, Bismarck, ND 26,505 1995 40 years South Pointe, Minot, ND 52,943 1995 40 years Stonehill, St. Cloud, MN 127,092 1995 40 years Pine Cone, Ft. Collins, CO 304,177 1994 40 years South View, Minot, ND 19,889 1994 40 years 1112 32nd Ave. SW 6,789 1996 40 years South Winds 62,921 1996 40 years Columbia Park-G.F. Phase I 0 1996 40 years South Pointe, Minot Phase II 0 1996 40 years Circle 50 - Billings, MT 0 1996 40 years Columbia Park-G.F. Phase II 0 1996 40 years Office Buildings: 114 S. Main 68,347 1978 20 years 408 1st St. SE 18,256 1986 19-40 years 401 South Main 101,657 1987 31 1/2-40 years Lester Building 45,912 1988 40 years First Avenue 275,265 1981 33 years Creekside 130,347 1992 40 years Commercial: Arrowhead Shopping Ctr. $ 1,993,595 1973 15-40 years Superpumper, Emerado, ND 121,328 1986 19-40 years Superpumper, Langdon, ND 45,527 1987 31 1/2-40 years Superpumper, Bottineau, ND 43,271 1989 40 years Superpumper, Crookston, MN 59,074 1988 40 years Superpumper, Grand Forks, ND 55,688 1991 40 years Superpumper, New Town, ND 20,261 1992 40 years Pioneer Hi-Bred 62,336 1992 40 years Lindberg Building 132,113 1992 40 years Superpumper, Sidney, MT 9,502 1993 40 years Hutchinson Tech 358,406 1993 40 years Minot Plaza 39,629 1993 40 years Smith's, Boise, ID 304,661 1994 40 years Midco Theatre, Grand Forks, ND 88,521 1994 40 years Pet Foods, Fargo, ND 35,097 1994 40 years Barnes & Noble, Fargo, ND 103,200 1994 40 years Stone Container, Fargo, ND 55,113 1995 40 years Barnes & Noble, Omaha, NE 38,739 1995 40 years $13,551,571
INVESTORS REAL ESTATE TRUST AND AFFILIATED PARTNERSHIPS Schedule XI (Continued) Reconciliations of total real estate carrying value for the three years ended April 30, 1996, 1995 and 1994 are as follows:
1996 1995 1994 Balance at beginning of year $ 90,892,662 $ 63,861,793 $ 46,319,398 Additions during year - acquisitions 40,660,975 27,371,289 17,094,188 - improvements 635,791 344,255 448,207 $132,189,428 $ 91,577,337 $ 63,861,793 Deductions during year - cost of real estate sold (741,694) (684,675) - Balance at close of year $131,447,734 $ 90,892,662 $ 63,861,793 Reconciliations of accumulated depreciation for the three years ended April 30, 1996, 1995 and 1994 are as follows: 1995 1994 1996 (Restated) (Restated) Balance at beginning of year $11,732,655 $10,097,374 $ 8,773,900 Additions during year - provisions for depreciation 2,261,724 1,767,294 1,323,474 Deductions during year - accumulated depreciation on real estate sold (442,808) (132,013) - Balance at close of year $13,551,571 $11,732,655 $10,097,374
INVESTORS REAL ESTATE TRUST AND AFFILIATED PARTNERSHIPS APRIL 30, 1996 Schedule XII INVESTMENTS IN MORTGAGE LOANS ON REAL ESTATE
Interest Final Maturity Payment Prior Rate Date Terms Liens Residential Billings, MT - 144 units 9% 9-01-98 Monthly - Higley Heights, Phoenix, AZ 8% 3-31-04 Monthly - North Park - Writer Corp. 14% 1-04-98 Monthly - Centrebrooke Homes 12% 1-14-94 Monthly - Marcella Knutt 11% 6-01-08 Monthly - Sweetwater Springs Balloon Retirement Center 9% 7-15-96 Payment - Melanie Betsinger 8% 6-01-25 Monthly - Rolland Hausman 9% 2-01-16 Monthly - Other-over $100,000 9-10 1/4% 5-01-96 to 8-01-07 Monthly - -from $50,000-99,999 8-12% 7-01-96 to 1-01-00 Monthly - -from $20,000-49,999 8-12% 9-01-97 to 12-1-03 Monthly - -less than $20,000 7-12% 9-04-97 to 3-01-02 Monthly Total Less - Unearned discounts - Deferred gain from property dispositions - Allowance for bad debts
Principal Amount Face Carrying of Loans Subject to Amounts of Amounts of Delinquent Principal Mortgages Mortgages or Interest $ 1,500,000 $ 320,938 $ - 809,786 681,032 - 1,550,000 618,810 - 1,900,000 205,512 141,345 300,000 236,880 - 2,810,000 1,254,810 - 217,761 216,154 - 315,659 314,710 - 678,814 448,029 - 1,340,381 360,998 3,473 768,088 252,315 - 293,304 21,950 - $12,483,793 $ 4,932,138 $ 144,818 (18,222) (165,074) (267,096) $ 4,481,746
Schedule XII (Continued)
1995 1994 1996 (Restated) (Restated) MORTGAGE LOANS RECEIVABLE, BEGINNING OF YEAR $ 5,815,772 $11,212,354 $12,869,463 New participations in and advances on mortgage loans 1,790,070 653,952 3,170,698 $ 7,605,842 $11,866,306 $16,040,161 Collections (2,647,434) (5,850,534) (4,827,807) Write-off through allowance (26,270) (200,000) - MORTGAGE LOANS RECEIVABLE, END OF YEAR $ 4,932,138 $ 5,815,772 $11,212,354
INVESTORS REAL ESTATE TRUST AND AFFILIATED PARTNERSHIPS SELECTED FINANCIAL DATA
Year Ended April 30 1995 1994 1993 1992 1996 (Restated) (Restated) (Restated) (Restated)_ Consolidated Income Statement Data Revenue $ 18,659,665 $13,801,123 $11,583,008 $ 8,048,916 $ 6,955,404 Operating income 3,617,807 3,560,318 3,135,426 2,222,313 1,612,231 Gain on repossession/sale of investments 994,163 407,512 64,962 145,165 34,408 Net income 4,611,970 3,967,830 3,200,388 2,367,478 1,646,639 Consolidated Balance Sheet Data Total real estate investments $122,377,909 $84,005,635 $63,972,042 $49,492,380 $33,707,171 Total assets 131,355,638 94,616,744 72,391,548 54,248,011 38,555,050 Shareholders' equity 50,711,920 37,835,654 29,997,189 23,347,449 18,420,243 Consolidated Per Share Data Operating income $ .30 $ .34 $ .35 $ .28 $ .23 Gain on repossession/ sale of investments .08 .04 .01 .01 .00 Dividends .37 .34 .33 .31 .30 Tax status of dividend Capital gain 1.6% 11.0% 7.4% 4.1% 1.0% Ordinary income 98.4% 89.0% 92.6% 74.0% 67.8% Return of capital 0.0% 0.0% 0.0% 21.9% 31.2%
INVESTORS REAL ESTATE TRUST AND AFFILIATED PARTNERSHIPS APRIL 30, 1996, 1995 AND 1994 GAIN FROM PROPERTY DISPOSITIONS
Total Original Unrealized Realized Realized Realized Property Gain 4/30/96 4/30/96 4/30/95 4/30/94 Brooklyn Addition* $ 25,000 $ 4,000 $ 1,000 $ 1,000 $ 1,000 1411 South 20th* 34,696 - 1,177 3,292 3,039 1302 South 19 1/2* 87,669 22,444 6,215 5,739 5,299 600 Maple* 60,025 - 41,253 859 766 406 17th Street - Mandan* 233,522 138,629 5,143 4,609 4,131 1320 19 1/2 South* 74,424 - - - 50,727 419 and 404 - Minot 82,053 - - 82,053 - Yankton, SD 305,542 - - 305,542 - 108 4th Avenue SE - Minot 173,211 - 173,244 - - Mobridge, SD 293,035 - 293,035 - - Lantern Court 50,971 - 50,971 - - Chateau 684,914 - 422,125 4,418 -__ $ - $994,163 $407,512 $ 64,962 * The gain from the sale of these properties is being realized based on the installment method. The amount of deferred gain realized was $476,913, $19,917 and $64,962 for the years ended April 30, 1996, 1995 and 1994, respectively.
INVESTORS REAL ESTATE TRUST AND AFFILIATED PARTNERSHIPS APRIL 30, 1995 MORTGAGE LOANS
Final Periodic Interest Maturity Payment Face Amount Rate Date Terms of Mortgage Arrowhead Shopping Center, Minot, ND 10.00% 10-01-97 Monthly $ 1,152,278 Century Apartments, Williston, 196 unit complex 7.50 3-01-96 Monthly 2,700,000 Century Apartments, Dickinson, 120 unit complex 7.50 3-01-96 Monthly 1,595,000 Colton Heights Assoc., Billings, MT 9.00 3-01-97 Monthly 1,291,000 Sweetwater Properties, Grafton, Devils Lake, 2003 to 114 units 9.75 2004 Monthly 914,138 Bison Properties, Jamestown, Carrington, Cooperstown, 1999 to 125 units 10.00 2000 Monthly 1,001,650 Hill Park Properties, Ltd., Bismarck, ND, 96 units 7.50 3-01-06 Monthly 1,470,000 Colton Heights, Ltd. Minot, ND, 18 units 9.50 1-01-00 Monthly 730,000 Residential Properties, Single family - 7.50 to 6-01-96 to 36 unit complexes 10.50 3-01-03 Monthly 4,017,631 Commercial Properties, Retail stores 9.00 5-01-98 Monthly 97,500 Pioneer Hi-Bred, Moorhead, MN 8.625 11-01-01 Monthly 425,000 Creekside Office Complex Billings, MT 8.35 12-01-16 Monthly 1,023,750 Hutchinson Tech Sioux Falls, SD 8.50 8-01-99 Monthly 2,800,000 Candlelight Apts. 8.25 12-01-04 Monthly 578,000 Oakwood Apts. 7.50 3-01-06 Monthly 2,250,000 Prairie Winds 7.19 5-01-18 Monthly 1,470,000 Forest Park 9.75 5-01-03 Monthly 4,500,000 Pointe West Apts. 8.34 1-01-14 Monthly 2,625,000 Crestview Apts. 8.30 1-01-14 Monthly 3,150,000 Midco Theatre 8.65 7-01-14 Monthly 1,750,000 Oxbow, Sioux Falls, SD 7.50 3-01-96 Monthly 3,565,000 Smith's Home Furnishings 9.75 3-29-03 Monthly 3,750,000 Lindberg Building 8.50 4-01-00 Monthly 950,000 Barnes & Noble, Fargo, ND 7.98 11-20-10 Monthly 4,900,000 Pine Cone 7.125 12-20-34 Monthly 10,685,215 1112 32nd Ave. SW - 18 plex 9.00 9-01-10 Monthly 425,000 West Stonehill, St. Cloud, MN 9.21 2-01-98 to 1-01-00 Monthly 8,232,569 North Pointe Apts., Bismarck, ND 8.18 8-01-15 Monthly 1,400,000 Southpointe Apts., I, Minot, ND 8.01 9-01-15 Monthly 2,800,000 Southwind Apts., Grand Forks, ND 7.84 11-01-10 Monthly 3,780,000 Stone Container, Fargo, ND 8.25 12-01-10 Monthly 3,300,000 Pet Food Warehouse, Fargo, ND 8.31 12-01-10 Monthly 840,000 $80,168,731
INVESTORS REAL ESTATE TRUST AND AFFILIATED PARTNERSHIPS APRIL 30, 1995 MORTGAGE LOANS
Carrying Delinquent Amount of Principal Mortgages or Interest Arrowhead Shopping Center, Minot, ND $ 145,277 $ - Century Apartments, Williston, 196 unit complex 2,700,000 - Century Apartments, Dickinson, 120 unit complex 1,595,000 - Colton Heights Assoc., Billings, MT 142,541 - Sweetwater Properties, Grafton, Devils Lake, 114 units 251,014 - Bison Properties, Jamestown, Carrington, Cooperstown, 125 units 152,946 Hill Park Properties, Ltd., Bismarck, ND, 96 units 1,470,000 - Colton Heights, Ltd., Minot, ND, 18 units 381,682 - Residential Properties, Single family - 36 unit complexes 1,634,398 - Commercial Properties, Retail stores 18,389 - Pioneer Hi-Bred, Moorhead, MN 350,023 - Creekside Office Complex, Billings, MT 946,482 - Hutchinson Tech, Sioux Falls, SD 2,470,548 - Candlelight Apts. 539,961 - Oakwood Apts. 2,250,000 - Prairie Winds 1,388,452 - Forest Park 4,177,577 - Pointe West Apts. 2,395,789 - Crestview Apts. 2,880,049 - Midco Theatre 1,703,009 - Oxbow, Sioux Falls, SD 3,565,000 - Smith's Home Furnishings 3,629,797 - Lindberg Building 851,838 - Barnes & Noble, Fargo, ND 4,828,123 - Pine Cone 10,645,576 -
INVESTORS REAL ESTATE TRUST AND AFFILIATED PARTNERSHIPS APRIL 30, 1995 MORTGAGE LOANS (Continued)
Carrying Delinquent Amount of Principal Mortgages or Interest 1112 32nd Ave. SW - 18 plex 414,283 - West Stonehill, St. Cloud, MN 8,186,235 - North Pointe Apts., Bismarck, ND 1,382,528 - Southpointe Apts., I, Minot, ND 2,775,212 - Southwind Apts., Grand Forks, ND 3,721,568 - Stone Container, Fargo ND 3,271,632 - Pet Food Warehouse, Fargo, ND 834,130 - $71,699,059 $ -
INVESTORS REAL ESTATE TRUST AND AFFILIATED PARTNERSHIPS APRIL 30, 1996 SIGNIFICANT PROPERTY ACQUISITIONS
Acquisition for cash and assumptions of mortgages Commercial: Barnes & Noble, Omaha, NE ** $ 3,627,206 Stone Container, Fargo, ND ** 4,042,217 $ 7,669,423 Apartments: 96 Units, Billings, MT * $ 3,727,440 North Pointe, Bismarck, ND ** 927,450 South Pointe I, Minot, ND ** 2,727,085 West Stonehill, St. Cloud, MN ** 10,765,830 1112 32nd Avenue SW, Minot, ND 593,147 Columbia Park Phase I, Grand Forks, ND * 3,373,754 Southwinds, Grand Forks, ND 5,433,683 South Pointe II, Minot, ND * 4,290,061 Circle 50, Billings, MT * 491,247 Columbia Park II, Grand Forks, ND * 661,855 $ 32,991,552 Total $ 40,660,975 * Property not placed in service at April 30, 1996. Additional costs are still to be incurred. ** Represents costs to complete a project started in year ending April 30, 1995.
INVESTORS REAL ESTATE TRUST AND AFFILIATED PARTNERSHIPS QUARTERLY RESULTS OF CONSOLIDATED OPERATIONS (UNAUDITED)
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 investments 1,009,468 1,058,136 1,082,506 467,697 Net gain on sale of investments - - 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 investments .09 .09 .09 .04 Net gain on sale of investments - - .04 .04 QUARTER ENDED 7-31-94 10-31-94 1-31-95 4-30-95 Revenues $ 3,247,910 $ 3,529,364 $ 3,492,941 $ 3,530,908 Income before gains on sale of investments 794,755 1,066,229 1,014,011 685,323 Net gain on sale of investments - 305,543 - 101,969 Net income 794,755 1,371,772 1,014,011 787,292 Per share Income before gains on sale of investments .07 .10 .10 .07 Net gain on sale of investments - .03 - .01 QUARTER ENDED 7-31-93 10-31-93 1-31-94 4-30-94 Revenues $ 2,619,795 $ 2,831,487 $ 2,898,989 $ 3,232,737 Income before gains on sale of investments 841,939 852,618 872,875 567,994 Net gain on sale of investments - - - 64,962 Net income 841,939 852,618 872,875 632,956 Per share Income before gains on sale of investments .10 .10 .10 .05 Net gain on sale of investments - - - .01
EX-27 2
5 12-MOS APR-30-1996 MAY-01-1995 APR-30-1996 4,535,603 4,411,857 4,962,407 (450,392) 0 13,459,475 131,447,734 (13,551,571) 131,355,638 3,142,190 77,501,528 54,263,917 0 0 (3,551,997) 131,355,638 0 18,659,665 0 9,494,119 0 0 5,547,739 3,617,807 0 3,617,807 0 994,163 0 4,611,970 .38 0
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